Live from pier 3 in san francisco, welcome to "bloomberg west," where we cover the global technology and media companies that are reshaping our world.
I'm emily chang.
Our focus is on innovation, technology, and the future of business.
Let's get straight to the rundown.
Amazon spending sprees shows no sign of slowing down.
They have the new features as they report their highest revenue ever for a nonholiday quarter.
The cloud is turning to into one of the microsoft pillars of strength as the new ceo puts his mark on the company.
A check of the top headlines.
Google, apple, intel and adobe have agreed to settle an antitrust lawsuit over hiring practices.
Terms were not disclosed.
More than 61,000 contractors -- the settlement comes weeks before a trial was set to begin.
Fcc chairman tom wheeler says proposed rules tweaking net neutrality will not in the internet fairness policy as we know it.
Providers would be able to charge companies like netflix and google more for access to internet fast lanes.
In a blog post, wheeler said that would be measures in place to protect consumers like for bidding isps from blocking content.
The executive in charge of google plus, he is leaving the company after nearly eight years.
He helped build google plus from the ground up.
In a post, he said he is looking forward to the journey to come without saying what he will be doing next.
First, tour lead story.
Amazon shelling out money as the largest e-commerce company tries to have a major presence from everything from cloud computing to content to grocery sprayed revenue was just under $20 billion.
A 23% gain.
The company turned a profit of $108 million, up 32%. amazon is forecasting a current quarter loss as it is investing all over the place, including in china.
Also, amazon prime pantry.
A service for prime members to get household items.
I'm joined by eric lawson in new york.
Technology that has helped retailers sell online.
I will start with you.
What are the headline takeaways here?
Shipping contents were huge.
Amazon does spend aggressively.
This is in keeping with their history from many quarters now.
It is just a lot of aggressive investment in the future breed whether it is the film at centers.
It is getting products out to the consumer much more quickly.
Shorten that amount of time, and it is another way that amazon is just tempting other industries.
Sales are up 23%. expenses are also up 23% pretty big part of that is shipping.
This is what your merchants depend on.
They get their goods from one place to another.
What stood out from the report?
What stood out is the amazon investment they are putting behind getting the last mile to the consumer.
You think over time, $20 billion a quarter, there is a lot of risk in the last mile.
If you go to the holiday, amazon bought the week before christmas to make sure they could get packages at on time.
That is not sustainable long-term as volume increases at this pace.
Amazon is working on its own shipping network focused on this last mile, as you say.
This will be out of the ups and fedex.
What do think about this?
Is this something your merchants would like?
I think anything that helps them get more exposure to amazon shoppers, merchants would love.
They are looking for alternatives.
We are always looking tee shot.
-- they are always looking to shop.
For sure they will open this up to third-party customers.
Over the next several years.
What about the shipping cost?
Up 30%. is bezos ever going to turn a profit?
The investors seem to let him get away with this as well breed quarter after quarter.
The fact is, remember what happened at christmas time brady made these promises to get the product.
It didn't matter when you ordered them.
We will get them to your door in time for christmas.
That is the expectation that amazon is setting.
It is raising the bar for everybody.
In terms of shipping costs, something they are doing that is important.
They have raised the rise of amazon prime.
The flat fee you pay every year to ensure that you get these items.
Likes -- that compels people like me to order one hand and have it delivered to me and i will not put other stuff in there.
I get delivery for free.
I just bought one pen for my friend.
Everybody does it.
How does amazon scale this in an economical way?
How will they turn a profit?
The thing is, if you look at amazon in segments, they are retailer.
We are shipping company.
They are a software provider.
They are in the cloud.
We are in the music and video business.
They look at their lines of business is independently.
They almost can't afford not to invest as much as they are.
Much more than every other retailer.
It is interesting, with amazon fire, now they have got a partnership with hbo, which is the story.
Hbo has its content lock down.
You look at netflix.
This is their sole business.
Video and streaming and creating original content.
For amazon it is, not just a hobby, but not nearly -- it is a hugely important part of the business.
They have this hardware.
They are not making a profit on that.
They idea is they will be increase lay become ubiquitous and invaluable not just for books, but for tv shows, for movies.
For all of those things we go elsewhere.
Amazon says, do it here.
Watch it on your kindle fire.
Watch it on these other products that you are going to see coming down the pike.
At some point the disbanding -- at some point the spending is going to have to trail off and read more benefits from it.
To merchants worry about amazon's margins?
I could care less about amazon margins.
The only camp out -- they only care about their margins.
Can i get exposure from amazon?
While not giving them too much information about my business.
What about rounds?
Drones are long-term investment.
It is farther out than they predicted.
They are trying to figure out the last mile.
In terms of their own fleet, it is economical to do that in l a, new york, los angeles.
It is not economic to do that in rural areas.
That is what drones are trying to address.
Ceo of march entry, thank you.
I want to get tom, with you, to another story prayed microsoft earnings.
The first earnings report since chaucer shook over -- sent nadella took over.
A net income of $5.7 billion.
They are starting -- they are turning a profit.
What stood out to you?
It is about the cloud.
We have been talking about a lot.
We will continue to talk about it.
It is what is his background.
He understand how microsoft can help businesses do their work more efficiently.
That is something that he is starting off on a high note.
He is championing this for a long time.
He has only been the ceo for two months.
How much credit does he deserve for getting this someplace before he came to chief executive?
This is his background.
He understands this.
Microsoft appeals to business to get there information, to store the information, to handle their computing tasks.
He understands that, what that relationship is.
It is not one that is easy to bring across.
Microsoft has a lot of competition in that space.
The differences, they have done much better job of working their way into the business.
And telling businesses we can make a big difference for you.
They are there from an early start.
This is something that has hurt them with regard to consumer businesses like phones and other businesses.
Like the internet where they have struggled.
Like he is focusing more on mobile devices.
Microsoft has historically struggled.
Is there hope their question or there is in the business side of that equation and making sure that these products work on mobile.
Transform themselves as businesses change the way they do business.
We are doing it differently.
We are not chained to her desk in the same way.
That is true of the customers across the microsoft landscape.
What about the big leadership that he has done so far?
He has to come in and put his stamp on the business.
We have seen a lot of that already in place.
You are probably going to see more of that as we go forward.
Coming up, he is a legendary designer and the latest partner to join connor perkins.
Our special guest host for the rest of the hour.
John meada is here.
I'm emily chang and this is "bloomberg west." john maeda spent a decade at the m.i.t. media lab as a professor and head of research.
He then went on to be president of one of the most prominent art schools in the country.
In the world, really.
The rhode island school of design.
He is with kleiner perkins and also the chair of the ebay design advisory council.
John meada, our special guest this hour.
Thanks for joining me.
I have been looking forward to this.
It is nice here.
Like that means a lot for someone with an eye for design.
How is he going so far?
How do you like silicon valley and venture capital?
It is amazing.
I think the speed is so extraordinary that -- the people, the energy, it is intoxicating.
How did kleiner perkins convince you?
I was tracking a lot of designers going into venture.
Recent graduates went off to silicon valley.
Like the ceo of air bnp.
And i kept telling students to go be like them, and i felt a bit disingenuous that i was not going myself.
So why not, i thought.
What is it you're helping the company do?
You're helping for polio companies.
You are also sourcing investments.
It is trying to understand the strategic value of design and company formation, and early incubation.
How to get design as early as possible in the process.
It is something i'm lucky to get the chance that.
-- chance to look at very closely.
We have been talking about companies reporting earnings.
What are some established companies that you think are designed well?
It is important to know that doing design well is not something that you get good at suddenly.
If you do it for a long time, things work out well.
People say apple's design is great.
You have to remember that they have been added for 30 years -- at it for 30 years.
They have always been a design company.
They have always been design first.
Do you think that apple is the gold standard still?
I think apple is one of the standards.
They have done well.
I see ibm coming back.
They began in the 60's and they had to revise it.
They are doing that.
I have gotten the chance to work with ebay closely.
I'm watching that.
And then small companies, an ecosystem of startups, a lot of activity there.
Any particular company that you would call out as doing a good job?
Definitely flip board.
They are moving like a rocket.
And people ask me why they are doing well, and it is because of this guy marco wescamp, one of the world great designers and he disappeared and he has come back with this company.
You need a great designer for a great company.
We are looking at your list of hot design companies.
Nest is not a surprise.
It is interesting, when you think of ebay or air bnb, i don't think of design with those companies first.
This is important to point out.
People think them a great designers, i love their website.
But that is not the point.
Joe and brian are industrial designers.
They design physical things.
They love the physical environment.
They get the physical environment, the space.
The website is like an artifact of that.
The website is a scaling mechanism for their sweet understanding of the physical environment.
The design is over here, not on the web.
That is their secret.
What is the wrong way to go about design?
Who is doing design poorly?
I don't like to throw apples at people.
I figured you would not.
What are some common mistakes?
I think the worst way is common.
To get the technology going and then realize, we forgot to make it powerful for people to use.
-- palatable for people to use.
So they will spray it on top.
Lipstick on the pig.
I never liked that.
Why does it happen?
Technology was always the game changer.
You want to because it had great tech.
Why would you care about design question mark design was something that was pretty frivolous and never had a big impact.
Design has been a problem.
If you have significant design behind a business model, scalable, you get a great company like a flip board.
Do you think design is more important than technology?
No, technology is the most important.
I went to m.i.t., two, so i am kind of schizophrenic in that respect.
Technology is the game changing experience in which human experience can happen.
You can have a good idea and it has to be implemented.
And this area will happen at scale.
You get that technology.
John maeda, we will talk about your role at ebay next.
Coming up, you may not think of ebay first when you think of a company focused on design.
We will ask john meada why he is working with the company.
I'm emily chang.
Ebay may not be the first company that comes to mind when you think about design, but john maeda reports directly to the ceo, john donahoe.
He is our special guest host for the hour.
Also with us is day and howard.
-- dane howard.
Thanks for coming up from san jose.
I will start with you.
It is so great, the story of how you ended up with ebay.
I would like you to tell it for me.
Brian chesky and john donahoe are great friends.
John noticed his great design and that is how he got connected.
He asked how can ebay's design culture that the world has never seen before.
It is how it started.
How does ebay think about design?
Ebay has moved from just thinking about pixels to something more holistic.
If you think about it, i we believe that commerce is focused on people.
The more that we can be customer focused, bringing design and technology and product together.
You work together a lot.
I am lucky to work with again.
What kinds of things have you been recommending to them?
If you think about brian chesky post on social media, it is about culture.
We have been coalescing the design culture across all of ebay's companies.
What does that involve?
Is about actuating -- activating awareness and bringing a lot of different designers together.
There are a lot of different business units inside of ebay.
We are focused on activating that conversation and revealing some of the great designers that are already there.
Are you working on the ebay marketplace's website?
In one, that i was removed -- i was moved by was les schwab's founders, and that we are moving from capitalism to talentism.
If you think of ebay's major asset, it is all that talent.
The way you make rate products is through great people.
The way you make great people connect is through a strong community.
Just yesterday we had an event.
And you were there and speaking with brian chesky and speaking before employees at ebay.
Tell us about the products you're working on, some of the stuff we do not know about.
We are moving design thinking into the process.
You will see a lot more design early.
That is the alignment.
That is what yesterday was about, getting the leadership to validate the product-centric parts of where we are going.
This long-term initiative is about getting the thinking forward and bringing the designers to the forefront.
How is design at a big tech company different than a startup?
I was saying to dane, when i work with startups i might have half a designer, or one and 1.1. in a large company you have hundreds of designers.
That is a major advantage.
But they all have to work together.
Design is subjective.
Can it be more difficult when they are all involved?
It is like a symphony.
If he have a lot of people in a symphony, you hear an amazing sound.
It is how you get them together in the same room.
You are an entrepreneur.
You started your own company and now you are working at a company there are how many designers question mark just north of 300. how does that work, getting everybody on the same page?
If you think about the symphony it is about activating , the conversation and bringing it to life.
You think about visualizing what the experiences could be.
The greatest thing is you start to dream a little bit and be able to move the product experiences forward in that way.
Dane howard, thanks so much for joining us.
John maeda of kleiner perkins, you are with us for the hour.
We will be right back.
We have heard how important good design is.
Where do they find all of these designers?
We will talk about the competition for new design talent coming up.
You are watching "bloomberg west," and i'm emily chang.
I'm joined by john maeda.
We have talked about why tech companies need good design.
How do you get good designers?
That is the question right now.
I'm curious about how you got into design.
You have an engineering background.
How did you get into this?
When i was young i went to a parent teacher conference and the teacher said i was good at math and art.
My dad overheard this.
He made tofu for a living and the next day he was saying to a customer, john is good at math.
He forgot about the art heart.
-- the art part.
Years later, i went to m.i.t. and to art school.
You are still focused on the art.
I went back to it.
I want to bring in john.
You know very acutely what the demand is for design talent.
How competitive is it?
It is incredibly competitive.
When you think about what a startup team used to be, it was the engineer and a business guy.
The start up team today is the the engineer, the business guy, the designer.
Of the thousands of startups, they all need one new person that they didn't need to think about.
The demand has gone way up in recent years.
What makes a good designer?
Does a good designer, are the also a good engineer?
Is a good engineer also a good designer?
The people who can both do engineering and design are a unique species.
The ones who can do design and leading the leadership question , is a big question, because companies that want to scale it need a design leader better than a pixel person.
What you mean by design leader?
Someone who loves people.
It is rare.
The people thing is kind of a pain.
Design leaders are much more important.
You work from companies from facebook to square.
What do they want?
Ultimately, they are design first companies and that is a big shift.
The opportunity to bring talent to the table is huge.
They are fighting with every other startup.
If you are one of these companies, how do you create an ecosystem to attract top design?
You walk into squares offices and it feels like a place that a good designer would want to work.
The same thing with facebook.
A different vibe, but a place a creative person who wants autonomy will want to spend their days.
I'm curious about that.
That assumes you know what they want.
What do you do to create design leaders?
People who can manage scale of the creative person?
A lot of it is about inspiration.
At the end of the day, the inspirational design leader, there are not that many of them.
It is a rare breed, and that is why you see the largest tech companies placing a premium on bringing someone to the table that comes out of fashion, retail, industry.
Other designers get inspired by these people and want to work for them.
It is a fundamental shift in the way companies are doing business today.
John, what do you think of a company like apple bringing in the ceo of burberry, and bobby brown going to yahoo!? people from the fashion industry -- i don't know if they have an engineering background, but people from the fashion industry to big tech companies?
That is more of a question of technology.
Technology is mouse to suppose will -- technology is now disposable.
That is for a mature company.
For the startups, you're looking at something much more substantial.
You do not want just fashion, but technology and great design.
What do you think about the fashion trend in tech lately?
You think about when we used to buy watches, we got them based on how well they tell time.
Today, that is and after product.
You by your watch based on design.
You by your blue jeans based on design.
Every company is thinking of design in the new way.
Companies have way greater needs for design talent than the companies of the last generation.
I used to say in a thousand engineers versus a thousand designers, with a thousand designers i can find 300 and want to understand engineering.
In a thousand engineers, you can find one or two that want to design.
That is true.
It is higher than 300 now.
A lot of designers are picking up code.
Unfortunately, many schools do not teach people going into design very much technology.
It is all focused on print design.
You were seeing designers saying, i want to learn front end coding.
How about trenton designers?
Flat versus schemorphism.
What are you explain what the differences.
What is better?
The flat versus ski more thick -- schemorphic.
When things are simple, we get to complex.
When things are too complex, we are tired and we make it simple.
In five years, we will be back with textures.
Is one better than the other?
No, it's a trend.
It's better because it makes you feel something, like this beautiful dress you are wearing.
If you wear it everyday it is tiring.
How do you do something different?
That is what we want to do as people.
Is it better to balance?
Or does a company have to commit to just one?
It is a balance question.
All right, fascinating conversation.
Thank you for joining me.
From twitter to facebook to the conversations happening online, they are all becoming important as ratings to television executives.
Up next, the rise of social media and how it has changed the face of tv.
I'm emily chang.
Facebook makes a move into the fitness tracking business.
They have bought a mobile app of moves.
Terms were not disclosed.
It is the latest acquisition for facebook, which agreed to by whatsapp for $19 billion, and oculus virtual reality for $2 billion earlier this year.
Now turning to our special series looking at house -- how technology is changing hollywood, facebook is announcing the launch of newswire.
The new service is part of a with story full.
Aimed to be a resource for journalists.
Jon erlichman is an l.a. with more.
Why is facebook launching something like this, a newswire?
And it is just that.
It is a newswire, and if you choose to be interested in it you can get in your newsfeed.
A long with the other stuff your friends are talking about.
The reason is tied back to the big battle between facebook and twitter.
In a lot of ways, they are like the media companies that are out there today.
The news networks pretty conversations that are happening.
They want to have more of those conversations tied around things that are happening in real time, the same way if you are watching one of the big news channels and there is something that is interesting to a wide group of people.
One of the knocks against facebook has been, can you really get people engaged around something like, hey, this is my new pair of shoes?
Maybe a couple of people are interested, but a lot more people are interested in a meaty topic.
This is the way to get a lot more verified, true journalism, and obviously, story corps is a partner in this and they look on all of the platforms and find the real deal news.
If it is coming into your newsfeed and that is something you are interested in sharing in a big way, then that makes facebook potentially more powerful.
On the one hand, this is a small development.
But part of the bigger story.
Is this a threat to traditional outlets that are focused on breaking news like, i don't know -- bloomberg?
All of the traditional media companies, the ones here in hollywood are very aware that , there are massive conversations taking away from media.
How do they deal with that?
Even a company like news corp., rupert murdoch showing interest, which they ended up buying.
And the other thing is that the conversation has come to show -- come to television and fueling entire shows.
That is what time one has been working on.
Our guest joins us now as part of our series.
Malcolm, thanks for joining us.
You guys work with tv channels on capturing the social conversation.
Explain to me how it works.
As you know, facebook is breaking on issues more and more.
The citizen is there when a fire or a car crash occurs.
A lot of first responders are letting folks know they are heading to a scene where something is happening.
He cut that is happening in social traditional media companies have recognized the need a way to pay attention to that.
But it is pretty technically cobbled hated to do.
There are a lot of copy tatian all powers and technology you need to actually access that and make it easy to use inside of the existing editorial process.
What we are doing is simplifying the process by processing hundreds of messages a day, and then delivering to media companies around entertainment and sports and so forth.
Delivering inside that news environment so they can use and turn into contact -- content quickly.
And how much of one particular show can you fuel?
In some cases we are talking about the ability to do huge amounts of tv programming for all of this data that you guys are mining.
It is interesting, because as social becomes a greater part of the conversation, as long as you have the right tools -- some of which we are providing inside the newsroom -- we have been able to power as much as 50% of daily shows.
There's quite a bit coming from social that tv programs can take it vantage of.
And this is broadcast by the way.
The same will apply to blogs or youtube or online video tech shows.
But i don't think we are that advanced just yet.
But we are getting there, though.
To tie this back to a business story like yours, talking about this is one thing.
But you are growing a business.
This is catching on.
As we roll out with more and more customers, they are finding that the shift is occurring with the way they tell stories and the stories they decide to tell is directly affected by what is happening in social.
In the old days, a newspaper or news editor for broadcast at an editorial desk might decide to run with this story first, this one second, this one third.
But they will look at what is trending online and they will say, what we thought should have been the third story, we need to spend more time on that and lead with that.
Social is telling them that people are interested in.
That is a complete shift.
This also brings up the question of whether computers should be making the decisions.
There are some in the world of social media that feel threatened by this.
Where does the balance occur?
At the end of the day, i don't think the machine can really reflect the voice of a particular news outlet.
Of course, google has one of the most complex algorithms on the planet to determine what news goes on google news.
But i don't think that people feel like they are getting a voice that they would get on, let's say, bloomberg, or any of the news channel.
At the end of the day, you need a human being who will do the final cure ration and describe a story.
There are the facts and then there are someone's feelings about the facts and how they talk about the story.
That is what happens at that final level of cure ration.
The kind of view that as the machine is figuring out all of the stories that are useful and valuable.
And then the editor is making the final call in reflecting the voice of the news outlet.
And just in our last 10 seconds, when it comes to stories on, let's say, sports or celebrities, what do you find the greatest amount of content being generated and then ultimately making its way onto television, where is that coming from?
That is hard to answer.
If you think of breaking news that is happening all the time everywhere, sports is the same and entertainment is the same.
Honestly, they are all about equal as far as i'm concerned, because there is just a ton of it everyday.
It would be very hard to measure how much is out there.
You have to look at how many people are consuming it, and that is a business question.
But in terms of revenue, that is where the money is.
That is a good one for us to know.
Malcolm, thanks for your time.
Emily, back to you.
Our senior west coast correspondent, jon erlichman.
Still ahead, we ask john maeda about his favorite apps and favorite clothing designers.
That is coming up.
I'm emily chang.
As the former president of the rhode island school of design and current partner in one of the most prestigious venture capital firms in silicon valley, john maeda has a long and distinguished career in engineering and design.
Still with me, he is our special guest host for the hour, john maeda.
You gave a tad talk.
The headline was you live at the , intersection of technology and art, a place that can get very complicated.
Is it stressful being who you are?
You know, do you think about the design of your table, your chair, and always want it to be better?
I used to.
I lived in tokyo for a while and i was with a swiss typography mob.
It is like making things 0.001 perfect on the page.
I was in that cold.
And then i broke out of it and i went reddish style.
-- british style.
British style is free.
So you let go a little bit.
What apps are on your phone?
What do you focus on?
Design is not just an aesthetic experience.
It can be a junkie, off-road, undesigned experience, and those are all examples of good design.
On one hand, i might like the solar app, because it is a great way to look at the weather and it feels like a rothko painting.
On the other hand, i might like snapchat.
You get the combination of fried chicken and expensive food.
A good balance.
Again, back to balance.
What about your clothing?
Steve jobs always wore the black turtleneck and jeans.
It is important to note that his black turtleneck was designer.
It wasn't just a black turtleneck.
There's something about staples in design.
These are very simple.
The put design quality and the fabrics.
Design is not just about how it looks, but what it is made of.
What designers do you like?
The whole combo.
A whole spectrum.
I want to talk to you about wearable computing.
I just got my own personal google glass.
What do you think?
This is the version with the glass frames.
I think of it kind of like robert brenner -- who used to work at apple.
Yes, and he did this great slide where he could make the headphones like beyonce.
It is kind of like, how you think technology matters.
If he was wearing the stuff before, it would be much cooler than now.
Someone told me that i was not allowed to wear these in public because i would be a social program on a -- literally, a social pariah.
It is all about how it is introduced.
If beyonce was wearing it, you would want to wear it.
It is about the culture around the technology.
What about this?
That is another example of, you cannot tell time with it and it does not display anything, but people are wearing it.
It is a trend.
What do you think about wearable in general?
Where is this going?
We have been discussing that people don't want to wear them every day and what you wear is very much an expression of who you are.
I feel lucky, because i feel like we foresaw all this stuff coming.
In the 90's -- in the there was 1990's, a guy wearing the stuff and doing this.
And there was a paper he wrote about parasitic power.
A little bit odd.
It was all about how to harvest power off your body, and the best place to harvest it is off your neck.
That is where your body is warmest.
We went off topic.
What are you wearing?
I wear a mystic charm.
-- misfit shine.
I have one of those.
And it is a watch, and i'm an older person so i like to wear a watch.
It doesn't work all the time.
They will be very happy to know that you are wearing that on the show.
I will take these off.
It is now time for the bwest byte, where we focus on one number that tells a whole lot.
Jon erlichman has the bike for -- has it for us.
What do you have?
Keep them on.
I will spare everyone.
Check this out, glasses or no glasses.
The number of times president obama has vowed to and played soccer with a robot, which he did this week in japan.
There is a humanoid robot that honda has been working on for 14 years.
He is doing some dancing moves.
I believe he can also walk up steps and served a cup of juice, and recognize faces.
You like robots?
John maeda, our special guest host this hour.
Thank you for joining us.
It has been a fascinating and authorization.
Thank you jon erlichman as well.