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Quest Means Business
Japanese PM Calls Elections; Referendum on Abenomics; Dow, S&P 500 Hit New Records; Nokia Launches N1 Tablet; New Role for Ex-BlackBerry CEO; Juncker May Face No Confidence Vote; Exclusive: Investigating Alleged Tax Cheating; European Markets Close Higher; Easy Jet Falls as Profits Rise; Virgin Money Makes Market Debut
Aired November 18, 2014 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(NEW YORK STOCK EXCHANGE CLOSING BELL)
MAGGIE LAKE, HOST: Wall Street rejoices. It's yet another record close for the Dow. It's Tuesday, November the 18th.
Tonight, back me or sack me. Japan's prime minister puts his policy to the vote and calls a snap election.
A re-energized boardroom. Powermat picks the old head of BlackBerry for its new boss. He'll be joining me live in the studio.
And Hoover goes into reverse. The CEO apologizes after some loose talk at a dinner party.
I'm Maggie Lake. This is QUEST MEANS BUSINESS.
Good evening. Tonight, the world's third-largest economy is headed for a critical political showdown, and the prime minister's entire economic
program is on the line. It's Shinzo Abe of Japan. He said Tuesday he is dissolving Parliament and holding a snap election next month.
That is almost instant response to Monday's hugely disappointing economic news, showing Japan is back in recession. Mr. Abe's trying to
avoid dragging the economy any lower by delaying a plan rise in sales tax. On the general direction of policy, though, he said changing course now
would be a mistake.
(BEGIN VIDEO CLIP)
SHINZO ABE, PRIME MINISTER OF JAPAN (through translator): We had finally gotten this chance of breaking free from deflation, which has
plagued us for the past 15 years. We can't let go of this chance. We must not return to that dark and confused period.
(END VIDEO CLIP)
LAKE: Earlier, I spoke to CNN's Will Ripley in Tokyo and asked him what Prime Minister Abe is hoping to achieve by calling an election.
(BEGIN VIDEOTAPE)
WILL RIPLEY, CNN INTERNATIONAL CORRESPONDENT: He came to power promising to turn around the Japanese economy, and yet here Japan sits with
a surprise recession. Consumer spending plummeted when the tax -- the national sales tax increased. People stopped spending.
The sales tax increase was supposed to bring in more revenue, help Japan pay off its national debt, which is huge, twice the size of its
economy. And yet, none of that has happened.
But, this is a time when Abe's popularity is still robust, his opposition is in disarray, so if he's going to guarantee more time to keep
pushing forward with Abenomics, he believes it will work, his advisors believe it will work, this is essentially the time, they believe, to hold
this election.
And if the outcome is favorable, if Abe's party stays in power, if he stays in control, it will allow him to push forward with that plan, Maggie.
LAKE: Will, what's his approval ratings like among the population? I know he was very popular in the beginning, but especially in light of the
sales tax, where does it stand now?
RIPLEY: Lately, they've slipped below 50 percent, which is still not great, but still strong enough to guarantee that his party would stay in
control if the polls are able to hold through this snap election period.
Also, he's hoping that perhaps by pushing back this sales tax increase, that may actually raise his popularity, consumers might say OK,
the prime minister's giving us a break, now we don't have to worry about paying more until April of 2017, and perhaps leading up to the election,
they're trying to stack all of the cards in their favor to see if they can pull this off.
(END VIDEOTAPE)
LAKE: Prime Minister Abe's announcement provided a boost for Japanese stocks. The Nikkei finished Tuesday's trading up more than 2 percent.
Over the past two years, Japanese economic policy has been called Abenomics, a radical effort to end decades of stagnation. It has three key
parts or arrows, as they have been called.
The Bank of Japan has printed massive amounts of money. It's pumping trillions of yen into the economy and recently voted to ramp up its bond-
buying program to $720 billion a year.
Ambitious government spending packages have been launched to stimulate growth, so far worth hundreds of billions of dollars.
And the third arrow, structural reform. The idea is to do away with restraints on business and tackle the world's largest government debt. Not
so much progress has been made on these fronts, however. Mr. Abe admitted December's election will be a referendum on his economic policies.
(BEGIN VIDEO CLIP)
ABE (through translator): If we fail to get a majority of the seats, it means Abenomics is rejected. I will resign.
(END VIDEO CLIP)
LAKE: Seijiro Takeshita with Mizuho International joins me now to discuss this. Seijiro, so nice to see you in the studio.
SEIJIRO TAKESHITA, MIZUHO INTERNATIONAL: Thank you.
LAKE: If confidence has been such an important part of the early success of Abenomics, is that confidence fading?
TAKESHITA: I wouldn't say so. It's been delayed, there's no doubt about it. Look at he consumption behavior. We might be seeing a new trend
of change, a negative trend that's emerging that is polarization of spending patterns, which we didn't have, because we don't have a strata of
classes in Japan as much as in the West. But it may be appearing. So, we're staring to see a lot of negativity.
But at the same time, the plateau of growth comeback is very good. You look at, for example, employment side, it's a 24-year low. You look
at, for example, the bankruptcies is at a 25-year low. All the grounds are set for capital expenditure to come back, but we haven't seen that yet.
That's one of the reasons why we're seeing this negativity.
LAKE: What's holding it back? Because you've just pointed out some successes I heard earlier in the day when we were talking about this.
Also, not everything has been a failure. Were expectations too high?
TAKESHITA: Too early, I'd say. And also I think there is also a cautiousness amongst a lot of Japanese exporters, who aren't really willing
to spend their $225 trillion worth of cash at all. And the reason is that they're being excessively conservative looking at the external factors.
There still is a lot of questions, especially in emerging nations. So, they're culling back a little bit.
But they should know that they're at the corner of basically replacement and demand in Japan. So, I think what we will be seeing is
capital expenditure kicking back probably in the next six months or so.
LAKE: It's interesting, we talk about the fallout of psychology from the global financial crisis, when you had two decades of stagnation, you
can understand, perhaps, why people are cautious and afraid to do some of the risk-taking that might be necessary.
Those structural reforms, the third arrow of Abenomics, we have talked about it often. It was always understood that would be the hardest to push
through. If he wins this snap election, which he's expected to, with a convincing majority, can -- will he have the political capital to start to
really push through some of those reforms? What does the market want to see?
TAKESHITA: Well, I think the market is asking for a quick fix, to be honest with you, and I think Bank of Japan is trying to reflate the economy
to create the wealth factor. And the government as well. They're trying to induce a lot of changes in corporate governance, which is skewed,
definitely, to attract the foreign investors.
So, both of them are trying to alleviate the market. But of course, we know that is that a real long-term solution structural reform? No, not
necessarily. It helps. It's a good help. But they really have to start tackling these things under the water quite quickly, I think.
LAKE: Public debt. He's going to, it looks like, postpone the sales tax, but not cancel it altogether. When does their debt level become a
problem? We have this massive debate about austerity versus stimulating economies everywhere in the world. When does debt become a problem for
Japan? Do they have the room to maneuver?
TAKESHITA: Well, right now, 94 percent of debts are consumed within, so we're not like Southern European nations. The problem isn't around the
corner. That said, of course, 200 percent of GDP, and also, if you look at our demographics, well, certainly things are pretty dire in that sense.
Now, we have to be seen to putting some discipline into the system. But this is a situation we're going to have to put the accelerator and
brake at the same time, that's Japan.
Because, well, the argument is that they want to basically reflate the economy, and therefore, the taxation side, reflourishing back again.
That's the argumentation. But unfortunately, as we can all see from yesterday's figure, well, that's not really happening at this point.
LAKE: It's not. But there are big challenges that they have tackle, so perhaps a little patience is needed. Seijiro Takeshita --
TAKESHITA: That's true.
LAKE: -- so great to see you in New York from Mizuho.
Well, the Dow and the S&P 500 hit all-time records. Alison Kosik joins us live from the New York Stock Exchange. Alison, every morning when
we start out, it looks like it might not happen, and then somehow, we get over that hurdle. What's driving this market?
ALISON KOSIK, CNN BUSINESS CORRESPONDENT: And it does, another day, another record, Maggie. This makes it the 43rd record high of the year for
the S&P 500, the 26th for the Dow. What ruled the day? Decent reports out of Europe. That is what really helped to drive stocks hire.
A German investor confidence report, that showed the biggest increase in 11 months. European auto sales, those rose again, so we saw that
enthusiasm spilling over into the US markets.
Even here we got some decent data. Home builder confidence and expectations for future sales all up. So today, it was all about good
news, and that's what drove the markets higher. Maggie?
LAKE: We'll see if it can keep on going. Certainly good for those balance sheets --
KOSIK: I agree.
LAKE: -- that's for sure. Alison, thanks so much.
Well, remember these? Nokia is best remembered for devices like this: the cheap, ubiquitous phones from the late 90s and early 2000s. Since
then, the company has gone on a long downward slide. But after ditching the handset, Nokia is making a comeback in a big way.
(COMMERCIAL BREAK)
LAKE: Nokia is back. The Finnish company was once the king of mobile phones. But now, after selling its phone business to Microsoft, Nokia is
barred from making phones with its own name on phones.
It is not barred, however, from producing tablets, and that is just what it has done. This is the Nokia N1 tablet. It marks Nokia's return to
the device market. It will go on sale in China early next year for around $250 US.
Now, this isn't a Microsoft product. You could be forgiven for the -- being confused, though. I know I was. Microsoft has dropped the Nokia
name from some its products, but it still sells its own Nokia-branded tablet.
Now, Nokia is making a big deal out of the home screen it's developed, the so-called Z Launcher. The company says it learns about the user and it
makes starting apps easier. Underneath, though, the Tablet runs Google's Android operating system.
And actually, this isn't really a Nokia tablet. The Chinese company Foxconn in charge of building it, selling it, and even servicing it.
Foxconn is best known as the manufacturer for another tech giant, Apple.
Well, the former CEO of BlackBerry is now focusing on smart ways to charge all these mobile devices. Thorsten Heins has been named chairman
and CEO of Powermat. It is the company that produces wireless charging devices. Heins is tasked with getting Powermat's technology into more
devices and businesses in the face of some pretty stiff competition.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: Powermat at Starbucks is the easy way to charge your phone. Just get a Powermat ring, plug it in, and start recharging
wirelessly. Now you'll always have all the power you need. Well, maybe not all the power.
(END VIDEO CLIP)
LAKE: Thorsten Heins joins me now in the C Suite. Lovely to see you. So, tell us about this new venture. We all seem to have this problem that
we have more and more devices, and they're more fantastic, but we're all still running around looking for someplace to charge them and running out
of juice. What are you going to try to do at Powermat?
THORSTEN HEINS, CHAIRMAN AND CEO, POWERMAT: I think you're nailing it perfectly. I was in the airport this morning, people looking for power
outlets. So, we have freed the communication. We can all talk when we want. But we still need to find power outlets and cords when we want to
charge them, right?
So, in order to keep everyone charged, to keep everyone in a position to use their devices, smartphones, tablets, whatever, at any given point in
time, we want them to be charged everywhere. Airports, coffee shops, cars. And that's what we're going to do. Really take the cord off of the charger
and allow people to charge their devices wirelessly.
LAKE: Where are we with the technology behind this? The advances are so rapid with the devices, but it does seem a little old-fashioned still --
and a lot of people think about charging as really a commodity, if you think about batteries -- and the part that is the boring part, the part we
want cheaper, the part where there's not a lot of innovation. Where are we? Are we behind on that?
HEINS: I think we're still in the engine room of the cruise ship of charging. But what we will be doing at Powermat is we will really put
these charging spots in various locations, then connect them to a network, so we actually build a charging network. And then on that network, you can
put services and a user community.
So, we believe that charging's not just the bare bones charging anymore, it's actually going to be a service that people will love to use
and will enrich their daily lives beyond staying charged and powered up.
LAKE: All right. So, we're just at the beginning of this --
(CROSSTALK)
HEINS: Yes, absolutely.
LAKE: -- if what you say is true, or what you hope to be true. You obviously coming off of being the CEO of BlackBerry, this is a very
different challenge, isn't it? And where do you see BlackBerry now in the marketplace?
HEINS: When I took over at BlackBerry, we had quite a huge program ahead of us and very, very turbulent times. So we had to get finances
straight, we had to get the strategies straight to go to market. And I think we laid the ground work in those two years and various platforms.
You heard about BlackBerry 10, the new best that they just launched, the BBM cross-platform.
So, I think John Chen and the team are executing based on those platforms, and thumbs up and I wish them all the best to succeed and
finally really getting to the turnaround point and then making BlackBerry grow again.
LAKE: When we're talking about wireless -- and you must have to think about this, if you're trying to own the charging part of it -- where are we
with devices? It seems like a lot of people feel like maybe phones have plateaued and it's a kind of a race to the bottom to see who can make them
cheaper, and that's ultimately going to be who wins.
And that devices maybe moving elsewhere, that they're going to get a lot smarter. Maybe it's going to move to wearables. Where do you see the
future of mobile?
HEINS: I still reckon what I said one or two years ago is I don't talk about devices and their concern, I really talk about mobile computing.
And this is what we have enabled in the past years, given the technology and processing power on all these devices.
Think about internet of things. Think about the internet of everything. Think about wearables, think about health care. There's so
many things that we can enhance and get to higher levels of productivity, efficiency, and benefit for the user that mobile computing will enable.
This industry is just starting to begin on a whole new innovation curve.
LAKE: And when you're talking about services, what does that mean, if you're talking about charging? I can't even begin to imagine what I would
need in terms of services from trying to charge up my device.
HEINS: Yes. Think about you're at an airport, right? You put your device to charge. You get a message from the airport authority saying hey,
we know you always love to buy this and that, Lindt chocolate, or whatever it is. Here's a special deal for you, you get a coupon, buy two, get one
for free.
So, there's a whole economy around this charging because you have minutes and eye minutes on that device while you charge.
LAKE: Ah!
HEINS: And we can use that --
(CROSSTALK)
LAKE: The eyeballs, you're talking about back to eyeballs.
HEINS: The eyeballs, that's exactly what it is.
LAKE: Does that put you at odds with people that you might be wanting to partner with if you start to move into services? How is that going to
work?
HEINS: No, we see this as a very strong partnership. We enable their business model, we enable them to actually create higher revenues, to
create even more customer tendency and stickiness, and we want to be their strong partner, but not in any way compete with them.
LAKE: And you've got --
(CROSSTALK)
HEINS: We're an enabler.
LAKE: -- a captive audience while we're all having to charge those devices, I guess you could say.
HEINS: Exactly, that's what it is.
LAKE: Well, we wish you the best of luck at this new venture, and do come back and bring us right up to date on what we can expect.
HEINS: Happy to do that. Thank you very much.
LAKE: Thank you, Thorsten, great to see you. Well, we will be back with QUEST MEANS BUSINESS in just a moment. Stay with us.
(COMMERCIAL BREAK)
LAKE: He has only been in the job about three weeks, yet Jean-Claude Juncker, the European Commission president, may face a vote next week on
whether to sack him. The issue that's riling some European Parliament members is tax.
They are pushing for an inquiry into allegations that Luxembourg helped hundreds of multinational companies avoid billions in taxes.
Juncker was Luxembourg's prime minister in the years when it is alleged to have happened.
However, Juncker is supported by the largest political bloc in the parliament, and it will back him in any vote. His supporters say a motion
of censure would weaken the European Commission and the whole EU.
The EU's new competition commissioner says she doesn't want this debate to get in the way of a big tax investigation. Global companies like
Apple and Starbucks are under scrutiny. In an international television exclusive, the commissioner spoke to CNN's Nina Dos Santos, who asked her
if she was prepared to investigate her own boss, Jean-Claude Juncker.
(BEGIN VIDEOTAPE)
MARGRETHE VESTAGER, EU COMPETITION COMMISSIONER: I think that is completely premature. And what I find very, very important is to make sure
that this will not be a debate about one person or another, but be not only a debate, but also an investigation into concrete practices in order to
make sure that they are changed if there is a competition issue.
Because it's not fair if one company can get one tax ruling, which has some benefit, and another company cannot have it.
NINA DOS SANTOS, CNN INTERNATIONAL CORRESPONDENT: This is a big case that's fallen under your brief as competition commissioner last year,
because it's not just companies, it's countries that seem to have engaged in deals with these companies, like Ireland, the Netherlands, Luxembourg,
to attract foreign direct investment with luxurious tax regimes.
Now, let me ask you this: if countries like Ireland don't have significant manufacturing bases, they don't have an awful lot more they can
offer, how are they going to get firms like Facebook to employ their staff and set up shop there if they can't offer them some kind of sweetheart
deal?
VESTAGER: Well, I think that we have, as Europeans, accepted that there is tax competition by the front door. Because the level of corporate
taxation differs from one country to another. We have lived with that, and I think we probably are going to live with that because it's very, very
hard to change.
But what we're talking about here is tax competition by the back door. Because countries -- companies may not be treated in the same way. And
that's unfair competition. So, here we have two debates. We have a debate about fair competition or not, and we have a more general debate about
taxation as such. And I think that we can have both, and both are equally relevant.
DOS SANTOS: What do you think the outcome of those debates is likely to be? Because if you take a look at the statement that some of these 340
companies have put out to defend themselves, they say, look, we operated within the parameters of the local laws in those EU countries. Do those
laws need to be changed according to you?
VESTAGER: Well, I do hope that we can pass legislation at the European level, which would also make it easier for every business to get
organized in a proper way. For instance, to pass the legislation about common consolidated corporate tax base. Because then it will be much
easier for the average company to know what taxes to pay.
And I do hope that we can pass legislation to secure automatic exchange of tax rulings so that the rulings of one country will be
available for maybe the home country of the mother company in order to make a much greater degree of transparency.
(ENC VIDEOTAPE)
LAKE: European stocks ended higher after German investor confidence rebounded. Easy Jet, though, missed out on the rally. Its shares fell
despite strong annual earnings. The company said it had no plans for a special dividend this year. Easy Jet CEO Carolyn McCall tells CNN the
airline is far ahead of the competition for business travelers.
(BEGIN VIDEO CLIP)
CAROLYN MCCALL, CEO, EASY JET: We have the number one network in Europe, and I think as a result of that, we built are frequency, we do
London to Amsterdam 27 flights a day, London-Barcelona 24 flights a day. London-Scotland, we fly 60 flights a day. Paris-Milan 14 flights a day.
Paris-Toulouse 12 flights a day.
So, you can see, we're doing very frequent flights to a lot of the business destinations of Europe. That has really helped. And then
thirdly, I think the fact that we make it easy for our business travelers to get through the airport as quickly, as speedily as possible is very,
very important to them.
And that's why we add things like fast track security, allocated seating that they can choose to buy. Everything is about making it as easy
as possible for them to get from one airport to another.
(END VIDEO CLIP)
LAKE: While Easy Jet shares were down, Virgin America's shares were moving higher, not a bad day. They finished sharply higher, in fact, in
New York.
Though another company bearing the same brand, Virgin Money, may receive a less upbeat reception from investors. Its shares drifted lower
as they started trading today on the London Stock Exchange. As CNN's Jim Boulden reports, the Virgin-branded bank found its footing in the economic
crisis.
(BEGIN VIDEOTAPE)
JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT (voice-over): It's dubbed "a challenger bank." A minnow going up against the big four British
banks. But this smaller bank has a twist: the Virgin name.
Virgin Money has gone public on the London Stock Exchange, giving investors a chance to tap into the Virgin brand, as some just did with
airline Virgin America.
JASPER LAWLER, MARKET ANALYST, CMC MARKETS: Virgin Money, I think, is a play on the UK economic recovery. Just like any banking stock would be,
if the economy's expanding, there's going to be a greater demand for credit, and so bank stocks typically should do well in that acceleration
phase of the economy.
BOULDEN: In its prospectus, Virgin Money states it has just under $3 million customers. The bank is focusing primarily on savings accounts,
mortgage, and credit cards with just 75 branches around the country. In other words, boring banking.
There is yet another twist. In 2011, Virgin Money bought from the UK government the remnants of the collapsed bank Northern Rock, which saw
savers line up outside branches back in 2007. The first run on a British bank in decades. And a scene that was the precursor to the economic
crisis. The British government had to take it over.
BOULDEN (on camera): Now that Virgin Money has gone public, it's paying back the UK Treasury more than $77 million out of the proceeds,
taking the total amount it's paid back to the UK Treasury to more than $1.5 billion.
BOULDEN (voice-over): As with other parts of the Virgin empire, Virgin Money relies on its brand name and founder. The group warns
potential investors that any reputational damage to the Virgin name could make it hard to gain or keep customers at the bank.
Virgin did take a major hit when the Virgin Galactic rocket broke up and crashed during a test flight in late October.
LAWLER: There is certainly a psychological element in there. Virgin as a brand do have a good history of really ramping up the marketing and
the advertising aspect of things. And if you actually look at the bare bones of what we're looking at with Virgin Money, it's not far off being
Northern Rock. That was where they picked up all their branches.
BOULDEN: But with the big four British banks shrinking to meet tighter regulations, the challenger banks, like Virgin Money, are seen as
the only part of the banking industry that has any hope for expansion.
Jim Boulden, CNN, London.
(END VIDEOTAPE)
LAKE: From a house of worship to a house of horror. Israel's prime minister calls for unity after a deadly attack at a synagogue in Jerusalem.
We'll take you there live.
(COMMERCIAL BREAK)
LAKE: Welcome back, I'm Maggie Lake. This is CNN, and on this network, the news always comes first.
Israel's prime minister, Benjamin Netanyahu says Jerusalem is facing a terror onslaught. Four Israelis were killed and several injured as two men
armed with a gun and butcher knives attacked them in a synagogue. The suspects were shot dead by Israeli police.
Japan's prime minister has called an election for next month a day after his country unexpectedly fell back into recession. Shinzo Abe also
said he was delaying a planned increase in the sales tax. After the last tax hike earlier this year, consumer spending dipped sharply, and Japan is
now in recession.
The US Senate will in a few hours vote on whether to let the controversial Keystone XL pipeline be built. It would allow crude oil from
Canada to be pumped to refineries on the US Gulf Coast. However, even if Congress votes to permit the pipeline, the White House is expected to veto
it.
Diplomats from around the world have arrived in Vienna for a final round of nuclear talks with Iran. British officials say a deal can be
reached if the Iranians show more flexibility. The Iranian foreign minister said excessive demands by the West could torpedo the chances of an
agreement.
Ukraine prime minister is calling for fresh talks with Russia to try to end the violence in the East of Ukraine. While fighting goes on, Dutch
investigators are at work in the region collecting pieces of the downed Malaysia Airline flight 17. As Phil Black reports from the crash site,
there is now extra pressure on the search team to beat the coming winter.
(BEGIN VIDEOCLIP)
PHIL BLACK, MOSCOW-BASED NEWS CORRESPONDENT FOR CNN INTERNATIONAL: Four months after MH 17 struck the earth here in Eastern Ukraine it is
being raised again piece by piece. This is part of the operation, and you see it's not a delicate one to collect the scattered debris of the aircraft
- the Boeing 777 from across this landscape loaded onto flatbed trucks. And it will eventually find its way back to the Netherlands to be
reassembled to some degree as part of the investigation to try and find out precisely what brought this aircraft down. This is taking place under the
supervision of Dutch investigators, but the work is being carried out by local Ukrainian emergency services men who now work for the separatist
government that has been established here in the Donetsk region. And should also point out it is taking place under the supervision of some of
the armed pro-Russian gunmen as well.
Four months to collect it, could be many more weeks before experts actually begin examining it very closely trying to piece it together. It
is in terms of an aircraft (inaudible) investigation, an eternity really, but it is important that it is happening now because in this region, well
winter is almost here. Snow has already begun to fall. Very soon it will blanket this landscape. It would push back such a recovery operation by
many months more. This has not been the priority up until now - the physical wreckage.
Before now, it has been about the victims - their remains, their personal effects. Up until now though, however, nine of the victims - nine
of the 298 people who were aboard that aircraft, their remains are yet to be accounted for. As they've been moving this wreckage in recent days and
weeks, they have found more, raising hopes for the loved ones, the families of those nine, that they could indeed be accounted for an identified
perhaps in the near future. The removal of this wreckage marks the closing of a chapter.
The scenes witnessed here in this remote corner of Ukraine in the days after the accident, horrified the world. But international focus from
these fields will move on while the conflict - widely accepted to be the cause of this accident -- continues only a short distance away. Phil
Black, CNN in Clabava, (ph) Eastern Ukraine.
(END VIDEOCLIP)
LAKE: We want to get more information on that major story we are following out of Jerusalem. Israeli Prime Minister Benjamin Netanyahu
blames the Palestinian Authority among others for inciting hatred against the Jewish state and its people. His comments come after two Palestinian
men stormed a synagogue and killed four people in Jerusalem. Mr. Netanyahu outlined his immediate response to the attacks.
(BEGIN VIDEOCLIP)
BENJAMIN NETANYAHU, ISRAELI PRIME MINISTER, VIA INTERPRETER: We will uphold law and order and security in all the streets of Jerusalem. I
decided this evening to demolish the homes of the terrorist who committed this massacre and to accelerate the demolishment of the homes of previous
terrorists and to enforce law, to make punishment more severe and to outlaw all sorts of organizations and I also gave the orders to increase security
in Jerusalem.
(END VIDEOCLIP)
LAKE: In Gaza, some Palestinians are celebrating the massacre, not condemning it. "The Jerusalem Post" reports that Palestinians even handed
out candy and brandished axes in praises of the men who carried out the attack. But the tone from the Palestinian President Mahmoud Abbas was very
different.
(BEGIN VIDEOCLIP)
MAHMOUD ABBAS, PALESTINIAN PRESIDENT, VIA INTERPRETER: We strongly condemn this incident and do not accept under any circumstances attacks on
civilians. At the same time we condemn these actions, we also condemn the attacks on the Al Aqsa Mosque Holy Place.
(END VIDEOCLIP)
LAKE: Our senior international correspondent Ben Wedeman is in Jerusalem and joins us live. Ben, as we learn more about these attacks,
we've heard now from both sides, and this seems to be a situation that has all the hallmarks of escalating.
BEN WEDEMAN, CNN'S SENIOR INTERNATIONAL CORRESPONDENT BASED IN ROME, ITALY: It certainly does and we're - just a little while ago in the street
below me, we were seeing a crowd of as many as 200 Israelis, mostly young men, chanting death to the Arabs, and as you mentioned, there were those
celebrations in Gaza and all the other parts of the West Bank by Palestinians in the aftermath of the attacks. Now the Israeli prime
minister of course is saying that Israel is going to demolish the homes of the two Palestinians attackers from East Jerusalem and the homes of others
who were involved in recent attacks on Israelis. Israeli officials say that they're hoping this tactic of home demolition which actually dates back to
the time of the British Mandate, will deter other potential attackers. But certainly the worry is that simply the passions on this street on both
sides of the situation escalates are going to get out of control with results that nobody can predict. Maggie.
LAKE: Ben, when you've reported for us before, the conditions of the conflict had been different. The home demolitions aside, how difficult
will it be for Israel now that this seems to be these small groups? Some people are calling them lone wolf, other people, you know, objecting to
that - blaming others for inciting the violence. But how hard is it to predict these kind of events to protect against this type of event?
WEDEMAN: It's very difficult geographically, first of all, Maggie. Keep in mind that East Jerusalem is open to West Jerusalem, and in fact,
the rest of Israel. They are resident of Jabel Mukaber where these attackers came from, can easily travel to the far north and the far south
of Israel. And therefore they have freedom of movement and at the same time, if these are lone wolves, the problem is that the Israeli
intelligence which is quite extensive, they have been very successful at infiltrating some of these groups, working through collaborators and
informers, but when it is individuals or, say, close cousins in this case, working together, planning for an attack, there's much less intelligence
that can be gathered to either prevent an attack or to arrest attackers before one takes place. So it's much, much more complicated than for
instance going after Hamas in Gaza. These are people who live in very much many of them work on the Israeli side of the line in Jerusalem, work within
Israel proper. Maggie.
LAKE: Which makes it a terrifying new chapter. Ben Wedeman with the very latest from Jerusalem tonight. Thank you, Ben. And we will be back
with more "Quest Means Business" in just a moment.
(COMMERCIAL BREAK)
LAKE: The CEO of Uber, the on-demand taxi service is reacting strongly to comments from one of its own executives. Travis Kalanick
didn't mince any words when he tweeted about recent remarks from Uber's Emil Michael. Kalanick said, "Emil's comments at the recent dinner party
were terrible and do not represent the company. His remark showed a lack of leadership, a lack of humanity and a departure from our values and
ideals." So what did Emil say? Apparently it was that he'd like to give the media a taste of its own medicine. According to someone present at
Friday's dinner party, he said how he was tempted to dig up dirt on journalists. The point would be supposedly to try to stifle media
criticism of the company. Uber has been cited for heavy-handed tactics against its competitors. The company later released a statement saying
Michael's remarks were wrong. CNNMoney's Laurie Segall joins me now. And, Laurie, you have had your share of interaction with Uber. What is going
on? What were they thinking? I mean, this sounds -
LAURIE SEGALL, TECHNOLOGY CORRESPONDENT FOR CNNMONEY: I think the word we're looking at is the tone deaf, right? First of all this is an -
what he thought was -- an off-the-record dinner, but with a lot of journalists. They spoke specifically about targeting one female journalist
and digging up dirt on her personal life. This is in light of all the sexism in tech talk that we keep coming on him, and I've covered Uber for
ages. And I know for a fact another journalist who has covered Uber. I can tell you they have aggressive tactics in general with their
competition, but also with handling the media sometime. And you get the idea in this scenario that they were just a little bit tone deaf and
they're going to have to backtrack.
LAKE: It also seems bizarre that they take it so personally. They definitely -
SEGALL: Oh, yes.
LAKE: -- some conspiracy - or this one person does anyway. I mean asks questions - that we do - that's our job. And they seem to take it
incredibly personally.
SEGALL: What he was said was - he went back and said that he was talking about the sensationalistic media coverage. But guess what? When
you're an $18 billion company, people are going to ask you hard questions. That's our job.
LAKE: Right.
SEGALL: And, you know, what happens is I cover a lot of these early entrepreneurs who make it big. And they all of a sudden in five years
going from zero to an $18 billion company, sometimes they're not as prepped as you would think to handle a lot of the criticism that comes with having
a multi-billion dollar company. And you begin to see it and this immaturity that oftentimes can come out in situations like this.
LAKE: Absolutely. There are growing pains -
SEGALL: Sure.
LAKE: -- (inaudible), although in the light of, as you said, Gamergate and everything that's going on, --
SEGALL: Absolutely.
LAKE: -- it's amazing that choosing to go after a journalist like that was something that even came up. In terms of the reputation of the
Valley, this is not the first incident for Uber - is this going to hurt them? I mean listen, let's be fair, money talks. That's what matters in
this company has been unusually so far, they have a mass evaluation.
SEGALL: Sure..
LAKE: Will this kind of - and especially since it's extreme - will this hurt their reputation?
SEGALL: You know, a lot of folks in the Valley are talking about Uber - good and bad. I spoke to PayPal co-founder Peter Thiel, and I should
mention that he is an investor in Lyft which is Uber's competition.
LAKE: Right.
SEGALL: But he was very vocal on his thoughts on Uber. Listen to this.
(BEGIN VIDEOCLIP)
PETER THIEL, VENTURE CAPITALIST: I am on record as saying that Uber's the most ethically-challenged company in Silicon Valley, and -
SEGALL: Why do you say that?
THIEL: Well, because I do think - you know, I do think - there's are sort of all sorts of ways that they really pushed the envelope on what
they've done with Lyft competitively in all these different contexts. And it's only the question how far you can push the envelope in business. And
sometimes the people who break the rules win and sometimes they push it too far. I think Uber's right on the cusp of going simply too far on many of
these things. Most companies in tech - you know - it takes some risks, you push the envelope a little bit, but Uber's been in a class of its own.
(END VIDEOCLIP)
SEGALL: You know, and when I actually off the phone with an entrepreneur in the Valley and they say - people want Uber to succeed.
This is a darling of the Valley and multi-billion dollar company that has just skyrocketed. But the thing, it's getting harder. We're seeing more
instances of sexism and the aggressive tactics that if they're going to grow up and mature as a company, they've got to start acting like it.
That's exactly what one entrepreneur just said to me - right when I got off the phone here. So -
LAKE: And when - and when you have a disrupter and you're disrupting traditional industries, you're going to have scrutiny on you -
SEGALL: Absolutely.
LAKE: -- so perhaps this an opportune time for them to step back and really flush out their staff and maybe do some of that due diligence in
terms of really checking their ethics at this point. All right, Laurie, great to see you. Thank you so much. Good story to watch. Well, there
are moves toward making traditional bank branches obsolete -- speaking of disruption. In today's "Future Finance," Samuel Burke shows how app-based
payment services are making it easier to ditch your wallet and your local bank.
SAMUEL BURKE, CNNI BUSINESS CORRESPONDENT: New York City. This global financial hub is one of the easiest places in the world to do your banking
with branches seemingly on every street. The future, however, may look very different.
JOSHUA REICH, CEO AND CO- FOUNDER: We're much more like a technology company that's providing banking services.
BURKE: Josh Reich is a tech disrupter who calls the traditional banking business model outdated. He hopes to build a sprawling financial
empire far above the city streets way up in the cloud. His app, called Simple offers banking services without a physical bank. Reich says because
of low overhead, he can serve customers better.
REICH: We don't profit from overdraft fees, we don't profit from penalty fees, so we don't have them. And the reason why we can do that is
we won't invest in this really expensive real estate in Lower Manhattan.
BURKE: He hopes to revolutionize banking the way Netflix transformed video rentals. Simple consists mainly of an app and a piece of plastic. So
the debit card that you have that's connected to your Simple account is actually a Simple credit card.
REICH: Simple Visa card.
BURKE: Consumers use the card to make purchases in stores and get instant notifications of those purchases on their mobile phones. We see it
popped up there.
REICH: And it's included a tip calculation for me because it knows that I usually tip when I'm buying food.
BURKE: That'll be good news for him.
REICH: Yes.
BURKE: In lieu of bank branches, Simple's debit card allows customers to withdraw money at ATMs. Other transactions like transfers and check
deposits are done online. Simple faces competition from other mobile banking apps like Green Dot's GoBank and Moven. And like all tech
companies, glitches are part of the start-up experience.
JELENA EWART, NERDWALLET: It's no secret that Simple has had a big technical glitch in August when they issued an update, several thousand of
consumers didn't have access to their real-time banking information for a while. And that's kind of the price of going with a new, experimental
product and provider. So I think that it is wise for folks not to have a mobile bank as their only banking resource.
BURKE: That said, Simple and other up and coming apps do have traditional banking apps on the defensive.
EWART: Banks have had to deal with a lot of really complicated regulation and they cover a lot of stuff, and so sometimes it's really hard
for them to really realize what the essence that the consumer wants to see, and these folks are really just good at nailing those couple of things.
REICH: Simple customers are using the Simple app multiple times a day. What that means is that they're getting connected to their finances
in the same way they connect to their friends via Facebook. We see our customers -- just (inaudible) of us save 5.5 in the national savings rate.
BURKE: And it's not just social media-savvy millennials taking the plunge. You really have a 97-year-old -
REICH: We do (inaudible) -
BURKE: -- and it's not your grandma?
REICH: It's not my grandma.
BURKE: Whether it's millennials or senior citizens, more customers are moving their money online. And a new generation of banking apps is
eager to earn their trust.
(END VIDEOCLIP)
LAKE: Times Square is counting down and it's not even close to New Year's Eve as the middle of Manhattan gets ready to show off its biggest
billboard, we look at the cost of standing out in the advertising crowd.
(COMMERCIAL BREAK)
LAKE: Tonight Times Square's biggest and most expensive billboard will light up for the first time. The famous New York junction of 7th
Avenue and Broadway isn't exactly short on advertising bling, but this is billed as something different. The new digital mega screen is eight
stories tall and it is roughly as long as an American football field, spanning an entire block in the heart of Times Square. It's takes big
bucks to advertise on a billboard that big - about $2 and 1/2 million for four weeks. That is an expensive piece of outdoor ad real estate.
For the first time, it will show an exhibition of digital art. After that, Google takes over as the debut advertiser. Compare that with a full-
page ad in the New York Times -- the cost - just over $100,000. Then again, figure on about $4 million for a 30-second Super Bowl commercial -
you can figure it out. So what are the merits of spending a fortune on giant billboards like this in New York? Let's ask Peter Shankman, co-
founder of the Shankman Honig PR Company, and he joins me here in New York. Peter, I saw it - a billboard. Are we still looking at billboards? Is
this still relevant?
PETER SHANKMAN, CO-FOUNDER, SHANKMAN/HONIG PR: In Times Square it is because think about who you're focusing on. You're focusing on tourists
here. Tourists walk around Times Square looking like this. Real New Yorkers, people who go to work every day walk around looking like this, you
know, with (inaudible) out to push you out of your way. Right, so this really a tourist play and it's smart to launch it when they're doing it,
because December is a very, very high season for tourists in Times Square and New York City as a whole, and it's big enough that you sort of can't
avoid it.
LAKE: Right. So this is a sort of special piece of real estate -
SHANKMAN: Exactly.
LAKE: -- in terms of billboard. But we've talked so much about things changing in digital, and we have, you know, adverts coming at us in
all different ways and it seems to be trying to get more personal and more location- -
SHANKMAN: Yes.
LAKE: -- based, so are there going to be different types of people that would sort of choose to advertise on that venue?
SHANKMAN: It's similar to how Beyonce dropped her album on iTunes with no promotion. No one can ever do that again.
(LAUGHTER)
SHANKMAN: OK, it's exactly the same thing with this. You have an ad - a billboard that's so large and so huge that people are going to go to
see the ad just so they say they saw the billboard. You can't repeat this. You're not going to find something like this in Union Square or something
like this in the Bronx. We are moving towards a very personalized age, especially where everyone is in the network, and everyone understands
everyone else's reviews in real time. Hey, I'm at this restaurant, it's good/it's bad. So, something like this you're not going to see it
repeated, but it's a brilliant idea. That area has been subject to - for years - to very, very large ads, but nothing that's taken over the entire
block. And so people will look at it to see the same way they look at - they stand outside of Google's offices so they can point to the sign and
have their photo.
LAKE: Right, like I said the selfie moment -
SHANKMAN: Exactly.
LAKE: -- seems completely apparent. Do people have to be smart about the way they use this? I mean, you've got this amazing piece -
SHANKMAN: Yes.
LAKE: -- of real estate. You could get it so wrong.
SHANKMAN: Exactly, and --
LAKE: I mean, I'm assuming this is a chance to -
SHANKMAN: -- that's what I'm waiting for. I'm waiting for the first brand screw up. You know. But, again, it's a digital ad so it doesn't
have to stay there for long. You know, this has been - and unlike a Twitter ad that can go around the world in five seconds, there's a little
more stability here in that you see it, it's public, it's outdoors, it's not something that can go on and be taken off -- $2.5 million, a lot of
planning goes into that as opposed to 140-character tweet. So I'm not really worried about people screwing up that much, but it's going to be
interesting to see after Google, who ponies up that kind of cash.
LAKE: Yes, would you expect the traditional? Because I'm thinking car companies have got to have their eye on this or does it have to be a
hipper brand? I mean, you got to have a lot of cash, that's for sure.
SHANKMAN: Nike makes a lot of sense because they do have, they have a flagship right near Times Square. That makes a lot of sense. I don't see
airlines doing it, I don't see smaller companies. It's really brands that connect to a consumer on a daily basis. So, look, it's footwear companies,
look, it's fashion brands, things of that nature. Ii think that also as your - as the ad continues to get bigger and the ad's space continues to
get smaller, 2.7 seconds is all you really have to reach a consumer today with a new ad. So it's - we're going to see bigger ones - maybe not here,
maybe in London. Maybe in Chicago, but you're not going to do another one in New York like this.
LAKE: It's morphing. We'll have to get a box of popcorn and go give -
(CROSS TALK)
SHANKMAN: -- down and watch, exactly.
LAKE: But thank you so much for coming in.
SHANKMAN: My pleasure.
LAKE: We've got to leave it there. We do have some breaking news we want to bring our viewers up to d ate on. The fifth victim in the attack
on the synagogue has died in Jerusalem. The hospital tells CNN that the police officer who was critically wounded this morning has died of his
wounds. Of course we'll continue to bring the very latest on that developing story. Right now though this is "Quest Means Business." We
will be back. We going to break now? I think we are. Nope, OK let's continue on.
Let's focus on robots now. It's something that's growing smaller and cheaper. What used to be the stuff of sci-fi is now a common site on
factory floors. We've been finding out how machines are transforming the workplace in our series, "The Robot Revolution."
(BEGIN VIDEOCLIP)
Male: Electro, behave yourself.
Robot: Quiet please.
LAKE: They have fascinated us for decades, entertained us, and even terrified us. Today robots are increasingly stepping out of the realm of
fiction and making new inroads in the workplace driven by faster, cheaper and more sophisticating computing.
And this expressive robot is helping lead the charge. This is the new face of manufacturing. Meet Baxter. Now, automation is nothing new on
factory floors, but Baxter is built to be working side-by-side with humans. Baxter, developed by Boston-based Rethink Robotics doesn't eat, sleep or
talk back to the boss as he performs his repetitive tasks. But Baxter does in his own way communicate -- alert and serene when working hard and
worried when anticipating manufacturing problems.
RODNEY BROOKS, FOUNDER, RETHINK ROBOTICS: This is a way for people to be more productive because they don't have to do those really repetitive
things, and any person is much more dexterous than any robot. So we can have people doing the dexterous stuff, but multiply the workforce by having
robots in there with the people.
LAKE: Baxter, based in Boston made its debut recently in 2012. But further south in Pittsburgh, robots had been in the market for years. In a
vast grocery warehouse, robots made by Seegrid chugged calmly through the bustling chaos helping workers restock shelves. And tug robots are used to
transport food, medications and linens to hospitals like the University of Pittsburgh Medical Center. The tug robots may not look that sophisticated,
but an array of ultrasound infrared and lasers mean it can navigate the hospital on its own, making its way up and down hallways and into
elevators. In fact, the tug is filming me right now.
The goal is to complement workers, not replace them.
TRISH GEORGE, UNIVERSITY OF PITTSBURGH MEDICAL CENTER: They can't touch a patient, they can't help a patient. They have no human touch.
They're just merely there to do the non-value added stuff. That's why I'm here.
LAKE: But many fear trouble to come. A recent study by Oxford University says nearly 50 percent of current U.S. jobs are in danger from
automation.
BEN WAY, AUTHOR, "JOBOCALYPSE": We live in a capitalist society which basically says that the more efficient you can do something, the more money
you can make from it. And these companies are basically making money from replacing human jobs.
Male: It has a full suspension -
LAKE: That view is not shared by all. Robotics pioneers like Carnegie Mellon's Red Whittaker see only benefits from automation. There
is a concern that robots are going to take people's jobs.
RED WHITTAKER, CARNEGIE MELLON ROBOTICS INSTITUTE: The robots in my own experience have created great wealth, created many jobs and to my
knowledge, haven't taken any.
LAKE: Ah, like not so smooth -
Male: Yes.
LAKE: You need it to go up and over - that's it, I was trying to (inaudible).
Male: There you go.
LAKE: My close encounter with Baxter showed that humans and robots can get along famously for now.
Male: Beautiful.
LAKE: But for some, the rise of the robots could lead to a sea of change in society that we haven't even begun to anticipate.
(END VIDEOCLIP)
LAKE: And we will be back with a look at another record-breaking day on Wall Street next.
(COMMERCIAL BREAK)
LAKE: Want to remind you of breaking new in to CNN. A fifth victim has died in the attack on a synagogue in Jerusalem. The hospital tells CNN
that the police officer who was critically wounded this morning has died of his wounds. We will have much more on the story in the hours ahead. For
now, I'm Maggie Lake in New York. Thanks for watching.
END
