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Quest Means Business

Putin Says Russia Wants to "Fully Restore" Relations with the U.S.; Apple Shares Recover Ground After Monday's Plunge; Disney Takes Control of Hulu. Aired 3-4p ET

Aired May 14, 2019 - 15:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

RICHARD QUEST, CNN INTERNATIONAL HOST, QUEST MEANS BUSINESS: An hour left to trade on Wall Street, 60 minutes and what a difference a day makes.

Today, we were off the highs of the day, that was over 360 points, but we are still showing a gain of more than 1 percent. Same for the NASDAQ and

the S&P 500. If you look at the Dow 30, there are only stocks that are down -- United Healthcare and McDonalds. Otherwise strong gains,

including, for example, the Dow which is up more than 3 percent. The markets all looking good. And these are the reasons why.

The trade propaganda war, China and the United States, each accusing each other of reneging on promises. WhatsApp is hacked, the culprits, the

victims and we'll tell you what you need to do. And calls for a big tech breakup. Scott Galloway tonight on how and why to break up Facebook,

Apple, Amazon and Alphabet and at the same time, be happy yourself. We are alive in the world's financial capital, New York City on Tuesday, it's May

the 14th. I am Richard Quest, I mean business.

Good evening, despite prevailing fears of further escalations in the U.S.- China trade war, investors today, taking a deep breath, and in some shape or form, attempting a climb out of yesterday's crater.

We are in the final hour of trading and the U.S. markets are rebounding after Monday's selloff. The Dow is having a really good day, its best day

again in nearly three months. But the truth is, we are off the best of the day. That was 364 points. So the test will be, how far it manages to hold

these gains for the remainder of this volatile session towards the close.

President Trump is on a tour of a natural gas export and LNG facility as his administration and China takes turns in the negotiation blame game.

We're expecting the President to speak shortly.

Now as we look at the way and we work out what the markets have been doing, how they have been reacting. We need to look at the impact of what's

happening. Krishna Memani is with me to tell me more about it. Good to have you, sir.

KRISHNA MEMANI, CHIEF INVESTMENT OFFICER, OPPENHEIMERFUNDS: Thank you.

QUEST: The impact on the market? I mean, two very serious days down or last weekend yesterday down. And now we have a reserve just a very small

bounce back. Is that just an overreaction?

MEMANI: Well, no. So I think the down leg is very much justified. You know, trade wars are not good and there will be an impact on overall

growth, growth in the U.S., growth on a global basis and profitability as well. So market should be down. The real question is, after they do a bit

of a D rating, where do we go from here?

And I think on that front, overall global growth still looks quite decent and the direction for the market is probably higher rather than lower,

recognizing that whatever our growth targets or whatever our market targets were earlier in the year, it probably ends up being somewhat lower than

that now.

QUEST: Right, but the dislocation as a result of the trade, the U.S.-China trade, if it is not settled, the dispute, do the markets tumble further?

How much of failure is priced in if any?

MEMANI: Well, so I think in the core, the markets are still expecting some sort of a deal at some point, in not too distant future. If at some point,

it becomes quite clear that that is not going to happen and that is not going to happen in the short timeframe, I think the likelihood of markets

going down is quite real.

Again, the point is the markets may go down, but from there on, they probably come back as economic growth ends up being okay, rather than

catastrophic.

QUEST: I was interested to read your notes and to read your views that you quantify what you believe is the GDP or economic hardship under this and

you have the U.S. in about a half of a percent of GDP, but you have China at one percent of GDP admittedly from a higher level of six to seven

percent. So net-net as I've been trying to understand, who suffers most from this?

MEMANI: Well, you know, there are no winners in this. The U.S. economy is a large economy, it's a diversified economy. Imports have a lower role to

play. So net effect on the U.S. is less, but let me not misguide your viewers, you know, both sides lose on this thing. The best outcome for

everyone is for this to be settled and for this to be settled expeditiously.

QUEST: Is this buy on the dips? I mean, I don't mean today, but I mean, you know the market of five to seven percent. Some stocks like Boeing down

21 percent, is this buy on the dips?

[15:05:10] MEMANI: I think buying on the dip is still a good thesis. Over the last 10 years, the two things that have driven the markets are the Fed

policy of low interest rates and Chinese stimulus, both of those pillars still stand today.

So our outlook is markets go up from here, but perhaps not as much as we had anticipated earlier, but the trend is still higher, rather than stay

here or go lower.

QUEST: Right, final question. Donald Trump, in a tweet today urged the Fed to cut rates, join the analogy with what the people of Central Bank of

China would probably do in difficult times, is he right to ask for that?

MEMANI: Well, so I think Trump has been asking for the Fed to cut rates even when we didn't have trade wars, and the economic numbers came out at

three and a half. So from his perspective, it's always rate cuts. But I think in this case, he does have a point.

If the economy slows down meaningfully, given how low inflation is, the markets are actually expecting the Fed to cut rates at some point. I don't

think that happens in 2019. But I think in 2020, it is a real possibility if things continue for that long.

QUEST: Excellent to have you with us, Krishna. Thank you.

MEMANI: Thank you.

QUEST: The trade war has turned into a propaganda war. Each government not surprisingly, is spinning hard. President Trump started his day with a

tweet storm, suggesting everything from calling on companies to move production back to the U.S., buying non-Chinese products to expressing the

hope China will buy more from American farmers and call on other leaders to increase pressure on Beijing. Mr. Trump called the trade war a little

squabble.

(BEGIN VIDEO CLIP)

DONALD TRUMP (R), PRESIDENT OF THE UNITED STATES: We had a deal that was very close, and then they broke it. They really did. I mean, more than

just -- more than renegotiated, they really broken. So we can't have that happen.

(END VIDEO CLIP)

QUEST: China is putting its spin on the negotiations, too. The U.S. shouldn't underestimate Beijing's willingness to stick to its position. In

a press conference, the spokesman of the Foreign Ministry said it was the U.S. not China, which reneged on its promises.

(BEGIN VIDEO CLIP)

GENG SHUANG, CHINESE FOREIGN MINISTRY SPOKESMAN (Through translator): Last May, China and the U.S. reached an agreement in economic and trade issues

and made a joint statement in Washington. But then the U.S. backed out of it a few days later. Then last December, the two also reached an agreement

on Chinese purchases from the U.S., but then the U.S. raised their terms. So you absolutely can't put the hat on China of reversing positions and

going back on one's promises.

(END VIDEO CLIP)

QUEST: CNN's Matt Egan believes the China trade war won't last. Matt is with me. Why do you say that?

MATT EGAN, CNN BUSINESS LEAD WRITER: Richard, I think it's just that it really can't last because these two economies are just so intertwined and

they're so important. We're talking about the two biggest economies in the world. They're each other's biggest trading partners and you know, China

is sitting on $1.1 trillion of U.S. Treasuries making it America's largest foreign creditor.

And so what happens here just matters so much and it simply doesn't make any economic sense for it to continue any longer than it has to.

QUEST: But if you listen to the President today, the U.S. President, he was quite clear. He is happy with the increased money that's coming in to

the Treasury. He believes the U.S. can, should and will continue if necessary, ad naseum.

EGAN: That's right. But President Trump also kind of seemed to soften his stance just a little bit. He said that he thinks that a deal can

absolutely get done. As you mentioned, he went from calling it something tougher. He called it just a little squabble. He also expressed a lot of

respect and appreciation for the Chinese leadership.

And China, on the other hand, has seemed to take a little bit more of a tougher stance. You know, they've had all these editorials in state media

and in newspapers in recent days, and they are taking a pretty tough stance.

QUEST: In a variety of issues, there's apparel, farmers. I mean, even today, the President was talking about more help to the farmers. Well, he

did this once already. It was $12 billion to $15 billion was put aside for soybean farmers. He says that they will be the farm -- the U.S. government

will be the farmers' best customer if the Chinese stop buying.

EGAN: That's right. So President Trump is trying to backstop you know, the U.S. farmers. He is trying to ease some of these real serious economic

concerns that farmers and other people are feeling right now because of the retaliation from China.

You know, what I think really matters here is what happens with the stock market because we know that President Trump, he checks on the market all

the time. He checks on it several times a day. And so if he sees the market taking a real dive, not what's happened vote so far. So far, it was

less than 5 percent. But if it was a bigger decline that would probably raise the pressure on President Trump to shift his position and maybe be

more willing to reach a deal with China.

QUEST: We're nearly at the highs of the day. Were up 320 odd points on the Dow. Is this just a bounce from some serious losses? I mean, the

fragility of these gains is high.

EGAN: Right. I think that what you said with your last guest was great in the sense that the market is not pricing in any sort of disaster here at

all. The market apparently was pricing in a trade deal was coming. And so Bank of America put out three scenarios how this could play out.

[15:10:43] EGAN: They said, one, we could reach a deal very quickly and that would obviously be a big positive for the market. Two, there could be

an intensification of the trade war and then an eventual deal. And in that scenario, we could see the market drop five to 10 percent, because earnings

would hate to take a modest hit, but the negative outcome would be a full blown trade war/recession. And in that scenario, Bank of America sees a 20

percent to 30 percent decline in the stock market.

QUEST: Matt, good to see you, sir. Thank you. Matt Egan with us. Nick Valencia has been exploring the impact of the tariffs are having on small

U.S. businesses. This is his dispatch.

(BEGIN VIDEOTAPE)

NICK VALENCIA, CNN CORRESPONDENT: Is it panic mode yet?

VANESSA JESWANI, CO-FOUNDER, NOMAD LANE: Basically.

KISHORE VASNANI, CO-FOUNDER, NOMAD LANE: Yes. I mean --

JESWANI: We're almost there.

VASNANI: Yes. We're -- we're like tethering on the edge of panic.

VALENCIA (voice over): Kishore Vasnani, and his wife Vanessa Jeswani, own the successful travel bag company, Nomad Lane.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: Each side has a zip around divider.

(END VIDEO CLIP)

VALENCIA: It's been around for about two years. But right now, with the current China trade war, their U.S.-based small business is taking a big

hit. Vasnani, a registered Republican, blames President Trump and his new tariffs policy. He calls it a gut punch to the American public.

(BEGIN VIDEO CLIP)

VASNANI: It makes us wonder what, you know, the justification is, what the reasoning is behind it and, you know, we're, you know, trying to find our

way at the moment.

JESWANI: Yes, and I think it's tough because he's supposed to be, you know, pro-business, but this was not a pro-business move, especially for

small businesses like us.

(END VIDEO CLIP)

VALENCIA (voice over): The company is based in New York, but their bag is manufactured here in Wenzhou, China. After getting the news on Friday that

the bags will be hit with huge tariffs when they come back into the U.S., the couple are now on their way back to Asia to find a new supplier outside

of China. With an upcoming production order they have to figure it all out in less than two weeks.

(BEGIN VIDEO CLIP)

VASNANI: It's going to have a downstream effect on not just us, but on a wide swath of industries, accessories, products, et cetera.

(END VIDEO CLIP)

VALENCIA (voice over): The couple is now debating between absorbing the new costs or leaving that to the consumer. They've already been severely

impacted and as a new business, aren't sure how much more costs they can take on.

Before President Trump, the tariffs for bags was 17.6 percent. Then it increased to 27.6 percent in the summer of 2018. As of last Friday, it's

15 percent more, bringing the total tariffs now to a whopping 42.6 percent.

(BEGIN VIDEO CLIP)

VASNANI: I think Americans love, you know, being able to find high quality products at a reasonable price. And so I think the new reasonable, you

know, now has a 25 percent markup on it.

(END VIDEO CLIP)

VALENCIA (voice over): Which, in the end, may leave the couple holding the bag. Nick Valencia, CNN, Jonesboro, Georgia.

(END VIDEOTAPE)

QUEST: And that puts it into context these disputes that we often talk of in grand terms actually have real people at the bottom of it or at least

that are most affected.

Bayer says it will appeal against the court decisions to award worth more than $2 billion in damages to a couple who claimed Roundup weed killer

caused their cancer. Bayer bought Roundup maker, Monsanto only last year. The award underscores the massive costs they could owe in the U.S. where

the company is facing lawsuits from more than 13,000 plaintiffs.

Anna Stewart is in London. This latest one is not -- it's not the first and it's not going to be the last award against them. What's going on?

ANNA STEWART, CNN REPORTER: This is now three out of three jury verdicts that have gone against Bayer and as you said, there are over 13,000 --

actually, 13,400 other lawsuits in the U.S. queuing up all relating to this weed killer Roundup that has his key ingredient glyphosate.

Now the current -- the one we're talking about today, the latest trial that is awarded $2 billion to the couple. That absolutely dwarfs the other two

trials and obviously has investors very, very concerned. Share price down 2 percent today, Richard, but down nearly 40 percent or actually, I think

just a bit over 40 percent since that made that Monsanto acquisition, which is where it gets this weed conundrum last June and they knew when they

bought Monsanto that they had these pending lawsuits.

QUEST: Okay. I mean, obviously a certain amount of this will be paid by insurance companies that Bayer has, but clearly no company can continue to

withstand these sorts of lawsuit awards and for very long, even if they are slashed back on appeal. How can Bayer afford this?

[15:15:07] STEWART: Well, Bayer certainly couldn't afford 13,400 at $2 billion even if that gets reduced. Obviously it couldn't, but Bayer after

a while has said that it is absolutely confident, Richard, that it will overturn these decisions on appeal, but it goes to a judge they will

appeal. And so far, it's been three juries all in California. The next one will be in Missouri in August. It is very confident. I have to say it

has set aside costs, you know, money for legal costs, but it hasn't set aside any money for compensation. That is how confident it is. But the

shareholders, the AGM just two weeks ago, it had a massive backlash, unprecedented backlash from shareholders. They're clearly not nearly as

confident, I guess, as the company's Board.

QUEST: And you remind me again, where the next case takes place?

STEWART: So the next one is Missouri. This is going to come in August. It's going to be another jury verdict. But what we're really waiting for

here, Richard, I don't have a date for you here is the appeal of the first one because what happens after the first appeal will be absolutely crucial

as to what happens next in the other ones and the 13,400 other lawsuits.

QUEST: Anna Stewart in London, thank you. The European markets -- we will stay in Europe, they closed higher. There were major gains in Paris,

following a selloff. It was the U.S.-China trade talks that led to the selloff. Donald Trump is calling it a little squabble, but the markets

certainly rallied considerably, even the FTSE di rather well.

WhatsApp built a business it claimed end-to-end encryption, the safest way of sending messages. Billions of users have their messages and hoped they

would stay private. But there's a security flaw that gives hackers access to your entire phone. It happens without even knowing about it. There is

a fix. But let's see the damage.

Apple pushes back against allegations of a price monopoly. I'll be discussing with the entrepreneur and marketing guru, Scott Galloway,

exactly who needs to be broken up and who not. It is QUEST MEANS BUSINESS live from New York.

(COMMERCIAL BREAK)

QUEST: Simple, reliable, secure. That's WhatsApp tagline. And today it's somewhat ironic after it was discovered that a flaw allows spyware to be

injected through its app onto your device, which can then steal all your details and allow you to be monitored willy-nilly. Apparently, all it

requires is a simple WhatsApp phone call.

[15:20:07] QUEST: When the WhatsApp phone call happens, then hackers can then implant malicious code. It gives them access to your entire phone.

The target so far look to be human rights activists. You haven't been assuming, it just happens.

A source tells CNN, a software from Israel's NSO group is behind the attacks. NSO obviously denies involvement, and says their technology is

only used to fight crime and terrorism by legitimate law enforcement organizations.

But that's the same line that the company used when it was linked to the merger of the journalist, Jamal Khashoggi in Saudi Arabia. Donie

O'Sullivan is in New York with me. And let's take this to the fact, first of all, WhatsApp discovered it, but apparently has already patched it,

correct?

DONIE O'SULLIVAN, CNN BUSINESS REPORTER: That's correct it seems, Richard, that it was patched sometime over this past weekend. Now, what WhatsApp

did when they learned about this was they started actually reaching out to human rights groups. They seemed to know that whoever was behind this

attack was targeting human rights groups.

And in fact, one human rights lawyer who does not want to be identified who is based in London, who was the target of these attacks that I spoke to

today, began to notice strange calls at unusual times very early in the morning coming through WhatsApp in March, and those attackers tried to hit

him again on Sunday.

But by that point, he and his colleagues and WhatsApp were aware that this was happening, and they were able to stop that attack.

QUEST: I mean, what did this do? It took all the information of your phone? It allowed people to listen to your call? What did it do?

O'SULLIVAN: We're not precisely sure what it could do. We do know that software from this company can basically get total access to your phone.

So similar software, it's sort of a free rein into your phone once it gets on it and what's astonishing about this particular hack, as you mentioned,

is that you didn't even need to answer the call. For this it to be installed on your phone, the phone just had to ring. So it is extremely

troubling. WhatsApp say they have patched it, but you've just got to wonder how many more vulnerabilities out there are like this.

QUEST: NSO says, "Look, we didn't do it. And only legitimate law enforcement people get hold of all, all software." I mean, that's a valid

excuse or argument, if it's true, of course. But that is a valid say -- I mean, "Under no circumstances would NSO be involved in the operating,

identifying of targets with its technology, which is solely operated by intelligence and law enforcement agencies." It's not their fault.

O'SULLIVAN: So here's the thing, the human rights lawyer in London, who we spoke to is involved in a case against NSO group. He is working with

individuals who say they were spied on using NSO technology. So this is what sort of arose suspicion in NSO. They have very, as you say,

stridently denied that they are involved in this that they have tried to hack into this individual's phone.

But that is sort of the great mystery of this, who is behind it? NSO sells this code to governments across the world and we do know that U.S. law

enforcement, according to WhatsApp are now trying to look into and get to the bottom of who is behind this.

QUEST: Donie, thank you. Keep watching this all for us. Thank you very much indeed. Staying with technology, the U.S. is forcing a Chinese tech

firm to sell its majority stake in Grindr of all things.

The U.S. doesn't trust Beijing's Kunlun Tech to own the gay dating app. It appears Grindr is the latest victim of U.S.-China tensions. Our tech

correspondent Samuel Burke joins me now.

Exactly -- I mean, this is an unusual one, A, because of the nature of Grindr and B, because it was a deal that was already done and it's the U.S.

regulator. Why?

SAMUEL BURKE, CNN BUSINESS TECHNOLOGY CORRESPONDENT: It was a deal that was done some years ago, actually. But at the heart of this is very

similar to the Huawei allegations, the U.S. fears that information data that could be collected by Grindr and is in fact collected by Grindr could

be used, stored on Chinese servers, and then the government could come in and get that data and somehow use it, the Chinese government against

American citizens.

I want to just put up on the screen in case people aren't familiar with Grindr, which is of course very popular in the GBT community -- just men so

we won't use the L there. It has information like sexual orientation, fetishes, HIV status even and so they're worried that this information

could be used against government employees potentially and used to blackmail them.

[15:25:07] BURKE: And so they have reached a deal now so that this Chinese company will sell the app back to the United States and they agree that

there's no way to monitor this, to not give over any data by the time they sell it back in 2020.

QUEST: All right, but the U.S. -- what's the game here? What is the U.S. trying to do? I mean, does the U.S. really care that much about the sexual

proclivities that may be revealed on Grindr? Or is this a bigger issue in terms of China and the U.S. trade?

BURKE: Well, you could say that the proof is in the pudding. The fact that this is a relatively small app, yes, there were plans to make it go

public. But it's not collecting the huge amounts of data that let's say, 5G will with Huawei. So in a sense, you can say it doesn't appear that it

is about economics, and that really is perhaps about sexual proclivities, that they're very much worried that this data could be used, particularly

against government workers.

So I would say that this situation would back up some of the bigger fears that the United States says they legitimately have about data use and that

it doesn't appear to be part of the financial back and forth between the United States and China.

QUEST: Samuel Burke, with Grindr. Thank you. The U.S. Supreme Court says iPhone users can sue Apple for running a price monopoly. Now of course,

the tech titans, should they be broken up? Scott Galloway is an author and professor, tells me, yes. And he is going to tell me how it should be

done. He's also written an extremely good thought, "The Algebra of Happiness." You're not breaking up, Scott Galloway, I'll tell you what you

do need to be doing in a moment.

(COMMERCIAL BREAK)

QUEST: Hello, I'm Richard Quest. There is more QUEST MEANS BUSINESS in just a moment. Presidential candidates want to break up the big tech

companies, Scott Galloway will tell us how to do it and more importantly, whether it's even necessary. He thinks, it appropriately, it is. And

streaming wars take a turn as Disney takes full control of Hulu.

[15:30:00] Before we get to any of that, this is CNN, and on this network, the facts always come first.

The Dow is having its best day in nearly three months as the U.S. markets rebound following Monday's heavy sell-off. Investors are setting aside

worries over a further escalation in the U.S.-China trade war. All the major indices are higher, but off the best of today.

The Russian President Vladimir Putin says he wants to fully restore ties with Washington. He's just finished meetings and talks with the Secretary

of State Mike Pompeo in Sochi. Mr. Putin denied interfering in U.S. elections and praised the Mueller report which found that Russia did indeed

interfere in a quote, "sweeping and systemic fashion."

Donald Trump's efforts to stop Congress from seeing his tax returns may be in trouble. A Washington judge had some very pointed questions for Mr.

Trump's lawyers at the hearing. The judge must decide whether to allow Congress to subpoena tax records from the president's accountants.

Saudi Arabia says it has stopped pumping oil at a major pipeline after two pumping stations were attacked by armed drones. The Energy -- the Saudi

Energy Minister says the drones caused minor damage. It follows Riyadh saying two of its oil tankers had also been damaged near the Strait of

Hormuz.

Tens of thousands more protestors are expected to reinforce a mass sit-in in Sudan after a night of deadly -- after a night of deadly violence.

Soldiers used bulldozers to clear pro-democracy protestors in Khartoum on the front lines of the sit-in. Unknown gunmen also opened fire, at least

six people were killed.

A rebound is taking place in Apple's shares after Monday's drop of nearly 6 percent. So it's put on the best part of two today. Apple is on track to

close with a gain as you see for the day overall. The company says it will prevail against a lawsuit that accuses Apple and the app store of

using monopolistic pricing policies.

The U.S. Supreme Court ruled on Monday that the anti-trust case can proceed, but note, that is just a procedural issue, it's still got to go

ahead the claimants and actually win the case. So from -- so from Facebook co-founder Chris Hughes to all U.S. presidential hopefuls, there are

repeated calls to break up all the major tech companies.

And by that, you're talking about obviously Apple with its music and its app store. You've got Google, which have got all those, of course.

Facebook has an infrastructure and an architecture of WhatsApp, Instagram and Messenger and the like. And Amazon, with its three vast divisions.

Now, Scott Galloway has advocated to break up and explains how to turn the four into their component parts. So Amazon becomes three fulfillment, AWS

and cloud services and the media group. Apple could be broken up or regulated with devices, iTunes and app store, and Facebook goes into social

brands such as Facebook, WhatsApp, Messenger and the like.

You put it all together, and you see with Google, you also break them up as well. Now, we want you to join in this conversation on your digital

device, should big tech be broken up? It really is as simple as that. Should it be broken up, yes or no?

Scott Galloway is with me, the professor of marketing at NYU. Scott, before we -- so we know where you stand --

SCOTT GALLOWAY, PROFESSOR OF MARKETING, NEW YORK UNIVERSITY STERN SCHOOL OF BUSINESS: Yes --

QUEST: Should it be broken up?

GALLOWAY: Oh, 100 percent. We want to oxygenate the economy, we want those numbers on the screens to be -- continue to be green. If you were to

break this company up, distinct of the weaponization of platforms, distinct of the power, distinct of their inability to prohibit bad actors from

weaponizing their platforms, let's make the shareholder argument.

If you look at almost every major break up, whether it was Telcos, the old companies, several years post-the break up, the combined companies were

worth a great deal more than the original companies.

QUEST: But you take, for example --

GALLOWAY: Yes --

QUEST: Facebook --

GALLOWAY: Yes --

QUEST: I mean it only put WhatsApp in there a few years ago, and Instagram came along a bit late after that.

GALLOWAY: Yes --

QUEST: You're breaking things up, I mean, normally you know, think of IBM, Standard Oil, AT&T, companies that have been around decades.

GALLOWAY: Yes --

QUEST: He's been around minos --

GALLOWAY: Well, but look at the power. I mean, and they're so here close to home, but when the DOJ filed the suit against AT&T's acquisition of

"Time Warner", they were worried about bringing together 130 million people.

[15:35:00] In terms of AT&T contracts and "DirecTV", yes, we're going to let WhatsApp, Instagram and Messenger encrypt a back-end communications

platform that reaches 2.7 billion people.

QUEST: But there are -- the argument Facebook makes, and I'd like to hear you, so tell me why you think it's wrong, is that there's plenty of choice.

There are loads of alternatives for example to a Messenger service.

There are alternatives to an Instagram, maybe they're not as successful, but there are --

GALLOWAY: Right --

QUEST: All these alternatives available, and it's not Facebook's problem or Google's problem that they've been successful.

GALLOWAY: Well, it's not their problem. It's not -- and they haven't -- I would argue they haven't done anything wrong. But I don't agree with the

fact that there's alternatives. There hasn't been a major social media network of any real substance founded since 2011. I mean, where do you go?

If you -- if you shut off Facebook and you want to reach your sisters and your mom back in Britain, where do you go? What messaging platforms or

social media networks are out there? This company literally controls 80 percent, 90 percent of social media traffic.

So this kind of defines monopoly. I mean, if you look at the fastest growing parts of our economy, social, search devices, there's typically one

or two companies that control almost all of it.

QUEST: So which of them would you break up?

GALLOWAY: Sure.

QUEST: So, I mean, because, you know, you -- Facebook, you've done, yes?

GALLOWAY: Yes, but let's talk about criteria, first --

QUEST: Yes --

GALLOWAY: You want to restore competition, and secondly, you also don't want to kneecap these companies. You want their shareholders to benefit.

You want sort of a Goldilocks strategy. So the most obvious one or I think the easiest one is Amazon spinning AWS.

Because on the spin, AWS is one of the ten most valuable companies in the world, and Amazon can no longer subsidize their retail platform with the

profits from AWS. When the Chinese came in and priced steel below price, of course in the '80s, we call that dumping.

When Amazon subsidizes the retail platform with AWS, we call it innovation. On the spin, the shareholders benefit. AWS has a bigger market as an

independent company, Richard, because Wal-Mart won't use AWS right now because it's owned by a competitor. So AWS thrives, more competition,

better for the economy, better for the planet.

QUEST: And to the argument -- well, yes, but we'll pay more for Amazon because there won't be that subsidy --

GALLOWAY: Sure --

QUEST: That exists.

GALLOWAY: Well, so that's a correct question because right now all anti- trust law is based on consumer harm. But it used to be in the Brandiesian days based on competition. Where it said if competition is suppressed for

long enough, ultimately a company can charge monopoly-like profits.

Look at the marketplace, the marketplace is valuing Amazon at a multiple valuation of any other retailer, and the market is telling us that at some

point, this company is going to be able to charge monopoly-like prices because it's putting other retailer --

QUEST: Is there evidence, because the --

GALLOWAY: Sure --

QUEST: Problem with Facebook is -- so we break up Facebook, you break up Amazon, who else would you break, Google?

GALLOWAY: Oh, Google, spin YouTube and probably Google Cloud.

QUEST: Right, anybody else? Apple --

GALLOWAY: Well, Facebook -- Apple is a tougher one because Apple --

QUEST: There's competition everywhere for Apple.

GALLOWAY: True and also with Apple, the key asset there is the brand. So who gets -- who gets stewardship of the core asset of the brand? So that's

a difficult one. I think when the case of the app store, that might require regulation, not anti-trust if you will.

QUEST: Why -- and the Supreme Court obviously --

GALLOWAY: Sure --

QUEST: Is looking at, why would regulation not work in the case of these other companies? But I can see maybe Amazon web services is more difficult

to do a regulatory issue because they're very different.

GALLOWAY: Yes --

QUEST: The components are very different. But in the case of Facebook --

GALLOWAY: Yes --

QUEST: There's a commonality that could be regulated between the three.

GALLOWAY: Yes, I would argue the anti-trust is sort of a gift that keeps on giving. That if you look at almost every anti-trust action, there's

very few government interventions that kind of always work. And it would be difficult to find an instance where anti-trust in breaking up companies

didn't work.

So I think that's sort of a go to, is break them up and let them flourish. Most tech spins have resulted in -- have been a creed of the shareholder

values. So I actually think anti-trust and breaking them up is the more capitalist thing to do before you go to regulation.

QUEST: Funny, when we started the discussion, we had about 75 percent of people saying that, no, they shouldn't be broken up. Your argument is

obviously persuasive because --

GALLOWAY: Not persuasive enough --

QUEST: Well, you know, 67 percent --

GALLOWAY: Oh, they said yes or no, is --

QUEST: While you've been arguing --

GALLOWAY: Yes --

QUEST: While you've been discussing, 67 percent now say --

GALLOWAY: Yes, it's working.

QUEST: They should be -- they should be broken up. Do you hold out any realistic possibility --

GALLOWAY: Yes --

QUEST: That action will be taken. Regard -- I mean, at the moment, every democratic presidential candidate --

GALLOWAY: Yes --

QUEST: Wants to break up everything.

GALLOWAY: Yes, I do think for the first time, I actually believe the worm has turned and we're moving towards anti-trust. However, where it might

happen or where it might -- you might see the seeds of it is abroad. And that is in Europe, they register all of the downside of big tech, the job

disruption, monopoly behavior, the abuse of the platforms.

But they recognize a fraction of the upside. So I think they will make it so difficult for these companies that ultimately they start to maybe even

prophylactically decide to do this. My big prediction, Richard, is that Jeff Bezos; the smartest man in business prophylactically spins AWS so he

can stave off regulation and anti-trust.

[15:40:00] QUEST: Stay where you are.

GALLOWAY: Thank you --

QUEST: We're going to talk about your new book --

GALLOWAY: Thanks, Richard --

QUEST: In just a moment. All three, first though, WhatsApp is under fierce scrutiny for becoming a hotbed of false information during India's

general election. Now, as deja vu for the messaging services, parent company Facebook, no stranger to electoral propaganda. Nikhil Kumar filed

this dispatch from the Indian state of Uttar Pradesh.

(BEGIN VIDEOTAPE)

NIKHIL KUMAR, CNN NEW DELHI BUREAU CHIEF (voice-over): As India votes, a typical village scene in northern Uttar Pradesh state. A post-lunch huddle

about who might win. These men are discussing the latest political news. Their main source, messages and posts on Facebook and WhatsApp.

PRAVEEN TYAGI, INDIAN VOTER (through translator): We only use WhatsApp and Facebook, that's the internet for us. And with the election, my phone is

flooded with political messages.

KUMAR (on camera): Almost everyone we've spoken to in this village has a phone and they're often relying on the messages they see there, the

politically-themed videos and memes to decide who gets their vote. It's their main source of news. The electoral battleground, it's in their

hands.

(voice-over): But the terrain is murky, littered with fake news that can sometimes prove fatal. Authorities here say fake rumors spread on WhatsApp

which is owned by Facebook triggered mob attacks that claimed more than a dozen lives in 2018.

Experts in Indian politics are worried that during the elections, social media could be used to divide communities or worse, trigger political

violence. Facebook already under scrutiny after the 2016 U.S. presidential election has set up this election war room in California. Sitting in

Silicon Valley, these Facebook staffers are keeping a close eye on posts being seen by hundreds of millions of Indian voters.

KATIE HARBATH, PUBLIC POLICY DIRECTOR FOR GLOBAL ELECTIONS, FACEBOOK: We're starting to see a wide variety of different tactics that people might

be using to interfere with the elections. One of those that we've been investing a lot in our capabilities around is video or audio that might be

altered to not be truthful.

KUMAR: Indian police are also worried, this is just one of the many special units set up to monitor social media around the clock. And

WhatsApp has launched a massive campaign to warn Indians about the threat of fake news. With more than 200 million users, this is app's single

biggest market.

Back in Uttar Pradesh, the problem is clear, voters say it's often hard to figure out which political message on social media is real and which is

fake.

TYAGI: We can't trust every message. We've got a lot of fake messages. We just don't know what's true. Social media has become more than just a

tool for mobilizing support. It's become a weapon for peddlers of misinformation. And voters like these often don't know what to believe.

Mikhil Kumar, CNN, Uttar Pradesh, India.

(END VIDEOTAPE)

QUEST: Now, we turn from business strategy to life strategy after the break. Scott Galloway's book is called "The Algebra of Happiness", this is

the pursuit of success, love and meaning. Which is somewhat extraordinary from a professor of marketing and branding. We'll talk about it in a

moment after --

GALLOWAY: Thanks, Richard --

QUEST: The break.

[15:45:00] (COMMERCIAL BREAK)

QUEST: The curve of happiness over a lifetime is the shape of a smile. That's one of the key themes in Scott Galloway's new book "The Algebra of

Happiness". It explores both our needs for professional success and personal fulfillment. The book is out today, Scott is still with us. This

is a compendium of the sort of advice or suggestions that you have given your students over the years. What's its purpose?

GALLOWAY: So I think -- well, if it's a purpose of personal self discovery, I look to stock my blessings and I took stock of my mood and one

didn't foot the other. So I started looking at all of the wonderful research out there on happiness. And also the way I write books is I take

my most popular course, I turn it into a video, and if the video does well, I turn it into a book.

And the last session of my course, 4,000 students is trying to distill all of this research and observations and personal experiences down to a set of

equations around best practices for not only creating happiness, because happiness is a sensation.

You can get happiness from Chipotle, Netflix and Cialis. What I'm really talking about is the investments and relationships and the decisions we

make through our life to create an art of satisfaction. Such at the highs and the lows that we all experience happen on a higher plain. And it's my

most popular class.

QUEST: Can anybody do it? I don't mean anybody in the class --

GALLOWAY: Yes --

QUEST: Is it one of these things that is -- it's deceptively simple to read --

GALLOWAY: Yes --

QUEST: And unbelievably difficult to achieve.

GALLOWAY: Yes, and to be clear, you know, it's misleading, because I don't think there is any one equation. I think people have to chart their own

course. But there are best practices, Richard --

QUEST: Such as --

GALLOWAY: Well, let me cut to the -- if there's a secret source, the larger study of happiness of its kind, the Harvey Grant(ph) study tracked

400 men through their life tracked literally everything they did, their food, their relationships or exercise and query them on their happiness and

satisfaction, and they found the one factor most common across the cohort that was happiest was simple, the depth and number of meaningful

relationships.

At work, do you feel respected and admired, and do you respect and admire other people. Amongst your friends, do they feel a sense of joy and

camaraderie from you? And do you feel joy and camaraderie from them and then most importantly at home with your family? Do you feel an intense

level of love and support?

And most importantly, do you know they feel that intense level of support and love from you. The greatest academic study in history has the best

opening line of an academic study, and the line is the following: "Happiness is love", full stop.

QUEST: Right, and if you haven't got it --

GALLOWAY: Yes --

QUEST: I mean, it might be a bit late. But if you come -- if you suddenly realize --

GALLOWAY: Yes --

QUEST: One is wanting --

GALLOWAY: Yes --

QUEST: What do you do then?

GALLOWAY: Well, QUEST MEANS BUSINESS, we talk about compound interest, making small investments over time result in something huge at the end of

life. A $100 a month can turn into a million dollars, start making the small investments in relationship, reaching out to people, texts, notices

of appreciation. These things add up to something meaningful.

QUEST: Right, and on that, we've just shown it on the -- on the screen.

GALLOWAY: Yes --

QUEST: You got work-life balance --

GALLOWAY: Balance, yes --

QUEST: That I'll admit, I have successfully got wrong for the best part of three decades.

GALLOWAY: And now you have it. And this is what I tell my young kids, and it's a bit -- it's a bit counter to what we're talking about before. If

you expect to be in an economic weight class in the top 10 that slips -- in the top 1 percent which most young people aspire to, then realistically,

myth of balance or balance is a myth.

And that is we all know somebody who's great at what they do, donates time at the ASPA and has a food block, assuming you're not that person. If you

want to be very successful, pretty much plan on working and doing not a lot else in your 20s and 30s.

QUEST: In the last 10 seconds, the one thing you would have changed?

GALLOWAY: The one thing?

QUEST: I know you've been asked this a million times.

GALLOWAY: Sure --

QUEST: But what is the one thing you would change?

GALLOWAY: The universe wants to prosper. The happiest people get the incentive of the following, and that is if they love someone else

completely and they don't keep score, they just decide to go all in and focus irrationally on their well-being, they resolve -- they are rewarded

with tremendous happiness.

I wish I had started making those investments earlier in my life.

QUEST: I'm glad you came along today to talk about it --

GALLOWAY: Thanks, Richard --

[15:50:00] QUEST: Thank you very much. Disney, talking of happiness, going for the streaming wars. Full control of Hulu, we need to understand

why after the break.

(COMMERCIAL BREAK)

QUEST: The streaming wars are taking a turn. Disney now getting full control of Hulu. At one point, Hulu had four owners, Disney, "21st Century

Fox" Comcast and our own parent company "Warner Media". Now, of course, things have moved on. Comcast is the latest to sell out, 33 percent stake

gone. It leaves Disney the last one standing, takes full control.

Brian Stelter, why are they doing it? I mean, Disney is already starting its own streaming service. What do they get -- I mean, besides 20-odd

million people. But it's a different service, Hulu.

BRIAN STELTER, CNN ANCHOR, RELIABLE SOURCES: It is a different service, but it does give them a base for further expansion, further growth of the

subscription marketplace. We know Disney is going to be launching this Disney-plus service aimed at families and everybody later this year.

Hulu is more of an adult-themed service. A lot of programs at the hand- made sale and other shows, the kids aren't going to be interested in it, but adults will. This gives Disney yet another arrow in its quiver in the

streaming wars.

Big picture, of course, Richard, is we're moving from an all you can eat buffet of streaming, something like Netflix into a world of a food court

where you've got to go to a lot of different places if you want a lot of different content or a lot of different parts of your meal.

There's going to be Disney and "Warner Media" and Comcast and all the rest. And we're seeing this play out --

QUEST: Right --

STELTER: Step by step, and today was a big step in that direction.

QUEST: And "Warner Media" itself has been rumors and leaks about whether or not "Warner Media" content will -- "HBO" content, tell me, what's the

word on the street?

STELTER: Yes, "AT&T" CEO Randall Stephenson, of course, our ultimate boss, CEO at CNN spoke today at an investor conference and went further than he

ever gone before in revealing "AT&T's" plans about this. He says, "increasingly, the Warner Brothers films and TV shows that are right now

available on services like Netflix and elsewhere will increasingly be coming home so to speak.

Coming into the "Warner Media" library for the "Warner Media" streaming service. That's going to be soft-launched later this year and have a

bigger launch in early 2020. That's another example of what Comcast is doing as well. What they say bringing shows home, "The Office" for example

is a big hit on Netflix, "NBC" is going to have it within its own library as well in a couple of years, so we can sell ads against episodes of "The

Office" --

QUEST: Right, but --

STELTER: The big question is whether these will be exclusive or non- exclusive deal.

QUEST: And at the end of the day, how much --

STELTER: Right --

[15:55:00] QUEST: Good stuff do you have on the shelf? Because you know, fine, so you've got "The Office", but if you've got nothing else, then you

know, you're not going to -- people are not going to spend a streaming service for limited gains. So where do we think the break point is for

streaming services?

STELTER: Right, is it going to be $30 a month or $40 a month or $50 a month? I don't think we know yet. I think this market is being tested

every day as more and more people sign up for the first time for these various services. These are incredibly complex deals that are being re-

done, renegotiated.

All of that is on the business end. On the consumer front-facing end of this, the question is exactly what you said. How many services are people

willing to pay for? It's probably more than two or three, it might be less than ten. This is a giant experiment to unwind the cable bundle and then

start to rebuild a new --

QUEST: Wow --

STELTER: Form of streaming bundle. It's going to go on for a year.

QUEST: Good to see you, Brian, as always --

STELTER: You too --

QUEST: I appreciate it, thank you. I'm going to show you a quick look at the final look at the markets. Your Dow is still the strongest in the

markets, recovering and you see we're all off of the top of the day, well off the top. But still it's going to end with a gain of about 1 percent.

We will have our profitable moment after the break.

(COMMERCIAL BREAK)

QUEST: Tonight's profitable moment. It is only with the setting of the sun that one judges how well the day went. I can't remember which

philosopher said that, but it's basically the thesis behind "The Algebra of Happiness", Scott Galloway's book. It is so temptingly easy to get wrapped

up in the rat race in one's 20s, 30s and through one's 40s, as you battle on, forgetting all the good lessons of basically the golden rule.

"Do unto others as you'd have them do unto yourself and be kind and nice to people and they might do it back to you at the same time." Which is why I

find this book fascinating, and Scott Galloway writes beautifully on the subject. It's easy to win in the rat race of the corporate ladder.

But to actually win in the life-long race is much more difficult and requires many more lessons. It's worth having a read of this, it's useful.

And that is QUEST MEANS BUSINESS for tonight, I am Richard Quest in New York. Whatever you're up to in the hours ahead, I hope it's profitable.

(BELL RINGING)

The Dow is up, the bell is ringing, the day is done.

END