© 2014 Dow Jones & Company. All Rights Reserved. THEWALL STREET JOURNAL. Monday, November 3, 2014 | R1

SPECIAL REPORT

AT GOOGLE’S “MOON SHOT” DIVISION, they are working on ingest-ible pellets that would attach themselves to cancer cells and reportback data to doctors. Apple CEO Tim Cook and Alibaba chief Jack Masaid they are intrigued by a possible partnership on payment sys-tems. Venture capitalist Marc Andreessen said that tech valuationsare “running a little warm.”These were just a few of the revelations at the Wall Street Jour-

nal’s inaugural WSJ.D Live global technology conference, held in La-guna Beach, Calif., last week. In front of more than 200 attendeesfrom 21 countries, some of the most important newsmakers fromaround the world took the stage to discuss tech’s most provocativeissues and dynamic new breakthroughs. Among them:� Chen Lifang, senior vice president of Huawei Technologies, ad-

dressed the company’s dramatic pivot to making smartphones, andthe continuing ban on selling networking equipment in the U.S.

� Axelle Lemaire, France’s digital minister, challenged big U.S.tech companies to adapt to regulations designed to limit their marketpower in Europe.

� Movie mogul James Cameron said he thinks the excitementover virtual reality is overblown.

� Former Microsoft CEO Steve Ballmer sang bits of songs fromBing Crosby and Fergie (among other things).

� Legendary tech investor Peter Thiel said that when it comes totech, the U.S. government is stuck in the Middle Ages.Meanwhile, scientists from the University of California, San Fran-

cisco took the audience on a visual tour of the brain of WSJ personalcolumnist Geoffrey Fowler; and News Corp Chairman Rupert Mur-doch and telecommunications billionaire Carlos Slim discussed life-time bets they have won and lost.Excerpts of key interviews are in this report.

Mr. Krim is The Wall Street Journal’s global technology editor. Hecan be reached at jonathan.krim@wsj.com.

BY JONATHAN KRIM

Global Tech’s Hot-Button IssuesTake Center Stage

At The Wall Street Journal’s WSJ.D Live conference, leaders from aroundthe globe talked about where the technology world is headed, and how it’s likely to get there

Jack Ma on how Alibaba canhelp U.S. exporters, R2

Voiceitt is voted the favoriteat the WSJ.D Live startupshowcase, R2

Chen Lifang on how Huaweigrew into a giant, and what’snext, R4

Rupert Murdoch and CarlosSlim on bets they’ve wonand lost, R4

Steve Ballmer on the L.A.Clippers and the future ofthe tech industry, R5

Peter Thiel on the new land-scape in startup financing, R5

James Cameron on thefuture of storytelling in thedigital age, R6

Maelle Gavet and SebastianSiemiatkowski on whereglobal e-commerce isheaded, R6

Hugo Barra on Xiaomi’s‘family’ of cutomers, R7

Marc Andreessen onwarming valuations inSilicon Valley, R8

Axelle Lemaire and BradSmith on U.S. tech giants’troubles in Europe, R8

Sue Desmond-Hellmann andSam Altman on technologyand health, R9

Alex Karp and Kira Radinskyon big data and privacy, R9

Jeffrey Katzenberg onthe state of the moviebusiness, R9

PLUS: Andrew Conrad onhealth care, Kevin Mandia oncybersecurity, Gene Block ononline education, Richard C.Levin on technology andeducation, Noam Bardin ondriving apps, Hans Vestbergon the smartphone, andLucian Grainge on themusic industry

INSIDE

LIVEWHERE THE DIGITAL WORLD CONNECTS

IT’S ONE OF THE most recognizableand sought-after brands in the world.It’s also facing a raft of questions aboutits products and its direction.The Wall Street Journal’s editor in

chief, Gerard Baker, sat down with Ap-ple Inc. CEO Tim Cook to address thosenagging concerns—from merchants hes-itating to accept the company’s pay-ment system to battery life on theforthcoming Apple Watch to concernsabout privacy breaches.Here are edited excerpts of the con-

versation.

Taking PaymentsMR. BAKER: Let’s take this Apple Pay is-sue. You ran into headwinds with CVSand Rite Aid and others. Is this a realchallenge now, this issue of whether ornot some of these retailers are willingto cooperate?MR. COOK: I think it’s a skirmish. Westarted last Monday. We’ve been at itfor a week. In the first 72 hours, we hadgone over the one million mark on acti-vations of cards.It’s the first and only mobile pay-

ment system that’s both easy, privateand secure. So, we hit on all three keypoints that the customer cares about. Ithink that over the long arc of time re-tailers will step back and say, “Wait aminute, it’s more secure.”

MR. BAKER: Apple Watch. As you say, ithasn’t gone on sale yet. You left a fewunanswered questions at your launch.Battery life is one of those. Am I goingto be able to get up at 6 o’clock in themorning, and it’ll still be running if I

haven’t charged it?MR. COOK: We think that people are go-ing to use it so much that you’re goingto wind up charging it daily. Overnight.This isn’t like a notebook, where

there’s a very well-understood historyof use.Given my own experience and others

around me, you’re going to wind upcharging it every day, because you’regoing to use it so much that it’s goingto need to be charged.

MR. BAKER: I want to ask about some ofthe broader strategic questions for Ap-ple. This phenomenally successfuliPhone, which continues to churn out ex-traordinary profits. You’ve got a veryhigh margin, relatively low volume interms of total share of the smartphonemarket.

Now you’re about 15%, 16% globallyof the smartphone market. That modelhas been compared to the Mac versusPC model of old. You have these beauti-ful devices, which you were first with,which people adopted very, veryquickly, but which were a smaller and

smaller share of the market.In the end, the Windows model blew

away the Mac, in terms of marketshare. Is that a risk here?MR. COOK: I don’t think all market shareis created equal. Our objective hasnever been to make the most. We’ve al-ways been about making the best.The analogy to the Mac isn’t a good

one. It’s clear when you look back whatwas happening in terms of the Macplatform was there weren’t enoughapps on the Mac platform. Customersbegan to leave, because there weren’tenough apps. Look at iPhone and iPad.I get more customer notes than anyCEO alive, I’m sure. I’ve gotten zerosaying, “You don’t have enough apps onyour platform.”

Staying SecureMR. BAKER: You have these issues of se-curity breaches.

Explain to me what you think every-body should be doing with regard toprotecting individuals’ privacy andmaking sure that you address the con-cerns that people have.

MR. COOK: Our value system is that webelieve that your data’s yours. And thatwe’re not about collecting every detailabout you.We don’t read your email. We don’t

read your iMessages. We designed iMes-sage such that we don’t keep any of it.If somebody comes to get it, a bad

guy or a government, we can’t provideit. If somebody tries to get your Face-Time records we can’t supply it. Andwith iOS 8 we added some things tothat to further encrypt that puts theuser in charge. We’re designing a FortKnox kind of thing.

AUDIENCE: As someone who’s accumu-lated just under 40,000 music tracks inhis library I have many friends, rela-tives, salivating for their 160 iPod Clas-sic only to find out that you discontin-ued manufacturing it two months ago.Why?MR. COOK: Because we couldn’t get theparts anymore.

AUDIENCE: Not even in China?MR. COOK: Not even anywhere on Earth.

Tim CookAnswersThe SkepticsApple’s CEO on Apple Pay, the AppleWatch—and killing the iPod Classic

GaryFong

/Dow

Jones

Watch What Happens

Wearables

Apple will continue to lose market share toAndroid devices in the smartphone andtablet markets but will take a big bite outof the market for wearable computingdevices—and give that market a significantboost—when the recently unveiled AppleWatch goes on sale next year, according toABI Research.

Percentages may not total 100 due to rounding*

Figures for 2014 and 2015 are forecasts

Source: ABI Research The Wall Street Journal

Global market share of shipments byoperating system

2013 2014* 2015*0

5

10

15

20

25

30

35

40 million

75% 25% 4%

67%

42%

35%

19%

26% 8%

Tizen

Proprietary

Apple iOS

Android

WSJ.D Live Videos>>See videos and complete coverage of the WSJ.DLive conference at wsj.com/wsjdlive.

‘Our objective has neverbeen to make the most.We’ve always been aboutmaking the best.’Tim Cook

R2 | Monday, November 3, 2014 THEWALL STREET JOURNAL.

THANKS TO THE success of hisAlibaba Group Holding Ltd.,Jack Ma is the richest person inChina, which makes him a bigpower in the business world, anda political force whom China’sleaders must reckon with.Mr. Ma’s e-commerce giant has

revolutionized retailing in China,branched out into financial serv-ices, and is now trying to expandinto mobile technology, entertain-ment and sports. The Wall StreetJournal’s Dennis K. Bermantalked with Mr. Ma about hiscompany, the Hong Kong pro-de-mocracy protests, and the possi-bility of an electronic-paymentsalliance between Alibaba’s Alipayand Apple Inc.’s Apple Pay. Editedexcerpts of the conversation fol-low.

Reversing the TideMR. BERMAN: What is11Main.com? What does it meanfor Alibaba?MR. MA: I got my inspirationsfrom Silicon Valley, 15 years ago,on my trip to the U.S. I saw Sili-

con Valley, the lights everywhere,on Sunday, and people workinghard. So I go back to China andbuild up Alibaba. Today, it’s ourtime to come here, invest in Sili-con Valley, helping entrepreneurs.So we invested in 11Main.

MR. BERMAN: A website to shopin America via Alibaba.MR. MA: Yeah.

MR. BERMAN: You’re bringingthis to places like Brazil andRussia, the notion of bringingcommerce directly from China toconsumers in other countries—basically cutting Wal-Mart outof the process of getting cheaperChinese goods to other nations.MR. MA: I’m more interested inbringing America to China, Bra-zil to China, Russia to China, be-cause selling Chinese productsaround the world—that’s thepast 10, 15 years.What I want to do is, how can

we sell more American small-business products to China?More European products to

China? This is the unique valuethat we have. Because when youhave such a huge demand ofgood products from outside, thenext 10 years, I believe, Chinashould import.

MR. BERMAN: What U.S. smallbusiness products would makesense in the Chinese market?MR. MA: Last year we helpedWashington state. We sold 150tons of cherries. We sell Alaskaseafood. We sold 80 tons of nutsto China.There are so many farm prod-

ucts here that can be sold toChina; because of the pollution,

people cannot have good qualityproducts.We start with agricultural

products. People here probablydon’t realize that in China, whenyou have 110, 120 million peopleshopping on your site every day,you can almost sell everything.

Challenging the BanksMR. BERMAN: The most radicalthing you’ve done in China isyour money-market mutual fund.For decades, the people havebeen subsidizing the state banksof China and the state-owned en-terprises of China. When youbrought them better-yieldingmoney-market accounts, youwere changing the whole finan-cial-services game in the coun-try, and that is radical.MR. MA: Yeah, that’s radical.That’s dangerous.

MR. BERMAN: Why dangerous?MR. MA: You have taken moneyfrom those people who take itfor granted. I heard so manybanks talking about supportingsmall guys. But none of them re-ally put efforts into that. I saidfive years ago, “If banks do notchange, let’s change the banks.”

We have more than 300 mil-lion active users for Alipay. Weare probably the third-largestpayment system in the world, af-ter Visa andMasterCard. We arenot trying to build a financial sys-tem. We want to build the creditsystem for each individual andsmall business. We can funda-mentally change the China finan-cial system.That’s why last year, I had a

tough year. Within six monthswe gathered more than $100 bil-lion. That make the governmentworry. All the banks hated us.I’ve never seen the top five big-gest banks in China unite to-gether, want to kill us.I talked to all the chairmen of

the big bank. One of the guyssaid, “Jack, in 10 years, we willhave a fantastic memorial foryou. Thank Alibaba and Jack Mafor doing these great things. Butnow we have to kill you.”

Hong Kong ProtestsMR. BERMAN: What happenswhen you see the umbrellas openup in Hong Kong?MR. MA: The Hong Kong problemis not about China and the HongKong relationship. It’s about

young people, they don’t havehope. All the big guys take…thegood things. And the young peo-ple feel hopeless. But [the pro-tests] should not push that much.When I was young, I was up-

set by IBM, Microsoft. They tookall the great opportunity fromme. And I think, how can I be myIBM? How can I do things likeCisco? Later I say, “Forget aboutthat.” I started to work. I startedto focus on myself, my job, and agreat life.

MR. BERMAN: Is it only a matterof time till the umbrellas openup in greater China?MR. MA: Both sides should listen.And both sides should stepdown. This thing cannot last, itshould not last long.

MR. BERMAN: Would it makesense for Alipay and Apple Payto come together?MR. MA: I’m very interested inthat. But a good marriage needsboth sides hard working. And Irespect Apple. I respect him[Tim Cook] very, very muchfrom my heart. I think he’s doinga fantastic job. And I hope wecan do something together.

How Alibaba Plans to Help U.S. ExportersExecutive Chairman Jack Ma’s strategy is to connect small businesses with Chinese consumers

SPECIAL REPORT | WSJ.D LIVE

Company Headquarters Product

Hangzhou Shuxiong Network Co. ChinaWi-Fi marketing system for events,retailers, shopping malls

Bale Interaction (Beijing)Media Co.

ChinaFree interactive entertainment online,including variety shows and dramas

Guangzhou ZhoumoNetwork Technology Co.

China Mobile social platform for schools

Kabam Inc. U.S. Free multiplayer games for social networks

Peel Technologies Inc. U.S.Free app that allows smartphones andtablets to be used as TV remote controls

Beijing Sankuai Technology Co. ChinaWebsite that offers daily deals on local goods,services and events

Hangzhou KuaiZhi Technology Co. China Mobile app for booking taxis

TangoMe Inc. U.S. Free mobile video-calling and messaging service

Beijing Baicheng International Travels Co. China Online tourism information and services

Lyft Inc. U.S. Ride-sharing app

TutorGroup Inc. Taiwan Online live language tutoring

1stdibs.com Inc. U.S. Online luxury-goods marketplace

Source: Dow Jones VentureSource The Wall Street Journal

Growing Company, Growing ReachAs Alibaba Group’s revenue and profit have surged, the company has invested in startups in a range ofbusinesses, participating in 13 rounds of financing for 12 venture-backed private companies so far this year,more than in any previous year.

GaryFong

/Dow

Jones(2)

‘How can we sell moreAmerican small-business products toChina? More Europeanproducts to China?’Jack Ma

VOICEITT, AN ISRAELI startupdeveloping voice-translationtechnology for the disabled, waspicked as the audience favoriteat a startup showcase at theWSJ.D Live global technologyconference.The company’s translation

app, Talkitt, is being tested andis expected to be released in thesecond quarter of next year, ac-cording to Rabea Ziuod, Voi-ceitt’s vice president for busi-ness development in the MiddleEast and North Africa. It will en-ter a field where a number oftechnologies aim to help peoplewith disabilities better commu-nicate with others.Mr. Ziuod has a personal

stake in the success of the tech-nology: Two of his five siblingshave cerebral palsy and struggle

with their speech. “My vision isto bridge the gap between peo-ple with disabilities and theircommunities,” he said.A video of the app in action

shows a boy struggling to say “Ilove you,” and the app translat-ing his words into intelligiblespeech.The app works by learning

the user’s speech patterns, andVoiceitt hopes it will work forsufferers of amyotrophic lateralsclerosis (or ALS, commonlyknown as Lou Gehrig’s disease),autism, Parkinson’s disease andother conditions.The company has raised

$25,000 on the crowdfundingsite Indiegogo and has additionalfunding from the Israeli govern-ment, Mr. Ziuod said.Voiceitt was one of five final-

ists for the showcase selected byWall Street Journal editors outof more than 200 applications.

The other four finalists wereYondr, which makes a cellphonecase that blocks signals to createa phone-free zone at concertsand other venues; Qorio, themaker of an app that helps trainits users to sing; Next Glass,whose app assists in choosing abottle of wine based on theuser’s preferences; and AirGoDesign, for its futuristic airplaneseat.Each finalist made a presenta-

tion, followed by comments froma group of well-known experts:Karla Martin, director of globalbusiness strategy at Google Inc.;Adam Ross, founder and chiefexecutive of Goldcrest Ventures;Joe Chen, chairman and chief ex-ecutive of RenRen Inc.; and YossiVardi, an Israeli entrepreneur.The audience at the confer-

ence then voted on their favor-ite, and Voiceitt came out aheadwith 55% of the vote.

And theWinner Is...The WSJ.D Live audience favors an Israeli startup

RABEA ZIUOD

BY ROLFE WINKLER

The FavoriteWSJ.D Live participants wereasked which startup they wouldinvest in among the five chosen tomake pitches at the conference.The results:

AirGo20% Next Glass

13%

Qorio7%

Yondr5%

Voiceitt55%

FULL PAPER: The entire Wall Street Journalissue that includes the WSJ.D Live report canbe obtained for $6.50 a copy. Order by:

Phone: 1-800-JOURNALFax: 1-413-598-2259Mail*: WSJ.D Live

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REPRINTS AVAILABLE

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For more inFormation, please visit:WSJDLive.WSJ.com

The Wall STreeT Journal thanks the sponsorsof WsJDLive 2014 for their generous support.

THEWALL STREET JOURNAL. Monday, November 3, 2014 | R3

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R4 | Monday, November 3, 2014 THEWALL STREET JOURNAL.

RUPERT MURDOCH and CarlosSlim know a thing or two aboutsuccess. Each has built a multi-billion-dollar empire using boldstrokes and an ability to identifycompanies, markets and ideaswith potential. Mr. Slim ownslarge stakes of businesses intelecommunications, banking andother industries. Mr. Murdoch ischief executive of 21st CenturyFox Inc. and executive chairmanof News Corp, publisher of TheWall Street Journal. Wall StreetJournal Editor in Chief GerardBaker spoke to them about suc-cessful bets, some less successfulones, and what lies ahead.

MR. BAKER: Carlos, were thereone or two bets that looked in-credibly risky at the time thatactually set you on the path towhere you are now?MR. SLIM: It’s difficult to just sayone thing. You begin to buildmany things, and they get inte-grated. Circumstances are impor-tant. At 25, I made many compa-nies. I was thinking more like abusinessman or entrepreneurthan a CEO. I created many com-panies, small companies, mediumcompanies. I tried to be involvedin many kinds of activities, in fi-nance, in real estate, in mining.The most important moment,

if you are talking about two orthree years, was the big crisis ofexternal debt world-wide in ’82.In our country [Mexico], afterhaving so much oil, we used themoney of the oil, and we in-creased our external debt. In ’82,’83, ’84, prices [for companies]were crazy. It was like the 1930sin the U.S.

MR. BAKER: Rupert, is there onethat stands out for you?MR. MURDOCH: We bought TheSun newspaper, which was bank-rupt, for nearly nothing, changedit into a tabloid. I found a bril-liant editor, and it just took off.I started Sky, which everyone

thought was crazy. We failed toget the license. It was almost apirate station. Today, it’s a veryundervalued $25 billion com-pany. We own 40% of it.Later, here, I guess the best

deal I did was Twentieth Cen-tury Fox. I said, if we’re in tele-vision, content is king, we’ve re-ally got to be able to be whereit’s made, not have to overpayfor it. Today, Fox is worth $75billion. Shareholders are happy.Then we started thinking, Fox

News. People thought we werejust crazy. I was the only onewho wanted to do it in the com-pany or outside. And of course,

all the analysts, who know ev-erything, said I was mad. Andtoday, it has a bigger audiencethan all the other news networkstogether and makes way over $1billion a year.

MR. BAKER: Let’s talk about betsthat maybe didn’t work out sowell. Carlos, would you sayyou’ve had a few along the way?MR. SLIM: CompUSA was a baddecision. We stayed too muchwith CompUSA, and we stayedtoo short with Apple.

MR. BAKER: Rupert, I assume ev-erybody here’s going to agreethat Dow Jones was a great bet,a great success.MR. MURDOCH:When we boughtDow Jones, we paid a high price.But we really wanted it. And nowI think it’s absolutely the corner-stone of everything we’re goingto do. It’s a terrific platform. Cir-culation is holding up well or go-ing up, as is the London Times,the only paper in London to do it.Do you want to talk about

failures?

MR. BAKER: Yes, Myspace.MR. MURDOCH: Well, we justmessed it up. The buck stopswith me. But we didn’t know. Itwas growing like crazy, and the

chief executive of Fox and myselfsaid, “Well, we don’t knowenough. We’ve got to get advice.”We took bad advice and put in

a layer of bureaucracy from ourown company that didn’t knowany more than we did to studyit. And it was completely thewrong way.We either should’ve had faith

in that management, and let itrun, or changed it and foundsomeone. But we learned fromit. You’ve got to learn from theseexperiences.

MR. BAKER: You tried to make an-other very large bet this summerwith the bid for Time Warner.MR. MURDOCH: It was their loss.

MR. BAKER: You pulled back.MR. MURDOCH: I’ll tell you, quiteseriously, we all talked about it. Itwasn’t particularly my idea. Weall thought, this is just a great fit.You had things like Time WarnerCable and Comcast coming to-gether. We felt we needed morecritical mass in content.We’d even talked to them

about it. They said they weren’tready for it. So anyway, we madea good bid. And then it wasquite clear that we’d have to putthe price up another $10 or $12.And we would have been very fi-nanceable. But the fact is, wewould have had over $90 billiondebt in the combined company.There will be other times.

Therewill be other opportunities.

MR. BAKER: Rupert, News Corphas just made its biggest invest-ment so far, in Move, which in-cludes the Realtor.com digitalreal-estate listings site.MR. MURDOCH: That area, Real-tor, is a huge opportunity. It’s avery fragmented market. No onedominates it. And we have thisgreat platform to link with it, inthe Journal.There’s a lot of work to do.

You can do a much, much betterjob in selling houses, or enablingpeople to sell houses, with awebsite than you can with asmall ad or even a large ad in anewspaper.

WinSome, LoseSomeRupert Murdoch and Carlos Slim on mostly winners

IT’S ONE OF the biggest compa-nies in the world. And it’slargely unknown in the U.S.China’s Huawei Technologies

Co. is a leading global player intelecommunications, but ithasn’t broken through in theU.S., where it has been held upby questions over its security.What’s next for this giant? Andhow soon before it becomes aforce in the U.S.?To get some insights, Wall

Street Journal Deputy EditorRebecca Blumenstein talked withHuawei’s senior vice president,Chen Lifang, who spoke througha translator.Here are edited excerpts of

the conversation.

Formula for SuccessMS. BLUMENSTEIN: Huawei hasrisen to be a leader in both wir-ing the world and in cellphones.These days, 65% of Huawei’s rev-

enue comes from outside ofChina, but not here in the U.S.,where questions about networksecurity have largely frozen outHuawei. To what do you oweHuawei’s rapid growth?MS. CHEN: If you ask me aboutthe success factors, there arethree. The first is we value R&Dinvestment, technology and in-novation. In the past 10 years,we invested $25 billion.We really value management.

When we were still very small,our CEO and founder, RenZhengfei, said, “We can learn.We should learn managementexperience from other compa-nies.” So we invest heavily inmanagement.The third success factor is our

employee shareholding mecha-nism. This enables employees toshare the success of the com-pany. We have 84,000 employeesthat have company shares. And

the biggest shareholder is Mr.Ren, our founder. He only has1.4% of the company shares.

MS. BLUMENSTEIN: In 2012, acongressional report recom-mended that U.S. telephone car-riers avoid equipment from Hua-wei out of national-securityconcerns. What are you doing tochange the perception?MS. CHEN: Those are just accusa-tions. There are no facts sub-stantiating that. There are threebillion people using our equip-ment and our solutions. This is agood track record. In the future,we’ll continue to make efforts onsafeguarding the security of thenetwork.In the past two years, we

made a lot of efforts. Securityhas already been embedded inevery technology, every product,every process. And we made alot of investments in security

technology. In the future, for 5Gand smartphones, the securitytechnology related to that, wealso made a lot of investment tomake sure those phones wouldnot be hacked, and the data issafe.

MS. BLUMENSTEIN: You havebeen selling a lot of contracts inEurope. Can you guarantee thatthere is no way that the Chinesegovernment could tamper withthe networks?MS. CHEN: Huawei has never re-ceived any requests from theChinese government asking us todo anything or implying weshould do anything.We have a principle: Trust no

one. I will go through rigoroustests and validation. For exam-ple, the equipment we sell in the

U.K., the U.K. government test-ing body will test that and tellus the feedback.

Entering the U.S.MS. BLUMENSTEIN: Are you confi-dent that Huawei will break intothe U.S., in terms of networkingequipment anytime soon?MS. CHEN: It will take longerthan we’re used to taking in Eu-rope and Asia. In the past, wedidn’t have much communicationin the U.S. People in the U.S.don’t know Huawei. We have toinvest more time, let them knowmore about us.

MS. BLUMENSTEIN: Could you tellus about Huawei’s R&D?

What are you focusing onmost now? Why is there a sensethat China is behind the innova-tion curve?MS. CHEN: Innovation dependson four factors. The first one isabout market. Only with a bigmarket that can attract compa-nies to make more investment.China does have that.The second factor is talent.

You need a good talent pool togenerate good ideas. China has

an advantage because of thelarge number of graduates. An-other factor is economic devel-opment. If we can enjoy contin-ued and sustainable economicdevelopment, that would be ahuge attracting factor for peopleto make investments. China isalso quite good on that.The fourth one is about mech-

anism. America has the best in-novation mechanism to motivateso many people and so manycompanies to continue to inno-vate. China is also making prog-ress.

MS. BLUMENSTEIN: Mark Zucker-berg made headlines last weekat Tsinghua University by speak-ing in Chinese. Do you think thatwas a good move? Will it im-prove Facebook’s chances to getinto China?MS. CHEN: I admire him forspeaking such fluent Chinese.It’s not like me. I cannot commu-nicate with you in fluent English.I haven’t used Facebook be-

fore, so I don’t know about thecustomer experience. My sonuses Facebook, and I heard a lotfrom him.

The Secret to a Global Giant’s SuccessHuawei’s Chen Lifang on how the company has grown so fast, and its plans for entering the U.S.

SPECIAL REPORT | WSJ.D LIVE

CARLOS SLIM

GaryFong

/Dow

Jones(4)

‘We have to investmore time, let themknow more about us.’Chen Lifang

RUPERT MURDOCH

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THEWALL STREET JOURNAL. Monday, November 3, 2014 | R5

WHEN IT COMES to startup fi-nancing, it’s not the ’90s any-more.Young companies have a range

of new options for landing capi-tal, and many choose to go publicmuch later in their life cycle.To make sense of this new

landscape, The Wall Street Jour-nal’s Dennis K. Berman spokewith Peter Thiel, a partner atFounders Fund and co-founderofMithril Capital Management.Here are edited excerpts of their

discussion.

Changing the WorldMR. BERMAN: The term you usein your book is that a startup isan excuse to change the world.How do people inside big compa-nies take that idea and makesomething of it?MR. THIEL: There are a number oflarger companies that are stillinnovating fairly aggressively.I’m very biased, as an investor,to be pro-companies that are

still led by the founders. Thefounders are often able to makemore choices and take more riskand have more inspiration thanmore politically minded CEOs.The old founders don’t alwayslive forever, that’s true. You needa figure that’s as close to afounder as possible.In theory, large companies

could do far more than smallcompanies. They have more cap-ital. They have longer time hori-zons. They can take more risks. I

tend to think it’s always that theinternal politics somehow get inthe way.

MR. BERMAN: It seems, though,at least now, the market favorsdividend-returning, stock-buyingtechnocrats. And they reallydon’t have much patience for acharismatic leader, even if it’snot the founder.MR. THIEL: The antitechnologybias in our culture is also mani-fested in the investor class onWall Street, which prefers com-panies to issue dividends, to buyback their shares and is alwaysvery disturbed if you are, in-stead, investing a lot of it in var-ious opportunities.

MR. BERMAN: So what would beyour advice to a CEO who’s inthe cross hairs of an activist?MR. THIEL: When you go public,start with a statement like Face-book made, where the companywill be managed for the longrun. It won’t be managed on aquarter-to-quarter cycle. Youdon’t give much guidance on aquarterly basis, all these thingswhere people have positionedthemselves to be vulnerable toactivist demands.

The Decline of ‘Sociopaths’MR. BERMAN: Let’s move to Sili-con Valley. A lot of venture capi-

talists out there. They have a lotof money. Marc Andreessen saidhe thought valuations werewarm. Give us the Thiel temper-ature measurement. Warm, hot,cold, what is it?MR. THIEL: They’re probablywarm. I don’t think it’s a bubble,like in the late ’90s. These bub-bles were psychosocial phenom-ena. There’s no bubble, becausethe public is not involved. Thecompanies are generally not go-ing public.

MR. BERMAN: If you were to ana-lyze the psychosocial realm ofSilicon Valley venture capitalists,Sand Hill Road in particular,what would be your analysis?MR. THIEL: There probably hasbeen some shift in the center ofgravity from Sand Hill Road tothe entrepreneurs. In the ’80s or’90s, the most important rela-tionships one had as a venturecapitalist were with other ven-ture capitalists. At this point,the most important relationshipsare with the entrepreneurs. Thisis very different from the socio-pathic investor class that oftendominates not just venture capi-tal but many other areas of fi-nance.

MR. BERMAN: Can you tell memore about that?MR. THIEL: A sociopath is some-

one who optimizes at every sin-gle moment and does not thinkabout longer-term repercussions.We’re living in a more transpar-ent world. Sociopathic behaviorwill work much less well.

MR. BERMAN: What percentageof venture capitalists are socio-paths, would you estimate?MR. THIEL: There were a lot moresociopaths in the ’80s and ’90sthan there are today. It no lon-ger works in a way in which itworked in the past.

MR. BERMAN: Do we need ven-ture capitalists in the way wedid before? We have a range ofcrowdfunding platforms. Financ-ing is coming in from all cornersof the world. Big companieswant to get into the venturegame. Maybe we just don’t needas many venture capitalists.MR. THIEL: The demand for capi-tal is much bigger than it was inthe ’90s, because the IPOs arehappening much later. The ca-pacity to invest is much greater.There certainly are somewhatmore pools of funding. You havemore angel investors and crowd-funding at the seed stage. Youhave private equity, mutual fund,crossover investors at the very,very late stage. But I think thefirst part, I would say is justthere’s far more capacity.

WhyBigCompaniesDon’t Think LikeStartupsVenture capitalist Peter Thiel says larger firms could do better. But internal politics gets in the way.

STEVE BALLMER, former chair-man and chief executive of Mi-crosoft Corp., would rather talkabout his new National Basket-ball Association team, the LosAngeles Clippers, than the futureof the tech industry or his legacyat Microsoft. But Wall StreetJournal reporter Monica Langleygot Mr. Ballmer to talk a littleabout all three. Edited excerptsof their conversation follow.

Technology on the CourtMS. LANGLEY: Have you aban-doned technology now thatyou’re a basketball team owner?MR. BALLMER: Not at all. I’velearned as much about machinelearning in the last three monthsgetting ready for the Clipperhome opener as I did in the lastthree months I was at Microsoft,which is actually a lot.Every NBA arena has six cam-

eras in the ceiling that are tak-ing pictures of the action that’s

going on. And we found astartup here in L.A. that’s gottechnology that looks at thevideo and tries to learn what theplays were, what people weredoing, categorizes them.The sports analytics people

use them. We’re going to let thefans use them. We’re going to letfans pick their favorite playtype, and try to throw them upon the Jumbotron.

MS. LANGLEY: What about distri-bution? We’ve heard talk for thelast couple of days about digitaldistribution going over the top,streaming content directlythrough the Internet.MR. BALLMER: We’re partnerswith Fox in L.A., with Rupertand his guys. And that’s been agreat relationship. But the bigquestion for everybody, whetherit’s Fox or the Clippers is, “Whatdo you do over the top?” And ina way, it’s interesting to try to

model. Over the course of a sea-son, five million homes will tunein and watch one of our games.And so you sort of say to

yourself, “Can we get that to behigher? Would we be better offdoing it direct? Are we better offworking that through with Fox?How much do we charge? That’skind of a function now of whatour business arrangement lookslike with Fox. But could we selltickets of various types? Howwould you use the analytics andthe technology to change the ex-perience at home?”How you think about all that

is very, very important. And thatwill be a discussion we havewith our partners as we moveforward.

Eyes ForwardMS. LANGLEY: You spent yourlifetime at Microsoft. In a busi-ness moving so fast, do youthink you moved fast enough?MR. BALLMER: I’m sort of tired oflooking back.I’d summarize things looking

forward this way: My successorgets a business that made aquarter of $1 trillion in the last14 years. He’s got $90-odd bil-lion of cash to work with, thestrongest enterprise franchisearound, one of only three world-class machine-learning assets inthe world, an incredible hard-ware team, of course our tradi-tional strength in software, and

a sort-of-leading business in thecloud.The company made between

$25 and $30 billion. So, greatprofit stream, great cash in thebank, great enterprise position,a great consumer brand, one ofthe best, in Windows, in theworld. Really the question nowis, “What will my successormake of these things next?”

MS. LANGLEY: I hear you don’twant to talk about how youmissed social or mobile.MR. BALLMER: You’re very per-sistent. This is the tech industry.If we’re not people who are go-ing to look to the future of whatyou can do, what good are we?Our job, as an industry, as theleaders of the companies in ourindustry, is to look forward.My successor has great as-

sets. With these great technol-ogy assets, with these greatbrand assets, with this great fi-nancial position, where goes Mi-crosoft? On that topic, I am ex-tremely bullish.

MS. LANGLEY: Do you see money

to be made in technology? Whatis exciting you?MR. BALLMER: All the money intech is made, essentially, in fiveareas. Devices; Apple and Sam-sung are the two most profitablecompanies. No. 2 is selling to ITdepartments, enterprise soft-ware, another asset Microsofthas built up. The third is sellingtelecom subscriptions. Fourth isselling to marketing depart-ments. Google and Facebook areonly two companies that makesignificant money selling to mar-keting departments. Microsoft’sprobably the third-largest. Last,but certainly not least, is matingbuyers and sellers. What Ama-zon, Airbnb and Uber do. Creat-ing these marketplaces and tak-ing a fee.

MS. LANGLEY: Have you seenanything really new, even inthose five categories, that madeyou say, “Wow, I never thoughtof that. I wish I had.”MR. BALLMER: You see newthings all the time. But in termsof saying, “Wow, that’s going tomake a ton of money”? No.

MS. LANGLEY: You were knownas someone who wasn’t quite asinnovative, but, by God, you de-livered the bottom line.MR. BALLMER: No. That’s just nottrue. We innovated. That’s whywe get to deliver the bottomline. In areas where we didn’t in-novate, we didn’t get to deliverthe bottom lines, but we’re play-ing. Microsoft plays in areas inwhich there is a way to makemoney. In some cases, I just sayit’s innovation yet to come.

MS. LANGLEY: You don’t havekind things to say about Ama-zon’s business model.MR. BALLMER: Let’s say what theworld believes. Microsoft’sworth roughly $330 billion, $340billion. And we’ve generated$250 billion profit in the last 14years. Amazon is worth about$150 billion. If they wanted toperform like we did, they shoulddeliver in the next 14 years $100billion of profit. That’s a ton ofprofit for a company that, basi-cally, has never had a quarterwhere they’ve made much morethan a couple hundred million.

Ballmer’s New GameThe former CEO on his—and Microsoft’s—future

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VOICES FROM THE CONFERENCE

“The majority of theEarth’s population thatwill be connected to theInternet, they will nothave had the black-and-white TV, color TV, thecomputer, a laptop, afeature phone and thena smartphone. They willstart at the end. Theywill start with a smart-phone.”

Hans Vestberg,Chief Executive Officer,Ericsson

‘My successor gets abusiness that made aquarter of $1 trillion inthe last 14 years.’Steve Ballmer

‘The antitechnologybias in our culture isalso manifested inthe investor classon Wall Street.’Peter Thiel

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R6 | Monday, November 3, 2014 THEWALL STREET JOURNAL.

MAELLE GAVET has been thechief executive of Russian e-commerce group Ozon Holdingssince 2011. Widely referred to asthe Amazon.com of Russia, Ozonbecame the top e-commercecompany in a country dominatedby cash by developing a systemof couriers who accept paymentupon delivery.Sebastian Siemiatkowski is

the CEO of Klarna, a Swedishonline payments processor thatuses a risk algorithm to reducethe amount of information re-quired from buyers duringcheckout. The company plans toenter the U.S. market next year,where it will go up against behe-moths like PayPal Inc.The two sat down with Wall

Street Journal technology col-umnist Christopher Mims to dis-cuss where e-commerce isheaded. Here are edited ex-cerpts.

Customer EngagementMR. MIMS: So e-commerce ismore than 20 years old and yetit represents only 6% of retail inthe U.S. And in most markets it’sa fraction of that. Clearly we’vegot a long way to go. What isthe new frontier in e-commerce?MR. SIEMIATKOWSKI: The initiale-commerce companies like Am-azon are really infrastructurecompanies. They had to solve allthe logistical problems, theproduct-search problems, the e-commerce platform problems,everything they needed to beable to sell stock online.The new e-commerce compa-

nies we see today are totally dif-ferent. They’re much more aboutproduct, brand, discovery.The new frontier is really how

do I engage with customers indifferent new ways, whether it’sthrough social media or whetherit’s through these cool newthings where you can take pic-

tures and see how you’re goingto look in these clothes. Allthese things we think are goingto bring it from 5% to 15% and20%.MS. GAVET:: I completely agree.We’ve been operating in Russiafor 16 years and clearly the firstproblem we had to solve was aninfrastructure problem. How dowe deliver? How do we takecalls? How do we handle thepayments?This is changing now. It used

to be a huge competitive advan-tage. It is becoming less and lessbecause there are alternatives.And so now we’re refocusing alot of our energy and people andresources to precisely what youdescribed, which is marketinghow to interact with customers.

MR. MIMS: Given that so muchattention is now being directedthrough Facebook and other so-cial media, when is that going to

become a channel for purchas-ing?MS. GAVET: Before Amazon andFacebook, we launched an e-commerce solution in Russianwith a social network calledVKontakte. It was a big, big fail-ure. Nobody wanted it. The cus-tomers weren’t ready to actuallybuy online.And what we learned from

that is that they love social net-works to interact with us, to askus questions, to complain, tosend us funny pictures of theircat in the Ozon box, all thesekinds of interaction.So for us, social network is a

[customer relationship manage-ment] tool much more than asales tool.MR. SIEMIATKOWSKI: It’s defi-nitely going to happen sooner orlater.If you look at Pinterest, you

have things you’ve collectedfrom different places. To add a

buy button that allows you to in-stantly buy what’s on that listwithout going to every separatemerchant—it just makes a lot ofsense.But there are technical chal-

lenges. There is also somewhatof a power struggle between the

merchants who then feel thatthey might lose and becomenothing other than infrastruc-ture, where they just ship thegoods and they don’t have theinteraction with the customerany more because the sales hap-pen on other platforms. But overtime, this has to happen.

Delivery by DronesMR. MIMS: Is there a danger thate-commerce infrastructure willbecome commoditized? That likethe telecommunications carriersthat provide dumb pipes for bits,large e-commerce companies willprovide dumb pipes for atoms?Is this going to happen to Ama-zon?MR. SIEMIATKOWSKI: I wouldn’tbe surprised if 10 years fromnow they don’t sell productsthemselves anymore, they justship other people’s products. SoI definitely think that they’re onthat path.I think the challenge these

companies have is that basicallythey’re becoming a conglomer-ate of many subsets of things,and they need to stay competi-tive in every subset. That is re-ally, really hard.And that’s when over time,

you will have the Carl Icahns ofthe world come in and say, “Hey,

you should split this, you shouldspin off.” Just take eBay andPayPal. That’s the first examplewe’re seeing of that starting tohappen.

MR. MIMS: Maelle, as somebodywho has handled logistics in oneof the most difficult environ-ments possible, what do youthink about delivery by drones?MS. GAVET: I think drones are avery good technology when itcomes to delivery, but this isn’tabout having a drone going tothe warehouse all the way toyour house.Think about New York. I don’t

even understand where drones[would land]. Where it becomesreally interesting is when youhave many warehouses and youcan’t possibly keep your stocklevel where it should be to en-sure same-day or even next-daydelivery in all these warehouses.Here drones comes in very

handy because they become likeroads. You just send drones backand forth between the ware-houses to optimize your stocklevel.That, I very much believe is

likely to happen. Whether adrone is going to land in my gar-den in Moscow soon, no, I don’tthink so.

HowE-CommerceCompaniesAreChangingMaelle Gavet and Sebastian Siemiatkowski say it’s all about customer engagement

JAMES CAMERON has taken au-diences to the far future, thebottom of the ocean—and theedge of technological innovation,such as his groundbreaking workwith 3-D on “Avatar.”The Wall Street Journal’s Eve-

lyn M. Rusli spoke with Mr.Cameron about the future of sto-rytelling in the digital age, in-cluding what will happen whenvirtual reality can place audi-ences into immersive, lifelikeworlds. Here are edited excerptsof their conversation.

The Future of NarrativeMS. RUSLI: What do you think thefuture of immersive storytellingwill be eventually?MR. CAMERON: Most of what a

filmmaker does is narrow yourfield of view to show you justthat which you’re supposed tosee and take in sequentially forthe story to be best presented.All aspects of editing and com-position and so on highlight themain subject.The second that you put

somebody in an immersive viewspace, you’ve just taken all thataway. You’ve just tied bothhands behind the director’s backunless the filmmakers who workin this new medium embrace theidea that the audience has actualpower, they have a vote in itabout where they want to look.

MS. RUSLI: Where is “Avatar” go-ing? How are you pushing the

envelope?MR. CAMERON: We’re pushingforward on every front. It won’tbe revolutionary in the sensethat the first film was in 3-D andthe majority of films before thatwere in 2-D. It’s really more inwhat the viewer will experiencein terms of the world, new cul-tures, new creatures, new envi-ronments.

MS. RUSLI: When “Avatar” cameout, a lot of people, includingyourself, thought by the year2014 we would all be using 3-Dtelevisions. That reality hasn’tcome to pass yet. Is it still inevi-table?MR. CAMERON: The good news isthat 3-D’s firmly entrenched in

the film business. The bad newsis that it didn’t make the leap tobroadcast. It tried to, but unfor-tunately it was one of thosethings where it was done prema-turely, and the technologywasn’t right.Nobody wants to put the

glasses on. You’ll do it in amovie theater because you havea fundamentally different con-tract with the media that you’retaking in. You’ve carved out asmall piece of your life to have acompletely passive and powerfulexperience. Most people don’tgive that up easily, and in therest of their life they want tomultitask and they want to beable to do different things. Sothe glasses don’t work becauseit’s too exclusive.Now the technology has come

along that is glasses-free, autos-tereoscopic, full resolution, looksgorgeous. Had it all happened ayear later or maybe two yearslater, we’d be seeing a very dif-ferent outcome now. But all thebroadcasters that were investingin 3-D production just kind ofdumped all that because itwasn’t being received well. Andthen the screens came along.I think we’ll see another

round of that at some point andhopefully it’ll stick.

The Bottom LineAUDIENCE: Can you talk abouthow you think about money, ini-tially the spending of it andeventually the making of it? Howmuch does that weigh in your

process?MR. CAMERON: It has to weighheavily unless you only want tomake one movie in your life.We’re always trying to get themost value for the money, butthat doesn’t necessarily meanmaking a cheap movie. You haveto look at the market and say,“What is it that people want?”Look at the two highest-grossingfilms of this year: “Guardians ofthe Galaxy” and “Captain Amer-ica: The Winter Soldier.”They were big movies. They

were in the $150 million class offilms. That’s been pretty muchconsistent over the last fewyears. The challenge for me ishow do I make a movie in thatweight class that is a clutter-buster, that’s different, thatdoesn’t follow the formula.

I want to make somethingelse that delivers visual specta-cle. I’m a bit of a curmudgeonwhen it comes to tech. I don’twant people watching my mov-ies on an iPhone, I’m sorry.That’s fine if you want to watchit the third time that way. Thefirst time, I want the sanctity ofthe big screen.

MS. RUSLI: A tech journalistwanted me to ask you: Whichcompany most resembles Skynet,the computer network in “Termi-nator”—Facebook or Google?MR. CAMERON: I’m going to getin trouble no matter how I an-swer that. As long as they don’thave their fingers directly tiedto a nuclear weapons system,they can’t be compared directlyto Skynet.

Why 3D TV Was Just a Bit Too EarlyJames Cameron predicts consumers will embrace the new, glasses-free technology

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VOICES FROM THE CONFERENCE

“We want to reach a point where if you see a carstopped on the side of the highway, and you reportit, five minutes later, a tow truck comes and tows itaway. Or if you report about a pothole or a watermain that broke, the next day, the city can comeand fix it. “

Noam Bardin, Chief Executive Officer, Waze

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MAELLE GAVET

SEBASTIAN SIEMIATKOWSKI

‘I don’t want peoplewatching my movieson an iPhone. I’msorry.’James Cameron

Source: Ozon Holdings The Wall Street Journal

What Is Ozon?Ozon Holdings is a collection offive businesses:

u Ozon.ru | A retail site selling awide range of products includingbooks, movies, music, electron-ics, housewares and appliances,clothing, jewelry, sporting goodsand antiques, among others. Thecompany says the site draws morethan 700,000 unique visitorsdaily.

u O-Courier | A delivery servicethat carries packages for Ozon.ru and for more than 70 smallere-commerce businesses.

u Ozon.travel | Allows custom-ers to book hotel rooms and buyplane and train tickets online. Cur-rently offering a selection of about278,000 hotel rooms.

u Sapato.ru | Retailer of shoes,apparel and accessories, withselections from more than 400brands. Acquired by Ozon inFebruary 2012.

u Ozon Solutions | A serviceaimed at helping Russian andinternational brands with theirInternet sales, strategies, techno-logical solutions, order processingand deliveries.

VOICES FROM THE CONFERENCE

“I can easily see online education being a substi-tute for the community-college experience. Again,a warning: There are special aspects of commu-nity-college residential experience which might notbe easily replaceable online. But I could imaginestudents at UCLA, for example, entering an engi-neering program in the second year, having takenthe first year fully online. So I think it is a way toreduce the cost, but there’s no substitute, I be-lieve, for some residential experience.”

Gene Block, Chancellor, University of California,Los Angeles

THEWALL STREET JOURNAL. Monday, November 3, 2014 | R7

HUGO BARRA left Google Inc. ayear ago to join Chinese-basedXiaomi Inc., the manufacturer ofthe best-selling phone in theworld’s biggest market, and acompany that operates almostentirely without traditional ad-vertising or retail stores. Xiaomisold about 18 million phones in2013 and is forecasting sales of60 million units this year. TheWall Street Journal’s deputy edi-tor in chief, Rebecca Blumen-stein, talked to Mr. Barra, Xi-aomi’s global vice president.Edited excerpts follow.

MS. BLUMENSTEIN: What is thebiggest contributor to Xiaomi’ssuccess? Is it a cult that you’vecreated in China?MR. BARRA: Our core belief is ba-sically that if you treat your us-ers or customers as friends, ifyou listen to them carefully fortheir feedback, if you respecttheir views, if you really takecare of them, they become at-tached to you and to your prod-ucts. They tell their friends.They forgive your mistakes.They help you out. It’s kind oflike becoming part of a family.So, I prefer family to cult.

MS. BLUMENSTEIN: Many compa-nies say they involve customersor fans in beta tests and testing.Does Xiaomi do completely ex-ternal beta testing constantly?MR. BARRA: That’s a nice way tolook at it. We have this website,which is our user forum. On theChina side of the website, wehave about 30 million registered

users, and about 400,000 postsevery day, from product feed-back, bug reports, questions,feature recommendations and soon. On top of that, about 10% ofpeople who buy our smart-phones are on what we call ourbeta track. They’ve chosen to re-ceive software updates everyFriday, with new features, someof which are still sort of onlyhalf baked, half implemented,because they want to providefeedback.

MS. BLUMENSTEIN: You sell yourphones at cost. You are a $10billion company in revenue, per-haps one of the fastest-growingtech companies ever. But howare you going to make money?MR. BARRA: We’ve built our owne-commerce platform from thevery beginning. We sell the ma-jority of our products on e-com-merce that way. And it’s not justphones. We have about 1,000SKUs on our website.If you look at our product

portfolio, it’s incredibly simpleand focused. This year, we’veonly announced two new smart-

phone models, Redmi Note andMi4. These models stay in themarket for up to 24 months, soit’s a very long life cycle. Theeconomies of scale are huge. Andall marketing is social media.

MS. BLUMENSTEIN: There havebeen some headlines about thesecurity of data stored in Xiaomiphones being in data centers inChina. Are you moving data cen-ters outside of China to countersuch concerns?MR. BARRA: I actually think Chi-nese companies are, to a certainextent, held to a higher privacystandard than most companiesout there.We are moving to a global in-

frastructure with data centers inAsia Pacific, North America, andnext year India.That will help with perfor-

mance. It helps us comply withlocal data protection regulationsand so on. But then, it has thisamazing benefit of making peoplefeel better that they have theirdata next to them.

MS. BLUMENSTEIN: Jony Ive, Ap-

ple’s senior vice president of de-sign, has criticized certain phonemakers for producing phonesthat looked a lot like iPhones. Hecalled it outright theft. Manypeople took that to be, even if hedidn’t say Xiaomi, a direct slapat Xiaomi. What’s your reaction?MR. BARRA: I don’t think Jonymentioned the word “Xiaomi.”Our designers, our engineers, areinspired by great products, bygreat design out there. In today’sworld, who isn’t? Point me to aproduct in our industry that had

completely unique design lan-guage. You’re not going to beable to find one.Apple is the world’s design

Mecca. And Apple inspires itselfon great products and greatideas as well. The iPhone 6, inmy opinion the most beautifulsmartphone ever built, without adoubt, carries design languagethat’s very HTC-like from a fewyears back, of course with an as-tonishing twist of Apple innova-tion on top of it. But it is asomewhat familiar design lan-

guage.It’s fascinating that Apple

took existing ideas that werevery good, added their twist ofinnovation on top, and in manycases actually made those ideasbetter or much better. Like,quick settings on iOS is muchbetter than quick settings on An-droid. But it was on Androidwell before you’d find it on aniOS device. So, this idea of build-ing upon great ideas and addinga twist of innovation is whatthey do. It’s what we do.

No Stores. No Ads.Just a Lot of Sales.Xiaomi’s Hugo Barra describes how the Chinesephone maker relies on its ’family’ of customers

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VOICESFROM THE

CONFERENCE

“We’re in the mostextraordinary transi-tion that the industryhas ever been in. Thetransition’s probablybeen going on for 12or 13, 14 years. Thefirst 10 years was un-derstanding, livingwith and trying tocontain illegal filesharing and piracy.The last two or threeyears has been aboutstopping the declineand creating as manynew platforms and asmany services andopportunities to cap-ture money.”Lucian Grainge,Chairman and ChiefExecutive Officer,Universal MusicGroup

VOICESFROM THE

CONFERENCE

“I would never saytechnology will notreplace Yale. It mightsome day. But I don’tsee it happening for along time.”Richard C. Levin,Chief Executive Officer,Coursera Inc.

‘If you look at ourproduct portfolio,it’s incrediblysimple andfocused.’Hugo Barra

R8 | Monday, November 3, 2014 THEWALL STREET JOURNAL.

U.S. TECH GIANTS are comingunder pressure from Europeanregulators to comply more withEuropean laws amid growingconcerns about individuals’rights and the huge marketshares of those companies.Axelle Lemaire, the French

deputy minister for digital af-fairs, and Brad Smith, generalcounsel of Microsoft Corp., dis-cussed these issues with WallStreet Journal reporter RolfeWinkler.Edited excerpts follow.

Too Powerful?MR. WINKLER: Axelle, are U.S.tech companies too powerful?MS. LEMAIRE: European techcompanies are not powerfulenough. We are guilty of nothaving been able to see the dis-

ruption coming. We have strongmajor players in traditional in-dustrial fields. We thought theywere powerful enough not tohave to get more interested inwhat was coming from the digi-tal sector.

MR. WINKLER: There’s this acro-nym in Europe: GAFA.MS. LEMAIRE: Google, Amazon,Facebook and Apple. Wheneverwe talk about them, we’re a littleschizophrenic, because we’refascinated. What they’ve done isfantastic. But also, we’re a littlescared.The fact that they don’t pay

taxes doesn’t help. So, most ofthe time when we talk about theGAFA, it’s to say, well, look, theydon’t pay their taxes, eventhough they use European con-

sumers a lot.Then, there’s this whole pri-

vacy issue. That doesn’t help aswell.We’re not anti-Google, but we

want the GAFAs to cooperatemore. Not to become less Ameri-can, but to understand that ifthey really want to be interna-tional actors, they have to adapta little bit more.And they have maybe to be-

come a little bit more European,at least, when they do businessin Europe.

MR. WINKLER: Brad, tell us aboutcompeting in Europe today.What are the challenges?MR. SMITH: European govern-ments are insisting that peoplepay more attention to their laws.Their laws, in many instances,reflect their cultural values.There’s a tug of war going on,and the people on each side ofthat rope need to probably learna little bit more about what theother is trying to accomplish.

MR. WINKLER: Axelle, what doesBrad need to learn?MS. LEMAIRE: He’s been througha tough time already with Eu-rope.In France and in the rest of

Europe, I’ll meet engineersworking for Microsoft. Theyopened offices there. They in-vested. They work with startupslocally. But that was after theEuropean Commission had tolook at [Microsoft’s] behaviorwhen it comes to antitrust regu-lations and fair competition.The question with the GAFAs

is should we strictly apply anti-trust laws to them in Europe?Strictly speaking, antitrust regu-lation is difficult to apply fortwo reasons. They’re not monop-olies, in the sense that their be-havior doesn’t result in an in-crease in prices. It’s, at least inthe short term, pretty much the

opposite. But then, Google has94% of the shares of the marketsin this search engine. I think inthe U.S., it’s around 60%, or is it65%?

MR. WINKLER: 70%-ish.MS. LEMAIRE: Also, they’re multi-global. How can you applyFrench law to a multiglobal ac-tor like Google?And the GAFAs should be

more transparent in the waythey deal with customers. As acustomer, I want to know whatthe results of the search comesfrom. Is it a scientific, neutral al-gorithm? Is it something thatcomes as an option that will takeme to another website so that Ibuy? The selection of informa-tion that appears is a choice initself.

MR. WINKLER: What is in thepublic’s interest in terms of in-formation that should remainonline when people file a pro-test?MS. LEMAIRE: There is a court ofEuropean legislation, and itneeds to be respected. There is aset of rules which is pretty so-phisticated when it comes to theRight to be Forgotten. When thedecision was rendered, one daylater, 70,000 people had askedfor some information aboutthem to be removed from thesearch results.

Data ProtectionMR. WINKLER: Microsoft is fight-ing a U.S. warrant for emailsstored in a Microsoft data centerin Dublin. Some say it’s a P.R.stunt, that U.S. companies aretrying to rebuild trust [after alle-gations about U.S. spying withhelp from U.S. tech companies].MR. SMITH: The U.S. governmentis arguing that whenever anAmerican company builds a datacenter in another country, U.S.law and the U.S. government canreach across the border and ob-tain the content.That is the kind of thing that

puts on edge our ability to winthe confidence of customersaround the world.The question is going to be

will American companies havethe opportunity to build and op-erate these data centers in othercountries. That is one of thethings that is at stake, in myopinion.

TheU.S. TechGiants’TugofWar in EuropeFrance’s Axelle Lemaire and Microsoft’s Brad Smithon how to bridge the legal and cultural divide

MARC ANDREESSEN, the Webpioneer who co-foundedNetscape Communications morethan two decades ago, has be-come one of the most prominentinvestors in Silicon Valley.His venture-capital firm, An-

dreessen Horowitz, was amongthe early investors in TwitterInc. and Facebook Inc., bet onSkype ahead of its acquisition byMicrosoft Corp. and more re-cently has become a leadingevangelist for bitcoin, investingin the digital-currency arena andtweeting and blogging about itspotential.Mr. Andreessen sat down with

Wall Street Journal technologyeditor Jonathan Krim to discusswhere the tech industry isheaded. Here are edited ex-cerpts.

Bitcoin’s PromiseMR. KRIM: You’ve been incrediblybullish on bitcoin, and it haskind of dropped off the radar inthe past few months. Do you stillsee it as a transformationaltechnology?MR. ANDREESSEN: This is a re-ally, really big deal. We’re com-pletely convinced that bitcoin isto money what TCP/IP was todata. But it doesn’t just happenovernight. It takes time.

Bitcoin is a tremendousbreakthrough in computer sci-ence. If there were Nobel Prizesfor computer science, this wasone that would definitely win.It’s a way to establish trust onan untrusted network like theInternet that we never had.

MR. KRIM: Is there some problemthat you think is a barrier to thistransformation happening atthis point? Or is it just a matterof time?MR. ANDREESSEN: There weretons and tons of problems, justlike there were tons and tons ofproblems with the Internet. Ifwe were sitting here 20 yearsago having this conversation, wewould say, “Oh, my God, look atall the problems on the Internet.It’s really slow. It’s hard to geton. Consumers don’t understandit. E-commerce doesn’t workyet.”It turns out when you have a

really fundamental transforma-tional technical breakthrough, allof the problems basically be-come gigantic opportunities.What actually ends up happen-ing is they become companies,and then they ultimately becomeindustries.

MR. KRIM: Are you concerned

about valuations in the Valleyright now?MR. ANDREESSEN: Well, they’rerunning a little warm. So, thebig thing we talk about a lot isdiscipline. You want to go afterthe opportunities, but you wantto do it in a disciplined way.

You want to have a reason-able approach to valuation. Youwant to have a reasonable ap-proach to cash burn. You want tohave a reasonable approach tothe total amount of venture cap-ital. It’s a tension. People get de-pressed. People get excited. Itgoes back and forth. And itcomes out somewhere in themiddle.

Finding UnicornsMR. KRIM: Between your portfoliocompanies and the research thatyou do, you will see the trendscoming before almost anyoneelse. Let’s say you start to seethings getting overheated. Willyou tell us early?MR. ANDREESSEN: Well, in fact, Idid. I got a fair amount of flakwhen I said about a month agothat the cash burn is getting outof hand.Here’s the real question of

valuation. The way that valua-tions and tech business and ven-ture capital works is that basi-

cally all of venture capital is anexercise to get to the 15 compa-nies a year that are the unicorns.They are the ones that will getto $100 million in revenue, gopublic and get to billion-dollarvaluations. These companiesgenerate more than 90% of allventure-capital returns.Today, $20 billion to $30 bil-

lion a year is going into 4,000new tech startups in the U.S.,translating into 15 home runs—companies like Google and Ama-zon and Apple.The question would be, is that

15 number about to go up? Theargument for it to go up is thattechnology is permeating moreindustries in a way that it hasn’tbefore. Airbnb is a unicorn inthe real-estate industry. Uberand Lyft are unicorns in trans-portation. There are technology-driven unicorns in health care,financial services, government—in a whole series of industries.So you can make an argument

that says instead of 15 a year,there will be 20 or 30 or 50, inwhich case there should be a sig-nificant ramp in venture capitaland we should stay aggressive.You could also say, there they goagain, hubris.

MR. KRIM: Pivot time. I want to

talk about the issue of the treat-ment of women in tech. In theNFL, the owners have prettymuch gotten together and de-cided there’s a zero-tolerancepolicy now. Misbehavior involv-ing even words is being dealtwith immediately. Is there amodel there for tech?MR. ANDREESSEN: The high-qual-ity companies tend to be prettygood on this. And within ourportfolio, we’re quite tough onthis.Could firms do more? I think

they probably could. The otherside of it is inclusion. We just

simply need to get more womeninto this industry.

MR. KRIM: But if they’re treatedbadly and made to feel likethey’re sort of pariahs and sepa-rate, how do you?MR. ANDREESSEN: I think thatmay be overblowing it a littlebit. There are maybe a few com-panies that have serious culturalissues, but none that I workwith. The companies I work withvery much want to have a largerpercentage of women in thecompany, and they are doing alot of work on that.

The Temperature in Silicon ValleyVenture capitalist Marc Andreessen sees valuations getting a bit ‘warm’

SPECIAL REPORT | WSJ.D LIVE

GaryFong

/Dow

Jones(4)

‘You want to go afterthe opportunities, butyou want to do it in adisciplined way.’Marc Andreessen

AXELLE LEMAIRE and BRAD SMITH

Percentages may not total 100 due to rounding *2014 figures are through the third quarter

Source: Dow Jones VentureSource The Wall Street Journal

Where the Money Is GoingIn recent years business, financial and consumer services have claimed agrowing portion of equity investment in venture-backed firms in the U.S.,with the shares going to information technology and health careshrinking. But some business sectors within the IT and health-caregroups are still among the most popular with investors.

The top 10 business sectors in 2014*, by total investments (in billions)

Business and financial services Consumer services

Information technology Health care

Health-care administration software

Network/Systems management software

Transportation Services

Shopping facilitators

Online communities

Advertising/Marketing

Database software

Business application software

Data management services

Biotechnology therapeutics $2.89

$2.45

$1.99

$1.62

$1.42

$1.42

$1.40

$1.29

$1.12

$1.01

’14*’12’10 ’13’11’09’08’072006

’14*’12’10 ’13’11’09’08’072006 ’14*’12’10 ’13’11’09’08’072006

’14*’12’10 ’13’11’09’08’072006

50

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% 50

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% 50

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The Regulatory OutlookPending European Union legislation on data protection has been a source ofsome tension between the EU and U.S. Internet companies, whose businesshas been growing steadily in Europe.

� The legislation was put forwardby the European Commission inJanuary 2012 to reform existingrules from 1995. In March 2014 theEuropean Parliament proposedchanges to the text. The aim is tohave the legal text done by June 1,2015, so it can then be put to a vote.� The new rules would apply toany company that does or seeks todo business anywhere in the 28European Union countries, meaningit would affect U.S. companiesincluding Google Inc., Amazon.comInc., Facebook Inc., Apple Inc. andeBay Inc.� Companies that abuseconsumers’ data would face finesof up to 2% of global revenue–or 5%if the European Parliament’samendments make it into the finallegal text.

The Wall Street Journal

� The rules would be implementedby a national data-protectionauthority in each EU country. Underone provision, companies mustnotify those authorities of seriousdata breaches, such as hackingattacks or system failures, as soonas possible, ideally within 24 hours.� The “right to be forgotten,” one ofthe controversial areas of thelegislation, means people would beable to delete their data if there areno legitimate grounds for retaining it.� A separate ruling by theEuropean Court of Justice thatgives individuals the right torequest removal of results thatturn up in Internet searches fortheir names has led to Googletaking down links that individualswant removed–though not theactual Web pages those links led to.

THEWALL STREET JOURNAL. Monday, November 3, 2014 | R9

BIG DATA IS a concept that’s re-shaping how companies and gov-ernments do business. What itmeans for privacy can be toughto understand.To get a clearer picture, The

Wall Street Journal’s JonathanKrim spoke with two executiveson the leading edge of data ana-lytics: Alex Karp, co-founder andchief executive of Palantir Tech-nologies, which originally fo-cused on using data to track ter-rorists and has now spread intomany other fields, and Kira Ra-dinsky, chief technology officerand co-founder of SalesPredict,which crunches data about abusiness’s customers to helpthem optimize sales.Here are edited excerpts of

the discussion.

MR. KRIM: Talk a little bit aboutthe coverage and criticism some-times of what companies likeyours do in the fields of surveil-lance and scooping up data.MR. KARP: The general critique isthat you will move from a predi-cated-based analysis—i.e., I havesome suspicion—into a nonpred-icated-based analysis—I have nosuspicion, but I can discoveryou’re involved in criminal be-havior based on a pattern you’rethrowing off.In reality there are certain

kinds of terror attacks or crimi-nality that to stop them, youmove to nonpredicate-basedsearches. If you’re looking at aterrorist attack in Iraq, you don’tlook just for predicates. You lookfor nonpredicate-based analysisthat allows you to find thesepeople and then drill down.There are very few people

who are against that happeningoutside America or on the bat-tlefield. There are many people,including myself, that areagainst a system where it’s hardto tell whether it’s a predicate-or a nonpredicate-based analy-sis. And where there’s no way toverify whether the governmentis doing predicate- or nonpredi-cate-based analysis and who arethe targets. This is why we spentthree years building a systemthat makes it very difficult tomove from one to the other

without leaving a trail.

MR. KRIM: But in your work, doyou not take advantage of non-predicate opportunities whenthey’re offered to you?MR. KARP: We do all the time inthe context where they’re appro-priate. So, for example, lookingat cyber, if you want to figureout who intruded into my sys-tem, where did they come from,or is there an intrusion in mysystem, and if so, what countryare they from? Obviously, that’san appropriate use of a nonpred-icate-based search. A nonappro-priate use would be, say, at Pal-antir, I tell everyone, “You havea complete right to privacy in-side my company,” and then I dononpredicate-based searches onthem all the time despite thefact I said I wouldn’t do it.

MR. KRIM: What are the privacyand broader societal concernsgoing forward that you wrestlewith?MS. RADINSKY: Businesses areless concerned about privacy be-cause so much information ismostly open. You can estimategrowth based on everything theypublish about themselves. Youcan buy information about howmuch traffic gets to their web-site and infer how much are they

putting in marketing and howfast they’re growing.But I would like to say some-

thing about privacy in general.When we lose privacy, we gainso much more. For example, ifwe open all our medical data foreverybody to have, we can haveinsights. People can analyze thedata to find cures for diseases.One way to do this is deferentialprivacy, a way of letting peoplemake statistical queries on somekind of records without seeingthe records themselves.So maybe we should think

about how to democratize data.Then nobody’s going to have pri-vacy concerns, because every-body’s going to have access todata.MR. KARP: I don’t want everyonehaving access to all my data. Welive in a society now where onlypeople who are angels in highschool can get elected. This is ahuge problem. You can say,“We’re all going to get used toit,” but it’s already having hugeconsequences on our country. Ikind of like the idea of beingable to change who I am, have apersonal life that’s not confor-mant with broader norms. And ifyou start making all these thingspublic, it’s actually very hard todo. Do you want to explain toyour mom how you live?

BigData vs. PrivacyAlex Karp and Kira Radinsky on balancing the two

SUE DESMOND-HELLMANN runsthe $40 billion Bill and MelindaGates Foundation, which isprobably best known for invest-ing in the development of drugsand vaccines to fight widespreaddiseases such as AIDS and ma-laria. Sam Altman is the presi-dent of Y Combinator, one ofthe best-known technology incu-bators in Silicon Valley.Together, they sat down with

Dennis Berman, The Wall StreetJournal’s business editor, to dis-cuss how technology is beingused to solve the world’s prob-lems. Here are edited excerpts.

World’s Biggest ThermosMR. BERMAN: I think you guysrepresent, in some ways, distinctways of solving problems aroundthe world.

Sue, you might say that youcan combine a lot of what Samhas to offer into big organiza-tions. But can big bureaucracies,big organizations do the workneeded to respond to somethinglike Ebola?MS. DESMOND-HELLMANN: Whatwe have in common is we’reboth problem solvers and inves-tors. And one of the great thingsabout the Bill and Melinda GatesFoundation is we can, in a veryprecise way, sometimes with asmall group of people, invest insolving problems.But inevitably we need to

work with governments or whatyou’re calling bureaucracies.When you’re working on theworld’s biggest problems, whenyou’re working in sub-SaharanAfrica at scale, you’ve got to goto the local ministry of health.

You’ve got to understand thatNGOs and governments and uni-versities are part of that. And soit won’t scale if we won’t inter-act with bureaucracies. So wedo.

MR. BERMAN: Give us one or twothings that get you most excited,whether it be companies or ini-tiatives happening at the GatesFoundation.MS. DESMOND-HELLMANN: One ofthe things that I saw when I wasout in Ethiopia over the summeris called the P6, the world’s big-gest thermos. A front-line healthworker in Ethiopia can put vac-cines that need to be stored coldin it, and it allows her to get

those vaccines to the villageswhere the children are, savingliterally hundreds of thousandsof lives.So sometimes, the big gee-

whiz high-tech things allow us todo things to get safe and effec-tive vaccines to save kids’ lives.And that kind of technology al-lows us to markedly reduce un-der-5 mortality.

MR. BERMAN: Sam, do we overfe-tishize startups and what theycan do for the world?MR. ALTMAN: One of the topproblems with how venture capi-tal works right now is that thetime period over which peopleare expecting results is incredi-

bly short. And so a lot of thesethings, you do have to be incred-ibly patient. It isn’t as fast aswriting software and having aviral consumer product. I dothink there is a big lack of pa-tience among much of the in-vesting community in startups,though it’s beginning to change.

MR. BERMAN: We’ve seen, overthe last 20 years, most venturecapital in biotech has had apretty crummy return. The pa-tience isn’t there.MR. ALTMAN: None of these ideasare bad ideas. They were just tooearly. The things startups needto win are a very low initial costand a very quick cycle time. Andhistorically that hasn’t reallybeen the case in areas like en-ergy or biotech. But I thinkthings have happened in the lastfive years that have reallychanged that.

MR. BERMAN: So a company thatyou have like uBiome. Just walkus through what that is and howtechnology is making those char-acteristics possible.MR. ALTMAN: So uBiome is acompany that sequences the bac-teria in your gut, your micro-biome, and then can tell you alot of things about that. Andthey mail you a kit, and you sendthem back a sample.

MR. BERMAN: A sample of what?MR. ALTMAN: Poop, I think is theword they choose to use for it.For this to work, the cost of

sequencing needs to come downa huge amount, and that hasbeen falling on this incredible

curve. I think Illumina says theycan do a full sequence for $1,000with their newest machines. Butalso, we needed a software suiteto actually analyze this genomeand say, “Given this raw data,here’s what this means.”That software wasn’t widely

accessible until very recently.Now, you can do this thing youcould never do before, becausethe cost and the speed and theavailability of tools have justcome down so much.

The Doctor’s RoleMR. BERMAN: It seems that weare rolling out these incredible,beautiful, mechanical, software-driven creations. And they’re do-

ing a lot of good. Will the indi-vidual doctor just become aconcierge to the machine overtime?MS. DESMOND-HELLMANN: Thereare certain parts of that interac-tion between a patient and aphysician that are extra spe-cial—asking the right question,laying on hands, caring, under-standing what’s going on in away that Watson still can’t do.So I think of all of the tech-

nology as tools and tactics toimprove outcomes in health. Butthe human part of what a physi-cian does becomes more impor-tant over time.

MR. BERMAN: But over time,might that role disappear? Youwould say there’s something spe-cial about the way humans drivecars. But there’s nothing specialabout it. We don’t drive themvery well.

Computers would probably bebetter at driving cars. They’regoing to be better at diagnosingdisease.MR. ALTMAN: Certainly the fearwith AI or machine intelligencein general is that it replacesdrivers or doctors or whatever.But the optimistic view on this,and certainly what backs upwhat we’re seeing, is that com-puters and humans are verygood at very different things.So a computer doctor will do

a better job than a human onlooking at a massive amount ofdata and saying this. But oncases that require judgment orcreativity or empathy, we arenowhere near any computer sys-tem that is any good at this.

Taking Aim at the Big ProblemsSue Desmond-Hellmann and Sam Altman hope technology can address some of the world’s woes

SUE DESMOND-HELLMANN

GaryFong

/Dow

Jones(6)

ALEX KARP

SAM ALTMAN

KIRA RADINSKY

VOICES FROM THE CONFERENCE

“The tough challenge for us, as securityexperts, is trying to figure out, is it rea-sonable for a brick-and-mortar companyto defend themselves from cyberespio-nage that’s backed by people who are inuniform every day badging into a build-ing and hacking Campbell’s soup orsomething, just as an example. Youcan’t expect a soup company to preventa military from breaking in.”

Kevin Mandia, Senior Vice Presidentand Chief Operating Officer, FireEye Inc.

VETERAN HOLLYWOOD execu-tive Jeffrey Katzenberg is thefounder and chief executive ofDreamWorks Animation SKGInc., the high-profile movie stu-dio credited with releasing someof the biggest hits in animationhistory, including the “Shrek”and “Madagascar” franchises.The studio has also had its

share of flops, however, and inrecent years Mr. Katzenberg hassought to diversify the com-pany’s revenue stream by mov-ing into areas such as digitalmedia and consumer products.He sat down with Wall Street

Journal editor Dennis K. Bermanto discuss the state of the moviebusiness and the company’s newventures, among other things.Here are edited excerpts.

A Difficult YearMR. BERMAN: Let’s start with thenumber 4.0. That’s the numberof per capita movies a year thatthe average American will see in2014. In 2004, that number was4.8. So Americans are going tothe movies significantly less.What has changed? What hasgone wrong?MR. KATZENBERG: There aremore ways and more opportuni-ties to consume movies todaythan ever before. And they’remore popular than they’ve everbeen before. As we have moreways to access content, there isa challenge to the movie-theaterexperience. I love the movie the-ater. It’s the only place in whichyou really can see films in thesort of communal experiencethat is so special. Comedies arefunnier. Scary movies are scar-ier.On the other hand, the movie

industry has done a remarkablejob of making sure that peoplecan get access to our films in asmany different ways, shapes,forms, price, windows. And so ifyou look at it on a global basis,you know, the movie businesshas never been bigger than it istoday. But we’ve had a difficultyear in 2014.

MR. BERMAN: And we saw the re-sults from AMC Entertainmentand Regal Entertainment. Theywere both pretty bad.MR. KATZENBERG: It’s a cyclicalthing. I promise you, 2015 and2016 will be historically highyears for the movie [business].

MR. BERMAN: Give us a couple ofmovies that are going to movethe needle.MR. KATZENBERG: Well, I don’tknow anybody on the planet whoisn’t waiting for that next “StarWars” movie—to see what J.J.Abrams does with it. Jim Cam-eron will be back with “Avatar.”The amazing Marvel movieshave become the hot genre infilms today. And there’s just aton of great films and filmmak-ers coming in 2015 and ‘16. Theywill be good years.

MR. BERMAN: AwesomenessTV, a

Web video company that youspent a significant amount ofmoney on, is about getting con-tent from large populations tolarge populations. Who needsmovie producers when you havethe Internet with people produc-ing a bunch of their own stuff?MR. KATZENBERG: One of the newand most exciting sort of fron-tiers is short-form content,which actually has been incu-bated and really brought to lifethrough YouTube.And the marriage of short-

form content and mobile devicesis creating a completely new op-portunity for entertainment anda way in which we can engagewith people in a new way. Itthink it’s going to grow into aspectacular business.If you go back and look at

how television came about in the1950s and ‘60s, it filled thesetremendous spaces that peoplehad and continue to have intheir lives—for instance, afterschool, after dinner time, atnight and on the weekend. Thesebig gaps were filled.Today, now with portable de-

vices with us all the time, wehave these in-between moments,these little places where, youknow, you’re waiting to checkout at the counter. That is pre-senting a whole new opportunitybecause people want to be enter-tained.

Big Money Coming?MR. BERMAN: Is there money inthat? I think AwesomenessTV‘srevenues in the last quarter werearound $4 million.MR. KATZENBERG: We’re at thebeginning of that. You’ll see inthis quarter, they’re significantlygreater.

MR. BERMAN: Is it because you’reselling advertising against it?MR. KATZENBERG: It’s both ad-vertising and sponsorship. It’sintegration.For those who don’t know,

AwesomenessTV is a YouTubechannel specifically geared for12- to 24-year-olds. Right nowthey have about a hundred mil-lion subscribers, and they’re do-ing a billion views a month.And Brian Robbins, [who runs

it], is making phenomenal,

short-form content—bothscripted content, as well asthings that are about fashionand lifestyle and beauty and in-formation. He has built an in-credible audience there, and heis now starting to monetize it.

MR. BERMAN: How big of a busi-ness can this be? Are we talkingfive years from now, a $100 mil-lion business? A $500 millionbusiness?MR. KATZENBERG: I think muchgreater than that.

Chinese ExportsMR. BERMAN: Let’s talk aboutmovies in China, which is a hugefocus for you. You have OrientalDreamWorks, I guess you’re a49% owner of that operation inChina. How are you going to dobusiness there?MR. KATZENBERG: The proposi-tion that we brought to Chinawas to build a studio, which weare doing in Shanghai.We have almost 300 anima-

tors there now. And what we areattempting to do is to makefilms in China for China, andthen for export to the rest of theworld.

MR. BERMAN: What Chinese filmmight we see in U.S. theaters inthree or four years?MR. KATZENBERG: Just thinkabout “Kung Fu Panda,” which isin every respect a Chinese story,something that very much em-braces the culture and the his-tory of China in a very fun andfunny way. We have a couple oforiginal stories that are funda-mentally Chinese. But we’re tell-ing them in a form that is West-ern in its storytelling. And Ithink they will travel wellaround the world.

Movies’ Tough YearJeffrey Katzenberg says things are looking up

‘I promise you, 2015and 2016 will behistorically high yearsfor the moviebusiness.’Jeffrey Katzenberg

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