? live from pier three in san francisco, welcome to "bloomberg west." we cover innovation, technology, and the future of business.
I'm emily chang.
Google is hoping its latest shot takes flight.
We look into the challenges of drone flight and how long it will be before age on delivers packages to your door.
Besides the big screen iphones, apple's september 9 event is a mystery.
We know apple will unveil a wearable device, but will it be a watch and can apple really have big success and watches, and why are they building a mysterious white building at the site of the event?
We will look into all these key questions.
How much do other banks and other corporations spend on cyber security?
That is the question in the forefront after j.p. morgan chase and at least four other banks were hit by russian hackers.
Jpmorgan got attacked despite boosting cyber security spending to nearly $250 million this year.
Burning man will catch fire for another three days as the sets -- self expression festival brings 70,000 people into nevada's blackrock festival.
How did burning man come to be and why does it attract so many tech titans?
We will speak to the author of "spark," a burning man documentary.
Videogame site twitch -- bought videogame site twitch, and now google has revealed project wing.
Like amazon's auctor copter -- octocopter -- google says it will take a few years before the system is ready for commercial use, but it is possible.
The drone delivery technology is several years away from government approval.
Cory johnson with me here in the studio.
Joining us from san diego, paul kedrosky.
In new york, brenda shulman tom an attorney specializing in commercial drone law.
Via skype from philadelphia, a university of pennsylvania engineering professor.
Thank you so much for joining us.
Vj, you think there is so much potential here and that is going to happen sooner than we think.
The potential for developing autonomous aircraft is there.
Not only that, you can have them scale down the size of technology not just in rural areas, but in populated, urban areas.
Paul, you are a bit more skeptical about what google is doing here.
What is your take?
I'm wildly bullish about drones in general.
But i mean, in general i think this is much more about proof of concept and a little bit of a recruiting exercise for google.
It's really important for google to demonstrate constantly to would-be hires that it is sitting at the leading edge.
Some of this is a marketing exercise directed at stanford students as much as it is a project they hope to bring to market.
It's important to keep those two things in mind and not expect anything in the near term from google other than it being an even more attractive hire.
How do you respond to that, vijay?
The question is is it commercially viable and what sectors it is viable in.
In certain areas such as farming, delivery of high-value products, there is a business case to be made.
Given that we are always short of people that are skilled, especially in countries like africa and australia, there are lots of things you can do with the small vehicles.
Technology is maturing so rapidly, not just in terms of computing, but the hardware we used to build these aircraft.
The rate at which the technology is gaining acceptance, socially and from an economic standpoint, that rate is increasing dramatically.
Like paul, and very bullish on this.
-- i'm very bullish on this.
The only thing i'm sure of is that the business case can be made and the technology will be here sooner than we expect.
What about the legal case?
Google had to do testing in australia because the laws in the united states are too strict.
What kind of legal challenges lay ahead for delivery drones?
It is quite dismaying that google had to go overseas to do testing on these technologies.
We are talking about a company whose technology in search was developed with the assistance of the national science foundation.
For it to have to go overseas is really a step backwards for the country.
With respect to regulations, what we have right now is a situation where there are no specific regulations regarding unmanned aircraft systems.
The faa has told everyone to stop using them for commercial purposes.
Brendan, does the data that they gather in doing these kinds of tests help make the case and help be the kind of information [indiscernible] here in the u.s. to get faa ap proval?
Part of the problem is it has not been clear to date what they faa has required that will give anyone the green light for using these systems.
As we reduce the weight and altitude of some of these drones, the safety case becomes quite clear they will not pose a hazard if you are flying a couple of pounds and 100 or 50 feet off the ground.
This google effort was profiled deeply in an atlantic piece today.
One of my favorite lines, yeah, unicorns could also win the kentucky derby.
Google is saying this could be as innovative as the pony express as the u.s. postal service.
Do you see that potential?
I see huge potential for drones, but the delivery case is tougher for me.
In the atlantic article they talk about how they have to do these reverse sky hooks because these consumers, as soon as we see a package on a drone we want to go in and grab it.
Unfortunately, these copters have the capacity to cut your fingers off.
Keeping it away from consumers as long as possible and focusing on industrial apps will keep the lawyers at bay and help the market progress faster.
In terms of the engineering challenge, what is the principal thing that google is trying to solve here in terms of the engineering challenge?
In that atlantic article they talk about having this big question whether or not it is possible.
They decided afterwards it is possible.
What was the question that was answered?
The technical challenge is how to navigate [inaudible] going from point a to point b, you can do this -- commercial aircrafts can do this autonomously today.
I can delivery and civilian applications, have to navigate the last hundred meters down to the warehouse or porch autonomously and that is were issues have come in.
Not just about consumers, but imagine a robot trying to sense the environment and trying to figure out how to navigate in a safeway.
We are not even addressing the possibly adversarial behaviors of consumers wanting to throw baseballs or what have you at these vehicles that are flying.
You really have to think about what kind of sensors need to go in and what computers need to go on board, how to really implement the kind of things that faa is thinking about on a macro scale, but now you have to do this on a micro scale.
Quadcopters burn 200 watts per kilo they carry.
Anytime you put a sensor or computer on board, your burning lots and lots of power.
As we know from laptops and cell phones, one thing that does not act in our favor is batteries.
It is a complex design problem to solve all of these challenges.
Amazon and google have been very secretive about their drone.
I wonder, which company do you think is better equipped to win the drone delivery war, and is it google or amazon or somebody else?
The drone delivery issue -- amazon has all the urgency.
They want to knock ups and fedex out of the middle of the delivery loop.
Google, this is an experiment to whole bunch of different ideas that apparently initially started with aid and relief and disaster circumstances.
I give the lead far underway to amazon.
Vijay, a quick last word.
Who has a better chance?
I agree with paul.
The urgency for amazon -- the chinese are already doing it.
Amazon has to step into the fray.
Google has a big advantage from a technology standpoint.
You think about how they think about the google car.
It is really a car with lots and lots of infrastructure that is not on the car.
It is in the cloud.
Imagine being able to leverage on that cloud infrastructure to navigate the last hundred meters.
Google already has that.
It also has a 3-d infrastructure to deploy cars on the ground.
For them to extend this to aircraft is a lot easier.
To my knowledge, amazon [indiscernible] to this point.
Vijay kumar, thank you so much for joining us, as well as attorney brendan schulman.
More after this quick break.
Up next on "bloomberg west," more on apple's big announcement on september 9. ? i'm emily chang.
This is "bloomberg west." we are just days away from apple's big event on september 9, where the next iphone or iphones will be unveiled.
Now we have learned we will also see wearable devices.
Will apple's highly anticipated smart watch make its debut?
We are back again with our bloomberg contributing editor, paul kedrosky in san diego, as well as cory johnson.
Adam, what is this big, white building that apple is building all about?
They have set up shop at the flint center, down the street from their headquarters.
They are building a structure next to it.
It could be a demo area.
After they do the product unveilings, it is somewhere for people in the media or other visitors to check out the products.
I have not gotten a tour of it yet.
Do you know if they will sell a 30-foot cube?
It is where steve jobs unveiled the first imac, right ? yes.
They unveiled the macintosh and also the imac after steve jobs came back and took over control of the company.
Could this event be as pivotal as those were?
It certainly could be.
It is a convenient location.
It is booked by intel next week for the development forum.
It may be that the space they wanted is not available.
That is where the compact- hewlett-packard merger was approved.
Everything apple does is so deliberate threat of wonderful areas a bigger meaning.
What do you think -- deliberate.
I wonder if there is a bigger meaning.
What do you think?
A brainwashing center to convince people they actually need another device on their wrist.
[laughter] i don't know if you saw the story this morning, that it may not even ship until january.
They may not even be taking pre-orders next week.
You are trying to freeze the market more than anything else.
Apple doesn't have anything to ship yet, and it would not surprise me in particular.
If that is the case, this is about staking a position more than launching a product.
Trying to keep everyone else from gaining share.
There isn't much share to be gained.
What about the idea that nsc chips would be part of the watch or the phone, and this would make mobile payments easier whereby you could just swipe your phone at a checkout counter?
This is another one where there is an opportunity there.
There has been a lot of buzz in silicon valley about, we could make payments with our phone.
It is something that companies like google, ebay, a lot of companies have been trying to do and it has not taken off.
For most people, using a debit card or cash works just fine.
Apple has some things these other companies don't have.
The thing you have is a stash of credit card number your -- nu mbers that few companies can rival.
They have got that payment information and payment permission.
They also have their fingerprinting technology which adds a certain level of security that nobody else has.
They are set up in an interesting way to make nfc work in ways no other company is, but he could be one of those in syria and -- zero billion dollar businesses.
Nfc technology is huge in countries like japan but has yet to take off here in the united states.
I'm wishy-washily optimistic.
I want it to happen, personally.
When you try to explain it to normal people, people say i can only do that with credit cards.
I hate cash.
I worry that the take up here will be much different than a take-out for this technology elsewhere around the world.
There is a certain inevitability to it or it i wonder if the take-up will be slow and full of the valleys.
That's why we love him.
[laughter] paul kedrosky in san diego, thank you so much.
Adam satariano, we will be looking for more scoops about apple from you.
A social media uproar.
How did twitter judge the guy who installed the knee defender?
Find out next.
? earlier this week united airlines around a flight from newark to denver after a fight broke out between two passengers.
One man had installed a device called the knee defender, which prevented the seat in front of him from reclining.
If the woman whose seat was locked in an upright position got so upset she threw her cup of waeter -- water at him.
A passionate public debate about who was more in the wrong has broken out on social media.
Eric chemi joins us from new york to talk about how twitter judge the argument.
Cory and i are completely split on this thing.
I think this thing is completely obnoxious.
You don't think it is obnoxious?
The tall people like me who suffer.
Obnoxious to other people on the plane.
If you are on a plane, you have got to realize you are in a cramped space.
So you are on the drink-throw her side.
-- drink-thrower side.
For you to now say it is obnoxious for someone to be able to recline their seat act is obnoxious on your part, cory.
That is what the data on twitter suggested, if you look at thousands of people and millions of tweets talking about this exact fight, three to tone -- three to one was the ratio blaming the guy with the knee defender.
That is because short people are on twitter in excess size.
[laughter] quite seriously, the amount of legroom on planes has shrunk over the last couple of years.
The average space for most airlines in an economy seat is 30 two inches.
That is down from what it was in years past.
It makes a big difference when you only have three inches to go.
Cory makes a good point.
Originally what happened on twitter was the fight people was talking about was which of these two people were more at fault.
Then the conversation switched.
Once they started talking to ira goldman, the guy who invented the knee defender, he started blaming the airlines.
He was able to change the online conversation from who was wrong between these two people to why the airlines are so bad.
If you look at cory, he is the example of someone who instead of blaming the guy with the knee defender, is now blaming the airlines.
What is going to happen first?
Our planes going to have more space, or are they going to ban the knee defender?
Now they have expanded their seats with more legroom.
Virgin america does the same thing.
They have more seats with more space, on average 35 inches instead of 32 inches that other airlines tend to average.
They're pulling a lot of customers in for that reason.
He should have bought a seat in first class.
They already had more money for these bigger seats.
Jetblue, a lot of their analysts say they would get more money if they were able to reduce that legroom because they feel like there is more revenue to be had, and forget the customer pushback.
That is the pushback from the stock market.
This one will be fun to follow.
Eric, you are welcome on the show anytime as long as you take my side.
[laughter] eric chemi, head of research for bloomberg tv.
If a seat slams into my knees and i can't walk when i get off the plane, it's about protecting myself.
I'm not going to change my mind on this.
In the wake of the jpmorgan hacking, how much money to spend to protect themselves?
We talk about the real cost of cyber security, next.
? time for bloomberg television on the markets.
I'm matt miller.
Let's get you caught up on where stocks closed for the day.
Not a heck of a lot moving on the dow.
The s&p 500 up a third of a percent.
S&p closing out its best month since february.
Up about 3.7% for august.
In february we were up 4.1%. ? what that will really disrupt the banks, similar to the lending club model.
Inks are banks are not providing the capital both to businesses or consumers.
Most banks cannot make money providing a business on 410, $20,000. they look at them as consumers, really.
They are requiring them to give a personal guarantee.
At the end of the day.
The way that businesses and consumers for hundreds of years.
It seems like the innovation isn't just on the side of the person of the money.
The ability of investors who want to get a rate of return in an arena where it wasn't available to them.
Banks are taking in deposits.
Granny is putting in her lifetime savings and banks have to be careful where they are making their loans.
A lot of individuals and institutions looking at this last form.
This is a $3.8 billion tire, 90% of the banks listed on exchanges.
Is this fair?
Lending club is not about you to today.
It's profitability and returning.
You are seen a valuation based on future growth.
What it is doing to the transportation industry.
Lending club is almost like ebay.
You have buyers messed up with sellers.
The buyers being the borrowers and lenders being the sellers.
Wall street is looking at this as more of a technology play and more of a valuation indicative of that.
There is so much more competition to the lending club and i wonder it of all of the borrowers and lenders are sharp on that last form for just a couple of platforms.
Do expect those rates of return or the rates to come down a lot because there is more competition?
There comes a point whether it is on lending club or where we offer our working capital for businesses, you have to price the risk.
It is no different than an auto insurance company if a driver has five accidents with the next 12 months, you will charge them a higher premium than a driver that may not have had an accident the past five years.
The greater the risk that the lender or the funding source is taking, it has to be priced properly.
There will be some price pressure.
This is not a return, the risk is too great without getting the proper yield on the money.
The founder and ceo of am erimerchant.
We will continue to follow the road to ipo.
For other banks were hit by russian hackers this month.
Since the data was accessed.
How must accompany state to spend to protect themselves?
-- how much you companies need to spend it to protect themselves?
Jpmorgan had been preparing.
They were spending like a quarter of a billion dollars.
It will be a quarter of a billion dollars by the end of 2014. they're going to have about 1000 staff specifically dedicated to cyber security.
It is rare that they have gone public with this type of information.
The thinking is any kind of information that is out there just makes them more vulnerable to an attack.
I did find some information divided up i sector on how much different sectors are spending.
It turns out that financials spent more than $10 billion, information technology companies just behind them.
Health care, energy, defense all lower.
Clearly often the targets but they are spending the most to defend themselves.
It appears that these hacks are all related, that this was a larger and more coordinated attack.
There comes a point at which the level of sophistication is such that there is no amount of money that they could spend to protect themselves, particularly if the hackers are sponsored by a foreign government.
That expertise is that there is no amount of rent that money that they could spend to protect themselves.
Some other numbers they found that were pretty interesting.
And with the about hacking, target comes to most people's mind because they were very publicly hacked at the end of last year.
It turns out that was only the fifth biggest data breach since 2005. the biggest one happened last year, 200 million consumers had their information accessed by consumers.
Target is the most public example in an increasing trend but thanks for the most vulnerable.
-- but banks the most vulnerable.
There is only a few days left of the annual burning man gathering.
What does it take to pull off the event year after year?
That and more when "bloomberg west" returns.
The systems which provides cloud-based software is showing the growth.
Shares are soaring after revenue was up 53% and the company posted a 50% gain in profit.
Cory johnson is back with more.
Aviva is the salesforce for the pharma industry.
Is this the right way to think of your company for the shorthand?
For the shorthand, the way to think about it is that we are delivering the industry clout.
The industry specific software for companies.
Our companies are pfizer, novartis, eli lilly.
They're trying to improve and extend human lives.
A very specific mission.
We are helping them do that, to help them develop drugs faster, bring them to market more effectively.
So, we are trying to transform the industry.
A specific industry.
This demonstrates the notion of how the software industry works.
I've covered this for a long time.
28% of all software sales, that is eager than the database market.
Much bigger than the operating system market.
What has the trend been there?
What is happening is that it has been the case but it is accelerating.
Industry specific software is five times as big as the -- market.
With cloud software, you can tackle these industry-specific problems more effectively, you can use the use of that to generate data.
It is accelerating the value of industries.
It is a mean that we have for running custom software for their auto plants anymore.
Will we see more than the future, not less?
They are writing custom software, that was not even included.
Going forward, we will see less custom software.
Our customers are developing less custom software because they are using solutions.
They can deploy these in 12 weeks rather than developing it and taking two years.
What is it about that industry, particularly your industry that you have to customize around?
They have very specific requirements about how to develop a drug, what kind of data do they need to bring, what kind of audit trails?
They have very specific needs about how they promote their drugs.
How do they treat drug samples, how can they treat dangerous or controlled substances.
They have a tremendous amount of legislation.
These are life altering drugs and there is a certain way you have to be controlled around that.
It is amazing to where you see in the ranks.
And a couple of years, you are the top four among all companies.
What we are doing is pretty transformative.
Think of yourself.
Your just banking on the growth of the internet.
It is transformative.
They use the internet to collaborate with their customers and partners and fundamentally new ways.
This is causing the excitement and growth.
This year we announced that we will cross the 300 million revenue mark this year and that transformation, that disruptive technology, that is what is fueling our growth.
Thank you very much.
The movie "spark, that burning man story" gives viewers a behind-the-scenes look at the event.
We will discuss the event when "bloomberg west" returns.
Welcome back "bloomberg west." labor day weekend is upon us.
While some are traveling to the lap of luxury, 70,000 people will be spending a long weekend in the nevada desert for burning man.
People talk about it as a life-changing experience.
This wonderful documentary is called "spark" talks about what it is like to be there and carries that conversation forward.
"spark" is the group of a small intimate group of artists who have this huge dream of creating a place where people can truly be themselves without any judgment.
The highest calling is to collaborate on art and we were filming this movie at a time when that community had gotten so big and world-famous, a global phenomenon.
The question is what happens to those ideals and that dream when you get big and famous?
Can you hold onto that dream?
There is an element that has come to burning man.
I have known people back east you want to connect with something about silicon valley that happens at burning man.
Is there something that is at burning man?
Click silicon valley is famous for innovation and new ideas and people taking risks on things.
The root of innovation is great problems, necessity is the mother of invention.
You say, ok, i will go for my summer vacation.
I will build some crazy huge thing in this big sandbox out in the desert.
A giant dust storm comes up and creates all of these challenges.
You have a lot of the combination of the space to try something new and do something crazy at the same time.
Lots of great challenges and problems that are really inspiring and engineering challenges.
The engineering challenges with the open campus for creativity.
That is a real inspiration for people that come here for technology.
You have run a couple of startups before.
I wonder, i feel like the connection to the art world and the world of silicon valley is often not there.
I don't see so much in silicon valley but burning man is very much the opposite.
Talk to me about that.
I think the roots of inspiration and creativity and innovation are the same.
You have to take a risk to go into uncharted territory.
You have to be unafraid of how you will be judged.
You have to be unafraid of failure.
If it doesn't, they go to try to start something new.
Burning man by its very nature out there in the desert, they disappear, you burn them down.
Then you pick up the pieces.
If you are trying to create some big art project, you will be knocked by the critics.
If you're building a project out there, you can take risks.
It is all ok.
That creates a kind of freedom.
This is the rest in the world in the tech side.
I see an interesting kind of fusion of the two at burning man.
The rich, successful techies, but they don't realize that so many many of the occupant errors -- many of the on-screen or is, that was their summer camp.
What are the vibes, what do people talk about?
What has gotten so big and well-known that many of those conversations about burning man have changed a lot.
When you're out there, you're in this harsh environment, you might be in the middle of a total whiteout dust storm.
Trying to ride your bike with no navigation across a two mile expanse to try to find your camp or friends.
You run into all kinds of other people.
You have no idea who people are.
Everyone is just a human being and a peer and there is not this hierarchy that we have in our society.
There are the stories about the expensive rv's and the expensive just to get their wish suggest there is more of a tiered structure their.
Wealthy people with private jets going to burning man, they are finding things there.
They kind of bring all of their judgments from this world and what this must mean.
I am sure you can find anything you want to find out there.
When you have somebody come in like that, maybe they're coming in because they were curious about it.
Maybe they are only swooping in for a couple of days.
They get inspired.
That's is very different than i thought.
This is interesting to think about what i would do, if it wasn't about status, about any of these things being judged on in the world.
If you can just go back to that, the kind of spark of creativity.
The sense of the suggestion, we change from the experience.
The comment from somebody that went fair for the first time, wow, i had no idea.
I have something i want to build for next year.
The success of our demand is creating this culture where you can feel like you can leave all of your self-limiting beliefs and baggage behind.
-- the success of burning man is creating this culture.
This leads to a lot of new ideas and new things.
Steve brown, the director of "spark, a burning man story." leave all of your baggage behind, go to burning man.
It is time for the bwest byte.
What do you have?
5999, that is the latest product from go pro.
It lets you strap a camera on your dog.
They released the product this week.
It is really cool.
I think you need to get this for your dog.
I think my kids would love seeing life from bear's view of the world.
He probably would see a lot of knees.
Have a great long weekend.
This text has been automatically generated. It may not be 100% accurate.