emily: i'm emily chang, and this is the "best of bloomberg technology," where we bring you all our top interviews from this week in tech. coming up, big tech reports results, apple says iphone sales are stabilizing and the bet on services seems to be paying off. plus, alphabet falls the most in seven years after first quarter revenue missed analyst estimates, sparking fears that advertisers are shifting spending to google's rivals. and facebook puts its best foot forward at its f8 developers conference, as the social network works to pivot to more private communication.

we are going to hear from the vice president of facebook messenger. but first, to our top story, apple reports earnings results, with services revenue hitting a high of $11.5 billion. this after unveiling a plethora of new services, including streaming video, video games, and a revamped new subscription service. still, its biggest revenue driver remains the iphone, where demand has stabilized. the iphone bringing in $31 billion after a disappointing holiday quarter. bloomberg's caroline hyde caught up with ibc's vp of global device trackers, ryan reith, and forrester principal analyst julie ask on tuesday after the results. ryan: overall, it's definitely not pretty, and i think we have got some tough times ahead. we are looking at basically 2020 as sort of the beginning of the real recovery for the overall market, and that is pretty much around all of the device markets that apple plays in, as well as their services business, which is growing to be the center of

attention quickly, beyond iphone and other things. caroline: beyond the iphone and other things, which is where they could put some cash to work. we talked about its cash pile previously. we are getting clarity on the call, saying apple had $225 billion in cash at the end of the quarter. they can invest confidently. where would you want them to invest confidently? julie: oh, that is a very hard question. if i knew the answer to that, i would have a very senior position at apple. [laughter] julie: no, more seriously, i think what is hard here is that you cannot just throw money at the challenges ahead of them. there isn't that next "it" device. they can spend money on marketing to drive demand and create more services to get to that next device, but it is hard in the services market because they are so dependent on ecosystem partners. while the growth is scalable, it

is also very hard-won. caroline: talking about "it" devices, sort of a stealth "it" device has been airpods. i am a google pixel phone user, owner, but i use airpods with them, and clearly we are hearing on the call that wearables had a very strong performance. airpods, apparently, the interest was off the charts, according to the cfo, and they are working to catch up with demand. they can still make it work on hardware when they want to. ryan: absolutely they can. you would be a fool to rule apple out of any of these businesses, right, in terms of hardware. so no question, they are dominating the wearable market whether that is air pods or apple watch. they are owning basically the majority market share in both of those categories. so let's not overlook that and clearly they are highlighting that. as julie mentioned in the last segment, going into the service business, we talk about this because it is a shift for the company, but it is not an easy play. they will have different competitors, people investing in

areas they have not as significantly. so they have challenges ahead, but it is not to say that anyone should rule them out by any means. caroline: in other news, it seems as though the apple card has been terrific, thus far. that is what tim cook has been saying on the call. and apple pay transactions as well, expected to top $10 billion by 2019. julie, how much is this fin tech angle of apple overlooked as a future area of growth? julie: it appears to be a strong area of growth. i think the open question here is how much revenue will it continue to generate for them? i do believe some of the early deals they signed may have expired. they need to continue to grow the ecosystem, and if it is going to replace something like cash or a credit card, i have to be able to use it everywhere, and that includes transportation systems and other places where i want to spend money, but -- there is a reoccurring payment, but i don't want to have to get

a separate credit card pass. there is a lot of runway for apple, but it is also hard work. caroline: it is. ryan, it is also hard work to re-create a juggernaut in the hardware space to become a services business. do you think they are so far succeeding in their reorientation, and at what point will they ever become predominantly a services company? ryan: to the last part of the question, i don't know exactly when. i think that is the million-dollar question, or we could say trillion dollar question. [laughter] ryan: realistically, these guys are not done with hardware by any means. we have not talked about iphone, which is i think the first earnings briefing we have been on where we have not dug into that. that is a product that is not done, still holding 15% market share of the entire segment. it is going to still make some revolutionary gains, but they have their challenges ahead and there are changing times on both aspects, the services and hardware side.

caroline: ryan, to that end, the iphone is not done, but how do you see the price point maturing? we are seeing, interestingly, samsung offering even more expensive phones with the foldable one, which has been a slight disaster in terms of its launching in the market. but on the downside, we're seeing the likes of huawei and samsung eroding their market share. how much do we need to go down on the price point, or is that never a good idea with apple? ryan: they will not go down to the areas where huawei, samsung, and xiaomi, they are playing to support their market share. apple is never going to go that low in terms of price point. i would not be surprised -- and this is just some speculation -- if we see another go at it with a lower cost iphone. but that will probably be into next year. keep in mind, again, this is still the cash cow, they will not give up on this. they are looking at all the market dynamics, but as you said, they cannot go down to the

bottom, but they are realizing that there is a market need for, whether it is a $500 to $600 iphone, who knows. but probably something lower than the $1000 plus stuff we are seeing from traditional phones, and samsung is getting into the $2000 plus, and huawei will follow pretty soon. emily: julie ask of forrester and ryan reith from idc. coming up, how will tech shape politics into 2019 and the presidential election? we talk to senator marsha blackburn about her view on big tech from capitol hill. and if you like bloomberg news, you can check us out on the radio, listen on the bloomberg app and in the u.s. on sirius xm. this is bloomberg. ♪

emily: big tech platforms like google and facebook are facing the prospect of more regulation from lawmakers in the u.s. and abroad amidst accusations of spreading fake news, hate,

misinformation, and allowing their platforms to be weaponize divisive treatments. we spoke to u.s. senator marsha blackburn from tennessee about the intersection of tech and politics. sen. blackburn: when you are getting right is that they provide a service, and information service that people enjoy. and they have changed the way we conduct our lot of our transactional life. many people will say that is for the better. however, when you look at their lack of privacy enforcement, and now, emily, people are beginning to figure out oh, they are data mining me, tracking, following. oh, they are sending my information out, and they are big ad companies and i don't like that, i want them to only access information that i give them explicit permission to see. i don't want them following me, and how is it they can monetize my information, anonymize it,

except back to their ip address, which is their virtual you, and then sell that information to retailers. so people have a lot of questions about this business model, and it is why they are saying it is time for congress to do something about privacy and data security in the virtual space. emily: so, what should congress do when it comes to legislation? sen. blackburn: you know, the browser act is my legislation, that is kind of the benchmark, if you will, that people talk from and say let's say to or -- let's add to or take from, the browser act. this would require an individual to give explicit permission, opt in for sensitive data sharing, opt out for nonsensitive information. it would be one set of privacy rules for the entire internet ecosystem and one regulator, the ftc, which is our nation's privacy regulator, both in the virtual and physical space.

emily: do you think europe and gdpr is a good model? sen. blackburn: i think it reaches a little bit too far, it is a little bit too restrictive. and my preference is to see the internet remain a place where innovators can pop on and innovate. we have to bear in mind that the internet from 1995, no one ever thought about apps, mobility, in the sense that we have mobility now. they never thought about the convergence of voice, video, and data. and now you see that, and it is all on a handheld device. you take it with you everywhere you go. and we need to make certain that individuals that are going to use that spectrum as their backbone, that they have the ability to innovate, and we should not have laws that are restrictive that are going to limit new entrants into the marketplace. emily: now, there have been growing concerns from conservatives about social media

suppressing conservative views. president trump just met with twitter ceo jack dorsey. do you think social media is suppressing conservative views, deliberately or un-deliberately? sen. blackburn: we have had hearings on this. of course they will say no, we do not. here is where we get into what many people think of as suppression. it is the way they built the algorithms that are doing the data mining. the question should be to facebook and twitter and these entities, do you subjectively manipulate your algorithm? and what we have to realize is in silicon valley, a lot of people have a more liberal bent. that is their preference, they bring that to work, they are engineering and building these algorithms. and then they probably tilt left, instead of being down the

middle, and we know they don't tilt right. emily: you actually had a pro-life ad in 2017 that was taken down by twitter. they said it was inflammatory, they apologized, reinstated it. what have your conversations been like with the executives of these companies? they are active, they are lobbying on capitol hill, and they want your support. sen. blackburn: and when we did a hearing a couple weeks ago, twitter publicly apologized to me. but the question is how to we get to a point where pro-life language is considered inflammatory? that is the underlying question. why did they make a decision to block that and then it took them a while, through conversation, to put it back up? and for all of our edge providers, this is the question that needs to be there. people want to know that if this is the new public square, they are going to be able to express their opinions, and that the public square is going to be appropriately monitored and

regulated. keep out violence, keep out terrorism, those things which do not serve the public conversation well. emily: let's talk about that. there was just another shooting at a synagogue in california, and some would argue that these platforms have done a lot to combat terrorism, combat isis, but have not done enough to combat white supremacy. what do you think? sen. blackburn: you know, emily, there is no place for hate speech, hatefulness. this kind of action on any of these platforms, and they are going to have to be diligent in making certain they deal with those things. likewise, many of us have spent a lot of time working on human trafficking and sex trafficking. working to shut down entities like backpage, to make certain that we tamp down any of the other entities that grow up.

one investigator told me we stop backpage, then you have the mom and pops that come up. and this does not have a place. we want to make certain that everyone and their information is safe online. and we definitely want to make certain that our children are safe online. emily: senator elizabeth warren has been calling for a breakup of big tech companies, and she has gotten support on both sides of the aisle. do you think big tech companies, facebook, google, amazon, apple, do they need to be broken up? sen. blackburn: what we need to do is make certain that they are responsible to americans using their platform. and also that they are not acting in a way that is not going to serve our -- their consumers well. we don't want an individual's private information to be made

public. we want to make certain data security provisions and breach notification provisions are in place. we want to make certain that individuals have the toolbox they need to protect their virtual you. emily: would you say breaking up big tech or antitrust regulation is a step too far? sen. blackburn: it is something we are going to look at. we will say first, here are the privacy rules of the road, because right now we don't have those. and say, this is the regulator you will be responsible to. as somebody who is a light touch regulator, i think we need to do that first and foremost. then we can move on and do some other things. we definitely have to look at the censorship issue. we have to work with these companies on that issue, and if they are going to consider themselves a news source, maybe they should hire a news

director. emily: you have called net neutrality socialistic. what do you mean by that? sen. blackburn: when you would put the government at the head of the pipe, if you will. that broadband pipe, and putting them in the first spot, that we don't want to do. the internet is not broken, it does not need the federal government to fix it, if you will. so what we would like to do is make certain that we preserve an open internet. we are all against blocking, all against throttling. what we want to make certain is that before we make a decision on prioritization that we are talking with innovators. when you talk with people that are working in ai or av or in health care technology, they will say, let's be, let's move very slowly when we talk about

prioritization. because we do not know what the next innovation is going to be and how we are going to utilize those technologies as 5g comes into the marketplace. emily: now, you have been a staunch supporter of president trump. we know that senator biden has just declared he is running and he has kicked off by talking about charlottesville. you know, there continues to be the contention that president trump did not handle that situation well. do you have any concerns about biden or any other democratic opponent? sen. blackburn: they are going to have their primary, and they will go through that primary, they will choose a nominee, then we will have that race once they have chosen their nominee. emily: you are the first woman senator from tennessee. sen. blackburn: yes. emily: you supported the kavanaugh nomination. that mobilized a number of your voters. how much progress has the #metoo

movement made and how much still needs to be made? sen. blackburn: my hope is that the #metoo movement has helped this to be a conversation that moms and daughters and employers and employees have. and i think it is a good thing that our children and grandchildren are not going to be fearful to bring it up when they have had someone act inappropriately. i think that is a good, healthy thing. emily: senator marsha blackburn there of tennessee. coming up, he is the man in charge of microsoft's most lucrative business. we will speak with scott guthrie, executive vice president of microsoft cloud and ai. and later, the home of the world's tallest building also boasts the world's first minister for artificial intelligence. we'll ask him about his ambitious plan to make the united arab emirates the world's ai leader. this is bloomberg. ♪

emily: outside of ceo satya nadella, scott guthrie is arguably the most important person at microsoft. as the executive vice president of microsoft's cloud and ai group, he has helped the tech giant claim a top spot in the cloud, just behind amazon. ahead of the microsoft developer's conference next week, i caught up with guthrie and talked about what lies ahead. scott: i have been fortunate to work with satya for a long time. we worked on azure in the cloud business. the day before he became ceo, we had a conversation and i took on what was his role. emily: what did he say? scott: well, we worked so closely together, so it was a pretty quick conversation. the company as a whole has been going through this cloud transformation. it has been incredibly fun to be a part of. more importantly, helping our customers through it, it has been a great ride. emily: in the break, we're

talking seven to eight years ago, the business did not really exist. it is a fairly new business but it has grown really fast, and you made a decision to focus on cloud and shift resources and workers to this area making millions from areas making billions. you are an engineer by training, how did you make that decision? what informed that? scott: in technology, things move fast. the most important thing is trying to understand where the hockey puck is going. how do you skate to it? as a company -- we had missed a couple of trends, which is why -- widley know. -- which is widely known. we saw cloud and said this is a trend we are not going to miss. and more than just a technology shift, we see every customer out there is looking to do digital transformation and cloud is integral. and i think we were able to execute very well. it aligns well with what customers are looking for and is great to see the success of their businesses, and in turn with ours. emily: how do you compete with amazon when they got a four year head start?

scott: the thing we focused on is how do we focus on the enterprise markets and companies that target the enterprise market? that is something we did early on, where amazon focused more on consumer startups. it has allowed us to play to our strengths around hybrid, a key differentiation we have versus other cloud competitors, and it also allows us to look at the overall microsoft cloud portfolio, which is not just azure but office 365, and bring a unique set of offerings to bear that amazon and other cloud vendors don't have. emily: are you taking business from them? are you attracting customers they have to your platform, or are you mostly winning new customers that are new to the cloud entirely? scott: we've seen both. i think we have a very large number of large customers that have switched to our cloud, with azure.

we also see the market has been growing, and we are taking a disproportionate share of the growth, and that has been driving our overall cloud momentum. the market is still fairly new, not anywhere near over in terms of its growth phase, so the things we get energized around is just the tremendous opportunity that is ahead. not just to grow our business, but more importantly, grow our customers' business as we enable them to do more. emily: do you see the pie getting bigger, and if so, how much more will you have in the future in terms of a percentage? if amazon is many times bigger now, what does that look like in three to five years? scott: i don't think amazon is many times bigger than us now, maybe seven years ago they were. but if you look at the enterprise market, most people have us pretty darn close in terms of overall cloud share for businesses.

again, we see the opportunity ahead as enormous. because everything is moving to cloud over time. not just the traditional i.t. workloads, but cars, facilities, manufacturing, a bunch of technology we never had any participation in in terms of the core business is now being cloud-enabled. i think it enables an enormous market out there. emily: i know is not a game, but is this a market where you feel there will be one clear leader or will there be many? scott: i do not think there will be one, there will definitely be several. again, it is probably a trillion dollar market, so it is a very big market. and the thing we are uniquely focused on is how do we have this unique value proposition that makes our customers successful? emily: coming up, alphabet first-quarter revenue misses estimates as growth in ads slows, but the company points to strength in mobile search and

the cloud. we'll break down the results. and bloomberg tech is livestreaming on twitter, check us out and follow our breaking news network tictoc on twitter. this is bloomberg. ♪

emily: welcome back to the "best of bloomberg technology." i am emily chang. alphabet shares sliding this week following its first quarter results, revenue missing analyst estimates, sparking concern that advertisers are shifting some spending to digital rivals. sales came in at $29.5 billion, excluding payments to distribution partners. wall street was looking for $30 billion. google is usually the first place consumers go when searching for new products, but that has changed with increasing competition from amazon. collin colburn, analyst at forrester research, and jitendra waral of bloomberg intelligence gave us their reaction. collin: 17% growth is not horrible. let's just put that out there first.

next is that the search ad market is maturing. this is something google has been after for 20 plus years now. so this is something that is at a point where there are just lots of advertisers who are hitting a point of saturation, of diminishing marginal returns. the other thing that is happening here, as we mentioned, amazon is now a bigger part of the digital advertising ecosystem. there is greater competition than ever before. if you are looking at this as an optimist, you are saying to yourself hey, google is doing pretty well now that there is even more competition, stiffer competition than ever before. if you are a pessimist, you say amazon is dominating product search today. it is the number one place consumers go to research anything about retail products they are purchasing, whether it is on or off amazon. and amazon is capturing a greater share of the search ad dollars from consumer goods or retailers that are selling on any of these marketplaces, whether it is amazon or walmart.

so to me, that is a bit of a warning sign. and amazon is just getting going with their ad business. yeah, they did not have the greatest quarter with their ad business, growing 30% year on year when we are used to 90% plus, but they are really just getting going where most of the money is coming from search advertising, and they have a lot of runway to go. emily: now, they have been reining in some of their spending. we saw capex go down, falling to $4.6 billion from $7.3 billion last year. also, i have a chart in the bloomberg that shows what is happening with margins, you can see margins getting slimmer over the last three quarters. i did speak to the alphabet cfo before the call got started, speaking about the revenue miss. she blamed it on fx, saying the numbers reflect fx headwind in contrast to a tailwind last year. she said the year-over-year growth rate also affects our

-- reflects our strong 2018, so a comparison on a strong base. in response to the amazon question, is amazon becoming a bigger threat because consumers are starting their searches directly on amazon? she said we see people using search robustly across a wide variety of use cases, including shopping. she also talked about how much of ad budgets are off-line, and how much of commerce is still off-line. jitendra, what do you think of those arguments? jitendra: if you actually look at this quarter, you mentioned currency, comparisons, they say there are product changes that affected last quarter, and that tailwind is tapering. i mean, if we look at the revenue growth over the last three years, they had changes for the product on mobile search and youtube, and the growth accelerated. now we are seeing a deceleration, especially in the per-click growth. has competition kicked in? we do not think so yet, but it is a warning sign for this year.

i think it is more of a function of the tailwind of all the product changes done in mobile search and youtube sort of fading, so the expectations need to reflect that. emily: collin colburn of forrester research and jitendra waral of bloomberg intelligence. well, the united arab emirates is a country that prides itself on building big and being first, and that extends to the tech sector with the country's appointment of the world's first minister for artificial intelligence. behind the ministry's creation is the emirates' lofty ambition to be the global leader in ai, and to boost the country's gdp by 35% by 2031. bloomberg's manus cranny spoke with his excellency omar bin sultan al olama from the first ai everything conference in dubai about the nation's ai strategy and how it has changed the economy. omar: let's not talk about businesses that are starting, let's talk about proven businesses. so some of our more successful

ventures so far are artificial intelligence stories of sucess. careem is an artificial intelligence company that was acquired for 11 billion dirhams, $13.2 billion. souq.com was acquired by amazon for 2 billion dirhams, and media.net for 3 billion dirhams. these are all artificial intelligence companies at their core, and these are probably are the proof that our leadership has been working on this for years. we have attracted the right talent, and today these sucess stories are coming out. manus: do you think careem, souq.com, those businesses act as an inspiration for the next generation to give it a go themselves in ai? to give it a go themselves and abroad? omar: it proves there is something, we are not doing ai for the sake of ai, we are doing ai because it has value, and there are returns that make it tangible. manus: from an economic and employment aspect, there is also

the thought at the back of everyone's mind that ai will reduce employment opportunities. how do you manage that? omar: everything is technological innovation. everything in advancement has cost jobs, whether it is one job or 100,000 jobs. the job of government is to help people who lose their jobs. and ensure that people are doing jobs that are not going to be lost. this is what we are doing. we are going to round of these people who have lost jobs and give them other jobs, because we know jobs are going to be lost. manus: we have a smart city, dubai is known around the world. how will ai and your ministry play into the smart city evolution? omar: the idea is we want to become the smartest city through ai and make sure decision-making is done in a very efficient manner, a timely manner, and the right decisions are being made.

because [inaudible] so that is the first thing. the second, we want the government here to be proactive in delivering services. manus: is the government prepared to be experimental with ai in the delivery? omar: we already are. we launched a lab where we are able to work for six months. see the impact. it is a controlled environment, and if it is good we expand that. it is coming from around the world and we are implementing it in the uae. emily: that was the minister of state for artificial intelligence in the uae. coming up, facebook wants to be your go to place for messaging. what the social network unveiled to make it a reality at their annual f8 conference, next. this is bloomberg. ♪

emily: facebook is doubling down on a successful but controversial part of its namesake app -- messaging. the redesign focuses on a group feature, and moving toward more private and intimate communication. here is mark zuckerberg discussing one of the newest additions to messaging. mark: we need to make sure the service is available everywhere that you are. for a modern messaging experience, that means having a great desktop experience. so we built a great new desktop app, siri built a chat and video chat in a native app, not just a browser. we are launching this on both mac and windows. this is one of our topmost requested features. emily: bloomberg's caroline hyde caught up with stan chudnovsky, vp of facebook messenger at the f8 conference in san jose.

stan: you can watch videos while in the video chat with friends of yours. we also another thing that we will be rolling out later this year called friend stop, were where all of your close communications with friends and family will go to, and you can have stories, all of them will be right there. so we have been busy the past year designing our app. we are going to be busy as we continue to go forward. one thing also to say about the privacy part of that, we are looking forward to being even more private than ever before. end-to-end encryption. we are working with stakeholders all over the world to figure out the right ways of doing it, and throwing it out to our users worldwide. as well as interactibility, you will be able to send messages

from whatsapp to messenger and back and forth. caroline: when will that be a reality? stan: could you repeat the question? caroline: when do you think the inter-operability between whatsapp and messenger will be a reality? stan: it is going to be years, and the reason why it is going to be years is because it will take us a long time to figure out how to do it right. we need to figure out a way to do it right. that will require us to consult with many different constituents out there. safety advocates, privacy advocates, governments, policymakers. it is going to take time to get it right. we don't have all the answers right now, but once we do, we will be able to have the timeline. caroline: ok, so years for that particular merging. what about what is available now in terms of business and the person? you talk a lot about how messenger is being used within

families and friendship groups, but it looks as though you are focusing squarely on the enterprise as well. how are you looking to make money off of that? stan: so we are definitely very excited about our business system that is emerging around messenger. today, we have 20 billion messages that are being sent between people and businesses every month. what excites me personally is actually not the number, but the trajectory. a couple of years ago when we announced our first number, it was 2 billion, and then 4 billion, and 6 billion. six months ago in december, i was in new york and we had 10 billion. today we are at 20 billion. it is the simple fact that people want to message to businesses. they want to communicate with businesses the same way they are communicating with other friends. so they do not call necessarily anymore, they do not prefer emails, they prefer messaging. we can be certain if we are

continuing -- go ahead. caroline: will you charge businesses for this? would you charge them? how will this earn you money? stan: oh, yes. the way we will charge is through ads. we are an ad business, and one of the fastest-growing products today at facebook is click to messenger ads. the way that works, it is a simple ad, but the call to action for people is message. once you cap it, it opens up a thread between the person and the business, and then the business can have that channel of communication with their customers. for that, you definitely have to pay because you are buying an ad, and that is how we make money today. caroline: interesting.

would you look to make money in different ways going forward from messenger? what are the ways in which you can really make the most being so integrated between the customer and the enterprise? stan: the way we are thinking about it is that we need to focus for now more on two things, building products people really love and enjoy using, and building the business ecosystem where people can talk to businesses and continue to grow the ecosystem. once we figured these two things out and do it very well, we think there will be plenty of ways for us to make money. but facebook is about building products for people first before going deeper, and that is what we are going to do. caroline: talk about building products. a few years ago at f8, the big talking point was bots, how it will be integrated with messenger and help. how are bots helping today? are they being rolled out in the way that was originally envisaged? stan: we are very excited about automation. what we are experiencing right now are experiences where people

are combining automated messages that are enabled by bots, and human messages enabled by real people. and the most powerful experience in messenger today are those combinations, where you start a conversation with a bot, and once the bot sort of ran the end of its depth, then the person picks up the conversation and can handle it better than a bot could. so they are really enabling the growth of the platform today, and we are excited about them growing into the future as well. emily: that is facebook messenger vp stan chudnovsky. coming up, udacity co-founder sebastian thrun joins us to discuss the scholarship rolling out with facebook to expand education for deep learning, and ai specifically tied to privacy. this is bloomberg. ♪

emily: for years, udacity has been helping students learn the skills needed in the next wave of tech disciplines, including ai, deep learning, and vr. and as demand for privacy and security tools grows, there is an opportunity for new talent. udacity is now partnering with facebook for a new scholarship on privacy and encryption. udacity co-founder sebastian thrun joined us wednesday to discuss. sebastian: there is a new program for people who care about privacy and security in the ai space. it is interesting, when you do machine learning you get all this data in, and there is a chance that it gets compromised somehow, and a machine can learn. it sounds magical but it adds massive amounts of security to any machine learning approach.

emily: it is interesting you are announcing this partnership with facebook. facebook is backing 5000? and facebook is notoriously not focused on privacy. but this is part of their new mission. why facebook? sebastian: we work with facebook, google, amazon, anybody in this field. privacy is a universal concern. it does not mean we always get it right in silicon valley, but everybody cares. emily: how would you describe the pool of talent who can focus on who has the expertise on privacy and security related issues? is there just not enough people to satisfy that? sebastian: it is almost nobody, it is a new topic. but with the level of cyberattacks going up every week, every month by state actors and so on, the sophistication of the defense has to go up as well. very few companies are good at this. what we do at udacity is train people. we train people with the latest skills.

it is funded by facebook's scholarships to really build the latest and best so any person on the planet can now become a privacy expert. emily: should we be worried about our privacy and how well we are being protected at this moment by the new generation of technology? sebastian: we are learning about it every day, problems that googles and governments have. as technology progresses, there are good uses and bad uses. we have to learn how to focus on the good uses. emily: you announced this at facebook's mobile development conference, f8, and it works well with mark zuckerberg's new strategy going forward to be more privacy focus. he made a joke yesterday that fell a little flat. let's take a look. mark: i get that a lot of people are not sure that we are serious. i know we do not exactly have the strongest reputation on privacy right now, to put it lightly.

emily: so there was a slightly awkward pause there. because well, that is an understatement. do you think this strategy can really get facebook back on track or improve its reputation? sebastian: i do believe in silicon valley at large. not any single company. we need to take this issue super seriously, and it starts with training, it starts with people getting the right skills to bring this to the workforce. i would say being a technologist myself, it is amazing what has happened the last 10 years. the genie out of the bottle, we do something and we reach a billion people. what is lacking is the responsible, ethical technical training that makes this secure. emily: is it just the technical expertise missing, or the values? because it almost seems like values have not caught up with what people now want. sebastian: we have to have a very broad discussion across the nation about what we want and what we stand for as americans.

i say that for myself as well, now being an american, and we have to have a dialogue that goes to washington and everybody to see what is right for us. that dialogue is beginning. i see udacity playing a big role in this, because we teach people. we have 75,000 graduates. we have students. we teach people all across the nation, and we can bring those values to anybody in the tech field. emily: so give us an update on the latest at udacity, how many nano-degrees have you awarded, and tell us about all the disciplines. i know there has been some restructuring and organization. sebastian: we have 86,000 or so nano-degrees, and most find places like facebook or google for jobs, many, many companies. i think we are now beginning to invent a new degree.

nano degrees are becoming what we call the fourth degree. it is an industry accepted credential from top companies as a way to recruit and certify people who want to be lifelong learners, who are not done learning after college but want to keep brushing up their tech skills. we can really transform the entire american workforce where people continue to learn, get these new skills, get job opportunities, make more money, and have a better life. emily: now, you wear a lot of hats, you are also the ceo of kitty hawk, the self flying car company, or just flying car company. give us the latest on where kitty hawk is. when can i ride it? sebastian: i think you're the first person to ride in a self driving car, and it looked like a crazy idea. the same way a flying car looks crazy. we have done in the order of 22,000 test flights. and we are still in the development phase. it is not safe enough yet to

really unleash to the people, but we have this vision. we believe we can get you in downtown san francisco to berkeley in three minutes. or from san francisco to palo alto in 15. emily: how does your vision incorporate what is already out there? you have ridesharing, uber is working on flying taxis. there are many different theories about what the roads and skies will look like. what is yours? sebastian: i worked on cars for a long time, so i started a long history. emily: yes, you are the inventor of the self driving car, literally. we always have to get your perspective on that in every interview. sebastian: for a long time i believe the self driving car will be the thing that solves traffic problems. we kill 1.2 million people every year in traffic accidents around the world. i realized if you go a few hundred feet up, there is almost nothing to hit. there is no kids running around,

no bicycles, no curbs -- whatever you care about doesn't exist. now to a new problem, how to manage traffic up there, you can build engines so quiet you will not notice them. so as a futurist, a visionary, i believe it is inevitable at some point our daily commute, we will go up in the air and then that will be the end of traffic. emily: when? when does that happen? sebastian: that is the $10,000 question. not today but i hope something in the next three to four years. emily: so you went on to found googlex. google is working on self driving cars, so is uber, so is tesla. who owns this market? will it always be many different players? will one or two pull ahead? sebastian: the market is still very open. we have to remind ourselves, the most successful is tesla. they have rolled out an autopilot with self driving features.

i believe on the ground there will be one or two companies who own the market, and by that same logic ridesharing is owned by two companies, you get a network effect. the more cars you operate, the shorter time it takes to get one, and the better the user experience. there's a natural network effect, just like facebook. emily: which two companies? [laughter] sebastian: if i invested today, i would invest in waymo, and the second one, i think, for a long time. not tesla. i am impressed by what tesla is doing, and i love the autopilot feature, but i think it is a long shot from autopilot to city driving without a driver inside. i believe waymo right now has the leading edge. emily: that does it for this edition of the "best of bloomberg technology." we will bring you the latest tech throughout the week.

tune in every day, and for livestreaming on twitter, check us out at technology. follow our global breaking news network tictoc on twitter. this is bloomberg. ♪

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