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Quest Means Business
Spain's Football League Moves to Stop Strike; European Markets Mostly Down; Greece Begins IMF Payment Due Tuesday; Greece's Looming Cash Crunch; US Markets Close Lower; Government, Business Warn on US Infrastructure; Make, Create, Innovate: Self-Healing Concrete
Aired May 11, 2015 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[15:59:58] (NEW YORK STOCK EXCHANGE CLOSING BELL)
RICHARD QUEST, HOST: Off the lows of the day, but the Dow is still down most -- almost half a percentage point. HTP ringing the closing bell.
Time to hit the gavel.
(GAVEL POUNDS)
QUEST: Oh! That's what you call a good, strong gaveler on Monday, the 11th of May.
Tonight, it's a more level playing field literally. A footballer strike in Spain is drawing anger from La Liga.
A lot of talking, not a lot of progress. I'll ask the EU Commission vice president what's gone wrong with the Greece talks.
And a surreal amount of cash. This painting is about to make history. But would you want it on your wall?
I'm Richard Quest. We start a new week together, and I mean business.
Good evening. We begin tonight with Spain's football league vowing to stop a strike that could wreck the final matches of La Liga's season. In a
power struggle over TV rights, the biggest football stars in Spain are up against the league officials.
Now, the players are threatening a strike that, if it takes place, could cost more than 50 million euros a day. Join me at the super screen
and we'll talk more about it and you'll see. This is, of course, a strike that you might wonder what on Earth is it all about?
Well, the dispute is over plans to negotiate media deals collectively instead of club by club. La Liga, that's the league, they want to create a
more level playing field and to do so by pooling TV revenues. The idea is smaller clubs have a chance to take home more money.
The Spanish government supports the changes, and they want to stop the strike. And the Spanish government has put in place a law that would allow
for this collective bargaining, or collective negotiation. The professional league says a strike would be illegal, and they've filed a
suit to stop the strike.
(BEGIN VIDEO CLIP)
(WHISTLE BLOWS)
JAVIER TEBAS, PRESIDENT, SPANISH PROFESSIONAL LEAGUE (through translator): It is an a la carte strike. For this yes, for this no, I
want this. So what does it mean? That it's a strike to hurt La Liga, and those kinds of strikes are forbidden. They're only aiming to hurt the
league and teams who are complaining.
(WHISTLE BLOWS)
(END VIDEO CLIP)
QUEST: Blow the whistle, because you've got the stop strike on the one side, but on the other side is the Football Federation, which is
supporting the strike. It says the changes don't guarantee enough money for the smaller clubs.
Wealthy superstars like Messi and Xavi are supporting a protest by the players' union. The head of the union said they will strike because the
older system is fairer.
(BEGIN VIDEO CLIP)
LUIS RUBIALES, HEAD OF SPANISH FOOTBALL PLAYERS' UNION (through translator): Do you think these football players here today have any need
to get into this situation? They are here because in the FAE captains' meeting, we agreed that whatever change we achieve would be in favor of the
humblest for the sake of the division and equally for them.
(END VIDEO CLIP)
QUEST: Esteve Calzada joins me now from London. He's a former marketing director for FC Barcelona. Good grief! This is complicated as
to who is -- who wants a strike, who doesn't want a strike. And now the whole thing is going into the courts. Let me ask you, what is so wrong
with this new collective bargaining arrangement?
ESTEVE CALZADA, FORMER MARKETING DIRECTOR, FC BARCELONA: It is complicated, but actually, you guys gave a very good explanation of what's
going on. I think no one is questioning the fact that Spanish La Liga needs a centralized system that distributes the money in a more equal way.
It just has to do with the way this money is distributed.
One of the things that the footballers' union is asking for is for more money to go to lower divisions. The way it is now, it's 90 percent
for La Liga clubs and then 10 percent for Segunda Liga clubs. They are trying to get this percentage for Segunda Liga and below that higher.
QUEST: Right.
CALZADA: And that's why they are pushing for these changes, right? But I think it's important to put this in context. This is an historical
moment for Spanish football, and all the parties realize that whatever they have to achieve, it's now or never. That's why everyone is trying to push
to get the right portion.
QUEST: Right, but it's unusual to have the players saying that they are going to strike. And if the players do decide to forward this strike,
what are the implications just two weeks before the end of the season?
[16:04:58] CALZADA: Of course, the implications are huge, and it's a big damage for Spanish football. I want to think that this is going to be
solved. It's happened in the past several times and normally gets solved. It doesn't help, again, the image of Spanish football. But I want to be
optimistic and think that that situation will be resolved. Because at the end of the day, we still hurt the players themselves.
QUEST: Now, I -- I'm aware that, obviously, the players at the top of the game are getting many hundreds of thousands per match and millions a
year. But it's a bit difficult to find too much sympathy for well-paid football players threatening to go on strike, isn't it?
CALZADA: Yes, exactly. And I would guess that some of them showing in that picture don't really know what it's about, and they just basically
follow the instructions that they receive from the union, and they only know that they are trying to help the players with lower income.
But again, I would be very surprised if this strike ends up being a concern. But let's see. Let's see, as of now, as La Liga president has
said, obviously, the strike is (inaudible), and let's see what happens.
QUEST: Sir, thank you for joining us, putting it into context. We'll watch it closely. Thank you.
The European markets mostly ended lower. It was concerns about Greece's debt, which we'll be talking about in just a moment. They were
the troubles which weighed on investors, and this is despite reports saying that Greece is to make a payment to the IMF on Tuesday.
Airbus shares were dropped -- were down 2 percent after that crash in Spain, which has raised questions about the future of the A400M, the
military plane. So, you look down, you've got three markets that were down, one market, Zurich, the SMI, that was up
And of course, in New York, the Dow Jones Industrials, that closed the day -- we'll talk more about the Dow later, but it did close the day down
the best part of just over 80-odd points.
Ministers meeting in Brussels have heard that Greece is paying an $800 million bill to the IMF. We'll talk about that after the break.
(COMMERCIAL BREAK)
QUEST: Greece has begun making an $840 million payment to the IMF, which is due to be paid on Tuesday. It means that Greece will have avoided
default once again. At a meeting in Brussels, eurozone finance ministers praised the debt negotiations but called on Athens to quickly do what's
necessary to reach a deal.
There were reports that some people in Greece's ruling party wanted to withhold the IMF payment, the idea being that they would get a statement
from the ministers in support of Greece, and that would give it more ground, it would give it leverage with the ECB. But the finance minister,
Yanis Varoufakis, said his country has made sacrifices.
(BEGIN VIDEO CLIP)
YANIS VAROUFAKIS, GREEK FINANCE MINISTER: In recent weeks, there has been considerable convergence, primarily due to our government's great
efforts and major concessions during the Brussels group negotiations. Unfortunately, agreement has not been reached as yet.
(END VIDEO CLIP)
QUEST: Now, on his way into today's talks, the German finance minister gave a slightly less rosy view of what had changed after all the
months of talking.
(BEGIN VIDEO CLIP)
[16:10:01] WOLFGANG SCHAEUBLE, GERMAN FINANCE MINISTER (through translator): It's warmer, the weather is better. Unfortunately, when it
comes to Greece, there has been little to no progress made to indicate we will have a decision.
(END VIDEO CLIP)
QUEST: It doesn't get much grimmer than that when you're talking about Greece. Join me at the super screen and we'll put it into context.
In February, February the 20th, that was the date of the agreement, and they agreed in principle to a four-month deal.
There areas of disagreement. There was pension reform, labor market reform, questions of privatizations, and the sales tax. They all had to be
negotiated. But there was supposedly a four-month window during which they would hold those negotiations, and again, the parties have been meeting
right the way March and April.
Well, fast-forward to May the 11th, and the areas of disagreement: pension reform, labor market reform, privatization, and sales tax. We can
go backwards and forwards between the two. And as Mr. Schaeuble has perhaps said, it doesn't seem as if much progress has been made.
The sticking points remain unchanged. According to Mr. Schaeuble, it could make sense for Greece to hold a referendum, but that's been held off
in the past.
Valdis Dombrovskis is the vice president of the European Commission, joins me live from Brussels. Sir, thank you, first of all, sir, for taking
time out to come and join us this evening.
VALDIS DOMBROVSKIS, VICE PRESIDENT, EUROPEAN COMMISSION: Good evening.
QUEST: We do appreciate it. The reality is whatever progress has been made is too little and dangerously too late. Would you agree?
DOMBROVSKIS: Well, certainly as regards negotiations with Greece, we have seen clear progress since the last eurogroup meeting in Riga and
during the last couple of weeks. Certainly negotiations have been going more intensively and more progress has been made than in the previous two
months.
QUEST: Right.
DOMBROVSKIS: But as you rightly said, there is still a lot of ground to be covered, and there is little time. So what we need now to accelerate
the negotiations and engage more intensively to reach a deal as soon as possible.
QUEST: What's the sticking point? To your understanding, sir, what's the difference of opinion when they are sitting in the room between what
the eurogroup is seeking and what the Greek negotiators will offer? We heard, there, a question of pension reform, labor market reform,
privatization, sales tax. What is it?
DOMBROVSKIS: Well, certainly those are issues you mentioned, and actually, there are still more areas which we are discussing, because
primarily, what is important is to ensure a credible fiscal path for Greece, how they're going to reduce their budget deficit, what is going to
be their primary surplus targets.
And the eurogroup is ready to compromise on this, provided that debt sustainability is being ensured. And then there are discussions --
QUEST: Right.
DOMBROVSKIS: -- by which exactly reforms and which exactly measures this is going to be achieved.
QUEST: It always comes down to, though, as Jeroen Dijsselbloem put it, a comprehensive deal is needed before any disbursement can take place.
So, it really comes down to -- and I see you're sort of nodding with this. But it really comes down to this idea which comes first, the chicken or the
egg? Or in this case, which comes first, the disbursement or the agreement? And that hasn't changed.
DOMBROVSKIS: Well, it's quite clear that agreement comes first. And once there is an agreement -- and for this we need a comprehensive list of
reforms from the Greek side, how they're going to ensure fulfillment of program conditionality. Once there is this agreement, there can be a
disbursement.
QUEST: -- very much sir. Thank you very much, sir, for joining us. I appreciate you giving us time from Brussels tonight. Thank you very
much.
Now, Clare Sebastian takes a look at the Greek cash crisis, bearing in mind money has now been found, originally for the last IMF payment, and now
for this IMF payment, but there's many more payments to come, including a rolling over of a huge amount of T bills. So, Clare, now, tells us how it
all got to this point.
(BEGIN VIDEOTAPE)
[16:14:57] CLARE SEBASTIAN, CNN PRODUCER (voice-over): We've all opened a credit card bill and worried about paying it back. Greece is in
this situation on a colossal scale.
MICHAEL JACOBIDES, LONDON BUSINESS SCHOOL: The cash is probably going to be running out in a matter of days or weeks, and I expect that sometime
in May we're going to find ourselves in a crisis.
SEBASTIAN: Greece's crisis as we know it began in late 2009. Then, the eurozone and the IMF stepped in. The roots of the cash crisis, though,
came even before that.
SEBASTIAN (on camera): Back then, Greece was already in serious debt. They effectively had many different credit card bills from different
private creditors. So, when the eurozone and the IMF came and bailed them out, what they effectively did was replace these credit card bills with
this even bigger one.
UNIDENTIFIED MALE: Clearly the vast majority of the monies that were lent to Greece by the eurozone creditors were there in order to pay off
other loans which the Greeks had already taken out.
SEBASTIAN (voice-over): The loans were enough to cover the old debt with very little left over.
JACOBIDES: The money went not to support anything new. Not to support investment. The money went so that the Greek government could
continue functioning and operating. And as a matter of fact, operating with ever smaller expenses.
SEBASTIAN: A credit card is only supposed to tide you over until your next paycheck. After five years of austerity, this is not an option for
Greece.
UNIDENTIFIED MALE: If you have a 25 and more percent contraction in the size of your economy, then you're going to have a large contraction in
the taxable element of your economy.
SEBASTIAN: Tax revenues are like wages for he government. Greece's economy is not generating enough to pay the bills. And the gap is
widening. The economy is set to grow just half a percent this year, while the debt is set to balloon to more than 180 percent of GDP.
Most economists agree Greece's cash crisis is built on mistakes made years ago. Fixing them, well, that is long overdue.
Clare Sebastian, CNN, London.
(END VIDEOTAPE)
QUEST: Mohammed El-Erian is the chief economic advisor at Allianz, and he joins me now from Irvine, California. You heard, I think, the
commissioner. You may have heard Clare's -- how do we get out of this mess? We're going in circles.
MOHAMMED EL-ERIAN, CHIEF ECONOMIC ADVISOR, ALLIANZ: -- very well, Richard, when you said too little and dangerously too late. So, what's
happening in Brussels is too little. It's not even enough to get a strong statement of support from the eurogroup from Greece, let alone what Greece
needs most, which is an infusion of cash.
And it's dangerously too late because the financial system is imploding every single day. And the more that continues, the greater the
risk that the politicians and the policymakers lose control. So, I agree with you completely, too little and dangerously too late. That is what's
happening right now.
QUEST: But -- OK. Within that context, we know that the outflows from the banking system are huge. And we also know that the entire banking
system is basically on life support from ELA from the ECB. Apologies for all the initials, but we have to talk about these things. Is it -- do you
think there's a risk that the ECB will pull the plug?
EL-ERIAN: Yes. I would be very nervous if I were a Greek government official about the weekly ECB meeting. Like you said, the ELA, the
Emergency Liquidity Assistance, that the ECB provides is not meant to substitute for other people getting paid. And it's certainly not mean to
be permanent. But these are the two realities right now.
So, the ECB is basically the only institution putting in money, and everybody else is taking out money, including the Greeks themselves, from
the banking system. So, there's a limit to the ECB's willingness to do that, and I think we're getting close to that willingness.
And that talks about the possibility of the dynamics on the ground becoming the main drivers of what happens next, as opposed to negotiations
among policymakers.
QUEST: There does not seem to be a sense of crisis, certainly nothing like we saw two, three, four years ago. And I'm not talking now about
whether the eurozone is better able to answer a Grexit or a default, but there just doesn't seem to be -- people aren't sort of shushing about it in
corridors in the same way.
EL-ERIAN: Yes. And there's two reasons for that, a good one and a bad one. The good one is that Greece is less of a threat to the eurozone
today. I think meaningful actions have been taken since 2010 and 2012 to make Greece less of a threat to the integrity of the eurozone. That is
good news.
[16:19:56] The other sense -- the reason why you don't get a sense of crisis, because people don't want to have to act on that sense of crisis.
So no one wants to take the bold decision.
And there's one of two bold decisions right now. One is you go all in, you trust each other, the Greeks, the Europeans hold hands together, go
in and do what they want to do as a collective responsibility. But there isn't enough trust for that.
The alternative is to make an active decision for Greece to exit the eurozone, but no one wants to go down in the history books as having made
that decision.
QUEST: Ah! OK --
EL-ERIAN: So, the result of that is muddle along.
QUEST: OK, but finally, but they have -- well, I suggest they have made a decision. They have made a decision to go for your first option of
holding hands together and singing all together and one for all. The problem is, they can't execute that on either side.
EL-ERIAN: Yes, I don't even think they've made that decision. I think what they've done is they go into the room and say you go first, no
you go first, no you go first. No, you start singing first. No, you start singing first. And the result of that, nobody sings. Right?
So, that's why it's too little, is that they're not coordinated enough. And that the fundamental reason for that, they can't agree on the
interpretation of the past and present, let alone trust each other on the interpretation of the future.
QUEST: And on that optimistic note --
(LAUGHTER)
QUEST: -- we will say thank you, sir. It's good to have you with us. Thank you much. We -- one thing you can always say about QUEST MEANS
BUSINESS with Mohammed El-Erian, we certainly tell you exactly how the situation is. Thank you, Mohammed. Good to see you, as always.
EL-ERIAN: Thank you.
QUEST: Now, traders on Wall Street just couldn't keep Friday's rally going. Look at the numbers. It started badly, ended -- went on worse, got
a great deal worse, and then did not as bad as it might have been when it was done. Off 85 at the close, a loss of some half a percent.
The S&P gave back half a percent, it was light trading volume and there was no major economic news. It was Greece, it was China slowing
down. When you see a market like that, it could be any one of ten reasons.
The government and business groups say America's crumbling infrastructure needs fixing for the sake of the economy. The big problem
that might have a microscopic solution. It's QUEST MEANS BUSINESS, good evening to you.
(COMMERCIAL BREAK)
QUEST: Unions, business, and the US government uniting to jointly send a warning that America's airports, railways, and roads, are in urgent
need of repair, and they're warning that lawmakers' failure to agree on a long-term plan is both costly and dangerous. Take a look and you'll see
what I mean.
(RINGS BELL)
QUEST: A failure to invest has led to scenes like this, a bridge and roads falling apart. Now, scientists in the Netherlands have found an
unlikely material that they say repairs degrade concrete. It's bacteria. Nick Glass explains what could be the revolution of breakup.
(BEGIN VIDEOTAPE)
NICK GLASS, CNN INTERNATIONAL CORRESPONDENT (voice-over): Ever since the Romans made spectacular use of it on the Pantheon some 2000 years ago,
we've been trying to find ways to make concrete, the world's most popular building material, more durable. The fact is, all concrete eventually
cracks, no matter how carefully it's mixed or reinforced.
[16:25:02] GLASS (on camera): But now, scientists here in the Netherlands have come out with an entirely new way of giving concrete a
longer life, and they found it under the microscope.
HENK JONKERS, TU DELFT: We've invented bio concrete. That's concrete that heals itself using bacteria.
GLASS (voice-over): Professor Henk Jonkers is a microbiologist. In 2006, a colleague came to him with an unusual challenge.
JONKERS: He is a concrete technologist, me being more an expert in microbiology. And then he asked me if it would be possible to use bacteria
to make concrete self-healing.
GLASS: In just three years, a very fast turnaround in scientific terms, Jonkers had cracked the problem with a special family of bacteria,
Bacillus.
JONKERS: You need bacteria that can survive the harsh environment of concrete, but also to make them produce repair material for the concrete.
That is limestone.
GLASS: Here at the Delft Technical University, they study concrete stress levels. An old bridge support is tested to breaking point. But
Jonkers is interested in the first signs of deterioration: micro cracks as thin as a human hair.
JONKERS: If you have cracks, water comes through. If this water gets to the steel reinforcements, if they corrode, the structure collapses.
GLASS: Here the concrete is mixed as it would be on an construction site. Sand, gravel, Portland cement, and water are combined. But then,
they add their special ingredient.
JONKERS: This is it, the healing agent. It will not dissolve during the mixing, but only at the case when the concrete cracks and water gets
in, it will become active.
GLASS: They add the concrete mix to molds to create test cubes that they crack to see if their bacteria fill in the gaps.
JONKERS: If concrete cracks and water gets in, the water activates the bacteria and starts to make limestone. So, the active bacteria makes
limestone, and this limestone fills up the cracks. And that makes the concrete more durable so extends the surface lifetime. It's as simple as
that.
GLASS: Testing in a lab is one thing, but Jonkers sought to prove concrete could heal in the outside world. By a lake, a modest lifeguard
station, the first building in the world using self-healing concrete.
JONKERS: At the start, we came back almost every two, three weeks to see how the process was going. And yes, we were really happy to see that
it worked.
GLASS: Concrete is now being used more than ever. In China, where new cities rise every year, they used more than 6 billion tons in the last
three years alone. That's more than the US has used in a century. And Jonkers hopes his concrete could be the start of a new age of biological
buildings.
JONKERS: It is combining nature with construction materials, so nature is supplying us a lot of functionality for free. So, I think it's a
really nice example of tying nature and the build environments together in one new concept.
(END VIDEOTAPE)
QUEST: Hard as concrete. The EU says it's going after the people who exploit the vulnerable and the desperate migrants. We're going to show you
at least one of its proposals that is turning out to be extremely controversial.
[16:28:51] (COMMERCIAL BREAK)
[16:31:32] QUEST: I'm Richard Quest. There is more "Quest Means Business" in just a moment when the chief exec of Airbnb tells us the
hardest part about setting up your own business.
And how a group of Algerian women are about to break a multi-million dollar record here in New York. Before all of that, this is CNN and on
this network the news always comes first.
Authorities in Malaysia say more than 1,000 migrants from Myanmar have landed on the island of Langkawi near Malaysia's coast. That's after
hundreds of refugees were rescued off the coast of Indonesia. Many of them are believed to be Rohingya Muslims fleeing persecution in Myanmar.
The European Union says it's aiming to tackle a crisis of migrants arriving on its shores. It's asking the United Nations to let it use
military force to destroy smugglers' boats. It's also proposing a controversial quota system that would accommodate the migrants that do make
it through.
The E.U. high representative for foreign affairs says the international community has to target the business model of the smugglers.
(BEGIN VIDEOCLIP)
FEDERICAN MOGHENINI, E.U. HIGH REPRESENTATIVE FOR FOREIGN AFFAIRS: The crucial thing for the European Union is destroying the business models
of the trafficking and smuggling organizations, making sure that the vessels cannot be used again, making sure that the assets of these
organizations are destroyed.
Destroyed in a larger sense. I think that on this - on the need to dismantle the model, dismantle the networks and their assets, there is a
large, let's say, consensus about the need to act quickly and together as an international community.
(END VIDEOCLIP)
QUEST: Wednesday's summit of Gulf leaders at the White House will be missing a key U.S. ally. The new Saudi king Salman bin Abdulaziz Al Saud
has canceled his visit. He'll send the crown prince and his deputy instead. Saudi officials say the king is busy with military operations in
Yemen.
Houthi rebels in Yemen say they shot they shot down a coalition warplane. A pro-Houthi TV channel broadcast this video of tribesman
celebrating around what appears to be the wreckage of an aircraft. Rebels said they downed a Moroccan F-16 fighter jet over Northern Yemen on Sunday.
Francois Hollande has just met the former Cuban leader Fidel Castro in Havana. Earlier the French president is seen here with the Cuban Archbishop
Jaime Ortega and urged Washington to end its trade embargo against the country.
The U.S. and the E.U. are in foreign policy talks with Havana. Mr. Hollande's been discussing a larger role for the French in the engagement
with the West.
(BEGIN VIDEOCLIP)
FRANCOIS HOLLANDE, FRENCH PRESIDENT, VIA INTERPRETER: You know that France's position has always been to lift the embargo that is hindering
development in Cuba.
But even if destiny has made it possible to stop the movement of the markets, it will never be possible to stop, to prohibit the movement of
ideas and culture.
(END VIDEOCLIP)
QUEST: The British Prime Minister David Cameron says reforming Britain's relations with the European Union will be tough, but the voters
have given him a mandate to do just that. Italy's foreign minister tells CNN the U.K. can't cherry pick what it wants from the European Union.
Paolo Gentiloni went on to say that compromising on some issues will be impossible.
(BEGIN VIDEOCLIP)
PAOLO GENTILONI, ITALIAN FOREIGN MINISTER: We are both Italy and U.K. interested on a less bureaucratic European Union. But I also think that
the U.K. government is aware that you can't imagine a sort of cherry picking within the European Union pillars. So I choose the freedom of
trade but I don't want the freedom of movement.
[16:35:13] This is practically impossible. We have some pillars of European Union and we have to share all of them.
(END VIDEOCLIP)
QUEST: The U.K.'s already heading for a battle with Brussels over the migrant crisis. Europe wants every E.U. country to agree to take in
refugees according to set quotas. Now that's something the new British government is going to fight tooth and nail.
CNN's Atika Shubert reports from London.
(BEGIN VIDEOCLIP)
ATIKA SHUBERT, CNN CORRESPONDENT: Hundreds have died already, drowned at sea, crammed onto rickety boats to cross the Mediterranean. Desperate
to reach Europe.
More are at risk the E.U. says unless immediate action is taken. The E.U. solution - quotas and guns. Military force is necessary to attack
people smugglers in Libyan waters, the E.U. ambassador told the U.N. Security council on Monday.
(BEGIN VIDEOCLIP)
MOGHENINI: The European Union, we will do a lot but we cannot do it alone. This has to be a common global effort. That's why we count on your
support to save lives and dismantle criminal organizations that are exploiting people's desperation.
(END VIDEOCLIP)
SHUBERT: But stopping the boats is not enough. Here are the stark numbers. Nearly 2,000 have died this year along - a 20-fold increase over
last year. The vast majority have been landing in Greece and Italy. But many are moving north. In fact, the top two countries, Germany and Sweden.
But legally refugees must seek asylum in the country they first step foot in and that means Italy and Greece are bearing the brunt.
The E.U. now wants a mandatory quota of refugees for each of the 28 E.U. member states. How many? Well that will be based on the country's
GDP, population, unemployment and refugees already taken in.
Germany backs the deal but the U.K. rejects it.
Female: Please welcome the Prime Minister!
SHUBERT: The newly-reelected British prime minister has a mandate to stand tough against the E.U. and follow through with this pledge he made in
October.
DAVID CAMERON, BRITISH PRIME MINISTER: At the end of 2017, it will not be the Brussels bureaucracy or the politicians of any party who'll
decide whether we remain in the E.U. or not. If I'm prime minister, it will be the British people who make that decision --
Audience: Hear! Hear!
CAMERON: -- through an in-out referendum.
SHUBERT: The U.K. says it has a proud history of offering asylum and it has already taken in nearly 32,000 refugees, far fewer than Germany and
Sweden. The E.U. proposal could see that number double which is why Britain wants to set its own voluntary quota.
Either way, the U.N. High Commission for Refugees says Europe must act fast. It needs a home for 20,000 for this year alone and the number is
growing. Atika Shubert, CNN London.
(END VIDEOCLIP)
QUEST: Now think of it as the sharing economy on full display. Uber's new valuation is putting it in a rarified territory and the ride is
pretty strong. And Airbnb's chief exec tells us about his plans to keep growing.
(COMMERCIAL BREAK)
[16:41:27] Uber is reportedly starting a new round of funding that would make it the most valuable private startup in the world.
It would be worth more than 400 companies listed on the S&P 500. And it's the blue chips like Fed Ex and Direct TV in the rear view mirror.
It's also reportedly making a $3 billion - come and have a look at the map and you'll see just what they are up to.
So follow the Uber map. They're making a bid for Nokia Maps over here, they're experimenting with food delivery - it's another Uberitis, and
it's testing a bike messenger service as well.
So, if Uber was to arrive on Wall Street today, Uber today on Wall Street - it would have -
(CAR HORN HONKING)
QUEST: -- thank you very much - a massive $50 billion - billion valuation. How on earth can a taxi company - even a global taxi company -
be worth anything like that.
Paul La Monica is here to make sense of these numbers.
PAUL LA MONICA, CNN MONEY DIGITAL CORRESPONDENT: $50 billion you do have to scratch your head. I don't get it either. The key to really
proving that it's worth it is going to be that they're not just a taxi company.
They obviously want to be taking more than just people from point A to point B, but also goods and that's going to be I think what gets them to
really deserve that valuation.
But right now it just seems insane.
QUEST: Right. It seems - not only does it seem insane based the size of the company or what the company physically does, but also the legal
issues it's got - in Germany, in India, in the U.K., in Bel - it's got problems.
PAUL LA MONICA, CNN MONEY DIGITAL CORRESPONDENT: There's a lot of controversy - legal issues obviously as you mentioned, concerns about
privacy as well and there's a fair amount of competition - Lyft in the U.S., there are a number of companies in China which is where Uber really
wants to expand as well.
QUEST: That's it - their offices have been raided and have been searched.
LA MONICA: Right. Yes. Uber is I think not by any means a risk-free investment for these venture capitalists, but they're all falling over
themselves. People I've spoken to seem to think, well wait a minute, what if it's the next Google, what if it's the next Facebook? I don't want to
be left out. And that's what this worry I think is and that's driving the valuation ever higher.
QUEST: To be absolutely fair, I'm not saying that Uber isn't a good service. I've use it me-self and I'm sure you -
LA MONICA: Definitely.
QUEST: I've used it in different cities around the world. So it does what it says on the tin, but it can't justify this level of valuation
unless I'm so old-fashioned that I should pack up and go home.
LA MONICA: I wouldn't go that far. The only thing I would say is that looking at valuations of private companies, it's notoriously
difficult. You could have made the argument Google 2004 -- $27 billion or so. Oh my God, that's so overvalued. It's not worth almost $400 billion.
Facebook, $104 billion when it went public. It's more than doubled.
So it's not easy to know when a company's growing as rapidly and Google - their venture capitalists arm - they said that Uber's the fastest
thing they've ever seen period. And that includes their own company,.
QUEST: So what's - I'm at risk of sort of getting you to repeat your answer which is probably exactly what I'm doing. What's driving that?
LA MONICA: Really, yes, as I said, I mean, The venture capitalists that are already in the - in Uber - definitely don't want to miss out. And
I think also private companies, when you invest in them at this stage, you can cash in a lot more easily -
QUEST: Right.
LA MONICA: -- than you can when they go public. And I think that's a red flag for the average investor. It's one thing if you're a V.C. firm -
don't buy this when it goes public.
QUEST: But this is all part of the greater revolution - the sharing revolution, the Airbnb revolution, isn't it? Do you use Airbnb?
LA MONICA: I have not used Airbnb yet but I use Uber all the time. I've had one bad experience in about a year and a half of using the
service.
I understand why people like but, again, $50 billion not so sure.
QUEST: Well that was a lot - that was a very expensive ride if it was $50 billion.
(LAUGHTER)
LA MONICA: Talk about search pricing, yes.
QUEST: Yes, that really would give a new definition to search pricing. The chief executive of Airbnb says regulators need to be nervous
about companies like his until they get to know them better. He says they tend to be nervous and worried when the first look at them.
[16:45:00] Brian Chesky has been named President Obama's ambassador for global entrepreneurship. From the White House lawn earlier today, he
talked to Maggie Lake about the future of Airbnb and offered advice for the next generation looking to get an ideas off the ground.
(BEGIN VIDEOCLIP)
BRIAN CHESKY, CEO, AIRBNB: I think the hardest thing for young people trying to start a business is just knowing that they can start a business.
You know, I grew up and my parents were social workers and I never really met an entrepreneur growing up.
So when I was a kid I didn't want to be an entrepreneur because I didn't think that was an available option. And then I moved to San
Francisco and I had friends all over the city of San Francisco that were starting businesses and I realized well if you could do it, probably I
could do it as well.
And that was my story and I think the thing I love to inspire for other people around the world is you can do it as well. I mean, starting a
company is - it's challenging but it's completely possible. I think the hardest thing to do is just to start.
MAGGIE LAKE, BUSINESS ANCHOR AND CORRESPONDENT FOR CNN INTERNATIONAL: That's right. And in such a short time you've seen such amazing growth.
I'm sure some of these young people are actually using your service.
CHESKY: Yes.
LAKE: Over a million rooms now. Do you expect that kind of growth rate can continue?
CHESKY: I think it will continue because our business is driven by word of mouth. You know, we'll have around 400,000 people tonight staying
in a Airbnb and they're coming from 186 countries around the world. More than 70 percent of them will leave a review, so they'll have these really
great experiences and then they're going to go back from where they came from.
And when you travel, when you go back to work you tell your friends - think about it - you'll tell them about the trip you had and Airbnb is a
very important part of that trip and so I think we're going to continue to see further growth.
I mean, the travel industry's a multi-trillion-dollar industry. So I think there's a lot of room for everybody.
LAKE: And as excited as those travelers are, that sort of momentum has made a lot of people nervous, whether it's established industry, union,
city officials - do you feel like you're having a better time having your business model understood by them? Is the relationship improving?
CHESKY: Yes, absolutely. I think that people tend to be nervous about things they don't understand. And we are new and so when we came
onto the scene, people didn't completely understand who we were.
But what I found is the more we educate people and the more people have learned about Airbnb, the more comfortable they get with us. And they
realize that we can provide a lot of income to cities. For example, we just did an economic impact study in the city of New York, we showed we
brought $1.15 billion to the city of New York last year. We've also showed that when you have people staying and 186 countries around the world, that
it provides really interesting opportunities for relationships around the world.
LAKE: And you've been making headlines, you're pushing into Cuba.
CHESKY: Right.
LAKE: Where else should we expect to see the expansion?
CHESKY: Well we're now in 191 countries, so that means we're in every country in the world that we're allowed to operate in. So notwithstanding
Antarctica and the North Pole, we're pretty much -
LAKE: (LAUGHTER).
CHESKY: -- in all places we're actually allowed to be in. I think it's a matter of just trying to provide more support in the communities
we're in. Cuba. Asia is a nascent market for us, but it's our fastest growing market, so I think you're going to see a lot of expansion there as
well.
LAKE: And how has the experience been so far in Cuba? It's a country that's been cut off for so long -
CHESKY: Right.
LAKE: -- what have been the challenges?
CHESKY: Well, I mean, it's certainly - one challenge is only 5 percent of the people in Cuba have internet access and we're in a website
and an app. So it doesn't work without internet access, so how do you solve that?
And one of the things we found was there are people who have internet access - we call them now host partners - and they work as kind of partners
to the thousands of people in Cuba that have homes on Airbnb.
So that was just one of the solutions. We also had to get very, very creative about how to facilitate payments because a lot of people, you
know, they can't really accept money very easily especially from travelers. So those are some of the challenges.
But what I will say is this, 40 days ago we launched in Cuba with 1,000 homes. Forty days later, we now have 2,000 homes. So it's one of
the fastest-growing markets in the world now for us. And just to give you a point of reference, the city of New York, - I reference now how big that
is - it took us three years to get our first 1,000 homes in New York.
(END VIDEOCLIP)
QUEST: Extraordinary. Absolutely extraordinary. At lovers - talking of extraordinary matters - are watching and waiting and it's this
remarkable piece of work that could make history tonight.
An expert on investing in art will be with us next, but would you buy it? And if so, how much would you pay? (RINGS BELL).
(COMMERCIAL BREAK)
[16:50:45] QUEST: There are pictures, there are paintings, and then there is this. Tonight an iconic Picasso could set a new record for the
most expensive artwork ever sold at auction. If this is the piece that - of which - we are talking, "the Women of Algiers," the versioner (ph) went
into the hammer in around three hours from now at Christie's in New York.
The auction house expects it to fetch - who know? -- $130, $140 million and even that could be an underestimate. Christie's says it could
be the most important Picasso to remain in private hands. And it's not even being revealed of whom is the seller.
The most expensive artwork ever sold - well since you want to know, it's Francis Bacon's "Three Studies of Lucian Freud." Now, these three -
they sold for $142 million (LAUGHTER) in 2013 -- $142 million. But Picasso is the centerpiece of a major art sale that takes place. We have to talk
more about this.
Phillip Hoffman is the chief exec -
PHILIP HOFFMAN, CEO, THE FINE ART FUND GROUP: Nice to see you.
QUEST: -- of the Fine Art Fund Group of Global Investment Art House. Before that you worked for Christie's. He joins me. So, what do you
think?
HOFFMAN: I've seen it many times, it's fantastic, it's going to break the records. It's going to go $150 million, maybe more. There are four
buyers I think who are going to be on the -
QUEST: Hang on, you give me all the information - a lot of information -
HOFFMAN: -- (inaudible) (LAUGHTER.
QUEST: -- and that's before the buyer's premium, isn't it?
HOFFMAN: There's buyer's premium, about 12 percent added on top, just to -
QUEST: (RINGS BELL) Just in case you thought you were getting rid of it - so that's another $12, $15 million -- $20 million or so. Keep going.
HOFFMAN: Keep going yes.
QUEST: Right, so $150 million.
HOFFMAN: Yes.
QUEST: Who owns it currently, do we know?
HOFFMAN: I believe it's owned by an American collector.
QUEST: Right. Who bought it, you were telling me before, at, you know -
(CROSS TALK)
HOFFMAN: (Inaudible) $20, 30 million over 10, 15 years ago.
QUEST: So very huge, huge profit.
HOFFMAN: It's not unusual to make some of these huge profits. We were acting for a client who bought a Van Gogh for $10 million and sold it
for $63 million 20 years later. So there are these profits going on.
QUEST: But they're very few and far between in terms of the great famous painters, aren't they?
HOFFMAN: Yes.
QUEST: They tend to be restricted to the Van Gogh's, the Rembrandt's the -
HOFFMAN: Yes.
QUEST: -- Monet's, the Picasso's.
HOFFMAN: Yes, I mean, I think this week we're going to see about $2 and 1/2 billion selling and there's going to be a Bacon selling for $50 or
$60 million, Freud $50 million -
QUEST: Who's going to buy this?
HOFFMAN: I think it's going to go to Asia. I think the Chinese are going to be fierce at contesting this. Some of the biggest buyers right
now are coming from Mainland, China, Taiwan and there might be the odd American coming in -- a bit of a hedge fund manager who might take it for
his own take home.
QUEST: But it's about to disappear.
HOFFMAN: It'll go into private hands but it could well - I mean, it could be that Qatar or Abu Dhabi buy it for their museum. And they are -
the last time 'round, Qatar bought a - they bought a Cezanne - "Card Players" for $250 million, a Gauguin for $300 million privately. So this
is a snip of only $140 million.
QUEST: But they bought that privately.
HOFFMAN: They bought those privately, yes.
QUEST: And that's not reported in quite the same way.
HOFFMAN: Absolutely.
QUEST: So when you tell me that - so you're telling me that a picture has gone for a quarter of a billion?
HOFFMAN: Absolutely, yes.
QUEST: But that's not recorded?
HOFFMAN: That's not officially recorded, no, but there are plenty of - there are plenty of buyers out there who are prepared to spend - I mean -
there are probably 25 to 50 buyers who could pitch and buy this tonight.
QUEST: And tell me what the atmosphere is like. Because I have been in a sale room watching it and covering when you've got a big auction, but
on from the other side - from the auctioneer's side, from the auction house's side. You've got all the phones, you've got the people in front of
you. They're just there really for the drama, aren't they?
HOFFMAN: It is, I mean, I was talking to Ucie Polkano (ph), the auctioneer last night and he is going to be super scared. I mean, he's
going to be - the adrenaline's pumping, he's not - he knows probably where the phone bidders are and he knows who's probably lined up, but the phone
could go dead at the last minute, somebody could change their mind. You know, something can change a bidder in 30 seconds.
QUEST: Right. And when he's doing that, can the auctioneer pull up the price?
HOFFMAN: The auctioneer can encourage. I mean, he can make a big -
QUEST: Right, but can he - do you think an auctioneer can get this from, say, $135 to $150 million?
[16:55:03] HOFFMAN: Absolutely. A good auctioneer will be able to shift that up and it's just a matter of coaxing out. And at this level,
there's a - there is a -- question of winning. And there are people who want to win this picture - the most expensive picture in the world at
auction - and there are four or five people who want to go away with it. And they're not going to give up.
QUEST: Fascinating.
HOFFMAN: (LAUGHTER).
QUEST: Thank you sir.
HOFFMAN: Thank you.
QUEST: $140 million. Well, I better get my bid in now. We'll have a "Profitable Moment" - a very "Profitable Moment" after the break. (RINGS
BELL). "Quest Means Business."
(COMMERCIAL BREAK)
QUEST: Tonight's very "Profitable Moment." Let's talk about Uber and Airbnb - two companies that have completely revolutionized, defined,
invented - I don't care which adjective you use - they are the sharing economy. Uber is said to be worth $50 to $60 billion, but it's Airbnb that
I find absolutely fascinating.
This is a company that has completely and utterly revolutionized the hospitality and the overnight stay. It's now become Darerego (ph) and the
norm. People are visiting a city, you say where did you stay? And they say, 'I Airbnb'd it.'
It's a complete and utter revolution in what's happened. And you've got to ask yourself why - because of course it makes sense and it does what
it says on the box. In many cases the hotel industry has been slow to respond and they have genuine grievances against Airbnb. So what? The
truth is Airbnb now has size, it has scale and it has something else - it has acceptability. People like using it.
Now of course they just have to work out ways to float, make money and who is going to be the competition? And that's "Quest Means Business" for
tonight. I'm Richard Quest in New York. Whatever you're up to in the hours ahead, (RINGS BELL) I hope it's profitable. Let's get together
tomorrow.
END
