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Quest Means Business
FAA System Outage Causes Flight Disruptions Across US; Markets Up Ahead Of Inflation Report; Uniqlo Owner To Raise Pay In Japan By Up To 40 Percent; Russian Budget Tips Into The Red As Sanctions Bite; Bernard Arnault Promotes Daughter Delphine To Dior CEO; English Premier League Spending; Experts Warn TikTok Use May Be Linked To Addiction, Depression; Profitable Moment. Aired 3-4p ET
Aired January 11, 2023 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, CNN INTERNATIONAL HOST: We have an hour to finish before trading is over at 4:00 PM, and if you look at the market, you'll see that
we're building on yesterday's gains, quite sharply, dramatically, in fact, strong results.
There is a feeling that something has changed. Something is different. We'll talk about it over the program.
The markets and the main events. Today, it is travel chaos in the US, after a national computer system failed.
Succession planning at LVMH. The world's richest man has promoted his daughter.
And the era of cheap money may not be over. Olivier Blanchard joins me to discuss why high interest rates may not be here to stay.
We are live in New York as you would expect, middle of the week, Wednesday, January 11th. I'm Richard Quest and I mean business.
Flights in the United States are slowly getting back to normal after a major computer failure dramatically disrupted air travel this morning. For
two hours, the FAA, the Federal Aviation Administration stopped planes taking off. It is called a ground stop. It was after a crucial safety
system went down.
And the ripple effects as you would expect. Well, more than seven and a half thousand flights were delayed, and also 1,100 cancellations. Here is
another look at the impact of the disruption. This is what the skies over the Northeast and the South looked like at 8:30 yesterday morning. Now look
this morning. Considerably less, and that's because there were those that were in the air, they carried on. There were those that left before, they
carried on, but no more joined the throng before being allowed to start again.
Worryingly, the cause of the outages are still unknown. The US Transportation Secretary Pete Buttigieg told us the FAA's technology must
(BEGIN VIDEO CLIP)
PETE BUTTIGIEG, US SECRETARY OF TRANSPORTATION: We have to understand how this could have happened in the first place. Why the usual redundancies
that would stop it from being that disruptive did not stop it from being disrupted this time.
KATE BOLDUAN, CNN HOST: Any indication that there was a cyberattack involved?
BUTTIGIEG: There has been no direct evidence or indication of that --
(END VIDEO CLIP)
QUEST: Now, before we get to further into what may have happened and how it happened and all of that, I need to update you on actually what is
happening at the moment.
Amara Walker is at Atlanta International Airport, joins me now. Are things slow, but sure, but things are moving?
AMARA WALKER, CNN CORRESPONDENT: Yes, things are moving here at Atlanta International Airport, the world's busiest airport. I do want to mention,
you know, through at all, we did not see scenes of chaos here at this airport, nor do we see long lines. We've been here since seven o'clock this
morning. And airport officials credit that to the fact that January is a slower time of year to travel. And of course, Wednesday is also a slower
time of the week.
But as you mentioned, flight operations have resumed as normal per the FAA for the most part. But as you'd imagine, a lot of the airlines are now
dealing with this ripple effect. They are here playing catch up, trying to get these planes, many of them back in the air back on schedule, getting
passengers rebooked as well.
And hence, we are still seeing the number of delays and cancellations still tick up very slowly. So, as of now according to FlightAware.com, the number
of delays as now for flights in and out of the US is now at around 8,300; number of cancellations at about 1,200.
So obviously a lot of passengers are really inconvenienced. I've been talking to a lot of people throughout the day. People have been pretty
calm. They've been taking things in stride for the most part because they realize that this is not nearly as bad as what we saw two to three weeks
ago during that Holiday nightmare, that winter storm causing massive, massive delays and cancellations and of course, the Southwest Airlines
QUEST: Right. I think sort of, there is a resignation amongst travelers, a sort of a weariness that this is just what it means to travel today.
WALKER: Yes, that's true. I actually spoke with a woman who said that she was in an Uber on her way to Atlanta International Airport when she got an
alert that her flight on Southwest Airlines had been delayed.
And of course, her first thought was, oh gosh, is this what I'm going to be dealing with? Are they having another meltdown. Oh well, I'm here at the
airport let me just see what's going on.
Thankfully, she said, it turned out to be a different problem.
Not on the same scale, not the same kind of duration where you're seeing people stranded at the airport for days. But yes, there was a sense of
resignation from some people who were like, all right, well, this is the new normal -- Richard.
QUEST: Good to see you, Amara. Thank you. That's Hartsfield. Thank you.
So what failed? The FAA's NOTAM, the Notice To Air Mission System or Airmen as it used to be called. That failed. It sends alerts to pilots, updating
them on the conditions that could affect the safety of their flight.
The US aviation regulator still doesn't know what was behind the outage, as you heard from the Secretary a moment ago, and the calls are thick and fast
for the system to be upgraded.
Mary Schiavo is with me, our CNN aviation analyst, former Inspector General of the US DoT. She is with me from Charleston, South Carolina.
Well, now, we have -- this is really interesting, isn't it? Because it begs the question, look, stuff is always going to happen. There are always going
to be failures.
But as the Secretary said, really, this is about why the redundancy didn't pick up the slack.
MARY SCHIAVO, CNN AVIATION ANALYST: Well, I think this shouldn't come as a surprise to the FAA because my old office, the Office of Inspector
General way back in 2011, audited this automation system and many more. And we said, Look, FAA, you're not on top of this automation system, you
haven't even -- it's not even anywhere being finished and the cost overruns were in the millions, hundreds of millions of dollars. And we're not really
sure that anyone even understands it is on top of it.
And most important, they said no one in the FAA is taking responsibility for this. There is no ownership. And this is part of a huge system called
the SWIM System, the System Wide Information Management System that runs things that are, you know, just as vital or more vital than the NOTAMs. It
runs the entire communication system throughout FAA and Air Traffic Control.
QUEST: But, Mary, now, billions have been allocated for the next generation air traffic movement system. And so we -- you know, the money
is, I mean, feel free to tell me I'm wrong, but is this a shortage of money? Or is there's a shortage of will?
SCHIAVO: It is a shortage of oversight. So the money -- this has happened, literally, I mean, time and time again. When they were starting
to build the system out, they had the system somewhat built, they had a million or so lines of code they couldn't fix, and they scrapped it. And
this was probably two or three decades ago.
And then they started over again, and again, and then again. They keep changing contractors. Just a few months ago, they dumped another contractor
and not with this program, another one. And so the FAA isn't really on top of the contract.
So, so much of this money that the National Airspace System needs -- desperately needs -- gets wasted, because no one's really managing the
(AUDIO GAP) -- they waste it.
QUEST: Now, the aviation system in a country the size of the United States is fundamental to the economy of the country. We can all agree on
It is the modern roads, it is the bridges, but it's the necessity. So why do you think there is this inability? Now, I tell you what I say this,
because I've already seen comments from the new Chair of the House Transportation Committee saying we're going to hold hearings, and I often
wonder whether the politicians don't realize that they're part of the problem, not the solution.
SCHIAVO: Well, that's right. They are a part of the problem, because they -- you know, back when I was in the government, it was freely acknowledged
that once the cameras you know are turned off, and the reporters go away, the will to do anything also dissipates.
And it's a revolving door in the government. I mean, you put somebody in charge, and Congress holds hearings and said, your head is going to roll.
Well, likely, it is not. They're going to hit the revolving door before that ever happens.
And I really think that it is a lack of understanding. For example, this system is not one, you know, it's really nothing more than an electronic
billboard. But it's an electronic billboard that goes worldwide.
I mean, in Europe, they have to consult this before they fly into the US to know which runways to use at which airports, and what they haven't realized
are the literally hundreds, if not thousands of different contractors that have to coordinate in the system, and then airlines and contractors around
the world around the world are allowed to connect.
So I'm not surprised at all that the system failed and the redundancies aren't there, even though back in the beginning when they were building the
next-gen system, they were supposed to have three systems; one to run, one for maintenance, and one is a backup and we just don't have that.
QUEST: Mary, you'll help us understand more as we continue to watch.
QUEST: Thank you. I appreciate it.
SCHIAVO: Thank you.
QUEST: As we continue after the break, the IMF's former Chief Economist doesn't think two percent is the right target for inflation. His new book
is all about fiscal policy in the monetary policy age. Olivier Blanchard is with me after the break.
QUEST: The Dow is up 200 points, 230 points as we wait for tomorrow's Inflation Report. It has been gaining steam steadily throughout the course
of the afternoon, and the triple stack is also doing very well. It's up three percent since the year began and it looks like it'll be a four-day
winning streak. And in fact, interestingly, that'll be the first four day streak since September.
So you can see things -- I guess, the issue is whether there is a mindset change.
Rising inflation brought the era of cheap money to an abrupt end. Olivier Blanchard believes it's only a matter of time before it returns. He is the
Chief Economist at the IMF, and he says the underlying forces that led to rock bottom rates still exist.
The Federal Reserve's goal of two percent inflation may be too ambitious, arguing it can loosen up once inflation hits three or four percent.
Olivier is with me now. He is a Senior Fellow at the Petersen Institute for International Economics. Your book is "Fiscal Policy" or essay is "Fiscal
Policy Under Low Interest Rates."
And your fundamental tenet is that debt -- debt when used properly, is a good thing. I guess the problem is, too many people don't actually use it
as a good thing.
OLIVIER BLANCHARD, SENIOR FELLOW, PETERSEN INSTITUTE FOR INTERNATIONAL ECONOMICS: Right. Right, exactly. And there is always a risk that leaders
used and used readily.
The argument is that if interest rates were going to low levels after we finished the fight against inflation, which will come, I think within a
year or two, then I think interest rates will be very low. And when interest rates are very low, then it makes sense to actually use fiscal
policy and possibly deficits and possibly debt to do useful things.
There is more room to play with, than most people believe. So I think the big question is, you know, what happens to interest rates looking a few
years out? And that's clearly one of the big questions that I have to deal with in my book.
QUEST: Right? So if you take a terminal rate of say, five percent in the US, where does it fall back to? Where do you see the long term rate in the
BLANCHARD: So I think in terms of real wage rate, it is adjusted for inflation and so before the COVID, we would have minus one, minus two
percent. And the question is where do we go back to?
So for the moment, clearly, the rates are higher. The nominal rates are higher, but inflation is higher. So even the real rates are not terribly
high for the time at which we are really fighting inflation by tightening vital policy.
But the question is, put that yourself, you know, a year or two out, where do we go back to? And I think we go back to something like what we had
before, which is very low, nominal rates and the low real rates.
And if I'm right, then this is an environment in which monetary policy will be constrained again, not in tightening. We can tighten easily, but in
helping and where there is more overall for fiscal policy.
QUEST: We saw fiscal policy come in direct conflict with monetary policy in the, in the UK during the Liz Truss fiasco, at the end of last year.
Now, we want to get into the UK political merit, but we've seen time and again, governments try trying to push against what Central Banks are doing.
BLANCHARD: Yes, I mean, there is no question that there was a bomb in the UK a few months back, I think the reason was not that Miss Truss was
pushing for a deficit, it was more of a notion that she didn't know what she was doing.
My sense is that we've seen this during the COVID crisis, the markets have given a pass to fiscal policy where it was used for the right things,
mainly in Europe to protect people against the high gas prices, for example, electricity prices.
In that case, I think the market realized that there was enough room to do it, and it was a good thing to do. But if you do something, you're
responsible, then the markets will react and they did, right?
QUEST: We're going to get to a position probably later this year, arguably, next year probably where Central Banks are going to have to
decide, do they -- I mean, well, they've said they're going back to two percent as being the target rate. There will be a moment where people will
say, well, it is not bad, we're close enough, we can pivot. Do you buy that?
BLANCHARD: I buy that as a discussion, which will surely take place. I mean, suppose that a year or a year and a half from now, we're down to say
three percent in the US, and the Fed says, well, we're not at two percent, you know, we have to actually tighten credit. We have to decrease the goal
in order to get from three to two. I think, there will be a very serious discussion. People will say, are we really ready to have maybe even a
recession in order to get to two? So I think the issue will come up.
And what I've argued is that, again, ignoring the political economy of it, which is very important is that three percent is a perfectly reasonable and
actually desirable number, rather than two.
And the reason for this is, I mean, there are many reasons, but one of them is that if you have inflation running on average at three percent, then you
have nominal rates, dollar rates at three to four. And the room that monetary policy has to play with is slightly bigger. It can decrease the
rate from four to zero, where if it were two, then it can only decrease the range from three to zero.
So I think it gives a bit more room for monetary policy to help when needed, and therefore less need for fiscal policy to help. So I'm pushing
the idea that three percent is a better target.
At this stage, I think the Central Bank should be silent about this, they should say first we get to three, and then we'll see what we do. I don't
think it would be wise to have a debate in Central Banks at this point, but they just wanted to raise the issue.
QUEST: And yesterday in his Riksbank speech, Jay Powell -- I mean, he did exactly, he didn't go down the monetary policy route, but he did say
Central Bankers must not become political in the sense of allowing the agenda, climate, all of these other issues that are now part of Central
Bankers remit or self-appointed remit, very different what he said to the way Christine Lagarde views it at the ECB.
BLANCHARD: I was very happy with Jay Powell's speech. I think that you know, Central Banks cannot do everything. They can do something which is --
and it is not easy, but it can kind of slow down the economy, accelerate the economy, control the inflation rate, and even then, we know that it is
not so easy and they don't do a great job, but they do the best they can.
When you task them with other things, income distribution, global warming and so on, it is just not what they are supposed to do. So within their
remit to the extent that it is relevant, they should take it into account.
But I fully agree with Jay that it is a good thing to focus on what their main mandate is, which is keep inflation low, and make sure the economy is
as close as possible to potential. I was very happy with that speech.
QUEST: Olivier, it is good to see you, sir. I'm grateful. Thank you.
BLANCHARD: My pleasure. Thank you.
QUEST: Now to Japan, we're rising inflation has caused a sharp drop in living standards. The Bank of Japan's Governor says businesses should raise
wages, as prices rise. Uniqlo's parent company, Fast Retailing, is now the latest Japanese company to answer that very call. Employees will get paid
up to 40 percent more.
Paul La Monica joins me.
I was listening to the radio and I heard you. In Britain, there are strikes for nurses wanting 10 percent, they're not getting it. In the US, there are
strikes with people wanting six, seven, eight, nine percent; they are not getting it. So why these very large wage rises in Japan?
PAUL LA MONICA, CNN BUSINESS REPORTER: Yes, it is a fascinating question, Richard. I think that for Japan, it is a country that had been so used to
deflation for so long. I mean, we had talked about the lost decade or decades for Japan, because of how low interest rates were at zero for an
extended period of time. Inflation didn't really exist.
Now that inflation has come at a vengeance in Japan, just as it is, in the rest of the world, Japanese companies are facing pressure to raise wages
and salaries in order to compensate for the fact that the price of just about everything has gone up.
And I think, you know, it is not really as expected a phenomenon as it is in other Western nations that you point out like the US and Europe where
there might be a little bit more resistance to pay wage increases at a time where inflation is really hurting everyone.
QUEST: All right, but this deflation in Japan, which we've seen for so long. And the inflation is arguably -- I mean, the Central Bank in Japan is
still adopting overall, and primarily, a very different monetary policy to say the ECB, BoE or Fed?
LA MONICA: Yes, that is definitely true. You are not seeing these overly aggressive interest rate hikes to try and fight inflation. But by doing
that, I think that is part of the potential problem, because Richard, everyone is hoping that when the US inflation numbers come out tomorrow
morning, Consumer Price Index, then we're going to see a moderation in price increases.
And that would make sense, because we've already seen in the latest jobs figures, that worker pay is not going up as dramatically as it was and
typically, when wages aren't going up as much, you're not going to see consumer prices go up that much, either. Because companies realize that
they may not have that leverage to keep raising prices, even if economic forces dictate that they should be because of what's going on with
commodities and other costs that might be out of their control.
QUEST: Paul La Monica, good to have you, sir. I'm grateful.
China is feuding with its neighbors about COVID travel restrictions. Beijing has suspended new travel visas to people from Japan and South
Korea. Those two countries require Chinese arrivals to take a COVID test. It is now casting a doubt over the travel rebound as the country reopens
CNN's Marc Stewart is in Hong Kong.
MARC STEWART, CNN CORRESPONDENT: China is open and that means tourists can travel the world and come to cities including Hong Kong, and once they
are here, spend money. A potential jolt at a time when many economies around the world are struggling.
KI KI YANG, RETURNING TO MAINLAND CHINA: This is a very famous cooking in Hong Kong.
STEWART (voice over): Ki Ki Yang is packing for herself and others.
YANG: This is a gift for my father.
STEWART (voice over): She is heading home to China with a specially purchased suitcase just to carry her gifts from her base in Hong Kong. She
has been away for a year after stringent COVID restrictions prevented her from seeing family and friends in China.
YANG: Even a list -- a list for me of what to buy and what they want.
STEWART (voice over): Yang represents an economic jolt that will be felt around the globe now that travel restrictions to and from China had been
IRIS PHANG, CHIE ECONOMIST, GREATER CHINA: So there will be extra demand in this world that hadn't been seen for three years within China and also
for the rest of the world.
STEWART (voice over): China is the world's second largest economy with a population of more than one billion people. Asia beauty store giant, Sasa
is hoping to benefit.
DANNY HO, EXECUTIVE DIRECTOR AND CFO, SASA INTERNATIONAL HOLDINGS: Just think about the number of consumers. I mean, the level of consumers and the
increase in spending power they have, the propensity to spend is quite massive.
STEWART (voice over): And then there is the travel component. In Thailand, a welcome banner at the airport as Chinese tourists begin to
visit once again, promoting a lasting friendship between the two nations.
The government even held a special ceremony for Chinese visitors as the first flight arrived. Popular attractions like the Erawan Shrine and the
Golden Cabaret are preparing for crowds after the COVID drought.
A Thai official hopes the new arrivals will revive the economy, yet, in some parts of the world, the welcome is far from warm. More than a dozen
countries including Japan are now testing travelers from China, which China is protesting.
In Milan, Italy Airport, workers sanitize luggage; and in Brussels, Belgium, wastewater from a jet is removed for analysis. All of this, as
China's COVID restrictions disappear while the case count is exploding, and hospitals are overflowing.
As for Ki Ki, there is something that won't fit in her suitcases -- precious time with her loved ones.
STEWART (on camera): This is not just about spending money. The opening of travel to and from China means face-to-face meetings instead of video
calls, a chance for business leaders to rebuild business relationships that may have been tarnished during the pandemic.
Marc Stewart, CNN, Hong Kong.
QUEST: QUEST MEANS BUSINESS continues. Bernard Arnault is keeping his business in the family, quite literally. His daughter has a big promotion
and we'll discuss the future of the luxury empire in a moment.
QUEST: Hello, I'm Richard Quest. We will have a lot more QUEST MEANS BUSINESS together. We'll talk about the big promotion for the daughter of
the Chairman of LVMH, Bernard Arnault is turning his family control of the company.
And chief executive of Arsenal about its success this year in the Premier League.
More importantly, how much money is he going to spend in the transfer window?
This is CNN and, on this network, the news always comes first.
QUEST (voice-over): French police say an armed attacker has hurt at least six people at a Paris train station. The Paris prosecutor described the
weapon as a metal hook. Officials say the suspect was shot by the police and is now in hospital. And no motive has been given.
Brazil's supreme court has ordered national authorities to secure buildings and highways in anticipation of more pro Bolsonaro protests. The social
media page that has been shared by Bolsonaro's supporters is calling for demonstrations to retake power later today.
Congressman George Santos has told reporters he won't resign after a group of senior New York Republicans have called him to go. Santos has admitted
to repeatedly lying about his education and employment record on the campaign trail.
QUEST: You'll be well aware that on QUEST MEANS BUSINESS we never count dollars before we count the bodies. Even so, the economic aspect to what's
taking place in Ukraine is crucial. The war there is now taking a financial toll on Russia. It has lost many thousands of its service men.
The deficit ran $47 billion last year, more than twice the projected amount. The finance minister has blamed it on social programs. However,
CNN's Clare Sebastian says the grinding conflict is more likely to blame.
CLARE SEBASTIAN, CNN CORRESPONDENT (voice-over): More than 10 months into a war that he hoped to wrap up in days, President Putin is preparing his
people for a long and costly battle.
VLADIMIR PUTIN, PRESIDENT OF RUSSIA (through translator): We have no limits when it comes to financing. The country, the government gives the
army everything it asks for.
SEBASTIAN (voice-over): It's not just the high tech drones and tanks or the new frigate loaded with hypersonic missiles; according to an estimate
in July from British think tank RUSI, at the height of the fighting in the Donbas, Russia was burning through more ammunition in two days than the
British military has in stock.
The impact of that clearly showing up in the Russian budget.
SEBASTIAN: This was the official estimate for last year. Defense spending was expected to have grown by about 30 percent compared to 2021. National
security spending meanwhile, about 20 percent.
But oil and gas revenues were expected to grow by about a third. They ended up coming in higher than expected, according to the finance ministry. But
so did spending, tipping the budget into a bigger than expected deficit.
This year, we are looking at more defense spending, a rise of about 6 percent. That's roughly in line with inflation. But add to that a 58
percent planned increase in national security spending and a complete reversal of last year's oil and gas windfall and this means budget cuts.
SEBASTIAN (voice-over): Roads, agriculture, even health care all getting hit.
ELINA RIBAKOVA, DEPUTY CHIEF ECONOMIST, INSTITUTE OF INTERNATIONAL FINANCE: (INAUDIBLE). I like what President Putin says. And I think he understands
it better than anybody else because this is authorities were in power already in the '90s when Russia went through a severe crisis, dip or
delamination (ph), devaluation.
And I think they remember that. If that were to happen, it will be even faster way for them out of the office.
SEBASTIAN (voice-over): Keeping Putin in power and fighting a war is expensive. Next year, Russia has allocated almost as much to national
security, which also includes law enforcement as it has to defense, according to the budget passed early last month, a sign Moscow may still
intensify its crackdown on protests and dissent.
URSULA VAN DER LEYEN, PRESIDENT, EUROPEAN COMMISSION: We all know that European solitary --
SEBASTIAN (voice-over): And experts say even with an E.U. embargo on Russian seaborne oil, a price cap mechanism in place and lower energy
prices, Russia is not facing an imminent budget crisis.
RIBAKOVA: Well, we did not implement energies sanctions up until now right, embargo just came in. So what happens, Russian (INAUDIBLE) last year
was more than 200 billion. So if you think about it, if you arrested about state (ph) roughly 300 billion in reserves, Russia already accumulated more
than 200 billion just last year.
SEBASTIAN (voice-over): Pressure is still mounting. If the E.U. and G7 lower their oil price cap below $60 a barrel, that would likely hurt
revenues. And technology sanctions make it harder for Russia to modernize its military. Still, behind the propaganda, it's clear Russia has a
financial plan to fund this war.
Even as its people pay an ever increasing price -- Clare Sebastian, CNN, London.
QUEST: You need to think of this next story as a real life version of the HBO hit series, "Succession." This time it's taking place at LVMH. So the
world's richest man, Bernard Arnault, has promoted his daughter to run Dior, one of LVMH's 75 signature brands along with Louis Vuitton and Moet &
The promotion sets up possibly Delphine Arnault to run the whole thing one day. You see, there are five children in all. In some shape and form, they
are all in leadership roles. The oldest son is running the family's holding company. The others are at Tiffany, TAG Heuer and Louis Vuitton. Jim
Bittermann is in Paris.
So the first question, just set the parameters. Let's stick with "Succession," if we may.
Do the siblings all get on?
JIM BITTERMANN, CNN SR. INTL. CORRESPONDENT: As far as we can tell, there are no knives in anyone's back. The fact, is they do get together. There
are apparently some family lunches on Sundays or whatever.
Of course, we would love to be a fly on the wall for those. But the fact is, they do seem to get along. They have been groomed for now decades by
their father, Bernard. The world's richest man, worth supposedly 160 billion, according to "Forbes" magazine, has been grooming very carefully
his two children by his first wife and the three children by his current wife.
And all of them are being now, as you said, are in management positions. But what was most interesting in the last two months, actually, the changes
that are taking place in the management which seemed to be an effort to consolidate the family's hold over LVMH.
Last month, Antoine Arnault, the second child of Bernard, was named to be the CEO of the family holding company. So that is a very important position
because it own 56 percent of LVMH.
But today, what was announced, Delphine Arnault, who's the oldest child, has been named to be the head of Christian Dior. And she was at LVMH; the
head of Christian Dior was moved over to LVMH. So it sounds like moving the chairs around.
Except that she now has had working experience at the two top brands in the LVMH empire, the ones that account for almost 50 percent of all the income
of LVMH. Richard.
QUEST: Is there any indication that Dad is off?
He's decided to retire and head off into the blue yonder?
BITTERMANN: Well, it's not impossible. But he's 73 years old, which is relatively young for a CEO. He also just recently raised the retirement
ages for CEOs in the company to 80 years old. So he's got latitude there.
But he's a very cautious, careful, precise person who plans things out. And he's been planning this succession for some time now; perhaps as long as
two years ago he started this whole thing into operation.
Certainly he's been grooming the children for many years, for decades.
In fact, there is a story, apocryphal or not, that when Antoine, number two among the children, when the -- Alexandre, the number three, was born, 14
years before he was born, when Alexandre was born, Antoine sent him a postcard that said, "I hope you are prepared to work," just a few days
after he was born because that is what the family does.
With the Murdochs, the Arnaults, thank you, Jim. Jim Bittermann in Paris tonight, thank you.
Arsenal are on top of the English Premier League halfway through the season. Now they haven't got there just by spending big. The club's chief
executive and what sets them apart, particularly focusing not so much as the pitch but perhaps the fans and the spirit of community that drives them
forward -- in a moment.
QUEST: Arsenal is at the top of the English Premier League, it is the midway point of the season. It is important because they haven't won a
title in nearly two decades. Arsenal is by no means a small club.
But it is being outspent by rivals. Chelsea, for example, has splashed the most cash in the summer transfer window, more than twice as much as
Arsenal, you see the numbers there.
Throwing cash around isn't always the answer to a team's success. And for the Gunners, the investment in scouting and player development are now
starting to pay off.
Vinai Venkatesham is the chief executive of Arsenal, joins me now from London.
Sir, it is good to see you. Before we get to the minutiae of where you are going to spend your cash, these new murals that you have put on the
Emirates stadium, the reason and that purpose of them, I mean, we are looking at them now.
Why did you feel that you want to put these up?
What do they tell you about that club and its fans?
VINAI VENKATESHAM, CEO, ARSENAL FOOTBALL CLUB: Well, listen, the genesis of this project is all from our fans. Our fans told us that they in fact
felt it was time, not only to replace the eight banners on the outside of the Emirates stadium but to change them entirely.
And we have run a massive consultation process involving more than 100 supported ex players, ex players' families, members of the community to
redesign these banners. The Emirates stadium is already iconic. And we are going to have eight new pieces of art hanging from it, completely changing
what the stadium looks like.
And also changing what the North London skyline looks like. And the reason we've done it is all in response to fan feedback. They wanted us to make
this change. And we've involved them in the process to make those changes.
And today we are launching these banners right in the heart of Islington and the fan reaction so far has been fantastic, which is great to see.
QUEST: Now the fan reaction certainly will be interesting on the murals; they will be even more interested if you bring Mykhailo Mudryk to Arsenal.
Where do we stand on that?
Have you got your checkbook ready?
VENKATESHAM: Well, you will not be surprised to hear that I'm not going to talk about individual players. But of course, we are in a transit window at
the moment. Edu Gaspar, our sporting director, has a long term plan around how we want to strengthen our squad.
And whenever transfer window is open, as an opportunity for us. And of course, when a transfer window is open, we are always looking to see if
there's an opportunity that makes sense for us.
If an opportunity makes sense for us, we will do it. And January is no different from any other transfer window.
QUEST: Define what makes sense?
You're at the top of the Premier League, you're also obviously going to hope to stay. There Champions League, championship finals are giving you
more difficulty. So in this scenario.
And assuming you've got the cash, what makes sense?
VINAI VENKATESHAM, CEO, ARSENAL FOOTBALL CLUB: Well, of course, you are. Right we have had a great start to the season. We are only halfway through,
as you said. We will take each game as it comes, stay humble and see what we can do trying to win every game as we go.
In terms of the transit window and your specific question, in terms of what makes sense, it is always the same equation.
Can we find a player that we think is really going to add something to the squad?
And can we find a player where we think the price of that player makes sense?
And when those two things make sense, we will make a move. When something doesn't make sense, we need to be patient.
QUEST: We are a business program so -- and you are the CEO. So you are used to looking at the balance sheet. Let's talk some of the business
aspects. The cost of a season ticket now, it is over $4,000, 3,200-odd pounds. This again, balancing act.
The U.K. is probably in recession at the moment.
How are you going to navigate the ability to raise revenue and, at the same time, be a fan based club and not go broke at the same time?
VENKATESHAM: Well, we have multiple revenue streams. We always have our broadcast revenue stream. We have our match you talked about, we also have
commercial revenue stream.
So of course we need to drive our revenues forward across the board. And then, effectively, they cover virtuous circumspinning (ph). We drive more
revenue, we invest on the pitch, we are more successful on the pitch and we can drive more revenue.
Of course, it is tough economic times at the moment that we have to navigate. But the challenge remains the same, to continue to grow the size
of our business so we can invest more on the problem side to give us the best chance of being successful on the pitch and tripling our objectives,
which are to compete for the biggest trophies in the game.
QUEST: When you look back at the whole ill-fated Super League, what do you make of it?
I mean, obviously the question is whether there was something along those lines came up again, would you be -- I'm not asking would you join.
Would you be interested?
Would you take a meeting even?
VENKATESHAM: Listen, as far as we are concerned, the Super League is in the past. It was something that we apologize for and we move on from and in
terms of a Super League going forward, it is not something we're interested in.
QUEST: Back to the game. Back to the way, it is looking good.
What do you think has changed that has allowed you to propel Arsenal that little bit harder and further this year?
Is there something, as you look at the team -- the composition, the strategy, the match day strategy -- can you see something that you think
VENKATESHAM: I think there is great momentum at this football club on and off the football pitch. On the pitch, our men's team, of course, are doing
really well. Our women's team are doing fantastically well. Our academy continues to promote players into our first (INAUDIBLE).
So I think it's a combination of factors. I think, right at the heart of it, coming back to the project today, has been that connection and the
strengthening of the connection that we have with our fans.
And today is a great example of that for this. We are changing the banners on the outside of the stage. And we are doing that hand in glove with our
supporters, involving them every step along the process. And that is what we are doing at this football club.
Making sure we are involving our supporters in the big decisions that we make to make sure that the connection between the club and the supporters
is as strong as it possibly can be. That helps us have a fantastic atmosphere in the stadium and it helps us fuel performance on the pitch.
QUEST: I think I am looking forward to -- we need to do a QUEST MEANS BUSINESS from the Emirates stadium one night, come and talk business --
QUEST: -- we look forward to that. Absolutely. Thank you sir, I'm grateful. Thank you.
Now we were talking about the cost of the tickets. So a bit of every day inflation, which is what we like to make relevant, Arsenal fans can breathe
easier than some. High inflation may have kept the season tickets high and stable as we talked about.
This season it was up 4 percent, lower then broader U.K. inflation. Before that, Arsenal hadn't increase prices for seven years. The average ticket
price is about 1,500 if you can get, one.
And this is the key to it. There's a 5 to 10 year waiting list to actually get a season ticket. QUEST MEANS BUSINESS tonight, TikTok has taken
teenagers by storm. The critics say it is taking a toll on their mental health.
QUEST: The pressure is increasing on TikTok on both sides of the Atlantic. The chief executive meant E.U. officials yesterday on privacy and safety
concerns. In the United States, some say the app is contributing to a youths' mental health crisis. CNN's Vanessa Yurkevich reports.
VANESSA YURKEVICH, CNN BUSINESS AND POLITICS CORRESPONDENT (voice-over): In just five years, TikTok has amassed more than 1 billion global users.
Eyeballs around the world glued to the endless content and viral videos. How long do you think you spend on TikTok every day?
UNIDENTIFIED MALE: Two to three hours probably.
UNIDENTIFIED FEMALE: Three, four hours.
YURKEVICH: But last month, the U.S. government along with more than a dozen states banned TikTok on most federal devices citing national security
concerns over its Chinese parent company and the possibility it could pressure TikTok to hand over personal data.
There is no public evidence the Chinese government has done that but there is evidence of another risk, social media's impact on mental health,
particularly among Gen Z.
DR. JEAN TWENGE, PSYCHOLOGIST, SAN DIEGO STATE UNIVERSITY: The depression started to rise after 2012, so did self-harm and suicide.
YURKEVICH: Dr. Jean Twenge says, as smartphones and social media grew, so did the rate of depression among teens, nearly doubling between 2004 and
2019. By that year, one in four U.S. teen girls had experienced clinical depression, according to Twenge.
TWENGE: So there're pro-anorexia videos. There are videos that instruct people on how to cut themselves. All they're trying to do is to get people
to use the app for longer so that helped the company makes more money.
YURKEVICH: TikTok in a statement said, quote, "One of our most important commitments is supporting the safety and well-being of teens and we
recognize this work is never finished.
"We continue to focus on robust safety protections for our community while also empowering parents with additional controls for their teen's account
through TikTok family pairing."
Users of TikTok spent an average of 1.5 hours a day on the app, more than any other social platform.
What is it that keeps you scrolling, even if you know maybe you've spent one, two hours on it?
EMERALD GOLDBAUM, SOPHOMORE, UNIVERSITY OF BUFFALO: Once you watch the one video, you're like, well, can I watch another?
So you just keep doing -- it's a cycle. You don't realize that the time is passing.
YURKEVICH: That's exactly happened to Jerome Yankey.
JEROME YANKEY, DELETED TIKTOK IN 2021: I had definitely done all my dues on TikTok before. I had just been scrolling until the sun came up.
YURKEVICH: He says he lost sleep, his grades suffered, he lost touch with his friends.
(voice-over): He lost his sense of self. In 2021, he deleted the app.
YANKEY: Getting disappointed by my own life is never something I want to be doing, especially when I have the power to change it. But I just wasn't
because I was spending hours on this app.
HANNAH WILLIAMS, CREATOR, SALARY TRANSPARENT STREET: We have like a lot of cool resources that we give to our audience for free.
YURKEVICH: Hannah Williams proves the positive side of TikTok, allowing her to create a business, Salary Transparent Street, providing pay
transparency to her nearly 1 million followers.
WILLIAMS: I think TikTok definitely helped just because they have such audience reach potential.
YURKEVICH: She hopes TikTok's algorithm works in her favor.
WILLIAMS: Helping people in marginalized communities is the only reason I am doing this. It's my entire mission.
YURKEVICH (voice-over): Vanessa Yurkevich, CNN, New York.
QUEST: And we'll have a "Profitable Moment," after the break.
QUEST: Tonight's "Profitable Moment," TikTok or fiscal policy?
Choices and decisions.
No, instead, let's talk about the fiasco that was today's aviation industry in the United States, when the NOTAMs system failed and the FAA put it to a
ground halt. The reality is simple: this is the result of a lack of investment.
No matter what the final cause is and the full investigation will show, the fact is that there was, number one, no redundancy that picked up the slack;
number two, it took quite a while to recover; number three, the whole thing fell over.
There needs to be an understanding of how, in this day and age, major, vital, critical infrastructure like this falls apart. In the United States,
the problem, of course, is one of investment.
It is just about impossible to get reliable, longterm investment for infrastructure. Even though the president, President Biden, put forward a
bill with many hundreds of billions of dollars exactly for that last year. Longer term, the message and moral of what was happening in the United
States has to be a clarion call and a warning elsewhere.
Because I assure you, China is still spending on its infrastructure. And there are many countries in the new economies that are spending on
infrastructure. And that is a warning to be taken to heart as you sit on the plane.
And that is tonight's QUEST MEANS BUSINESS. I am Richard Quest in New York, whatever you're up to in the hours ahead, strong day for the Dow. I hope it
is profitable. The closing bell is ringing, best of the day.