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First Move with Julia Chatterley
Sources: U.S. set to Finalize $2.5B Military Aid Package; Thunberg: Absurd to Look for Climate Answers Inside Davos; Business Leaders more Hopeful as China Reopens; U.S. Stocks Fall in Early Trading, Tech Earnings on Deck; Microsoft President: We should be Ready for Expansion of Russian Cyber Activities; The Takeaway Messages from this Year's WEF. Aired 9-10a ET
Aired January 19, 2023 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:00:00]
(COMMERCIAL BREAK)
JULIA CHATTERLEY, CNN HOST, FIRST MOVE: A warm welcome as always to "First Move", I'm Julia Chatterley coming to you live once again from Davos in
Switzerland and the World Economic Forum today's show scaling mountainous new heights. Let's call it an Alpine piece de resistance as we discussed
the ongoing quest for global energy security without compromising sustainability that's the key.
And China's reopening and hopes for Asian markets profitability, also the rise of artificial intelligence, chat ability. All of the important issues
being discussed at this year's Davos is the rise and quick adoption of sophisticated AI search and information tools like the chat GPT bot,
developed by the firm open AI and their power, of course too, to change society. This is one chat lib both excited, but also concerned about the
ethics of all of this as well of course a little bit about being replaced perhaps one day soon.
The rise of AI and society's reply, just one the number of tech trends. We'll be discussing this hour with Brad Smith, the President of Microsoft;
his company was an early investor in open AI and is reportedly in talks to up its stake. Now amidst the futuristic fanfare tech is going through a
painful post lockdown adjustment too.
Microsoft just one of many of the growing numbers of firms across the sector announcing sweeping layoffs this year. Microsoft warning that
customers are pulling back spending and with the recession fears we've all been talking about so much here this week in Davos short term spending cuts
however, cannot be a reason to slide on those climate promises. Greta Thunberg and other young climate activists in Davos today had big oil
firmly in their sights, blasting the international community to for not doing more to cut fossil fuel usage during a panel discussion with Fatih
Birol the Head of the International Energy Agency.
And he will be joining us shortly to discuss that and more. And another key theme to China and the investment opportunities tied to its big post
lockdown "Reopening". Chinese listed firms having a great 2023 so far with the HANG SENG up almost 10 percent. I'll be discussing what's ahead for the
investment in the region with the CEO of the Hong Kong stock exchange operator HKEX.
And here's the global picture now weakness across the board. The European Central Bank had Christine Lagarde in Davos today to adding her voice to
those who believe the economic trends across Europe in particular are improving overall. Though, of course, the wild card remains energy prices
and the devastating war in Ukraine and that's where we begin today's show. The United States is set to finalize a $2.5 billion military aid package to
Ukraine.
Sources tell CNN for the first time, it will include a shipment of Stryker combat vehicles. What it won't contain, however, other tanks all long range
missiles, Kyiv has been desperately asking for. Instead, the pressure is on Germany to provide tanks with its lap and battle tanks being seen as the
most suitable option.
(BEGIN VIDEO CLIP)
VOLODYMYR ZELENSKYY, PRESIDENT OF UKRAINE: I would like to thank again for the assistance to our partners but at the same time, there are times where
we shouldn't hesitate or we shouldn't compare when someone says I will give tanks if someone else will also share his tanks. I'm strong in Europe and I
can share if someone outside of Europe will contribute as well. I don't think this is the right strategy to go with.
(END VIDEO CLIP)
CHATTERLEY: Oren Lieberman is the Pentagon Correspondent. What do we know and I think we have to make the point that the equipment they're not
receiving requires maintenance, it requires detailed training? So while I'm sure they will be grateful to receive this package. It's also going to be
laced with some degree of disappointment and it raises pressure once again on the Germans.
OREN LIEBERMANN, CNN PENTAGON CORRESPONDENT: Absolutely a lot of pressure on the Germans and it's interesting that U.S. Defense Secretary Lloyd
Austin, who was just in Berlin, with his Senior Defense Officials who said that Austin is optimistic.
They'd be able to work out some sort of agreement or arrangement with Germany that would allow Germany not necessarily to send its own Leopard
tanks, but to allow - or to provide approval for other countries who have signaled. They want to send their German made Leopard tanks to Ukraine.
For example, Poland and Finland have both said they're ready, but they need that German Sign off. The question is what sort of pressure can Austin and
others put on Germany to give the sign off that would give you great in the tanks they've been asking for so long?
Meanwhile, as that's happening, the U.S. is set to approve and approximately $2.5 billion Ukraine security package that would make it the
second largest package and its, worth noting that the three largest packages 3 billion announced just a few weeks ago, 2 billion or just under
2 billion right before Christmas and this one have all come within the last month.
[09:05:00]
LIEBERMANN: It is a sign of ongoing U.S. support, long term here with equipment and weaponry that's getting heavier and more powerful. As you
pointed out Stryker combat vehicles those are armored vehicles designed to carry infantry across the battlefield. Those are supposed to work in
conjunction with the Bradley fighting vehicles that were announced just a few weeks ago.
So you see that Ukraine may not be getting the long range missiles they've been asking for or tanks from the U.S. But they are certainly getting
heavier and more powerful weaponry additional training from the U.S. Patriot missiles batteries, not only from the U.S., but also from Germany
and the Netherlands, all in anticipation of a fight that will continue here. The U.S. is committed to this for the long term and that's what
they're showing here.
CHATTERLEY: Oren Lieberman there, thank you so much for that update there. Now on to a shock resignation from one of the world's best known leaders,
New Zealand's Prime Minister, Jacinda Ardern say she's stepping down in just a few weeks from now, in a powerful statement, the widely celebrated
Prime Minister said she no longer has the energy to lead the government.
(BEGIN VIDEO CLIP)
JACINDA ARDERN, NEW ZEALAND PRIME MINISTER: I know what this job takes and I know that I no longer have enough in the tank to do it justice. It's that
simple. I know there will be much discussion in the aftermath of this decision as to what the so called real reason was; I can tell you that what
I'm sharing today is it.
The only interesting angle that you will find is that after going on six years of some big challenges, I am human, politicians are human. We give
all that we can for as long as we can and then it's time and for me, it's time.
(END VIDEO CLIP)
CHATTERLEY: Ivan Watson has more on what all this now means. I haven't I think everybody listening to that will feel great sympathy above everything
else. She seemed incredibly emotional there holding it back. Honest, huge challenges that she's faced, like all leaders, I think over the past few
years and also to have the strength to say, I can't do it anymore.
IVAN WATSON, CNN INTERNATIONAL CORRESPONDENT: Yes, and it's, definitely stunned members of her own party, fellow lawmakers, they were not expecting
this. Last year, Prime Minister Ardern had been saying that she would were on for reelection. In her emotional statement she did say that she had
thought about this over the Christmas holidays and had come to this conclusion that this was not the time for her.
So she's stepping down it leaves her party in a bit of a lurch for elections, which are now scheduled to take place in October because she is
the biggest star of her party and she and the party are sagging in the polls have been for some time now. And that also may have contributed to
this decision. You know, that's some of the analysis that we're hearing from people who watch politics in New Zealand.
Yes, she's been through some huge hurdles. I mean, I remember personally covering the Christchurch terrorist massacre of 2019, when a racist
attacked two mosques in Christchurch and killed more than 50 people. And she stepped in and helped heal her country and also pass restrictions on
firearms in very quick time.
And then going through the COVID 19 pandemic, but it is some of those measures certainly linked to COVID that have hit her politically at home.
And you sent kind of polarization about even Ardern in this small country. Take a listen to what some New Zealanders had to say about her resignation.
(BEGIN VIDEO CLIP)
UNIDENTIFIED FEMALE: I think she was an excellent Leader. And I'm devastated that she's going, she's resigning
UNIDENTIFIED MALE: As a business owner. This is a wonderful day. The restrictions and the extra compliance and the extra tax on business that
has happened and especially staffing levels where there's no immigrants has with left us all short, all stressed out.
UNIDENTIFIED FEMALE: She was awesome. She did everything she could during the pandemic kept a lot of people safe. Yes, I think she's going to have a
great legacy.
(END VIDEO CLIP)
WATSON: I want to direct you to a statement issued by Helen Clark. She's a Former Prime Minister of New Zealand, who also came from the Labour Party.
And in addition to congratulating Arden's record, she did say this "The pressures on Prime Ministers are always great, but in this era of social
media, click bait and 24/7 media cycles, Jacinda has faced a level of hatred and vitriol which in my experience is unprecedented in our country".
And she's urging society there to reflect on this. In her kind of closing remarks, Ardern spoke about her family, which she said had sacrificed the
most. Recall that she gave birth to a daughter as Prime Minister that hasn't happened I believe in some 30 years prior to that first sitting Head
of State to do that.
[09:10:00]
WATSON: And she said that she's looking forward to being able to take her daughter to school and to finally marry her longtime partner and the father
of her daughter, Julia.
CHATTERLEY: And congratulations to her and them on that. Ivan Watson thank you so much. OK, straight ahead here on "First Move", the man with a plan
to tackle climate change. The Head of the International Energy Agency, Fatih Birol joins me after the break, plus.
(BEGIN VIDEO CLIP)
SATYA NADELLA, CEO OF MICROSOFT: we in the tech industry will also have to get efficient right, it's not about everyone else doing more with less, and
we will have to do more with less.
(END VIDEO CLIP)
CHATTERLEY: Microsoft joining other tech giants scaling back some of those pandemic era job expansions. We'll discuss that climate change in AI and
more with President Brad Smith. That's up next too, stay with us.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to "First Move", the magic word is "Investment". That was the takeaway from the Executive Director of the International
Energy Agency debating the climate crisis on the panel earlier today here in Davos. As you would expect, the environmental emergency is at the heart
of all the discussions really this year, with the United Nations Secretary General calling for global accountability.
(BEGIN VIDEO CLIP)
ANTONIO GUTERRES, U.N. SECRETARY-GENERAL: Some in big oil peddles the big lie. And like the tobacco industry, those responsible must be held to
account. Today, fossil fuel producers and their enablers are still racing to expand production knowing full well that these business models are
inconsistent with human survival.
(END VIDEO CLIP)
CHATTERLEY: However, Greta Thunberg said it was absurd to expect solutions from the kind of people on the Davos guest lists.
(BEGIN VIDEO CLIP)
GRETA THUNBERG, CLIMATE ACTIVIST: I think that right now, the changes that we need are not very likely to come from the inside rather I believe they
will come from the bottom up, so to speak and because without massive public pressure from the outside, at least in my experience, and these
people are going to go as far as they possibly can?
[09:15:00]
THUNBERG: As long as they can get away with it they will continue to invest in fossil fuels they will continue to throw people under the bus for their
own gain.
(END VIDEO CLIP)
CHATTERLEY: Also on that panel, Faith Birol, the Executive Director of the International Energy Agency. Sir it is always a pleasure to speak to you.
Great to speak to you in person! That was a tough panel, because that was the ultimate combination of practicalities, politics, and passion from
activists.
FAITH BIROL, EXECUTIVE DIRECTOR OF INTERNATIONAL ENERGY AGENCY: And just threat but I believe we have to talk, engage with the young activists, and
I believe the climate change challenge is so complex, so huge that we need to build a coalition, a grand coalition, if I may say. So governments,
industry, civil society, those who genuinely I underlined genuinely here who genuinely want to tackle climate change, which is the reason I accepted
their invitation and hated their look with them.
CHATTERLEY: I had one of those activists on the panel yesterday, and they're pretty uncompromising, though there's no reasoning with them. Which
is also part of the challenge, too, but in a way, you've presented what's possible and what we can do. And there is a meet in the middle here, and
you've said it, investment is the magic word.
And Secretary John Kerry said money, money, money and you said if we can take renewable energy investment from $1 trillion to $4 trillion by 2030,
we can wipe out all that additional investment, it can be done.
BIROL: It can be done; in fact, today we have about $1.4 trillion decrease in energy investment.
CHATTERLEY: And that's a big jump, by the way in the past --.
BIROL: Big jump, you read our papers very well, thank you very much.
CHATTERLEY: --for the word.
BIROL: Thank you very much and with current policies is 1.4 in 2030, will be $2 trillion.
CHATTERLEY: Yes it's nothing.
BIROL: It is nothing and if you want to be in line with our climate cause, you need to go from 2 to 4 trillion, all clean energy. It is wind, solar,
hydrogen, electric cars, nuclear power. If you do that, then we don't need to build new coal, oil and gas deposits. So the problem is not with energy,
the problem is with emissions.
CHATTERLEY: Yes, and that's also points to the oil and gas sector as well. And I spoke to the Occidental CEO on a panel as well this week. And she was
saying, Look, that's exactly what we're targeting emissions and we have to bring those down too and they are working on ways to do it. I have a bit of
a hallelujah moment and I want to check whether I'm just getting over excited.
I've spoken to the Head of the IMF this week, the United Nations Secretary General, also Secretary Kerry, and he was talking on behalf of President
Biden when he said, both the IMF and the World Bank seem to be on board with a business model change, accepting some risk as shareholders and with
that potential loss in order to leverage money, make it more bring in the private sector, push cash to projects, whether it's here in the West, or in
the richer nations or in the developing nations. Is that the game changer we need?
BIROL: Julia, I'm even more passionate than you. I can tell you, going from 2 trillion to 4 trillion, it is a problem. We had the cap there is the
money around the world. But bulk of this jump needs to be in the developing and emerging countries where there's a lot of risk for investment.
So what needs to be done? The international financial institutions such as the ones you mentioned, in my view, didn't make a good job until recently.
And it is time for them to ramp up their efforts and bring clean energy finance on top of their agenda and had two distinct measures for
concessional funds in order to help those countries.
CHATTERLEY: Secretary Kerry promised me the Spring Meetings of the IMF and World Bank and the IMF chief said, look, don't worry, we're already on it.
So we're going to hold them accountable. One of the other things that jumped out to me in your latest report, only 25 percent of announced
manufacturing products for solar are under construction or beginning imminently. 35 percent for EV batteries less than 10 percent for
electrolyzers did those percentages now rise? Because the plans are there is again about kick starting.
BIROL: Exactly, there's a lot of plan, there's a lot of project pipeline.
CHATTERLEY: We have the technology --.
BIROL: The technology just needs to meet with Capitol, and mainly in the again emerging countries. I believe money and the clean energy projects in
Europe and North America will meet. But how are we going to make sure that the green energy projects in Indonesia, in Asia, Latin America, and Africa.
We'll find a capitalist disease issue because it is important for also for the advanced economies because one ton of CO2 going to atmosphere from
Jakarta, from Detroit or from Zurich or from Austin. It has the same effect on everybody. Even in the United States, the emissions will come to zero.
They will not be immune to the effects of the climate change.
CHATTERLEY: Yes, what we're seeing that every day, we have to own up to it too to a greater extent.
[09:20:00]
CHATTERLEY: And fast forward or actually rewind today, you've warned you're concerned about the possibility of rising energy prices again for a couple
of reasons. One we know supply from Russia and the uncertainty around that also, the concern, good news and bad news in this China reopening and what
then sucking up demand for energies means?
BIROL: Yes, this is very important, I think a bit overlooked because China's oil and gas consumption domestic for the first time in 40 years
last year decline. In 2022, oil and gas consumption declined for the first time since 40 years. And now with the opening up, it will go up getting
stronger, and which means that China will import more oil, more LNG which further put upward pressure on the prices unless in terms of oil, the oil
producers would make some steps to comfort the markets.
CHATTERLEY: How much higher are we talking in terms of potential price rises oil and gas?
BIROL: I think we may see today we are numbers are about $80, we may see its significantly higher than this depending on the level of recovery in
Chinese economic.
CHATTERLEY: Above 100 again --?
BIROL: I hope not because the global economy, as we all know is in many countries flirting with recession even. So therefore, I hope we will not
see those prices in the hands of the producing countries whether or not they have a comfort to markets.
CHATTERLEY: --catch 22 here is that there's concern about China ramping up coal use. And again, I asked Secretary Kerry when he's going to cut the
deal with the United States to try and limit that and he said he's working on it but that aside, if they did do that? That sort of creates more upward
pressure for LNG and for the oil that they import. So we're in this sort of climate sustainability, energy requirements, catch 22.
BIROL: China is cold, but I think we shouldn't forget that today. China's at the same time number one in solar. Number one in wind, number one
electric cars half of the electric cars sold in the world today is in China, other half everybody put together.
CHATTERLEY: I'm not criticizing - actually that's a great point too very quickly. Are we stacking up supply chain challenges for the future perhaps
the concentration of innocence China, Bolivia, Argentina, when you've got the formation, perhaps of a OPEC plus equivalent in some of these nations
because of their the mineral and metal demand?
BIROL: Exactly, yes and we talked about energy transition. Energy Transition means industrial transition, the next age of the industry will
be clean energy technology, manufacturing. And China has a dominant position in batteries, in solar, in wind, electrolyzers and everything. So
better, the rest of the world diversified in order to innovate secure supply of these important technologies.
CHATTERLEY: OK, I've taken this down a darker path there. But I want to end on a positive note very quickly, with glass half full. I think here, there
is a rise in investment. There's a lot of passion here. We heard it from the young people and I think we owe them a better planet.
BIROL: Yes, yet from young people and from less young people --.
CHATTERLEY: Yes, exactly, thank you very much.
BIROL:--
CHATTERLEY: Me too, eventually, hello, no is on - she said at the end of mine. I'm the only person who was born in the 21st century here and we all
went right. OK, thank you, great to chat to you.
BIROL: OK, thank you Julia.
CHATTERLEY: OK, we're going to take a break, coming up, a bridge we hope it's a bridge between global Investors and China, the Head of the Hong Kong
stock exchange and more talks to me about China's reopening and the opportunities that will bring that's next.
(COMMERCIAL BREAK)
[09:25:00]
CHATTERLEY: Welcome back to "The World Economic Forum" here in Davos, Switzerland. One of the biggest themes once again this year, China this
time China's reopening earlier this week. The country's Vice Premier Liu made a passionate appeal for foreign investment after Beijing's sharp U-
turn; we can call it that from its zero COVID policy.
(BEGIN VIDEO CLIP)
LIU HE, CHINES VICE PREMIER: We must always promote all round opening up. Opening as a basic state policy it is a catalyst of reform and development
in China at a key driver of economic progress. China's door to the outside world will only open wider.
(END VIDEO CLIP)
CHATTERLEY: Meanwhile, Hong Kong was scrapped quarantine requirements for people infected with COVID Starting from January 30. This all fuels
optimism across global markets to the Hong Kong stock exchange is trying to build more bridges to connect international Investors with China, and much
more. Joining us now is Nicolas Aguzin. He's the CEO of Hong Kong exchanges and clearing not bad rechecking did a good job.
Welcome and good to see you. You know what I can only imagine your phone. What happened after that speech? Vice Premier, you heard people saying
reform, development, reopening no mention of COVID what's going on? And what are you hearing from businesses in particular?
NICOLAS AGUZIN, CEO OF HONG KONG EXCHANGES AND CLEARING: Well, actually, a lot of the things that were mentioned in that speech, I think that over the
last, you know, few months have been repeated. I mean, we had the central economic workforce conference in December.
And the focus around development around making sure that we the economy restarts. I think that this reopening of China after the restrictions that
we've seen over the last few years, I mean, it's going to be probably the most significant event for global markets, for the most part positive event
for global markets in 2023.
CHATTERLEY: A lot of the companies that I speak to that either had or do invest in China, we're using the word an investable, basically an
investable over the last couple of years in particular for many reasons for travel being one of them, but for other reasons.
And I think you understand that better than most particularly with what we've seen in in the tech sector with concerns over the property sector.
What's the word on the street now because I can tell you the word on the street here in Davos is that the calls have been made, firms have been told
we're backing off, get on with it help growth? Is that true?
AGUZIN: There's a lot of investment that started to come back. And we've seen some of these issues being addressed. Some comments about the
rectifications of the platform economy's been getting to the end of that period, that process, I mean, so there's a lot of signaling, development is
important.
We've seen measures addressing real estate issues. So when we go one by one, things have been you know, being checked off. And in addition to that
you have an environment where international investors are saying, well, maybe this is a good time to start coming in and entering the market and
we've seen significant flows.
CHATTERLEY: I was going to say we did it that in the introduction to the show as well.
[09:30:00]
CHATTERLEY: Talk to me what you've seen even just in the short term the last couple of months.
AGUZIN: I mean, essentially, in the first 15 days of the month, I mean, not several months, but just days--
CHATTERLEY: No, days,
AGUZIN: We've seen more than all of last year combined in terms of inflows into the mainland.
CHATTERLEY: 15 days outweighing an entire year.
AGUZIN: Correct.
CHATTERLEY: Do you think that's sustainable?
AGUZIN: Well, I mean, I think right now there's still a lot of flows that need to go both ways. One of the important thing and this is not just about
attracting capital one way, there's also been an announcement made that is like a breakthrough announcement.
Which is essentially that international companies that come to listing Hong Kong will be available from onshore investors to invest in those companies?
So essentially, retail investors, mainland investors are going to be able to invest in companies, international companies that come and look for
capital in Hong Kong, which is a little bit of a different thing. I mean, in the sense that we have two way flows.
CHATTERLEY: The returns alluring?
AGUZIN: Right, right, right, I mean--
CHATTERLEY: People are nervous. How do you convince them that we're not going to do another U-turn, things aren't going to deteriorate? I mean, we
recognize the situation, people recognize a situation where it's almost a case of not having a choice, because growth has been weakened so badly. The
data that we see at least we can see that. So there's a necessity going on here. There's going to continue?
AGUZIN: There's been a significant amount of under spending over the last two years. There's a lot of excess savings that there are in the system.
CHATTERLEY: We're talking about consumers in China.
AGUZIN: Yes, consumers in China, about $2 trillion U.S. dollars over the last two years of excess savings that are ready to be put back to work into
the market. So that will create a lot of demand, it will be attractive for international companies that want to take advantage of that consumer demand
in China, it will create a lot of like good flows both ways.
CHATTERLEY: It's interesting because you - the comparison with the United States here actually is very similar. We had a similar kind of sum in the
United States, consumers have spent around half and it's provided a cushion to the economy that we've seen.
However, there's a cultural difference here, surely that the Chinese people, there's a lack of welfare state there. They're starting, obviously,
to build that. But surely, people are going to be far more cautious.
And even for younger people, if they're a little bit more able or willing to spend the unemployment rate is pretty high. I speak to graduates that
couldn't get a job in the last couple of years. Is it going to take a bit more time and then the optimism perhaps suggests?
AGUZIN: We've seen a little bit of this after 2020. Remember, at the beginning of the crisis of the COVID crisis, immediately after that initial
stage, there was quite a bit of a rebound. So we went to a little over 8 percent growth in GDP, you know, the year after.
I mean, there may be a similar factor being playing here in the sense that all these excess savings will come back into the market. So we feel, you
know, fairly confident that this is now a cycle where you're going to see increasingly positive fundamentals moving forward.
CHATTERLEY: Talk to me about the pipeline for companies as well looking to IPO. I do feel like un-financial and you don't have to use names. But I do
feel like that was a marker point. So the moment I see their name pop up is willing to IPO. And I know they've said in recent days, no intention at the
moment, but I do feel like starting to see this too will be a marker?
AGUZIN: We're starting to see a lot of momentum. Actually the second half of 2022, we saw four times more IPOs than the first half, so four times.
And when we look at December 2021 IPOs, just in December, and we had approximately 10 in just like the first few days of January.
So very active 90 IPOs in the whole year and that was a tough year, so we're seeing the activity in IPOs coming back we have about 100 companies
right now that have filed for their IPO. So man, that's a healthy number. So we feel pretty good about the types of company that are looking for
capital.
CHATTERLEY: So funny when we had the conversation three years ago the last time we were together I said to you have a tough job in your hands, my
friend? We had no idea. I'm looking forward to chatting again.
AGUZIN: Thank you very much.
CHATTERLEY: Thank you very much great to chat to you. Nicholas Aguzin there the CEO of the Hong Kong Exchanges and Clearing still got it. Thank you.
Coming up after the break, we have the President of Microsoft his thoughts after the CEO of the company Sathya Nadella warns even a company as big as
Microsoft is exposed to global headwinds that next.
(COMMERCIAL BREAK)
[09:35:00]
CAHTTERLEY: Welcome back to "First Move"! The U.S. debt ceiling dilemma is one of the topics of discussion here in Davos. Washington set to hit its
self-imposed $31 trillion debt ceiling today. A reminder of the political battle set to take place later this year when the treasury runs out of
emergency options to pay the bills and prevent a default.
The fights to raise the debt ceiling in Congress just one of the issues also waiting perhaps on U.S. equities stock falling for a third straight
session as new U.S. data points to a weakening U.S. economy. A bit of caution too as tech earnings season gets underway with Netflix results on
deck.
In the meantime, fans of the musical wicked, no one thing or two about defying gravity. And those are the words chosen by the CEO of Microsoft,
when talking about economic growth governed by inflation and a weakening economy. Context is everything here. Just take a listen.
(BEGIN VIDEO CLIP)
NADELLA: At the end of the day, all of us are governed by what is happening in the world inflation adjusted in terms of economic growth. So because no
one can sort of defy gravity and the gravity here is inflation adjusted economic growth.
And I would say all up in the world, the inflation adjusted economic growth has been pretty weak. And one of the things that I'm optimistic is digital
technology can help boost things like artificial intelligence can help boost. That said, in the tech industry, we grow multiple times GDP.
(END VIDEO CLIP)
CHATTERLEY: The Microsoft Chief there emphasizing like others in the sector they're not immune from the forces of economic slowdown having announced
job cuts on Wednesday. And it amplifies too, a chorus of voices questioning the existing high growth model and valuations in the future.
Brad Smith is President and Vice Chair of Microsoft. And he joins us now always a pleasure to have you on the show. I have too much to discuss with
you. So let's talk about some of the tougher topics. Losing people losing jobs is never easy. Just put that in context, because I think it does echo
a lot of the conversations that are being had about that high growth model about the valuations that we've seen. Where next for tech?
BRAD SMITH, PRESIDENT AND VICE CHAIR OF MICROSOFT: Well, first of all, I think it's always important to acknowledge what you just said. We all have
friends and colleagues, it's always a hard day when people lose their job.
As such has been saying, as we've been talking with our employees, it's really about doing two things simultaneously. The first is to adapt to the
short term turns out that gravity applies to everyone. We've got to get costs and revenue and alignment. And at the same time, pivot for the next
long term opportunity which in our view is clearly the AI inflection point where all add in 2023. We've got to do all of this simultaneously.
CHATTERLEY: And you have to make decisions for the next 5 to 10 years in the short term even as you're adjusting to economic conditions as well. You
said the magic word there which was AI we have to talk about chat GPT which for everybody out there sort of an AI driven chat bot.
[09:40:00]
CHATTERLEY: When the hype around this started? I got 10 people sent to me like try, try and try it. And I tried it. I was like, guys, where have you
been for the last year? We've got you, AI solving drug challenges and all sorts of things. But you're an investor. Talk to me about what it means for
Microsoft?
SMITH: Well, I think this is tremendously important for the future. This is easily one of the major technology trends for the next decade. And it's a
little like 2007, when the iPhone burst onto the scene, smart phones were around people forget, Microsoft was the early leader.
It was a change in the interface, the touch UI, all of a sudden, everybody said, oh my gosh, now we're in a new mobile era. Fundamentally what we're
seeing with the open AI models with the partnership and relationship between open AI and Microsoft is a way for everyone to start to harness the
power of AI.
Really, to think more critically, to learn about what's happening in the world and to pursue more creative expression to get help assistance advice,
in what we want to do what we want to communicate with others around the world.
CHATTERLEY: There's a rumor out there that you want to take a bigger slice of the pie and take a bigger stake. Can you give me any information on
that?
SMITH: I absolutely we never comment on rumors Julia.
CHATTERLEY: There was a moment there where I got excited. Now and its most excitable though wait for it. I've seen it being described as a Google
killer. Is that what it is fried revenge?
SMITH: No, the way I would think about it actually, is if you look at the world of the next generation of AI, think of it as these large language
models, foundational models, they're called, I think there's three institutions that are collectively at the forefront of the world.
One is Open AI and its relationship with Microsoft, a second is Deep Mind, which is now part of Google. And the third is the Beijing Artificial
Intelligence Institute. And what we should all think about is that it's good to have competition, it will be good to have more competition, even in
a field like search where it's been lacking.
And it's good to have two institutions, privately funded at the forefront of saying the United States, Western Europe, competing with China. And it's
going to be a very interesting set of years ahead.
CHATTERLEY: Does it get dangerous, the ethics of AI? You and I've talked about it before, as you mentioned too private companies or government one
in China, the challenges the military use the ethical questions. You and I often talk about this sort of digital Geneva Convention idea and coming
together on all these types of things? I'm worried.
SMITH: Well, from a Microsoft standpoint, I would say two things. First, we should be enthusiastic about the opportunity--
CHATTERLEY: Agreed.
SMITH: But clear eyed about all of the potential risks. And I see three priorities, real goals for us as a company as to how we approach this?
First, ensure it's released in use responsibly and ethically. The second is to ensure that it really serves the international competitiveness and the
national security of nations.
And the third is really to try to ensure that it reaches and serves people broadly, and then it helps create new jobs. We give people the skills that
it raises the economic opportunity in ways that we really have not seen fully since the tech era began.
CHATTERLEY: Definitely glass half full. And I agree with you on all the positives. I have my fingers crossed for the challenges here. I want to
move on and talk about Ukraine, because, again, we've talked about it in the past. You were the first instrumental in going into Ukraine and saying
how can we help mitigate the second war that's going on here?
And it's not the kinetic, the physical war, it's the cyber threats? What can you tell me about what you're seeing today, and what your biggest
concerns are as we push through the year, whether that's in Ukraine or beyond?
SMITH: We're really focused on two things. I would say in terms of cyberattacks, the last 30 days have been quieter. There have been fewer
Russian cyberattacks against Ukrainian targets, we'll see if that lasts, or whether there's an effort to regroup and do something new. We need to be
prepared for it all.
And the second is on the influence operations, the propaganda. Right now the Russian government, as we see it is having to focus so many of its
resources on the Russian population to try to sustain support, that there's a little bit of a reprieve outside of Russia.
But we should be ready for an expansion of all of this. Typically, when the spring comes militaries wage offenses; we have to be ready for an offensive
cyber war, offensive cyber influence activities. And that's part of what we are preparing for.
CHATTERLEY: It's tough to connect the dots on these things, because it's always supposition. But I was wondering whether to your point about the
quieter period that we were going through whether that sort of presented some sort of indication of a change in terms of the kinetic war that's
going on. But your point about the misinformation and actually focusing on sending a message at home to try and galvanize sentiment and support that's
interesting.
[09:45:00]
SMITH: When a war is not going well.
CHATTERLEY: Yes, he focused--
SMITH: The home front becomes even more significant in that way.
CHATTERLEY: Can I just check the amount of money that that Microsoft has spent personally on this $400 million through the end of 2023?
SMITH: As of today, I guess it's the 19th of January, we have spent $436 million to provide financial support and technology aid to Ukraine.
CHATTERLEY: And I know you always told me, it's not about the money, but the point needs making. Let's talk about climate, please, because this is
our - one of our favorite subjects as well. I'm excited. I'm enthused, actually, from the conversations that I've had here and in specifically
about the need for more investment, the need for more money.
And conversations about institutions like the World Bank, and the IMF changing their business models, allowing some risk to be taken some loss to
be taken and perhaps leveraging money. Am I too excited and enthusiastic - think like a shift.
SMITH: I do believe there is a shift underway. And it's really easy to come to Davos this year. And you see the two sides of this. On the one hand
connecting with the war in Ukraine people are saying Europe couldn't get through the winter without more reliance on fossil fuels, perhaps we're
going backwards.
But more fundamentally, we are seeing a rewiring of the European economy, the economy more broadly, a real increase in investment in renewable energy
as Europe unplugs from Russian gas. I think that bodes well for 2030 for 2025 even if in 2023, it feels more challenging.
CHATTERLEY: Yes. Because the winter again, for Europe and the lack of supply from Russia and yes, all for all the economic reasons as well. You
know, it's funny, you mentioned some of the Paris targets for at least 2023 and that's to limit global warming to one and a half degrees on industrial
times.
And we're already hitting or we're already getting very close. I asked the panel that I was on to show of hands, who thinks we will hit those targets,
and I counted six and a half people one was hiding, it was actually seven and a half people in a full room.
There's deep skepticism that we're doing enough. Is this a - do feel like this is a pivot point with the jump and renewable investment that we've
seen from paltry levels? That was 2 percent growth after Paris 12 percent in the last year growth. Is this a turning point? Or is it just war in its
short term?
SMITH: I think it is a bit of a turning point. I do think that we should, frankly, be concerned even pessimistic that we'll be able to stop short of
this 1.5 degrees centigrade increase--
CHATTERLEY: Do you think we're never go to --?
SMITH: It's going to be hard. But on the other hand, even with all of the enormous challenges that will create, you see the forces coming together
for longer term progress. So we may find that the climate issues get harder before they get easier. And what we need to be is determined and people
always ask is that glass half full? Is that glass half empty? I don't know. But there's definitely water in that glass. So we need to pour more into
it.
CHATTERLEY: Some if it's cloudy, though, there is still a lot of green washing going on. It's definitely a green color.
SMITH: A little more transparency--
CHATTERLEY: Yes, - more precisely. You know, does that mean calling out names? I don't know. I feel like we're at that point.
SMITH: Well, I think it's a little more your job than mine to name names in all honesty. The reality is transparency will serve the world well,
especially on something like climate. Transparency is coming.
Because the European Union has a new directive, it takes effect in a little less than 18 months. Thousands of organizations, mostly companies, but not
only companies are going to need to be reporting their climate emissions, that's going to give us all added incentive to do more and move faster.
That's probably good for the world. I think actually, it's absolutely good for the world.
CHATTERLEY: So it sounds like a lot of red tape and fox kicking and filling in which I'm a little bit concerned about, but we'll reconvene on that
because Europeans are furious about the Inflation Reduction Act as well. And hopefully they'll step up a little bit more too, exciting times.
SMITH: Thank you. Always good, see you.
CHATTERLEY: Thank you. Brad Smith, President of Microsoft. All right after the break a final thought on our final shaping Davos here what we've
learned this week and who better than to join me to discuss it than our very own Richard Quest. No, that's the answer. He is up next.
(COMMERCIAL BREAK)
[09:50:00]
CHATTERLEY: Welcome back to "First Move"! And on our final "First Move" here from Davos and our team here worked around the clock to bring you some
fascinating insights into the worlds of business, economics and politics plenty of highs and lows mainly this cold and a total lack of sleep, but
we're not complaining add to that of course plenty of worry about the world. Richard is here you're wearing your gloves.
RICHARD QUEST, CNN EDITOR-AT-LARGE: Yes, I'm wearing gloves because I keep thinking about this. Why do we have to suddenly do this macho its cold out
there?
CHATTERLEY: It's actually snowing.
QUEST: I would also show you my long - agree thermals. You were with me last night on "Quest Means Business". You were there with me in "Quest
Means Business"?
CHATTERLEY: Yes.
QUEST: Only you--
CHATTERLEY: Oh sorry.
QUEST: --could arrange a scenario where I ended up being heckled by the head of the WTO and - have a listen.
(BEGIN VIDEO CLIP)
QUEST: These are the sort of emphasizing the ticks are the ones that count
CHATTERLEY: I want to circle also why is climate crisis updated? Is that not one of my choices?
QUEST: She's clearly not been watching the program this week or she didn't know the answer to that question.
UNIDENTIFIED FEMALE: --answer Julia.
CHATTERLEY: Of course.
QUEST: That's the Director General--
CHATTERLEY: He's going to put you in your place.
UNIDENTIFIED FEMALE: --everywhere.
QUEST: --everybody.
CHATTERLEY: Because everyone would tick that.
QUEST: Exactly so.
CHATTERLEY: This is what I wanted to say. OK. I'm not worried.
QUEST: --ice.
CHATTERLEY: OK, I'm going to circle.
QUEST: Oh too clever by half.
CHATTERLEY: I'm also circling worried because I do worry about worry and stress too.
(END VIDEO CLIP)
CHATTERLEY: --so serious wasn't I?
QUEST: Talk about - given--
CHATTERLEY: I know what did you say though? Do you said too clever - it was lovely thing to say.
QUEST: Absolutely.
CHATTERLEY: Observations.
QUEST: It's been a good Davos, not a down Davos, not a depressing Davos.
CHATTERLEY: A different Davos.
QUEST: A different Davos where serious issues have been discussed in a multiple of different rooms and forum and that makes it better.
CHATTERLEY: What do you think was the standout moment or the standout theme I think? What was the hallelujah moment actually --?
QUEST: Well, that probably Zelenskyy, of course because of the circumstances. But I think really, for me, what really has been the big
moment is just getting on with it.
CHATTERLEY: Yes, you're right.
QUEST: Everybody's look - there's a big Congress Center over there. But down over there. There's something called the ice village with lots of
little rooms that only fit 30 odd people in and they're all discussing the biggest and best issues that they can. They'll never make it on "First
Move" or "Quest Means Business". But they are being talked about because this is the engine room.
CHATTERLEY: Yes. I couldn't agree more. They will when they get bigger too and the ideas the technology the things that you learn here that ordinarily
you wouldn't even know about--
QUEST: And issues.
CHATTERLEY: It gets criticized Davos but I do tend to walk away from this place with great hope for the future because a lot of things get discussed
that we don't see. You know what we missed this year, though? And it is of course, anniversary. Its three years since we were last year of course, the
snow angel. Do you remember the snow angels? We did snow angels down there. I think we've got a picture of it look.
QUEST: There's only one problem. There's no snow. I mean yes there is some snow because there's no real snow.
[09:55:00]
CHATTERLEY: No, wait. You mean you would have done it? You would have lied.
QUEST: Absolutely.
CHATTERLEY: Really?
QUEST: What you're suggesting madam?
CHATTERLEY: Would you have done it again?
QUEST: On tonight's Quest Means Business, snow angel.
CHATTERLEY: You're right though. There's not enough snow. And that's part of the - isn't it? There isn't enough snow and a reason to continue to
tackle climate change.
QUEST: Oh, go on I would like to say goodbye.
CHATTERLEY: Thank you, Richard.
QUEST: "Quest Means Business" with you.
CHATTERLEY: From Richard Quest and he'll be back in a few hours time. But that's it for "First Move". We'll be back thank you Richard.
(COMMERCIAL BREAK)
END
