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Quest Means Business
Interview with President of Microsoft; Leaders Hold New Talks on European Migrant Crisis. Aired 4-5p ET
Aired November 11, 2015 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[16:00:00]
(BEGIN VIDEO CLIP)
RICHARD QUEST, HOST: In the United States, Harry Connick Jr. ringing the closing bell and getting a raucous welcome at the New York stock exchange
as trading, oh, strong gavel as we might expect from veterans on Wednesday, it's November the 11th.
Tonight, Microsoft heads to Germany to stop Uncle Sam snooping, I'll be joined by the Microsoft President in this hour.
Also leaders hold fresh talks about Europe's migrant crisis and warn it will take more than money to fix it.
And then more evacuations and more bodies recovered. The mine disaster in Brazil is turning even more dire than we first thought.
(END VIDEO CLIP)
QUEST: I'm Richard Quest, I mean business.
(MUSIC PLAYING)
QUEST: Good evening. Drastic steps being taken by Microsoft to protect European customer's data. An amazing development, it's a threat of
guarding against us not from Hackers, it's from the United States government.
(BEGIN VIDEO CLIP)
QUEST: Microsoft operates data around the world including the Netherlands and in Ireland, as you can see from this map.
On Wednesday, it announced plans to build two more data centers in Germany. And this is the interesting and different part. Deutsche Telecom, not
Microsoft will operate the centers and control access of so called trustees.
In other words Microsoft is putting the data out of the reach of the U.S. surveillance machine.
(END VIDEO CLIP)
QUEST: It's an extraordinary development, and one that reflects the recent European court decision against so called safe harbor and the transfer of
data between the European Union and the United States.
Joining me now, Rod Beckstrom, the former director of the National Cyber Security Center. Rod, how far is this decision a reflection of that court
decision that basically said data cannot be transferred from countries like Germany to the U.S.?
ROD BECKSTROM, FORMER DIRECTOR OF NATIONAL CYBER SECURITY CENTER: Clearly Richard it is a result of that decision. It's also a result of good
business sense.
(BEGIN VIDEO CLIP)
BECKSTROM: But it's driven also I think by personal psychology and the national psyche around the world and people wanting to feel like they have
more control over their personal information.
QUEST: And yet if we look at all those data centers, one can imagine that it's not long before, for example, the data centers in the U.K. maybe not
so bearing in mind to the U.K./U.S. agreement. But if you look over towards Asia, where they're in Japan, or the data center is in Australia, in India,
down in Brazil. How long before those centers also become standalone with no links back to the U.S.?
(END VIDEO CLIP)
BECKSTROM: Not long. I think within the next three to five years, this will have rolled out to many, many countries around the world.
(BEGIN VIDEO CLIP)
BECKSTROM: And the reason being, that you know citizens want this, a lot of countries want it and its popular politically if you're the politician to
say we're going to impose laws to keep data in this country. So this is what we call the balkanization of the internet, or the fragmenting of the
internet.
(END VIDEO CLIP)
BECKSTROM: The funny thing is though Richard, the internet is a global phenomenon and you can try to segment your data nationally, but everything
that's interconnected is potentially subject to transparency just given the laws of information, physics and (inaudible).
QUEST: All right, so now - let's put it - now I'm completely (inaudible), novice, ignorant in how the internet works other than the fact it does work
for me. So if I have my emails stored on a server, or my music, or my photographs stored on a server in Germany but I send an email to somebody
in the United States. Well of course now some of that data is in the United States by virtue of that email isn't it?
BECKSTROM: Plus wherever it hops through on the way there. Because the way traffic routing works on the internet is it's very decentralized and can go
through any number of hops.
(BEGIN VIDEO CLIP)
BECKSTROM: It does not respect national borders in general in terms of how the data flows with the internet itself.
(END VIDEO CLIP)
QUEST: Rod, from the U.S. government's point of view, bearing in mind a lot of this came from the fallout from Edward Snowden, how much is this - is it
handicapping their abilities or merely a hobbling of their abilities?
BECKSTROM: It's - well you know it's not for me to speak to how the U.S. government views this. But you're right part of the aftermath of Snowden
is more stringent privacy laws and measures that have been taken globally.
(BEGIN VIDEO CLIP)
BECKSTROM: Which has put some U.S. companies at a disadvantage and that's why you see firms like Microsoft now making this move.
[16:05:10]
BECKSTROM: But you're also going to see successful companies in Germany. I just came back from Japan and I was meeting with senior level government
officials, they're going to be building a national cloud infrastructure there and it will be independent and we're going to see this happening all
over the world. It's a good opportunity for businesses to sell more hardware, consulting, software, et cetera.
(END VIDEO CLIP)
QUEST: Rod Beckstrom joining us from Mountain View, California. Thank you, sir. And in just a short while later within this hour, you're going to be
hearing from Microsoft's President and Chief Legal Officer Brad Smith will be with us on Quest Means Business tonight.
To the markets. [Bell ringing] U.S. stocks swung (inaudible) gains and losses on Wednesday.
(BEGIN VIDEO CLIP)
QUEST: Look at that, up and then down and then up and then down, and then finally all the way down. But the losses were not big, it was just off
55/56 points at the close.
The bond market was closed for Veterans Day holiday. Macy shares were down 14%, they reported a drop in sales and they lowered their guidance which is
rather worrying bearing in mind just about to start the holiday season. And a fall in tourism was also one of the reasons.
In a moment, E.U. leaders are looking to their African counterparts as they try to resolve the migrant crisis.
(BEGIN VIDEO CLIP)
QUEST: What can the African continent do? We'll have to talk about that after the break.
(MUSIC PLAYING)
(COMMERCIAL BREAK)
(MUSIC PLAYING)
QUEST: European politicians are meeting for a sixth time to try to forge a unified response to the migrant crisis.
(BEGIN VIDEO CLIP)
QUEST: Now this time they've invited leaders from Africa to join them at their summit in Malta.
The E.U. is ready to offer Africa nearly $2 billion, to help reduce poverty and tighter border controls and indeed to crack down on people smuggling
and human trafficking.
The E.U. Foreign Policy Chief says it's crucial that the continents join forces.
FEDERICA MOGHERINI, EU FOREIGN POLICY CHIEF: But it's not only about money, I want to make it very clear, this is about building opportunities for
people, protecting people's lives, fighting against criminal networks that exploit people's desperation, and doing this together. I think together is
the key word of this summit.
(END VIDEO CLIP)
QUEST: So far Europe's response, to the enormous increase in migrant, far from looking like together has seemed chaotic and mostly ineffective.
(BEGIN VIDEO CLIP)
[16:10:05]
QUEST: To put this in perspective at least 18 more people were found dead off the coast of Turkey in the hours before Wednesday's meeting.
Think of it this way, 14 of them died in this wooden boat trying to get to the to the Greek Island of Lesbos.
The E.U's initial plan to find homes for 160,000 refugees seems to be going nowhere if not gone nowhere. Only 147 have been relocated over the past
seven weeks. And Germany alone, a study says housing new refugees will cost $22 billion.
(END VIDEO CLIP)
QUEST: The Director General of the IOM, the International Organization for Migration is William Lacey Swing, he joins me now from the meetings in
Malta.
Director General, I don't think I am being unfair or uncharitable when I say that so far the EU with all its Summit meetings has failed.
WILLIAM LACY SWING, DIRECTOR GENERAL INTERNATIONAL ORGANIZATION FOR MIGRATION: I think you have to see it, Richard, that is an evolution
starting in April when they decided to make saving life the top priority.
They've advanced further and I think this is a very important meeting today. It's rather symbolic because I'm standing right at the Crusaders
Castle which is right in the middle of the Mediterranean where Africa and Europe are joined together.
(BEGIN VIDEO CLIP)
SWING: It is true, I think the Africans came to this summit with their enthusiasm fairly under control. But I think the declaration they came out
with shows that some progress was made in meeting some of their demands, particularly that there not be any forced returns but rather voluntary
returns. And that there be also some help with the development side, and we have got to make that connection for the Europeans between the humanitarian
aspects and the very important economic side that they're going to need more people. Europe's population is declining.
(END VIDEO CLIP)
QUEST: Look, I mean at the end of the day, sir, it is a disgrace, that - I mean listening to what you just said, they started talking in April, they
are still talking now, there is no common policy upon which they all agree, and the best they are trying to do is hold back a tide of people.
(BEGIN VIDEO CLIP)
SWING: I think - yes, I think there are three problems that Europe is coping with now. They're not talked about very much. But one is I think
there's a good deal of refugee amnesia here in which people have forgotten that my own organization and the High Commission for Refugees were founded
in 1951 precisely to take European refugees from the ravages of World War II to a safer and better life.
There's also the fact that a lot of others in the last 60 years have fled into open arms nearby. So I think they're working at that.
The other as you say it's in many ways a crisis of solidarity. You have the very strong lead, the very courageous lead by Chancellor Merkel, and
then it was not followed by the other countries which builds pressures even in her country.
And then thirdly they have to adjust from having been a continent of origin for four centuries and now for four decades they've become a continent of
destination. And this has - this takes leadership, it takes a lot more political education and political information.
(END VIDEO CLIP)
QUEST: You are not optimistic that anything important or useful comes from this summit meeting are you?
SWING: No, I -- look, I think we're taking it now a step at a time.
(BEGIN VIDEO CLIP)
SWING: This was an important step, this is the first time they've ever held a summit solely on the issue of migration. I hope it's not a once off, and
if it is, then it won't be the success that we need.
We're moving ourselves quickly to try to get as many of these relocations done as possible. We've done the first couple, we hope to do more. But
the numbers are still too small. And we need to remember that although 800,000 people have come north, as you mentioned, 14 died in the last 24
hours, almost 3,500 have died and that is - that is not in any way necessary if we have the right policies and we've got to work on that.
(END VIDEO CLIP)
SWING: In addition, we have to remember there are countries like Ethiopia, they have 700,000. Lebanon with 5 million people has more than a million.
So there are comparisons there that need to be taken seriously.
QUEST: Sir, thank you for joining us tonight from (inaudible) in Malta. Come back and talk to us more when there is the result from this summit
meeting.
We were talk about it earlier this week, it's one of the world's worst mining disasters in Brazil's history.
(BEGIN VIDEO CLIP)
QUEST: And now fears of new flooding in the village where a tragic accident happened last week. We'll talk about it in a moment.
(MUSIC PLAYING)
(END VIDEO CLIP)
(COMMERCIAL BREAK)
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(MUSIC PLAYING)
QUEST: Brazilian officials have ordered more people to evacuate their homes near the site of last week's deadly floods at the Iron Ore mine.
(BEGIN VIDEO CLIP)
QUEST: Two wastewater ponds burst their banks. The company involved is now working to shore up a third. Five people are known to have died,
another 20 are still missing.
On Wednesday executives from the two giant companies that jointly own the mine visited the site and have promised to help the communities recover.
(BEGIN VIDEO CLIP)
ANDREW MACKENZIE, CEO BHP BILLITON: The people of Brazil, the people of (inaudible) have my absolute determination that we will fully play our part
in helping to rebuild your homes, your community and your spirits, and we'll do this working hand in hand with the (inaudible) and (inaudible) and
through (inaudible). Thank you.
(END VIDEO CLIP)
QUEST: Shasta Darlington is with me from Rio. You and I talked about this dreadful event earlier in the week but it does seem whatever the reasons
and however it happened, that the management, the top management of the companies, BHP Billiton have taken this with - quite rightly grave
seriousness.
SHASTA DARLINGTON, CNN CORRESPONDENT: Well Richard, they have. There have been plenty of complaints about how long it has taken some authorities to
react however though. Just the pain and despair when rescue workers were initially searching for survivors has really turned into outright anger
here in Brazil.
(BEGIN VIDEO CLIP)
DARLINGTON: Not so much for BHP but with the federal government with the other - the other company that owns (inaudible), we're talking about
Brazil's valley. There were questions about why the CEO wasn't on the site immediately. Why hasn't the President of Brazil visited the site and
people do want to know what caused this, why wasn't there a warning system. What's going to be done to stop this. These are unanswered questions.
We are now a week from that initial tragedy and as you mentioned now they're ordering new evacuations concerned over a third dam. This is
obviously really angering people here in the country because not only was it not prevented but now we're looking at possibly even greater
repercussions.
The Federal Government has responded saying they're going to send in the Environmental Minister, to check out the damage. And remember these are
waste dams, this is waste water. The sludge is still continuing downstream contaminating rivers and actually damaging the water supply systems in the
state of (inaudible), and it's already suffering a severe drought.
[16:20:10]
DARLINGTON: So I think at this point we've obviously got to continue talking about the human loss, the people want - if they can't have their
family members back, they do want the bodies recovered so there is a human tragedy here but we're also looking at a much bigger environmental and
health hazard. We still don't know the full dimensions of it Richard.
(END VIDEO CLIP)
QUEST: Now that health hazard, when you say we don't know the dimensions, is this because of the contamination that was in that wastewater? And do
we have any idea of what contaminants are involved?
DARLINGTON: You know we don't have all of those details and what BHP and Valley said in their joint statement today is they want to continue to
focus on the consequences of this accident and providing help.
(BEGIN VIDEO CLIP)
DARLINGTON: But at this point they're still not going into great detail about what the damage could be, about what caused it, and there is going to
be a lot more finger pointing. And we haven't seen as I said the President of the country move in, there is going to be a lot of who's going to take
care of this? Who's going to do what? The companies say that they've created an emergency fund to help the families that have been affected, to
rebuild the communities. But again, there has been a certain slowness in the response Richard from the local official - from the Federal government
and from the local company here.
(END VIDEO CLIP)
QUEST: Shasta Darlington, in Rio de Janeiro tonight. Thank you.
To our top story where we return, Microsoft revealing plans to open two new datacenters in Germany.
(BEGIN VIDEO CLIP)
QUEST: It won't be Microsoft that operates the centers, it will be Deutsche Telecom as trustees. The American company hopes that that will
put the data stored in them beyond the reach of U.S. authorities and give confidence to Europeans.
(END VIDEO CLIP)
QUEST: Joining me now is Brad Smith, Microsoft's President and Chief Legal Officer.
Mr. Smith, thank you for joining us on what is a --- I think it's a land mark day in many ways because it is one of, if not the first of a - of the
major corporations such as yourselves, basically saying we respect and acknowledge this security problem and Europeans wish to have their own
datacenters.
BRAD SMITH, PRESIDENT AND CHIEF LEGAL OFFICER, MICROSOFT: I agree, this is an important day not just for us but for the industry. Certainly for
Microsoft this is a key step in a multibillion dollar, multi country expansion of our cloud services in Europe all aimed at giving customers
stronger security and more choice. So if customers want to have data in a datacenter where a European is the trustee, they can choose that and they
can choose other options that we offer as well.
QUEST: So let me be blunt.
By doing this whatever sort of may be the philosophical view in the grand scheme of things, but it does deny the U.S. the ability for surveillance of
that data.
SMITH: Well, actually what this does is give Europeans the confidence that if they choose this option, their rights will be protected by European law,
things will have to go before a German government of court.
And the United States government can continue to work in a lawful way by interacting with other governments, in this case, the German government.
But it will be done pursuant to the international rule of law.
QUEST: You are starting a trend here because before long, as we were talking earlier on the program, other countries are going to say, right,
they did it in Germany, let's do it in Japan, let's do it in Australia, India, Brazil. Wherever those 24 datacenters are or many of them non-U.S.,
surely you are now ready to have to do exactly the same structure elsewhere.
SMITH: Well this is a new step and it actually builds on an ongoing trend.
We've now constructed datacenters in over 100 countries around the world. Just yesterday we announced two new data centers in the U.K., as well as
the expansion of our data centers in Dublin and Amsterdam.
The truth is most customers probably just want their data to be nearby. There may be some customers that want to go farther, and they want a local
company to be the trustee of their data, to be the only company that has access to it the way we set it up with Deutsche Telecom, we'll have to see.
QUEST: How much of all of this is basically the fallout from Snowden?
SMITH: I think it's fair to say that the Snowden disclosures lit a match and that flame does continue to burn to the a degree. But I think people
have always also appreciated, this is a broader issue, people need to have trust in technology, it is how they manage their lives. We're fundamentally
in the business of ensuring that people can count on us for the technology that they need.
[16:25:18]
QUEST: Right now for somebody - I mean I'll admit I have a subscription to Office 365 which incidentally has just renewed so you got some money out of
me, thank you very much.
Now will I have to make - assuming I was Germany or the U.K., would I be given the option - will it come up nice and clearly or will it be buried on
page 146 of a 500 page boilerplate document where it says do I want my data stored locally or - you know what my question is here.
SMITH: Well I do know exactly what your question is and there's two answers. First, this is first rolling out for enterprise customers like
CNN, like any business that has 50 or more users or a government. That'll happen next year, we'll see what interest there is in broadening it beyond
that. But I'll also say this; our goal is to have contracts that are 7 pages long. You should never I hope have to get to page 146.
QUEST: Right, but hang on. At the moment it's only the big boys and girls that can do this with data, so to some extent (inaudible) but you do hope
to be able to offer it to the little man like me?
SMITH: Well, we don't think of you as a little man, but - and this is for any business that has 50 employees, you don't have to be a big company.
But to your question is it yet available for any consumer? Not yet, but what we are doing already is saying if you are a consumer in Europe your
data will be stored in Europe, it's typically hosted now in Dublin.
So we're already moving in that direction.
QUEST: A final and much more general and wider question sir. A recent CEO basically said to me that when it comes to hacking and cyber security, this
is a non-delegable responsibility from the Chief Executive of any company. The buck stops with the CEO when it comes to making sure the systems are
secure. Would you agree with that?
SMITH: I think one has to think about two things. First security has become so important to every enterprise that by definition, it is a CEO and
Board of Directors responsibility. But second, we have to recognize that this is a shared responsibility, cloud services are probably the single
most powerful tool that any enterprise can use to strengthen its security. It doesn't have to reinvent every wheel, it can rely on the multiple
billions of dollars that a company like Microsoft is making in its data center.
QUEST: Brad Smith, good to have you Sir on the program, and thank you for taking the time.
SMITH: Thank you.
QUEST: We appreciate it, Brad Smith joining us from Microsoft headquarters.
When we come back, the planes, well some of them are flying for Lufthansa.
But the strike continues and there's every possibility it's going to get worse. It's Lufthansa's worst industrial relations nightmare after the
break.
(COMMERCIAL BREAK)
[16:31:29]
QUEST: Hello, I'm Richard Quest. There is more "Quest Means Business" in a moment when the Bank of England Governor Mark Carney says bankers have a
long way to go to win back our trust.
And a court in Germany leaves Lufthansa defeated and passengers frustrated.
Before all of that, this is CNN and on this network the news will always come first.
Afghanistan's President Ashraf Ghani is promising to find justice for the people in the south of his country after protesters tried to storm his
palace in Kabul.
Demonstrators were angry about recent killings ISIS. The militants beheaded seven members of their Hazara ethnic minority over the weekend.
Leaders from Europe and Africa have been meeting in Valletta in Malta. They're trying to address the migrant crisis.
The E.U. is offering financial aid to Africa to encourage governments to crack down on people smuggling. Malta's prime minister told CNN building
fences and walls will not fix the problem.
(BEGIN VIDEOCLIP)
JOSEPH MUSCAT, MALTESE PRIME MINISTER: First there needs to be capassable (ph) building at the borders. The borders need to be secure.
But just looking at this from a security aspect while necessary is not enough. There needs to be a humanitarian approach and also a realization
that this is a people-on-the-move phenomenon that will remain with us for the foreseeable future.
(END VIDEOCLIP)
QUEST: Reuter's News Agency says Russia has released a draft proposal to end the Syrian civil war. It calls for an 18-months' process of
constitutional reform ending in presidential elections.
But it does not rule out the possibility of Bashar al-Assad standing in the election. Moscow is denying the report, saying no such proposal exists.
(HORN BLOWING)
QUEST: From London to Los Angeles, people around the world paused on this Armistice Day to remember those whose lives were lost in war.
(CLOCK BELL TOLLS)
QUEST: Cities were brought to a standstill as the clocks struck 11 on what is known as Armistice Day around the world.
Two minutes of silence marked the 11th hour of the 11th day of the 11th month when the Armistice was signed in 1918, ending the First World War.
The Russian President Vladimir Putin says the country needs its own investigation into doping allegations.
Russia's Olympic Committee says it will work to clean up sport after an international report said there was a culture of doping in Russian
athletics.
Anti-doping Authority has recommended Russia be excluded from next year's Olympics in Rio. The head of the IOC says he has faith that an agreement
can be reached so that Russia can compete.
(BEGIN VIDEOCLIP)
THOMAS BACH, PRESIDENT, INTERNATIONAL OLYMPIC COMMITTEE: We're convinced that the new president, Sebastian Coe will do whatever is necessary and
then I think also Russia will cooperate there to make progress and to be sure that Russian athletics is compliant with WADA.
And this is what it needs to be in order to participate in the Olympic Games.
(END VIDEOCLIP)
[16:35:16] QUEST: The flight attendants strike that is crippling Lufthansa looks set to continue for the rest of this week.
Two attempts by the airline to force union members to end the strike failed in the courts. Instead, it's Lufthansa that was forced to cancel more
1,800 flights on Wednesday and Thursday.
Now the disruption is to about 200,000 customers. I asked the head of communications in Lufthansa what the short-term prospects are for
passengers.
(BEGIN VIDEOCLIP)
BARBARA SCHAEDLER, HEAD OF COMMUNICATIONS, LUFTHANSA: The strikes are limited until Friday this week and then people can fly with us completely
normal again. This is a good perspective.
Of course we would like to end these strikes earlier but therefore we need to get at least a minimum agreement with the union. Let's wait and see.
QUEST: The situation appears to be getting worse though, doesn't it?
SCHAEDLER: I don't think so. You know, this is of course the heaviest (ph) and longest strike in the history of Lufthansa and it is actually
something we can't (ph) just apologize for with our customers.
It is indeed awful. But we've been making a lot of steps to work the unions. We have been offering mediation and honestly the thing that is
really difficult is to understand why the unions don't act at all constructively.
But we continue to try to get in touch with them.
QUEST: How much of this is a strike and really over the big picture - the changes that the management says are essential to make Lufthansa profitable
long term versus the union saying that it has stepped too far against the workers.
SCHAEDLER: This is a really, really good question and I'm with you - it is beyond a normal strike for pension, conditions or skews (ph).
I think it's the question of do the unions of classic Lufthansa passare (ph) accept that we're going to work in a double brand world in the future
with the new Eurowings with different working conditions, but of course competitive working conditions like in other German or European airlines.
This is one of the questions that is not on the table but of course in the background.
QUEST: Obviously it goes without saying this is a very damaging strike, but the history of these sort of strikes is that passengers soon forget and
they soon come back to you.
Is that your understanding?
SCHAEDLER: You know, this is what we - what we don't hope that they forget but we hope that they trust us, continue to trust us and that they value
the 60-year history more than this one additional week of strike and we are desperate to avoid another strike situation in the forthcoming months.
(END VIDEOCLIP)
QUEST: The Lufthansa strike. (RINGS BELL). European stocks moved higher on Wednesday when the brewer Carlsberg the way.
The Danish company gained more than 6 percent. It announced 2,000 job cuts. Carlsberg said it's scaling back operations in China, Russia and the
United Kingdom.
Mark Carney says more work's needed by banks to get their houses in order. The Bank of England governor hosting a major forum in London on the future
of the financial sector.
Now he still - Mr. Carney said, "Bankers still need to earn respect." The ECB President Mario Draghi called for integration across the Eurozone's
financial system.
And the problems continue for European banks. UniCredit announced plans to slash the workforce by 18,000.
John Kay's the visiting professor of economics at London's School of Economics. He took part in Wednesday's forum and he joins me now live from
London.
Good to see you, sir. The governor of the bank - the Bank of England - has used this phrase, you know, `Heads you win, tails I lose' as a description
of the way capitalism needs to change or the form of capitalism that needs to change.
Is he making any progress in that?
JOHN KAY, PROFESSOR, LONDON SCHOOL OF ECONOMICS: I think not much. I mean, we've done a little in terms of financial reforms since 2008 but
nothing like as much as is required actually to create a resilient financial system that actually meets the needs of the normal financial
economy, and that's what we need to do.
QUEST: And is the reason for that because of obstructionist lobbying by the financial sector or is it perhaps simply one of those issues that's
more difficult than anybody ever thought was going to be trying to be done?
[16:40:14] KAY: It's pretty difficult. There is obstructionist lobbying from the financial services industry. But the real problem is we don't
have real ideas of what to do.
When the 2008 crisis hit, we were actually thrown into panic. And all we have done really has been to attempt to intensify the regulation that are
largely failed before 2008.
It's like saying when the magic hasn't worked, what you need is more of it.
What we need is a very different approach that actually addresses the faults in the structure of the industry, the culture of the firms in it and
the incentives of the people who work there.
QUEST: You hear me see that's not going to be solved overnight, is it? I mean, and I don't say that cynically. I'm talking about to change a
culture - if you - look, if you can't change a culture after the Great Recession, Libor, Forex, misspelling of products. If you can't change a
culture after that, you're never going to change it.
KAY: Well I don't know that you're never going to change it, but you're certainly not going to change it by writing more rules.
What we need to do is first of all to start breaking up the existing financial conglomerates that today dominate our financial sector so we have
focused institutions with a clear sense of purpose and knowledge of the customers they're trying to serve.
QUEST: Professor Kay -
KAY: That's the first step.
QUEST: Right. Professor Kay, I want to just turn to one other issue. I read the Prime Minister's letter - David Cameron's letter - to Donald Tusk
setting out the whole area for E.U. negotiation that he wants for the U.K. to stay in.
One of the core things buried deep in the language is this idea of the U.K. continues to regulate for Britain, the Bank of England continues to enjoy
sovereignty in that respect. How far is the government - the U.K. government - worried about Europe, the Eurozone, trying to do over the city
of London?
KAY: I think it is worried and to some degree it's right to be worried. But actually there's very little prospect that either Paris or Frankfurt
will become a financial center to rival London.
But nevertheless, we can do a great deal of damage in terms of regulation emanating from Europe. I think part of the problem here is the extent to
which regulatory measures are actually influenced by domestic financial services lobbies.
So that to a very large extent - and this is particularly true in France and Germany - these governments equate the interests of these countries and
financial services with the interest of their large firms in the industry.
So that for Germany, financial services reform is about promoting the interests of Deutsche Bank.
For France, it's about promoting the interests of Soc Gen and BNP Paribas. And unless we address that issue - address not just in France in Germany
but even more in your country and in mine the political part of the financial services industry we're not -
QUEST: Right.
KAY: -- going to get what we really need which is a resilient financial system and one that serves the needs of businesses and households.
QUEST: Professor Kay, please come back as the negotiations continue. We're going to need your guidance and assistance to understand who's
(inaudible).
KAY: I hope I can help.
QUEST: Thank you, sir. Thank you.
Now, I have a question for you. So, is it a llama or is it an alpaca? Whatever it is, I bought it in Peru which is where we're going to be
looking how the business traveler is served after the break. What are you?
(COMMERCIAL BREAK)
QUEST: Now when I travel for business, I do like to get a souvenir from my colleagues. As you can imagine, they're always most welcome when you bring
something like this home.
I still haven't determined @richardquest whether it's an alpaca or a llama. But whichever it is, when it comes to the llama, it's actually a real
symbol of the country's traditions.
The Incas used llamas for wool and for food and as a mode of transport. Over the course of the next few weeks on "Business Traveller" we're going
to be bringing you key figures in the Peruvian travel industry. It is growing fast and it is about to really take off.
So today let's start with the chief executive of Peru's largest hotel group, a group that wants to frankly monopolize the market -- Casa Andina.
(BEGIN VIDEOCLIP)
QUEST: So this is one of you Private Collections?
JUAN STOESSEL, CEO, CASA ANDINA: Right. This is the oldest one. We start 13 years ago. We start with -South Surguit (ph) with a three-star pay
hotel chain, you know?
In Olga (ph) from Lima to Old Surguit (ph) or around Cusco.
QUEST: Casa Andina is by far Peru's largest hotel chain with 23 properties across the country and two more opening before the end of the year.
And it's not just the number of places where they are, it's their location in both major and minor markets.
STOESSEL: The three-story is a Classic brand. Then we add the Select brand and the Private Collection brand which are our 4 and 4+ star.
We are located not only now in the South Surguit (ph), but we are located now in the North Surguit (ph) and also in the jungle.
QUEST: You've got 23, you're going up to 25 hotels. You've pretty much got universal coverage in Peru.
STOESSEL: We are by far the largest hotel chain in Peru, no, with these 25 properties. The chain that follow us has only eight hotels.
QUEST: How big do you want to get? You've got the market.
STOESSEL: We have a big part of the market, and having the 3, 4 and 4+ is --
QUEST: Hang on, hang on. But you are three times larger than your nearest competitor?
STOESSEL: That's right.
QUEST: Casa Andina now essentially has the market to themselves and they aren't stopping.
So where do you grow?
STOESSEL: Because we have these three brands, we are able to grow everywhere. But there are also important cities that are growing for terms
(ph) three our brand goes perfectly there.
QUEST: They follow the format of the big international chains, having different brands at different prices.
So when do you think an expansion into neighboring countries might take place?
STOESSEL: It might have a lot of sense to have a Casa Andina a brand in our neighbors like Ecuador, like Bolivia, like the north of Chile probably,
Colombia and probably those are the most - it makes the most sense to be there.
(END VIDEOCLIP)
QUEST: Casa Andina. And I still haven't decided a llama or an Inca.
One day's shopping and nearly $13 billion - what China hopes to show the world with the biggest online shopping day in history. And of course
you'll want to make a moment pause "Make, Create, Innovate."
(COMMERCIAL BREAK)
[16:52:26] QUEST: So the e-commerce giant Alibaba rang the Wall Street opening bell on Wednesday and did so from Beijing.
(BEGIN VIDEOCLIP)
(CHEERS AS OPENING BELL IS RUNG)
(END VIDEOCLIP)
QUEST: Slightly unusual bells. The chairman Jack Ma and the president of the Exchange Tom Farley they teamed up they were marking "Singles Day"
which is China's answer to Cyber Monday, the biggest single day of shopping anywhere in the world.
The past 24 hours have smashed the previous days' records by near $4 billion -- $13 billion was on Singles Day. Inside the first eight minutes,
$1 billion was spent on Alibaba's shopping platforms.
The company's virtual tills rang up more than $14 billion by the end of the day. What an extraordinary amount of money.
Alibaba was not the only one having a great Singles Day. Xiaomi broke records of its own -- $196 million in sales. The Chinese company is
challenging its Western rivals in everything from smartphones to cameras.
Our business correspondent Samuel Burke has tried out some Xiaomi.
(BEGIN VIDEOCLIP)
SAMUEL BURKE, CNN BUSINESS CORRESPONDENT: This is the Xiaomi Yi action camera. Xiaomi is one of the biggest smartphone makers in the world, and
this Chinese company has become one of the most valuable startups on the planet.
Their smartphones aren't actually in that many countries but their little camera is. It's main competitor? The GoPro.
And while these two cameras may look very similar and have nearly identical specs, the GoPro will cost you nearly three times more.
So we asked New York's Zipline Adventure Tours to let us take them on a ride and see how they compare.
Both cameras are easy to set up using a smartphone app, but when you're zipping through the woods you don't want to keep on fiddling with your
phone.
That's where Xiaomi comes in short. It doesn't have the small screen GoPro has that shows you which setting is on.
UNIDENTIFIED MALE: You're good to go, man.
BURKE: How do I get myself into this stuff?
UNIDENTIFIED MALE: Three, two, one - zip away!
BURKE: Oh! Here both cameras are in automatic mode. You can see the overall video quality is pretty close. GoPro produces a more balanced
picture and Xiaomi slightly overexposes the shot.
I'm going down fast but not as fast as GoPro's stock - up 70 percent in the past 12 months.
Despite investors' confidence zipping down, GoPro's sales are still shooting up. So it will be an uphill battle for Xiaomi to replicate
GoPro's success.
[16:55:07] With this camera Xiaomi's showing that its technology can compete with the big boys, but the question of whether it can build a
relationship with retailers and wireless carriers to bring its smartphones to countries like the United States, is still up in the air.
Samuel Burke, CNN, Hunter, New York.
(END VIDEOCLIP)
QUEST: Extraordinary. What on earth is that shirt? I'll have a "Profitable Moment" after the break.
(COMMERCIAL BREAK)
QUEST: Tonight's "Profitable Moment." Microsoft's decision to open two new data centers in Germany that will be run by trustees Deutsche Telekom
is both a reflection of the reality and also something deeper.
The reality that the European court has ruled that safe harbor means data can't be transferred from Europe to the United States.
So much for the legal position. But it's also a reflection of another form of reality - Europeans want safety and security with their data, and that
also means not only from hackers but also from intrusive governments.
Microsoft is a global company. It may be based in Redmond in Washington state, but it recognizes and realizes the various views of people outside
the U.S.
They don't want the U.S. government snooping on their data. Of course, who will be allowed to snoop and under what provisions and circumstances - well
now that still has to be worked out.
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. I'll see you tomorrow.
END
