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First Move with Julia Chatterley
New U.S. Jobless Claims Report Out Today; According to Book by Woodward, Trump Knew Virus was Deadly, But Downplayed it; Yum China Stock Drops on Hong Kong Debut. Aired 9-10a ET
Aired September 10, 2020 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:00:00]
JULIA CHATTERLEY, CNN BUSINESS ANCHOR, FIRST MOVE: Welcome once again to FIRST MOVE. Lots to get to today, including new battles in the stay-at-home
tech wars, as I mentioned there, the Slack CEO, Stewart Butterfield will discuss the fight for supremacy in your home office.
There is also a slack in the stocks premarket, too. We're taking back some of yesterday's gains. Actually, look, we've flipped in the last 20 or 30
minutes or so.
The NASDAQ staging a dramatic bounce from correction territory to close-up some 2.7 percent yesterday, led by Apple, Microsoft and Tesla. It's
certainly a correction deflection otherwise known as buying on dips, as we discussed yesterday.
The index gains masking the full blow in economically sensitive sectors, recovery stocks like airlines. It's just another illustration that the
sheer dominance of these indices by the tech names, but also, I think, too, the ongoing uncertainties and challenges ahead.
On that note as I mentioned, too, data today showing a further 884,000 Americans filing for first-time jobless benefits last week. It's the second
straight week though below one million people, but there is a caveat and we'll explain why in a moment.
It's also small comfort. We are more than six months into this crisis with no agreement in U.S. Congress to provide additional help. The Senate voting
on its so-called skinny stimulus bill today. There's no chance that it passes.
We'll also be asking whether businesses themselves can do more to help workers like paying a living wage, for example. The CEO of Gravity Payments
tried it. He'll join later to discuss some surprising results.
Lots coming up. Let's get to the drivers.
Paul La Monica joins us now. Paul, it is tough not to get a bit glazed eyes when we see these numbers every week, but it's millions and millions of
Americans, 29 million plus by the latest count two weeks ago, still claiming some form of support.
PAUL LA MONICA, CNN BUSINESS REPORTER: Yes, when you look at the numbers in aggregate, Julia, it is continuing to be frightening. Obviously, you
point out the 29 million number. There's obviously well more than 10 million still filing for continuing jobless claims.
So even though that 880,000 or so number that we had for just this past week is below the somewhat magical one million number of people filing
claims, it's hard to get too excited. And as you alluded to, there's also the revisions in the numbers, people are now looking at the non-seasonally
adjusted numbers for jobless claims and that makes it a little more difficult to compare apples to apples to some of the previous numbers that
we had seen in the past couple of weeks and months, because of this change that's been made to the dataset.
CHATTERLEY: And I was just looking through some of the details there, too, the continuing claims, the numbers where people who are still getting
benefits actually rose rather than fell in the data, what? A week and a half ago.
So there's a warning sign in there perhaps, too. But I do want to bring it back to what we're seeing for stock markets, in particular exactly what we
were discussing yesterday, the broader shifts in the overall market is determined by the tech names.
You don't really get a sense when you look at the aggregate what's going on for those so-called recovery stocks and we saw that again yesterday.
LA MONICA: Yes, it is pretty astonishing, Julia, that some of the quote- unquote "recovery stocks" have fallen back again because investors are still infatuated with tech after the brief dip. I have a story that's going
to be going up on CNN Business later today that talks about how the market cap weighting on the S&P because it is so heavily concentrated in those big
tech names, the broader market is up about five percent this year, which is a pretty good year, all things notwithstanding. But that's when you factor
in the market cap weighting.
If you look at the individual companies in the S&P 500 and you do it equally weighted, the index is down nearly five percent for the year and
nearly 300 of the companies in the index are in the red for the year.
CHATTERLEY: Wow.
LA MONICA: So it's really accurate to say that this whole market is rallying, it's a case, again, of the haves and the have have-nots and the
haves continue to be Apple, Amazon, Alphabet, Facebook, and Microsoft.
CHATTERLEY: It's so funny, you and I always say the stock market is not the economy, but in terms of the haves and the have-nots, that's a great
illustration of what's going on for the underlying economy as well and the widening effect of the wealthiest and the poorest here.
Paul La Monica, thank you so much for that.
Now, to a stunning admission directly from President Trump that he purposely downplayed the threat from coronavirus, which has now killed more
than 190,000. That admission came in a recorded interview with legendary journalist Bob Woodward for his latest book. And as Joe Johns reports, the
White House is struggling to manage the fallout.
[09:05:16]
(BEGIN VIDEOTAPE)
JOE JOHNS, CNN SENIOR WASHINGTON CORRESPONDENT (voice over): President Trump, in his own words, admitting on tape that he understood just how
dangerous the coronavirus could be. The revelation from a series of recorded interviews for journalist, Bob Woodward's new book, "Rage."
In early February, Trump privately told Woodward the disease was deadlier than the flu, weeks before the first confirmed coronavirus- related death
in the United States.
(BEGIN AUDIO CLIP)
DONALD TRUMP (R), PRESIDENT OF THE UNITED STATES: You know, the touch -- you don't have to touch things, right? But the air, you just breathe the
air, and that's how it's passed. And so that's a very tricky one. That's a very delicate one. It's also more deadly than your - you know, even your
strenuous flus.
(END AUDIO CLIP)
JOHNS (voice over): But even 19 days later, here is what the President said to the public.
(BEGIN VIDEO CLIP)
TRUMP (on camera): That's a little bit like the flu. It's a little like the regular flu that we have flu shots for, and we'll essentially have a
flu shot for this in a fairly quick manner.
(END VIDEO CLIP)
JOHNS (voice over): By mid-March, Trump admitted privately he was downplaying the coronavirus.
(BEGIN AUDIO CLIP)
TRUMP: I wanted to always play it down. I still like playing it down.
BOB WOODWARD, INVESTIGATIVE JOURNALIST: Yes, sir.
TRUMP: Because I don't want to create a panic.
(END AUDIO CLIP)
JOHNS: And despite the President's repeated claims, like this one last month about the effects of the disease on children --
(BEGIN VIDEO CLIP)
TRUMP: If you look at children, I mean, they're able to throw it off very easily. Their immune systems are very, very strong. They're very powerful.
(END VIDEO CLIP)
JOHNS (voice over): Trump told Woodward months earlier that the coronavirus wasn't only harmful to the elderly.
(BEGIN AUDIO CLIP)
TRUMP: Now it's turning out, it's not just old people, Bob. Just today and yesterday, some startling facts came out. It's not just old -- older
people.
WOODWARD: Yes, exactly.
TRUMP: Young people, too. Plenty of young people.
(END AUDIO CLIP)
JOHNS (voice over): The White House denied the allegations from the book, even after the recordings were released.
(BEGIN VIDEO CLIP)
KAYLEIGH MCENANY, WHITE HOUSE PRESS SECRETARY: The president has never lied to the American public on COVID. The President has been very -- the
President was expressing calm and his actions reflect that.
The President never downplayed the virus.
(END VIDEO CLIP)
JOHNS (voice over): Hours later, the President responded to Woodward's book himself and defended his handling of the pandemic.
(BEGIN VIDEO CLIP)
TRUMP: Well, the fact is, I'm a cheerleader for this country. I love our country. And I don't want people to be frightened. I don't want to create
panic, as you say. And certainly, I'm not going to drive this country or the world into a frenzy. We want to show confidence. We want to show
strength.
(END VIDEO CLIP)
JOHNS (voice over): Trump's defense, the same day the United States confirmed COVID-19 death toll topped 190,000, according to Johns Hopkins
University, a grim milestone the President says he prevented from being even worse.
(BEGIN VIDEO CLIP)
TRUMP: So I think if we didn't do what we did, we would have had millions of people die.
(END VIDEO CLIP)
JOHNS (voice over): In an interview with CNN, Joe Biden slammed Trump's leadership during the pandemic.
(BEGIN VIDEO CLIP)
JOE BIDEN (D), DEMOCRATIC PRESIDENTIAL NOMINEE: It's disgusting. We learned this on a day that 100 -- we turned 190,000 Americans dead, and he
knew this?
He waved a white flag. He walked away. He didn't do a damn thing. Think about it. Think about what he did not do. And it's almost criminal.
(END VIDEO CLIP)
JOHNS (voice over): The book reports some of Trump's top officials also questioned his abilities. Woodward writing former Defense Secretary, James
Mattis called the President "dangerous" and "unfit for office."
And Dr. Anthony Fauci said Trump's "attention span is like a minus number" and "his sole purpose is to get re-elected."
(BEGIN VIDEO CLIP)
DR. ANTHONY FAUCI, DIRECTOR, NATIONAL INSTITUTE FOR ALLERGY AND INFECTIOUS DISEASES: I don't really want to get involved in the kind of stuff -- that
is very distracting to the kind of things that I'm trying to do and that we're all trying to do with this outbreak.
(END VIDEO CLIP)
JOHNS (voice over): And as racial injustice has fueled protests and unrest across the country and is taking center stage as an election issue, Trump
dismissed concerns about black Americans' frustration.
(BEGIN AUDIO CLIP)
WOODWARD: Do you have any sense that that privilege has isolated and put you in a cave, to a certain extent, as it put me, and I think, lots of
white, privileged people in a cave, and that we have to work our way out of that to understand the anger and the pain, particularly black people feel
in this country? Do you --
TRUMP: No. You -- you really drank the Kool-Aid, didn't you? Just listen to you, wow. No, I don't feel that at all!
(END VIDEOTAPE)
CHATTERLEY: All right, let's move on. Little appetite for Yum China in Hong Kong today as the shares had their debut. They ended down more than
five percent, following a $2 billion cash raise for the fast food giant. Selina Wang is in Hong Kong.
Selina, what do we think happened here? I mean, it was a tough session overall in the Asia session, a bit of IPO here or indigestion or was this
story specific? There's plenty of challenges for them with the COVID virus going around clearly?
SELINA WANG, CNN CORRESPONDENT: Well, Julia, it certainly bucks this trend of those recent secondary listings in Hong Kong, but these Chinese
companies really popping on that first day of trade.
As you mentioned, Yum China actually dropping as much as 6.3 percent on its first day of trade. This is the operator of KFC, Pizza Hut and Taco Bell in
China. Compare that in sharp contrast to NetEase and jd.com, which recently listed in Hong Kong and sharply bounced on the first day of trade.
[09:10:23]
WANG: Now, there are a number of factors at play here. I spoke to the Managing Director at China Renaissance and he said that timing is a big
reason why this happened.
Hong Kong Exchange has this rule where there's a five-day waiting period between when you set the price of the shares and the day when they actually
trade. Unfortunately, for Yum, the markets turned negative during that time period.
Another reason is the business model, which you alluded to earlier. Unlike jd.com and NetEase, which are these fast-growing technology companies, Yum
is a restaurant operator and it was hit very hard by the coronavirus pandemic. It operates some 10,000 restaurants across China, and at one
point, they had to close more than one-third of those stores.
Even though they are pretty much all back, nearly all back up and running at this point, the profit and sales are still under pressure as restaurants
around the world grapple with these social distancing measures. But Yum does have the benefit of being located in China, which is the first major
economy to reopen.
CHATTERLEY: Yes, I mean, you make some great points there. The timing is so important when you have five days of market moves in either direction,
then you would expect an adjustment when they guys start trading.
Selina, we have to leave it there, but thank you so much for that. Some smart analysis, Selina Wang.
All right, these are some of the other stories making headlines around the world.
A massive fire raging at the Port of Beirut. The Lebanese Army says it is happening at an oil and tires warehouse. It comes, of course, just one
month after a devastating explosion at the port killed nearly 200 people and injured thousands of others.
CNN's Arwa Damon joins us live. Arwa, any idea how this fire started?
ARWA DAMON, CNN SENIOR INTERNATIONAL CORRESPONDENT: No, Julia. At this stage we don't know and there's nothing official that's being said. Bearing
in mind, too, that they're still trying to get those flames under control.
But one thing without a doubt is that this fire caused mass widespread panic. I mean, people haven't even begun to psychologically recover, never
mind, you know, physically or be able to return to their homes from that first massive explosion that took place just over a month ago.
And I was talking to some of the team members of my charity who were on the ground in the destroyed neighborhoods still running our medical tent, and
they were describing sheer terror, because when people down there began seeing the smoke rising, it caused them to start to flee just as quickly as
possible.
They were saying that the Army that was down there, people that were down there, NGOs that were down there, workers on buildings were jumping down
off of them just trying to get out of the area because their initial reaction was, this is going to be another similar explosion that's going to
be taking place. I mean, it re-traumatized them incredibly severely, and understandably so.
And now there is a lot of still ongoing widespread anger. And once again, the government is nowhere to be seen. You're not hearing government
officials coming out and reassuring people that, you know, this is not going to lead to another explosion similar to the one that we saw in the
beginning of August.
There's no one out there who is really reassuring a population that, as I was saying, is already very severely traumatized. And also remember that
just a few days ago, it was announced that another four tons of ammonium nitrate were found at the Beirut Port.
So, again, people's fears are very, very understandable. There is little to no faith in the government at this stage. People really feel as if they
have been left to their own devices. A lot of people who lost their homes, who you will talk to when you ask them, as I've been asking a number of
people who I know, how they feel about what's happening, they will tell you that they have a sense of complete and total, utter despair.
They are at a loss as to how it is that they can even begin to move on with their lives. And now you have something like this, again, the cause of
these fires raging right now in the Beirut Port are as of yet unknown.
But something like this, it just re-traumatizes the population. It re- ignites that already deep seated anger toward the government and it feeds into these ongoing feelings, as I was saying, of despair.
CHATTERLEY: Yes, I think you paint the picture there incredibly well, Arwa. Just traumatic things to see, and on top of a terrible period that
they've already faced over the last few weeks, not to mention the broader challenges going on.
[09:15:08]
CHATTERLEY: Thank you for that, Arwa. Arwa Damon there.
All right, new fires burning in California, Wednesday, as the West Coast battles unforgiving wildfires that have left at least seven people dead.
More than 14,000 firefighters are battling nearly 30 fires in California. Wildfires are also devastating Oregon and Washington State, too.
The E.U. warning Britain not to alter its Brexit Withdrawal Deal. Proposed new legislation facing the British Parliament would allow the U.K. to
change parts of the agreement signed by London and Brussels late last year.
U.K. Ministers admit that would be a breach of international law, but argue the change is only a minor clarification. The Irish Prime Minister told CNN
this is no time to play games over Brexit.
(BEGIN VIDEO CLIP)
MICHEAL MARTIN, IRISH TAOISEACH: This moving away from the norms of diplomacy and conduct between nations and between countries, and it's
serious from that perspective, and I was very, very taken back by it.
And also annoyed and angry at the fact that there was no heads up. That was not the normal engagement that one would expect from countries involved in
a negotiation process.
(END VIDEO CLIP)
CHATTERLEY: All right, we're going to take a break here on FIRST MOVE, but still to come, office managing platform Slack looks set to be a work from
home winner, but the results on the lockdown quarter tell a bit of a different story. We'll get the scoop from the CEO.
And paying off, the CEO who took a salary cut for his staff finds them willing to return the favor. Gravity Payment, CEO joins FIRST MOVE later on
in the show.
Stay with us.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to FIRST MOVE. Workplace messaging app Slack closed down some 14 percent, Wednesday. Second quarter results suggested
its struggled to capture the COVID-19 boost experienced by other work from home stocks.
Billing growth slowed even as the number of paying customers using the messaging platform rose. Here to explain, Stewart Butterfield, the CEO of
Slack. Stewart, always great to have you on the show.
You know, I have to feel some sympathy when you see annualized levels of revenue growth in a quarter of 50 percent and people are complaining that
you didn't do so well, but I guess the obvious comparison is the whopping growth of Zoom. Talk us through what happened.
[09:20:26]
STEWART BUTTERFIELD, CEO, SLACK: Sure. Zoom is obviously a tough one for anyone to compare to. But I think what you see is a demonstration of the
size of the market and obviously that's good for us in the long run.
I think you're right, there's expectations that may be unrealistically related to that, but I think there's another thing going on here.
We talk about our wins in the enterprise and this quarter, it was a focus on financial services, companies like HSBC and LPL, Northwestern Mutual.
Last quarter, it was Amazon and Verizon. We had record growth in the number of million dollar plus customers, but we had 8,000 net new paid customers
this quarter. That's all kinds of businesses that are all over the world that brings the total to 130,000 businesses.
Obviously with that many, there's an enormous number of small and medium businesses and they're much less resilient in the face of this kind of
economic condition. You see things like hiring freezes and layoffs.
We charge on a per seed basis, so that kind of -- the impact of that mutes what's going on underneath. The fundamental trends are phenomenal, that 60
percent increase in the rate of new customer acquisition is what drives billions in revenue growth in the future. So we're well set up, and I think
it is a little bit hard for people to interpret that because they're not used to enterprise companies that have big success with the largest
companies in the world, and also have an enormous pool of self-serve and small and medium businesses.
CHATTERLEY: So are you saying you offered pricing concessions to some of those smaller and medium-size businesses simply because they were
struggling because of the environment? Because even with that -- go on.
BUTTERFIELD: Well, yes, we did do some of that. But I mean more -- there's a kind of predictable rate of expansion, and when people are hiring less,
then they expand less. We charge on a per user basis, and same thing with contraction.
When someone lays off 30 percent of their staff, it means, we get 30 percent less revenue from that customer. The impact of that, or the worst
of that certainly happened in this quarter.
Expansion may be somewhat muted, but I think you'll start to see the net number reflect the positive contributions as opposed to like netting out to
a more muted response because of the contraction.
CHATTERLEY: Yes, there will be people listening to this going, hang on a second. In a work from home shift in the COVID environment that we've been
through, if Slack can't monopolize on that now in some dramatic way as a replacement for e-mail and in some way to make people's lives easier, then
they never will. What is your response to that?
BUTTERFIELD: I think that we have. I mean, I can't remember the number off the top of my head, but something like 70 percent growth in the number of
million dollar customers, enormous growth at the high end of the market and huge success, four out of six largest telecommunication providers in North
America now use Slack, and I just mentioned all the financial services.
But the market leader in more or less every single category, whether that's travel, badly affected; media, positively affected; retail, hardware,
technology, they all use Slack.
And that growth for us is accelerating. There is going to be an environment where there's 30 percent annualized GDP decline in a single quarter and
record unemployment numbers, and that will also be reflected in our numbers because we serve such a broad range of businesses.
CHATTERLEY: Yes, it's interesting. The other thing obviously, the big decision that you've made and you and I have talked about the impact of
Microsoft Teams as a competitor in the past, is that you've filed a competition complaint, you say simply the fact that it's a part of
Microsoft Office, it's embedded, you never really get a look in at Slack because they've already got that option.
What difference would that make to your business? What have you lost, do you think, in terms of scale as a result of that?
BUTTERFIELD: Yes, I think there's no question that it has some impact or produces some friction. Despite that, we've been competing with Microsoft
for 14 straight quarters and have continued to demonstrate real success there in the Enterprise, where of course most of our customers are, Office
365 users.
And the complaint that we filed, you know, that's not a strategy for the company. That's a tactic. And I think it would have been irresponsible for
me not to pursue that when we genuinely believe that there is illegal anti- competitive behavior going on and we're pretty sure that the Commission will find the same and choose to pursue an investigation.
I don't put a lot of time and energy into that, but it's not just for us. That's on behalf of the whole ecosystem and competition more broadly, which
ultimately benefits consumers. And this is just something that businesses do.
I mean, this is no different than AWS disputing the award of the JEDI contract with Azure a little while ago. It is no different than Spotify,
the leader in subscription services filing a complaint against Apple.
Whatever perpetually goes on between Apple and Qualcomm, Salesforce complaining to the same Commission about Microsoft's acquisition of
LinkedIn. It's just something that goes on in businesses.
So that's years in the making and I wouldn't read anything into that related on what's going on today.
[09:25:20]
CHATTERLEY: So it's not a distraction or a distraction technique?
BUTTERFIELD: Not for me. For the lawyers and regulators.
CHATTERLEY: Okay. What is the message to investors, Stewart, at this moment? Because I think the message from the markets here and what we've
seen this week is, there's a real concern. You're explaining it and you're saying look, good things are happening and we're talking to the right
people and the people that are investing are making a shift.
What is your message to investors about what the future of Slack is and how you lift that growth going forward?
BUTTERFIELD: That's a wonderful question to get to answer, and the message is look at the growth in net paid customers. So a lot of these investors we
have known for many years and they've made big bets on the company and we appreciate them as shareholders and kind of partners in this.
They have heard me say over and over again that the highest priority for the company is accelerating the rate of net new customer acquisition
because that is the fundamental driver of the entire business.
So that's great, you know, 60 percent increase year-on-year, but what's even more encouraging for me is the reason why it is happening, and some of
that is due to the increased importance and relevancy in the category in this environment where there's work from home, and all of that disruption,
but a lot of it is due to just real momentum with product changes we're making that's improving the user experience for teams that are just signing
up for Slack for the first time.
And more than anything else, it is Slack Connect, which is a new system that allows two Slack using organizations to communicate across
organizational boundaries. That's been a real driver of the business.
Growth there is accelerating. You look back to Q4, it was 140 percent annualized growth, Q1 of this year, it rose to 160 percent and the most
recent quarter over 200 percent and that's a network effect that will continue to propel the business forward.
This quarter, of the 8,000 new paid customers, a thousand came from Slack Connect and that was in half the quarter. We expect that number to rise.
More and more people are docked in Slack Connect, and the message to Enterprise customers there, I think is a huge win because it's not just an
improvement to the way that you collaborate and you get all the benefits of Slack and channels and higher engagement and all of that, but you also get
a massive step forward in security and compliance and that's incredibly compelling.
Because what it is replacing is messaging and communication that's largely out of band with respect to the company. It is things like text messages
and WhatsApp where the company has no visibility and all of that.
CHATTERLEY: Stewart, come back and talk to us next quarter. We'll see how you're doing. Stewart Butterfield.
BUTTERFIELD: I would love to. Looking forward to it.
CHATTERLEY: The CEO of Slack there. Thank you.
All right, the market opens next.
(COMMERCIAL BREAK)
[09:30:58]
CHATTERLEY: U.S. stock markets up and running this Thursday and a major banking announcement to bring to you. Citigroup is making history by naming
Jane Fraser as its next CEO. She will become the first woman to lead a major U.S. bank. Congratulations to her.
Now, just in the last week, more than 850,000 Americans filing fresh claims for jobless benefits. The pain goes on. Economist, Megan Greene is Senior
Fellow at Harvard Kennedy School and also for Chatham House in London, too.
Megan, fantastic to have you on the show with us. I have to say it's the 29.5 million Americans claiming benefits of some form in the latest check
that stands out to me every week. These are enormous numbers.
MEGAN GREENE, SENIOR FELLOW, HARVARD KENNEDY SCHOOL: Yes, they are huge, and you have to consider that at the same time, the unemployment insurance
enhancement that was offered, the $600.00 a week that was passed under a previous fiscal stimulus bill has now expired and it's been replaced by a
federally-funded $300.00 a week that's only actually being disbursed in six states and is already almost out of money.
So, all of these people are claiming benefits and actually the benefits have decreased quite a lot, which means that consumption will inevitably
suffer.
CHATTERLEY: You know, it is interesting. You have used the best illustration, I think out there among the alphabet soup options of what the
recovery looks like here. A cartoon character for where we've been and where we are now. Wyle E. Coyote. Just explain what you see here for the
economic recovery.
GREENE: Well, I think like Wyle E. Coyote, the U.S. economy has run off a cash cliff and it's suspended in midair and it hasn't really realized its
predicament or fallen down into the chiasm yet, but without a safety net, I think that's inevitable.
So, in addition to the unemployment insurance enhancement that I mentioned, the PPP loans, the Paycheck Protection Program, which allowed companies,
small companies to get loans which turn into grants that they kept people employed, those have already expired as well.
And as a result, we're going to face a bunch of small business bankruptcies and that will result in more unemployment. And again, unemployment
insurance isn't what it used to be, and so I think we're about to face this huge headwind to the recovery unless we get some kind of new fiscal bill,
and that's looking, actually, less likely today than it did even yesterday.
There's a chance in September that Congress will pass something. But if they don't, I think the U.S. will go back into recession.
CHATTERLEY: When does that gravity point for Wyle E. Coyote actually hit? Because we're always behind the curve when we're collecting the data and
seeing what's happening, and if you look at auto sales, you look at home sales, you look at the unemployment reading, if you believe it, that we got
last Friday, it looks like we're on pace for a better recovery.
We could even see a great positive number for Q3. It sort of masks the underlying damage that's going on and the weakening.
GREENE: That's right, so traditionally economic indicators are all coming out with such a lag that they don't really mean anything anymore. So retail
sales, durable goods, they all look pretty good still.
If you look at some of the higher frequency alternative data though, things like restaurant bookings, T.S.A. travel data, it actually shows that we're
still recovering very slowly. So the bottom hasn't dropped out yet. But like I said, that's inevitable unless we come up with more support for
workers and for small businesses in particular.
CHATTERLEY: Your argument, and we need to take more time to discuss this, we have to reset as we rebuild for the labor market and part of that
involves the challenges of a greater concentration of industry, a weakening of power of workers.
How do you give workers power back to fight for higher wages?
GREENE: So one way is to encourage unionization or stop discouraging it, at the very least. Another way is to address misclassification of workers.
Lots of workers are being classified as consultants, so they don't get any benefits and so that they are on short-term contracts, rather than making
them full-time employees, which they're really doing the job as, just without any of the frills.
So that's something else you can do, and then you can also address this market concentration issue. It's driven primarily by a lack of competition,
so campaign finance lobbying gets to that.
And so if you could limit campaign finance, limit some lobbying efforts that might help address market concentration and sort of antitrust efforts
to prove competition. That could help increase worker power a little bit as well.
[09:35:40]
GREENE: I mean, I think if you're looking for a really quick fix to this, though, it would be figuring out how to create good jobs, high wage, high
hour jobs for lots of Americans. And there's a real opportunity in infrastructure spending, and particularly infrastructure spending to retool
the economy for sustainability and climate change.
So that should be coming down the line. That was an absolute no-brainer before this crisis even happened, given how low borrowing costs already
were. Now, they're even lower, so I think there's no excuse for not doing that.
CHATTERLEY: We need you advising the next administration, whichever one they are. Megan, we will continue this conversation. Thank you. Megan
Greene, Senior Fellow at the Harvard Kennedy School. Thank you for that.
Now exactly on this point, leading by example, the CEO -- this CEO made waves when he offered all his employees a minimum wage of $70,000.00 and
cut his own pay to fund it. We'll see how his business is doing and how his workers are doing, too, next.
(COMMERCIAL BREAK)
CHATTERLEY: Meet the $70K CEO. In 2015, Dan Price was a millionaire running his own company, Gravity Payments, which is an interesting story in
itself. But that was when he made a decision that's being studied and discussed to this day.
Price gave all of his 120 employees a big raise. Everyone would earn at least $70,000.00 a year. To fund it, he realized a different kind of
gravity would have to apply to his own salary. He cut it from around a million to $70,000.00 as well.
[09:40:21]
CHATTERLEY: Dan Price, the founder and CEO of Gravity Payments, joins us now. Dan, it's a huge pleasure to have you on the show. Where do we start?
Let's talk about the day you woke up and were like, you know what, I know what I am going to do. I'm going to pay all my workers a living wage and
I'm going to take a whopping pay cut myself. Talk me through that.
DAN PRICE, FOUNDER AND CEO, GRAVITY PAYMENTS: Well, Julia, you know, I've been studying business pretty much my whole life because I started my
company when I was 17 and I had heard all of these things about measuring costs, but, you know, and kind of treating employees like cost centers. But
I started to realize maybe that wasn't true and there was a little bit of propaganda being applied to what I was being taught every day.
And since 2011, we had been working on increasing wages for our bottom employees little by little. And it was going well, we were seeing a lot of
success. But one of my friends who didn't work at Gravity, she was explaining to me how a $200.00 rent increase was throwing her life into
chaos, and here, there are 120 employees of Gravity Payments that are doing all the actual work to build all the value from this company. I'm getting
way too much from it. I'm getting way too much credit.
And it just hits me that I'm not okay with that anymore. And so, I was on a hike with my friend, Valerie and I decided that I was going to implement
the $70,000.00 minimum wage, but was difficult and I decided I needed to just go for it.
CHATTERLEY: You basically realized that $200.00 could make all the difference to somebody and have little impact, actually, if somebody else
loses it.
PRICE: Yes, and it's different because we are taught so strongly to look at employees as cost centers. We're taught to basically do everything we
can to put our balance sheet first, and for all the companies out there that publicly say they put their employees first, we've seen in this crisis
that they just quickly lay off their employees when things get tough and they kind of are babies at the top, to be honest.
CHATTERLEY: You were laughed at. You were called a socialist. You were told that the business would fail, that this would be a study at Harvard
Business School in how not to operate a business, and actually now, you're being studied as an example of something that worked for you and clearly
worked for these workers.
PRICE: Yes, I mean, it is tough running a business. But it's not so tough, you know what I mean? And like the really hard work that people do -- I
mean, I get way too much credit in this.
The fact that people are still talking about this five and a half years later, I think it says more negative about the system than anything
positive about me. Because the reality is, we know that the people actually working at these companies, the people that work at Gravity Payments and
all the small businesses that we're helping to reopen and support and make sure to keep safe during COVID-19, those are the ones that create the
value.
I just manage it and kind of orchestrate it all, why should I be getting all the credit and all the money from that when the workers get left
behind?
CHATTERLEY: COVID is an interesting one because your revenues dropped I believe 50 percent overnight and you looked at it and said we're just not
sustainable like this. We're going to have to cut 10 percent of the workforce, and you told your employees and they made an interesting choice.
Talk us through that.
PRICE: Yes, so I have a lot of great mentors in my industry that are more on the traditional business side and they share their views with me and I
like to listen to everybody, regardless what their views are. And people basically told me two things. Number one, there's companies in our industry
that are implementing $100.00 per month extra charges to small businesses. If you do that, you'll solve your fiscal deficit.
We were losing $1.5 million a month and we had three months before we were going to go out of business. Alternatively, the other option is you could
lay off up to 30 percent of your staff and that would also solve it.
And I just was honest with my team about how I didn't know how we were going to get through this. And those doubters that you brought up, the
people that said I was going to fail, you know, I honestly had to look at it and say maybe they're right, because I don't know how we're going to get
through this.
But this is the magic of this type of business model and how I think most business people in the United States and around the world get it wrong
right now, which is our employees came together. They formed kind of like a reverse union to rally around the company, and they volunteered on an
individual anonymous basis to give pay cuts.
They wanted it to be anonymous because they didn't want anybody to feel pressure and they didn't want somebody who maybe just had a partner lose
their job or a spouse lose their job to feel pressured to contribute.
So that team orientation, you're not going to get that in the traditional company that is slashing and burning and laying off people right now or a
bigger company like Amazon that maybe, yes, is growing and hiring, but they're paying slave labor wages while the CEO makes many times over what
all of the warehouse workers combined are making.
CHATTERLEY: Yes, you prevented a Hunger Games scenario where people have to fight for themselves because they were on the bread line and fighting
for survival, too.
Okay, because this is how you caught my notice. You don't hold back when you're criticizing bigger companies. You're pretty punchy about Amazon.
You're pretty punchy about the scale and growth of CEO pay relative to individual workers.
There will be people watching this going, this may have worked for your business. One, are you profitable and is this really scalable as a business
model for bigger companies to be able to stay in business, but also pay their workers more. Your response?
PRICE: My response is quit being such a big baby. I mean, people in the business were better getting all of that money, that are getting all of
that success. Whenever the going gets tough, they sell out their workers. They sell out their customers and they get extra big bonuses.
You see that, you know, with AT&T, the former CEO, leaves after getting $30 million working there and gets $60 million. You see it with Hertz. You see
it with so many of these big companies. And we were taught that capitalism and running a business is about taking risks.
So actually take a risk for something that's good and stick up for your workers, and actually in the end, if you do that, it will pay off. But you
have to be willing to not, you know, kind of coddle your CEO, coddle your shareholders. Take them through and actually give them a chance to help.
CHATTERLEY: I was going to say that, because there's other stakeholders here and there's also customers. There is also investors. Do we not also,
as customers, have to choose businesses that are fairer to their workers and as investors accept that better businesses pay their workers more?
PRICE: Well, there's a huge desire out there to do that. I mean, I get literally thousands of people reaching out to me every week saying I want
to support businesses like yours.
But the big companies know that, and so they create monopoly power. They smoke out competition. They buy out competition. I mean, I myself, through
the pandemic it's been stressful. You know, I've had days, weeks where I've been working 16 to 18 hours a day, triaging all these different emergencies
that are happening, and at the same time I'm getting e-mails, hey, Dan, walk away and we'll give you more money than you could ever imagine that
you could spend the rest of your life.
And so we're setting up this system where the people on top get such big rewards that they just walk away and then it preserves that monopoly power.
The upshot on that on all of us is that when monopolies rule, the services that we receive are worse and so we get nickeled and dimed. We get all of
these unfair processes and procedures, and that further incentivizes companies to lay off employees.
Because if the customer can't hold the company accountable, even for good service, let alone good behavior, then the company is going to act with
impunity, and we're seeing that all over the economy, not just today, but really for the last 40 years.
CHATTERLEY: Yes, I agree with you. Dan, very quickly, just to answer the point you said about getting better offers and significantly better offers,
any chance you would leave Gravity?
PRICE: I've been doing this since I was 17 years old and I've never been happier than I am right now, because our team knows we can make a bigger
difference saving small businesses during the pandemic, giving them all the apps they need for social distancing and payments, than we have for the
last 16 to 17 years combined.
CHATTERLEY: You know, I have a very soft spot for payments and I have strong beliefs about this. So, come back in a few weeks, please, and talk
to me about your business specifically. We've talked about very important social issues, but I want to hear about the business, too. Dan, a pleasure.
Dan Price, CEO of Gravity Payments. Thank you.
PRICE: Always a pleasure, Julia. Thank you.
CHATTERLEY: Thank you. All right, coming up, how plummeting oil prices are driving hundreds of companies out of business in the U.S. shale industry. A
spot check. Stay with us.
(COMMERCIAL BREAK)
[09:51:25]
CHATTERLEY: BP investing $1.1 billion in U.S. offshore wind power, a sign on the pressure on bigger oil to find new sources of income as crude demand
and prices remain subdued. John Defterios looks at how the collapse of the U.S. shale industry is affecting lives in Texas.
(BEGIN VIDEOTAPE)
JOHN DEFTERIOS, CNN BUSINESS EMERGING MARKETS EDITOR (voice over): Midland, Texas, the beating heart of U.S. shale production. But this part
of America, they know all too well what boom and bust feels like.
Oil service company, CEO, Bobby Bounds was all smiles during the boom. He and a dozen employees did industrial painting on storage tanks, pipes,
valves, anything related to oil and gas in the giant Permian Basin.
Then COVID-19 hit, striking first on Wall Street and in no time, Main Street Midland felt the pain.
(BEGIN VIDEO CLIP)
BOBBY BOUNDS, OWNER, HEAVY DUTY INDUSTRIAL: And so I woke up, I think it was on a Monday and the Dow Jones had dropped 2,300 or something and it
wasn't 12-hours later I'm getting phone calls from my big customers telling me to stop all work.
(END VIDEO CLIP)
DEFTERIOS (voice over): An oil price war then broke out between Saudi Arabia and Russia and prices went below zero for the first time in history,
and so, too, did Bobby's business. All told, he lost a half million dollars of work.
(BEGIN VIDEO CLIP)
BOUNDS: I'm the entrepreneur risk taker. I put resources at risk in hopes of a gain. And if I don't -- and if I get some gain, but then it goes bad,
well, that's bad for me. But I see it's almost a gamble.
(END VIDEO CLIP)
DEFTERIOS: And in this high-stakes game of oil, he was forced to fold his hand, pack his bags for New Mexico, where he started a new business. The
economic fate of the Permian is closely linked to what's called the active oil rig count.
Last autumn, when I was on the ground in Midland, it was listed on a sign downtown, 860 nationally, 414 locally. Today, as of early September, it's
256 nationwide and only 125 in the Permian.
Even the big boys feel the pain. As an independent player, Pioneer Natural Resources sits on the largest shale assets.
(BEGIN VIDEO CLIP)
RICH DEALY, CFO, PIONEER NATURAL RESOURCES: The world doesn't need a million barrels a day of growth coming from the U.S., we'll have to adjust
our staffing levels down to -- right size it to our activity levels.
And so we are in the middle of that process right now.
(END VIDEO CLIP)
DEFTERIOS (voice over): That's reflected in the local unemployment rate, rising nearing five-fold in a year, from just over two percent to 9.4
percent. Next door in Odessa, it's the highest in Texas.
Other oil producers and service companies did not survive, with three downturns in five years, 492 of them have gone bankrupt with a debt of
nearly $300 billion.
(BEGIN VIDEO CLIP)
DEFTERIOS (on camera): How do you batten down the hatches? And for what length of time?
DEALY: It's really unknown at this point. It's really dependent on when we get a vaccine and see what happens to demand. So I would say, kind of the
earliest is second half of '21, but it could roll into '22 or '23 time period, where we really see demand for oil get back over a hundred million
barrels a day.
(END VIDEO CLIP)
DEFTERIOS (voice over): Meaning the shale shakeout for players big and small is far from over.
(END VIDEOTAPE)
CHATTERLEY: And John is with us. John, clearly devastating here. What has it meant for production and what hope for government support for these guys
going forward?
DEFTERIOS: There are two key points here raised in there, Julia. This has been a perfect storm. Let's call it like it is, right?
We have this energy transition taking place. We talked about the BP investment. Money has been moving into wind and solar, battery storage
already, so that's one trend.
The second trend is those investors who are staying in want higher dividends, so it's holding back production. And then you're clobbered by
COVID-19. So we've lost from the peak in U.S. production in February, 13 million barrels a day, we lost three million barrels. It is like taking UAE
out of the market because we are down in August at 10 million.
It started to stabilize, but that doesn't take into account the second wave. And originally, we heard Donald Trump wanting to bail out the shale
producers, so proud of the 13 million barrels a day. I think they looked at the debt numbers, Julia, and said, wow, nearly $300 billion of debt
accumulated over the last five years. We've had what -- nearly 500 companies go bankrupt over that period of time.
It would be good money chasing the bad money. So even if Donald Trump wants the votes in the shale basins, wants to support this group, they could not
muster up a bailout and there's no talk about it right now.
It was a cleaning out, I think, Julia, that was overdue, and now just stabilizing after a nine-month washout. That's what it has been.
[09:55:58]
CHATTERLEY: Yes, it's a struggle for the industry though, and lost jobs and potentially lost votes, too.
John, great analysis. Thank you so much as always.
DEFTERIOS: Oh, big time.
CHATTERLEY: All right, that just about wraps it up for FIRST MOVE. Richard will be here with you tomorrow. I'll see you on Monday.
That's it for the show. Stay safe and have a good weekend.
(COMMERCIAL BREAK)
[10:00:00]
END
