Return to Transcripts main page
Quest Means Business
Fed Chairman Says Several Factors are Supporting the Outlook, Fiscal Policy Has Become More Stimulative - Ongoing Job Gains are Boosting Incomes and Confidence - Foreign Growth is on a Firm Trajectory - Overall Financial Conditions Remain Accommodative; Marc Zuckerberg Said "We Have a Responsibility to Protect Your Data and if We Can't Then We Don't Deserve to Serve You" As He Breaks His Silence on the Facebook Data Scandal And Promises That Lessons Will Be Learned
Aired March 21, 2018 - 17:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
Aired 5-6p ET>
(COMMERCIAL BREAK)
[17:00:00] (APPLAUSE)
(CLOSING BELL RINGING ON WALL STREET)
ZAIN ASHER, CNN HOST, QUEST MEANS BUSINESS: All right, that sound marks the end of yet another trading day on Wall Street. Take a look at this,
starting point (INAUDIBLE) session, lots of highs and lows, we did actually get Fed announcement today, the Fed will actually be raising interest
rates, that has been priced in so the market had been expecting that but we did end the day down, ever so slightly because there are fears that the
rate of interest rate hikes could actually be more accelerated than had been expected.
All right, it is Wednesday, March 21st.
"We have a responsibility to protect your data and if we can't then we don't deserve to serve you," Marc Zuckerberg breaks his silence on the
Facebook data scandal and he promises that lessons will be learned.
And the market rally says all after Jerome Powell Fed debut, we will have friend of the show Clare Sebastian will be joining us in a few minutes.
And fresh fears about self-driving cars, for the fleet, for the pace of autonomy has slow down.
Hello everyone, I'm Zain Asher and this my friend is QUEST MEANS BUSINESS.
All right, welcome everyone, I am Zain Asher.
Tonight, Marc Zuckerberg has broken his silence on the data scandal that has consumed his company over the past few days. We heard from Zuckerberg
the man himself, he admitted that mistakes have been made - mistakes have been made with users' information and he promised, he made several promises
that he was going to fix them.
In a statement posted in the last few hours Zuckerberg says that he takes responsibility, the buck stops with him, he takes responsibility for
letting user data end up in the hands of Cambridge Analytica. He announced several new measures to tighten up Facebook's data policies including new
restrictions on what data third-party companies can store.
Zuckerberg is also due to sit down with CNN's Laurie Segall for an exclusive interview on CNN later tonight, if you're in London that will be
1:00 a.m. your time; he said in his written statement on Facebook, he said, "At the end of the day I am responsible for what happened on our platforms.
I know it takes longer to fix all of these issues than we'd like but I promise you we'll work through this and build a better service over the
long-term."
Right, so much to discuss here.
Joining me now is CNN Senior Reporter, Dylan Byers and Shelly Palmer, CEO of The Palmer Group so Shelly I want to begin with you since you're right
in front of me.
So, I read this statement there were a few things that I myself - I want to get your take on this, that I myself found alarming and a lot of people
have mentioned this before.
Number one the fact that third-party apps even had access to data of your friends in the first place, a lot of people would find egregious. Second
of all, that Marc Zuckerberg actually knew about this scandal this debacle since 2015, we the users are only just finding out about it now. And third
of all that when Cambridge Analytica said, hey, listen we've deleted all the data, Marc Zuckerberg instantly believed them only to find out later
that may or may not have been true.
Is this forgivable?
SHELLY PALMER, CEO, THE PALMER GROUP: Well, well, that's a lot of questions that are all kind of well asked - and well - and they should be
asked. Let's take them one at a time.
Should you have data available to third parties and should that data include not only your data but the data from your friends?
Whether that's right or wrong in 2014 that was Facebook's policy and they published that policy. We could argue with it that it's a bad idea or a
good idea but that was what you agreed to when you click the user license agreement.
Now -
ASHER: I see.
PALMER: - I could morally say to you well, that sounds awful and I can make all kinds of personal comments about what we think in 2018 should have
happened in 2014 but in 2014 that was their policy.
And so, Facebook is free. No, it's not. Facebook is nothing like free, you get to use -
ASHER: User information is -
PALMER: - the service because -
ASHER: - the product that is being -
PALMER: - Right.
ASHER: - sold.
PALMER: Your information is what you pay for Facebook with so back then it was not a very well understood business. They were trying to basically
serve you the right ad at the right time and to get you engage and they felt that this was a way to do it.
We've really matured over the last four years and certainly through -
ASHER: That's right.
PALMER: - the elections but back in 2014 in a more innocent time that was their policy. It hasn't been their policy for quite some time and so we're
talking about data prior to that.
The next question you asked was well Marc Zuckerberg new in 2015, what should he have said?
I can't answer for Marc Zuckerberg but I can tell you that everyone that I know at Facebook, people were very close, now that he is and have said to
me in all honesty, 'he's beside himself,' with -
ASHER: I can imagine.
PALMER: - and wants to fix it and with an engineering brain like Zuckerberg has and he is first and foremost an engineer his first
inclination is to fix it.
ASHER: Yes.
PALMER: Right and I thought his -
ASHER: And he outlined -
PALMER: - statement today.
ASHER: - several ways to do it -
PALMER: He did.
ASHER: - to try and (INAUDIBLE) is what he was trying to say.
PALMER: He actually -
ASHER: Yes.
PALMER: - did and what I believe in earnest is the right thing for him to have done is said, "Look, the
buck stops with me." He's taken full responsibility. He knows this is super important.
[17:05:14]
So, you've got a guy who is an engineer at heart who wants to fix things who knows how to forensically look and fix things, knows that it needs to
be fixed and has agreed to fix it.
I don't know what more they can actually do at the moment.
We can argue with him if it was a good idea or bad idea over the last few years.
Now the last question you asked was about Cambridge Analytica, how they get a hand - their hands on it - you know, the bad guys, and how they get their
hands on it and what went down?
ASHER: And that they told Marc that they deleted it.
PALMER: That they deleted the data and that he believed them.
ASHER: Questionable(ph).
PALMER: I think Facebook is going to have to answer for that flat out. I think -
ASHER: Yes.
PALMER: - someone's going to have to go to Facebook and say, "Wait, did they give you an affidavit did they - or like how, do you, know they
deleted this data," I think that is a reasonable question that any reasonable person would ask and I think Facebook owes everyone an answer
about that.
ASHER: Shelly standby, let me bring in Dylan Byers into the conversation.
So, you know, Dylan you know, we waited four days for this statement from Marc Zuckerberg. Apparently, he wanted to wait so that he could give a
really detailed, thoughtful, response, certainly understandable, was this particular statement worth the wait do you think?
DYLAN BYERS, CNN MONEY, SENIOR MEDIA REPORTER & AUTHOR, "PACIFIC" NEWSLETTER: Well you know, first of all everything that Shelly said is
absolutely right and certainly it lines up with all of our reporting.
Look being the CEO of a company requires more than just sort of you know, going into hiding for four days and working on improving the product and
then coming out. There's - you also have to be aware of the sort of public conversation and the narrative that's happening out there.
There is a lot of time for a very critical narrative about Facebook to develop and fester over the course certainly of Monday and Tuesday and
today before Marc Zuckerberg came out with this statement.
You ask is it - is it enough, was it worth the wait?
I don't know. As - look all - everything - almost everything that happened in this scandal happened above board, it happened in line with Facebook
policy. Users do go online and they do - or at least they did in the past agreed to share this data and to have - and to have your data shared if you
were a friend of somebody who shared their data. All that is true.
But the problem is, is that I think Americans especially have been woefully naive about how much data they are sharing and what issues like this and
issues like Facebook's role in Russian meddling in the 2016 campaign highlight is that Facebook's reach, of our data, the way that they follow
us around whenever we are in line even when we're not on Facebook on platforms, that Facebook really has a lot of this data and that this data
can always be exploited, can always be manipulated by third parties and that no matter what Facebook does, there is always the possibility of a
violation like this.
They can monitor it better but they can never wholly prevent it and so the real question here -
ASHER: Yes.
Byer: - is, are people going to look and re-think about whether or not they want to be giving their data to a platform that they haven't been able
to trust in the past, that certainly like you said took years to address this problem and are they - are they willing to continue trusting that
platform when they know again that they can't wholly prevent this problem from happening again.
I'm not so sure that the case on the other hand, we're talking about over 2 billion users around the world that's a lot of (INAUDIBLE), it's you know,
the - Facebook could see user declines of 2 or 3 percent and really ultimately it wouldn't hurt the bottom-line.
ASHER: OK. Fair enough.
But in terms of user responsibilities both of you brought up a very interesting point about user responsibilities because what is our
responsibility, yes of course, we clicked "Yes," to the terms and condition but if you talk to ordinary people who are on Facebook, many of whom are
teenagers, many of whom are very young, the privacy policy is - of Facebook are so cumbersome and so difficult to understand.
A lot of people think Shelly that that is done by design what are your thoughts?
PALMER: It - it's neither done by design or not by design. We give up our privacy for the quality of our enjoyment of the intranet (ph). If you want
to see relevant ads and relevant content, if you want to dynamically create an environment for you that is most - that you are most likely to want to
engage with, then you have to give up your data in order for a computer, basically an algorithm to give you what you want.
If you want to see plain-vanilla ads and plain-vanilla content it will become an incredibly emotionally unsatisfying experience so we'll say oh
that's - I could deal with that. No, you really couldn't. You'd find this to be an incredibly cumbersome environment.
Let's - let's break this down. We live in - we're living in a world where we create data everywhere, everything we do we create data points. When
you say Facebook knows something about me, no, they don't. Facebook has a data set and if you actually data set, can I find Zain - or - people like
Zain who are likely to buy this thing at this day, if you ask the right question it will give you back an answer. And that's how Facebook uses
Facebook and that's how the data is rightly used.
What we are talking about is when data is used improperly or - by a bad actor.
Now Robert Mueller III, has a new job but in his old job as Director of the FBI, he had a great quote [17:05:16] my most favorite quote on the subject
-
ASHER: What's that?
PALMER: - "There's only two kinds of companies in the world, companies that have been hacked and companies that do not know they have been
hacked."
ASHER: True (ph).
PALMER: And in this case, it wasn't even a hack, this was inside a policy because we were too young -
ASHER: It's completely above-board as -
PALMER: - we were -
ASHER: - you said.
PALMER: - That's right. We were too young as a society and too young in business to understand the ramifications of this much data.
So now we're coming to a world where we're living in a data-driven society and none of us - none of us can say we understand fully what the dangers
are.
It might be worth a stronger look.
ASHER: (INAUDIBLE) -.
BYERS: Zain, I do want to go back - I would -
ASHER: - (INAUDIBLE) -
BYERS: - like to go back to your question. There's - there's - you know, Shelly, there's something really important there which is a question of you
know, we agreed to these user agreements and they're really long and they're really cumbersome and ultimately, it's on us for just scrolling to
the bottom and clicking, "OK," and actually -
ASHER: Nobody reads -
BYERS: - thinking about -
ASHER: - those fully.
BYERS: - the data we're given up but there is regulation coming in the European Union, at the end of May that is going to make this a much clearer
choice for Facebook users and other social media users in the European Union.
You're going to have clear options to say would you like to share your data and are you OK with that data being used for marketing purposes. You're
also going to have the opportunity to take back your data and give it to another company.
That sort of regulation - look I don't have a great deal of faith in the - in the U.S. Congress' ability to impose that kind of regulation but if that
works in Europe and if Europeans like that that could be an interesting test case for tech regulation here in the United States later down the
line.
ASHER: That is certainly a valid point. A lot of people are saying that regulators have been at least five steps behind technology companies -
BYERS: They're always going to be.
ASHER: - but guys I'm running out of time, I'm so sorry.
Dylan Byers, thank you so much.
I want to remind our viewers that you can actually catch more from Dylan Byers in terms of his newsletter, "PACIFIC" that is available every single
day.
And Marc Zuckerberg is actually going to give an exclusive interview to CNN's Laurie Segall in just a few hours from now, you can watch that on
"ANDERSON COOPER 360" at - which airs at 1:00 a.m. if you're in London, that is local time, and it will be replayed throughout the day on Thursday
as well.
After British and E.U. regulators told me they still want answers from Facebook, now Ireland's Data Protection Commissioner says she needs them to
step up, earlier Helen Dixon told me companies like Facebook need to be held accountable.
(BEGIN VIDEO CLIP)
HELEN DIXON, IRISH DATA PROTECTION COMMISSIONER: I suppose what the events of the last weekend have highlighted for us is this, even where Facebook
have terms and policies in place for app developers it doesn't necessarily give us the assurance that those app developers are abiding by the policies
that Facebook have set and that Facebook is active in terms of overseeing that there is no leakage of personal data and the conditions such as the
prohibition on sending on data to further third parties is being adhered to by app developers.
So, I suppose what we want to see changed and what we want to oversee with Facebook now and what we're demanding answers from Facebook in relation to
is first of all what preclearance and what preauthorization do they do before permitting app developers onto their platform.
And secondly once those app developers are operatives and have apps collecting personal data, what kind of follow-up and active oversight steps
does Facebook take to give us all reassurance that the type of issue that appears to have occurred in relation to Cambridge Analytica won't happen
again.
(END VIDEO CLIP)
ASHER: I'm joined now by Shelly Palmer again, thank you for sticking around so you know, what she's talking about is really this inherent trust
of third-party apps just doesn't seem to fly.
I know that Marc Zuckerberg actually addressed in his post that he's going to make sure that third-party companies are going to agree to audits and if
they don't agree to audits then they won't be allowed to work with Facebook.
Fair enough but are regulators also to blame somewhat as well because as you and I and Dylan were just talking about, regulators seem to be two,
three, four, steps behind these big tech firms?
PALMER: First of all, let's break that down a little bit. What you need data for if you're a third-party app developer and what you should be
entitled to, how is it that your app actually works and what do you really need.
Facebook does kind of go a little bit into that, they do and I think they've been - in their minds pretty good about looking at how you use data
that you would take in from an app.
If they get too crazy in regulation, if - and I'm saying this as politely as I can, regulators are going to be using a blunt-force instrument on a
very delicate situation because not all data that you use, that you give up to somebody is going to hurt anyone; it may really help you enjoy the app
that - or get more use out of the app.
Ways, for example, if you don't tell it where you're going and it doesn't keep a record of how you like to travel and where you're going back-and-
forth to work then it can't possibly ever learn enough about what you're doing, it will just need - time - just start from the beginning.
[17:05:15]
So, as we get into a world where we're using statistical Machine Learning and Neural Networks and Augmented and Artificial Intelligence to analyze
data for things that you do to make your lives better, if we don't give the data to the apps -
ASHER: Yes.
PALMER: - can help us -
ASHER: Right.
PALMER: - and so we're just -
ASHER: You have to strike the right balance though.
PALMER: - That's exactly right. And so, what we're hoping for and I'm saying that with all of my heart is that regulators don't have a knee-jerk
reaction and go, "Well they've done something bad therefore we must regulate this," to the point where you know, it's so strict you can't
actually get the good actors to benefit.
ASHER: Right.
PALMER: There is clearly a problem but Facebook has said they understand there is a problem -
ASHER: Yes.
PALMER: - now the question is, are - do people trust them well enough -
ASHER: Hm.
PALMER: - to give them a chance to fix it.
ASHER: We shall see.
All right, Shelly stick around, again.
PALMER: OK.
ASHER: We have another tech story because gosh, it - when it -
PALMER: (INAUDIBLE).
ASHER: - rains it pours, there is more bad news for Facebook and this time it's coming from the - Europe specifically, the E.U. is proposing sweeping
tax changes that could cause tech firms like Facebook and Google over 6 billion, with a B, dollars per year. The new digital tax would force
companies to pay a levy based on where they make money rather than where the companies' headquarters are actually located.
So, Shelly this is about - for the Europeans this is about basically leveling the playing field and sort of closing the legal loopholes that
have existed for several years.
What will it mean financially for these - for these tech companies?
PALMER: The tech companies pay about 10 percent tax in Europe right now and normal businesses pay roughly, 22, 23, 24, percent tax and so the
European regulators and the lawmakers are looking at that and saying what - why and how, how does this work, how are they paying less tax and the
reason they've determined that they're paying less tax is the way that they are taxed by where their headquarters are versus where they are doing
business throughout the 28 countries of the E.U.
ASHER: Yes.
PALMER: And so, the proposal is that they're going to tax businesses where the business is done at the point of the consumers' interaction with the
business.
I think it's misguided but that's just me personally. I think they're going to have a very high bar. They're going to have to give a lot of buy-
in, certainly there are small 'Dutches' (ph) and small countries like Estonia that are really benefiting from the way the tax laws are set up
right now and then there's the rest of the E.U. who are - have different feelings about how the tax law should be.
They are looking right at tech companies because they are the easiest ones to look at although they claim in Europe that it's not just about tech.
ASHER: Yes.
PALMER: I have also heard that it has nothing to do with the new tariffs that were proposed here in the United States. On the other hand, I think,
wink, wink, everybody thinks that they are heavily related to this trade war that's about to start because taxation is a way to sort of fight a
battle in that war.
And so, we've got a bunch of moving parts here -
ASHER: But it will be interesting to see where - how the Europeans tax system works in conjunction with the new American taxes that are working
here (ph), I'm curious to see how that - they work together.
All right, Shelly Palmer, thank you - thank you so much for sticking around.
PALMER: My pleasure.
ASHER: You were the perfect guest to -
PALMER: Oh.
ASHER: - have today.
PALMER: Thank you.
ASHER: And also thank you for coming in on a snow day, I know it wasn't easy to get here today, thank you.
All right and later on in the program I'll be speaking to the former Facebook Product Manager, Antonio Garcia Martinez about where Facebook goes
from here.
OK, still to come here on QUEST MEANS BUSINESS, as the Fed chairman says, "The economic outlook is improving" but policymakers are concerned about
something outside of their control, possible, Shelly was just talking about this, a possible trade war, the Trump administration is planning to hit
China with new tariffs.
That story next.
[17:10:54]
(COMMERCIAL BREAK)
ASHER: Welcome back everybody.
Stock see-sawed as the Federal Reserve announced a rate rise and the Fed chairman took questions, investors also reacted to the news that Trump
administration is planning to hit China with new tariffs on Thursday.
Let's take a look here at the Dow's moves, you can see we were up pretty much in the red and the green all day - we were actually in the green
around the time of Jerome Powell's announcement, it dipped - briefly dipped into the red by - in the 45-minute or so after. It recovered after that
but could not hold the gains. It closed with a loss of 45 points, you can see it's down 44 points or so. The S&P and the NASDAQ closed slightly in
the red as well.
The Fed's decision pushed up government bond yields and pushed down the dollar. Now today's rate rise is the sixth since the financial crisis and
Jerome Powell's first as Fed Chair. The Fed plans to stick to its schedule of three rate rises this year but rates are projected to rise more than
expected in 2019 and in 2020 as well.
Now the pace of rate rises reflects the chairman's view that the U.S. economic outlook has improved.
(BEGIN VIDEO CLIP)
JEROME POWELL, CHAIRMAN, U.S. FEDERAL RESERVE: Although the growth rates of household spending and business investment appear to have moderated
early this year, gains in the fourth quarter were strong and the fundamentals underpinning demand remained solid. Indeed, the economic
outlook has strengthened in recent months.
Several factors are supporting the outlook, fiscal policy has become more stimulative; ongoing job gains are boosting incomes and confidence; foreign
growth is on a firm trajectory; and overall financial conditions remain accommodative.
(END VIDEO CLIP)
ASHER: All right, so Clare Sebastian joins us LIVE now so it's interesting Clare because we had expected a rate rise -
CLARE SEBASTIAN, CNN INTERNATIONAL CORRESPONDENT & CNN MONEY CORRESPONDENT: Yes.
ASHER: - today but what's in store for us for the rest of the year?
SEBASTIAN: Where the rate rise today was really not the story, the stories this, this is what the Fed members think should be done about the fact that
key line in his statement, you just heard Jerome Powell that - say that the economic outlook has strengthened in recent months so what does this tell
us?
Well this tells us that they expect a median of three rate rises over the course of this year, another three, next year that's crucial and then
another two in 2020 so the pace that they're looking at in terms of rate rises, if you're just here at (ph) December, over there you can see this is
a steeper graph in March that we're seeing.
Go back to March for second?
ASHER: Which is this (ph).
SEBASTIAN: And you see also it's more disparate, it's more spread out and I was down on the floor of the stock exchange just a couple of hours ago,
just after we got this, I took this down to the floor and I asked a couple of traders why are we seeing these so spread out this time round?
(BEGIN VIDEO CLIP)
KEITH BLISS, SENIOR VICE PRESIDENT AND DIRECTOR OF SALES & MARKETING, CUTTONE & COMPANY: There's a lot of things factoring in to the calculus
that they just don't know what's going to - how it's going to play out you know, what is going to be the effect of the - of the tax law longer-term
especially in the 2019-2020, is this going to be a temporary, transitory type of bump, fiscal policy bump that we have here in the U.S.
And the - and the great unknown right now which I don't think the Fed has modeled at all, you see it in some private sector models is what could
happen with tariffs you know, and whether there'll be some retaliation and retribution from our trading partners and what would that mean for domestic
economics as well as global economics.
(END VIDEO CLIP)
(BEGIN VIDEO CLIP)
TED WEISBERG, PRESIDENT, SEAPORT SECURITIES: The message was reasonably benign in the sense that it - there was - I didn't see any dramatic change
from what we were getting from Janet Yellen and I think that's a positive.
Because I think what investors want is they want some clarity.
SEBASTIAN: Right.
WEISBERG: You know, what markets have trouble dealing with is uncertainty and we have plenty of uncertainty surrounding the markets, all we have to
do is even look at today's volatility -
(END VIDEO CLIP)
SEBASTIAN: Then you saw the markets today, you see it in the dot plot as well as despite the fact that the economy is doing really well,
unemployment was revised down, quite dramatically by the Feds, give them - there's just so many unknown quantities out there, be it tariffs, be it -
ASHER: Right.
SEBASTIAN: - the effect of the tax cuts and I think that's why we're seeing this big spread in the dot plot today.
But just one word of caution this is a moment in time, these projections could change at any moment based on the data that's out there.
ASHER: And based on the headwinds that you just talked about.
SEBASTIAN: Right.
ASHER: All right. Clare Sebastian, thank you so much.
Now the Fed Chairman, Jerome Powell said, "Members of the committee expressed concern about U.S. trade policy," that's what Clare was just
mentioning over there, President Trump is expected to unveil tariffs against China on Thursday.
I want to go to Diane Swonk in Chicago, she's - she's a Chief Economist at Grant Thornton
[17:15:15].
So, Diane first of all just give us an overview, was this what you are expecting from Jerome Powell? Some people - actually most people are
expecting three rate rises this year, some people thought there was a possibility for four?
DIANE SWONK, CHIEF ECONOMIST, GRANT THORNTON INTERNATIONAL: Well we were just a sliver away from four in the forecast which was interesting and I
think that really reflects the upgrade in the forecast and it also reflects the Fed sort of straddling this issue of they expect inflation to pick up,
they expect wages to pick up, but it is still an expectation not a reality.
The Fed has been humbled many times by how they've expected inflation and it is not showing up. They thought it was transitory, the slowdown in
inflation, they really won't find that out until the data comes out for the March inflation data which comes out in April so by June they'll have a
much more firm footing on whether they are seeing the whites of the eyes on inflation which is I think what it takes to really move the whole committee
to that four commitment in June.
ASHER: Now one of the things that Clare was talking about as well is this - is this idea of headwinds on the horizon. I think the looming headwinds
especially because we might get an announcement, we will get an announcement tomorrow, President Trump is going to be announcing tariffs
against China tomorrow. We expect China to retaliate as well, hitting agricultural exports.
How is that going to play into the economic headwinds that the U.S. economy might see?
SWONK: Well this is the great unknown and the uncertainty and I think you really saw J. Powell sort of dodged the questions, he did say - acknowledge
that it was discussed and the minutes are going to be watched very closely because I think the precedence (ph) of the Feds which are all - which tend
to be more economist, those economists that were around the table would have a different kind of scenario that they're going to be talking about
and the destruction or the inflationary consequences of tariffs what that can mean, different scenarios.
Then the non-economists around the table which includes Chairman Powell and I think he was very artful at how we sort of balanced and diplomatic
saying, "Listen, this is something people are concerned about it, the business community has expressed concern but we can't as the Fed do
anything about it until we know what they are," there is that uncertainty, they have to react.
And I think you really saw that in the present moment with Chairman Powell, he's also much more plain-spoken he had as many questions thrown at him but
got done in half the time as Chair Yellen, that's because he doesn't do a deep dive on economics, he's really, 'colors within the line,' and this is
what you're going to see from him as he stay - stay into his script; even though they have to deal with it, they can't deal with it until it happens.
And so even though the - it was discussed I think it really highlights how much the minutes will reveal and how the economists at the table felt
versus the non-economists and that will come out in those minutes to the meeting.
ASHER: Yes. As Fed chair you have to be very, very, careful with every single word that comes out of your mouth because as we've seen, the markets
are watching you very, very closely. We saw a lot of movement in the stock market today.
All right, Diane Swonk LIVE for us there, thank you so much.
All right still to come here on QUEST MEANS BUSINESS Facebook's Founder, finally faces up to his company's biggest challenge yet, we'll have much
more on how Marc Zuckerberg is responding to him massive data breach.
After the break, don't go away
[17:25:18].
(COMMERCIAL BREAK)
[17:30:00] ZAIN ASHER, HOST, QUEST MEANS BUSINESS: Hello everyone, I'm Zain Asher, coming up on the next half hour of QUEST MEANS BUSINESS, I'll
speak to a former project -- products manager at Facebook as Mark Zuckerberg prepares to sit down for a Cnn exclusive interview.
And the CEO of Starbucks tells us about his plans with Chinese expansion we call that though, these are the headlines we're following for you at this
hour.
All right, just a short time ago, Facebook CEO Mark Zuckerberg broke his silence on the Cambridge Analytica scandal that allowed the firm to harvest
tens of millions of users data.
Zuckerberg admitted Facebook made a mistake, he vow to a strict, develop his data access and offered a tool that shows you his wish app debuts and
how to revoke those apps data permissions.
British Foreign Secretary Boris Johnson said Russia will look to boost its image by hosting the World Cup in the same way Adolf Hitler tried to use
the 1936 Olympics in Nazi, Germany.
Those comments coming as he addressed lawmakers. Johnson also said the timing of the poisoning of a former Russian spy is likely connected to
Vladimir Putin's re-election.
South Korea and the President Moon Jae-in suggesting a three-way summit is possible between himself, North Korea's Kim Jong-un and U.S. President
Donald Trump. He says it could happen if the planned separate summit go with Kim -- with Kim go well.
Meantime, North Korea is hailing witful, a sign of change in its relations with the United States. And more than 70 million people are under winter
weather warning or watches as a powerful snow storm slams the U.S. northeast.
Schools are closed in several states and more than 4,700 flights have been canceled. The storm is disrupting Washington, the White House in fact
canceled all public events and federal offices were closed.
And the suspect in the string of bombings in Texas killed himself on Wednesday by detonating a bomb in his vehicle as police approached. Police
have identified him as a 23-year-old Mark Anthony Conditt.
Police say Conditt is responsible for five bomb explosions that killed two people and injured five.
OK, so we want to return now to our top story. Facebook CEO Mark Zuckerberg has broken his silence five days after a data scandal completely
engulfed his company. In a Facebook post, Mark Zuckerberg admitted that the firm made mistakes with users data and pledged to restore -- guess he
meant trust.
Samuel Burke is joining us live now from Miami. So Samuel, how much did this actually do? The statement by Zuckerberg actually do to restore trust
in his company that has no doubt been just very much broken.
SAMUEL BURKE, CNN BUSINESS AND TECHNOLOGY CORRESPONDENT: Zain, let's just go through these one-by-one, because there are still a lot of gaps here.
He laid out three points. Number one, they're going to go back and investigate the apps, like this personality test that had access to large
amounts of data.
But even in his letter here on Facebook, he admits that Facebook knew about this in 2015 and investigated it then. So how will this investigation be
different and why didn't they notify us back in 2015. Number two, they're going to restrict the apps that are still on the platform.
But Facebook doesn't make most of its money this way, it makes most of its money through ads. So why even allow apps to have any of our data at all.
And number three, they say they're going to have a new tool that's going to help people understand these apps better.
But Zain, this tool has really been around, why didn't they make it easier for people to find before, and how come so often when Facebook creates
these tools, they're only available on the desktop, even though they pride themselves in being a mobile company.
More people use the Facebook app than use the desktop model. So how come these all important tools so often only are available on their desktops.
There are still some very big gaps that need to be filled in here, Zain.
ASHER: So the biggest issues now for Facebook, I mean, in terms of where people are really concerned, are the biggest issues outright dishonesty? Is
it lack of transparency or blatant carelessness?
[17:35:00] BURKE: I think especially the latter too. When you talk about the lack of transparency -- again, they knew about this in 2015 and never
told us. And it does seem rather careless that people -- just a professor at Cambridge University originally before had to get off to Cambridge
Analytica was able to get this type of information.
And really, people didn't realize that. So there needs to be much more transparency here. But then I really think this gets to a question that
people at the core of Facebook, people inside the bubble have been asking not for days, not for weeks, but for months if not years.
We have been hearing people sound the alarm saying they're putting the cart before the horse. In this case, the cart being the money. They're focused
on profit and they're not realizing that this is the first time a company has had access, direct access to $2 billion and they don't realize or
they're choosing to willfully ignore the power of their platform.
This isn't a new story in a way. People have been saying, this could be a problem for ages, and now we know, and certainly now, Mark Zuckerberg and
Sheryl Sandberg know that it is a problem.
ASHER: Right, Samuel Burke live for us, thank you so much, appreciate that. OK, I'm joined now by former Facebook Products Manager Antonio
Garcia Martinez; former Facebook Products Manager.
Somebody who used to work at Facebook yourself, how do you think Zuckerberg did?
ANTONIO GARCIA MARTINEZ, FORMER PRODUCTS MANAGER, FACEBOOK: You know, I think he did -- he did exactly what he needed to do. Basically, he needs
to shut down platform.
Platform is a product that the company made a big bet on in 2011, 2012, it's kind of languished, frankly, nobody uses that much anymore. And he
basically closed, you know, the hall on the data leak that produced this entire Cambridge Analytica fiasco.
And I think it's the right thing. It's a concrete technical step and it's what the company should have done.
ASHER: You know, what's interesting is that there have been so -- on this program and of course, from many networks, we've covered so many tech
companies that have experienced crisis. It's certainly nothing new these days.
But this one I have to say, Antonio, this one feels different. Do you think the damage done is repairable?
MARTINEZ: Yes, I mean, I think -- look, you know, a lot of users have sort of a love-hate relationship with Facebook, and this is I think part and
parcel of that. I know, I think the damage done might be repairable, it's actually more internal to Facebook.
I think the internal morale and sort of internal cohesion of the company that has gotten it, you know, to where it is today, I think that's taken a
big hit. A lot of the leaks that are coming out of the company show a lot of policy intrigue happening, almost are involved in the part of employees.
The fact that you even have leaks is already significant. Facebook was a famously secretive company that never allowed leaks and now you're seeing
those. So I think ultimately, the biggest damage the company might suffer might be purely internal.
In terms of the external damage, you know, Facebook is so addictive that at the end of the day, you know, users might say, oh, delete Facebook, they
might do it today, but they'll reinstall tomorrow.
ASHER: Right, so you think that, you know, I guess this turmoil is somewhat short-lived. But you mentioned traditionally, Facebook hasn't
really had that many leaks. The people that --
MARTINEZ: Right --
ASHER: You still know that work at Facebook, how is the morale right now?
MARTINEZ: I think it's pretty poor. You know, the way it works in Silicon Valley is, you know, your job is more than just a job, it's kind of your
life. And you know, you wear a shirt with a Facebook logo on it or whatever company it is, and you feel kind of proud of that fact.
You like working for a cool world changing company. And if people will look at a name like Facebook and think, oh, you know, spying on you,
something or well in, that's just not cool anymore.
And yes, I think people are not going to feel very good about that.
ASHER: OK, so I have Mark Zuckerberg's statement in my hand, I've highlighted a lot of it and made notes. But what I found very interesting
is the comments from people who replied to Mark Zuckerberg and just reading to it what they said.
You know, some people were actually very positive, saying listen, Mark, you made a mistake, we forgive you, you've done so much good for the world,
you've done so much to unite the world and we appreciate that.
But a lot of people, a lot of people had very negative things to say. You know, how can we trust you again? You've destroyed your credibility, you
know, we're not buying the fact that you didn't know anything.
You know, it just felt as though, the balance of comments and the balance of opinion on this was far more negative than positive.
MARTINEZ: I mean, maybe. You know, maybe I'm too much of a tacky, but you know, the reality is, this is the nature of having a platform opened to
third party developers. I mean, most of those people with those negative comments may not realize it, but the Apple app store for example or you
know, the Android app store is exactly the same.
If developers -- you know, when you download one of those apps, you consent to sharing your data to those apps, and that is outside of Apple or Google
or in this case Facebook's control, and they can do anything with that data.
I mean, that's kind of the world that we live in --
ASHER: Antonio, I get what you're saying, I get what you're saying, but you know, we sign up to it, we click yes, I agree, I accept on the user
agreement. But really, a lot of people find those user privacy agreements so cumbersome, so difficult to understand, so difficult to read.
So it's unfair to say that, you know, the -- maybe users do that, some responsibility. But Facebook has far more responsibility, especially
because Mark Zuckerberg actually admitted in his statement that he knew about what went wrong since 2015 and we're only --
[17:40:00] MARTINEZ: Yes --
ASHER: Finding out about it now.
MARTINEZ: Yes, I know, I think you put your finger on the part of it. You know, I think the part where the company I think actually deserves a fair
deal of criticism is exactly what you just said.
You know, this came out over the weekend for a couple of reasons. They booted Cambridge, there's a leaker or some sort of a face to the company.
But the reality is, this has been reported for something like two years, right?
And yes, I do think the company should have acted earlier. The company that I remember was really aggressive about protecting user data, and I
just don't understand how you know, once it was revealed that Cambridge was doing what it was doing, why didn't it act faster?
Yes, I think you're right, yes, absolutely --
ASHER: OK, Antonio, very quickly because I'm out of time. Mark Zuckerberg is going to appear on Cnn tonight in just a few hours from now --
MARTINEZ: Yes --
ASHER: What do you want to hear from him?
MARTINEZ: Well, I think, you know, part of what he said in his post, I want him to take some responsibility, right? Like he said in his post, I
find that he's complaining, ultimately I'm responsible for it. And you know, I think that will clear the air.
Because the reality is, his absence has been pretty conspicuous for the past week which is really unusual. He actually comes out and actually
speaks with the employees directly every week, and he hasn't even for this scandal.
So yes, I think he needs to show in a face and saying, I accept responsibility for this and I apologize, I think will go a long way to
regain user trust.
ASHER: Gosh, it was so fascinating having your perspective, especially given that you used to work inside the company, so you understand what is
going on inside the company right now. Antonio, thank you so much for being with us, I appreciate that.
MARTINEZ: Thank you.
ASHER: All right, let's talk about Facebook stock, because shares actually did rise, interestingly enough, did rise slightly on Wednesday, it ended up
three-quarters of 1 percent. There wasn't that much movement though after the Zuckerberg statement came out.
As I mentioned, they closed up ever so slightly, but they are still down, they are still down more than 8 percent this week so far. Although several
analysts on Wall Street say they're not necessarily worried about the long term share price.
So and then -- this could just be a blip on the radar. Now as I mentioned, Mark Zuckerberg is going to be giving an exclusive interview tonight to our
Lori Siegel in just a few hours from now. You can watch that on "ANDERSON COOPER AC 360" which airs -- if you're in London, that will be 1 O'clock in
the morning your time.
But then don't worry, the interview will be played throughout the day on Thursday as well. OK, still to come here on QUEST MEANS BUSINESS, when a
test-base turns deadly, a fatal crash involving a self-driving car sparked questions for our amazing(ph) industry, that story next.
(COMMERCIAL BREAK)
ASHER: A fatal crash in Arizona is sparking debate over the safety of testing self-driving cars on public streets. Police say the self-driving
Uber was going 14 miles an hour and a 30 mile -- 35 mile an hour zone when it hit and killed pedestrian Elaine Hertzberg.
A test driver was behind the wheel, but the car was in autonomous mode, it was in self-driving mode. Uber and Toyota have stopped U.S. protesting of
their self-driving vehicles after the crash. Google's Waymo and Apple, Tesla, GM Intel all appear to be continuing.
[17:45:00] To discuss these safety concerns, I'm joined now by Jason Levine; executive director of the Center for Autosafety. Jason, thank you
so much for being with us. So I mean, given this fatal crash that we've seen, what changes do you want to see in the self-driving car industry.
JASON LEVINE, DIRECTOR, CENTER FOR AUTOSAFETY: Thank you for having me. I think what we want to see is lots of focus on this particular incident,
though obviously tragic and more of an understanding that there's really no regulation or safety guidelines in place, that either the federal or the
state level when it comes to self-driving vehicles at the moment.
One of the reasons that Uber is in Tempe and Waymo is in Chandler, Arizona, which is just down the road is because Arizona has basically opened itself
up as a state where they are saying, please come in and we're not going to regulate you in any particularly strong fashion.
And arguably, not in any fashion at all as long as you self-certify that what you're doing is going to be saved. There's no demonstrated safety
mechanism ahead of time before these vehicles should be put on the road. So I think what will be smart to come out of this horrible strategy is an
understanding of how our communities are going to be made safe prior to this product coming on the road.
Because it's brand new technology, it's exciting, but has the potential to save a lot of lives. But we're told at the beginning and the question is
who is making sure that it's safe before it's getting on the road, not afterwards.
ASHER: Right, their argument would be that self-driving cars are extremely safe because the technology is in place -- normally, I guess it didn't
happen this time, but normally the technology is in place to detect any sort of moving person, any other vehicle on the road, plus, would be self-
driving cars.
You also have testers inside the vehicles as well. Obviously, something went wrong this time. Would a possible solution be to continue testing
self-driving cars that limit the number of tests on public roads for now?
LEVINE: That would certainly be an excellent start, and I think what's important to understand is, the expectation can be that we're going to go
from 40,000 or -- it's actually 37,000 traffic crash test in the United States a year, down to zero overnight.
That is obviously the goal, that's where we all, all want to get to. But the technology is certainly not perfect yet, and who knows it will ever be
perfect. But I think what we're getting a little bit of a false sense security. You know, we have a safety driver in these vehicles and he or
she can take over when the problems occur.
Well, as we see and what happened in Tempe, that isn't necessarily always going to be the case. Is it important to make sure that the product, the
technology has been tested in a way that make sure it works before there's wide deployment.
Of course it is, you can't just do that in a lab. That said, we don't introduce drugs to our senior citizens, we don't issue toys to our children
without some level of a demonstration of safety before it gets into the main stream.
And even more so, we don't do it with the cars that don't have autonomous technology on them right now. Right now, you know, if you want to go buy a
20 --
ASHER: All right --
LEVINE: Fifteen car --
ASHER: Yes --
LEVINE: It's got a lot more standards around it.
ASHER: Jason, I have to leave you, I'm afraid because we're running out of time, but thank you so much. Jason Levine live for us, thank you,
appreciate that --
LEVINE: Thank you for having me.
ASHER: You're welcome. OK, so on a day of a major snowstorm here in New York, all I can do is dream of the beats that I pulled in one second. Let
me have a little peek, a little peek at the condition this morning on Australia's Bondi Beach, gorgeous, I'm so jealous.
More than a 2.7 million tourists are visiting Bondi every single year. One photographer is saying how he turned his love of Bondi into a global
business on this week's "TRADERS".
(BEGIN VIDEOTAPE)
UNIDENTIFIED MALE: This is a story about how one man combined his love of surfing, photography and the web to create a multi-million dollar business
enjoyed by people across the world.
Meet Eugene, the creator of Aquabumps. He's been taking photos of Australia's iconic Bondi Beach almost every day for the past 18 years.
EUGENE TAN, CHIEF EXECUTIVE OFFICER, AQUABUMPS: Aquabumps was born out of a hobby essentially. I love taking photographs. I see that (inaudible) in
the '90s, take the photo, aim out to friends. The aim out grew in popularity and then people asked to purchase the photographs.
UNIDENTIFIED MALE: That is when he started his online business. After that, came a permanent gallery situated only a few hundred meters from the
beach.
TAN: We got a million with e-commerce, we were selling online back when it was kind of cave man day. We have such a big a market than just little old
Bondi Beach and (inaudible).
UNIDENTIFIED MALE: Today, Aquabumps trade globally, selling on average, 100 prints a week.
[17:50:00] TAN: We shoot prints all over the globe. Obviously, Cinemac(ph) is huge to us, that'd be about half of all prints sold in this
gallery. That should change the time we go to the USA, another few changes then we go to the U.K. and actually with my account -- the rest of the
volume.
We sell pictures to mainland China, Poland, you know, all over the place, Africa, you name it, we send prints there.
UNIDENTIFIED MALE: Key to the business is building his online presence. Since day one, Eugene has been sending daily e-mails with his photographs
to subscribers in Australia and abroad.
He's also tapped into social media channels to strengthen his brand and to increase his following.
TAN: The core group is our e-mail subscription. We have 40,000 on that, Facebook, 120,000 at the moment, Instagram is 117,000.
UNIDENTIFIED MALE: Social media platform, Instagram currently has more than 800 million monthly active users. With many expecting it to reach a
billion in 2018. That's more than doubled the monthly active users of Twitter and over three times the many users on WhatsApp and Facebook
messenger.
But at 25 million businesses on Instagram, today, 200 million Instagramers actively visit the profile of the business. When he first began capturing
his favorite corner of the world, Eugene never expected such a global response.
But now, as he seeks to share his images even more widely, he's realized what makes his photos so appealing.
TAN: I think it's attractive to people, in that it gives them escapism, unlike the two minute escape guy who looks at my work and he's like, oh,
that's where I want to be today.
(END VIDEOTAPE)
ASHER: Welcome back everybody. Facebook says it's reached pay equity in the United States when it comes to gender and race. It's a milestone for
the employer with more than a 150,000 Americans.
CEO Kevin Johnson told Maggie Lake where Starbucks is going next.
(BEGIN VIDEO CLIP)
KEVIN JOHNSON, CHIEF EXECUTIVE OFFICER, STARBUCKS: Starbucks today, we're announcing a 100 percent pay equity across the United States for any one in
similar jobs by gender or race, we've achieved 100 percent pay equity --
MAGGIE LAKE, CNNMONEY: Means a lot of applause on that, I'm sure --
JOHNSON: Well, and we've worked -- we've worked hard for a couple of years. Now to ensure, we could get there. But we are now there, and I
think that's another example of us taking care of our partners.
And by being able to make that statement allows us to continue to attract the kinds of talent and the kinds of great people that help us build this
brand.
LAKE: China, we know that your investors are laser-focused on that as real area of growth. The numbers have been good, is it sustainable?
JOHNSON: Well, I think certainly we believe it is. And here is why? Economists project that the Chinese GDP will grow to over $15 trillion
dollars by the year 2021. That growth in GDP is doing a massive expansion in the middle class in China.
The middle class now is estimated at about 300 million people, they anticipate that doubling to 600 million people in the next three to four
years.
[17:55:00] That doubling of the middle class, 600 million people in the middle class nearly doubled U.S. population.
So for us, we've grown from about 700 stores in China five years ago to 3,200 stores today. So we just are now integrating each China and
acquisition of the joint venture in east China. And as we do that, we're going to be able to accelerate new store growth in China.
So China is the second largest and fastest growing market for Starbucks. And there are, you know, decades of growth opportunity ahead for us in
China.
LAKE: I have my friends and colleagues who are really struck by the fact that you're not just in the big cities, you're in the smaller, second,
third-tier cities. But they wonder about brand loyalty. In the west, especially in America, we're very brand aware.
There's a sense that they go to Starbucks, but if there's one closer, maybe they'll go there too. How do you -- how do you engage a Chinese consumer
on loyalty?
JOHNSON: I think in China, no other western consumer brand has established affinity with the Chinese consumer in the way that Starbucks has. We've
been in China for 18 years now, and we enter China in a way where we focus on being respectful to the culture and the people in China.
We've invested in our partners in China, and we've done it in a way to create Starbucks as an aspirational brand for the Chinese consumer. We're
introducing them to premium coffee in a market that's -- you know, a tea forward sort of society.
And as a result, we continue to see significant growth in our relationships with the Chinese consumer. And I think the brand is very strong in China.
We just opened a Starbucks reserve glossary in Shanghai, you know, a 30,000 square foot, the largest Starbucks in the world.
And the number of customers that we are serving, not only in that store, but in our stores in China just continues to grow.
(END VIDEO CLIP)
ASHER: All right, my friends, that is QUEST MEANS BUSINESS, I'm Zain Asher in New York, news continues right here.
(COMMERCIAL BREAK)
END
