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tv   Bloomberg Technology  Bloomberg  November 1, 2019 11:00pm-12:01am EDT

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taylor: i'm taylor riggs and this is "bloomberg technology." google gets fit. they will buy fitbit in an effort to boost hardware. plus, a matter of national security. tiktok is said to be under review in the u.s. and apple tv+ launches.
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first, our top story, google agreeing to buy fitbit for $2.1 billion in cash. the fitness tracking device company jumped on the news. i am joined by garrett divina. what does fitbit know about hardware and software and health that google doesn't? gerrit: a good question. google has been rumored about talking about a smartwatch. but the operating system has been a collapsed and is not as - has been eclipsed by competitors. and is not as popular as android. what they are doing is saying let's buy fitbit and build our business from that.
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taylor: fitbit is seeing its third annual year of sales decline. why is it an attractive choice? gerrit: it's one of the few choices, i'm not sure attractiveness is what is going on. as you said, they have been in decline, they struggled as apple came out with the apple watch and can do things a lot of fitbit devices cannot. the price was a premium for fitbit that it is still cheaper than when it went public several years ago. it is a small amount of money for google and it can use the technology to add to its business and throw things against the wall. taylor: talk to me more about the ecosystem. we know they bought the intellectual property of fossil, also a watchmaker. how does this fitbit combination integrate the hardware with software? gerrit: i am curious how much
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google's wearable ls comes out, or if they scrap it completely. i think it's likely google will come out with its own watch, a pixel watch, so to speak, and complete the ecosystem. it is trying to play into what apple is doing, apple has phones, watches, laptops, and google wants to do the same thing. taylor: i have to ask about the regulatory scrutiny. more house of representatives members coming out in particular, a rhode island representative saying this does raise red flags. what is the antitrust scrutiny? gerrit: google already under scrutiny from state attorneys general, the doj, house of representatives, individual senators who have an ax to grind against google, and a lot of the usual suspects have come out and said today, nothing in terms of particularly new investigations but they said really?
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you are under scrutiny and you're going to buy another company? some are saying this is google thumbing its nose or regulators, saying we are still going to do this. from a traditional antitrust perspective, buying a watch company should not necessarily raise flags because google does not have a watch of its own, but it is buying a lot of data. google is one of the biggest data companies in the world and that will probably be the tack investigators take when they look at the deal. taylor: another day in big tech and another use of cash. thank you. with more on the atmosphere the google/fitbit deal finds itself in, i want to bring in greg becker from silicon valley bank. i know you can't comment specifically on the deal, but generally, what is the m&a environment like?
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greg: m&a and ip market, it's a -- and the ipo market, it's a healthy environment. there are a lot of great companies still doing well, some with property, like fitbit and the google acquisition. as a lot of money, good companies, and exits are healthy right now. taylor: when you say there is a lot of money, are you seeing more cash, credit, equity? greg: the main two sources of capital, equity and debt. for the innovation economy, the dominant is equity. from venture capital, raising larger and larger funds, sovereign wealth funds, family offices. if you think about it, where interest rates are right now, there aren't that many places in the world for growth, and innovation is a place for growth. obviously money goes where growth is, and you see a lot of equity going into this space.
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i think it will stay that way quite a while. i don't see that slowing down. it might be bumpy that it will be fine. on the debt side, that's a place where companies can raise cash to support their business, that's what we do. it is important to us. it is a very competitive market and there is lots of money out there in the space as well. we have grown dramatically and part of it is to put money into the innovation economy. it is really debt and equity and both are healthy. taylor: i have heard the term a lot of cash being used a lot. we hear that, there is a lot of cash chasing too few investments. what is that doing to valuations? greg: let's take a step back. you look at how much venture capital is flowing into the system this year, through three quarters, about $97 billion. it will be the second year in a row that it is or than $100 billion invested. in comparison to history, six years ago, that is a big jump.
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but it was back in 2000, it was only $100 billion. from the standpoint of almost 20 years ago, it's about the same amount of cash. when you think about it, the market is so much bigger than it was back then for all of the obvious reasons. companies are staying private longer, so for my standpoint, it is a lot of money, but when you put it in context of historical and you look at the $100 billion relative to the global capital markets, it's not that much money. my view is that in some ways, valuations are heating up, but it depends what sector you are in and what stage. taylor: has softbank structurally change your world? greg: it hasn't had a big impact on our world. if you think about the innovation space. what softbank has done is the following, they are putting large amounts of money into these companies that allows them to stay private larger, and it allows them to go after really big ideas.
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those two things i would say help the innovation space. when you are making big bets like that, they don't always work out and sometimes when they don't work out, get a lot of headlines and a lot of us are talking about wework. but i do believe it helps put more money into the economy, more money into the innovation space, and from that standpoint, it is ok. taylor: you have a lot of clients, i will bring up some of the specifics, peloton, datadog. greg: over the early part of the year and even the prior year, it was all about growth. don't worry about profitability, focus on growth, and a lot of prospectus, s1, becoming profitable was so far out it was
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hard to comprehend. that's different than it was historical. usually you saw profitability in a short time. i think people are less focused -- are more focused on profitability now and that is healthy for the environment. taylor: more focused on profitability and more healthy for the environment, that is my take away. thank you, greg becker. coming up, the unstoppable hack that appears to be one chinese hacking group, being unleashed on how value targets. -- on high value targets. this is bloomberg. ♪
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taylor: tiktok is one of the
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most popular music video apps in the world and it is being investigated as a national security threat in the u.s. it was formally known as musicly and was bought two years ago for almost $1 billion. the committee on foreign investment in the u.s. is reviewing the app's growing popularity amidst increasing concerns about its growing influence in the u.s. to us more is our editor for technology, tom giles. why now? tom: they are taking a close look at a lot of things, even things that happened in the past. there was the acquisition of grinder, the dating app. now that has to be divested. the concern is chinese ownership of something like that could represent a national security threat. what is happening with tiktok, which is popular with a lot of young people, the concern is
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twofold. one is that it engages in censorship that is against american values. two, what is it doing in terms of gathering data? it could be accessible to the chinese as a result. taylor: like you said, a bipartisan issue. you had a republican and a democrat coming out and saying this should be reviewed. does that help or hurt the case that this is a bipartisan issue? tom: look, that probably has helped raise the level of urgency around it. it doesn't show this isn't just one party or the other party. in our political sphere, where things are so partisan, it is interesting that there are some things that everybody can rally around and one of them is fear of china.
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taylor: does this confirm from your birdseye view that cfius is more involved in these technology deals across the border? tom: it is taking a deeper look at these deals, even deals that have happened years ago. smaller sized deals. scrutiny of anything that has to do with china. chinese investment in the u.s. chinese wants to buy a u.s. company, take an ownership stake or even minority stake in a u.s. company, it is all getting reviewed much more intensely. this is in light of the trade war. taylor: thank you for joining us. sticking with china and national security, chinese hackers are said to be targeting high-ranking military and government officials. apt-41 is using malware to steal text messages targets according
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to a cybersecurity firm. to discuss in washington is john holquist from fire eye. what did we learn about targeting specifically sms text messages? john: we discovered a piece of malware designed to essentially look at sms traffic on a telecommunications provider. it allowed the chinese hackers to search by phone numbers and other distinguishing characteristics belonging to users, but it has also allowed them to trawl for specific keywords, intelligence and military terms, as well as related to groups politically at odds with the regime. taylor: john, is text messaging the new threat? we still often talk about email. why text messaging? john: text messaging is used in
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a variety of applications. some people are certainly making a move toward more secure, encrypted applications, but it is important to remember that adversaries are going after them as well. almost all messaging is under threat right now. taylor: underscoring all of this is the concerns about huawei. considering it has been on this list. does this underscore that fears were correct about huawei? john: i can't speak to any specific company but i can say that china is acting on a global scale to subvert telecommunications. taylor: john, what have you learned about increasing hacking in 2019? how has it changed? specifically from china. john: china has strayed from a
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lot of the intellectual property theft we saw so much of before. they are refocusing on traditional, classic espionage targets, including dissident groups for them as well as military intelligence targets. one of the important things to know is that they are maturing and moving toward things like, places like telecommunications providers. they are moving upstream where they can gain access to a lot of people simultaneously. taylor: and some of the concerns about this sms messaging is that there is nothing that me as a user can do to protect myself, right? john: that's right. this takes place on the telecommunication provider network and not your phone. it's very hard for you to actually take some action to protect yourself here. you might look into an encrypted service or in the worst case
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scenario, you have to watch what you communicate. taylor: do you have any sense of how effective it is? i hear that communication providers, it is the most secure method, you get off of wi-fi and rely on your provider. is there any evidence these aren't as secure as we thought? john: there has been some recent incidents where we know nation state actors are looking to gain access to those providers. as more and more people use single providers, or a handful of providers, nationstates will be interested in targeting them specifically. they will put a lot of resources there. they make a great effort to keep your communication secure and they may be more secure than usual, but there should be no mistake that these adversaries are looking to break-in. taylor: finally, any sense as we
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head toward the election, is it china or russia, who are you most worried about? john: i am most concerned about russian actors. they are still very aggressive. the news came out very recently that they are again targeting the olympics in response to some of their troubles as far as being accepted into the games. i think that is a sign that they have not given up their aggressive ways and they will be equally willing to interfere in 2020. taylor: thank you for joining. coming up, the wait is over. apple has debuted its original content. we will talk about apple tv+ next. this is bloomberg. ♪
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taylor: apple ended years of anticipation about its next act in television on friday. they launched the apple tv+ streaming service, which will
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offer shows to match rivals. but it is liking what many -- is lacking what many consumers want, a big library of favorite movies and tv shows. to discuss, we are joined by our guests. dan, how far behind is apple? dan: they are far behind from a content perspective. you have others spending $10-$12 billion. but it is an iconic brand with an unparalleled install base. so they are behind but they are also diving into the deep end of the pool. this is a company that given the golden install base you can never count out. taylor: dallas, your take on apple's position, the strengths and weakness relative to its big competitors?
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dallas: they have two advantages two key advantages and challenge. i think the biggest advantage is distribution. apple's position to be the number one mobile streaming platform in the not-too-distant future, which is huge, because mobile is the accelerant driving the growth and streaming. the second is a, apple has been very aggressive at $4.99 a month, and it is free for any apple subscriber in the next 12 months. that is critical because many adults do not stream and this is enabling them to dip their toes and for free and try content and hope they love it. the third clear advantage is apple resources, a quarter trillion dollars, no studio has that to match. the other side, they have challenges, the content challenge is enormous. this is the weakest offering. none of the shows will be bingeable.
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hopefully they can correct quickly. the second challenges competition. we will see a lot of streaming interests entering the market, including disney in the next two months. twice as many consumers are interested in disney compared to apple. so there are headwinds but also some tailwinds. taylor: dan, i want to talk about content for pricing. with content and $100 billion of cash on the balance sheet, do they bid for old content, our old favorite shows, or use the cash on developing original content? dan: i think it will be a multipronged strategy. the first thing is, they are stepping up to about $6 billion a year, to build out the content.
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that will be more of a long-term initiative. i think they will start bidding on some of the content out there, but the issues with "friends" and others, it is an expensive proposition, but we believe it is a drum roll to them making a large acquisition of a studio in 2020. we've talked about mgm, sony, lionsgate. it is a one-two punch in terms of how they get there, they built a fortress and then they build the content. taylor: $4.99, is that appropriate? it is cheaper than competitors. and your thoughts on integrating the free service if you buy a new device, to further draw people into the business? dallas: apple doesn't have to win the streaming more. it is do or die for netflix but this is about strengthening this part of apple's business.
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i will not be surprised in the near future if we don't see apple news, apple arcade, the gaming service, apple music, and apple tv bundled in a content platform that becomes the defect a way in which we enter the streaming universe. the other thing to remember is that apple is a platform where you can build your own mini streaming bundles, so you can subscribe to hbo and showtime within your apple device. i think the $4.99 is very aggressive, the cheapest in the market by far, but they need to be in that space given the lack of content in the first 12 months. taylor: thank you to dallas and dan. coming up, it has been a week full of earnings, acquisitions, policy changes are political ads on social media.
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we go over the biggest tech stories in this week's tech in review. that is next. this is bloomberg. ♪
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taylor: now to our weekly roundup of the top stories in tech. the biggest toy of the day has -- story of the day has to be google buying fitbit. $2.1 million in cash. it could increase scrutiny by antitrust regulators. let me pull you in here. as an analyst, what are the antitrust scrutiny issues like for you?
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>> this beltway versus big tex -- versus big tech battle will be getting a close microscope. this is something investors will focus on. taylor: as you have been following the fundamentals and technical portion of this, but to the technical show us as far as how google is positioned? >> the stock has had this great move. it had been underperforming. it will be very bullish for the stock.
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some of the regulatory and political headwinds that it faces, it could be tough. it could have very interesting implications. taylor: does this give them a fighting chance against the apple watch? >> that will be a massive uphill battle. look at what apple has done. they have really cornered the market. they have done a phenomenal job with apple watch. this is an opportunity they needed. they saw where apple is going. they saw the fitbit asset. this is an opportunity. i think this is an offense of move and a defensive move at the same time.
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they continue to be at the top of the mountain. taylor: your thoughts on the general climate? does this continue to mean we are buying instead of innovating? >> it seems to be that way. the problem is the big players have so much money. they can force people out of certain areas. we are starting to hear from some of the venture capitalists. instead of saying they can build this product and we will take the company public someday, they say they are worried about that market. there are all sorts of implications. big is not so good right now.
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investors will be have to very be noble as they move forward. the election is almost one year away. taylor: as we talk about this and the regulatory environment, let's switch to the second big topic of the week, facebook. we learned that regulators are zoning in on their purchase of instagram. that will be a key area focus for the antitrust perspective. how is the stock pricing and -- in if instagram and facebook are broken up? >> it is funny because when you get to these situations where the political efforts fall into play, it is usually not that big a deal. this will only grow. you have a lot of people, you talk about the impeachment situation.
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a lot of gop people will start to say, how can i differentiate myself. i will go even harder on the facebook's of the world. we saw things peter out before the election. that is still nine months away. you will see pressure on the presidential campaigns and the henan -- senate and house campaigns. whether they break them up or not, i do not know. the headwinds surrounding these will keep facebook and google hampered. taylor: i have yet to hear your thoughts on facebook's stance on political ads versus twitters stance. who is right? >> i think it is a good move for facebook. the way they are approaching this, they are going on the offensive. they're going into selection
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from a security aspect. they built out that platform. they are not shying away. that is the right strategy. you look at twitter and facebook, twitter continues to still be licking their wounds. this is a bit of a head scratcher. for facebook, they are confident in terms of where they are. they are not shying away. this is something they are trying from a messaging perspective to show. look at the numbers. engagement and advertisement continues to be robust. taylor: the third big story of the week has to be about apple. when we got phase one of the trade deal, you came in on your cell phone on your car on the way to the airport. you said if this was not a trade deal, this could be as simple rewriting of apple stock.
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they have asked for a reprieve of the september 1 tariffs that are hitting the air pots and the watch. how much about trade is impending -- impacting apple? >> they are still the poster child for the trade battle. part of what you are seeing with the stock being re-rated is that it continues to be the china story. the tariff are contained situation. that continues to be a key dates that everybody is focused on. instead of burning iphones in the street and having pro-nationalism, chinese consumers are doing is buying the phones.
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taylor: you get the final word on apple. overbought or oversold? >> it is a little overbought. no question that it is a great company and a great stock. it is the most overbought it has been in two years. more overbought than it was last september. that correction had more to do with the broad stock market than anything else. i'm not saying you should short the stock. you will get an opportunity to buy a little bit cheaper on a technical basis. i think it could pull back five to 7%. that would be healthy. the stock market asks -- ask and funny way sometimes. taylor: a lively week in review. thank you both. we are getting some political news on friday.
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beto o'rourke has confirmed that he is dropping out of the presidential race. the former texas congressman has struggled for months to recapture the energy from his 2016 senate run. his campaign was said to be under extreme financial strain. he may have had to have some deep cuts to his staff to pay for ads. coming up, a canadian e-commerce company says it is not competing with amazon but helping other people to do so. we hear from the ceo. ♪
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taylor: shopify is one of
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canada's best performing stocks. the ceo sat with us to discuss the company's growth plans. take a listen. >> we said we would invest a lot of money. it is something we want to have. we will have to spend some money. >> are you surprised by the negative reaction to continued growth and investment? >> i work every day. the way we think about it is, we are working on sustained market value of the business.
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>> you were talking about systems. the purchase you made. making deliveries. anymore on your horizon? >> probably, but not that. this is very good. this is what we spend most of our time on. >> you talked about the need for two day delivery. how do you find the constant competition finding from amazon?
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and the need of your clients being somewhat different? >> one of them was wonderful. our shoppers and merchants are holding us to a higher standard. we will try to get things to everyone in two days. >> how do you think it will become more efficient as time progresses? >> things have to travel by any means possible. it can go futuristic to drones. old school bicycle couriers.
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different situations. different distances. we have to learn as an industry how to utilize all of those. shopping centers at certain places outside of a city. a truck. >> you mention that you have more than a million merchants that you work with. what are the cultural nuances that you find? >> it is super interesting. commerce and retail is deeply woven into the cultural narrative. in germany, politicians decided what exactly they needed to say.
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payments are very different. it is one of the most interesting things in the company. for everyone to figure out how do we take something that works and people are using. there is no answer. taylor: that was the ceo of shopify. the platform launched in 2017 and believes the future of retail is local. joining us to discuss is the cfo. she is a 25 year industry veteran and most recently served as cfo at a leader of licensed
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sports merchandising. great to have you. i want to kick it off with news of the week. $150 million in funding. putting you at a $1 billion valuation. what are you using the money for? >> we have a lot of growth opportunities. this is a business that has grown very rapidly since its founding a couple of years ago. our big priorities are continuing to add tools to the services of our marketplace. we will extent -- continue expanding categories. both of those businesses are doing well. we will continue to pursue those growth opportunities. taylor: your tagline goes a lot against what we hear. why are you betting on the local consumer? >> it is so interesting. i share this same perception. everything is about a retail apocalypse.
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the apocalypse has missed rocha lead to -- retail. -- has missed local retail. we have found the local retailers have really learned how to compete. the fair market places allowing them to have more tools at their disposal and be competitive. we give the makers an opportunity to find new retailers that want to find their goods on a whole soul -- on a wholesale basis. and the retailers have an opportunity to have 60 day terms. they can return products. we are making them more competitive. consumers are interested in that. having unique collections. shopping in their own communities. not have their main street set -- be full or vacant. taylor: you also say on your website that one of the big filters is not amazon. how consumers differentiating between what they want on amazon and what they want local we
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think amazon is providing people with convenience. local retailers are able to provide people with something very distinctive. those retailers want to make sure they make a relationship with the consumer. that is why that is the number one filter. taylor: is the consumer as healthy as the data show? >> our growth suggests that is the case. we are seeing tremendous indications that the consumer is strong. we hope that will continue to be the case. taylor: what is the biggest question investors have asked to? >> around the notion of the death of retail.
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it is the local economy really as vibrant. taylor: thank you so much for joining us. still ahead, the technology is not a hype. it is already changing lives. this is bloomberg. ♪
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taylor: san francisco blockchain week is wrapping up. there is still a lot of skepticism around the world about blockchain and cryptocurrencies. here to break it all down and tell us all about it is the firm's head of research. i want to talk about what your firm is. on your website you have it very clear picture of solving the
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scaling issues of going and the -- of bitcoin and the security issues is that how you are standing out? >> we like to position ourselves as the next generation of smart contact platforms. that is a platform to create an application on top of a blockchain and have it run in a decentralized way. even if your central server somewhere is taken down, your application will not be taken down. a network should be decentralized and owned and run by its users. this idea of having a decentralized blockchain application came from an idea of building applications and smart contracts. it has some significant serious security holes. when our team was at j.p.
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morgan, we did a bunch of research in all of the different blockchains that are out there. we decided we could do a good job making our own. that had the innovation that was originally brought. taylor: i want to get the news of the day. you have a partnership launching on tuesday. what can you expect? >> we are doing a token sale on the coin list platform. it goes live tuesday, november 5 at noon pacific time. it is very exciting. we are still in that phase where nobody is sure of the correct way to go from a blockchain starting at zero to be a true decentralized network. one way is to get tokens into many people around the world. they can interact with people around the world. we are doing a sale through
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coinlist. taylor: how has libra changed the regulatory scrutiny around all of this? >> it has brought more energy people pull thought it was friends. -- more people that thought blockchain was so fringe. it has been great for us. people started thinking critically about, if facebook thinks this is real, maybe it is not just some made up french -- fringe technology. maybe this actually has potential. kadena has been in the corner of thinking blockchain is usable for business and people to actually create resilient applications and transmit data in a secure way. you can track supply chains, interactions between companies. we are working on a partnership with a company doing medical device tracking. facebook entering the arena has
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really increased regulatory scrutiny. taylor: who is on our heels? is it china? >> i would've said they are not a big player. but the president of china last week said that he believes blockchain innovation is important. maybe we might actually see china being more open to cryptocurrency in a way that they were not before. the united states really gets to need their ducks in a row. taylor: thank you so much for joining us. that does it for this edition of "bloomberg technology." be sure to volatile -- follow tictoc on twitter. this is bloomberg. ♪
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