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CNN MONEY

Alibaba Issues Record IPO; Elon Musk Discusses Future of Space Exploration; New Technology Changing Transportation; Value of College Education Debated

Aired September 20, 2014 - 14:30   ET

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


CHRISTINE ROMANS, CNN HOST: The NFL in crisis. Could a PR stumble derail the biggest money machine in sports? I'm Christine Romans. This is CNN MONEY.

As the NFL stumbles through a public relations blitz, there are signs of change. Arizona Cardinals running back Jonathan Dwyer arrested on charges of domestic abuse this week and the team immediately deactivated him, a decision that other teams have been struggling with. Think Ray Rice, Adrian Peterson, Greg Hardy. Now, Dwyer is innocent until proven guilty, but the Cardinals were also considering the court of public opinion.

Meantime, sponsors are frustrated. Nike and Castrol backed away from Vikings running back Adrian Peterson following charges of child abuse. Radisson hotels suspended its sponsorship with the team. But the biggest concern for the NFL could be Anheuser-Busch. It released a statement saying it was disappointed and strongly concerned about the recent incidents.

Brian Stelter is CNN's Senior Money Correspondent, CNN MONEY's Cristina Alesci joins me as well. Nice to see both of you. Brian, a strongly worded statement from Anheuser-Busch. Other sponsors have been hedging a little bit more. Pepsi and others, Verizon, hedging. Is the pressure mounting or is it fading here?

BRIAN STELTER, CNN SENIOR MONEY CORRESPONDENT: I think we're sort of in a time-out period, words we have heard but actions we have not seen. It's not if these advertisers are taking their commercials away. They're not costing the NFL or the television networks money right now. They're just expressing concern.

CRISTINA ALESCI, CNN MONEY CORRESPONDENT: Which is why we've seen all of the sponsors hide behind these very carefully worded corporate statements, not coming on our air and blasting the NFL, right? They're being pretty moderate when it comes to criticizing the NFL.

STELTER: And there might be a very practical reason. How else are you going to get 20 million people to look at your beer commercial? The NFL is the way to do it.

ROMANS: But if you're the Radisson, you don't want all of those people to be looking at your name, which behind is the GM of the team who is talking about man who -- ALESCI: It's easier for them to take out a player than it is to walk

away from the whole team or the league.

ROMANS: And 45 percent of NFL fans are women. They represent a huge growth opportunity. You make such a good point, especially for marketing, for buying stuff, merchandise.

ALESCI: Absolutely.

ROMANS: How important is this?

ALESCI: The NFL has been chasing this specific demographic for about three years. It's invested in here. It's taking out full-page ads in fashion magazines. It's created dedicated clothing lines to women. Why? Because the audience on the male side isn't growing. And women, as you said, they spend. They'll buy the NFL makeup line.

ROMANS: So they're sizing the shirts right, they're trying to make it cool and appeal to women. They know our closets could be full of their players.

ALESCI: Exactly. They would love that. But here's the thing. We've seen that exact same demo take to social media and blast the NFL. Cover Girl has this line of makeup that's, you know, that is sponsored by the NFL. That photo-shopped image was plastered across the web this week. It showed the model with the black eye with the company's tag line "Get your game face on." It doesn't get much worse than that.

ROMANS: It gave Cover Girl a chance to say hey, we want this to be a conversation that we do not endorse in any way, shape or form. So Cover Girl, I think, used that well in the end.

Let's talk about the commissioner, Roger Goodell. He, under his leadership, 32 teams, all of them have grown in value. When you look at the numbers it's unbelievable. The top five have more than doubled their worth since Goodell took over. This is a money story. He made -- he made $44 million last year. At what point does he become more trouble than he's worth?

STELTER: He has 44 million reasons not to step down, right?

ROMANS: Right, right?

STELTER: To me, that number says it all about why we haven't seen action happen.

ALESCI: Right. But if you look at those team valuations, and, Brian, you know that more than anyone else out there, that is driven by the media contract. So how much of that is Goodell's doing and how much is the market driving the valuations?

ROMANS: I would argue that they could be the S&P 500 for most of those. A lot of financial properties have gone up, and these have been a moneymaker since 2006. STELTER: But the same market that is voting right now, we're going to

have 20 million people watch the NFL on Sunday. The ratings continue to be sky high. So it's not as if the audience is voting against the NFL right now.

ROMANS: And we have not seen the ratings. We have not seen the eyeballs go away. And that's what would have to change. But there are a lot of people still talking about this. At what point do you have maybe women saying I'm not going to sit down with my kids and my family and watch football if I have to explain to my 11-year-old why Ray Rice isn't playing?

ALESCI: This is a great topic for women's groups out there, right? Women's groups are taking this up and really getting out there. Ultraviolet flew banners over stadiums and in New York saying Roger Goodell must go. So this is a primetime for those women groups to get people activated for this issue. We'll see whether or not it actually permeates to the general fan base.

ROMANS: And $44 million, Roger Goodell, $105 million, I think, over the past several years. I think that's a salary that is priced for perfection. You know what I mean? That is a lot of money. You are priced for perfection, and this has been a real PR problem for the league. It will be interesting to see what happens. Thanks, guys. Nice to see you.

STELTER: Thanks.

ROMANS: Coming up, our top money stories of the week. We're talking tipping, breadsticks, billionaires, and, oh yes, a little thing like the biggest U.S. IPO in history. That's next.

(COMMERCIAL BREAK)

ROMANS: Getting your hands on an iPhone-6, that tops our five biggest stories of the week. Our CNN MONEY panel is here to discuss, Cristina Alesci, Paul La Monica, and Laurie Segall join us. All right, fans in frenzy, iPhone 6 went on sale Friday. Apple enthusiasts were ling up. This is the usual hype, the usual hype, and they still line up.

LAURIE SEGALL, CNN TECHNOLOGY CORRESPONDENT: They still do. And I will say this. Now more than ever there are about, like, 1,500 people outside the flagship store. That is more than usual. And I think part of that is the reviews are in. The reviews are very good, and Apple did publish those numbers. They said they sold a record 4 million iPhone 6 smartphones the first day they were available for preorder. So you are seeing more demand than usual.

PAUL LA MONICA, CNN DIGITAL CORRESPONDENT: It makes sense. I waited a day before downloading IOS 8 because of all the usual glitches. I like it. I think it's a big improvement over IOS 7. So if that is what's really going to be powering the 6 and the 6 plus, then it looks like these could be pretty good phones.

ALESCI: I just love the way Apple rolls things out. First the introduce the phone. They wait for the reviews and then they get the buzz going and they get a huge line in front.

ROMANS: Vintage Apple, you're right.

All right, the biggest initial public offering in U.S. history complete. Chinese internet company Alibaba went public at the NYSE. This is how the action looked on day one after pricing at 68 bucks a share, the top of its range. Laurie, the company's operations and customers are mainly in China, but its founder Jack Ma just cashed in on the American dream.

ALESCI: Right, going public on the floor of the New York Stock Exchange, you don't get much more American dream than that. And he's such an interesting guy because we talk about this rags-to-riches story. Jack Ma is now the richest man in China, but he couldn't even get a job at KFC before he dropped out of college -- he couldn't get into college. It's so unbelievable to see. And this is now the biggest tech company that many Americans have never heard of.

LA MONICA: Yum brands could use Jack Ma right now given their problems in China. Let's be honest here, I mean, Alibaba, a lot of U.S. investors do not know this company as a consumer brand so that might be a bit of a risk. But I think when it comes down to it, think of Facebook. Even though that IPO had a bit of a rough patch, it's now more than double from -- it went from where it went public, the stock's worth $200 billion. Don't judge it just on day one.

ALESCI: Don't judge it on day one, but there are risks inherent. First off, the investors I spoke to say they're buying this as a play on e-commerce and the consumer in China. The thing is that we've seen some really rough patches in the Chinese economy right now.

ROMANS: Right.

ALESCI: Retail numbers missed, the Chinese government had to increase liquidity in the banks there. So you have to kind of wonder whether investors are getting overly excited about the consumer in China.

ROMANS: And mom and pop investors, I always warn, give it a year so you can really see how a company can do and what the fundamentals are, because an IPO is the riskiest investment a regular person investor like us can ever do.

All right, blame it on the breadsticks, guys. Olive Garden is hemorrhaging customers. Parent Darden Restaurants promising a turnaround. One big shareholder has a suggestion -- fix the food. It put out a 294-page slide show, almost 300 pages, detailing Olive Garden's problems. On the list, too many breadsticks delivered all at once so they get cold and stale, overcooked pasta with sauce sort of ladled on top, and mamma mia, failing to salt the water used to boil the pasta, how could they? Paul what is this?

LA MONICA: It might as well be Paul La Monica. I'm a proud Italian- American. You've got to salt the water. You've got to cook the pasta al dente and just put on the sauce.

ALESCI: It's not Italian food. Let's just put that out there. LA MONICA: Starboard saying they're wasting food. I think there is

legitimacy there. You don't need to bring 10 breadsticks to a group of four. You can still have unlimited breadsticks by having people want more after they finish the ones that first come to them. I think that was their big gripe. Olive Garden's trying to defend themselves by saying it's Italian generosity, which I'm not so sure about that.

ALESCI: That's a little bit of a stretch. But there is one unlikely advocate for the company and the way it does business, and that is the workers, because this activist investor that you mentioned, Starboard, is pushing for cost cuts. And the workers are nervous about losing their job. So that's going to be a big PR nightmare for Starboard.

I think the solution besides going to dinner at your house, Paul --

LA MONICA: You're always welcome.

ALESCI: Thank you.

ROMANS: He's stingy, though. He's only going to give you one breadstick.

SEGALL: One of the solutions -- and Darden, the president, has said we're testing tablets and technology because that can make this a little more efficient, and if you want to order quicker, that kind of thing. And also Buffalo Wild Wings are already using this technology. So we'll see if that could be some kind of solution.

LA MONICA: Their CEO says that the tips are higher because things are more efficient and the waiters and waitresses there are pretty happy. So we'll see how that goes.

ROMANS: We were so offended about ladling on the pasta.

LA MONICA: It's a travesty.

ROMANS: All right, tip your housekeeper. That's the message from Marriott. The hotel is putting envelopes in more than 160,000 rooms in the U.S. and Canada. The gesture met immediately with criticism. A union that represents housekeepers says, tipping is nice, but hey, why don't you pay these people more money in the first place? They make about nine bucks an hour.

Here's the way I look at it. They're basically saying we want to give our housekeepers an $800,000 a day raise and we want it to come out of your pocket, the person who's staying in the room.

ALESCI: Lori was just talking about automation and getting rid of workers. Here's an example of a service that you can't automate, right? So pay your workers more to your point. And by the way, you've got to tip the housekeeping staff. God forbid you forget something in the room. You want to make sure you get it back. Keep those guys happy.

ROMANS: I know, I left my charger. How about this, I'll give -- they suggest $1 to $5 a day tip. I'll give $2.50, they give $2.50 and they can raise the wages a little bit. When you look at their quarterly report, they're making money. The room rates are going up. The corporate traveler is spending a lot of money.

LA MONICA: I think it depends on what kind of customer you are staying at the hotel. You know, I've got two kids. We leave the room and it's a tornado that has just hit. It's like a FEMA site. So I'm going to leave a nice tip because they have a lot of work to do.

SEGALL: But $9 an hour. Raise wages.

LA MONICA: There you go, yes.

ROMANS: They complain about turnover. They try to get really good people and keep them. Pay them more. Pay them more and we'll pay, too.

From one end of the earnings spectrum to the other, the world has 155 new billionaires. That's so great. More than 2,300 total, a seven percent jump from last year. Who are these people? They have an average $3.1 billion. The average age is 63 years old. Most of them become billionaires until their late 40s. There is hope for you still, Paul La Monica. Mostly they are male. Only 286 are women. And 35 percent of them didn't go to college. This is really self-made stuff. It's a billionaire boom. We can all sleep better at night, I think.

SEGALL: I think we'll definitely all sleep better at night because 103 of those billionaires are here in New York. I think it's interesting that they're all skewed in similar places. I think that number, that education isn't required is very, very interesting, especially in technology when you look at a lot of these folks who go on to make billions, they're college dropouts.

ROMANS: They ones that do go to college -- maybe all of them can pay a lot more than $5 at a Marriott.

LA MONICA: Larry Ellison is one of those billionaires and now all of a sudden he's going to have maybe a little bit more free time because he's stepping down as CEO, $50 billion plus. He's obviously still going to be chairman and doing a lot of work there. But, you know, this is a guy who -- he knows how to use those billions wisely -- yachts, islands.

ROMANS: Record highs this week in the stock market. A lot of those billionaires are billionaires because they're playing stocks there, and half of Americans are not, so they are not in that group that has been getting rich on the stock market. Thanks, you guys. Have a great weekend.

Coming up, the space race is back. Boeing landed the bigger contract from NASA, but SpaceX founder Elon Musk says his company is the best. We're going to ask him why next.

(COMMERCIAL BREAK)

ROMANS: The space race is back, but the 2014 version is not between nations, it's between corporations. Boeing scored a $4.2 billion contract from NASA this week. Rival SpaceX received $2.6 billion. Now, despite being awarded a smaller sum, SpaceX founder, Elon Musk, tells CNN's Rachel Crane his systems are light years ahead of Boeing's.

(BEGIN VIDEOTAPE)

RACHEL CRANE, CNN CORRESPONDENT: Boeing won $4.2 billion on this contract. SpaceX was awarded $2.6 billion. Let's talk about that discrepancy there. I mean, are you guys in second place here?

ELON MUSK, CEO, SPACEX: Our system will do about twice as much for about half as much.

CRANE: As the Boeing system.

MUSK: Yes, yes, absolutely.

CRANE: So your system has been superior, you say?

MUSK: Oh, definitely, light years ahead.

CRANE: How so?

MUSK: We can do precise propulsive landing. They're doing parachutes and air bags. They need, like, some huge area to land in, like 100 square miles or something of landing zone. And it's sort of an ignominious, embarrassing sort of landing, quite frankly. It looks like a crash.

CRANE: Were you nervous about the outcome of this race?

MUSK: I actually did have a slightly sleepless night. If there were two companies selected, then we're very likely to be selected. It could have been due to budget constraints that only Boeing was selected.

CRANE: There were two winners, SpaceX and Boeing. Is there now a new phase to this race?

MUSK: Yes. I think it's always more fun to see a race than a one person or one entity. I think having Boeing and SpaceX there adds a bit of excitement to things. SpaceX is kind of the up-and-comer. Boeing is the cagey veteran.

(LAUGHTER)

CRANE: That's the narrative. So the ultimate goal of SpaceX is to get to Mars.

MUSK: The only goal of SpaceX is to develop the technology necessary to establish a self-sustaining city on Mars. The thing that really matters to the future of humanity is being an independent species.

CRANE: Is their version of transportation and colonization of Mars that does not involve NASA? MUSK: My best guess is that the establishment of self-sustaining city

on Mars will have quite a bit of NASA involvement. I would be surprised if that's not the case. But I think it's going to be a public/private partnership.

CRANE: How about the other way around, though? Do you think NASA could do it on their own?

MUSK: I don't think NASA could establish a self-sustaining city on Mars. If you say what's the absolute lowest you could possibly imagine a government mission costing, at the absolutely lowest level, probably $500 million. In order for a self-sustaining economy to be there I think it actually needs to be more like $500,000.

CRANE: In order for that to happen, the government will have to turn to the private sector, you say?

MUSK: It doesn't matter how smart it is to be in government, it cannot be accomplished with that structure.

(END VIDEOTAPE)

ROMANS: We reached out to Boeing for a response to Musk's claims. Boeing says because Musk hasn't seen its contractor proposal he cannot back up his claim that SpaceX could provide the same service for half the price. Boeing also says its CST-100 capsule only requires 20 square miles to land, not the 100 square miles Musk estimates. And Boeing disputes Musk's description of the landing as looking like a crash.

Rachel Crane joins me. You've been inside both of these capsules. What's it like?

CRANE: They're definitely designed for safety and not comfort. The astronauts are only supposed to be in them for a matter of hours, though, so it makes sense why they're putting the emphasis on safety. But the dragon, the touch screens inside are the same touch screens that are in a TESLA, and the moods lighting is the same as if you were to get on a Boeing airplane. So they're trying to create some level of comfort within these capsules.

ROMANS: Brand a little bit for the consumer. But will the consumer actually be able to touch these? That's the question. Firms like SpaceX, Richard Branson, Virgin Galactic, they're promised space tours for all. But is that really realistic? It's more like space tours and for the one-tenth of one percent.

CRANE: Exactly. And you know, it's not going to be happening in the next year, although Richard Branson hopes to be transporting people to suborbital flights within the next year. But what SpaceX and Boeing are doing, they're doing low-earth orbit flights. So that's a totally different ballgame with Virgin Galactic, you'll only experience six minutes of weightlessness. And hopefully if one day you're able to save up the money to get on the CST-100 or on the dragon, you'll be experiencing hopefully a month or so.

ROMANS: Rachel Crane, great reporting. Thank you.

CRANE: Thank you very much.

ROMANS: All right, coming up, billionaire entrepreneur Peter Thiel on whether college is worth it.

(BEGIN VIDEO CLIP)

PETER THIEL, CO-FOUNDER, PAYPAL: A diploma is a dunce hat in disguise.

(END VIDEO CLIP)

ROMANS: You heard right, your diploma is a dunce hat in disguise. More on that next.

(COMMERCIAL BREAK)

ROMANS: Take a look at these two pictures. On the left is a Harvard class in 1932. On the right is a Harvard class today. Other than taking notes on laptops instead of paper, not a whole lot has changed for these students. Is it time to disrupt higher education? Billionaire entrepreneur Peter Thiel thinks so. The PayPal co-founder says unless you go to a top school, your degree is a dunce cap in disguise.

(BEGIN VIDEO CLIP)

THIEL: When we have $1 trillion of student debt that's been amassed in this country, you have to ask what that's paid for. And one of the things that's paid for is $1 trillion worth of lies that are told about how great the education that people have gotten.

(END VIDEO CLIP)

ROMANS: Thiel has a foundation that pays really smart college students to drop out of school and start companies. Of course, not everyone can be the next Mark Zuckerberg. That's why former Harvard president Larry Summers calls Thiel's program, quote, "the single-most misdirected bit of philanthropy in this decade," end quote.

But a four-year degree may not be right for everyone. Some two-year degrees offer real value. Pay Scale says students who graduated from these two-year programs earn around $70,000 a year by midcareer. These are two-year programs. And then there are these MOOCs, massive open online courses. They're expanding access to education. Right now more than 300,000 students are taking Harvard's intro to computer science for free.

(BEGIN VIDEO CLIP)

ANANT AGARWAL, CEO, EDX: Online learning is a new tool. And it behooves us as professors and universities to embrace new tools and experiment with them on our campuses. We believe that these new tools can transform campus education.

(END VIDEO CLIP)

ROMANS: Education is still the great equalizer in our society, but the current model, a four-year degree you pay too much for, is ripe for disruption.

Thanks for watching CNN MONEY. We're here every Saturday 2:30 p.m. eastern, so set your DVR. And check out CNNMONEY.com every day for the money news that matters to you. You can also find us on Twitter, Facebook, Instagram. Have a great weekend.