♪ emily: i'm emily chang in san francisco and this is "bloomberg technology." coming up in the next a hour, bloomberg scoop, a bumpy ride for lyft. why the company coo is leaving and why the founder plans to split up the job. trade commissioner joins us to tell us why she voted against the ftc's record $5 billion fine on facebook. an dan coats is leaving the job as trump's top spy.

what that could mean for national security. but first, to our top story. executive shakeup at lyft. chief operations officer jon mcneill is leaving after joining last year from tesla. he served as president of global sales and service at tesla. the lyft founders say they won't hire a replacement. why is he leaving? mark: that is a very good question that we don't quite have the answer to yet. it is an intriguing situation. he didn't even last two years. he was in one of the most high-profile positions at the company. this is also a situation where you are a very experienced executive coming in with a mandate to oversee operations but you also have two founders of the company and you have ideas of how the company should be operating. we note in the story that his predecessor and coo, came from amazon, didn't last three years.

there are questions about whether they could sustain somebody in that role. it may be telling that they don't plan to hire another coo. emily: lyft shares are down. what is the plan? mark: they will have to outline that. they probably won't have profit but they will have to disclose financials in a week and a half. the plan is they are still somewhat in growth mode, spending a lot this year, expanding throughout the u.s. where they have a huge presence. they have a couple of locations in canada, but there's a big world out there to expand to. they haven't quite outlined how they are going to get to profit. emily: they did say this would

be the year of spending. cooper is laying off people in the marketing department. mark: they are cutting the marketing department by one-th ird globally. emily: if those are what they call extraneous people, that's a lot of people. mark: they put out something that talks about how they saw the company had been slowing down, too many people overlapping and responsibilities, so they have ordered a cut. something he says in the memo is that it is indicative of a larger problem which raises the prospects that maybe there will be more cuts to come. emily: we will be watching for that. thank you so much for that

update. trade negotiations between the u.s. and china set to resume on tuesday. u.s. treasury secretary steve mnuchin and robert lighthizer will meet the delegation in shanghai with both sides showing little desire to compromise. friday, president trump indicated a deal could be a ways off. pres. trump: i think china will probably say, let's wait, let's see if one of these people who gives the united states away could possibly get elected. i will tell you what, when i win, like almost immediately, they are all going to sign deals. emily: let's get to l a where sarah mcgregor is standing by. what should we expect when these talks resume? sarah: it is really hard to know right now.

that's the million-dollar question. we know from the u.s. side, they want to start off where talks broke down in may. they want to rehash that document that they said at the time was 90% complete. the u.s. says china reneged on some of the promises they made. it is hard to see, if they are starting off from dispute, how they will find a way to go forward. i think we will be all carefully watching for words from the u.s. side, looking for compromise perhaps on rolling back tariffs. from the chinese side, we will be looking for those promises of addressing ip theft and economic reforms. emily: are there some point where we expect they might be able to find some common ground. sarah: for china, the easy answer has always been farm purchases. but this is not enough for the trump administration. that is the ground they seem to cover time and again. we saw a little bit of easing on the u.s. side from trump.

i think they have also sort of hardened their positions, more investment restrictions coming down the line. in that way, there seems to be much deeper divisions than areas of common ground. emily: there are some areas that we might consider setbacks. beijing is called the u.s. the black hand behind the protests in hong kong. there is this issue with fedex where they accidentally redirected some while way packages to the united states. beijing isn't buying that. sarah: china has gone deeper into that and say that it was even warned of farias than they thought, the fedex issue. i think if you look on the surface level, the two countries are saying, sit down and chat, but issues like this are cropping up.

-- a bit more farias than they thought. it is still being investigated. i think if you look on the surface level, the two countries are saying, sit down and chat, but issues like this are cropping up. another clear example on top of that is trump on friday saying within 90 days they will investigate the wto countries who label themselves as developing, giving them special trading rights. the u.s. thinks it is time well past and they want to pull that status from them. that would actually have a really big impact on china's global trade. these practical issues seem to be piling up on one side. on the others, they are saying, let's come up with an agreement. it is hard to see where they will come together. emily: sarah mcgregor, i know you will keep us posted on any

headlines as they happen. coming up, facebook gets the largest find in history for privacy violations, but did they really learn their lesson. a commissioner says the fine is not enough. if you like bloomberg news, listen on the radio, on the app , bloomberg.com, and in the u.s., on sirius xm. this is bloomberg. ?

emily: last week, the u.s. federal trade commission formally announced the details of its $5 billion settlement with facebook for years of

privacy violations by the social network. as part of the deal, facebook must submit to oversight by a board committee as well as new privacy certifications and assessments. while the fine is the largest ever imposed by the ftc, some are arguing the company got off easy. joining us to discuss is a commissioner who voted against the agreement. commissioner it is, as i said, , the biggest fine the ftc has levied in history. why do you think it is not enough? >> i voted against settlement because i thought, when you take the terms as a whole, i wasn't convinced it would do enough to change facebook's behavior and make sure in the future they kept their promises to the ftc and consumers. emily: you are suggesting face -- suggesting they should have

sued facebook or zuckerberg personally. rebecca: you would have to look realistically at what our options were. here, i think it would have made sense to take facebook to court. you may not agree to a settlement that changes your behavior so we will pursue it in court. open litigation would provide transparency and public accountability that i think are missing from the settlement. i also think the settlement is missing meaningful limits on how facebook collect, uses, and shares data. emily: suing facebook directly would have been a riskier path, wouldn't it? rebecca: i agree. if you think the entirety of the point of litigation is the outcome, the remedy we can get, and you think it is enough to

change facebook's behavior. but if you can't make it remedy their behavior, you can think about other things like public transparency, public accountability for what the company did in who knew what. at the end of the day, we at the ftc are not a private corporation. we are trying to work in the interests of the american public and we have an obligation to seek justice even if we are not guaranteed to receive it. emily: i spoke to your colleague, noah phillips, told him about your response. he voted in favor, of course. take a look at what he had to say about your suggestion that a lawsuit would have been a better route >> i don't think that is accurate of the state of play.

the changes we are making to facebook are very likely to have been achieved during a court process. in a normal litigation, what you are weighing is the certainty of less versus the chance of more. in this case, the certainty of more in the uncertainty of getting even less. emily: what is your response to that? rebecca: respectfully, i disagree with him. i don't think that the terms and the settlement were enough to guarantee that facebook would change it did it impose any public accountability -- would change. it did not impose any public accountability or transparency. i would rather take the chance in court, and i think the process of public litigation can make a big difference to how a company behaves. if our goal is to turn the company from doing something wrong and -- is deterring the

company from doing something wrong and other companies from doing something wrong, a trial can have a deterrent effect even if the remedy at the end could be different than a settlement. emily: what about zuckerberg personally? what kind of punishment or penalty would you have liked to have seen on him? rebecca: the thing i am going for here is public accountability and transparency. the settlement excused mr. zuckerberg and all other officers, directors, executives at facebook of liability. i didn't think we had a basis to say they should have no liability. at a minimum, i would have wanted to see some transparency, some testimony that would give us better insight. emily: are you concerned that

facebook won't learn its lesson? are you afraid facebook will slide back to its original state of play? and given that there are no structural changes to the business model, things will go back as they were? rebecca: fundamentally, that is my concern. that is why i think it is important for the ftc to be using the tools and resources it has, limited as they may be, to teach them a lesson that it is not worth doing again in the future and they can't simply pay a fine to make us go away. emily: the ftc has opened an antitrust investigation into facebook. what can you tell us about that investigation or your position on whether facebook is to bake? -- is too big? rebecca: unfortunately, i can't tell you anything about the substance of an investigation. the ftc has an obligation to look into antitrust violations

where it is appropriate to do so. emily: what about youtube and potential violation of the online children's privacy act? rebecca: again, i can't comment on any investigation that has not in publicly -- has not been publicly confirmed by the company or the agency. but children's privacy is something we need to take very seriously. i'm a mama three little kids -- i am a mom of three kids. i see how they interact with the internet. emily: you have senator elizabeth warren making this one of the centerpieces of her presidential campaign, getting

support from both sides of the aisle. what do you think the ftc's role will be in this discussion? rebecca: i hope we can live up to our obligation to protect consumers and competition. i don't think this is just about big tech. i think there are competition problems across the economy, that is something we are charged with dealing with and that we should deal with. i welcome the conversation on capitol hill and the attention in the public and political bodies about how important and dangerous concentration can be across our economy. emily: commissioner slaughter, thank you so much for joining me today. coming up, just what are investors watching for from

apple's third-quarter results. the numbers, next. this is bloomberg. ?

emily: etf investors have about $58 billion riding on apple's third-quarter results. according to bank of america, the second largest holding across etf's after microsoft. apple reports earnings after the market close tuesday. speaking of apple results, all eyes will be focused on how the company is faring amidst the trade war between the u.s. and china. bloomberg is predicting about a 10% drop in iphone sales in the third quarter but there looks to be a rebound in other segments like the ipad, apple watch. to tell us more, we have bloomberg tech reporter mark gurman. he covers apple, and in studio,

marybelle lopez. one thing we won't hear tomorrow is iphone numbers because the company stopped reporting those couple of quarters ago. what are you expecting? >> i am expecting it will be down single digits. that is no surprise. we have been following this industry for a while and decline is consistent. emily: iphone revenue in particular or apple overall? >> we are looking at the sales of what would have been units. emily: what do you think is driving that? maribel: there hasn't been enough innovation in the space compared with the cost and most people have a phone and don't need one now. mark: overall sales are likely to be around 53, 54 billion dollars. coming in either a little bit higher or lower or pretty much flat. apple was once this high and mighty company that could do no wrong and not have annual or

quarter consecutive sales drops. now it is entirely possible that it will be the third consecutive year-over-year drop. we will see what happens tomorrow. emily: what are you expecting in china specifically? we saw sales kind of follow for cliff, then they stabilized -- fall off a cliff, then they stabilized. maribel: there are incredible options in the chinese market. with apple, the transition from hardware to services is what to watch because that is what they are playing hard regardless of the market. emily: that said, you need to get devices into hands for users to access those services. so doesn't how much the iphone cell still matter? maribel: it does, but they are leveraging that 1.4 billion last quarter that you can deliver

services to. we need to look at, is that transition happening? that is a fairly good margin business as well. emily: the new iphones expected to be unveiled in september, incremental design upgrades, a better camera, but the real design overhaul will come in 2020. right? mark: this year's upgrades might be considered one of the smallest upgrades year-over-year. i said that last year. i think we will see a similarly small upgrade this year. the focus will be on a third camera. will people spend $1000 to update from the 10 or 10s, to the 11 or whatever they call it, just for a better camera on the back and a faster processor? there will be the early adopter crowd that does but i don't see

too many leaps from one $1000 phone to another $1000 phone for such an incremental leap. maribel: i actually think the thing to watch is the watch. 80% of millennials said that health was their key initiative, looking for ways to track that. apple has been doing deals with insurance companies. i think health and fitness is one of the futures for the company. not just smartphones. we might see in september the separation of that from the actual iphone. emily: more untethered experience. maribel: that would be a good move for apple at this point. mark: i don't think that is going to happen this year. i also don't think there will be a significant update to the apple watch this year. they positioned last year's up -- update as a complete overhaul. that's what they said and showed. when you look at it, it doesn't look that different.

when they use those talking points, calling it completely redesigned, completely reengineered, when they say that you know there will be a two or three year gap. emily: the gaming service, apple tv plus, the netflix competitor, apple news. which of those are you most excited about? maribel: the health services. i think the card does more to their bottom line than it does to change the industry. in terms of content, plenty of content choices. i think a solid showing is not what will drive it. i think they need to find new revenue streams related to health or possibly something else. emily: maribel lopez of lopez research, thank you. we will be all over apple earnings tomorrow. coming up dan coats is out as , the director of national intelligence. we will find out what his replacement's plans are

if he gets through congress. that is next. this is bloomberg. ♪

♪ emily: welcome back to "bloomberg technology." some of the most well-known tech companies way down the s&p 500. some of the biggest laggards on the index. this as we wait earnings from apple tuesday. we take a step back into the bigger picture, large-cap index, the nasdaq 100 has made quite the comeback in 2019. you have a column out, do you think it is really a semi-distant memory, or could it come back anytime? >> it absolutely could come back any time. it's just a reminder that just

at the end of 2018, the tech stocks just got hammered because of all the anxieties about slowing growth, about the trade war with china, antitrust, all kinds of things that went away for a few months and then came back after first-quarter earnings. now we have completely forgotten about it because there were, in many cases, these very good, very strong second-quarter results from a lot of the big tech names at the same time we had the announcements about antitrust investigations from the department of justice, the ftc, so it was a strange juxtaposition of strong results, far-off worries about the impact of antitrust investigation, and the end results. but for the most part, tech stocks went up. emily: most of the analysts and investors i've spoken about are not concerned with antitrust. when you talk about the doj and the antitrust -- is the ftc looking into antitrust?

is it misplaced? shira: it's hard to know at this point if investigators are just now starting their work on antitrust matters, what's going to happen? it could be they find some incriminating evidence, they could do depositions and talk to competitors of these tech giants. it's possible this drags on for years and years and nothing really happened, as was the case with the ftc investigation of google that ended in 2012 or 2013, and also this recent ftc matter involving facebook. so it is hard to quantify, it's kind of an unknown risk, but i agree that for the most part, it's a risk we cannot really worry about. emily: with apple earnings to

come and another quarter, what are you watching? what is next? shira: the thing that really matters for all these tech companies is growth. investors want tech companies to show revenue growth that will be increasingly important as the fed officials and monetary policy in general starts to shift more toward lowering interest rates, and that means that growth stocks will be even more important because investors have a hard time finding yield anywhere else. the only thing that matters right now is growth and the issue with apple right now is that it is not growing. emily: we look forward to your analysis of apple tomorrow. good to have you with us. let's switch to u.s. national security, and a shake up at the top of u.s. national intelligence. dan coats is resigning. president trump took to twitter

to announce his successor, congressman john ratcliffe of texas. twitter is where chuck schumer announced his opposition to the pick, saying it's clear it's because he exhibited blind loyalty to donald trump. if he's elevated to a position requiring intelligence expertise, it would be a mistake. to discuss, we have bill in washington. you had folks on both sides of the aisle praising dan coats, even mitch mcconnell talking about how this should be a nonpartisan position. what do we know about whether redcliff will make it through the senate and take the job? bill: it's going to be an interesting but tough pathway for him. the reaction from a lot of senators, including many republicans, is that they really don't know much about redcliff at all.

he raised his profile a little bit during the mueller hearing last week when he offered some very harsh questioning of the former special counsel. we know the white house was looking at him at one point as a possible replacement for jeff sessions, the attorney general. that job went to bill barr. but ratcliff is not a well-known personality. he's a former mayor of heath, texas, which is a suburb of dallas. there is a lot of concern about whether he will be someone who is independent-minded and stands up to the president when he has intelligence issues to deliver that maybe the president doesn't want to hear. emily: to recap his questioning of mueller, he agreed with the president that the special counsel's investigation was a "witch hunt." he said it was a way to invalidate the election. but dan coats himself last year had this to say about russian interference in our democratic process.

take a listen. >> in regards to russian involvement in the midterm elections, we continue to see a pervasive messaging campaign by russia to try to weaken and divide the united states. these efforts are not exclusive to this election or future elections, but certainly cover issues relevant to the election. emily: that was dan coats in november of last year. this is bob mueller last week on russian interference. take a listen. >> in your investigation, did you think this was a single attempt by the russians to get involved in our election, or did you find evidence to suggest that will try to do this again? >> they expect to do it during the next campaign. emily: that was one of the more poignant moments of robert mueller's testimony. how will this russia issue play out in ratcliff's confirmation,

given that we seem to have broad agreement among u.s. intelligence agencies that the russians did interfere in our election. >> absolutely. it's really not an issue that is questioned in the intelligence community at all. i think that clip you just showed is one that we will see replayed if, in fact, he does get formally nominated to the senate and has a hearing. that's not a 100% sure thing, either. the senate is leaving this week for its august recess and won't be back until september. it's unlikely the white house would even send this nomination up for consideration before the end that will give republicans and democrats here a lot of time to figure out who is he, what is this nominee, would he be independent? we have seen in the past, the president has made or announced nominations that never get sent to the senate or they get replaced at the last minute. but i think it will be a very

contentious hearing. dan coats was passed by the senate when he was nominated in 2017 by about 85 votes in favor. so wide bipartisan support. it helped that he was a former senator, of course, but i don't think we will see anything near those numbers when the new director of national intelligence gets nominated. emily: meantime, there has been fresh reporting that the russians managed to hack the elections in 2016 in all 50 states. nancy pelosi had this to say about the ongoing level of security and security threats. >> we're showing that the elections in all 50 states were targeted by russia, and the president calls this a hoax and senator mcconnell refuses to bend. emily: someone who believe this is merely discussion and attempt to invalidate the election results, what does that mean for

our national security? bill: i think you are raising the key point. this is also the kind of issue we will hear a lot of questions about in a hearing if ratcliff gets at hearing to begin with. the intelligence community is on the front line of the threat, the thing a lot of senators on both sides of the aisle liked about dan coats was that when president trump made a charge in public that he thought was wrong, dan coats got up there and defended the intelligence community and its work and did not bow to political pressure. it's one thing to pick a cabinet member like a secretary of state or secretary of labor or another position where you are really politically bound to the president in carrying out his agenda. i don't think anyone expects the intelligence community to follow politics, they expect the intelligence community to really present the facts as they are and lay them out for the president for decisions to be made. so the questioning of john

ratcliffe will be, can you be an independent person? what some of the presidents supporters will say, pompeo was a bit flamboyant or outrageous on the benghazi hearings, and turned out from the administration's point of view to be a pretty good cia director and secretary of state. obviously not everyone agrees with the policies there, but i think that's a model people in the white house are looking at, saying yes, he was a member of congress and he did what you have to do as a member of congress to stand out. when he gets to be the head of the intelligence community, he will do what is expected of a member of the intelligence cleaned it, but that will be the key question coming up in the hearings if the white house does send his nomination to the senate. emily: bill will be covering the drama for us that will ensue. the u.s. and is planning at another hearing on cryptocurrency.

one industry leader wants to make clear that not all cryptocurrencies are the same. what to expect from tuesday's hearing, next. this is bloomberg. ♪

♪ emily: cryptocurrency will be up for debate again on capitol hill this week. a hearing will be held on tuesday to discuss regulatory frameworks for cryptocurrencies and blockchain. ripple, one of the leaders in cryptocurrency, wrote an open letter to congress ahead of the hearing, asking for fair regulations. the company said please do not pain us with a broad brush.

many are responsible actors. we are responsible to u.s. and international law and responsible for serving the greater good. joining us is the senior vice president of marketing. congress was not excited about cryptocurrency last week, a lot of skepticism. how do you expect to change lawmakers'minds? monica: it's about helping them to understand that we are at a critical crossroads here in history where regulation in the u.s. that ensures responsible actors can use these technologies in a way that continues innovation, will set the u.s. up for global leadership much like global regulatory frameworks did in the 1990's with the internet. emily: so your ceo was on the show last week and talk about

how the libra plan was a little arrogant. how concerned are you that what facebook has done here could actually derail plans for ripple and other crypto players, given the regulatory pushback's? monica: most certainly libra has turned the world to the digital currency and blockchain industry, but facebook should not speak for the industry, and that's what want to convey in the letter. if you look at the testimony that has come out, it's about including voices from across the industry that have broader perspectives. for example, many in the industry like ripple, we partner with financial institutions versus seeking to replace them. we look at digital currency as a complement to major currencies like the u.s. dollar, again, not a replacement. many established companies like ripple have been complying with

existing u.s. international law around anti-money laundering, inter-terrace financer regulation. it's about bringing in those other voices from across the industry. emily: what kind of regulation would you like to see and would you support? monica: something similar to what the u.s. came out with in the 1990's for the internet. regulation that was more principle-based versus very restrictive, that would really hamper innovation here in the u.s. especially regulation that classifies digital currencies in a way that recognizes their fundamental differences. again, the u.s. really took a leadership role in the 1990's at the dawn of the internet age. a lot of that had to do with leadership from the u.s. government. emily: what do you say to the folks who say this is like the wild, wild west, a lot of people and companies who just want to

get rich quick outside of the rules? you have the irs going after thousands of people who have not paid taxes on the cryptocurrency game. a lot of critics don't understand what you are doing and perhaps believe in the good intentions. monica: within any industry at all, there are responsible actors and there are bad actors. with a good regulatory framework, what it looks like, it sets up the responsible actors to innovate and to improve efficiencies in the global financial system, while washing out those bad actors. we are well beyond the days of silk road by now. companies like ripple, where we have already partnered with more than 200 financial institutions worldwide, financial institutions that are regulated and are already complying with the assisting laws.

emily: is facebook a bad actor or a responsible actor? monica: i think that remains to be seen. so far they have published of white paper and they lay out an idea to create a global currency that would be a replacement to major currencies out there. as brad said on your show last week, that is ambitious, if not arrogant. emily: thanks so much for joining us today. still ahead, microsoft is betting big on artificial intelligence. we will talk about the latest investment, next. ♪

emily: consumers are looking forward to a $125 settlement from equifax. hackers are using the claim is another opportunity to steal personal information. the federal trade commission warning users on twitter to be wary of fake websites claiming to be the equifax settlement claims website. to learn more about a possible claim, visit the site. meantime microsoft has agreed to invest a billion dollars in a partnership with peter thiel and elon musk. as part of the partnership, open ai will use the azure fund services to train and run the groups ai software. joining us to discuss is gregg brockman. >> thank you for having me.

we are working together with microsoft to build next-generation supercomputers. what were trying to accomplish is to build what we call artificial general intelligence, trying to build a computer system that is as capable as a human at being able to master the domain of a study and to master more fields of study than one human can. emily: give me some examples of what it might be able to do. greg: for example, build a computer system that can solve medicine better than humans can. we do it by increased specialization. you talk to the first doctor who doesn't ultrasound but cannot read it, so he has to go to a different doctor to get the context of what is going on. this is not a problem we can solve by increasing how much we learn. we need tools that are capable of helping us all these problems.

that's what we want to apply general intelligence to. emily: the goal is to democratize ai while keeping safety front and center so everyone can benefit. how do you police the work that these supercomputers may be able to do in the future? greg: it's really important question. the webby think about this is, our goal is to distribute the economic benefits of artificial general intelligence. we can generate huge amounts of value. you look at the top 10 most valuable companies in the world, seven of them are technology companies. it's important that the benefits go to everyone, not just one place. the second part, it's important you keep the systems safe and secure and build them with ethics in the forefront. that's what we and microsoft are aligned on doing in the beginning. emily: the ceo has been there from the beginning on the ground

level of this project. elon musk is one of the cofounders -- but he left the board last year. how involved is elon musk? greg: he is no longer involved. he had to leave due to a conflict with tesla. emily: if you are the ones moving ai forward -- greg: ai technology is becoming very powerful. that means there are amazing benefits and amazing applications. imagine a personalized tutor that can really understand you and is available free to every person on the planet. that's the kind of system we want to create. you also have to ask, what are the risks? some already have bad

implications in the world, and how we -- how do we maximize the benefits and reduce the downside? we have to make sure we keep it safe and secure to mitigate the downside. emily: how is that a conflict with tesla? greg: they are also working on ai. emily: where will ai take us in five years? greg: the timeline is hard to predict. just looking at previous technological e asians, in 1878 thomas edison announce he was going to create -- british parliament put together a committee of distinguished excellence and said it would not work. it's hard to predict what the future will be like.

the computational power we are using is growing. every year we will have unprecedented ai technologies. we've been doing that for seven years. this year we have systems that can understand -- we should see within a bunch of different domains a lot of systems that can work with humans to augment what they can do much further than anything we can imagine today. emily: fascinating and very eye-opening stuff. thanks for stopping by. that does it for this edition of "bloomberg technology." we are livestreaming on twitter and follow us on tictoc. this is bloomberg. ♪

♪ >> this is "daybreak: middle east." our top stories this morning. >> the bank of japan keeps trade on hold, but says it won't hesitate to ease if needed. the tension now turns to tomorrow's fed decision. a near 2.5d falls to year low against the dollar. boris johnson steps up plans for a no deal brexit with less than 100 days to go. >> citigroup is the latest lender said to be ready to cut jobs in its trading division. stark new evidence of the industrywide slump in revenue this. isengineer group