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QUEST MEANS BUSINESS

World Economic Forum in Davos, CEOs Share Their Thoughts On The Global Economic Outlook; Commodities Collision Course; The Q25; Davos A to Z

Aired January 25, 2011 - 14:00:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


RICHARD QUEST, CNN ANCHOR, QUEST MEANS BUSINESS: Where we are live tonight, the latest economic numbers show recovery is slowing.

Chief executives tell us tonight you have to think differently.

And a top U.N. official warns the food crisis is very real.

I'm Richard Quest the World Economic Forum, where I mean business.

Good evening from Davos, where tonight the new reality is a two-speed world. The International Monetary Fund says global growth is picking up, emerging, developing economies are sprinting along in top gear. It is the advanced economies that are struggling to keep pace and to keep the wheels turning. Growth in emerging economies will average around 6.5 percent according to the IMF. It is forecasting 2.5 growth for the advanced economies this year. This two-speed recovery, as the IMF calls it, faces grave risks. In the developing world it is overheating, in the developed world, from high levels of debt and long term unemployment.

Now, the U.K. isn't just slowing down. The U.K. has gone into reverse, at least temporarily. Britain's economy shrunk 0.5 percent in the closing three months of last year. It was a shock to the markets and the analysts who had been expecting just sluggish growth The decline is blamed on the unusually bad winter weather. Even without snow the U.K. still would have been a frozen economy on zero growth. And some are worried numbers could signal the start of the famed double-dip recession brought on by austerity government cuts.

The U.K. Chancellor of the Exchequer, the Finance Minister George Osborne is being forced to defend the policy of strict austerity.

(BEGIN VIDEO CLIP)

GEORGE OSBORNE, FINANCE MINISTER, GREAT BRITAIN: It was the coldest December for 100 years. People couldn't get to work. Businesses were closed. And that has had a bigger impact than anyone forecast. But if you look at areas not so affected by the weather like manufacturing, they are growing. That is an important part of rebalancing the British economy and if we were to abandon our budget plans and not face up to the debts, as the way that Labour suggests, then we would be back in a financial crisis. That would be a disaster for Britain. And this government is not going to be blown off course by bad weather.

(END VIDEO CLIP)

QUEST: Now we need to update you with the markets and how they've been trading, obviously, regards to these numbers. Wall Street is under pressure. It did manage to trim some losses on the upbeat news on U.S. consumer confidence. Investors are watching the two-day Fed meeting. And tonight, President Obama gives his State of the Union. Those are the numbers for the markets at the moment. They were spooked on both sides of the Atlantic by the shock U.K. economic report, which pushed Europe's benchmarks all somewhat lower. And you can see that reflected in the FTSE which is the lowest of them all.

We need to put this into perspective in terms of what chief executives think of what is happening in global growth, and what they need to do try and change things. Alcatel-Lucent is one of the companies seen as a bellwether for global business. The chief executive always pleased to have on our program, I should say.

BEN VERWAAYEN, CEO, ALCATEL-LUCENT: Hi.

QUEST: Ben Verwaayen.

Ben, lovely to have you as always. You are a member of the foundation of the World Economic Forum. You have been here many-how many years have you been coming here?

VERWAAYEN: Many, many, many years, too many years too many.

QUEST: Too many, right. Well, we won't dwell on that.

Instead, I ought to point out, that you are in the quiet period. Which means that you have got results coming up, so we can't ask you too much about your own numbers.

VERWAAYEN: You can ask, but I cannot answer.

QUEST: Fair enough. We have a deal. I'll ask, you won't tell us. And we'll talk about something else.

How about instead, what are you-what are you seeing? What is happening in the global economy, as you see in your business?

VERWAAYEN: I thought what you just showed was exactly right. You see a world where the developing markets have a kind of "now it's our turn". Things are going very well. We are developing it is going very fast. And the advanced economies, they have a problem. They have a problem because certain things are going well, other things are not going well.

QUEST: Is this a situation that is correcting itself? Because this slowdown, or this, if you like anemic growth, this slow growth that we're seeing. Do you see any improvement?

VERWAAYEN: Well, certain sectors, absolutely. I mean, certain things are going very, very well, others are not. I think there are two issues here. First of all, the currency of jobs; we do not create enough jobs. And that is an important element to what we see as the recovery.

Second, if you look to the economy are doing well, others are not.

QUEST: I was listening to your blog, online, earlier. You talk very specifically about this being a crucial year and key decisions have to be made?

VERWAAYEN: Yes.

QUEST: But you are not just talking about inflation and unemployment, though, are you?

VERWAAYEN: If you talk about global risks, and that is what we all do, we talk about global risks. To me there are two things that we need to get sorted this year. First one is Doha (ph) alliance (ph).

QUEST: Oh!

VERWAAYEN: We cannot go back-we cannot go back to protectionism. And you can see a lot of rhetoric around the world that if we are not very careful people are going to do their own things. They are going to close the curtains, and look inside. We need to get the Doha (ph) alliance (ph), now concluded.

And the second thing we need to do is we need to find the new Internet. The new thing that people go back to the garage and invent, and that is green.

QUEST: I want to pause for a second, while we listen to what you actually said, in your blog today.

(BEGIN VIDEO CLIP)

VERWAAYEN: The World Economic Forum this year is even more important than last year's. The world has to decide. We live in a new reality.

(END VIDEO CLIP)

QUEST: The world has to decide? We live in a new era, you said. Decide what? You are talking about concrete firm decisions. The Doha round is a busted nut.

VERWAAYEN: No, it's not.

QUEST: Of course it is.

VERWAAYEN: Richard, this is about world trade. It is about how do we get along with a world that is so connected and still we haven't found a rule book to go and make sure that it works for all of us. We have to get it done. And the problem is we have now a different world. It is not just the G8. It is other people around the table as well. How are we going to make decisions? A really important question.

QUEST: And the real question, of course, is firm decisions. Not just airy fairy, snowy thoughts (ph).

VERWAAYEN: Absolutely, right. So, once you have a decision, how do we enforce it?

QUEST: Many thanks, indeed, Ben.

VERWAAYEN: Thank you.

QUEST: Lovely to have you on the program. Are you sure you don't want to tell me how long you've been coming to forum?

VERWAAYEN: Well, it is more than 10 years, so you know.

QUEST: Once you get over 10 you don't have to worry too much about that. Many thanks, indeed.

Now, if you are in the West, and you want to grab a piece of the action in emerging markets, and you have to take the sort of decisions Ben was talking about, it is time to start thinking differently. That, is the view of Dennis Nally, the chairman of PriceWaterhouseCoopers, PWC, International. When he joined me, earlier in the day, when it was sunshine, and we were at the PWC Lounge, we talked about the things that needed to be done.

(BEGIN VIDEOTAPE)

DENNIS NALLY, CHAIRMAN, PRICEWATERHOUSECOOPERS: These markets are different. And if a Western company, who has been incredibly successful, in their own markets, their own markets, if their products, their services, are not tailored to meet those unique needs, obviously, they are not going to be successful. So that is one of the key risks. So, basically, it says we need to change the way we think about doing business in those markets. We need to change the way we develop our products to meet the needs of those consumers. Moving product development, for example, away from the home office and into those markets. It is a different business model that has new risks that have to be managed.

QUEST: Let me ask you, how do you adopt that in your own business? Because you are a classic, Western-based, consulting management group, that now has a large emerging markets business. Your own profitability depends on those emerging markets.

NALLY: There is no question about it. Today about 20 percent of our global revenue comes from those emerging markets. The next five years, we project that to be 40 percent. So, it is a different way to think about the business. We have to be local. We have to understand those unique issues. We have to tailor our services. We have to understand the cultures in those markets to really be successful.

QUEST: But do you not feel sometimes, even as you are saying that, you are sounding like exactly the clients that you are advising. I mean, are you going to have to drink your own medicine?

NALLY: Well, look, I think it is all about making sure you understand those markets and getting close to those markets, working with people on the ground who are there, that are empowered to really make key decisions about your business, about understanding that marketplace. And that has got to be critical for future success here.

QUEST: As you talk back to your survey again. Sovereign debt is also, is No. 2. What are companies-what are CEOs worried about? I mean, they don't have any debts themselves, with countries, so they are not going loose money directly.

NALLY: It's a great point. I think it just goes to the sustainability of the economic recovery here. I think everybody understands the debt issues, the deficit issues, are a major problem. Governments are going to have to deal with that. Either in terms of raising revenue, cutting costs, cutting social programs, that creates all kinds of uncertainty. And uncertainty is an issue that CEOs worry about, in terms of whether or not this recovery is in fact sustainable.

QUEST: Their confidence is strong on emerging markets. If you absent those emerging markets, do CEOs fundamentally believe the U.S. and Europe are on the right track?

NALLY: I think they are saying they are on the right track, but in terms of capitalizing on the growth opportunities, they are not going to come from those historical markets. They are going to come from these emerging markets. And with that, means that they have to change the way they think about their business, how they do business, and that is where the threats comes into play here.

QUEST: Is that a pessimistic outlook?

NALLY: You know, I don't think it is. I think it's the reality of what is going on. I mean, we all know there is a major shift from the West to the East, and that is clear. It is happening. We are right in the middle of it. And so the determination of whether or not a company can really be successful and capitalize on that, I think is going to require a new way of thinking, a new way of doing things. And the companies that are able to adapt, into that new business model, are going to be the ones that are really successful into the future.

(END VIDEOTAPE)

QUEST: And those are the sort of issues that people are talking about here at Davos, the big issues. That is Dennis Nally at PWC.

Hollywood feels a long way, especially from this kind of weather. My next guest describes what is happening behind me, as perfect, for one of his productions. The Oscar nominations are out, the award season is in full swing, we'll be talking in just a moment, after the break.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: I'm pleased to announce that the 10 films selected as the best picture nominees for 2010 are-

(END VIDEO CLIP)

QUEST: "The King's Speech" is on the tip of Hollywood's tongue. The royal drama lead the way in the race for Oscars with 12 nominations today. Including best picture, best director, best actor, for Colin Firth, best supporting actor for Jeffrey Rush. The western epic from the Cohen Brothers, "True Grit" is next, 10 nods, one for the 14-year-old Haley Steinfeld, in the best supporting actress category. And the movie about Mark Zuckerberg, "The Social Network", has eight nominations. Jessie Eisenberg is up for best actor for his turn as the Facebook founder.

On the day that they celebrate the big screen nominations, we have to join us but the real big screen, the IMAX Chief Exec Richard Gelfond.

Always great to have you.

RICHARD GELFOND, CEO, IMAX FILMS: Great to see you again, Richard.

QUEST: And let's just dwell for one second on the Oscars. We are in that interesting period, aren't we, between nomination now, and the actual night itself?

GELFOND: Absolutely. On the Internet, in newspapers, everyone says, nominated for eight awards and there is a big marketing push. And there is a big courting push, for voters, to try to convince them that your film is No. 1. And I'm a member of the Academy, I get all kinds of magazines, calls, all sorts of things. It is a competitive time in Hollywood.

QUEST: So, when will you make your decision?

GELFOND: Probably about a week before the voting is done. I've seen most of the movies. I'm still going through them. And you have to make sure you see all of them. And there is great crop this year.

QUEST: It is a good crop.

GELFOND: It is a very good one.

QUEST: Let's turn to IMAX and the way in which your company has performed. Because you are specializing now and you have actually grown quite substantially. The number, percentage-wise, is quite huge.

GELFOND: Our box office doubled this year, which is kind of incredible in a recession, from about $300 million to close to $600 million. Our theater network grew over 20 percent. In "Tron", in North America, we did 25 of the box office, on 2 percent of the screens.

QUEST: But the thing is, are you getting enough product for those screens?

GELFOND: Oh-

QUEST: You are still a long way from what you want.

GELFOND: No, we're not. We're filled up, Richard. We have no holes in our schedule now. We have 52 weeks a year, a film playing out there.

QUEST: So, what do you want next?

GELFOND: I think to improve our technology. Chris Nolan (ph) is filming the sequel to "The Dark Knight" using IMAX cameras. So, is JJ Abrams (ph), in "Mission Impossible 4" with Brad Bird (ph) this year. So I think more, bigger, better.

QUEST: More, bigger, better. 3-D?

GELFOND: 3-D, 2-D, whatever the next movie is.

QUEST: Do you think that a lot of hype is spoken about the new technology? Certainly, when it comes to domestic abilities, whether it is 3-D television, whether it is G-TV.

GELFOND: I think 3-D is here to stay.

QUEST: Really?

GELFOND: But I still think it is about the movie. So for the right movie, like "Avatar", like "Tron", like "Alice in Wonderland", 3-D, no question. For the wrong movie, it doesn't save it.

QUEST: All right. And you'll let us-it would be impossible for me ask you, but I shall anyway, who you would vote for, for best picture?

GELFOND: I vote for "Inception" because we showed it on IMAX. I love Chris Nolan, so happy to say it.

QUEST: There is nothing like a bit of good old-fashioned bit of self promoting. Lovely to see you, have a good Davos, and a good year.

GELFOND: Good to see you, Richard. Thank you.

QUEST: We are live at the World Economic Forum where it is all about relationships. The boss here know about it, and so do the three business leaders who have opened their corner offices to "The Boss".

Tonight, relating to your investors, giving back to your community, it is "The Boss" on QUEST MEANS BUSINESS.

(COMMERCIAL BREAK)

QUEST: Cautiously optimistic, that is how Deloitte's global chief executive views the recovery. Now, Deloitte's chief executive, as he looks at the recovery, the consulting and accounting firm plans to put 250,000 new hires on its payroll. I caught up Deloitte's Chief Jim Quigley, and started by asking if he might be supporting rose-colored spectacles?

JIM QUIGLEY, CEO, DELOITTE: Well, I hope not because I've returned my hiring to pre-crisis levels. And we are in the talent marketplace and we are bringing people to our teams. And we are seeing our clients look for our help and assistance in dealing with the dynamic environment that we see. Perhaps, I'm too optimistic. But right now, we see strong sustained growth in our business.

QUEST: And the truth is that strong, sustained growth is by no means equal globally, is it?

QUIGLEY: No, absolutely not. We absolutely have the three-speed recovery underway. With high growth markets, I don't like to attach the word "emerging" to them, because I don't think we should describe the second-largest economy in the world as emerging. So those high growth markets are going to fight inflation. And some of the mature markets the word "austerity" is going to define the way that public policy behavior is all about, as they try to deleverage that public sector. And we need job creation in the U.S.

QUEST: What is your new reality? I mean, I've been trying to find, you know the phrase here, "shared norms for the new reality". What does that mean to you?

QUIGLEY: I believe that the world has been reset and expectations have been reset, how we interact with our talent, what the public policy behavior is going to be as we delever the public sector, and the role of government with business simply changes. And as we said, all of those things are very different than where we have been. And that is why I believe we also need a new approach to leadership.

QUEST: If there is one change that you would say that you have introduced as a leader, to reflect this change, to today, what would it be?

QUIGLEY: Values-based approach to leadership. And a values-based approach to-

QUEST: What does that mean? Hang on, what does that mean? Values- based approach?

QUIGLEY: That means that our people, all 170,000, understand what Deloitte stands for and what is important to us, as we serve our clients, and as we interact with each other. And they are empowered then to act in their market with deep local roots and real connection to the marketplace where they are deployed.

QUEST: Is it difficult for you, as a chief exec, with 170,000, to actually, A, get that message down, and B, to monitor if it is working.

QUIGLEY: Absolutely, it is difficult. It is the biggest challenge for leadership, is effective communication. How do you get your message to your people and then how can you bring them together so they can work effectively toward those shared goals. That is what leadership is all about.

(END VIDEOTAPE)

QUEST: Jim Quigley of Deloitte's, all about leadership. That is what leadership is all about, he says, inspiration, and relationships. Ask any boss, here at Davos, and they will tell you the same thing. If you are going to be the chief executive, and lead the company, you had better have a good idea where you are going and how to inspire people to follow you. Which brings us neatly to our weekly series, as we follow three chief executives who we call, "The Boss".

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: Previously on "The Boss", Michael Wu check in on his latest project, Canteen, to see whether the renovation was paying off.

MICHAEL WU, CHAIRMAN, MAXIM'S GROUP: We feel that we need to give it rejuvenation.

UNIDENTIFIED MALE: And in London, Sarah Curran, raised her profile by facing the camera lens for "Marie Claire" magazine.

SARAH CURRAN, CEO, MY-WARDROBE.COM: I think the customers want to see that it is not just a faceless site.

UNIDENTIFIED MALE: It is early on Saturday morning in Hong Kong, and some of the biggest companies are already doing their bit for charity. Leading his company is Michael Wu.

WU: Hi, good morning.

UNIDENTIFIED MALE: The chairman of Maxim's Group is getting together with some of his employees and their families.

WU: Hello, nice meeting you.

UNIDENTIFIED FEMALE: Hello, nice to meet you. I'm Susie (ph).

WU: Thanks for coming.

UNIDENTIFIED FEMALE: Oh, thank you for having us. This is Jessica and Hanna.

WU: Oh, hi, Jessica.

UNIDENTIFIED MALE: They are all meeting at Hong Kong Stadium, to take part in a charity walk they believe will help serve their local community.

WU: It is an annual event, and we always participate in this event. And it is a great way for us and our staff to come out and do something meaningful, and at the same time, have a fun day.

UNIDENTIFIED MALE: To Michael this is the opportunity to raise his company's profile. And to show that it, too, can be socially responsible.

WU: Before we were actually quite discreet about doing charity events, or doing things to serve the community, but I think in the past few years we've become much more public about it. And the reason, really, is that we are a very visible organization. And what we do, the public sees. And our staff see it.

UNIDENTIFIED FEMALE: We are going to start now!

WU: Oh, I'm excited. Ready to go.

UNIDENTIFIED MALE: But Michael doesn't force his employees to participate. It is their decision whether or not to be part of the cause.

WU: At the company we-part of our mission is that not only do we want to make good profits, but we also want to contribute back to society, and by participating in this event, it is a way of demonstrating that commitment.

UNIDENTIFIED MALE: As "The Boss" Michael also wants to send a positive message to his employees. He wants them to know that they work for a meaningful company.

WU: it is great when the staff see that the company shares the same values which they do, and for them to participate in this event with me is a great cause.

CURRAN: There have been some change internally.

UNIDENTIFIED MALE: Sarah Curran is not used to standing in front of a crowd.

UNIDENTIFIED MALE: You should put your cards down.

CURRAN: No, let me do it like that.

UNIDENTIFIED MALE: Today, she doesn't have a choice. In just a few minutes she'll be giving a speech to the My-Wardrobe executives. First, though, she needs to prepare.

CURRAN: In April I asked John-better?

(LAUGHTER)

This is really an opportunity for us to speech to the investors directly, update them on what's happened, and the plans for the next six months.

UNIDENTIFIED MALE: This isn't the first time Sarah has faced her executive board.

UNIDENTIFIED FEMALE: Where do you want it?

CURRAN: Maybe at the back. Back? Yes?

UNIDENTIFIED MALE: Still, she wants to make an impression, after all they are the cash fueling the business. As the moment closes in, nerves and excitement begin to show.

UNIDENTIFIED MALE: Are you ready?

(LAUGHTER)

UNIDENTIFIED FEMALE: Be brave.

CURRAN: As a brand, as a team, and as a business, there have been some changes internally. In April, I asked John Mark (ph) to step up and work with me as a chairman.

UNIDENTIFIED MALE: Sarah doesn't have to memorize her lines. She knows them inside out, after all, it is her business.

CURRAN: The changes that happened over the last few months have really been in place to help drive business forward.

UNIDENTIFIED MALE: To Sarah this presentation isn't about convincing her board. As "The Boss" she wants to inspire them. She wants them to share her vision for My-Wardrobe.

CURRAN: The investors are pretty sort of power group of people. So, you know, you have to stand up in front of people, who may not necessarily understand the sector. So you need to sell the business, sell the story, them excited, and get them to see the passion and feel it, and want to be a part of it.

UNIDENTIFIED MALE: Sarah bagged the first round of investment for her company in 2007. That, too, was nerve-wracking.

CURRAN: I remember my throat, sort of, as I started to speak, gradually closing, closing, closing up. At one point I had to shout out, water! Because I couldn't talk.

UNIDENTIFIED MALE: Not only does she have to face potential investors she also had to beat the competition. One investor, however, was convinced right from the start.

ELIZABETH HAMMOND, INVESTOR, BOARD MEMBER, MY-WARDROBE.COM: For me it seemed like a very real tangible, credible investment. And I fully, I was a very, very early adopter. Because I totally got e-tail, so to be honest they didn't have much of a job to persuade me to invest. I don't think they knew that, but I was desperate to put my money in at that point.

CURRAN: I think all these presentations have been a massive learning experience. Every part has helped to get us to where we are today. And has help us grow.

UNIDENTIFIED MALE: Next week, on "The Boss" Michael Wu tells us where he finds inspiration for new ventures. And we catch up with Richard Braddock, as he takes to the stage in Manhattan.

(END VIDEOTAPE)

QUEST: Fascinating insights into being the chief executive, "The Boss" exclusively here on CNN.

We are almost one month into 2011 and already the talk is who might run for U.S. president in 2012. Will the former New York Mayor Rudy Giuliani be on the list of Republican contenders? He answers that question and more. It is "PIERS MORGAN TONIGHT". It is about 30 minutes from now, right after QUEST MEANS BUSINESS.

When we come back after this short break, it is snowing in Davos. We are going to be talking the serious matter of food.

(COMMERCIAL BREAK)

QUEST: Hello, I'm Richard Quest, QUEST MEANS BUSINESS live from Davos in Switzerland.

This is CNN. As always, here, the news comes first.

Egyptian security forces have been using teargas and water cannons to break up anti-government protests. This amateur video from Cairo shows a man attempting to hold his ground against police trucks. You can see protests throwing rocks and, of course, you can hear them shouting. Thousands of people across the country have been rallying against corruption and failed economic policies.

Anger has been spilling into the streets in Lebanon, as well, as a new prime minister is named. Najib Miqati is backed by Hezbollah and opponents accuse the Shiite militant group of staging a power -- power grab and sidelining the caretaker prime minister, Saad Hariri. They blocked roads and they burned tires to protest against the nomination.

Retribution is inevitable -- the message from the Russian prime minister, Vladimir Putin, on Monday's deadly bombing at the airport in Moscow. Mr. Putin visited wounded victims as they recovered. No one has claimed responsibility for the attack. Chechen rebels have been blamed over past attacks. '

Let me remind you, 35 people died in the suicide bombing and more than 100 people have been injured.

White House advisers are talking up Barack Obama's State of the Union Address, saying it will be all about winning economic futures. The U.S. president will face a dividend Congress and many critics as he takes to the podium in just a few hours Tuesday night, Washington time. There will be a Republican and a Tea Party response.

So, as Egyptians protest, in part, over the rising cost of living, another other global food crisis could be on the way, according to the United Nations agriculture chief. He's echoing the French president, Nicolas Sarkozy's call on Monday for more regulation of commodities, as rising prices pushed the UN's food price index to its highest ever point.

Let me remind you of how some of these stand.

The price of cotton has doubled in the past year, to $1.62, an all time high.

Sugar has taken less than a year to double in price, in the past couple of months, it's hit 30 year highs, pushing to $0.34 a pound.

And yesterday, the price of wheat was at its highest since the latest food crisis in '08, $8.35 a bushel.

They are basic commodities used as the staple diet of many people around the world.

Joining me now, the director-general of the U.N. Food and Agriculture Organization, Jacques Diouf.

Director, you've warned of a crisis.

How realistic is that crisis?

JACQUES DIOUF, DIRECTOR-GENERAL, FAO: Well, all the data that you have just illustrated point to levels of prices that are almost at what we had in 2007-2008, where we have seen riots all over the world.

QUEST: Do you fear and are you prepared to say now that you fear more riots if this continues?

DIOUF: Well, oh, definitely, if prices continue to rise. And in particular, if the next crop is not up to the level that we anticipated, we will certainly have a very serious situation.

QUEST: If that -- when we see these prices, how much of these prices is -- is speculation?

How much of it is market shenanigans?

DIOUF: I believe that there are really three fundamental factors. The first one is that we have not been investing in agriculture enough. The share of agriculture is -- in '08 (ph) -- went from 19 percent...

QUEST: Right.

DIOUF: -- in 1980 down to 3 percent in 2006. Yet, we need to increase by 70 percent the production in the world because the population...

QUEST: Right.

DIOUF: -- will reach 9.1 billion. That's the first problem.

The second problem is a problem of the market, which is neither fair nor free.

QUEST: Right.

Are you calling for the market to be more regulated?

DIOUF: Oh, yes, because, in fact, it has been deregulated. We had a system that had been working...

QUEST: So...

DIOUF: -- since 1933, but in 1999 and 2002, there were decisions taken to deregulate the futures market. And that has...

QUEST: Right. But it's...

DIOUF: -- given consequences to that.

QUEST: -- there -- but you are aware, if you try and stop speculation or if you try to re-regulate the market too much, you could be in a worse situation.

DIOUF: Well, why did it work between 1933, from...

QUEST: But...

DIOUF: -- the Great Depression to 1999?

During...

QUEST: Because...

DIOUF: -- that period...

QUEST: -- because globalization has changed the rules.

DIOUF: Well, globalization has changed the rules. But we have also seen the consequences of deregulation in the financial crisis and economic crisis we have seen.

QUEST: What -- if nothing happens, what happens next?

If the situation is allowed to maintain and lead us -- Sarkozy has said he's looking into it.

But if nothing happens, what happens?

DIOUF: Well, I think that if nothing happens -- and I don't expect that nothing will happen, because the G20 is addressing it, FAO is addressing it, all other institutions are trying to do something about it. Naturally, we will have the riots spreading as it did happen in 2007-2008.

QUEST: And are you confident that here in Davos, you, Mr. Director, can get this on the agenda?

DIOUF: Oh, it is already on the agenda. It...

QUEST: But at the top of the agenda...

DIOUF: Well, I hope it will reach that top, but I hope in particular that we will implement the decisions we've been taking in so many conferences that we have not followed by action.

QUEST: Action is what's required.

Many thanks, indeed, for joining us, Mr. Director.

Have a good Davos.

A sensible man, wearing a hat. It is actually snowing outside.

Now, we want to just take you to a speech in London at the moment. It is -- it's in Newcastle in Northeastern England.

That is Mervyn King, Dr. Mervyn King, who is the governor of the Bank of England. He's addressing the question of inflation. And, obviously, he will be talking about the U.K. economy -- he's talking about rates to rise.

We will be listening for. We're monitoring what he's saying and, of course, we will bring it to you so you don't have to sit through a very long speech from the governor of the Bank of England, we will -- we will do the hard work for you and bring you the best picks afterwards.

QUEST MEANS BUSINESS live from Davos.

In a moment, our exclusive interview Q25. And we will talk to you about how and who got the green chips.

(COMMERCIAL BREAK)

QUEST: The Dow Jones, which was flirting with 12000, now off 60 odd points. It doesn't look like 12000 is going to happen -- well, you never know, before the week is out.

High profile meetings in Davos are ramping up and our Q25 for the earnings season winds down.

Tonight, we hand out the last five chips for this edition of the Q25. And we have -- we have both the little and the large.

We have the little one here, so that I can keep track of where we stand. And, of course, back at QUEST MEANS BUSINESS headquarters, we have Esa, who will do the honors on the big -- the big one, as you can see there. Right. And so we all -- yes, we are on the tape.

Great. Bring in Maggie Lake from New York -- and, Maggie, we start with American Express, AMEX, which was a three out of five. We had a debate.

And how did you feel about it?

MAGGIE LAKE, CNN CORRESPONDENT: Yes, we did have a debate. And in the end, we gave it a green. Listen, they missed estimates. It was the first time in two years. So, initially, you know, a credit card, a lot of regulations, exposed to the consumer but when you dig down into the details, American Express looked very good. Their card members are spending more. Their delinquencies are down and they're upbeat about the future. So this looks like that they're going to get a green -- Richard.

QUEST: They are going to get a green. And also, I particularly liked they're bringing money back from the reserves. They didn't lose money in the recession and that they're well-positioned. So American Express gets a green in the little -- and a little -- and a green in the large.

3M is our next contender tonight. Look, the -- the -- the results, three out of five, the results from 3M were not good, Maggie.

How can we justify giving them a green?

LAKE: Yes, I think they actually only got two out of five, so they weren't even as good as we thought. But they had some issues, for sure, and especially, it's something we've heard a lot of, right, rising material costs really hurt them.

But, Richard, you know I like it when people play it straight. And the CEO coming right out and saying, listen, we were late to the game on that but we've got it now, we're going to deal with that, pass them along, cut some costs and get control over that.

And, actually, other than that, when you sort of dig down, it looked good -- strength across all their business units. The results topped expectation and they've raised their forecasts...

QUEST: Right...

LAKE: -- which we know investors like.

QUEST: Right.

LAKE: So I think even though they only got two out of five, they deserve a green.

QUEST: Look, for Maggie to give a green when there is some doubt -- and she's a -- this is -- this is revolutionary stuff. Reva -- all right, Esa, drop another green onto the big board. And the greens are really now pulling ahead.

DuPont, we don't need to waste too much time on -- for this one. DuPont was an automatic one. It gets a green. Let's throw that one in -- Maggie, anything on DuPont?

LAKE: I do just want to say one thing. This is a company -- I interview the former CEO some years back. It was really struggling. They were very exposed to pharmaceuticals and expiring patents. The new CEO came in. She's really turned things around and she's focusing on growth areas and sort of redefining that company.

So her -- her strategy really paying off here, Richard.

QUEST: All right. Now, Siemens is the next. It's an automatic green, so, Esa, you do the honors there, please. Put your green in first. Siemens gets an automatic green. It's a company that is performing well. It's got a good range of products and it's got a good, strong geographical spillover.

LAKE: Yes, it certainly does. This is another one of those stories like GE, not just good for Siemens, but good if you're looking at the global economy. Look at these numbers, Richard. First quarter new orders to India up 160 percent. China up 46 percent. That tells the story right there. Real strength in emerging markets.

QUEST: All right, finally, Ericsson. Now, this is not the Sony Ericsson that we talked of last week. This is the Ericsson that makes large routers and it makes large equipment for the telecoms industry. The -- the results themselves were so-so. There was an improvement. But, interestingly, we're still going to give them a green -- Maggie.

LAKE: Yes, growth margin concerns still persist here, Richard. But when you look at the mix of the business, where they're seeing strength is where the future is headed. They're really benefiting from that explosion in Smartphones, as telecom makers, telecom companies upgrade the networks.

So all things being equal, if the best part of your business is the part that has the most promise, I think you have to err on the side of the benefit of the doubt and give them a green.

QUEST: And we're going to give -- while we put that green in on both little and large, we will hear from the Ericsson chief executive, Hans Vestberg.

(BEGIN VIDEO CLIP)

HANS VESTBERG, CEO, ERICSSON: We will always have markets that are investing a little bit less and others investing a little bit more. And, of course, we have had North America to be, actually, the ones growing the most during 2010, actually, through all the quarters.

Then we have seen Europe coming back. We saw, in the fourth quarter, China and Northeast Asia coming back for us. So it's a little bit of a blend. We still are down in India year-over-year as well as -- as parts of Africa.

(END VIDEO CLIP)

QUEST: That's Hans Vestberg of the -- of Ericsson. And I'm slightly overwhelmed by the number of greens, so many, I couldn't quite total them up as we were going through.

Esa, luckily, is at the big board and she has the number for us tonight.

ESA: Richard, our final tally is 18 green and seven red.

QUEST: Eighteen to seven. There was a late burst of reds yesterday - - Maggie Lake in New York, what can we take away from the Q25 in this quarter?

LAKE: You know, Richard, I'm always sort of a bit cautious when it comes to these things. But I have to say, the thing that jumped out at me is instead of it just being some companies operating well in -- and really hitting it out in a difficult environment, I -- I'm seeing signs of people talking about the global economy getting better. GE and Siemens -- we talked about Siemens today -- said good things about the overall global recovery strengthening.

Banks, even though they had some trouble spots with trading...

QUEST: Yes.

LAKE: Investment banks were hurt, but consumer -- the credit conditions are improving. And IBM services were up. So business is spending again.

Those are some -- I don't want to use the word green shoots, but those are some positives to sort of focus on, not just for the companies themselves, but for the broader economy.

QUEST: No, I think you've misdirected yourself here, Maggie Lake. I -- I think that -- I think you're ignoring the emerging market element, coupled with the austerity. I think that what we're seeing at the moment is companies holding on to the gains that we saw in the last quarter -- Maggie.

LAKE: Yes, I will give you the austerity. That is a big concern, austerity, not just in Europe, but in the U.S., here, what could be facing us. That is definitely going to be a challenge. But I'm not willing to be negative, Richard. You're not going to do it.

QUEST: I -- I don't know what they're putting in the water in New York, but Maggie Lake is -- is showing an -- an unseasonable burst of optimism. It won't last.

A quick reminder of where we ended this quarter, it's 18-7. That was where we ended the Q25 this time.

There will be another Q25 in three months time. Well, it's a quarterly thing.

It's real -- it's snowing here in -- in Davos.

Guillermo Adruino is at the CNN World Weather Center.

And the only question is whether or not we are going to get sufficient -- sufficient snow to give a nice gloss over those trees.

GUILLERMO ARDUINO, CNN METEOROLOGIST: Well, we'll see some light snow showers, I think, in the next day. And as you see, Wednesday is the day when we see most of the snow. Then Thursday and Friday, it is going to be colder because the high pressure is going to set in -- you will not get a lot of snow. So unfortunately, it's going to stay like that. It is not green, it's not red, it is white and it's here to stay because it is cold. And we are at very cold temperatures.

There is another system that is coming here. And it -- this is the one that is going to bring the snow into Davos and for many of the parts of Europe, in fact.

If you are watching from Britain, you see the satellite picture and you say, oh my god, it looks awful. That's what we did when we were walking to Taylor behind the scenes, our producer. And, no, it is light rain showers that we see in Cartes (ph), in London, in some other areas.

Where we are going to see the change is in the east. Things are getting a little bit better, but colder. So the high pressure that is here is retreating a little bit, allowing the system, the low pressure, to bring some rain in Britain. And then the cold air is going to be emphasized, especially in the east.

And this is throughout the week. And, look, we see the deep blues, especially in the North and in the East. And a little bit of a break for Spain and Portugal right now. Snowfall, as we've been talking, you know, we see some in Davos because of altitude because of the location, but not by much.

Munich is reporting some snow showers, Zurich, Vienna, Ramstein, Helsinki, Insbourg. All those cities are reporting snow as we speak.

Berlin may have some snow on Wednesday. And then things are looking OK for other places. I think it's going to be rather breezy in Britain, too. So the English Channel, here, the North Sea and the northern parts of France. Look, London right now, 13 kilometer per hour winds; 15 in Paris; 19 in Copenhagen; 22 in Stockholm. That's going to stay. It's going to continue to be quite breezy.

Temperature-wise, we are expecting a high of six. That may feel a little bit lower with the wind in London, but it's not that bad.

Kiev, minus two. So we'll continue to see the cold, as I said before, in the east.

And New York, Canada, Montreal in the Northeast, the New England states, we saw on Monday morning temps that were really low, minus 30, minus 23. We see minus 15 now in Montreal; zero in New York, Richard.

You know, it's going to continue to be cold and a little bit snowy but it's not as bad as Monday morning.

QUEST: Guillermo at the World Weather Center.

Snow in New York, snow in Davos and many places in between.

Many thanks.

ARDUINO: Thank you.

QUEST: Now, I promised you that I would update you if Mervyn King was -- said anything, the governor of the Bank of England, speaking in Newcastle, Northeast England.

The governor has said that inflation could well hit 4 to 5 percent. He's blaming three areas. He talks about import prices. That's obviously as a result of sterling's fall. Energy prices, that was a result of the oil price rising toward $100 a barrel. And he talked about domestic matters. That's, of course, a reference to the VAT increase to 20 percent, which has taken place in the U.K.

We'll keep listening to the governor and we'll bring you if he says anything else that might be of crucial importance.

QUEST MEANS BUSINESS live in Davos.

Why do so many of the world's richest and most powerful people schlep here every year?

It's all about access. And we have access to all areas after the break.

(COMMERCIAL BREAK)

QUEST: Time and again, the fundamental question is asked, why do they come to Davos?

What's the magic of what happens at the Swiss mountain?

It's time to put it in Davos 101.

(BEGIN VIDEOTAPE)

QUEST: D stands for decision-makers, destination Davos. Each year, at the end of January, the elite from government, business and finance take their limos through this tunnel.

They've been making the same journey for 40 years, all in a bid to find some common ground.

(on camera): A is for the Alps, high up in the Swiss mountains they come to create lofty goals.

(voice-over): V is for value -- at Davos, there's always a lot of talk.

Does anything actually come of it or is it just hot air?

(on camera): When you talk about values, it's all too easy to take cheap shots at the annual meeting as a gab fest for the global elite. But the fact is there is value in people who have the power to change things coming together.

O is for organization. This is where everything will take place -- in the new, enlarged Congress Hall, where improving the state of the world seems to have taken on industrial proportions.

(voice-over): The Congress Center has had a revamp. There are new lounges, nooks and crannies, with suitable 21st century themes.

(on camera): S is for skis. Whether it's downhill or cross country, there's plenty of them here in Davos. Just don't think of ever using them if you're here for the economic forum. For me, it's more suits than skis.

I think this is yours.

(voice-over): Skiing may be off the agenda, but here we can still learn an economic lesson or two.

UNIDENTIFIED MALE: Classical, slow but always forward.

QUEST: Classical, slow but always forward -- heaven forbid you move backward.

(on camera): Come back here, Hans.

UNIDENTIFIED MALE: No, we should always go forward. And you called me and I came backward.

QUEST: Life.

(voice-over): A moral we could all do well to learn.

Richard Quest, CNN, Davos.

(END VIDEO TAPE)

QUEST: Now, there is a great deal more to Davos than ski slopes and even to the economic forum. Real life corridors of power and some of the best talking points are found in the back rooms, far away from the tedious discussions.

Angela Merkel and Nicolas Sarkozy may have a chance to catch up and discuss Europe's economy. The ECB president, Jean-Claude Trichet, could try to win support for boosting Eurozone bailout funds. While China's commerce minister, Chen Deming, will be in demand to talk over trade and currency issues.

Those are some of the side issues when people, like-minded, interested in those subjects, all come together at the World Economic Forum.

And that's aside from the hundreds of panel discussions that also take place.

When I come back in just a moment, it's a Profitable Moment when we need to think differently.

(COMMERCIAL BREAK)

QUEST: Tonight's Profitable Moment.

Over the next few days, everyone will be talking about the shift in economic power, north to south, west to east. Tonight on this program, we heard Denis Nally of PWC warn that to succeed in this new market, it's not just enough to trade. That's old-fashioned. That's old globalization.

Today, you have to think like the consumers in those countries. You have to be prepared to let these new markets dominate your strategy. Take your company out of the old way of thinking, change the outlook. It's a sophisticated new way of thinking that perhaps many CEOs are not capable of. It requires strategy, bravery and the realization if you don't change your company, you won't have a company to change.

And that's QUEST MEANS BUSINESS for tonight.

I'm Richard Quest in Davos, Switzerland.

Whatever you're up to in the hours ahead, I hope it's profitable.

I'll see you tomorrow.

END