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First Move with Julia Chatterley
Gaming Stocks Plunge as Beijing Summons Tech Leaders; Janet Yellen Warns of Irreparable Damage if the U.S. Congress does not Raise the Debt Limit; The CEO of Self-driving Firm Luminar on their Anti-Collision Technology. Aired 9-10a ET
Aired September 09, 2021 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:00:05]
ALISON KOSIK, CNN BUSINESS ANCHOR: Live from New York, I'm Alison Kosik, in for Julia Chatterley. This is FIRST MOVE, and here is your need-to-know.
China's crackdown. Gaming stocks plunge as Beijing summons tech leaders.
Debt dilemma. Janet Yellen warns of irreparable damage if the U.S. Congress doesn't raise the debt limit.
And laser guidance. The CEO of self-driving firm Luminar on their anti- collision technology.
It's Thursday. Let's make a move.
Great to have you with us. We are watching U.S. stock futures and they are mixed after fresh data came in on jobless claims; 310,000 Americans applied
for first time unemployment benefits last week. That's a new pandemic low and below the estimate of 335,000. The data suggests the labor market is
holding up despite this surging delta variant.
In Europe, stocks are trading mixed as the European Central Bank decides to slow down the pace of bonds purchases under its pandemic emergency program.
But the E.C.B. leaves its key interest rates unchanged.
In Asia, the Hang Seng fell 2.3 percent as shares of Chinese video game giants plummeted. Authorities summoned Tencent and Netease to demand they
play down profits. Japan's Nikkei and South Korea's KOSPI also closing lower today.
Okay, let's get straight to the drivers. Gaming stocks in China plunging Thursday after industry leaders were summoned to speak to regulators. The
firms were told to lessen their focus on profit, and to modify any element of the game that could be seen as addictive.
Steven Jiang joins me live now. Steven, you know what I heard this, I thought, wait a minute, you know, focusing on profit is at the heart of
what companies do. Do you have any sense from these firms that they are able to actually carry out these demands?
STEVEN JIANG, CNN SENIOR BUREAU PRODUCER: You know, Alison, you hit the nail on the coffin here, because the things the companies were told are the
almost the very reason for their existence, you know, pursuing profits and attracting players and fans.
But of course, this is Xi Jinping's China we are talking about and tumbling stock prices may be the least of these companies worries because remember,
just in the past few weeks, we have seen this flurry of policies and regulations being applied to a growing number of industries and sometimes,
destroying an entire sector almost overnight, with recent examples of the private after school tutoring industry, and before that, the crypto mining
sector.
So, for these companies we mentioned, this meeting was attracting a lot of tension because it came on the heels of the last week's sudden announcement
by the authorities to limit play time for minors basically to just an hour on Fridays, weekends, and public holidays only.
Now that rule, of course, that rule changed. The stated goal was to combat gaming addiction. I think that's something that's been resonating with many
parents, not only here, but also around the world, but it's the way. The issue here is the way the authorities have been doing this.
Now, in this meeting, basically, as you said, they -- the authorities were telling the companies how to run their businesses, and also to further
clamp down on how minors play their games, not only telling them not to focus on profits or attracting players and fans, but also telling them to
modify their own games and rules to further reduce addiction, so not to offer huge rewards for minor players.
But I think the more ominous aspect in this meeting also comes up, content restrictions. Basically the companies were told to ban or censor anything
the government deems to be promoting wrong values, not just things that you would expect, such as violence and obscenity, but also very specific
subjects such as you feminine male beauty and gay love.
So, this is seen as another example of this party, this leadership increasingly intruding into people's private life. I think that's very
worrisome because one of the main benefits of the economic reforms in the past few decades is people gaining more personal freedoms in their private
life.
And now of course, with this latest meeting, it seems this is another example of this Communist Party trying to reassert its dominance not only
in this one industry, but also in the broader economy, but also in every aspect of Chinese society. I think that is going to have wide ranging and
long term implications not only for financial analysts, but also for many millions of ordinary Chinese citizens across the country -- Alison.
KOSIK: Steven Jiang, well said. Thanks very much for your reporting.
ARK Invest headed by high profile investor Cathie Wood has dramatically cut its exposure to China. That's according to "The Financial Times" today. It
comes after Beijing ordered a crackdown on a number of sectors of the economy.
[09:05:10]
KOSIK: Clare Sebastian joins me live now. Clare, great to see you.
You know, Cathie Wood is cutting her exposure, but she is quoted as saying, she is not pessimistic about China in the long run, because she believes
China is a very entrepreneurial society, and that she doesn't think the government wants to stop growth and progress at all. But isn't that
essentially what China is doing with this crackdown?
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Well, Alison, Cathie Wood, who as you know, is very closely watched, someone who tends to, to pick the
more disruptive stocks to invest in, a darling of the sort of meme stock phenomenon. She has said -- she has called this a reset.
She said that they are cutting their holdings, as you said, dramatically, but they're looking more to companies that she said are currying favor with
Beijing. Now, the trigger for Cathie Wood in doing this, according to comments cited by the "Financial Times" was the crackdown on the private
education sector that we saw from the government in July.
At this point, she realized that she said that this was sort of social engineering and that Xi Jinping's quest for what he calls Common
Prosperity, sort of a redistribution of wealth became his prevailing concern. And because of that, she now wants to go into stocks that are
really sort of supporting that vision.
Some of the ones named are the likes of Pinduoduo, which is an agricultural platform linking farmers with consumers, also JD Logistics, which is the
logistics arm of jd.com. So, she is shifting into those areas. But as you said, she is not giving up, she says, we think they'll reconsider some of
these regulations with time. We won't give up on China because they are so focused on innovation, and so inherently entrepreneurial.
But she now moves into this intense debate that is going on about whether this intense regulatory pressure from Beijing on a variety of different
sectors is going to go away and whether that renders Chinese stocks, a real investment prospect.
KOSIK: So that's what Cathie Wood is doing and everybody knows she is a super successful investor. Are you hearing from other investors about what
they're doing when it comes to China?
SEBASTIAN: Well, look, this has been a debate, as I said, that has now been raging publicly. We've heard from you know, BlackRock this week, they
had a huge success with the launch of their fund in China, their investment fund, that was criticized though by George Soros. He called it a tragic
mistake.
He said it was now a problem for global democracies, because the money that is invested in this fund will help prop up President Xi's regime, he said,
which is repressive at home and aggressive abroad. That was in an op-ed in the "Wall Street Journal." So, he was criticizing BlackRock.
Ray Dalio, another billionaire investor, though, on the other side said that he thinks China is an exciting opportunity, and that what we're seeing
now with the quest for, quote, "Common Prosperity" is a sign of philanthropy. That is something he didn't see in China when he first
traveled there many years ago.
So, there's a lot of sort of concern around these stocks. We're seeing not only regulation in China, but regulation in the U.S. around Chinese
listing. It's coming from both sides. It's coming at a time when relations between the U.S. and China have been deteriorating. So, this is a question
that many investors are asking and someone like Cathie would believe the regulation might die down, others believe perhaps not -- Alison.
KOSIK: Okay. Clare Sebastian, thanks so much for breaking all that down.
A sharp warning now from the U.S. Treasury Secretary. Janet Yellen says the Federal government is likely to run out of cash by next month unless
Congress takes action. Matt Egan is on the story and joins us live. Matt, great to see you.
You wrote a great piece about this breaking down what will happen if there is no agreement reached on a new debt limit. I mean, it can wreak havoc on
everything from, you know, credit cards to car loans. What's the likelihood that we're going to reach this emergency point, though? Nancy Pelosi sounds
pretty confident that a deal can be reached. Also, where on the calendar do we run out of money?
MATT EGAN, CNN REPORTER: Well, Alison, here we go again, another debt ceiling fight is brewing in Washington, and it is looming as a key risk
this fall. Now, we knew that the federal government was going to eventually run out of money because of the debt ceiling. The Congressional Budget
Office had previously said that this could be an issue of sometime during the final three months of the year, probably in October or November.
But Treasury Secretary Janet Yellen is putting a finer point to it in a new letter to Congress that Yellen sent yesterday. She warned that this is
coming up very soon. Let me read to you what she said.
She said, "Based on our best and most recent information, the most likely outcome is that cash and extraordinary measures will be exhausted during
the month of October." Now Yellen had said -- she said that once those extraordinary measures are exhausted, the United States will be unable to
fulfill its obligations for the first time in history.
Now, this would be an epic disaster and a complete unforced one, to your point, we would see stock markets tank, borrowing costs for the United
States would go straight up.
[09:10:10]
EGAN: The Treasury rates would go up, and that's a big deal, because Treasuries are the benchmark by which all other securities are measured.
So, this would be very bad, and it's not just concern we're hearing from the Biden administration. I talked to Mark Zandi, the Chief Economist over
at Moody's Analytics. He also was a former economic adviser to Republican, John McCain, and here's what Zandi told me.
He said it would be, quote: " ... financial Armageddon. It's complete craziness to even contemplate the idea of not paying our debt on time."
Unfortunately, Alison, we do live in crazy times now.
KOSIK: And as you said, you know, this is not the first time that we see Congress run down the clock, and so I ask you again, are we sort of
screaming fire in a theater here? Are we -- you know, this is sort of the same old timetable that we're up against? Usually, Congress comes to the
rescue and comes to, you know, figures out a deal. Nancy Pelosi sounds pretty confident.
If you were a gambling, man, what's the likelihood we are going to reach, you know, DEFCON 5 on this?
EGAN: Well, Alison, the markets are not freaking out about this at all. We haven't really seen any strong evidence of major concern about the debt
ceiling yet. I mean, the S&P 500 hasn't even had a five percent pullback in more than 300 days, and I think that a lot of investors and economists do
expect that this is going to get done probably closer to the last minute as it always does, simply because not acting here would be way too disastrous.
But the fact that markets haven't reacted here at all, doesn't necessarily mean that this is an all clear, because it could be that the markets end up
having to react as things get a little bit dicier down the line, and that means that they could have to react that much more.
Again, ultimately, I do think that the Treasury Department, the Federal government, and congressional leadership, they realize that they don't --
they'd be basically playing with fire here.
So at the end of the day, they're going to do everything they can to make sure something gets done. But we do have to remember that, you know, this
isn't happening in a vacuum. This debate that we've had before is happening at a time when the global pandemic is still raging, when the delta variant
is actually slowing the U.S. economy, as we showed -- as we saw in the August jobs report.
And so, you know, one analyst I talked has said that it's never a good time to sort of play chicken with America's credit worthiness. But he said this
is, quote, "a particularly childish time" to have this debate because of all these other challenges we have going on -- Alison.
KOSIK: Yes, hello, pandemic. Right? Matt Egan, thanks so much.
Big news a short time ago from the European Central Bank, it will dial back its bond purchases over the coming quarter, a step towards unwinding
pandemic era emergency aid. Anna Stewart is here, with more.
Okay, so if I was a fly on the wall at this meeting, I would say there's a push and pull happening within the E.C.B., you know much like what's
probably happening at the Fed. We've got the risk of inflation versus the risk of COVID slamming the brakes on the economic recovery. So the E.C.B.
taking action, but they're stopping short of calling this a taper.
ANNA STEWART, CNN REPORTER: Yes, it's definitely a gradual move. The two key words really, Alison, were moderately lower. That is the moderately
lower pace we are now expecting from the pet program, the Pandemic Emergency Purchase Program. And we don't know what moderately lower really
means just yet.
It's currently that pace has been 80 billion euros a month, about $95 billion, and we're not likely actually to find out what the moderately
lower decrease will be until we get publications from these be in the coming weeks.
However, the starting gun has been fired here for the beginning of this tapering process, albeit gradually and here is the reasoning why from the
President of the ECB, Christine Lagarde.
(BEGIN VIDEO CLIP)
CHRISTINE LAGARDE, PRESIDENT, EUROPEAN CENTRAL BANK: The current increase in inflation is expected to be largely temporary, and underlying price
pressures are building up only slowly.
The inflation outlook in our new staff projections has been revised slightly upwards, but in the medium term, inflation is foreseen to remain
well below our two percent target.
(END VIDEO CLIP)
STEWART: Well below that two percent target. That was one of the biggest concerns actually going into this meeting as you suggested there. It was
interesting. She was quite bullish about the look of the economic recovery in Europe, but she also hinted caution saying that a lot of it will depend
on the course of the pandemic and of course, a particular concern regarding the delta variant -- Alison.
KOSIK: Okay, Anna Stewart, thanks so much.
Still to come on FIRST MOVE, meme stock selloff. Investors drop GameStop after a hype free earnings call.
And life-saving laser tech, we're going to take a look at the laser that can prevent car crashes.
(COMMERCIAL BREAK)
[09:17:41]
KOSIK: Welcome back to FIRST MOVE. I'm Alison Kosik.
U.S. stock futures remained flat after new jobless claims fell last week to the lowest in almost 18 months.
Yesterday, Treasury Secretary Janet Yellen warned the government could run out of money next month unless Congress raises the debt ceiling. Meanwhile,
the Fed's Beige Book report says the U.S. economic growth slowed over the summer.
Joining me now Brian Levitt. He is the global market strategist at Invesco. Great to see you, Brian.
BRIAN LEVITT, GLOBAL MARKET STRATEGIST, INVESCO: Thank you. Good to be here.
KOSIK: So, we are beginning to see some weakness enter equities. The Dow and S&P fell for three straight sessions. And you know, when you see moves
like this in September, we remember back that it is one of the seasonally weakest months of the year. Do you think the economy has peaked and that
stocks are overvalued.
LEVITT: So the economy is definitely slowing. You know, equities are somewhat elevated on valuation from a historical perspective, but that
tends to happen as you're a year and a half out of a recession because the market recovers before the economy and earnings recover. So, we're going
through that process right now where the economy, you know, while it is slowing, is still going to be supportive of corporate earnings and
companies are likely to grow into those multiples.
We also have to remember that equities are trading at valuations where they are today in a very low interest rate environment, and so equities continue
to be the asset class of choice, even if valuations look a bit elevated right now.
KOSIK: All right, so the focus is on the Fed these days and you know, its taper dilemma and as I said, we are looking at this decelerating economy.
So, the question is, will the Fed really take its foot off the stimulus gas? Or will it keep chugging along? I mean, if we get data like we did
last week about the labor market, which was a huge miss, do you see the Fed changing course any?
LEVITT: I don't think the Fed is going to change course from the perspective of they'll start to put in the plan to taper asset purchases as
we move towards the end of the year or the beginning of next year and maybe we can quibble a little bit about the timing of it.
But what I think is really important is that anyone that was extrapolating tapering to then mean interest rate hikes to then mean a flattening or an
inversion of the yield curve to then mean a recession, I think is wildly overstating what the Fed is likely to do.
[09:20:10]
LEVITT: And so I think the way investors should think about this as well, although tapering is going to go forward again, we can quibble on the
timing, the prospect of higher Fed fund's rate is well off in the future. And if you believe like I do, that business and market cycles don't die of
old age, they end when the Federal Reserve kills them with interest rate hikes, then that suggests to me, that's a long time off.
I believe we're still early in a cycle, and when you're early in a cycle, that favors credit over Treasuries, and that favors stocks over bonds.
KOSIK: Okay, so clearly, you've got an optimistic view of where we're headed with the market, but then politics plays in to what's happening on
Wall Street as well. I'm curious if you think that the reconciliation bill and potential tax changes, how much of that complicate your outlook?
LEVITT: So I would view it as if you do see the type of spending come forward, it's a large number, but remember that number, that money is going
to be spent over a multiyear period. If they are able to pass an additional spending bill then it will be paid for with higher taxes, and those higher
taxes do hit earlier than the spending would hit the economy, and so you end up with something of a fiscal drag at a time that's likely not ideal as
the economy is still dealing with the delta variant and perhaps some slowdown in the service economy.
I don't believe that that fiscal drag leads to recession. What it does do is it slows the economy down further and has implications for what happens
in markets. In a slowdown, we would expect rates to not go up meaningfully, we would expect commodities to be under some pressure. We would expect
stocks to do well, but more growth oriented parts of the market than the deeper value parts of the market that investors favored earlier this year.
KOSIK: How else should investors play this then as well with their portfolios?
LEVITT: Well, look, I think that investors should be looking for structurally advantaged businesses wherever they can find them. I know that
we will ultimately get through this delta variant and we'll have another leg up in economic activity in maybe the final stages of a deep value or
really cyclical rally.
But if you're looking out over a multiyear period, you have to ask yourself, if this is an economy, a global economy that moves to a new,
higher sustained level of growth, or one that you know, just reverts back to where we were, call it from 2011 through 2019. I would suggest it's the
latter.
And then, for my opinion, you're looking in that type of an environment for structurally advantaged businesses, companies that can grow in a relatively
slow growth world wherever you can find them both in the United States and around the world.
KOSIK: Okay, Brian Levitt, Global Market Strategist with Invesco, thanks so much for your time today.
LEVITT: Thanks.
KOSIK: And these are stories making headlines around the world. The Taliban are allowing roughly 200 people to leave Afghanistan on the first
commercial flight out of Kabul since they seized power. Several Americans are expected to be on today's flight to Doha, Qatar.
Let's get more now from CNN's Sam Kiley, who is in Doha. So what are you learning about this flight? Can you tell me more about who was on the
plane?
SAM KILEY, CNN SENIOR INTERNATIONAL CORRESPONDENT: Well, the details of the passenger manifest are still likely to emerge, but we know from other
broadcasters' material that people heading for Canada and London are certainly on the flight. And we know that there may be -- there are some
Americans. We don't know how many Americans, but this is a multinational flight of expatriates. It doesn't seem that there are any Afghans on the
flight.
It is, according to the Qatari mediator there who has really been driving the whole process of not only getting the technical abilities to stand the
airport up, but also persuading the Taliban of the merits of allowing people to come and go freely from what is now their capital.
According to him, this is a commercial flight, not an evacuation flight. It is effectively, a Qatar Airways charter. There may be others going in. Four
others landed from other nations, notably other Gulf nations carrying aid, much needed aid into Kabul, and I think that's part of the aid and trade
exchange that the Taliban are being encouraged to make in return for trying to moderate some of the worst aspects of their behavior.
But some of that is already going wrong. Of course, we've recently seen pictures of journalists who have emerged from brief detention at the hands
of the Taliban after covering demonstrations in Kabul, bearing the marks of some vicious beatings with cables and other whips, which is definitely not
the sort of trajectory that particularly the Qataris have been asking from the Taliban.
And it is the Qataris really more than any other nation that have a line into the Taliban, at least, a communications line. The extent to which they
are being listened to is somewhat open to question given the very hard line all male government that has now emerged in Kabul.
[09:25:10]
KOSIK: Yes, I mean, the first priority of the Taliban doesn't seem to be, you know, kind of a humanitarian mission or trying to prop up the economy,
it seems to be trying to ban these protests.
KILEY: Well, they're not only prioritizing banning the protest, they're aware that politically, that these protests are potentially extremely
threatening to them, given that the majority of Afghans are urban. And it is in the urban concentrations that protest in Kabul and Iraq and elsewhere
have grown.
If it is in the urban areas where women have been empowered for so long, likely that would be an environment in which they face the greatest level
of opposition, but they also know that they are facing a humanitarian catastrophe, which could also undermine their power base.
So, they have to work very hard indeed, in legitimizing themselves to some extent at any rate, so that they can be the conduit through which
international aid might flow. But most aid actually in Afghanistan, due to the previous years of catastrophic levels of government corruption has been
through NGOs multilaterally through the United Nations, and that's likely to continue.
So right now, what they need in humanitarian terms is more of delivery systems, more trucks going across the border, more aircraft landing, but a
lot of that also comes with demands for more freedom, and it is that area where there's going to be continued friction with the Taliban.
KOSIK: Okay, Sam Kiley live for us in Doha. Thank you.
And you're watching FIRST MOVE. The market open is next.
(COMMERCIAL BREAK)
[09:30:01]
KOSIK: Welcome back to FIRST MOVE. I'm Alison Kosik, and that was the opening bell at the New York Stock Exchange. It looks like U.S. stocks are
opening flat after new data on jobless claims. The number of Americans who applied for first time unemployment benefits hit a fresh pandemic low. The
weekly jobs have trended lower -- the claims have trended lower since mid- July despite the spike in delta variant cases.
Meantime shares of Lululemon are surging after its second quarter results beat expectations. The athletic retailer also offers a stronger outlook for
the next quarter. But Boston Beer is down after it pulled its earnings guidance amid a slowdown in sales of its hard seltzer brand.
And meme favorite GameStop is also falling even after the company said its loss narrowed in the second quarter. GameStop posted a net loss of $62
million for the quarter as sales jumped about 25 percent.
Joining me now to talk about this is Michael Pachter, he is Equity Research Analyst at Wedbush Securities. Great to see you.
MICHAEL PACHTER, EQUITY RESEARCH ANALYST, WEDBUSH SECURITIES: Good morning, Alison. Thank you.
KOSIK: So you know, GameStop posting this smaller loss than last year, it posted rising sales. Talk me through why the stock is tumbling?
PACHTER: Well, those are fundamental factors, and I don't think anyone has invested in the stock for fundamentals. So, institutional investors
abandoned the stock a long time ago. The only people who care about fundamentals are the shorts, and there remains a structural defect in the
short position, and the Reddit raiders have figured out how to exploit that and they've been pretty smart about it.
What's keeping the Reddit raiders afloat is the promise of this groundbreaking strategy that Ryan Cohen said he would unveil back in
January. And you know, each quarter, we have to wait another three months, because it just hasn't been forthcoming.
So, I think they're disappointed and the longs had sold off the stock because they didn't get the strategy they expected this quarter, a quarter
ago, and two quarters ago.
KOSIK: So solve me this riddle. Fundamentals don't matter, although, you know, we're starting to see GameStop kind of look like a real company, even
though their earnings call didn't provide an outlook. You know, we're seeing new names in the C-suite, people from Amazon, we're seeing GameStop
shift its business toward e-commerce, expanding its customer care operations.
Help me square what's going on here?
PACHTER: Well, new names for sure, and they are very competent. They're not really doing anything differently than the old management, and I'd say
the biggest differences that the average age of the C-suite is about 15 years younger than the average age of the prior management.
I don't think that the old guys, you know, no pun intended, were Luddites. You know, I think the old guys were fine. But -- and they were the ones who
cleaned up the balance sheet. They are the ones who shifted the focus to e- commerce.
I think Ryan Cohen is an impatient minority shareholder who exploited, you know, rise in the stock and got people that were wearing golden handcuffs
to take off and become centimillionaires.
I don't think he's done anything differently than they were doing with the possible exception of adding a distribution center in Reno, and I'm not
exactly sure why that, perhaps he is going to try to beat Amazon in deliveries to the Bay Area.
But I don't really know what they're doing that's different, to me, it's business as usual. I actually like this company, it's a good company, it's
just fundamentally not worth more than 50 bucks.
So, they're doing nothing different, and if they ever tell us their strategy, they have to kill us. So I think that we're going to keep waiting
three more months and hear nothing, and three more months and hear nothing. And I think the truth is, there is no strategy other than be like Amazon.
So, I think that's what they're doing.
They hired a bunch of Amazon people, they are very competent, and I think they're going to try to be like Amazon, I'm going to remind you that
Walmart tried to be like Amazon, too. And it took them about 20 years of emulation before they broke down and bought Jet. So maybe, Ryan Cohen
thinks he can do the same thing, but I just don't see it.
KOSIK: Okay, I've got to ask you about China before we go, because China's laser focus on social -- anything social related to tech, and anything that
Beijing sees as being too profitable, it is really a target for China to crack down on that company. Talk with me about how investors should play
this.
PACHTER: You know, it's the same thing in China that's going on here. It's really that the people in power, at least in the prior administration are
exploiting a culture war, and so it's easy to target Big Tech because everybody feels exploited by Big Tech and to say they are, you know,
sucking all the profits and sucking up all your time.
I have to say, personally, I don't cover any of the Chinese equities. I'm personally long Tencent, because I think the selloff is overdone. That's a
phenomenal company. Investors have bid down U.S. companies that do business in gaming in China, particularly Activision, which is on our best ideas
list. I love that stock. That stock is trading about $25.00 below. It is $105.00 peak.
[09:35:10]
PACHTER: And I think it's an excellent entry opportunity to have everything lined up perfectly. Great management, great IP, exploiting
different business models, and the landscape is changing for the better for them.
So you know, they're in a really great position to capitalize. I would play Activision.
KOSIK: Okay, Michael Pachter, Equity Research Analyst at Wedbush Securities. Great getting your perspective today. Thank you.
PACHTER: Thank you.
KOSIK: From how they learn to what they play, the children of China are now subject to far-reaching government restrictions. It's a not so subtle
effort by the central government to intervene in the private lives of families, and potentially shape future generations. CNN's David Culver
reports.
(BEGIN VIDEOTAPE)
DAVID CULVER, CNN CORRESPONDENT (voice over): Sweeping changes to China's social order focused on the next generation. The all-powerful central
government rolling out drastic measures over several weeks, from a crackdown on private tutoring, to heavy restrictions placed on kids in
gaming, all portrayed to help the masses.
DALI YANG, PROFESSOR OF POLITICAL SCIENCE, UNIVERSITY OF CHICAGO: A lot of those actions are designed to help ease the pressures, whether it's
property prices or schooling or gaming and so on.
CULVER (voice over): It resonates with some families like the Yang's in Shanghai. Dad, Yeqing capturing picture after picture of his two teenage
kids enthralled by their phones, playing hours upon hours of endless games.
The government now restricting the use of online video games to just three hours a week for kids, 8:00 to 9:00 p.m. on Friday, weekends, and holidays.
YEQING YANG, FATHER IN SHANGHAI: It's a good policy that we get a chance to rebalance everything.
CULVER (voice over): And it is coinciding with a massive crackdown on pricey after school tutoring. Many venting concerns on Chinese social
media. One post reading, "I am very worried that this generation of children will become the victims of policy oriented actions, but some
supporting the government's efforts to restructure home life.
This person writing, "In the past few years, extracurricular training institutions have gone too far. If the country does not regulate them,
these training institutions will only become more and more crazy."
A rising middle class has struggled in recent years, spending millions buying homes in desired school districts, and paying private tutors to keep
their kids academically competitive, with some complaining that wealthier families had an unfair advantage.
As China marks 100 years since the founding of the Communist Party, General Secretary and President Xi Jinping is shifting focus back to its
foundational party values, even calling for a redistribution of wealth to counter poverty.
Some have labeled this as a new Cultural Revolution harking back to the 60s and 70s when then leader, Mao Zedong led a movement to purify the party as
he put it, an obvious effort to reassert his control. It led to brutal crackdowns on free thought, mass imprisonment, and hundreds of thousands of
people were killed.
D. YANG: General Secretary Xi is careful not to mobilize the masses to rise clearly against the power structure as Mao did, but at the same time,
however, many Chinese do feel like actually, it resonates with the Cultural Evolution in certain respects.
CULVER (voice over): There are striking similarities. Last year, the government banning the use of foreign textbooks in most schools, and more
recently limiting the role and influence of foreign teachers on some education platforms.
D. YANG: A lot of this is really about eliminating any potential risks to the system.
CULVER (on camera): And starting this new semester, Chinese students of all ages from primary to graduate schools will have to start learning from
textbooks like these, the subject, Xi Jinping Thought, reinforced by the many photos of this country's increasingly powerful leader.
CULVER (voice over): For the Yang family, there are positives.
Y. YANG (through translator): I do feel the policy came in abruptly, but it seems like people accept it well.
CULVER (voice over): His kids turning to sports and physical activities again, less phone time and fewer academic pressures in exchange for more
family time.
But beneath the easing of some daily pressures, a deeper indoctrination may be underway, aimed at keeping anything the party disapproves of firmly in
its place.
CULVER (on camera): Now, many of these policies that we are seeing roll out here in China are rooted in the new three child policy and that is a
government push to encourage families to have more children, and that's not just about trying to increase the population, it is also heavily rooted in
maintaining and increasing prosperity, which in turn translates into social stability here.
David Culver, CNN, Shanghai.
(END VIDEOTAPE)
[09:40:00]
KOSIK: North Korea marked its 73rd Anniversary with a military parade in the middle of the night, Kim Jong-un greeted people and waved to the crowd,
but local media doesn't say he gave a speech.
The parade featured planes, marches, and huge crowds. But as far as the videos show, no new missiles.
After the break, we hit the brakes, technology that promises to save lives on the road unveiled at the International Mobility Show. We'll explain all
in two and a half minutes.
(COMMERCIAL BREAK)
KOSIK: Welcome back. All this week, we've covered new innovations at the IAA Mobility Show in Germany. One of the most dramatic demonstrations we've
seen comes from Luminar Technologies. It is showcasing this laser collision avoidance system called LIDAR, saying it can consistently stop a car from
crashing into what's in front of it.
Intel's Mobileye is using LIDAR technology in this self-driving Robo taxi. It has three special sensors built into the roof, allowing the vehicle to
navigate traffic without a driver.
Austin Russell is the CEO of Luminar, and he joins me live. Great to see you.
AUSTIN RUSSELL, CEO, LUMINAR: Yes. Thanks for having me. It's certainly an exciting show.
KOSIK: It sounds that way. First, let's walk through what LIDAR -- how LIDAR works for those who are watching who don't understand.
RUSSELL: Yes, yes, so LIDAR stands for Light Detection and Ranging. It sends out laser pulses into the environment, it measures the exact distance
for what it takes to hit an object and come back and you'll know how far it is.
And then you do these millions of times, and you can collect this LIDAR image that allows you to understand exactly where everything is, so that
the car can autonomously navigate safely, while at the same time, you know, when you are driving a vehicle to be able to enable better collision
avoidance, to be able to actually start saving lives out on the road that are caused by accidents, which 95 percent of accidents out there are caused
by human error, you know, leading to 1.5 million lives lost out on the road.
So, for the first time here at IAA, we're actually debuting not only our LIDAR system with Iris, but also this -- what we're calling proactive
safety software in this full stack approach that allows this new next generation vehicles to actually be able to prevent you from hitting things
from whether it's people cars, you know, whatever objects may lie ahead, and to be able to hopefully save a lot of lives.
[09:45:16]
KOSIK: But we've seen autonomous cars on the road and we have heard of accidents even with those autonomous vehicles. So now, you know, as they
become more and more widely adopted, responsibility for those accidents could be shifted away from drivers and toward those who design and
manufacture the vehicles, and there's going to be a need to sort out who is responsible. How do you sort of deal with the liability factor of
autonomous vehicles as this becomes broadened out?
RUSSELL: Yes, well, importantly, the cars certainly weren't using Luminar. You know, we pride ourselves on extreme levels of safety, and you know,
the, the importance of this.
You know, I think there's also a very important understanding between right now, the systems that people try and develop are called self-driving are
really assisted driving systems that are out there. And there's a very important distinction where the driver has to be constantly paying
attention, ready to take over the wheel at any given moment, whenever the vehicle makes a mistake.
You know, so the real distinction here is that -- and the opportunity is, instead of having a car that the details constantly that relies on the
human to take over, when you're driving, it should take over when it senses that you're otherwise going into an accident. You should have a much more
focused approach in a technology that can enable that, and that's what makes all the difference. That's what we're doing here.
On top of that, too, when it does come to autonomous driving and self- driving, that's what people can finally enable with this. So, this is what we're going into production with, with automakers, you know, ranging, you
know, Volvo has been public about announcing, for example, the integration to SAIC, the largest automaker in China to, you know, Daimler trucks and
other kinds of major OEMs.
But at the same time, you know, we're really excited to see this out on the roads. And as you mentioned, Intel and Mobileye just launched their vehicle
just the other day here powered by Luminar as well.
So, it's certainly an exciting time for this.
KOSIK: Okay, let's talk Tesla for a moment. Elon Musk, Tesla's CEO has been critical of the technology that you have, saying LIDAR is a fool's
errand and that anyone relying on LIDAR is doomed. Yet, is it true that he has a contract to use sensors from Luminar Technologies for testing and
development? So does that mean there's a partnership brewing between Luminar and Tesla?
RUSSELL: So I think I can't confirm or deny things from a customer confidentiality perspective. But that said, listen, we're working with what
-- eight of the top 10, you know, major automakers now to be able to start integrating for testing and development, and ultimately, with the goal
towards series production.
You know, that's really the focus of being able to see this technology through. We are already starting to convert those into true production
wins, really the first of its kind in the industry. And on top of that, now, we are seeing some automakers are sticking a claim like Volvo out
there saying, hey, not only is this a key technology that should be optional on high-end vehicles, but safety is critical, safety should be
standard.
And just like seatbelts or airbags, you know, there's no seatbelt option upgrade on your car. It's something that standard with every vehicle and
the way that we see it is that LIDAR and software specifically proactive safety software with us is going to be no different. That's the goal.
That's what we're planning for and that's what we're executing to. It's only accelerating here at IAA.
KOSIK: Okay, well, after Luminar listed on the NASDAQ, you became the world's youngest self-made billionaire at 25 years old. In fact, you booted
Kylie Jenner off of the list? How do you feel? And what's the top advice you'd give your younger self and I say younger than 17 because at 17, you
developed this idea for Luminar.
RUSSELL: Yes. No, it's good. Well, I already hit my quarter life crisis. So you know, it's a process. No, just kidding. So, I think -- you know, I'd
say the biggest thing is just stay focused. You know, there's so much noise, there's a lot of other stuff. Stick to the vision that you had.
You know, I think it was very quick. There's always a lot of naysayers and a lot of other folks, you know that are out there when it comes to these
kinds of technologies. And you know, like when you do the analysis, when you know your stuff cold, you've got to stick to the path and obviously,
you know, be careful not to drink too much Kool-Aid along the way.
But when it comes down to it, seeing through this vision, you know, and actually partnering directly with automakers to see this technology
through, something that nobody thought was possible, but at the same time, we managed to pull it off.
And with that, we got a lot ahead, but I'd say, yes, just continue to stay focused. It's always the intersection of technology, drive, passion, and
execution that can change the world and excited to be doing that.
KOSIK: All right, Austin Russell, CEO of Luminar Technologies. I thoroughly enjoyed the conversation. Thank you.
RUSSELL: Thanks for having me.
KOSIK: You've got it. Still ahead, killed for food. How precious and protected wildlife in Kenya is under threat because of the impact of the
pandemic.
(COMMERCIAL BREAK)
[09:52:01]
KOSIK: The coronavirus pandemic has brought Kenya's tourism industry to a halt and the country's wildlife is paying a hefty price. The economic
fallout is so severe, protected wildlife is being killed for food.
CNN's Scott McLean has details.
(BEGIN VIDEOTAPE)
SCOTT MCLEAN, CNN CORRESPONDENT (voice over): The savanna of Southern Kenya is a tough place to survive. It's hot, dry, and there's the constant
threat of predators planning their next meal. Lions, leopards, and lately a lot of humans, too.
DONART MWAKIO, TAITA HILLS WILDLIFE SANCTUARY: Currently, the situation is worse because most people have lost their jobs, and now, they are resorting
to poaching.
MCLEAN (voice over): Twice a day, Donart Mwakio and his team of Rangers from the sprawling Taita Hills Wildlife Sanctuary go hunting for poachers.
On this day, they find a crudely butchered giraffe carcass killed by poachers in the last two weeks.
MWAKIO: It weighs about one tonne.
MCLEAN (voice over): Down the dirt road, the footprints are much fresher. It leads to a homemade snare fashioned from the electric fence meant to
keep poachers out. They find two more traps, the last one attached to the roof of an eland, the largest antelope on Earth.
New figures from the Kenya Wildlife Service show that seizures of bush meat, mostly antelope, zebras, and dig digs are on pace to hit a record
high.
JOHN MIGUI WAWERU, KENYA WILDLIFE SERVICE DIRECTOR GENERAL: The problem is, is not looking very good at the moment. Poverty is something that was -
- that came through with COVID because jobs are lost.
MCLEAN (on camera): People are desperate.
WAWERU: People are desperate. Yes.
WILLY MWADILO, GENERAL MANAGER, TAITA HILLS: They sit in the village morning to evening. They don't have a cent, they don't have food.
MCLEAN (voice over): Willy Mwadilo is the General Manager of Taita Hills and the two hotels inside the sanctuary that pre-pandemic were almost
always near capacity.
But in the past 18 months, he says they've scarcely topped 20 percent.
MCLEAN (on camera): People are asking you for jobs.
MWADILO: Yes. So many people, so many people.
MCLEAN: You don't have jobs to give them.
MWADILO: I don't have jobs to give them.
MCLEAN (voice over): In the village next to the sanctuary, poverty is the rule, not the exception. Wildlife is the most precious resource, but
without tourism, animals are worth a lot more dead.
MCLEAN (on camera): This village was struggling even before the pandemic, only some of the houses are hooked up to electricity. Nobody has indoor
plumbing and the pandemic has made life just that much harder.
People here say they don't have enough to eat and so it's pretty hard to blame them for poaching.
Ibrahim Chombo (ph) takes any odd job he can to earn the $7.00 a day that ensures his wife and two small kids have enough to eat. But since the
pandemic took hold, his kids eat just once a day.
"They become weak because there's nothing to eat. They don't complain. They know when their parents get money, they will get to eat." He says.
Chombo (ph) says he doesn't poach bush meat, but like many, he buys it. He can't afford beef. It's at least four times the price.
GABRIEL MRADAI, BUTCHER: Before corona, there were so many customers.
MCLEAN (voice over): The local butcher works on commission. Pre-pandemic, his display case would be filled with 20 or 25 kilograms of beef. Now,
there's just one, almost no one can afford it.
[09:55:10]
MCLEAN (voice over): Ask around and bush meat is not hard to find. This man who agreed to speak with us anonymously says he is the middle man who
buys the meat from poachers and takes it to town to resell at a small profit.
UNIDENTIFIED MALE: I have to take care of my family. So I have to risk to go back to the bush.
MCLEAN (voice over): He is well aware of the risk, jail time or a fine he could ever afford if he was caught.
MCLEAN (on camera): So, what's the lesson in all of this?
UNIDENTIFIED MALE: We need employment.
MCLEAN: If you could feed your family another way, you wouldn't do this.
UNIDENTIFIED MALE: Yes. I cannot do that.
WAWERU: The root of the problem is, we now must look for alternatives. But first, we must educate the people to tell them, the problem of why bush
meat is not the alternative.
MCLEAN (voice over): But that perhaps is a tough sell considering tourism has all but dried up.
WAWERU: It has, but recent numbers are show that it is beginning to pick up.
MCLEAN (voice over): A glimmer of light that cannot come soon enough.
Scott McLean, CNN, Tsavo, Kenya.
(END VIDEOTAPE)
KOSIK: Thanks for watching. I'm Alison Kosik. "Connect the World" with Becky Anderson is next.
(COMMERCIAL BREAK)
[10:00:00]
END
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