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Quest Means Business
Microsoft Is Betting Big On Artificial Intelligence; Stocks Upbeat As Busy Week Of Earnings Gets Going; Polish Foreign Minister: We Are Determined To Send Tanks To Ukraine; More Economists Predict Eurozone Will Avoid Recession; Buckingham Palace Releases Details About May 6 Coronation; Fortnum And Mason Looks Toward Coronation Boost. Aired 3-4p ET
Aired January 23, 2023 - 15:00:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[15:00:39]
RICHARD QUEST, CNN INTERNATIONAL HOST: We are in London tonight, back from Davos. The market has an hour left to trade, and what is it? Well, look,
there was great going along here, and then it sort of all petered out a bit, but we are still up overall.
If you look at the triple stack, you'll see a strong session, particularly on the NASDAQ, which is up eight percent year-to-date, and we're not even
out of January.
One swallow doth not make a summer make, but things are looking a little more cheerful. The markets and the main events of the day.
Microsoft is pouring billions of dollars into the company behind the AI phenomenon ChatGPT. What does it stand for? Anna Stewart will tell me.
Brazil and Argentina float the idea of a common currency, but will it fly?
And the CEO of Fortnum & Mason is here as the company prepares for a coronation year and better of course with a nice biscuit that I can enjoy
with my cup of tea.
Hello. We are alive in London tonight. It is Monday, January the 23rd. I'm Richard Quest, and in London as elsewhere, I mean business.
Good evening.
Tonight, Microsoft is making a multibillion dollar bet on the future of AI by upping its investment in OpenAI. This is the company and the creator of
ChatGPT. It's a tool that can do just about anything you ask it to do, compose an e-mail, write an essay, develop code. And, frankly, the
implications are simply extraordinary. So everybody is talking about it.
It could be doing extraordinary business, too.
Reuters says the company is telling investors it will make a billion dollars in revenues next year.
The Microsoft investment comes days after the tech giant said it was cutting 10,000 staff, whilst at the same time the CEO, Satya Nadella said
there was going to be a greater emphasis on AI and ChatGPT.
(BEGIN VIDEO CLIP)
SATYA NADELLA, CEO, MICROSOFT: If you had asked me last month coming to WEF would I be talking about AI this much, but it turns out that you know,
even the ChatGPT moment as I think captured people's imagination.
When you look at GPT 3 to 3.5 to what's coming, these are nonlinear development. So they're showing emergent capability. And I'm not saying
this is the last model architecture, innovation, there will be more to come, but the fact is that these things by themselves are becoming
platforms that I think truly can make a difference.
(END VIDEO CLIP)
QUEST: So Anna is with me. This investment, how significant?
ANNA STEWART, CNN REPORTER: Multibillion dollars, we don't know the exact figure, and over multiple years, no surprise, it is actually the third
phase of this partnership, and listening to Satya Nadella there, this is the future.
There is an arms race for AI. All of the Big Tech companies have their own unit or have a partnership with one, and they're going to do very well with
Open AI.
QUEST: How far is ChatGPT ahead of the rest?
STEWART: It depends on what we're looking at. If we're looking at language patterns in terms of chatbot obviously, OpenAI has just had a pivotal
moment.
I mean, this ChatGPT, I hope our users have used it. it is utterly extraordinary. But other AI companies are also making huge leaps in things
like healthcare and science that will probably change your life you just might not know it.
QUEST: All right now, I saw it for the first time today. I've known about it, obviously. But I actually saw it in operation at your desk in the
newsroom. I was -- it is extraordinary.
STEWART: And I've given you all sorts of naughty ideas of how you can use it. Is it cheating?
QUEST: Why do you go -- why do you immediately want to go down the ethically challenged routes?
STEWART: Because that's where you go with AI. Is it okay that I write my mother a thank you letter via ChatGPT? Maybe it is, maybe it isn't. The
letter will probably be better for it.
What about an essay? What about schools? What about universities? How will people know whether you're using this tool or using your own brain?
QUEST: Because you are pretty soon will be found out afterwards.
STEWART: I think you will, and I think because it is using AI and it's essentially absorbed language patterns, there will be a way to reverse
engineer whether or not AI created it.
The question is though, Richard, it'll get better and better. It will keep improving and as you saw the beauty of this chatbot is the fact that it
remembers the thread of your conversation, you can say "Can you make that a little bit shorter? Can you make that a little bit more Richard Quest for
me" and it will do that.
[15:05:10]
QUEST: We've asked it to do -- well, you asked it to do, isn't it?
STEWART: I just thought we'd help you out tonight, Richard. And so for your profitable moment, I asked ChatGPT to come with this, and we've got a
picture of it, and you can read it out. We've put it in the auto queue. There you go.
QUEST: I'm going to do it.
Ladies and gentlemen, welcome to the fascinating world of ChatGPT, the cutting edge language model developed by OpenAI. It's a machine learning
model.
What sets us apart from others? Language models, its ability, it's not just grammatically correct, but it makes sense and is coherent.
And then to wrap it up.
So here it ladies and gentlemen, the inner workings of ChatGPT. Who knows where --
Oh come on.
STEWART: It's a bit long, and you know what, it needs to read more of your work, Richard, to truly get your tone, but I have no doubt it will.
QUEST: I don't see the evil in it.
STEWART: You think it's okay for people to use this tool in a university setting? They can write an essay or in a school.
QUEST: We've talked about this. I think that what you do in that setting is you tell the people, it's an honor system. If you're found to be wanting
in that regard, then you'll have to do it again, but in a locked room.
STEWART: But future e-mails to you, Richard, you're quite happy if I just write to you via ChatGPT. They will be very --
QUEST: Providing I know you're behind it. Yes. Providing I know you've had input. Yes. If the e-mail just comes in, and it is replied to standard
with some -- well, you get the idea. You're obsessed by it, aren't you?
STEWART: I love it.
QUEST: You really are.
STEWART: I think it's fantastic. Genius.
QUEST: What does GPT stand for?
STEWART: Obviously, it's Generative Pre-trained Transformer, Richard. Glad you asked me just before we came on air because I did not know.
QUEST: I think that did it for you. Thank you. Thank you, Anna.
The applications of this technology are being welcomed and worried in equal measure. As Anna said, universities are trying to protect against it. In
the boardroom, its effects are already being felt.
Top CEOs are using it, including Asia's richest man, Gautam Adani. He says he's addicted to it, calling it transformational moment in the
democratization of AI.
It doesn't always get it right. Gizmodo reports, the tech outlet, CNET had to make multiple corrections to AI-written articles.
Erik Brynjolfsson is a Professor and Senior Fellow at the Stanford Institute for Human Centered AI is with me from London. It is good to see
you, sir. Thank you.
Erik, Anna Stewart has immediately wanted to raise the ethical problems and these things. I mean, what do you think?
ERIK BRYNJOLFSSON, PROFESSOR AND SENIOR FELLOW, STANFORD INSTITUTE FOR HUMAN CENTERED AI: Well, there are certainly a whole host of new ethical
problems that are being raised. Primary among them is the ability to generate misinformation and disinformation at scale, but there are also a
number of wonderful opportunities to create more and better content as well. S, we have some choices ahead of us.
QUEST: If I sent you a thank you letter for a lovely dinner that you'd hosted for me, and I'd given the AI sufficient details, we went to this
restaurant on that night, we had these meals, this was excellent. That was dreadful. He was nice. We had a good evening -- and it generated a nice e-
mail to you, would you be offended?
BRYNJOLFSSON: I wouldn't, and I think you had it exactly right, that as long as it was you who put in the details and the thrust of it, it can
maybe make you say it in a little nicer way, just like we have grammar checkers or spell checkers today, and I wouldn't be offended if you used
those either.
QUEST: So I know that people are saying it's really -- this is the calculator for our age. This is the digital calculator for our time. Is
that fair?
BRYNJOLFSSON: I think that's a good start. I mean, every time a new technology has come along, people have been worried. You know, the ancient
Greeks were worried about reading and writing. They thought that people wouldn't memorize epic poems as the way that they used to.
So each time we get used to having machines and technology do more of what we used to do, and hopefully humans can add more value in other ways.
QUEST: Do you think that there is a concomitant requirement that as these new technologies come in, we do devote time to teaching people about
how to use them. And I don't mean the nuts and bolts, but the ethics behind it?
BRYNJOLFSSON: Absolutely, it becomes more and more important. The nuts and bolts for sure, as well, but also the implications of it and how to avoid
misusing them, how to use them in an ethical way.
As the technology becomes more and more powerful, we have more ability to change the world and that means we need to think more about our values and
in which direction we want to change the world.
It is certainly easy to abuse these technologies and do a lot of harm with them if we're not careful.
QUEST: So extrapolate from where we are now, to where you believe we could be with this.
BRYNJOLFSSON: Well, the remarkable thing is if you'd asked me that question just a couple of years ago I would have been -- thought the timeline was a
lot longer and like most of my colleagues we've pulled in the timeline.
[15:10:08]
This has really been a genuine breakthrough that sped up the time towards where these technologies are quite powerful in what they are able to do, a
large number of the tasks that previously only humans were able to do, but we are already seeing these machines be able to pass the Bar Exam for
lawyers, or medical exams, or college entrance exams and many different categories.
And as a result, they are able to take on more and more of what only humans were able to do. That's only going to accelerate. We are still in pretty
early days of these foundation models as we call them.
QUEST: Can they think?
BRYNJOLFSSON: You know, at first I said, certainly not and now, I am beginning to think, what do mean by thinking?
When I string together a set of words, I mean, sometimes, the words come out before I totally figured out exactly what I was going to say and it is
kind of a nice feature that you know, the Greeks again, used to talk about the muse singing through them.
And that's a little bit what these systems do. They will put the statistical probable next set of words one after another.
I am not sure we really call that thinking, but it is starting to get a lot closer than it used to be.
QUEST: Okay, but for example, the pre nerves that I will have before going on air, just before I talk this evening, the thought that I'll have
just as I introduce you is, you know, is he going to be any good? Is he going to be brilliant? Am I going to have to rescue this? What's going to
happen afterwards? Is the camera going to suddenly fall over?
The AI doesn't worry about these sorts of things.
BRYNJOLFSSON: No, it doesn't worry about those sorts of things. It's a statistical model. It basically predicts words that are sort of plausible
to come after a sequence of previous words. It's a simple concept, but if you train it on a large enough data set, it starts getting very good at
that.
And whether or not it can think or not, I don't really think it can, but it definitely has economic value.
I'm an economist.
QUEST: Right.
BRYNJOLFSSON: And the economic implications are staggering in the trillions of dollars.
QUEST: All right, Erik, I've got a hard question, last question for you. So you have to write a letter, it's a lovely letter, it's a beautiful
letter to a loved one, a child or a spouse, and you want it to be -- you've got it -- and you know that the AI can write it better than you.
It will be more eloquent, it will have better prose, better cadence, you know that. Do you write you talk to you let the AI?
BRYNJOLFSSON: I'm certainly going to have the AI help me.
In fact, just today, my sister-in-law, Trish got a beautiful birthday poem from her son that was written in AI, and she thought it was gorgeous. Her
son had helped shape it. But the AI did a lot of the work. And I think for some reason, it worked just as well. I think we get more and more used to
having these systems.
I've used it to help with some of my academic conference remarks, and I think that that is going to be the new normal that we have these tools help
us. It is going to be a creativity tool, and as a result, I think we're going to have more and better pros than we ever had before.
QUEST: Helped by AI will be under all our signatures. Thank you, sir. I'm very grateful for your time tonight.
The markets, upbeat, a busy week for corporate earnings. The Dow is up. We are off the tops of the day. Wall Street is weighing the possibility of
slowing rate hikes from the Fed. The S&P is the interesting, it's the NASDAQ, the best of it.
The over nearly one-and-a-half percent or just over. The hedge fund, Citadel, has good reason to feel upbeat. It made a record $16 billion for
its investors last year, one of the largest one-year gains by any hedge fund, and the industry overall had a terrible year losing over $200 billion
in total.
Paul La Monica, what did they do that others didn't?
PAUL LA MONICA, CNN BUSINESS REPORTER: Yes, it is a bit curious because you don't really get a sense that Citadel had one big overarching trade that
really helped them in the way that John Paulson, the hedge fund manager who famously bet against subprime mortgages in 2007, he held the previous
record, his firm, of having a $15 billion or so annual profit and that was obviously because of that "greatest trade ever" bet against subprime
mortgages right before the financial crisis.
Citadel, I think just a very diversified bet on the right areas of the market at a difficult time when most investors and professional traders
lost money, as you pointed out, Richard, a more than $200 billion loss for the industry writ large.
QUEST: Well, whenever I hear this sort of story, I never know whether to be very impressed with Citadel or horrified with the rest of them who all
claim to have expertise that they weren't able to at least come close or get on the same train.
LA MONICA: Yes. I think it's a mix of both.
I mean, Citadel obviously has a reputation for being one of the top hedge funds for the past few years. As a result, they charge very lofty fees to
their customers and that I think is a bit of a double-edged sword because if you are going to charge very, very exorbitant fees, then your track
record has to match up to justify the fees that your investors are paying.
[15:15:25]
So if Citadel has a stumble anytime soon, that could be a very big problem, and I think that is something that most of the top hedge funds face that
challenge. If they're making a lot of money from fees, they have to keep this going. They can't afford any false moves, bad steps, because then
investors might start wondering, why am I paying you all this money again? To lose as much as I could on my own?
QUEST: AI wrote that last line for you. Thank you, Paul La Monica.
LA MONICA: Oh, no. That was all Paul La Monica. No AI there.
QUEST: Thank you, Paul La Monica joining us.
Now, we have a busy hour ahead of us.
At some point in the next hour, we are expecting to get an update on the tragic shooting in Monterey Park in California. This is a live picture from
Monterey Park. Governor Gavin Newsom is expected to be speaking alongside the Town Mayor, and I'm sorry to tell you that we now know that the number
of people who've died has risen, 11 people are confirmed dead.
(COMMERCIAL BREAK)
QUEST: Poland's Foreign Minister says his country is determined to send German-made tanks to Ukraine, no matter what other countries do, and that
seems to contradict the Prime Minister who said Poland needed other countries to join in on the effort.
Meanwhile, NATO allies have struggled to get German support. The EU's top diplomat says Berlin is not standing in anyone's way.
(BEGIN VIDEO CLIP)
JOSEP BORRELL, EUROPEAN UNION POLICY CHIEF (through translator): During the Council today, we discussed all of that, and of course what the Foreign
Affairs Ministers had already said before.
German Ministers said that Germany is not blocking other countries from doing this. Other countries who wish to export their Leopard tanks can do
so. So, Germany is not blocking exports of Leopard tanks.
(END VIDEO CLIP)
QUEST: Michal Sznajder is the anchor at the Polish News Network also known as TVN 24, he joins me from Warsaw.
I met the Prime Minister in Davos. He wants to send the tanks, but he only wants to do it when he can be sure there will be sufficient numbers. Do you
see movement here?
[15:20:05]
MICHAL SZNAJDER, ANCHOR, TVN: Good evening, Richard I'm very happy to be on your show.
We are seeing an intensified dialogue or a conversation perhaps not direct at certain points, but still, there is some movement, at least in the
verbal layer of this whole thing because what happened yesterday, the German Foreign Minister, Annalena Baerbock has said that Berlin would not
stand in the way if Poland sent its Leopard 2 tanks to Ukraine.
However, a German government spokesperson said on Monday that Berlin had still not received any requests to authorize the re-export of the tanks. So
the new information right now that we are receiving, we are receiving two kinds of information.
First of all, the Polish Minister of Foreign Affairs Minister, Mr. Zbigniew Rau did confirm that Poland would in fact, send that request to Berlin and
some media outlets, which are very well-connected to the Polish government, they are claiming that that request might be sent perhaps even today.
QUEST: Right now, is it your -- I mean, you look at this morning, noon, and night, is it your feeling that Poland is going to send the tanks?
SZNAJDER: Oh, yes, indeed it is, but what is being quite intense -- intensely said in this whole conversation is that Poland really does need
other countries to get involved, and this is right now when we are returning to the point of Germany, because the language of Prime Minister
Morawiecki leaves very little doubt.
He said, even if we won't get this approval, we would still transfer our tanks together with others to Ukraine, the condition for us at the moment
is to build at least a small coalition of countries. For certain reasons, it is important that Germany does give its approval, but if it's not given,
not permitted, Poland will still go through with this whole project.
QUEST: If we look at the Polish people, there are going to be elections at some point this year. The combined opposition would defeat the current
government, I believe, or the Prime Minister, but there is a long way between now and then.
SZNAJDER: Almost certainly, and what you're saying right now, Richard, it shows that you are really up-to-date with your knowledge about Poland,
because in Polish politics, because that is exactly right now, arguably the most significant debate taking place right now: Will the opposition go
together? Will they run together? Or will they be divided?
In the recent days, there has been certain signals that there's lots of infighting among the opposition, and given how complicated the Polish
electoral system is, that might be a matter of victory or losing for the opposition.
QUEST: Michal, we're very lucky with our sister network TVN 24 that we have you there, and you will, I hope, help us through these machinations in
the days and weeks ahead.
Thank you, sir. I am Grateful.
Now, two big economies, the biggest in South America might adopt a shared currency.
Brazil's President Lula da Silva met his Argentine counterpart in Buenos Aires earlier and President Lula said, Finance Ministers from each country
will put forward a proposal for a common currency, and then will invite other South American countries to join.
A difficult task, as for example, Brazilian politics are volatile and prices in Argentina have doubled in the past year. CNN Brasil senior
correspondent, Americo Martins is with me now.
Sir, I mean, when I heard this, I thought, this is just -- this is just -- I will say it, nonsense.
AMERICO MARTINS, CNN BRASIL SENIOR CORRESPONDENT: It's a long shot. We are talking much more here about a mechanism for trade rather than a proper
common currency like the euro, for example.
The idea was floated first by the Argentina Finance Minister Sergio Massa, who told "The Financial Times" that both countries wanted to create this
common currency for bilateral trade, they will expand it to Mercosur, which also has Uruguay and Paraguay as members of course, and then they will
invite all the Latin American countries to join in.
But today, they start playing down this idea of a common currency.
QUEST: Right. So, I mean, I'm old enough to remember the Hard Ecu, which was the 13th currency that was originally speculated before the Euro came
along. In other words, you could use your domestic currency or you could use the Hard Ecu -- that went nowhere. We've got the euro instead.
What is the idea here? Is the idea to create a third currency or a completely new currency because both these countries have flirted with
currency boards, pegging, dollarization -- all the things that have spectacularly gone wrong.
MARTINS: Because of the instability, the economic instability in the region, especially in Argentina in the last two decades.
QUEST: You say economic instability but economic policies --
MARTINS: And political --
QUEST: Policies and politics.
MARTINS: Absolutely. It is all together, right? Political and economic instability.
[15:25:06]
Brazil is much more stable despite what happened just two weeks ago, then Argentina, and Argentina is in a much weaker position.
They don't have access to easy credit abroad. Their dollar reserves are not that high. So, they are trying to find a mechanism, basically the first
step for Argentina to buy more Brazilian products through some kind of financing that will allow them not to use the dollar reserves.
This will be the first move, but both Presidents when they talked today, they were very optimistic about creating in the future, this common
currency.
This is a very long shot and a very difficult process because the economies are not balanced to start with, they're not stable to start with, so very
difficult to create a common currency like that.
QUEST: They also need sensible economic policies.
MARTINS: Absolutely. Absolutely.
QUEST: That would attract inward investment. Now, Argentina where we were last year, and I was in Brazil last year, the year before. Both of
them, do we have more hope of stability in political making?
MARTINS: We hope so. Argentina will have political elections. There will be presidential elections this year. Difficult situation.
They are economically in a much worse position, a hundred percent inflation almost. Brazil just elected a new government. There were those criminal
acts in Brazil two weeks ago, basically, people calling for a coup d'etat that does not help with political stability. But the situation seems to be
much more under control now, and the Brazilian economy is giving better signs than Argentina.
So let's hope the whole region will get slightly more comfortable and slightly more stable.
QUEST: And once again, thank you. The larger CNN family that we have from CNN, it is good to see you, sir.
MARTINS: Thank you very much.
QUEST: You know, the ability to shake hands in the studio after all these years --
MARTINS: Absolutely.
QUEST: How good to see you, sir. Thank you very much.
MARTINS: Thank you.
QUEST: King Charles' coronation will take place on May the 6th. I've already got it marked on my calendar.
Now, if we're going to do this, we do need to get and make sure we have the right sort of things, some Fortnum & Mason biscuits, some Fortnum & Mason
chocolates, some more biscuits, oh and a dark selection.
In other words, if you're going to celebrate, you have to celebrate properly.
After the break, Fortnum & Mason on how they're going to make sure it all goes well.
(COMMERCIAL BREAK)
[15:30:37]
QUEST: Economic gloom is easing in parts of Europe. One survey forecast, the Eurozone will narrowly avoid a recession growing just a 10th of one
percent. Now Switzerland is in much better shape. Its national bank expects seven tenths of a percentage point growth. The Swiss National Bank chair
join me in Davos, Thomas Jordan told me the bank is set to bring inflation under control.
(BEGIN VIDEOTAPE)
THOMAS JORDAN, CHAIR, SWISS NATIONAL BANK: Well, in Switzerland, inflation is already below three percent, you have 2.8. So, it's much lower than
elsewhere. But of course, our aim is clearly to bring inflation back to below 2 percent. And we expect that inflation will be at that point roughly
at the end of this year.
QUEST: Why do you think you've been able to withstand the inflationary pressures, so much better than all your neighbors because all the countries
that you trade with have much higher inflation, considerably higher inflation?
JORDAN: Well, this is true. Well, there are a couple of factors. So, one important one is Switzerland is less exposed to energy. So, the fraction of
energy within the CPI is a little bit smaller. Then we started that and that is the second point at a much lower inflation rate. And I think the
third and most important one, we have a very strong currency. So, the Swiss Bank appreciated in nominal terms and that, of course, absorbed some of
this inflationary pressure.
QUEST: Yes. it also cost you a great deal of money in terms of your balance sheet.
JORDAN: Well, a little bit, yes. So --
QUEST: I mean, your loss this year was eyewatering.
JORDAN: Exactly. Well, we have a big balance sheet. And of course, at the point when interest rates are increasing, the stock market declining, and
the Swiss Bank appreciating. We can make heavy losses as we made now, in the last year.
QUEST: This will have an effect, won't it? I mean, these losses actually have a real effect, because it means you can give -- you can return less
money to your principal shareholders.
JORDAN: Well, this is true. So, we will not make any dividends to the government or the contents this year. But of course, we did a lot of
profits over the couple of last years. But I have to remind you, our main goal is to maintain price stability, monetary policy, and not to pay a
dividend or profits to the government and the counties.
QUEST: What is the magic of two percent? And maybe not just in Switzerland's case, but just say you're a central banker, you sit down with
Christine Lagarde and the VOE and Jay Powell. And they're all sort of saying two percent, two percent, two percent. But the market is basically
saying, if you get close enough, that will be good enough, do you buy that?
JORDAN: Well, for us, the aim is between zero and two percent. So, we have a very conservative goal to have really price stability. And the reason for
that is that this is the situation where it's best for the economy, and it's the fairest for low-income people. So, having a low inflation rate,
having price stability is extremely important for the functioning of the economy. But also, for fairness, we see that now. So, people with a low
income, they are much more exposed to inflation.
QUEST: You're not moving, you're not going to shift the target.
JORDAN: Not at all. We keep to this target that served us well for many years. And I think this is also what is our mandate, price stability, low
inflation, and supporting the economy and obviously the people of Switzerland.
QUEST: Choose a color.
JORDAN: I take the blue one.
QUEST: They're all going blue. Come over here, sir. Just put your check and tell me why.
JORDAN: Of course, I take global recession and inflation.
(END VIDEOTAPE)
QUEST: Yes. Well, he was -- he wasn't in the majority there. Of course, it was Ukraine, the one on the whiteboard.
Buckingham Palace has released details about the celebration that will truly be fit for a king. It's the coronation of King Charles III. The
events are spread over three days with the coronation itself set for Saturday, May the 6th. It's a chance for the royal family to turn over a
new leaf and for British business to get even a greater boost. You can bank on the occasion to bring out millions of broad enthusiasts and generate a
celebratory spending splurge.
Now to Fortnum and Mason which, of course, seller purveyor, you know, itself they pervade luxury goods. Well, what did they send me? They've sent
me some rather nice biscuits, top a lot of sauce biscuits. I'm not sure they are but they'll go down well. They also have a royal warrant by
appointment to His Majesty. The King now I imagined and returned to profit last year.
Which is quite remarkable.
[15:35:00]
Oh, sparkling tea. That (INAUDIBLE) opened up by now. Thomas Athron is the CEO of Fortnum and he is with me. You don't mind me just calling you
Fortnum. That's what people do, isn't it?
TOM ATHRON, CHIEF EXECUTIVE OFFICER, FORTNUM AND MASON: Not at all. Good to be on the show. Thank you for having me.
QUEST: So, what plans are you making for the coronation?
ARTHON: So, we'll be launching a range of products at the end of March to celebrate the coronation. Our relationship with the royal family goes back
over the royal household more broadly goes back to 1707 when Fortnum was founded by a footman to Queen Anne, who asked for permission to take some
melted down candles (INAUDIBLE) reconstitute them into new candles, and sell them pretty much on the site that we trade from today on Piccadilly.
So, our relationship with the royal household goes back 300 years or so, and we're super proud of it.
QUEST: The Fortnum and I also declare an interest or to be transferred. I do send Fortnum hampers to some select friends at Christmas. There are
things that people do but you know the sort of place you pop out to just for the everyday groceries, are you? I mea, you're not Sainsbury's or
Tesco?
ARTHON: No, probably not. I mean, I think that we are -- I mean, you talked about us being purveyors earlier. You know, we like to think of ourselves
as purveyors of extraordinary food and drink, and enjoy giving things. Things that sit outside food, but very much connected to what food is all
about. But you'd be surprised how broad and democratic our customer base is actually.
The average item price of something sold in Fortnum is actually only 12 pounds. So, whilst we're a luxury business and we're in the business of
extraordinary food and drink, it's actually very accessible, you know, you can buy a jar of jam and let me tell you, it's the world's best jam for 595
at Fortnum's.
QUEST: Oh. Jamming in the packet. If we look at the where you expand, the temptation is to franchise or expand a shop in New York, a shop in Paris, a
shop in Sydney, a shop -- many British companies have tried it. Harrods, of course, notably has and most have failed.
ARTHON: Yes. I think that we've got a big opportunity to expand, I guess, to really think about a domestic customer base as much as anything else. We
launched our online business a few years back, pre-COVID, it was running at around -- sort of somewhere between 10 and 15 percent of our sales. What's
happened over COVID is we've managed to grow that business. And so, it's now responsible for -- well, certainly for our last financial year
responsible for 40 percent of our sales now.
QUEST: But when you send outside of the U.K., you've got -- I mean, you're telling me sending to Europe is difficult.
ARTHON: Sending to Europe is very difficult and has been since Brexit.
QUEST: Are you annoyed that the government has been told again and again and again, that companies are having tough exporting to Europe, and they
don't seem to be doing anything?
ARTHON: Look, it's intensely frustrating. Yes. You know, it was responsible for around 10 percent of our business pre-COVID. And, of course, we've lost
that almost overnight. But we can't wait for the government to improve relationships with the E.U., although I sincerely hope that they do, to the
extent that we can start exporting food again. But until then, what we've got to do is form our own arrangements.
And so, we'll be opening up a logistics operation inside the E.U., probably in the second half of this year, which means we'll be able to start selling
to our -- to our valued customers in the E.U. for next Christmas.
QUEST: Now when you say a logistic center, that means -- does that mean sourcing in the E.U. you just supply that center, or just doing one big
bulk into the E.U.?
ARTHON: It's the latter. So effectively, we'll be exporting to ourselves into somewhere in Europe, how's it in a distribution center, and then we
will send products to customers from there.
QUEST: Yes. You can tell -- you can tell it's quality stuff, it's making a noise, as I'm trying to open them. (INAUDIBLE) these are all (INAUDIBLE)
ARTHON: So, these are delicious. These are Toffolossus biscuits. They're made for us, my family firm that's been making these biscuits for us for 40
years. And actually, what you've just opened is a refill. So, what we do is we normally sell our biscuits in the tins, which you were holding up
earlier. But our customers were saying to us, we love these biscuits, but we can't bring ourselves to buy another tin. So, we're now selling them as
refill packs.
QUEST: Where's your -- where's your expansion? I know you want to open in terminals and airports but pick in the U.K., where's your big expansion
going to?
ARTHON: So big expansion, we think there's a big opportunity inside the U.K. to serve our customers better. The thing about having one shop on
Piccadilly is that it's not accessible to everyone. So, we're opening it -- so we're really investing behind our online business. That of course allows
us to export more to the -- to the U.S., to the Middle East and to the E.U., hopefully later this year.
We've just opened a shop and a restaurant in Hong Kong. And we've also opened in Hong Kong Airport. I'd love to see more shops open in airports
actually. I think that that's a -- it's a -- that's a good market for us. We need -- we need a lot -- we need lots of footfall of very intentional
customers.
QUEST: Do have a biscuit.
ARTHON: I will. They're absolutely delicious.
QUEST: Absolutely. Thank you very much.
ARTHON: Thank you very much.
QUEST: So, who's going to say no, then there'll be more for me. I shall follow more later. Thank you, sir. Very good to see you. I appreciate your
time. Thank you very much.
That's QUEST MEANS BUSSINESS. In about 15 minutes, if not 20, I'll be back.
[15:40:03]
Together we'll make a dash for the closing bell. The market is up not as much as it was but the NASDAQ said always come back a big again. The NASDAQ
is doing even better. Up eight percent so far this year. And Living Golf is next.
(COMMERCIAL BREAK)
[15:58:29]
QUEST: Hello. I'm Richard Quest. Together, let's enjoy a dash to the closing bell. And we have just under two minutes to go. U.S. markets off to
a good start of the week. The Journal says the Fed officials are preparing to slow down the rate of interest rate rises. And so, you see we've had a
couple of ups and downs during the session. But we are now on our way back up with a strong session.
The Dow have been up as much as 400 of the session highs. And to the triple stack, as you can see, good gains. But really the impressive bit is the two
percent on the NASDAQ, which is now showing a gain of some eight percent of the year so far. Microsoft says it's investing billions in the maker of
Chat GPT. Erik Brynjolfsson says an A.I. expert at Stanford says the program has enormous potential.
(BEGIN VIDEO CLIP)
ERIK BRYNJOLFSSON, DIRECTOR, STANFORD DIGITAL ECONOMY LAB: It's a statistical model that basically predicts words that are sort of plausible
that come after a sequence of previous words. It's a simple concept. But if you train it on a large enough data set, it starts getting very good at
that. And whether or not you can think or not, I don't really think it can, but it definitely has economic value. I'm an economist, and the economic
implications are staggering in the trillions of dollars.
(END VIDEO CLIP)
QUEST: And you can see exactly all of this with it. You've got the high growth stocks coming up. Even Disney's really boosting itself after being
beaten up so much. And down at the bottom. You've got the staples, P&G, Verizon, Johnson and Johnson. That gives you an idea. I wouldn't say it's a
rotation yet. I will just simply say that you're seeing second highest valued stocks in vogue.
[16:00:03]
And that's the way things look. I'm Richard Quest in London. Whatever you're up to in the hours ahead (INAUDIBLE) "THE LEAD" with Jake Tapper
starts now.
END
