emily: i'm emily chang, and this is the "best of bloomberg technology," where we bring you all of our top interviews from this week in tech. coming up, good app -- apple. wall street breathes a sigh of relief as apple guidance for the second quarter was not as bad as some thought. we breakdown latest earnings including iphone sales services, and wearables. plus, chinese telecom giant huawei feels the burn of u.s. sanctions. we have an exclusive interview with the chairman in the midst of a sales plunge whose says the

company has a plan b. and the cost of being "cool." a former executive testifies the company fired as many as 100,000 workers in recent years in an effort to compete with companies like google and amazon. the latest on multiple age discrimination lawsuits facing big blue. our top story of the week, apple earnings. the tech giant forecasting revenues that topped analyst estimates, seeing a surge in services, which now contribute to a fifth of total sales. apple also reported the iphone represented 48% of revenue, the first time it has made up half of sales in several years. in a way, this is progress towards apple relying less on the flagship product and more on new lines of business. i got reaction from bloomberg businessweek's max chafkin and a portfolio manager, dan morgan, who manages about 240,000 shares of apple stock for his clients.

dan: it is an interesting report. if you would have told me they would have missed on both services and revenue, i would have said there was no way they would beat on top and bottom line. but as you mentioned, wearables, 5.53 billion, that was a big plus. they also used about $21 billion of cash on the quarter to repurchase shares and increase the dividend. i think they kept it at $.77. so they did some other things to kind of help along, which initially you would have thought would have been a tough quarter for them at least based on the fact that they missed estimates on iphone revenues and also services. emily: still, we have got the president warning that the trade war is not going to get better anytime soon. that could impact the iphone max. dan: yes. emily: if tariffs come into play on the iphone, what do they do? max: the reality is, for years,

apple has been counting on global expansion, selling lots and lots of smart phones in china. and it has been able to do that to some extent, but as we are seeing, the numbers aren't there, and the outlook isn't great because you, as you said, have the possibility of tariffs, further barriers, and these chinese companies will be pushing harder and harder into the domestic market in china at the same time that apple is trying to get in there. there is potentially governments helping those companies along, so lots of quote unquote headwinds for apple. the good news is, the services thing, even though it is not exactly where they would like it, it is still very strong. it is pretty amazing that iphone revenues, this has basically been an iphone company for years, and it is now below half of apple's revenue. which you could look at as a bad sign but it is probably a good sign because we have heard tim cook say over and over again that they want to increase services revenue, and here it is happening. so that is good news for investors. emily: the earnings call has begun, apple ceo tim cook speaking right now, saying he is thrilled to report a return to growth.

dan, you own a couple hundred thousand shares of apple. how concerned are you about this tariff issue? dan: the tariff issues as max was saying, it is kind of a double whammy in regards to shipping phones assembled in china back to the u.s., then you have the trump administration. then you have or tablet. her regard to certain things like -- then you have retaliatory things in regard to certain -- in regard to certain things like glass covers, sensors that are shipped into china that could be potentially on a tariff watch with the chinese government. and the big question going forward, and maybe max can talk a little bit about it too, is what does apple do? do they try to raise prices, which they already have extremely high average selling prices compared to the competition, or do they just absorb the tariffs into their profit margins, and how does that work into like the international expansion theme, where you have annual average incomes in india and china that are a fraction of what they are here in the u.s.? so, it does create a conundrum

for apple going forward. it is definitely an issue in terms of trying to model out what will happen on apple with these tariffs. emily: meantime, they want to push the services business. they still hit a record in the services business, though lighter than what analysts had estimated. but in order to grow, they have to keep getting devices in the hands of consumers. max: in the bloomberg blog, it is pointed out that it is kind of a circular thing where, on one hand, services are replacing iphone sales, but on the other, you can't have services without iphones. and i think there is some question, is apple making all this money in services revenue because their services are really good, or is it because they have set up this business where you kind of have no choice? i mean if you have an iphone and you want to buy an app, that is revenue in apple's pocket. that is recurring revenue that is never going to go away, or not for a long time. in terms of revenue growth, is this real innovation or is this

a powerful, mature company kind of flexing its muscles and collecting revenue? and i think depending on what you think the answer to that question is is how you will value the stock. if you see lots of growth ahead, then you will be much more optimistic. emily: that was max chafkin and synovus portfolio manager dan morgan. and apple's biggest rival also reported earnings this week. samsung shares fell wednesday after the company said second-quarter profit more than halved from a year earlier. the ongoing global trade dispute and smartphones slump taking a bite out of their business. i got details from selina wang in hong kong. selina: we already received a profit warning from samsung, so they actually beat estimates on some fronts. the big story has been an industry-wide story, around these memory chips. the whole industry has really suffered from low demand, falling prices, part of that

because of the overhang from the trade war, economic global uncertainties, as well as slowing demand from these data center players. but we did hear positive news from samsung on that front. they are expecting demand to pick up in the second half of the year, a big sign was they expect these data center players to reconsider purchasing again. but we also saw declines in their mobile division. a 42% decline in operating income. of course, the whole industry has been dealing with problems, but samsung did say profitability was eroded because of intensifying competition in these low to midrange markets. so, some samsung-specific issues, but they've also been dealing with a lot of global geopolitical overhangs. emily: talk to us about how we think the u.s.-china trade war and the dispute between japan and south korea are impacting samsung specifically. selina: one of the biggest overhangs for them is how long this u.s.-china trade war will drag on for and how much it will have a slowdown on global growth, which impacts purchases

of smart phones as well as all of the components. the japan-south korea spat is also a huge concern for investors. there was a lot of questions from analysts on the call about how they are going to minimize the impact. we did not hear a lot of details from executives. we know so far that they have enough components for now, despite the export curbs, but the problem is if these do drag on, if they become even broader, how will samsung find alternate suppliers? that is going to be very difficult and it could lead to production issues. on the huawei front, that is a double-edged sword for samsung. on one hand, as huawei suffers from challenging demand abroad, that is a place for samsung to come in on the smartphone front, but in terms of their profitable chip business, that could be a big drag if huawei is really damaged and unable to purchase as many components from samsung. emily: meantime, samsung has also faced branding issues. they tried to launch a foldable

phone to much fanfare. there were problems with the phone, breaking down, then they pulled it back. how are issues impacting demand for the samsung phones? selina: as you mentioned, they have had a slew of branding problems. and have been seeing declining profits in their mobile division. they also made a statement that smartphone shipments in the current quarter will be similar to april and june. it suggests the launches of these new, flashy phone models may not be as successful as some were hoping for. but some of the bright spots in samsung earnings, one of them is the led displays. we saw apple come out with earnings recently that had strong results, stronger demand than expected, so that is expected to be a bright spot in t another bright spot executives touted on the earnings call is the development of 5g and the growing demand for 5g chips. however, that is still very

early stages, and there is a lot of skepticism among investors now about how that will play out for the rest of the year. but it is worth pointing out that another reason why there was such a negative share impact after their announcement was that they actually ended up delaying announcements in shareholder return plans until next year, citing some concerns to global growth and geopolitical uncertainties. emily: that was bloomberg's selina wang from hong kong. coming up, the federal trade commission has slapped facebook with the largest fine in history for privacy violations. but will facebook really learn its lesson? we talk about it with a dissenting ftc commissioner who says the fine is not enough. and if you like bloomberg news, check us out on the radio. listen on the bloomberg 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 it $5 billion settlement with facebook for years of privacy violations by the network. as part of the settlement, facebook must submit to oversight from an independent board committee as well as new privacy certifications and assessments. but while the fine was the largest ever imposed by the ftc, many lawmakers and privacy groups are arguing the company got off too easy. i talked to u.s. ftc commissioner rebecca kelly slaughter, voted against the settlement. rebecca: i voted against the facebook settlement because when you look at the terms taken as a whole, not just the fine, but also the injunctive relief, i was not convinced it would do enough to change facebook's behavior and make sure that in the future, they kept their promises to the ftc and to their consumers. emily: what would have been better? fining zuckerberg directly? i know you have suggested that the ftc should have sued facebook, should have sued zuckerberg perhaps personally? rebecca: realistically, you have

to look at what our options were. here, it would have made a lot of sense to take facebook to court. to say, you may not agree to a settlement that we think will change your behavior, so we will pursue the terms we care about in court. and open litigation in a public court of law would provide transparency in public accountability that i think are missing from this settlement. i also think the settlement is missing meaningful limits on how facebook collects, uses, and shares data. and i would have really liked to see that. emily: now, suing facebook directly would have been a riskier path, wouldn't it? you could have risked losing that suit. rebecca: i agree. and if you think the entire point of litigation is the outcome at the end of the day, the remedy that we can get, and you think the remedy in this settlement was enough to change facebook's behavior, then i could understand supporting it. but if you don't think the

remedy changes their behavior, you can think of other advantages litigation could have in terms of public accountability, public transparency about what the company did and who knew what in the company. and, at the end of the day, we the ftc are not a private corporation. we are not just making an expected value calculation about the end result of litigation. we are trying to work in the interest of the american public and we have an obligation to seek justice, even if we are not guaranteed to achieve it. emily: i spoke to your colleague, noah phillips. i told him about your response to the deal. he voted in favor of the deal, of course. take a listen to what he had to say about your suggestion that a lawsuit would've been a better route. noah: i don't think that is an accurate characterization of the state of play. the remedies that we have achieved, both financial and injunctive, meaning the changes we are making to facebook, are

very unlikely to have been achieved through a court process. in a normal litigation, you are weighing the certainty of less against the chance of more. in this case, we're facing the decision against the certainty of more and the uncertainty of getting even less. emily: what is your response to that, commissioner? rebecca: well, respectfully, i disagree with him. i don't think the terms on the table were enough to guarantee that facebook's behavior would change, or even necessarily to make it likely, because they didn't impose any public accountability on transparency, or any meaningful limitations on how facebook uses data. so i would rather take the chance in court, and i think the process of public litigation can make a big difference in how a company behaves. if our goal is deterring the company from doing something wrong and deterring other companies from doing something wrong, the prospect of a public trial can have a very effective deterrent affect, even if the

remedy at the end of the case may be different from what you can get in a settlement. emily: what about the zuckerberg -- about zuckerberg personally? what kind of punishment or more extreme penalty would you have liked to have seen on him? rebecca: what i am going for here is public accountability and transparency. the settlement the ftc entered into excused mr. zuckerberg, and all other executives at facebook from any liability, and i didn't think the investigation that we did justified that excuse. i didn't think we had a basis to say they should have no liability. at a minimum, i would have liked to see some transparency, some testimony, some documents in court that gave us better insight into whether liability was appropriate. emily: are you concerned facebook won't learn its lesson? do you think facebook will simply slide back to its

original state of play, and given that there are no structural changes to the business model here, things will just go back to the way they were? rebecca: yeah, fundamentally, that is my concern. i think that is why it is important for the ftc to use the tools and resources it has, limited as those may be, to fight as hard as they can to change the behavior of companies breaking the law, and teach them a lesson that it is not worth doing it again in the future, and they can't simply pay a fine to make it go away. emily: in the meantime, the ftc has opened an antitrust investigation into facebook. what can you tell us about that investigation, or at the very least, your position on whether facebook is too big? rebecca: unfortunately, i cannot tell you anything about the substance of a particular investigation, this or any other. i do think that the ftc has an obligation to look into questions of antitrust violations.

those are often going to be by big companies, and open investigations where it is appropriate to do so. emily: u.s. ftc ommissioner, rebecca kelly slaughter. coming up, qualcomm disappoints. the chipmaker reports weak smartphone demand and a downbeat forecast, we talk about the impact of trade tensions. this is bloomberg. ♪

emily: chipmaker qualcomm gave a downbeat fourth quarter sales forecast yesterday. at the high-end, qualcomm is looking at $5.1 billion in sales, while analysts predicted $5.7 billion. that is in line with a warning issued by qualcomm back in april that demand for smartphones, particularly that china would be weak. i got a rundown with bloomberg's senior market editor, mark regan in new york. mark: that forecast was very light.

the eps forecast for the quarter was also really light. they see adjusted eps of as much as $.75. the street was looking for $1.10. it all boils down to qualcomm's basic business model. it has this controversial practice of, instead of just selling chips to manufacturers, they license chips to them, and they want royalties equal to a certain percentage of the value of the device. now this has caused a lot of litigation problems for qualcomm. they actually settled with apple earlier this year. but there are still a lot of questions about similar case brought by the ftc. a judge in the ninth circuit actually ruled against qualcomm. they are waiting for an appeal and there is not a lot of clarity in today's earnings reports. they may be getting into it on the call as we speak right now, but not a lot of clarity about when they can expect resolution on this idea. that means, qualcomm was very

upbeat about the prospects for 5g in their earnings report saying their design wins have doubled over the last three months, but investors are not sure what that revenue stream is going to look like, because of this unsettled issue with the ftc. and they also came out and said, until they get a deal with huawei over the same issue, it is unclear if huawei will make additional payments to them, also saying that huawei is taking market share in china, which sort of has ramifications for the entire space. so, qualcomm has really been on a roller coaster ride this year. it is down 18%. more than 20% now if these declines hold in the trading tomorrow. still up 29% on the year. so, quite a wild ride for qualcomm this year. emily: president trump abruptly escalated his trade work with china thursday, tweeting,

"during the talks, u.s. will put an additional tariff of 10% on the remaining $300 billion of good and products. this does not include the $250 billion dollars already tariffed at 25%." come to anfailing to agreement in shanghai, a draft list of the targets included a raft of consumer and tech goods, including most of apple's major products. earlier, trump was asked if he is concerned about the market reaction. take a listen at what he had to say. pres. trump: no, i am not concerned about that at all. i expected that a little bit because people don't understand what happened. emily: to discuss, we are joined by our bloomberg trade reporter, sarah mcgregor. also with us is bloomberg businessweek's max chafkin. what does he think people don't understand? max: the theory from the trump administration is, number one, this a temporary thing, all part of the negotiation with china, you know, it is the art of the deal, and basically, trump

supporters basically agree with that. the other piece of this is that these american companies can adapt. the reason you don't see the apple stock tanking right now is because apple uses contract manufacturing, and in the long run, they could shift manufacturing out of china if they needed to. obviously, it would be a pretty big lift for them and a bit of a near-term disaster. emily: so, sarah, as usual, there is ambiguity on the length of time this would be imposed, the president indicating it could go up or down, be short or long-term. give us the details. sarah: so trump later when he spoke with reporters after he announced the 25% tariffs in a tweet, said it could go beyond 25% if he had to go there, so, again, it just creates a wholeee business community. companies like apple, for instance, this is a 10% tariff that trump announced today. when they first announced the $300 billion possibility of tariffs on the final batch of imports from china, the rate was

25%, so 10% is not quite there yet. still, this is the part of china's imports that will hit consumers. even a 10% tariff, if a company cannot eat that up, it will be passed onto the consumer. everything from children's clothes to toys, your iphone, this raises the possibility of those prices going up. emily: now, thus far, apple goods like the apple watch and air pods, those have not been tariffed, max. so how do companies deal with this uncertainty? sarah and i were talking yesterday, and she indicated it is increasingly looking like there is not going to be a short-term resolution. max: i think you are seeing companies talking more and more about manufacturing outside of china. you know, india, manufacturing in india or other countries would be a possibility. the entire high-end manufacturing ecosystem for consumer electronics is in china right now. the other thing is they could

raise prices, as sarah says. part of the problem is, already, the iphone is kind of under pressure from consumers. consumers have been hesitant to upgrade. the upgrade cycles are getting longer. and you wonder, if you start raising prices, even a little bit, that could change the economics for apple. emily: coming up, u.s. sanctions continuing to bite bite chair of chinese telecom giant huawei says there has been a dramatic slowdown of sales growth in the midst of a trade war. in an exclusive interview, with liang hua, he hints that even tougher days ahead. bloomberg tech's live streaming on twitter. check out our global breaking news tictoc on twitter. this is bloomberg. ♪

emily: welcome back to the "best of bloomberg technology." i am emily chang. chinese telecom giant huawei continues to face the fallout of the trump administration's attempts to thwart it. and we are beginning to get a picture of what that means. huawei's sales growth dropped in the first half of the year. amid u.s. sanctions. tom mackenzie sat down for an exclusive interview with the huawei chairman on the company's shenzhen campus. they talked about huawei's role in the smartphone business and how they can survive without google's android operating system. mr. hua: we don't know when the u.s. will make the decision on android and when that decision

will come, so we have to make preparations for our products. we will evaluate our strategy for the overseas market. if we are not able to use android for our new smartphones, we have the ability to develop our own operating system and ecosystem, which would become the basis for our services to the customers. tom: give us a sense how fundamentally you have had to change your supply chains to mitigate these pressures? have you completed those changes or is there more to be done? mr. hua: the entity list put into place by the u.s. was disruptive to our supply chain as we had already made plans to use the components from the u.s. for our business. but u.s. suppliers suddenly stopped supplying us, so we had to make adjustments to our supply chain, including our process of purchasing, manufacturing, and delivering products. we will do the adjustments to our supply chain. we will change to other suppliers and use our own chips

for the core components. i think the damage to the u.s. suppliers is even bigger than it is to huawei. we will have to increase our workload and manage continuity internally, but the damage to the u.s. supplier is direct as they lose a customer. if the u.s. removes huawei from the entity list, that would be a solution. tom: what impact are you seeing for demand for your 5g equipment given the u.s. pressure campaign on some of its allies around the world to block access to huawei? mr. hua: although the u.s. has been launching a campaign among its allies, it is up to each country to decide its partners based on its own development demands, telecommunication demands, and carrier infrastructure construction demands. i think now there might be some impacts in places like australia, but there are others who are willing to work with huawei. tom: when it comes to components, you have said that you are still blocked from some of your key suppliers.

can you give us some clarity on who those suppliers are, and the success you have had, or not, of finding alternative suppliers to fill those gaps? mr. hua: we might have some components that we can't buy from the u.s., but we will use our own components to supplement. smartphone operating systems like google's operating system and ecosystem haven't resumed business with us yet. we are working to find a way to patch this hole. we hope to see good news, but if there isn't any, we will try to enhance our own capabilities. tom: do you expect huawei to be part of the conversations when the trade negotiators meet in the next few days in shanghai? will they be discussing huawei, and do you welcome the backing of the chinese government for your company? mr. hua: huawei is purely a company.

when two countries talk, they talk about big topics. in the talks between china and the u.s., they will talk about big topics. for us, huawei only wants to do its own job, like what i just said. we need to patch up the holes, and manage continuity, as well as ensure product delivery. we do not sell to the u.s. what we do care about is doing a solid job to make sure the products are delivered to our customers. emily: that was bloomberg's tom mackenzie in an exclusive interview with the huawei chairman. so what language should a car speak? is it 5g, wi-fi? the answer could determine who will lead the way when it comes to developing self-driving cars. billions of dollars could be at stake. so could thousands of lives. bloomberg's ed ludlow has the story. ed: cars that can talk to each other, interact with traffic lights, and even see around corners. the advent of 5g could make

these real, bringing faster speeds and greater bandwidth needed for smart traffic systems and truly autonomous vehicles. but it is not the only option for connecting cars. it's up against a more established wi-fi-based technology. there is a debate about which is better. the choice is between the existing wi-fi standard called dsrc, or dedicated short range communications, or c-v2x, cellular to vehicle to everything which would eventually use 5g networks. china was the first to make a decision favoring cellular technology for its cars. with recent developments in 5g, that could be handing china an early lead. >> their focus is leading to this real time-to-market advantage. and frankly, they will be saving hundreds, if not thousands of lives much sooner than we will, as we fumble to determine which is the standard that is best for the long-term roadmap in the western world. ed: in october, china mandated the use of c-v2x and gave it a dedicated band of spectrum.

in the u.s. and europe, the spectrum issue is unresolved and there is a split on which technology to use. settling the standard matters. if the federal government mandated a technology today, it's estimated up to 8.1 million car crashes and 44,000 deaths could be prevented. so how are the technologies different? both are designed to connect cars directly to other vehicles and the infrastructure around them. but the cellular tech can also harness a 5g network's wider range and greater bandwidth, and crucially, its lower latency. >> that one millisecond delay in latency in 5g to let you know there is a car coming around the corner that you can't see is going to be critically important. today, with 4g, that might be 10, 20, 30 milliseconds. it will be crucially important to the safety levels. ed: the wi-fi-based standard has low latency, and backers like chipmakers nxp argue that it is

a better option because the technology is mature and ready for deployment now. but supporters of the cellular tech say it has s will build its car in china and bring it to market with basic self-driving capabilities. >> 5g will enable vehicles to talk to different infrastructure. it will enable vehicles to talk to each other. autonomous driving can use up to 1.5 terabytes of data per hour. that data needs to come into the vehicle and leave the vehicle. ed: c-v2x can evolve with each new generation of cellular networks, starting with 5g. it will be as simple as switching the modem. criticsi standard say that technology is outdated and not appropriate for the cars of tomorrow. so, which will prevail? 5g c-v2x is now backed by a trade group representing more than 100 car manufacturers and chipmakers, including qualcomm. >> vehicles are becoming more and more autonomous, relying upon cameras ann

once we start blending in both 5g and cameras and sensors, we get to see a far more transformative experience. ed: the e.u. commission plan for the wi-fi-based standard was defeated in july, opening the door for a 5g standard supported by audi and bmw. in the u.s., the p administration has put off making a decision, but ford is not waiting for washington. in january, the carmaker committed to deploying c-v2x in its cars from 2022. currently, general motors is the only u.s. carmaker promoting the older wi-fi standard. bloomberg new energy finance says in the long-term, the u.s., korea, and japandopt e cellular option as they aggressively deploy 5g networks. for now, the western world has left it to automakers to fight it out over which standard to adopt. ed ludlow, bloomberg news, san francisco. emily: coming up, testimony and age discrimination claims against ibm indicate the company may have fired as many as

100,000 workers in recent years. details on multiple lawsuits and ibm's response, next. and lab grown diamonds demand is growing for man-made jets to fly everything from 5g networks, to satellites, to engagement rings. i visited one of the top producing labs to see for myself and try a couple on. next. this is bloomberg. ♪

emily: ibm has laid off as many as 100,000 workers in the last few years, according to a recent lawsuit. in fact, big blue is facing several lawsuits, claiming age discrimination against older workers. in one suit, a former employee alleges that it was all part of an attempt to make ibm appear "cool and trendy" as it tried to appeal to millennials. our correspondent has details from new york. olivia: we have a varying number of lawsuits. we have a class-action lawsuit filed in manhattan and different civil suits filed across the country, from california, pennsylvania, and texas. and the similar thread between

all of these cases is they are alleging ibm has been firing its older employees in order to bring in and retain new, younger workers. they actually call these cases a fire and hire discrimination scheme. and they allege that ibm has been carrying out this resource action, which is the term the company uses for laying off employees, since as far back as 2014. emily: so, ibm in a statement said, "we have reinvented ibm in the last few years to target higher value opportunities for our client" the company hires 50,000 employees every year. tell us more about how the company is responding. olivia: so ibm is a 108-year-old company, and for the past seven years straight, it has faced fading revenues, and it has been trying to reinvent itself. it has kind of totally missed the mark in the cloud computing revolution and has been lagging

behind the likes of amazon, and microsoft, and google for about a decade now. so the company is really on this new growth trajectory. it is bringing in hybrid cloud and trying to become a whole different company that focuses on newer technologies like artificial intelligence and hybrid cloud. and it just a acquired red hat in a $34 billion acquisition. so part of this strategy of laying off older workers and bringing in new, younger workers is actually to turn the company around and to become, as we read in this deposition, a cooler, trendier company where young talent would want to work for ibm in a similar way that they would want to work for a google or an amazon. emily: that was bloomberg's olivia carville. well, after a year and a half of searching for the home of its second headquarters, amazon chose to split its campus between crystal city, virginia and long island city new york. , shortly after the decision was made, we watched the downfall of the new york campus as local

politicians pushed back on the decision and amazon pulled out. , since then, u.s. cities have upped the ante to try to persuade the seattle giant to bring jobs to a new location. one city that did end up making out from the start is nashville, tennessee. amazon announced last year that its operations center of excellence would move there and create 5000 jobs with it. we caught up with tennessee governor bill lee and asked him about the move, and how he plans to bring other big tech companies to his state. gov. lee: we are a state that has a very business friendly environment. we have no income tax, low business taxes, we have a regulatory environment that is friendly to businesses. so companies know that about states. we are very fiscally, soundly managed. companies know that, so they sort that out. then they look at then they look , at incentive packages that states have to offer. and we certainly deal with companies in that way. we incent companies to come

there. then we look at things like workforce development, and we have made a tremendous push in our state to create workers for companies that are coming there, particularly tech companies and textbased -- technology-based companies. our administration has done something called a future workforce initiative that is establishing the kinds of education, curriculum and pathways that will create the workers for the future. emily: there are some tech companies already there. lyft has operations there. postmates, mitsubishi has moved some operations there. what in the future do you think you can offer tech companies? i mean you are obviously making , the case here in san francisco this week to put a bet on tennessee. gov. lee: yeah, i think the biggest thing we can do is show to them our commitment for workforce. technology-related jobs require a workforce of the future, and

they require an education system, i believe, that understands the needs of the workforce. we created something called the give act the governor's , investment in education act, this year called the futures workforce initiative. those are legislative initiatives that in fact create workers of the future. it changes tur middle schools and high schools look. it ultimately changes the type of skills that people and workers in tennessee have. we need to be a place that when lyft is looking to expand their operations in tennessee, they know that they can add the 1000 jobs they need to, or amazon will know that the 5000 jobs that they are going to need to fill, that there will be a workforce out there to do it. our investment in that is very important. emily: nashville voters just overwhelmingly rejected a transit bill that would have brought light rail to the city.

do you see a risk that nashville or tennessee might not learn the lessons of seattle, which saw a rising housing costs, a traffic crunch because they didn't move fast enough when amazon came calling? gov. lee: yeah, we have to lead on this. what i think is most important that we have to do, and we were talking about this in our department of transportation now, but with other municipal leaders, we need to think about what transportation is going to look like in the future. you know, investing in a multibillion-dollar system that may be antiquated by the time it is built is not what we want to happen. i think transportation is rapidly changing. if you talk to some of the companies here about how people are going to move, that is what we need to be investing in from a transportation standpoint. we do have to stay ahead of that curve in our major cities, in tennessee. we want to be ahead of the growth curve as much as possible

so that we can not make the same mistakes that other cities have had to make and had to learn. we are going to learn from their mistakes and not remake them. emily: my conversation there with governor bill lee of tennessee. well, office-sharing startup we work posted an office day as they prepare for an ipo, reportedly looking to go public in september, in what is expected to be the second-biggest initial public offering of the year. wework said to be targeting a share sale of $3.5 billion. it was last valued at $47 billion. i got insight from bloomberg's ellen hewitt. ellen: we don't know a lot, we know that wework is hosting one today. they have had analysts from different banks and firms come in and hear the pitch, learn about their business model and get a sense of how they might be covering it. we know they held it at their office in new york city and that most analysts who attended had to sign nda's to agree not to

discuss what was shared until the ipo. emily: how typical is this? i don't remember uber or lyft having an analyst day before they actually went on a roadshow. ellen: i am not sure, but the s1 has not yet been made public. we know wework filed confidential documents with the sec last december, and said in april they had filed those documents, but we still have not gotten to see them. the company is aiming to do an ipo in september based on our reporting. so one would think that maybe there is a chance that sometime in the next month, we might get to look at the documents that show wework's earnings, losses, all the nitty-gritty, which certainly many of these people are excited to look at. it has been a company that has gotten a lot of attention for its unusual financial metrics, community-adjusted ebitda, things like that. people will be interested to look at the cold hard numbers. emily: let's talk about what analysts are actually looking for. what are the questions they want answers to?

ellen: i think they are trying to assess whether to look at this company as a real estate company or a tech company. it is something wework has gone back and forth on for many years about how it presents its identity. it wants to be seen as a tech company in part because it is interested in getting that sort of multiple in the markets, and it would be a much more valuable proposition for wework to be seen as such. of course many people look at it and say this is a company that takes on leases, rents out smaller parcels of real estate and should be considered more like a real estate company or an investment that is modeled more on how real estate models are done. emily: meantime, you mentioned some of the unconventional metrics. there has been some controversy around the founder and how much money has been taken off the table. what is the status of that? ellen: that is still just part whene story of wework people are trying to understand this company. but i think people will be trying to get their hands around

in terms of deciding how they value these companies. you mentioned the founder and ceo has taken out loans against some of his holdings. wework has also reportedly sold some of his equity in the company. he has also been known to have personal holdings of real estate that wework has taken leases in. the company has made steps to try to resolve some of those perceived conflicts of interest, but it is something i imagine is a big question on a lot of analysts' and investors' minds. is this a problem? do we think this might be a problem for the company as it goes public? emily: do we have a sense of how much money they are making, if they are profitable? do we know? ellen: they are not profitable. but they like to present -- that's why we talked about community-adjusted ebitda. that is a metric by which they see themselves as profitable on sort of a building-by-building basis, so almost what you might think of as the equivalent of the unit economics-type approach, where you're looking at an existing building that has been in place for 12 or 18 months. does that building itself make a positive profit? and they say yes, but it is certainly removing a lot of expenses other people might think should be counted into the greater calculation. [laughter]

emily: that was bloomberg's ellen huet. coming up, lab grown diamonds in silicon valley. they supply everything from 5g networks, satellites, to engagement rings. i visit one of the top producing labs to see for myself, and try a couple on, next. this is bloomberg. ♪

emily: and finally this hour, you may think of diamonds as a girl's best friend, what you may not know is that they are considered to be the computer chip's best friend a viable and , even superior alternative to silicon. in silicon valley they are being used to fuel advances in 5g, satellites, quantum computing. i recently visited a lab that grows diamonds and learned how they are made, what they are for, and of course, tried on a few. ♪

it sparkles. it shines, and it is one-of-a-kind. but this diamond isn't a product of mother nature. instead, it comes from a lab in a process that is shaking up the $80 billion diamond industry. how long does it take from start to finish to grow a two carat diamond? >> it takes a couple weeks and then a couple more weeks to finish it and do a polished gemstone. emily: lab grown diamonds have the same physical characteristics and chemical makeup as mined stones without the controversy of their origin. >> you start with this foundational piece and once it is in the reactor carbon atoms , start to come down one at a time and connect to the lattice of the diamond below it. and little by little you are growing diamond. all of the reactors we created in-house. not just built, but designed in-house. that is where all the magic happens. emily: martin and his team at diamond foundry in san francisco have been making these precious gems since 2015. >> our founding team worked on silicon technology, and we

recognized that the sets of technology we used can also be applied to grow diamonds of very high-quality in ways that previously were impossible. emily: but they are not the only ones. there is new diamond technology in st. petersburg, one in singapore, and even in the centuries-old them on business, debeers is getting in the act. in 2018, it launched a fashion jewelry retailer called light box jewelry, targeting younger consumers with its lab diamonds and selling them for $800 a carat. that is 1/5 of the price of other man-made stones, and 1/10 of the price of an actual gem. but questions remain of how well man-made diamonds will hold their value. >> debeers will probably will produce 35 cubits of natural diamonds this year. you look at the global output of man-made diamonds produced for jewelry, it is probably 5 million carats. but it was well under one million carats just a few years back. emily: last year a major win for producers of man-made diamonds when the u.s. federal trade commission amended its jewelry guidelines, clarifying a diamond

is a diamond, regardless of its origin. currently, man-made diamonds account for just 1% of the $14 billion global rough diamond market. that number is expected to grow to 7.5% by as early as 2020. much of that growth is in the luxury jewelry market. but the real money opportunity is to use what they have developed in this lab to fuel the future of silicon valley. >> we know in our past, we developed the first diamond wafer. that is going to enable a lot of technology applications, for power electronics, 5g networks, satellites. >> these applications go anywhere from quantum computing to high-tech laser and optics equipment. but i think we are probably still a good 10 years away. emily: ultimately, diamonds are forever, but consumers now have a choice, and the prospect of them enabling advances in technology in the future is bright. that does it for this edition of the "best of bloomberg technology." we will bring you all the latest in tech throughout the week.

tune in every day at 5:00 p.m. in new york, 2:00 p.m. in san francisco. and we are live streaming on twitter. check us out @technology and be sure to follow our global breaking news network tic-toc on twitter. this is bloomberg. ♪

paul: i am paul allen in sydney. shery: i am shery ahn. we are counting down to asia's major market open. ♪ paul: here are the top stories, hong kong braces for a citywide general strike as chinese state media warned beijing will not allow the unrest to continue. stocks are set for a losing streak. investors are preparing for a bumpy start