Return to Transcripts main page
Costs of Operations Against ISIS Examined; Apple iPhone Launch Encounters Problems; New App Allows Free Stock Trading; Some Companies Giving Employees Unlimited Vacation Time; New Company Transforms Greenhouse Gas into Plastic
Aired September 27, 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: Bombs raining down on ISIS targets. But stopping the world's richest terrorist group comes with a price tag for America. I'm Christine Romans. This is CNN MONEY.
(BEGIN VIDEO CLIP)
ROMANS: America at war in the Mideast again.
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: We will not tolerate safe havens for terrorist who threaten our people.
ROMANS: The United States launching air strikes in Syria against is, a terror group that rakes in up to $3 million a day by selling oil on the black market.
UNIDENTIFIED MALE: They are very well funded.
ROMANS: Part of the president's strategy, cut off the flow of funds.
OBAMA: It's time to end the hypocrisy of those who accumulate wealth through the global economy and then siphon funds to those who teach children to tear it down.
ROMANS: As the U.S. and its allies target terrorists' deep pockets, America is again tapping its war chest. Just one tomahawk missile costs $1.5 million, flying an F-22, $62,000 an hour. And the bills are just beginning.
UNIDENTIFIED MALE: We're going to degrade, destroy, we're going to defeat ISIL. That could take years.
JOHN KERRY, SECRETARY OF STATE: We're going to do what is necessary to get this job done.
OBAMA: This is not going to be something that's quick. It's not something that is going to be easy.
ROMANS: The costs escalate. Is America prepared to pay up?
(END VIDEO CLIP)
ROMANS: Lawrence Korb is a former U.S. assistant secretary of defense, a senior fellow at the Center for American Progress. Larry, nice to see you. You know, America has already paid for all these missiles, these planes, this personnel, it's already there. We already paid for it. But this fight against ISIS could go on for years. Can America afford this? Can it afford more spending on things like this in an age of budget cuts?
LAWRENCE KORB, FORMER ASSISTANT SECRETARY OF DEFENSE: Actually, the money is already there. They're estimating this will cost $7 million to $10 million a day, which is roughly two-and-a-half to about $3.7 billion a war. They have what we call an emergency fund or an overseas contingency operation fund which this year will be about $60 billion. And what they've done up to now is they've put a lot of things that should be in the normal budget in there. Just to give you an example, between fiscal year 2014, which is about to end and 2015, which starts 1 October, the overseas contingency budget basically for Afghanistan went from roughly 90 to 60, but the number of troops went down by 80 percent. And basically, they're funding things like the Navy's deployment to the Pacific. And remember that most of the things you're talking about, we've already bought and paid for, the planes and the missiles in the regular budget.
ROMANS: So the cost of this operation, obviously, is a fraction of what the occupation, for example, was, or the past 10 years of the war on terror. But what about the hit to the American psyche? The U.S. is trying to get out of the Mideast. Now it's back in. We're back on war footing again, Larry.
KORB: Well, that's a different issue. And, you know, my personal opinion is, since Americans, about 60 percent, you know, according to the polls, support this, I would say since it has to be paid, let's have a surtax to pay for it. That would get the people more involved, because since we don't have a draft anymore, basically, the Americans go, oh, that's great, let's do it, but it doesn't cost us anything. And we should have done that during the wars in Iraq and Afghanistan, which cost us at least $2 trillion in direct costs.
ROMANS: Yes, you know, you say that the Pentagon doesn't have a money problem. It has a money management problem. I mean, every year, you can't even audit the Department of Defense. It loses track of billions of dollars. Explain to me the management problem.
KORB: Well, what's happened is, and even people like John McCain, Senator McCain, who are big supporters of defense, say the sequestration, which capped defense spending at $500 billion, which really only takes it back to where it was, and even if you control inflation in 2007, was caused by the cost overruns and the poor management.
I mean, for example, the F-35, the new joint strike fighter, they started developing it before they had worked out all the bugs. And because the budget went up so much between 2001 and 2010, people didn't pay the attention that they should have, nor did they have the top management that they needed.
ROMANS: Lawrence Korb, former U.S. assistant secretary of defense and senior fellow at the Center for American Progress, nice to talk you. I'm sure we'll be talking again soon because by all accounts this is going to take a while. Thank you, sir.
KORB: Thank you.
ROMANS: CNN MONEY correspondent Cristina Alesci joins me now. Cristina, missiles and planes, they don't come cheap. How quickly are these costs adding up?
CRISTINA ALESCI, CNN MONEY CORRESPONDENT: It's funny, because the Pentagon mentioned this $7.5 million to $10 million number that Larry just spoke about. That's the average per-day cost. But anybody that's been paying attention to what's happening will notice that it's not much different than the number we got at the end of August. And we've stepped up the campaign significantly.
Just this week alone we started bombing Syria. And we led that effort with a huge strike, 47 tomahawk missiles. You mentioned the tomahawks before. It's one of our most expensive missiles, $1.5 million. The Navy went through about $70 million worth of supply. Now, you could argue, we had that supply, but at some point it's going to need to be replenished.
Then you look at, OK, yes, we paid for the fighter jets, we paid for the F-22 Raptors, the most expensive, you know, aircraft in military history. But if you actually look at the cost of flying, this costs money every time you go up in the air. Yes, you paid for the aircraft, the F-22 goes for $62,000 an hour when you look at maintenance and fuel costs.
ROMANS: Some people in the military start to argue about training, though. Sometimes the training, but you're already training in those aircraft anyway, so there are a certain number of flight hours that are coming up. The irony here, though, which is so interesting and really catching people at the end of the week, the United States is actually bombing its own equipment. The United States bombing its own equipment, the equipment it gave or sold to the Iraqi military but now fell into the wrong hands.
ALESCI: Yes, this is a story that I've been reporting on all week. And basically what it comes down to, this region is super complex. And the story here is that we left a bunch of Humvees and essentially mine-resistant vehicles behind. We left behind is more like we gave them to the Iraqi army, they fell into ISIS hands, now we have to destroy them.
And, again, this is the complexity of operating in this region where you never know where your equipment is going to go. But here's the thing. Years from now, when we are out of this region, we're going to have to resupply Iraq, that's what military experts are saying, if we want it to protect its own borders. So even when we talk about the average cost per day right now, what we have to be looking for is the future cost. We're not going to be there for a year or two or three. We're going to be there potentially much longer, and then you have to look at the replenishment costs to make sure that these countries can protect themselves on their own.
ROMANS: It is the mathematics of war. Since the beginning of navies they've been scuttling their own ships, right, to keep them out of the hands of others.
ALESCI: You think we would have come up with better technology to shut them off remotely.
ROMANS: Right. Cristina Alesci, thank you.
All right, coming up, a buggy iOS update and complaints of a bendy iPhone, just the usual new product backlash for Apple, or does the company have a lemon on its hands?
ROMANS: IPhones bending, software failing, and a blue tooth bug, Apple is dealing with some bruises. That leads our CNN MONEY top four this week. On our panel, Laurie Segall, Samuel Burke, Cristina Alesci. So nice to see you guys. Sam, you tested the iPhone 6 Plus, it did not bend for you, but on social media, they're calling it "bend-gate."
SAMUEL BURKE, CNN TECH BUSINESS CORRESPONDENT: Listen, you can bend the truth, you bend it like Beckham, and some people have managed to bend the iPhone 6 Plus. But Apple says it's just nine people. It could be more than that. Not everybody goes to Apple with their problems. So Apple is trying to mitigate this issue, but they can't mitigate the fact that 8.0.1 was a colossal failure. They had to pull back that update. Already people are reporting some problems with 8.0.2. At the end of the day, though, they send 10 million phones last weekend. They're still laughing all the way to the bank.
ROMANS: If it's nine people in very tight jeans who bended their iPhones --
ROMANS: And people always like to make Apple seem like a little bit like a lemon, because it is kind of the leader and gets all the attention.
LAURIE SEGALL, CNN TECHNOLOGY CORRESPONDENT: Yes, well, investors were not happy with all the headlines that were rolling this week. In fact, Apple led a decline in tech stocks, and this week, it hit the worst level since when we saw the hackers steal photos from iCloud. So it was a bad week for Apple.
ROMANS: Did it lead the market or part of the market's problem? I'm not sure.
SEGALL: I think at the end of the day, people are forgiving, right? That stock will go up. I think everyone knows when a new iOS update comes out, oftentimes it's a little buggy. People wait a couple of days. No one's going to remember bend-gate in the next week or two. People love Apple. The spotlight is always on Apple.
ROMANS: My favorite was the Heineken tweet that showed the crumpled, bent Heineken camp that said, we meant for our product to do that. Wal-Mart getting into the banking business, another big story this
week. It's teaming up with Green Dot Bank to offer low cost checking accounts. It comes with a MasterCard debit card. You can buy the starter kit at Wal-Mart stores nationwide in October for $2.95. Then you've got Citibank offering customers for a checking account with no checks. Customers will be able -- will not be able to overdraw their accounts, which is key. Key. We saw a similar move last year from Bank of America. Cristina, what's going on here? What's the catch?
ALESCI: The bigger store is really overdraft fees. A lot of these banks, especially Wal-Mart and the other example that you cited, Citibank, they're getting rid of this idea that you can get banged for an overdraft fee. And that's because regulator have said paying attention to this. In fact the Consumer Protection Bureau actually came out with a report last year that said, on average, people spend about $225 on overdraft fees. That's a lot of money for people at the lower end, which is exactly the kind of customer --
ROMANS: You have to hospital into overdraft fees. The number one personal finance rule is don't opt into overdraft fees. You can see these companies trying to take that option out.
BURKE: When I hear Wal-Mart and checking, I think of a rotary fun that is so passe, so much of my generation are moving to apps like Go Bank, which don't have these fees already. And the real thing we want to be able to do is transfer money from bank account to bank account. So many people are using Venmo now. If you're at a dinner and you want to split the meal, you connect your bank account to Venmo, that's how everybody's paying these days, and I think that's what these banks talk about.
ROMANS: You talk about your generation, when you look at millennials, they're using prepaid debit cards and prepaid cards, and those can have very high fees. That's the type of place that these places like Citi and other are catering too I think, you know?
SEGALL: Absolutely. And I agree with Samuel. When I think of even writing a check, I don't even think of physically writing a check now. That's not even something I would think about when doing it. But we hear about all of these different start-ups and all of the community kind of coming together to say, hey, this would be much easier, much more seamless, and addressing some of those issues that you've been speaking about.
ROMANS: From writing checks to checking out. Employees at Virgin Group just got a sweet bonus, all of the days off they want, all of the days off they want, unlimited vacation. Richard Branson's employees can take vacation days as many times as they want all year long as long as they work in the company's central locations of New York, London, Geneva, and Sydney. Laurie, Netflix and some other tech companies do this. Is this a tech trend that has made its way into the mainstream?
SEGALL: Yes, I think that's what we're seeing. My initial reaction is that if they tell me I can take as many days off and I start taking those days off, am I going to get vacation guilt? But we are seeing this in the startup community. Evernote, which is a huge start-up, they say you get a month of vacation time. But one thing that's interesting about Evernote is they say you are forced to take it. We want you to be away from the office. We want you to check out a little bit.
Look, I think it completely depends on the industry. Are you paid hourly? A lot of times we have our mobile devices so we're never really off work in general. But it definitely that stems from the start-up company that might be bleeding over into different types of job.
ALESCI: And the fine print here, there's 160 employees that actually qualify for this benefit. So it's not the company that Virgin Group is invested in, which is a much larger empire here. So they're trying it on a smaller scale, perhaps maybe then in the future rolling it out in a big way. But in reality anybody that wants to be really successful, whether it be in the startup world or any other industry, they're not taking time off. This idea of work/life balance is a little bit overblown.
BURKE: Richard Branson is not the only person who is advocating for it. Carlos Slim, second richest person in the world from Mexico, he's advocating for a three-day workweek. These are very smart billionaires. They need to do it. I lived in London and worked for CNN Europe for a couple of years. They do this there as well. You get about just as much vacation time as you want.
ROMANS: A three-day workweek, and we'll reporting from London next week.
ROMANS: Actor Jared Leto and rapper Snoop Dogg are investing in this new app called Robin Hood that lets users trade stocks for free. It's not quite ready to go live yet. I've been hearing about this app for a year. Why is it drawing so many celebrity investors?
BURKE: You talked about this a couple of weeks ago. More Americans own cats than stocks. And I think this application might be able to change all of that just by getting rid of that little fee which you have to pay to buy stocks.
ROMANS: Trading stocks for free, I get the concept.
SEGALL: But it's so little. If you go on an online platform you're paying, what, $6 or $7 to trade? If you're trading $10,000, it's really a drop in the bucket. And other people have tried this before and it's never really taken off.
BURKE: But it could work the way Skype did. Remember how much you used to pay for international calls? Skype created this premium model where it's free at first and for other services you pay. That's what they're trying to do.
SEGALL: I think one point we need to make here is celebrity investors, right? A celebrity is attaching their names though these products that maybe haven't even launched yet. But you look at Jared Leto, he actually invested in an app which sold to Google for $3 billion. Nas was on stage with Ashton Kutcher who's invested in Air B&B, Foursquare, onstage with Dan Horowitz who is one of the biggest investors in the valley. They're all rapping together. These relationships are very, very integrated, especially in the valley. So you're going to see more and more of these celebrity-backed start-ups.
ROMANS: Maybe they're not busy enough in Hollywood.
SEGALL: You can make more on a startup now than you can being a huge celebrity rapper.
ROMANS: So interesting. Thanks, guys. Nice to see all of you. See you again next week.
Coming up, changing the climate conversation. Activists flood Wall Street with protests as the U.N. holds a summit. But one small business in California isn't waiting for celebrities or heads of state to shape the future. How it turns dirty air into your next piece of office furniture. That's next.
ROMANS: Corporate capitalism equals climate chaos -- that was the rallying cry for protesters in New York this week against the backdrop of the United Nations summit on climate change. Climate activists claim Wall Street and the fossil fuel industry profit at the expense of the environment. Protests and high-level discussion could push change in the future, but technology is making it happen right now. CNN's Rachel Crane shows us a small business that's turning dirty air into plastics.
RACHEL CRANE, CNN CORRESPONDENT: Plastics -- they are everywhere and used to make just about everything. It's a $370 billion a year industry, dependent upon oil companies to mass produce its product.
I don't think a lot of people are aware that actually, their plastic is made with oil right now.
MARK HERREMA, NEWLIGHT TECHNOLOGIES: When you're drinking from a water bottle, what most people don't realize, you're literally holding solid oil or solid fossil fuels in your hands.
CRANE: Mark started Newlight Technologies in 2003 with the goal to revolutionize the business by taking the carbon you admit and turning it into plastic.
HERREMA: This concept started with a newspaper article about how much methane cows produce from birth. The big light-bulb moment was, wow, there's so much carbon going into the air, and we're talking about taxing it or putting underground. Why not look at as a resource?
CRANE: So you're basically taking pollution and producing plastic? HERREMA: Exactly. What we've developed is a technology that takes
concentrated greenhouse gas emissions, methane-based emissions, we combine them with air and turn that into a plastic that can replace plastics made with oil.
CRANE: Walk me through how you turn greenhouse gases actually into plastic. What is your process here?
HERREMA: The methane in the air go inside here, and as they pass by the biocatalyst, it's essentially pulling out the carbon, the oxygen, and the hydrogen.
CRANE: That strand right there, that's a strain of plastic?
HERREMA: That's a strain of air carbon plastic. The reason why we're the first to kind of have this plastic out on the market is because it was never cost effective. And the problem is in the plastics market, it's a $660 billion pound per year market. So if you add pennies to that cost, companies simply can't afford it.
CRANE: It took Mark 10 years to break that cost barrier, and now he's working with over 60 Fortune 500 companies, making everything from cell phone cases to bottle caps.
What you're describing almost seems too good to be true. Who stands to lose here?
HERREMA: The people who stand to lose, frankly, are oil-based companies.
CRANE: Exxon has 75,000 workers. You have 15.
HERREMA: The way that you scale is by having a superior product. I hope that 11 years from now, air carbon is being used on a commodities scale. We want to be part of a new sort of paradigm shift about how we view carbon emissions.
ROMANS: That really makes you think about the water bottle you're holding in your hand, doesn't it?
Coming up, college students have spoken, and they want to work at Google. So how do you get a job there? We'll tell you, next.
ROMANS: So what do you want to be when you grow up? Ask a kid, you might hear astronaut, cowboy, or ballerina. Ask a new college grad and you might hear Googler. A survey of 200,000 students in 12 countries finds Google is the number one place business and engineering majors want to work. So I asked Google Executive Chairman Eric Schmidt what grads need to do to get hired there.
(BEGIN VIDEO CLIP) ERIC SCHMIDT, GOOGLE EXECUTIVE CHAIRMAN: You need to be a good student, done well with your grades and so forth. But you need more than that. And once you get in the door, we're going to give you five interviews, and we're going to score you. And the people are looking for grit, creativity, invention. They're not just looking for that standard knowledge that everybody has.
(END VIDEO CLIP)
ROMANS: There you go, five improves. Schmidt she has Google wants smart creatives, people who are not afraid to try something new, who want to drive something, and who are curious. So where else do grads want to get hired? It's the big four for business major, Ernst & Young, Price Waterhouse Coopers, KPMG, and Deloitte. Getting internship for having global experience may be the best way for grads to score an interview. For engineering majors, Google is followed by Microsoft, BMW, Apple, and General Electric. Good luck out there.
You can find the whole list on CNNmoney.com, plus all the latest news on stocks, tech, luxury, and must more. Thanks for joining us on your Saturday. Don't forget to set your DVR to catch the money news that matter most each week. Have a great weekend.