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Quest Means Business
Facebook Fires Back on the Data Scandal, Microsoft is Making New Deals; World`s Airlines Holding Their Annual Meeting in Sydney, Australia; Howard Schultz Will Step Down As Starbucks Executive Chairman Effective June 26; Trump: I Have the "Absolute Right" to Pardon Myself; At Least 82 Dead in Guatemala Volcano Eruption; Jordan Gets New PM After Days of Anti- Austerity Protests; Trump Renews Fiery Rhetoric on Trade With China; U.S. Supreme Court Backs Baker in Same-Sex Marriage Case; Air France-KLM Shares Jump on AccorHotels` Interest; KLM CEO Makes Bet on Artificial Intelligence; European Markets Up As Political Uncertainty Eases; Dow Closes Up 180 Points, NASDAQ Hits Record High. Aired 4-5p ET
Aired June 04, 2018 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
PAULA NEWTON, CNN CORRESPONDENT: That was due. I want to call it a leap one rally, but you know what, it was pretty good. It is a triple digit win
for the Dow and guess what? There are now records on Wall Street. It is Monday, June 4th.
Tonight, Facebook fires back on the data scandal. You`ll hear directly from the company in just a few minutes. Microsoft is making new deals
pushing that now to a new record and the case of this cake, you do not want to miss this. It has made it all the way to the Supreme Court.
I am Paula Newton, and this is QUEST MEANS BUSINESS.
So, the NASDAQ set a record high, the flip side, yes, the data scandals continue to pile up for one tech company, Facebook. Now, I will be
speaking with its head of product partnerships who is responding to the latest allegations. We will also hear this hour from the head of an
airline company, and he is at IATA and the CEO of Qatar Airways who has been dealing with a blockade against his home country for a year now.
First though, Facebook is forced to defend itself once again from claims that it has been over sharing all of that data you`re feeding Facebook just
weeks after it tried to draw a line under the Cambridge Analytica scandal, a "New York Times" investigation says Facebook shared data with some of the
most powerful tech firms on the planet.
Think about it, this is everything from your smart phone to Amazon and it claims that the social network forged relationships with about 60
companies, as I said the includes Apple, Blackberry, Amazon, Microsoft, Samsung - in return, Facebook allegedly shared users` education history,
relationship status, work, religion, political leaning - don`t get me started on that - and upcoming events.
Now, the claims raise new questions about whether CEO, Mark Zuckerberg was right in telling Congress that users have "complete control" over their
data. Facebook disagrees with the "New York Times," saying, "These partners signed agreements that prevented people`s Facebook information
from being used for any other purpose than to recreate Facebook like experiences."
We are going to explain that in a minute. "We are not aware," Facebook continues, "Of any abuse by these companies." Now, those comments were
written by Ime Archibong, Facebook`s Vice President of Product Partnerships and he joins me now live. I can`t thank you enough for being here because
I think the questions are best answered by you.
You had some clear problems with "The New York Times" investigation, let`s get to it. What do you deny categorically from that investigation and I
don`t mean about excuses or explaining to me what apps were like a decade ago. What are your problems with that investigation. What was wrong?
IME ARCHIBONG, VICE PRESIDENT OF PRODUCT PARTNERSHIPS, FACEBOOK: You know, we are fundamentally talking about two different things here, ultimately.
I mean, you just mentioned apps more different a decade ago, actually I do think that that context does matter because I think what you find if you
would rewind back to the days with folks that had early mobile devices is if you are an Apple user and you are also a YouTube lover, you know, the
YouTube app was built by Apple until 2012.
So, similarly, when we were looking at how we could extend our mission, making sure that we gave as many people as possible around the world the
power to connect, you know, we didn`t want to limit ourselves to just the platforms that we could build for. We knew that --
(CROSSTALK)
NEWTON: Yes, but Ime, I`ve got to interrupt you there, because I know that you have very good points on this, but I can tell you right now all I hear
are excuses. The point is how did this data go to these 60 companies and how were they able to use it?
ARCHIBONG: I think that that`s a good point. I think it`s actually important to be very clear here that this data wasn`t transferred to these
60 companies. If anything, Facebook like many other folks in the industry made the means available for these devices to build - what we are calling
Facebook like experiences, so that yes, Blackberry user in Nigeria can have access to Facebook in the same way that Symbian user in a different part of
the world might have access to Facebook.
It was just really important for us to ensure that as many people as possible had access to this experience that we felt were improving people`s
lives.
NEWTON: Okay, but they also had access to data. I know that we have spoken to app developers who say that they get data that they didn`t even
know they were going to be - that was going to be shared, just in developing this. I mean, I think to just to get back to the crux of the
matter, in terms of this data, okay, we understand why you did and how you did it. We didn`t have apps on the phone that you can easily access
Facebook. Totally understood, but where are we going with this in the terms - you must have thought that there was something wrong because in
2015, you started to wind up all of these contracts.
ARCHIBONG: No, not at all. If anything, I think it is important to be very clear here is that data wasn`t shared, so for example, if I was a
Blackberry user and I was trying to connect to this application, I had to sign in, download the Facebook app, log in with my credentials and I got
the Facebook experience in just as the same way that I would on an iPhone or an Android device.
Friends, and the data that they were then sharing with me would only be surfaced to me in the same way that they would expect on a desktop
experience if I was accessing Facebook that way, so to be like really clear here that data wasn`t necessary shared. There were strong privacy controls
that were in place on Facebook proper and all of these device integrations with respect to --
[16:05:15]
ARCHIBONG: -- those same privacy controls. To your point about why we started - I`m sorry, go ahead.
NEWTON: Sorry, you go ahead, and then I will follow up on something.
ARCHIBONG: Oh no, yes, I said, to your point about why we started winding these things down, I think you know macro trends speak for themselves,
right? We started these integrations back in the day when A, there weren`t that many folks that were accessing our experiences on mobile devices and
clearly has changed over the course of the last decade.
A lot of these devices are legacy devices. So, yes, while it was important to be on the Blackberry and be on some of these feature phone experiences,
smart phones have gotten cheaper, in places like Indonesia, Nigeria, India, Bangladesh - a lot of these countries where these experiences are being
used are now having smart phone devices that have kind of proper Facebook experiences.
NEWTON: Ime, I have to challenge you on something though because even with the Cambridge Analytica scandal, what we learned was that Facebook did not
know what was going on with some of its data, so I am asking you right now, how many of these 60 companies have you audited to know that there has been
no illicit use or even marketing or strategy use of that data that Facebook had?
ARCHIBONG: So, again, this is a good distinction to draw, so for the platform experience and developers like Kogan and Cambridge Analytica,
there were standard terms that they would accept, but they actually got access to data to make the Facebook experiences and those social
experiences they were interested in, for these device partners, for these 60 device partners, we worked closely with them upfront.
These partnerships were tight, i.e. we had engineers working with them, we talked through their product experiences, ultimately, we really wanted to
make Facebook like experiences and that consistency was really important for us from the get go.
NEWTON: So, you trusted them? You trusted them the way you trusted Cambridge Analytica?
ARCHIBONG: No, very, very different experiences again. So, these 60 partners, we worked closely with them and these are the names that you`ve
talked about before. We had engineers sitting with them and their engineers sitting with us. We talked through product experiences, and
again, it was just like - they are fundamentally very different experiences and something like a Kogan application or even an application like Spotify
on our platform who are using are open with these guys.
NEWTON: I mean, Ime, you can understand that if you`re a Facebook user and you`re sitting here, you`re still not convinced and the reason you`re not
convinced is what came before because of Cambridge Analytica, and I know everyone can understand why you did it, but the point is, have you or will
you audit those 60 companies to make sure that nothing untoward has happened with any of that data.
Because even though you deny that the "New York Times" is right about sharing the friends` data, it looks kind of creepy right now.
ARCHIBONG: Not at all. I mean, we`ll definitely spend some time with these partners understanding the experiences, but the bottom line is that
we have since day one with them, and we have continually had different cadences with them across the, you know, really the last decade that we
have been working with them to extend these Facebook like experiences.
NEWTON: Okay, you said you`ll spend some time - but that`s auditing though, can you guarantee your Facebook users that absolutely, these 60
companies have not done anything they are not supposed to do with that data?
ARCHIBONG: We have not detected any misuse of this data with these experiences, yes. We haven`t done a formal audit if you want to frame it
that way, but we spend time with these folks since day one for the last decade. We will spend some time to understand the experiences especially
as we are winding them down. We have already shut down 22 of them publicly, and we are going to continue to wind them down over the course of
the next couple of time.
NEWTON: You know, our Dylan Byers who follows these things on CNNMoney, you know says that, "Look, the basic rule is tell the truth, tell it all,
tell it early, tell it yourself." You now have US government legislators saying, "Hah, I am not so sure Mark Zuckerberg told the whole truth and
nothing but the truth to Congress."
This can`t come at a good time in terms of having people question why - how their data is used on Facebook?
ARCHIBONG: Yes, I mean, everything that Mark said in DC was unequivocally true, right, and that`s the reason why I made myself available and the
reason why I think that we have been kind of very frank and very quick to come back is that we do believe that what we did here is good. We haven`t
detected any misuse of these experiences and ultimately, you know, we announced back in April that we are winding down some of these experiences
because of the fact that they are just - the people that are using them make up a smaller portion of the overall Facebook community these days and
it`s a good time to make a healthy transition.
NETWON: So, you are saying you would do it all over again? Because if I hear you, you are stopping these relationships because they are
technologically obsolete, not because you thought there was anything wrong with these 60 companies using the data.
ARCHIBONG: That`s absolutely right.
NEWTON: So, you would do it all over again?
ARCHIBONG: That is absolutely right and in the same way that if there was means and ways that people are getting connected to people that we didn`t
feel like we were part of those device experiences, we would look to start to figure out how we could extend those Facebook experience to them.
Me, personally, which I shared - my extended family is in Nigeria. There is no way that I would have known cousins and some uncles if I hadn`t known
them via Facebook.
NEWTON: And again, and I understand what you are saying, but again, it just sounds to users like excuses. Ime, we are going to have to leave it
there, but please, when we have these questions, we so appreciate you having you on. It is best to hear it from Facebook directly. Appreciate
it.
ARCHIBONG: Thank you for having us on.
NEWTON: Now given this, Facebook shares fell slightly - only slightly brought a bucking to that broader market trend though. You have to say it
was a good day for tech besides Facebook. Over - we go now to the QUEST MEANS BUSINESS trading post. They tell me I have to do this.
[16:10:16]
NEWTON: Dow was up, the NASDAQ hit a record. What is interesting about this is, yes, number 16 watch this - and again, as we were talking to
analysts earlier, on Wall Street, you know, they are saying that, look, tech is back, it`s back here to stay. No one is down on the tech companies
right now.
Now, this is the first record though in three months, and it is because of those stellar earnings and some of these stellar earnings gross that we are
going to see. Now, Apple and Microsoft - they are battling to become, get this, trillion dollar giants. Today, that all comes down to one thing,
famously expressed by Steve Ballmer.
(START VIDEO CLIP)
STEVE BALLMER, FORMER CHIEF EXECUTIVE OFFICER OF MICROSOFT: Developers, developers, developers, developers, developers, developers, developers.
Yes.
(END VIDEO CLIP)
NEWTON: Oh, my gosh, isn`t that a great tech televangelist point there. That was Steve Ballmer. In case you missed it, it was developers. Apple
and Microsoft create the phones, the operating system and iCloud platforms - the developers create the apps that you and I use. Better apps and
developers mean better sales for Apple and Microsoft.
Now, to Apple first and its developers conference today. Apple showed off new operating systems for computers, watches and phones. They include new
augmented reality features and ways to combat smart phone addiction.
Yes, you guessed that, ways to actually get off your phone. So, Apple is trying to get developers to build apps for Apple platforms. That`s what
Microsoft is doing so long ago, 18 years ago when Steve Ballmer was jumping around all sweaty on that stage.
Now, Microsoft though is taking a different approach - buying the tools developers already use. GitHub is the biggest of the bunch. Developers
use GitHub to store their code and interact with each other. It has 28 million users, that`s a lot. Microsoft, Facebook and Google all use it.
Microsoft thinks it`s more than $7 billion, that`s what it will pay. The deal is Microsoft`s biggest step yet to repair relations with the open
source community.
Now, the courtship is paying off. Microsoft has grown to a $774 billion company - but you guessed it, Apple is still winning the race. It is worth
$954 billion, yes, well on its way to becoming that trillion dollar company. Daniel Ives is head of tech research at GBH Insights. Beyond
that great piece of screaming tape we have from Steve Ballmer, you know, this is really Microsoft coming back from what they thought was going to be
the issue of proprietary. It`s all ours. It`s all us. We will develop it in-house and we will make money off of it, to going full board right back
into open source.
DANIEL IVES, HEAD OF TECH RESEARCH, GBH INSIGHTS: Yes, I mean, it speaks in Nadella, I mean, part of why the market caps don`t move there is because
every single step from Cloud to really shutting down some of the hardware mobile side to now going to open source with the acquisition. I mean,
that`s really been the success of Microsoft.
This is a company, Redmond has massively changed, got the developers on, and really with Cloud computing front and center, that`s why the stocks
really you know, call it tripled, since that speech, and I think you know, what you are seeing today is really a battle for the developer.
You saw it at WWDC with Apple. Microsoft clearly in a position of strength, and I think that`s really the future. I mean, for Apple, it`s
really about software but if you look at what Microsoft has done, they went from core proprietary Windows to now Cloud computing and open source, and I
think it just speaks to the open mindset in Redmond and part of why the success we`ve seen from Microsoft.
NEWTON: Does it lead to better tech though, and I think that - and will it also propel these companies to better profits because you still think of it
as you know, the 300-pound gorilla against the 300-pound gorilla.
You know, as they fight it out, is there enough room for everyone? I mean, Apple today created so much hype and they really target these developer
conferences.
IVES: Yes, it`s a big enough ocean especially for these two boats, and I think many, and I think what you are seeing across tech, you have seen with
Alphabet, you see it with Microsoft, you see it with Facebook, now you`re seeing with Apple, it`s really about the software piece. I mean, Apple for
the foreseeable future, it`s about iPhones.
I mean, iPhones is the keys to the vast majority of profits. When you look at software, for them, it called $50 billion of revenues with the income in
software services by 2020, that`s really the key for Apple right now. It`s like, what is going to be that second, third gross sort of step here, and I
think what we have seen now is really a battle for the developers and almost really, it`s the next paradigm of technology that we are seeing in
Silicon Valley in terms of the software piece.
I think that`s why Apple wants to make sure that they are not left behind. I think that`s what you saw today in terms of the developer conference.
NEWTON: There is barely a developer out there that is not agnostic about this, and I mean, they have really dogmatic opinions about where all of
this is going. Where do you think it is going in terms of who went out here and what it means for the way we use or phones --
[16:15:16]
NEWTON: -- and the way we use our computers, whether it is Microsoft or Apple?
IVES: I think it is going to be a sort of a balance. I mean, ultimately, what makes Microsoft who they are is Windows, is the proprietary
technology, but I think what they need - they can`t shun the open source community. I think that`s what you`ve sort of seen today and ultimately, I
think the success is going to be - it`s not just a one winner takes all. I think it`s going to be Apple on the iPhone side. I think on the software
side, if you look not just on mobile but on the enterprise and on Cloud, Microsoft and Nadella is the clear winner.
I mean, he has had the golden touch, really changed that organization. I think it just shows the 180-degree change that you`ve seen at Microsoft and
Apple wants to make sure on the software side, as you are seeing a more mature iPhone cycle. Software is going to be the key.
Ultimately, it could be content, but really right now, it`s about software and services and I think today was a pivotal day for technology, and I
think symbolically, obviously new (inaudible), but Microsoft and Apple really two of the frontiers leading us to where we are.
NEWTON: And Facebook showing us where the pitfalls could be. Daniel, thank you so much. We really appreciate you coming in. And tonight,
CNNMoney`s Laurie Seagal will have an exclusive interview with Apple Chief Executive Tim Cook that will air in four hours from now on Anderson
Cooper`s 360 and of course, you will see it right here on Tuesday`s "Quest Means Business."
Now, a steady day for the Dow which held on, I was kind of surprised of those healthy gains. It closed up nearly 180 points. Investors are
shrugging off concerns about a trade war. I don`t think they should, but they are, but with the US and China we will have much more on that later in
the show.
And when we return for now, Richard is as far away from me as possible. He is Sydney for the aviation get together of the year. You know, we want
Richard there for this. It is the annual IATA conference and there is so much to talk about. We will hear from the General Director and the CEO of
Qatar Airlines when we come back.
RICHARD QUEST, CNN HOST: Welcome to Darling Harbor in Sydney, Australia. It`s where the world`s airlines have been holding their annual meeting.
The airlines have a right to feel rather pleased about the way things are going. They are making good profits even at the time of rising fuel
prices.
However, there are some serious clouds on the horizon, which means that the CEO of IATA, the airline body, Alexandre de Juniac is warning that now is
not the time to become complacent.
(START VIDEO TAPE)
ALEXANDRE DE JUNIAC, CEO, IATA: We are expecting to make quite decent amount of plenty of profit this year. That is $3.8 billion, it`s okay.
It`s still thin margins as 4.1%, it`s not a big buffer. And we have areas of concern, mainly two of them.
First of all, you know, all the trade wars, and immigration debates, all the potential barriers that can be put on borders --
[16:20:16]
DE JUNIAC: -- for us is a threat, and secondly, we have rising costs - fuel, labor cost, infrastructure costs -- so the future is slightly more
uncertain than it was.
QUEST: There`s nothing like you can do on the trade front. The administration seems hell bent, the US administration on a particular
course and this issue with immigration similarly.
DE JUNIAC: The only thing we can do is advocate some theory of open borders. We are --
QUEST: But one question that no one is listening.
DE JUNIAC: You know, it`s our job - my job every day advocating for those causes. I don`t know if people are listening. It is my job to make them
listen to me and listen to us.
QUEST: The question --
DE JUNIAC: To be convincing.
QUEST: The second one is the question of cost. Do you think that - again, not a crisis, but the way labor has gone up and the sort of agreements that
have been reached, along with the fuel costs do give rise to concern about profitability. These returns --
DE JUNIAC: The reason why we have a slightly lower expectations compared to what we did at the beginning of the year was the rising fuel cost.
Mainly that. Secondly, in the adverse view of that is that the airlines have an enormous effort to increase their resilience. They have a
structure, they have put pressure on cost. They have invested in products. They have developed - they are linked with customers, so they are more
resilient, but they should pay attention to the coming month or years.
It would probably less easy or more difficult.
QUEST: Are they fooling themselves on this question of resilience? Yes, they are more resilient, but it wouldn`t take too many shocks - oil price,
geopolitical war - it wouldn`t take too many shots before this industry once again --
DE JUNIAC: No, they are not fooling themselves. They are perfectly aware of the concerns and of the dangers. They know that 4.1% is not a big
buffer that - it`s a thin margins. They know that they are overexposed to many risks, many risks whether it is a volcano, it`s a nuclear plant, it`s
an epidemic or whatever, we are over exposed, but they have done what they could to improve their resilience, but they are not fooling themselves, no,
I don`t think so.
QUEST: As you look to the next 12 months, what`s your biggest concern?
DE JUNIAC: Biggest concern is probably to establish a good relation and trustful relation with air ports and infrastructure you know authorities,
because it is becoming an enormous concern in the industry. We see port charges rising. We see air traffic management, all the flight (inaudible)
pieces increasing, so - but they are our partners at the same time.
We cannot fly an aircraft without landing somewhere, so airports are - they are also our friends and our partners. We have to build a trustful system
of partnership with them.
QUEST: Thank you very much indeed.
DE JUNIAC: Thank you.
QUEST: Good to see you.
(END VIDEO TAPE)
QUEST: At this time last year, IATA was meeting in Cancun in Mexico when several Gulf countries introduced boycotts or a blockade against Qatar.
For the last 12 months, Qatar Airways has been flying under enormous restrictions, the number of destinations are being reduced and the air
space has become limited around Qatar.
The Chief Executive, Akbar Al Baker makes no bones about it. It is having an economic affect on the airline. However, as he told me here at IATA,
Qatar Airways is still growing.
(START VIDEO TAPE)
AKBAR AL BAKER, CHIEF EXECUTIVE, QATAR AIRWAYS: It is making a huge impact on the airline. It has increased my cost of operations. It has increased
our pressure on the bottom line, so the airline is a bit affected.
But the pain was to bring down my country to knees. It was not to end the airline, so I should say, yes, airline is an important part of the economy
of my country, but my country has kept on growing, and we have been in the airlines including the pressure have been expanding, but also keep in mind,
that if it was not the resilience of Qatar Airways, another airline would collapse under this stress.
QUEST: Is the government - is it your understanding that the government is committed to you? That as the losses mount, which they will, because
obviously, it does have an effect, that you will - that they are committed to keep you going?
AL BAKER: Any government will be committed --
[16:25:16]
AL BAKER: -- to its national carrier. You can see what`s happened to Italy. You know what happened in the last days of Air Berlin. The
government were committed. We are a government institution, unlike those other airlines. We are owned by the government. We are funded by the
government to establish the airline and when we are under stress, eventually, not today, not tomorrow, not the next year, but eventually, if
this continues and my operation costs keep on mounting, the government will have to come and support Qatar Airways, as it is their company.
QUEST: Is there any evidence that passengers not from the Gulf, but passengers elsewhere are not flying you because of this incident?
AL BAKER: Not at all. The passenger numbers are growing. We are in demand. We are the best airline in the world and we have the best product
by far than any other airline, so passengers look for the best value for money and you know that there was a shock to the passengers in the
beginning, but now, our passenger numbers have started to grow tremendously.
QUEST: The deal with the US, good deal or was it a deal that got everybody off the hook? I mean, at the end of the day, you know you`ve got open the
books where there can be no fifth freedom flights --
AL BAKER: Richard, I was never interested in the fifth freedom. We used to do a fifth freedom while in Geneva, which has stopped nearly 10 years
ago. We had no intention to go fifth freedom. Our books are already open, so they were getting all of my accounts, and at the end of the day, they
didn`t achieve anything.
What we did is we should our commitment to our friend, the United States, that Qatar Airways will oblige because we were already doing so.
QUEST: How are relations if any at all between yourself and the other CEOs of the Gulf at the moment? Are they at best, nodding terms or worst,
nothing at all?
AL BAKER: Honestly.
QUEST: Honestly.
AL BAKER: I have not had any issues with both of the - all the CEOs of the blockading countries. At the end of the day, we sit in IATA. We are in an
international forum. We speak to each other. We shake hands with each other, but unfortunately, the communications when they are in their country
is not happening. And I have no problem.
(CROSSTALK)
QUEST: (Inaudible).
AL BAKER: They chose to do it, yes, I will be the Chairman of IATA, but in IATA, I don`t represent Qatar Airways. I represent the International
Aviation Community and I will do my best to my utmost capabilities to serve the International Air Traffic Association.
QUEST: And in terms of Qatar Airways for the next year, you`re dealing with this, you have got to grow the airline. Is it still your intention to
grow more destinations next year?
AL BAKER: We will grow record destinations against next year, similar to what we did during the year of the blockade, and we are not going to slow
down, Richard. You have my assurance that Qatar Airways will always fly high.
(END VIDEO TAPE)
NEWTON: And thank you, Richard. A busy day here QUEST MEANS BUSINESS now, you don`t want to take your eyes off the TV. Listen, just in to CNN,
Howard Schultz, will step down as Starbucks Executive Chairman. That is effective June 26.
Schultz has previously served as Starbucks CEO. You know, he is a very outspoken CEO there. He oversaw the company`s incredible growth and
remained its most prominent executive. Paul La Monica is here. It is incredible to me, Howard Schultz now has three weeks left at the company
that he created.
PAUL LA MONICA, CNN CORRESPONDENT: Yes, I don`t think many people saw this coming. Even though he has stepped back as the CEO of the company handing
the reins over to Kevin Johnson, a former tech executive with Microsoft.
NEWTON: They did?
LA MONICA: We wound up having Howard Schultz, there would be a very prominent public person to address the controversy with what happened in
Philadelphia recently with the two gentlemen who were asked to leave because they didn`t order anything and it sparked this whole racial
backlash.
We now have Myron Ullman who is going to be the new Executive Chairman, former head of JCPenney and interestingly also, Mellody Hobson - an
African-American who is the head of Ariel Investments, a big time investment firm. She is stepping in as Vice Chairman. Kevin Johnson is
not going to be the Chairman of Starbucks. They are separating that (inaudible).
(CROSSTALK)
NEWTON: They are separating that role out. Really interesting. If you are a shareholder, going forward, I mean, you`ve got a big expansion in
China here to worry about. Are you worried that they are safe pairs of hands there to see this through?
LA MONICA: I think that investors probably will be okay with this because we already knew that Schultz was stepping back from the day to day
operations and Kevin Johnson seems to be a pretty savvy person with regards to the operational side of things.
[16:30:00] And they also have the former head of Sam`s Club who is now -
NEWTON: Right --
LA MONICA: -- the COO of the company as well. She`s pretty well respected in the retail industry, so I think that for the most part, people are going
to be OK with this, but remember when Schultz stepped back from Starbucks, you know, a few years ago, the stocks cradled.
Of course, it was around the same time as the 2008 financial crisis too, but there was a lot of concern about Schultz stepping back, and then he had
to come in and save the company again.
NEWTON: Yes --
LA MONICA: I don`t think that`s going to happen this time around, but it`s always of course, you have to wonder when the visionary founder is taking a
step back, what`s next?
NEWTON: I have to leave it there, but we`ll continue to wonder as to why he did it, and whether or not he`s running for something, which is why he`s
doing. We shall --
LA MONICA: Twenty-twenty perhaps?
NEWTON: Oh, no, I mean, that call is a 2020, Paul, stating, so OK, we`re thinking far too hard here at this desk I can see. Our new tariffs on
China goods all but inevitable as President Trump fires off on Twitter, we`ll look behind the rhetoric.
(COMMERCIAL BREAK)
NEWTON: Hello, I`m Paula Newton, coming up on the next half hour of QUEST MEANS BUSINESS, the chief executive of KLM tells us how artificial
intelligence can help solve delays, editorial aside, hallelujah.
And the U.S. Supreme Court is backing a baker who refused to make a cake for a same-sex wedding couple in Colorado. First though, these are the top
news headlines we`re following on Cnn this hour.
U.S. President Donald Trump now claims he has the quote, "absolute right" to pardon himself, but suggested he wouldn`t do that because he`s done
nothing wrong. Now, in a separate tweet, he slammed the ongoing Russia investigation and called the special counsel`s appointment
unconstitutional.
At least 62 people are confirmed dead in Guatemala after a powerful volcanic eruption -- look at this video, it shows residents desperately
trying to escape. Scientists say, well, this eruption is officially over, new eruptions and of course dangerous mudslide are still possible.
Jordan has a new prime minister after days of anti-austerity. Protests say -- media say King Abdullah has appointed the education minister to be the
interim Premier after the Prime Minister resigned.
Thousands of Jordanians have been protesting tax hikes and rising costs. So the tit-for-tat between the world`s two largest economies shows no signs
of letting off. Weekend talks between China and the U.S. produced very little other than a warning from Beijing that it won`t tolerate new
tariffs.
And on Monday, U.S. President Donald Trump renewed his fiery rhetoric on Twitter.
[16:35:00] I`m joined now by Frederic Neumann. He`s the co-head of Asian Economics Research at HSBC. Thanks so much for coming. And you know,
there`s a lot to talk about in terms of the framework about the economics of these tariffs or no tariffs.
I want to talk first about that political rhetoric. Do you suspect that it`s harder than it needs to be, and harder in terms of the parallels to
the global economy?
FREDERIC NEUMANN, CO-HEAD, ASIAN ECONOMICS RESEARCH, HSBC: Well, we`ve seen I think a lot of the negotiations being conducted in the open, right?
We`re not used to sort of having these threats and counter threats actually being aired out in public, usually, it`s behind closed doors.
It`s sort of done with, your cards close to your chest. So what you see now is perhaps just so the seat of negotiations, and ultimately we`re
probably going to see some sort of a deal being arrived at because it`s in the interest of both sides I think to wrench things down and come to an
agreement.
NEWTON: You know, we`ve been commenting for weeks, the market has been incredibly calm about whether or not there`s going to be trade war. I can
tell you, traders on Wall Street have factored in that, yes, there`s going to be a deal, we`re not really paying any attention.
What are we missing though because I think when I look at data and I look at the Chinese disposition to this, they`re saying, you know what? We`re
going to survive a trade war much better than the rest of you. So we`ll win.
NEUMANN: Well, the Chinese actually in a very position, I think that`s not appreciate outside of China. Sincerely, the share of exports from China to
the U.S. make up a very small share of China`s GDP if the west puts tariffs on imports that would reduce China`s GDP a little by 0.1 percentage points.
So ultimately, China is a very large economy, it`s very close, and therefore, China is less vulnerable than it was 10 years ago. And that
means they can actually push back, and we saw over the weekend where they said, look, you know, we`re not going to you know, be threatened to over --
be here, we`ll push back.
And I think that makes it harder for the U.S. negotiate with a partner like that who has actually a very large market.
NEWTON: Do you think a better strategy would have been by trying to align with the EU and other U.S. allies to try and convince China that, look, if
you haven`t been playing fair on trade, you need to start now. Would that have been a better strategy for the Trump administration?
NEUMANN: Potentially yes, because there are some valid concerns, some on behalf of the Trump administration like every country has valid concerns
when it comes to trade and these may actually be shared with other allies.
But the initial strategy is sort of go it alone, and we started with the Trans-Pacific Partnership for example which is really a very powerful bloc
but the U.S. pulled out of it and kind of reduced the bargaining position a little bit here perhaps on behalf of the United States.
NEWTON: The president doesn`t realize that though, I have to go, but I have to ask you, is there anything about this that really worries you when
you`re looking at the global economy going forward?
NEUMANN: Yes, there`s always a risk of escalation, so the proposal so far are not really meaningful for global growth. But what we saw in previous
episodes historically is that, these tit-for-tat negotiations can escalate. And if we reached that point where sort of non-rationality takes over --
NEWTON: Non-nationality --
NEUMANN: When we -- when we take over, we make threats and these are being implemented, that could be very damaging indeed.
NEWTON: Not a word I want to hear too often, thanks so much for coming in, appreciate it.
NEUMANN: Thanks.
NEWTON: Now, one baker in Colorado says he welcomes everyone into his shop, anyone can buy cookies, brownies, birthday cakes, but a wedding cake,
that`s a decision for Americans highest court. We`ll explain.
[16:40:00] (COMMERCIAL BREAK)
NEWTON: U.S. Attorney General Jeff Sessions says he`s pleased with the Supreme Court after it voted in favor of a Colorado baker who refused to
make a wedding cake for a same-sex couples because of a religious objection.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: It`s not about cakes, it`s about the right of gay people to receive equal service.
UNIDENTIFIED MALE: I don`t see this as a case of discrimination, it`s a discrimination as saying you people are not welcome in my shop, but I
always welcome everybody in my shop. They`re just -- they then said I don`t create cakes for it, this was one of them.
(END VIDEO CLIP)
NEWTON: Now, the Supreme Court voted 7 to 2 in favor of the baker Jack Philips(ph). Jeffrey Toobin, thank God is here, CNN`s chief legal analyst.
I mean, Jeff, here`s what I don`t understand --
JEFFREY TOOBIN, CNN LEGAL ANALYST: OK --
NEWTON: You know, the LGBT community is really taking this as a loss, and yet others legally saying no, in terms of a legal decision, this was right
and proper because the baker we just saw there, his religious freedoms are respected.
TOOBIN: Well, is -- does the court kind of took a half step. They --
NEWTON: Yes --
TOOBIN: Didn`t go all the way. What happened was the way Colorado law works is there`s a commission that decides whether there has been
discrimination against gay people and others. And the commission decided that the gay couple had been discriminated against by the baker.
What the Supreme Court said was the commission acted improperly, that they showed bias against the baker. What they did not do is say when restaurant
owners, when bakers, when hotel owners can say my religious objections to your homosexuality allows me to exclude you from service.
Because that`s the big issue in this case. And the court really ducked that.
NEWTON: Did they duck it or in framing it that way, did they really give license to people with those religious objections to discriminate?
TOOBIN: Well, certainly --
NEWTON: Give that a word --
TOOBIN: It is more of a win for the people that don`t like serving gay people than it`s a loss for them. But it is not a complete green light,
green light for them. Certain, there are going to be more cases.
This issue is not --
NEWTON: OK --
TOOBIN: Really resolved, and so it really was about how these -- how these claims are evaluated rather than whether it can be done in the first place
and whether there can be this discrimination in the first place.
That`s why you can see why both sides are taking some solace in this, but the big issue will have to be decided at some point.
NEWTON: And so you`re saying, this is not the end by any means? You`re saying there`s going to be more cases clearly?
TOOBIN: Absolutely, and you know, this has become a big cause in the conservative movement in the United States because a lot of conservative
religious people disapprove of same-sex marriage, disapprove of homosexuality and they don`t want to do business with homosexuals.
This flies in the face of some states` laws like Colorado which has a law that says you have to, you can`t discriminate on the basis of age, race,
gender or sexual orientation. That conflict between individual`s religious commitment and the laws commitment to equality is not yet resolved by this
case.
NEWTON: Well, what`s strange to me in this is that people here look to the Supreme Court as the final arbiter on these things. It is not in this
case, you said very clearly --
TOOBIN: Right --
NEWTON: You follow the Supreme Court so closely, Donald Trump is very proud of having Neil Gorsuch on that -- on that case --
TOOBIN: That`s true --
NEWTON: In terms of the character, the complexion of the Supreme Court, did you see it come down on any political lines. There was 72 or --
TOOBIN: It was, but at the moment, there are four very conservative justices, four pretty liberal justices and Anthony Kennedy in the middle in
many of these high profile cases. Kennedy is 81 years old, he may leave the court, Ruth Bader Ginsburg, perhaps the most liberal member of the
court is 85 years old.
If either one of them leaves, Donald Trump will be able to transform the Supreme Court. And cases like this will not be closed anymore. They will
be in a conservative direction. If Donald Trump had another vote on this court, it is certain that the baker would have won an outright decision.
[16:45:00] NEWTON: Got you --
TOOBIN: And you know, we will see if he gets more points.
NEWTON: Yes, an important insight there to see how that balance will change. Jeffrey, thanks so much, appreciate it.
TOOBIN: Paula --
NEWTON: How do you establish a brand that outlives everyone? You don`t want to do that, right, Jeff?
TOOBIN: I do, I do.
NEWTON: We`ll take you to the exclusive club of companies that are more than a 100 years old.
TOOBIN: On the Starbucks there --
NEWTON: You are a freak.
(COMMERCIAL BREAK)
NEWTON: One of the world`s largest hotel chains may get into the airline business. Now Air France-KLM jumped more than 5 percent after AccorHotels
said it was looking at buying a stake in the group.
Now Air France-KLM has been struggling with strikes that ultimately cost the CEO`s job. The KLM chief executive told Richard, the group though can
and will recover.
(BEGIN VIDEO CLIP)
PIETER ELBERS, CHIEF EXECUTIVE OFFICER, KLM: I think it`s fair to say that of course it gets a lot of attention and the 15 days of strike and the CEO
stepping down is getting rightfully so with a lot of attention.
But if you take a few steps back and you see what has been achieved in 2017, first of all, on the financial side, the debt has been reduced and
both Air France and KLM have made a better performance in the year before.
If you look strategically, we had a strategic investment of Delta in China, ease in Air France and KLM. Air France-KLM has invested in Virgin, so with
that, if you see what we have done in order to get our place on the global aviation landscape, the group has really made very considerable steps in
2017.
QUEST: You were talking about artificial intelligence and the way in which it was going to handled by airlines. I always sort of worry that the
media, you know --
ELBERS: Yes --
QUEST: That`s getting the jock in of AI, how does AI help an airline? Plus, it`s not just technology, but artificial intelligence.
ELBERS: Well, you should see what we have been doing at social media where we started to experiment years ago and where we are today for our customers
and quick interaction and sort of being where our customers are, and having thousands and thousands of social media messages sent to our customers.
You see where we did that facing the customer, we make tremendous progress, however, many of the internal processes and internal procedures were still
sort of siloed operational oriented. AI really helps us now, we just launched a unique partnership together with -- between KLM and the Boston
Consultancy Group when it comes to using AI to have a better operational performance.
What does it mean for the customer? Less delays, less cancelations and more predictability.
QUEST: Why is this AI and not just technology? What`s the artificial intelligence aspect of it? What`s it learning?
ELBERS: It is learning the consequence of every decision you make on an operational to stop(ph) date. So that means we are not re-inventing the
wheel every time it snows or every time the wind blows hard, we are just using all the experiences of last time.
[16:50:00] And with that, we make sort of thousands if not millions of possible changes in fleets, crew and allocations, and with that, you`ll see
a better operational performance.
QUEST: As the chief executive, we were talking about technology earlier today and you made it clear that this is something that has to go right to
the top.
ELBERS: Yes --
QUEST: And by the same token, a huge amount of money could be pissed down the drain if you know, you don`t get it right, and that balancing that is
really tricky.
ELBERS: Well, it absolutely is, and I think the time that the majority of your money was spent on just engines and aircrafts is gone. We`ve spent a
hell of a lot of money nowadays on digitizing on IT and making sure that we provide a superior customer service.
(END VIDEO CLIP)
NEWTON: OK, now, the companies we`ve talked about tonight are all well known and have an established position just like KLM that Richard was
talking to. Yet, when you look at the long-term history, you know, they`re relatively young.
I want you to think about Apple, you know, it`s close to being the first company to hit a trillion-dollar valuation, co-founded by this man, Steve
Jobs. He has revolutionize the way we live, just think about it.
In just over 42 years, that`s only two generations. Now, while KLM is just shy of joining a very prestigious club, next year, get this, it will be a
100 years old. Here you can see a flight attendant serving tea on a KLM flight in 1935, that is an incredible shot.
Now, speaking of tea, one British producer Twinings already is in the 100 club and has been for a very long time. It was founded in 1706. Now, all
this week, we`re looking at companies that have existed for more than a century, so have a cuppa and enjoy.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: One of my most popular teas is the famous Earl Grey blend. It`s the drink that built a nation. The best tea maybe produced in
China or India, but there are a few countries which enjoy a nice cuppa more than England.
And in London, there`s one company which has been brewing up for more than 300 years.
UNIDENTIFIED MALE: With or without milk, it`s your cup of tea, you need to drink it the way you like it and yes, a day without Earl Grey is not a good
day.
UNIDENTIFIED MALE: When the company started, when Thomas Twining bought an existing land in coffee house at the back of this building and within the
city of London, there were over 2,000 coffee houses, so intense competition.
So having trained in tea, he introduced fine quality tea to his coffee house as a point of difference.
UNIDENTIFIED MALE: In 1717, Thomas Twining opened the company`s shop selling dry teas. At that time, the drink was an expensive luxury item
until 1784 when British Twining persuaded the British Prime Minister to slash the tax on tea, making it affordable to the masses.
Three years later, the apostasy was dropped from Twinings, creating the world`s oldest company logo which has remained in continuous use.
UNIDENTIFIED MALE: We sell tea in 115 countries at the moment, we work with the local people to find out what the local tastes are. So in our
portfolio teas, we`ve got over 400.
In 1837, Queen Victoria granted Twinings a royal warrant, and the company has supplied every British monarch since then, including Queen Elizabeth.
UNIDENTIFIED MALE: The most important thing I think for our future is they have the passion, everybody in the company loves tea, and particularly the
master tea tasters.
UNIDENTIFIED MALE: But yes, it does take time to build up a scale to become -- really suffer nuances with the tea.
UNIDENTIFIED MALE: In 1956, Twinings joined a revolution in tea technology, introducing its first tea bags which the company continues to
make at its factory in Andover near London.
UNIDENTIFIED MALE: In looking at the future, we are obviously fiercely again to gather(ph) our reputation for quality. But we`re also looking at
innovations. We`re just launching a range of teas that brew in (INAUDIBLE), it`s been very much moving with the times, we do this on
trend, we think that`s got a very strong future.
UNIDENTIFIED MALE: As a Twining working for Twining, it`s a very special feeling. I mean, sitting here, we`ve got the portraits of Thomas and
already the answers is looking down. I don`t feel a weight of responsibility, they`ve done their bid and it`s all about following their
tradition of doing things well, maintaining the standards but always moving forward.
So yes, it`s just wonderful, yes.
(END VIDEO CLIP)
NEWTON: Do agree, with a B, with an Earl (ph) Grey. Now, London and the other European markets closed in the green, the Spanish index is
particularly strong, gaining 1.2 percent.
[16:55:00] There are signs of political stability is returning to Spain and Italy, I`m almost even afraid to utter those words.
And the Dow in the meantime as we told you finished the day within a 100- point gain. Investors are looking top of the heated rhetoric between the U.S. and China on trade. And of course, who can forget that Nasdaq,
hitting a record, boosted in part by Apple and Microsoft.
And that`s all for me on tonight`s QUEST MEANS BUSINESS, I`ll be right back in the chair tomorrow. After the break though, Richard will be back with a
profitable moment, you don`t want to miss from Sydney.
(COMMERCIAL BREAK)
QUEST: Tonight`s profitable moment from Sydney, Australia, with the sound and light of vivid. The airline industry would be right to feel rather
pleased with itself. It`s making good money even at times of rising fuel prices.
However, what I`m hearing here from chief executives is that there`s a bigger issue lurking underneath. It`s all to do with technology,
artificial intelligence and issues like who owns and manages the data the airlines produce?
It`s an existential threat for today`s airlines and carriers because if they do not get this right, particularly AI and data ownership, then who
knows who will come in and take over. The prospects of the virtual airline where these carriers are just owners of planes is very real.
So the airline CEOs don`t really have an answer to this serious point, but they do know they have to tackle it. And if there`s one thing I have
learnt at this year`s IATA, it is technology, AI and data will be the fighting ground of the future.
And that`s QUEST MEANS BUSINESS for tonight, I am Richard Quest in Sydney, Australia.
END
