Return to Transcripts main page
Quest Means Business
French Government Dissolved; Austerity Versus Growth; Europe's Economy; European Markets Up; Ukraine Parliament Dissolved; S&P 500 Hits New Record; Amazon to Buy Twitch; Ebola Outbreak; Cost of Contagion; UK Treating Ebola Patient
Aired August 25, 2014 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(NEW YORK STOCK EXCHANGE CLOSING BELL)
RICHARD QUEST, HOST: A Race for the Cure and a race to a record. The S&P went through 2,000 during the day, fall back slightly. A strong rally
on the Dow, up the best part of half a percent. Trading is over.
(GAVEL HAMMERS)
QUEST: And she hit the hammer hard. It's Monday, it's August, it's the 25th.
Tonight, Europe "on the road to hell." Not my words. France's government's dissolved and ministers are slamming austerity.
Also tonight, the King's new conquest. I'm talking about Burger King. It heads north in search of lower taxes.
And Facebook's cleaning up your news feed. You won't believe it. And that's the thing that's going. We'll explain later in the program.
I'm Richard Quest. I mean business.
Good evening. We begin tonight with the turmoil and political disarray in France as the government battles over the future of the
economy. The French prime minister, Manuel Valls, and his government resigned on Monday, an upheaval which comes after the French economy
minister publicly bashed austerity, declaring that France must break away from Germany's obsession.
Arnaud Montebourg, who's been on this program saying similar things, says he can no longer serve a pro-austerity government.
(BEGIN VIDEO CLIP)
ARNAUD MONTEBOURG, FRENCH ECONOMY MINISTER (through translator): I informed the prime minister that if he considered I was in the wrong, that
if he deemed my convictions counter to the direction of the government he leads, then in that case, I thought it necessary for me to take back my
freedom, just as he accepts to give it back to me.
Long live the productive restructuring of the French economy. Long live the republic, and long live France!
(END VIDEO CLIP)
QUEST: Arguably, with colleagues like that, who needs a political opposition. Our senior international correspondent Jim Bittermann is live
in Paris. Look, Montebourg has always had a certain laissez-faire, if you like, a certain ability to speak his mind, but he went to far this time,
they would say.
JIM BITTERMANN, CNN SENIOR INTERNATIONAL CORRESPONDENT: He did absolutely. He did absolutely, Richard. He crossed a line because he
basically was very publicly critical of the government's policy and saying things like the fact that he didn't agree with the cooperation that goes on
between France and Germany and the Europeans over the idea that there should be more austerity, less deficit spending, and that sort of thing.
He said that's not right. He said the way to get the economy going is to pump money in. And he was very critical of something that the Hollande
government has pushed through the assembly here, which is this program to what they call a pact of responsibility between business and the government
which would give a lot of tax credits to businesses, 40 billion euros in tax credits.
And at the same time, under the same program, there would be about 5 billion accorded to householders, the French -- the average French citizen.
And Montebourg said that's totally out of line, that it should be brought back into balance. A lot of criticism from him.
QUEST: But why did the prime minister and the government resign, and then only to be asked to form a new cabinet rather than Hollande sack
Montebourg?
BITTERMANN: Well, basically the way the things work politically here is that the prime minister takes responsibility for the government. So,
Valls offered his resignation because of this uproar within the cabinet.
And not only -- it wasn't only Montebourg. In fact, there's two other cabinet ministers who sided with Montebourg, and perhaps a fourth. So you
have a total of four out of a cabinet of 16 who are kind of a rump group criticizing government policies.
And as a consequence, I think that Valls felt that he could no longer seriously be considered the prime minister if he couldn't keep his cabinet
in line. He went to the president. Of course, the president said no, you stick on and you form a new government.
So, he's going to try to do that. He's been working at it all day today, and hopefully, he thinks, he'll have it together by tomorrow. We'll
see. He's got a real problem now.
QUEST: Jim, France is Europe's second -- eurozone's second-largest economy, one of the key players. It is extraordinary that the economy or
that the country seems to be in such political chaos tonight.
BITTERMANN: Well, it's amazing that you have the economy minister criticizing the conduct of the economy. It's a rather amazing situation to
see. And to have this criticism within the cabinet. And it calls into question the entire authority of the government.
There was a poll taken earlier this summer that said that 75 percent of the French do not believe that this government, that the Hollande
government, can pull the country out of its economic mess in the next three years-- Hollande has three more years in office -- 75 percent don't believe
that, in fact, it can be done. Not by these people.
So, as a consequence, this is really -- we're going to go through a period here, I think, of a lot o instability. You've got the left wing,
Hollande's left wing, who are attacking him. And of course, you've got the right there that have been there all along attacking him. So, he's really
under fire from all directions.
QUEST: Jim Bittermann in Paris for us this evening. Jim, thank you, sir. The big question, of course, is once again now on the agenda, the
austerity versus growth debate, even as the eurozone has seemingly picked up speed and then fallen back. Join me at the super screen and you'll see.
This debate over austerity versus growth has been given renewed impetus, not only by the debate in France at the moment, but also about
what he ECB is going to do. First of all, let us start with President Hollande, who tips the scales towards austerity. The French president
clearly has a policy that is going to reform -- or so he says -- the French economy.
Now, as we've been hearing, Montebourg tips it back again with his comments throwing it behind growth and growth on its own. This is seen as
a direct challenge to austerity, as we've just been hearing. Montebourg says that change must be made, and it must be made right away.
(BEGIN VIDEO CLIP)
MONTEBOURG (through translator): We are in a serious situation. I recall that the forced process to reduce the deficit is plummeting all the
European finances. We do not want to -- and I have to say it -- we do not want to, I believe, the European Union to continue its descent into hell.
(END VIDEO CLIP)
QUEST: "Descent into hell." But this is only the French position. Because of course our old friend Angela Merkel in Germany firmly seen to be
on the austerity side, leading the charge, whether it was in Italy or Spain or in Greece. Or, indeed, all the various reforms of the EU that she
insisted upon and drove home.
And back on the other side, you've got Prime Minister Renzi in Italy, calling for more growth and prosperity. In fact, Montebourg cited Renzi in
his statement.
So, who actually holds sway here? This man over here: Mario Draghi, right in the middle. Draghi in his Jackson Hole speech said he's willing
to do more. The ECB minutes say they're now considering possibly September, the ECB spurring demand in growth. It could all prove to be
that significant departure, and Draghi is probably the man who holds the key.
Chris Sims is an economics professor at Princeton. He shared the 2011 Nobel Prize in Economics. He joins me now. Sir, good to see you. The
austerity versus growth debate in Europe, I read your article recently on this. I thought it was just about over, this debate. But it's come back
to haunt us.
CHRIS SIMS, PROFESSOR, PRINCETON UNIVERSITY ECONOMICS DEPARTMENT: I think it's inevitably going to keep coming back until the eurozone makes
some fundamental changes in its institutional setup. The individual countries, like France, are in a terrible bind.
They would like to end austerity, but in a country where additional debt is -- has to be paid off in money that the government can't issue,
additional debt may just raise the markets' worries about default, so that expansion is not as effective in these countries as it is in the UK or the
US, that has its own currency.
QUEST: Right, but the -- although the -- European -- the eurozone group and the EC has done a huge amount to put in place various forms of
fiscal compacts and treaties and things like that, they're not fully in force yet, and therefore, if there was to be fiscal expansion, where would
that come at the cost of?
SIMS: Well, the fiscal expansion by -- would have to be by individual governments issuing their own debt. And Spain issuing more debt is nowhere
near as effective in increasing demand as the US or the UK or Japan issuing their own debt.
The -- so, the expansionary effects of fiscal expansion are weaker. And the ECB is very worried because despite --
QUEST: Right.
SIMS: -- some continued deficits in the EC -- in the euro area, the inflation rate continues to drift down.
QUEST: Right. Now, what's interesting, you sir can't see this chart that I've got, but it does make it clear the austerity versus growth and it
is Mario Draghi who really has the next push, whether or not he is going to do some form of full-scale QE, which is very difficult for the ECB because
they can't do monetary financing by treaty.
SIMS: That's right. The ECB -- any kind of QE involves creating balance sheet risk for the central bank, and in countries like the US or
the UK, where the ECB is tied to one fiscal authority, balance sheet risk for the central bank may not be very important because the Treasury can
always -- could always, if in the rare event that the central bank has balance sheet difficulties, the Treasury can recapitalize them.
It's not clear how that would work in Europe. So, if the ECB expands its balance sheet by buying southern tier debt, it will set up a situation
where the euro area has to really think about fiscal coordination.
QUEST: Final thoughts, sir. Tonight, do you think we are watching -- for want of a better phrase -- shenanigans within the eurozone and within
the austerity and growth sphere, or do you think we are looking at once again another leg down?
SIMS: I'm afraid we may be looking at another leg down, and I'm very worried about it. The pace of reform and recognition of what needs to be
done seems very slow. Though Draghi's speech showed a great awareness of the need for fiscal coordination, and I think that's a major step forward.
QUEST: Sir, thank you for joining us. I very much appreciate you giving us time. Good to have you on the program tonight, sir. Thank you.
SIMS: OK, thank you.
QUEST: European stocks rallied sharply on Monday. They were boosted by the dovish comments from President Draghi that you just heard us talking
about. The FTSE was closed, it's a bank holiday in London.
Ukraine's president announce he has dissolved parliament. It was an expected move. New elections are set for the end of October.
Despite global turmoil and a tightening of monetary policy, stocks are surging. I'll explain what's behind the S&P. It did go through 2,000, and
then it sort of tapered off. That's next. QUEST MEANS BUSINESS.
(COMMERCIAL BREAK)
QUEST: The S&P hit a record. The index topped 2,000 for the first time. No, not that number. Look, if I show you during the intra-day
session. There you are, it nudged over 2,000. Let's put it there so you can get right in there and see. And then, it just sort of slipped and
tittle-tattled along for the rest of the session. Similar for the Dow, which didn't have quite the impetus overall.
Why were the markets so bullish? Well, you can really thank Mario Draghi for the latest record, hinting that the ECB is ready to pump more
money into the European Union, into the eurozone. It comes as the US Federal Reserve unwinds its own stimulus program, which had been one of the
key drivers of markets in the bull market and contributing.
Now, let's talk to Alison Kosik. Alison, we're at the end of the summer, so it -- these are quiet markets.
ALISON KOSIK, CNN BUSINESS CORRESPONDENT: Right.
QUEST: Quiet-ish markets. But even so, nice rally there, and then in the afternoon and the Dow and the S&P.
KOSIK: Well, first of all, the S&P didn't cross it -- didn't cross that 2,000 mark once, it did it at least six times today.
QUEST: Ooh!
KOSIK: So, it really, really tried. We've still got a long week ahead of us. But there are skeptics who are are saying, wait a minute. We
are in the final week of summer. We are seeing light volume. So the thinking is, maybe there really isn't momentum --
QUEST: Right.
KOSIK: -- there to really keep the S&P even -- to close at 2,000, let alone to surpass it.
QUEST: But it -- but come on! It's 1997 or something. I mean, not the year. It -- it just can't hold it. Admittedly, it's always harder for
the S&P --
KOSIK: Right.
QUEST: -- because it's a much broader market.
KOSIK: It took 16 years from when it reached the milestone of 1,000 back -- what? -- was 1998 to now when it just hit 2,000. So, it took 16
years. Of course, it takes much longer for the S&P to reach these milestones. This was a big day to see it hit 2,000.
QUEST: Should we take any notice of what happens in the market this week, bearing in mind it's a lot -- it's a long weekend next weekend, it's
the end of the summer. Frankly, you could shout around this building and you wouldn't find any management.
KOSIK: Exactly. Yes, my boss is gone, how about yours?
QUEST: I just give up.
(RINGS BELL)
(LAUGHTER)
QUEST: Best news of the week.
KOSIK: Yes, we can just do whatever we want.
QUEST: That's right.
KOSIK: It depends on what side of the fence you fall on. Do you believe that this is just volatility-driven, or is there a real -- is there
a real driver? Are the real fundamentals behind it? Some people say yes.
We've got the improving economy. We've got Mario Draghi suddenly riding in on his horse with his possible stimulus, so you turn off one
spigot, meaning the Fed, and you open up another one. That could be enough impetus to get the S&P to 2,000 and then over.
QUEST: We'll watch you during the markets, up 75, half a percent gain on the Dow. Thank you, Allison.
KOSIK: You've got it.
QUEST: News just in: Amazon has agreed to pay more than a billion dollars for Twitch. Now, what is -- or who is Twitch? Maybe I'm just
showing my age. Alison Kosik, do you know what Twitch is?
KOSIK: I have no idea.
QUEST: No!
KOSIK: And I thought I was hip! What is it?
QUEST: It's Twitch. Twitch is a service that lets users watch and broadcast video game play.
KOSIK: I had no idea.
QUEST: Nor did I. All right. We'll be back in a moment. QUEST MEANS BUSINESS, it's a Monday, good morning.
(RINGS BELL)
QUEST: The man in charge of the United Nations response to Ebola is now calling the epidemic a "war." David Navarro says flight boycotts to
the region could be hurting the response. Even the secretary-general, Ban Ki-moon, has told CNN air traffic must remain open to those affected
countries.
(BEGIN VIDEO CLIP)
BAN KI-MOON, SECRETARY-GENERAL, UNITED NATIONS: Excessive worry and fear will really hamper our smooth treatment and addressing these issues.
Therefore, I'm urging all the leaders concerned there not to close their borders. The borders should be open, and there should be no ban on air
traffic or sea traffic routes, land traffic.
(END VIDEO CLIP)
QUEST: That's the secretary-general. Now, the director of the US Centers for Disease Control has arrived in Liberia, despite his initial
flight being canceled. "The Washington Post" reports he had to scramble onto a Delta aircraft when Brussels airlines ground flights to the region.
Brussels is a major carrier to that part of the world.
Last week, Korean Airlines cut services to Nairobi as a precaution. Kenya has no known cases of Ebola, though it's a major travel hub for the
continent. Other airlines that have made the changes, you'll be aware -- you've got British Airways, Arik, and ASKY Air. They've all halted flights
to Liberia and Sierra Leone. Emirates has suspended services to Guinea.
Across the continent -- Ivory Coast, Zambia, Gabon, Senegal, Cameroon, South Africa -- in some shape or form, they've closed land borders or
they've banned flights from the affected countries altogether. And you can see the sort of areas involved, right the way down from South Africa where,
of course, not affected, to those countries where there are infected people in Sierra Leone and Liberian, Nigeria as well.
Now, as developed countries are pitching in to help end the Ebola outbreak, economically fragile countries in West Africa are managing the
tremendous costs of this crisis. Jim Boulden, now, on the financial toll of the Ebola contagion.
(BEGIN VIDEOTAPE)
JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT (voice-over): Counting the cost of Ebola in human terms, and now, economies. Quarantines in
Guinea, Sierra Leone, and Liberia mean victims and even those not affected are being cut off from basics, making a desperate situation much more dire.
HELENE GAYLE, PRESIDENT AND CEO, CARE USA: We know that there are people who are living inside of zones where they are not getting access to
basic essentials. We need to make sure that things like food and water are getting into those areas.
BOULDEN: Farming is key to African economies, none more so than in the poorest countries. The Ebola outbreak and the measures to stop its
spreading mean that even the most basic farming has been interrupted, with roadblocks aimed at containing the outbreak, farm workers and goods can't
get through. Locals can't buy or sell produce.
Rubber, palm oil, peanut oil, coca, all critical crops in the region going to rot. That will have an impact for the world economy. Various
forms of restrictions have also been placed on air travel and shipping to and from the three West African nations to help keep the disease from
spreading That has led to many global firms to pull employees out.
And while the countries directly affected have little in the way of tourists, destinations not facing outbreak, like major hot spots Kenya and
South Africa, are facing cancellations
NIGEL VERE NICOLL, AFRICAN TRAVEL AND TOURISM ASSOCIATION: This whole perception of Africa being a very, very small place is just so very wrong.
It's thousands of miles to South Africa from West Africa, and it's thousands of miles to East Africa. They are very much open to tourists.
BOULDEN: In fact, the World Health Organization has reminded people that Ebola is not an airborne disease. It spreads through close contact
with fluids, and it's unlikely to spread by air travel as long as passengers are properly screened.
The affected areas urgently need supplies via air travel and through trade. And experts say medical supplies, food, and water, should now be
stockpiled to go straight in when restrictions are lifted.
GAYLE: So, there are a lot of things beyond just those who are affected by Ebola, that I think if we can think about these earlier on and
start putting in place the measures to mitigate the downstream impact.
BOULDEN (on camera): The African Union says it's preparing a humanitarian and military response to try and help restore order and get
supplies distributed now and once quarantines are lifted.
Now, these fragile economies have only just started to be rebuilt after decades of civil wars. The fear is now that any progress that was
made will be swept away by Ebola.
Jim Boulden, CNN, London.
(END VIDEOTAPE)
QUEST: The first Briton whose been confirmed to be infected with the Ebola virus has now returned to London. He's 29-year-old William Pooley,
who's being treated at a hospital in the north of the capital. He was airlifted from Sierra Leone, where he was helping Ebola victims. Samuel
Burke reports from London.
(BEGIN VIDEOTAPE)
SAMUEL BURKE, CNN BUSINESS CORRESPONDENT: Will Pooley has gone through his first full day of treatment in an isolation ward right behind
me at the Royal Free Hospital here in north London. He's in an isolation ward that is the only one of its kind in all of the United Kingdom, and has
only ever been used two times before, though never for a case of Ebola.
In the past few weeks, CNN has actually been in this hospital, in the very isolation ward where Will Pooley is now, seeing how doctors were
preparing for the possibility of a case exactly like this one. Doctors say they're, of course, considering all options, and that includes experimental
medicines, drugs that are still being tested but not yet approved.
We learned that Will Pooley is in his late 20s. He was living in Sierra Leone as a volunteer nurse and actually decided to go and work at
one of the worst-affected hospitals in this Ebola crisis to try and help these patients until he himself became a patient.
And his friends have been speaking out saying that he's an extraordinary person, very courageous, helping these people, knowing that
there was risk to him and the other health workers.
But the fact that they had to bring Will Pooley from Sierra Leone to this hospital in England just underscores the fact that hospitals in West
Africa are struggling to meet the unprecedented amount of patients as a result of this Ebola outbreak.
Samuel Burke, CNN, London.
(END VIDEOTAPE)
QUEST: Now, when we come back, Burger King is planning to cut the cost of its tax bill whilst one US senator is proposing to stop companies
doing exactly that. So-called tax inversion.
(RINGS BELL)
QUEST: After the break.
(COMMERCIAL BREAK)
QUEST: Hello, I'm Richard Quest. There's more QUEST MEANS BUSINESS in just a moment. This is CNN, and on this network, the news always comes
first.
Ukrainian president Petro Poroshenko has dissolved the country's parliament to make way for October elections. The move was widely
expected. Ukrainians will go to the polls on October the 26th.
Russia says it's sending a second convoy of humanitarian aid to eastern Ukraine this week. The first convoy was condemned by international
leaders as a violation of Ukraine's sovereignty after it entered Ukraine without Kiev's permission. It returned to Russia on Saturday.
Syria's foreign minister says his government's ready to accept help from the United States and others to fight Islamic terrorists. ISIS is
expanding its control in Syria, seizing a strategic military base in Raqqa province. ISIS convoys paraded through the streets celebrating the
capture.
There's political turmoil in France tonight after the prime minister, Manuel Valls, tendered his government's resignation on Monday. The
country's economy minister challenged Mr. Valls and President Francois Hollande on the policy of austerity. A new cabinet is expected to be named
on Tuesday.
The funeral of Michael Brown, the teenager killed by police in the town of Ferguson in Missouri has been held. The Reverend Al Sharpton gave
a eulogy to Brown, saying he should be remembered as the person who made America deal with its policing strategy. Brown was shot dead by a police
officer on August the 9th. The killing has sparked violent protests over the course of the past several days.
Forget the seasoning on the burger, all you really need to give it a spice to the shares of a fast-food company is the prospect of a takeover or
a deal. Shares of Burger King ended today at more than 19 percent. The iconic American burger is in talks to merge with the Canadian Coffee and
doughnut chain Tim Hortons. You'll have burgers, doughnuts and coffee. The combined company - now this is the crucial bit. The combined company
would be headquartered in Canada. It's a strategy it's called tax inversion and the idea is the U.S. company merges with a foreign company
and then relocates its headquarters to the new country. The combined firm then takes advantage of lower tax rates in the new country. The incentive
is clear. The - in - the United States, if we take a look at the numbers, the U.S. tax month takes 39 percent bite of profits. That 39 percent
corporate tax rate is amongst the highest of all developed countries. Compare that to 26 percent in Canada.
Forty-seven countries - I'm sorry, companies - have made tax inversion moves over the past decades. So, 39 percent in the U.S., 26 percent or
similar in Canada or other European countries. Officials in Washington are struggling to slow the exodus. The Whitehouse has criticized the strategy,
saying it demonstrates a lack of economic patriotism. Our next guest is Senator Bernie Sanders. He's been an outspoken critic of inversion and has
announced legislation that would ban companies doing this from getting federal contracts. The senator joins me from Burlington, Vermont.
Senator, honored to have you on the program, sir. Thank you for joining us, I appreciate it.
SEN. BERNIE SANDERS, I-VERMONT: Thank you.
QUEST: I understand the strategy, I understand your law, or your proposed legislation. But surely the answer is not to penalize companies
that take advantage of an existing tax loophole. It's to close the loophole.
SANDERS: Well that's absolutely right. We need real tax reform which ends the absurdity of one out of four major profitable corporations in this
country paying zero in federal taxes. It ends the absurdity that saw the barrages of companies in America - companies like General Electric or
Boeing in recent years paying nothing in federal taxes. And it ends also the problem that way back in 1952, Steve, (ph) corporate America
contributed about 30 percent of all tax revenue to the federal government. Today that number is below 10 percent.
One other point - you talked about a 39 percent tax rate. As you know, that is the nominal tax rate. That's what is on paper. The last
study that I have seen - it came from the GAO -
QUEST: Right.
SANDERS: -- back in 2010 I believe, had corporate America on average paying 12.6 percent, not 39 percent, not 35 percent.
QUEST: Right.
SANDERS: So we need tax reform no doubt.
QUEST: Right, but -
(CROSS TALK)
QUEST: Let me jump in, sir. Forgive me, sir.
SANDERS: All right.
QUEST: Sorry - forgive me. But let me just say. But your proposal is to restrict companies from being able to get federal contracts. Now,
that is penalizing the company for doing something that's entirely legal.
SANDERS: Well, we would make it illegal. That's what Congress would do. At a time when this country has a $17 trillion national debt, and
while we have huge unmet needs in terms of education and in terms of infrastructure, the American people - I believe - are sick and tired of
large corporations not paying their fair share of taxes, running abroad for cheap labor and in this case, running abroad to lower their tax rates.
It's something we have got to address.
QUEST: When companies decide to do this, arguably in a global economy where frankly, Senator, more revenues are going to come from overseas in
the future for some of the largest company. Aren't you being a bit antediluvian trying to hold them back?
SANDERS: (LAUGHTER).
QUEST: Aren't you trying to - shouldn't you be saying, `Let's cut that tax rate rather than alter whether they can get a Pentagon contract?
SANDERS: Well, you know, I would say if I'm antediluvian, the average American is antediluvian. And they understand that the global economy,
the rules of rich - of which - are written by Wall Street, and large corporations have not worked with the average American. Look, in the
United States today, everybody understands the middle class is this pure and (ph) median family income (inaudible) by $5,000 since 1999. We have
more people living in poverty than any time in the history of this country at the same time as the richest people of large corporations are doing
phenomenally well. So, we have got to change the rules of the global economy and protecting corporations from not paying their fair share of
taxes in the United States, going to the Cayman Islands where the tax rate is zero - those are tax rules that we're about to change.
QUEST: Senator, thank you for joining us and I look forward to having you, sir, on the program as we have a good joust and debate on this in the
future, sir. Thank you very much indeed. Now, still to come - changes you won't believe - literally. We'll explain why Facebook is doing. It's
called `Clickbait,' it wants your newsfeed and, frankly, I have got a story that is so good for you with video so enticing with amazing pictures that
you're just going to want to stay there - (RINGS BELL) - Oh yes!
(COMMERCIAL)
QUEST: It's called Clickbait, and if you're sick of seeing your Facebook Newsfeed full of Clickbait, well Facebook's working to fix. Now
I'm talking about articles like this, take a look. It's a catchy headline with content that fails to deliver - the three deadliest drugs in America
are all totally - it could be bad news for sites like Upworthy, Viral Nova and BuzzFeed who are renowned for getting links that go viral. Our senior
media correspondent Brian Stelter is with me. So, who - I mean, -- explain.
BRIAN STELTER, CNN SENIOR MEDIA CORRESPONDENT: (LAUGHTER). Well, I think Facebook is concerned about its users, but as always, also concerned
about itself. Because if it's providing you an experience on Facebook that isn't very good and you end up being frustrated by the links you click on
Facebook, you might spend less time on Facebook, and that hurts them. So they want to make sure the quality of the content you see on the site is
worthwhile.
QUEST: Right. So this is where you get videos like `You're not about to believe' -
STELTER: Yes, sure.
QUEST: -- or `This video is the greatest' --
STELTER: `This will blow your mind' -
QUEST: Right.
STELTER: -- or `You can't believe what happened in this segment.' That kind of teaser - we do it on TV all the time, but when you have that
in a headline on link and then you click the link and it doesn't actually pay off, the content's not actually helpful to you, it doesn't actually
explain anything to you, then you're going to come away disappointed and unsatisfied. In Facebook's data, their surveys have shown 80 percent of
users would much rather have a headline that actually tells them something, explains something rather than tries to mislead them.
QUEST: So, they've got two tricky things here. First of all, they have to identify the headlines or the sort of headlines -
STELTER: Right.
QUEST: -- that are - that they're talking about. But secondly, they had to have the algorithm modified so that they can quantify whether it was
a valid one or a Clickbait.
STELTER: Yes. This is - this goes to show the power Facebook has. There are so many internet publishers, even CNN.com, that relies on traffic
coming in from Facebook's billion monthly users. But Facebook can always be changed in an algorithm. And this is one of those changes they're
making today where they're going to adjust it in ways that will hurt some sites - I think that'll really hurt bottom feeder sites that exist just to
try to get you to click their links. I think it won't end up hurting big sites that can easily change and move with the times. But there's this
whole ecosystem that's developed to try to take advantage of people that click these random links, and those sites will be punished - will be
penalized by this change.
QUEST: I wonder on a wider issue - I mean, that the power that Facebook now wields -
STELTER: Yes.
QUEST: -- these billion users and any other traditional - we've really been talking anti-monopoly.
STELTER: But with Facebook, we're not - at least not in the United States. There's been very talk about that, and maybe that's because it's a
beloved site. You know, there are now generations that can't live without it. They - you know - that don't know a world without Facebook. They
spend hours on it and they click a lot of those links -
QUEST: Right.
STELTER: -- over to news sites, so the news sites and entertainment sites also benefit.
QUEST: But at some point the Facebooks - and maybe this is an example of it -
STELTER: Right.
QUEST: -- the Facebooks of this world have a public duty. They're almost the utility company now. They're almost - you know, the telephone
exchange -
STELTER: Well to your -
QUEST: -- the telephone exchange used to have rules about what you could cut off and all those sort of things.
STELTER: -- to your point, last week with Twitter we saw with the James Foley beheading, Twitter taking those pictures down, making an
editorial choice. In a similar way, Facebook's making an editorial choice today against Clickbait, and I think it's probably a good thing for users.
Because this generation of Clickbait, this phenomenon of, you know, of cheap headlines that are trying to mislead you - they're not good to
anybody except the websites that are getting your traffic. So I think it's good to get rid of them.
QUEST: Good to see you, sir.
STELTER: You too.
QUEST: Cheap headlines indeed.
STELTER: Cheap headlines.
QUEST: There'll be no cheap headlines here - (RINGS BELL).
STELTER: (LAUGHTER).
QUEST: Tom Sater is at the World Weather Center. Anything from you, Tom, that smacks of cheap headlines and we'll have words later.
TOM SATER, METEOROLOGIST FOR CNN INTERNATIONAL: (LAUGHTER). We've been looking at this volcano so closely, Richard -
QUEST: Yes.
SATER: Nobody wants the headaches or the financial loss or the chaos that ensued for ten days of April in 2010. Now, seismologists on Iceland
continue to - well, what they're doing here is repairing this instrumentation because the number of quakes have been off the charts. In
a 24-hour period on Sunday, midnight to midnight, over 1,300. Today already they're reporting over 700 - that was earlier in the day. So,
could l have two straight days over 1,000 quakes. Every volcano acts differently, but what's been going on? Well, over the weekend, -- cracks.
This is the glacier adjacent to Bardarbunga. The volcano's just off your screen. This goes for about 25 kilometers and they believe magma is moving
underneath this ice.
Now, on Saturday, they believe they had a sub-glacial eruption. So, they lifted the status from orange to red. They restricted the airspace,
and then on Sunday, looking back at the data, said, no, maybe not. Maybe this is movement of all this magma. So they now went back to our orange.
All right? So, no more air restriction - good news, but the alert level, even though it's been dropped, the earthquakes continue. They believe 300
million cubic meters of magma is moving. Let me show you - these are earthquakes from Sunday. In green, those are larger than 3.0. They've had
4.0, they've had over 5.0 - the strongest since 1996. Here's Bardarbunga, here's another volcano, here's another volcano. This is the glacier.
Notice the earthquakes - they've been migrating to the north, but you go back to the 16th of August - look at the activity. It's just amazing the
number of volcanos, so they believe that the magma as it's moving away from the main chamber - which is good - as it moves, it's creating this movement
- trying to relieve itself of pressure. So what could happen is that it relieves itself and activity slows down. We could have a little side
eruption which could give some flooding obviously -
QUEST: Tom, Tom.
SATER: Yes?
QUEST: Let me just interrupt you if I may. This is fascinating, absolutely fascinating. So, are you saying - so which is causing which?
The earthquakes as a result of the volcanic eruption or the volcanic eruption as a result of the other thing? Which is the chicken and which is
the egg here?
SATER: Great question. I believe most of it is the movement of the magma. So, as that pressure from underneath the glacier - get this,
Richard, -- I mean we're talking an icecap that's 200 to 400 meters thick. So as the movema (ph) moves toward the surface or on these dikes they call
it - these sub-chambers - the pressure's got to relieve itself. They don't want it to come out through the top of the main chamber. So if it comes
out at a side fissure, they call it, there could still be ash. So there's three scenarios - 1) it dies out, 2) there's a side eruption on a side area
of a dike or closer to the main shaft, which could give an explosive eruption. They don't know yet. All we know is that the activity is
getting stronger and stronger, and these quakes - not only the strongest since this crisis started - but since 1996. So, again, we watch this and
continue to watch the scenarios. Everyone's hoping that that chamber with 300 million cubic meters of magma just continues to spread itself and the
reduction of seismic activity starts to calm. And that's what we're hoping for. Because if this does erupt again, this could be a mess.
QUEST: Tom, thank you so much. Keep an eye on that Bardarbunga. Is how I believe you pronounce it.
SATER: Yes. (LAUGHTER).
QUEST: Thank you (inaudible). Actually one has to say anyone who's visited Iceland - the most extraordinary topography and landscape and mood.
It's absolutely extraordinary from all the volcanic eruptions. When we come back, Sharapova and tennis may be something to behold on the court.
We'll meet the man behind Sharapova, the business.
(COMMERCIAL)
QUEST: Sony's Video Game systems are back online today after hackers took down its PlayStation network. The hackers didn't stop there. An
American Airlines flight with a Sony executive onboard was forced to land in Phoenix in Arizona after the same group reportedly sent out a tweet
claiming explosives on the aircraft. Sony's online president John Smedley tweeted about this incident. "Yes," he said, "my plane was diverted. Not
going to discuss more than that. Justice will find these guys.
Watchdogs are warning that cyber-attacks could trigger the next black swan event on the financial markets, and the world's top economic bodies
are taking note. The SEC in the United States has taken steps to beef up its cyber security. A panel of experts looking at preparedness - in the
stock market also in the event of a hack. The Bank of England's looked at the Waking Shark II test to gauge the sector's response to a hack and make
policy recommendations. Mark Rasch is a cyber-security expert and he used to prosecute crimes at the Justice Department. He joins me now from
Washington. Mark, good to see you, sir. Everybody says they are concerned, everybody says it's a big worry, but I just wonder how ill-
prepared are we?
MARK RASCH, CYBER AND PRIVACY EXPERT: Well, we're very ill-prepared. And the problem is that cyber-security is one of the last things we do
rather than being one of the first things we do. And those who live by the web have the potential for dying by the web.
QUEST: But no chief exec of a big bank or of any major company having seen what happened with Target and all the other (inaudible) - surely when
security - their cyber people say we need to spend $100 million on this, sir, or you risk the company going down.
RASCH: Well, they don't - they don't - see that as the genuine risk. You know, they look at all the economic pressures that they have - to meet
payroll, to get product out, to do marketing, to do advertising - and security is just seen as a risk mitigation. They don't see that security
really is the lifeblood of a company. One major hack like this and you could have the entire company be destroyed - all the value.
QUEST: Are you seeing any shift in this? And obviously not from WikiLeaks or from Angela Merkel's phone being hacked, but because CEOs are
probably more likely to look at what happened to Target and to the other department stores that got hacked.
RASCH: What we're doing is a couple of things. First of all is overall information security. That's protecting networks, protecting e-
mail, protecting trade secrets. We're seeing some movement towards doing that with better technologies and better thought processes. On the other
hand, we also have these payment systems - credit cards, smartcards, chip and PIN, and we're starting to move a little bit -
QUEST: Right.
RASCH: -- very slowly towards that. And the third thing is passwords. You know, there was a hack a couple of weeks ago where they
revealed 1.2 billion passwords having been stolen.
QUEST: Right, but -
RASCH: So we need to change that too.
QUEST: Right. But the ultimate answer, sir, is CEOs need to take more responsibility for sorting this out as part of their chief's job, and
you and I need to be more responsible about how we go about our online password and online shopping.
RASCH: And investors need to demand this of the companies. You know, shareholders need to say, `Hey, I want to see in your SEC filings exactly
what you're doing. What kind of commitment are you making towards cyber- security - what technologies and what risks are you taking?
QUEST: I fear - I mean, I'm looking forward to having you back on the program again, sir - but I fear you're going to be back quite frequently
and we're going to have a lot more to talk about in the year ahead. Thank you for joining us.
RASCH: Thank you.
QUEST: Now, the U.S. Open has kicked off in New York. The world's highest paid female athlete is Maria Sharapova and she's to take center
store - center stage, I should say - in just a few hours. Tonight, we're going to take a look at the powerhouse behind her career. Not on the court
- she does that herself - but what about off the court? What made her the highest-paid female athlete? I asked her agent of 15 years -- Max Eisenbud
to describe what is an absolutely unique relationship in tennis.
(BEGIN VIDEOCLIP)
MAX EISENBUD, MARIA SHARAPOVA'S AGENT: I think that most agents probably don't have the type of relationship that I have with Maria, only
because of time. I started working with Maria when she was 11 years old. So, that's very rare in any sport that you would start with a client at
that age. And then what that does is that just allows you to really understand the whole picture - the family dynamics - where she came from,
the struggles that she come through. So, -- and at this point of her career, I'm almost more of an uncle than an agent. You know, I'm really
involved in the family.
QUEST: When did you realize that this relationship was not going to be your typical agent/client relationship?
EISENBUD: I think when I was crying like a baby in the Wimbledon box at 17 when she won Wimbledon at 17 and the emotion and just crying like it
was a family member that just won Wimbledon. That was really special. It's something I look back as a really special moment in my life.
QUEST: So then you had to decide when it's time to add the next ones and to build the portfolio - for that's what it is. How did you decide
that?
EISENBUD: So the top dynamic - all of a sudden I want to start branching or my company is looking for me to branch off, and that's not an
easy thing. But, you know, to Maria's credit, she understood and she was supportive, and I just started really - I enjoyed that process of helping a
young player reach their dreams. So I started signing younger players that really weren't affecting Maria very much.
QUEST: So, you sign - you now have to decide a strategy for these players -
EISENBUD: Yes.
QUEST: -- to build a brand.
EISENBUD: Yes.
QUEST: How'd you do it?
EISENBUD: I mean, a lot is you as an agent understanding what they want, and opening up them to - you know, you're making their dreams happen.
So someone like Maria has a very idea of where she wants to go and then as she's playing, competing, you're trying to make those dreams - those vision
of her happen. So, you know, it's a lot of really important communication - where we're going to go, which companies we're going align. So after she
won Wimbledon, it was very important that we align her with great brands. And the money that the brands were paying were secondary. It was what -
who - the brand is, and how they're going to help market your brand. And she bought into that, so she had to make some difficult decisions - are we
going to take less money for the right brand, for the right marketing that's going to build your brand, so in ten years you can open up a candy
company.
QUEST: How would you describe Maria's brand in a sentence or two and then Li Na's brand in a sentence or two? So, to prove to me that you have
created two complementary brands.
EISENBUD: Listen, when I think of Maria, I think of somebody who's just, you know, glamour and tough and classy. And when you think of Li Na,
I think of Lena as someone that's a pioneer, someone who's broken down barriers. I consider her the Chinese Billie Jean King. So, Li Na is
somebody who - we're not feeling Li Na's effect right now, but in ten years, there's a bunch of six-year-old and seven-year-old girls in China
that just started playing tennis because they saw Li Na. We're not going to see that effect for another ten or 15 years.
QUEST: Are you ever over awed by the sums of money involved?
EISENBUD: I'm a little numb to it which is - sometimes when I step back and I look and I see, you know, Maria was a "Forbes" ten years in a
row highest-paid female athlete and you look at it - but I think they deserve it so much.
QUEST: What drives you?
EISENBUD: I love being behind the scenes and trying to make my players' dreams come true. They have a vision but they have a job to do -
to play tennis, to work, and then there's somebody behind that's just trying to make their vision happen. I love that.
(END VIDEOCLIP)
QUEST: The man behind the players. And I'll have a "Profitable Moment" after the break. (RINGS BELL).
(COMMERCIAL)
QUEST: Tonight's "Profitable Moment." On this program you heard the Distinguished Senator from Vermont putting forward a very strong argument
to penalize certain companies that choose to move overseas through a merger to reduce their tax rate. It's called tax inversion. It's happening all
over the place in the United States because the tax rate is higher. Ultimately, though, surely the answer is not to deny them federal contracts
when they do this, but the answer surely must be to close the loophole. Shareholders demand management do the best they can, and if that means
going over shore, going overseas, so be it. And that's "Quest Means Business" for tonight. I'm Richard Quest in New York. Wherever (ph)
you're up to in the hours ahead, (RINGS BELL) I hope it's profitable. Let's make a date - tomorrow.
END
