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tv   Squawk on the Street  CNBC  October 5, 2021 9:00am-11:00am EDT

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♪ good tuesday morning welcome to "squawk on the street." we're at the new york stoc exchange another turnaround tuesday will it stick? futures are positive as facebook shares bounce following the worst day since november pepsi with a solid beat and raise. the vix back to 22 our road map begins with troubling mounting for facebook, suffering its worst outage since 2008 shares have been under pressure and the whistle-blower is set to testify today. >> plus, wall street looking for a bit of a rebound, certainly some of those large tech stocks
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seem to have a bit of bounce in them as we get closer to the open. >> and mgm ceo is going to join us live this hour. there were really three different stories on facebook yesterday. the ftc complaint, the whistle-blower and this shutdown, jim, which according to the company is going to cost them about $6 billion. >> 6 billion it's horrible. i do think that when i listen to the senators, they don't know what to do they're just flailing. they've got really good information, which just says that facebook targeted younger people and everybody knows that by the way, senator cruz was saying that certain organizations -- i don't want to mention their names are marxist. and i would beg to disagree. >> ted cruz said that in the last ten minutes ago on -- about black lives matter. >> right
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i don't want to mention it he's singling out -- he says, look, facebook doesn't police the left i think the problem with facebook, they say they want to police things and they haven't been that successful but they continue to say that they police things and i keep coming back and saying, listen, you got to find a way to make it so that safety and truth are paramount and you do not have -- you have an off limits group and the off limits group is adolescence i think what appalled people, carl, about the memos and me personally, i did not know how much emphasis they put on getting adolescence. this is the group we have to protect. you need safety. they can't help themselves and we got to stop teen suicide. now, you can say, listen, jim, that's just -- that's not understanding all the safeguards and there are safeguards when you look at it --
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>> you said he, you mean zuckerberg some of our viewers -- >> you're right. i don't want to joke about this at all not at all i think he has tried i think the company has tried. but let me just be stock market dollar sign represented -- the investment club. why does this sell 24 times earnings because people don't trust it. the new changes by apple make it harder to track. if you're a new advertiser, i think you're surprised how little data you have but i also think that what the hearings do is call to attention the idea that maybe they've got to change their ways and the problem is, mark zuckerberg doesn't think they have to he thinks they're doing a tremendous amount. i'm sure they are doing a tremendous amount. but when you talk to my -- i thought that my -- at one point my suicide counselor daughter had said, listen, the real problem is -- letting kids look
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at this and you look at the documents and the documents are a little more chilling instagram to it. it does seem like it's difficult if you're a young woman to look at it and not feel, wow, that is a major -- makes me feel very inferior and that leads to the next thing which is ideating that i don't live up to society. and then after ideating then you take the ultimate action whatever they can do to stop that, would be great. >> times piece yesterday, it's amazing how un-godzilla like facebook feels the company is going to extreme lengths to improve its image, to stop users from abandoning its apps in favor of alternatives. and they show that instagram has gone from in terms of favorite apps, 35% in fall of 2019 to 22%. >> this is why i tell mark
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zuckerberg, look, it won't hurt the stock to be a better -- to have safety and truth being central. you can say, david, that's the benioff rap. many stake oldeholders here, including the teenagers. >> many teens professor snap or tiktok that's been going on for some time they're not aware, teenage girls, to some extent of the effects of instagram they're dealing with things we never had to deal with at all. any one time on snap, you can know where all of your friends are, you can know what parties you're not invited to. there are social things that are just a result of the advances in technology -- >> there's nothing more -- >> are we going to ban all sorts of -- >> do we think that he's trying?
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do we think that mark zuckerberg is trying to be better -- or excite more -- >> i don't know. i have a question for you which i think is an important one, you just brought it up in terms of the social esg, we talk about that. we have talked about the rise of esg for the last few years by the way, lately, we may not have mentioned it. it's still front and center. >> more than ever. >> i had two conversation with asset managers yesterday, it's what they wanted to talk to me about. they said it's redefining capitalism i mention it because will facebook start to fall under the esg metric that says no go >> yes the answer is yes. i had a conference that i ran last week -- >> like oil, gas and tobacco >> oil and gas are making real changes. i had a conference where i had marvin ellison who runs lowe's,
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marc benioff, every one of them said it's paramount to recognize all stakeholders, not just the shareholders i feel facebook does not have that ethos. >> you do? >> i do. i think they recognize shareholders, but not stakeholders they're not a single source of truth. you have to be. >> that's very interesting, in part because zuckerberg has complete voting control. if he wanted to, he could do anything he wants -- >> i was looking -- he was telling me, look, the facebook oversight board, you got to look at it. i'm looking at it. i want full time retired jurists who can't be bought. it has to be a full time tribunal that can measure these things
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let's say that he's right. why is it at 24 times earnings and the answer is because people don't trust it it can't have the same multiple as procter and gamble, but it does people say you can't track the ads as well and esg issues >> what about the shutdown itself i don't know if you noticed jack dorsey of twitter just tweeted the number six which was about the number of hours that that shutdown lasted. take your digs while you can, right? is that a story, just the shutdown >> i remember when chipotle had issues with food -- airborne none of the people at the other restaurants were criticizing them by the grace of god -- what was that i'm bullied every day on twitter -- >> you would not be throwing
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stones i'm sorry. maybe running square he can throw whatever he wants. >> have you looked at my mentions >> yes, it's horrible. >> don't do you know that the most featured -- >> sometimes we get roped in, you know, just -- >> i'm tired of the -- i'm going to say -- can i say what the most common drawing is or do you think it's just not appropriate? >> probably not appropriate. >> no. >> probably not. you're going to say it, anyway, aren't you >> no. i'm going to show prudence i'm going to try it. don't go to my mentions column and i tell this to my family because the threats of what is going to happen to me and my family are just, i would say -- and look, i've been threatened many times but this kind of thing where it's inciting, it's why i bought a place in pennsylvania. not that you would do any of those things -- i can't have the police be body guards.
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i can't get a gun because i'll shoot myself. >> that was ill-advised for dorsey to pile on there. six hours, that's a lot of money. >> true bully, go to twitter don't throw stones glass house. stones. >> agree >> you do? >> yes, completely >> you want me to describe what's in the mentioning columns. >> no. it's been the case for a long time in terms of the share prices, i did notice you're investing club, jim, said you were tempted by some issues last night. >> absolutely. yesterday was just a very big give-up. down 7 1/2 from the nasdaq is when i typically want to look at things when i was talking -- we talked to pepsico what are they saying numbers are good but inflation is real. it's packaging, it's freight can't find truck drivers
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truck drivers four to five times more expensive than before the pandemic incredible no truck drivers in britain. when you speak to people on the -- when you speak to ibm, yes, it's about -- >> that's the wrong graphic. >> let's take -- never mind. >> back to pepsi. >> okay, so i want to ask you, how many inflation is there at ibm? i have to add ibm to the bullpen for investing club i think -- he's given you mid single digit growth and used cash flow. he wasn't supposed to have the cash flow if he gave you the big growth he's given you both. he's talking about making major partnerships with amazon, with microsoft. this is ibm. they don't partner with anybody. >> you're getting positive on ibm? are you sure you want to do that >> yes yes. i think marvin has turned it
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around. >> they still have a lot of debt, don't they >> a lot of that debt is related to -- >> not that that's a necessarily bad thing. >> i was concerned about the deposition they're off-loading some of the slower stuff >> that is going to be separated, right >> you have to go over what the -- you went over the presentations, right, yesterday? >> no, i didn't. >> oh. >> i'm just basing this on history. >> oh. you're kind of winging it? >> yes, i am i'll admit that on this one. i don't typically do that. >> i have the misfortune of doing the homework and it told me that mid single digit growth, 35 billion in cash flow, decision to be much more a systems integrator, hire multiple business. i like this situation. >> so you're going to punt facebook and replace it with ibm? >> probably. >> where are you on pepsi, then? by the way, 9% organic, seeing
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numbers that we've never saw from this category before. >> we haven't seen this amount of inflation i love what ramon is doing he's doing unbelievable international. international is not a focus he got rid of tropicana. >> double digit revenue growth at pepsi, that's not just all inflation. >> pep k-- pepsico is not an evenings stock. >> mccormick is having supply chain issues, right? >> pepsico has its own drivers 30% of pepsico's business, they have to go into the open market for drivers. clearly, if i were -- the driver retirement rate was incredibly strong paychecks told me that the retirement rate during covid was extraordinary. people left the workforce because they felt that they
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would die going to work. but i think that ibm is good i'm always on the lookout with the investment club for ideas. >> as you should be. >> ibm has debt, but they have growth and i think they can pay down debt and i think you would be surprised how good the story is at ibm. >> that's an important moment there. facebook is on its way out and ibm is on its way in >> i like -- >> going back to the '60s, huh it's a good decade for you >> yeah, i loved it. i loved it, it was the time -- i was -- where have all the flowers gone that was me. >> where have all the flowers gone >> it was jerry ruben, me. who else was with me >> i wasn't there. >> tom hayden. i was his broker and he was fantastic. >> i talked to harvey quite a bit, i thought he was a terrific
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guy. >> abby hoffman. >> sacha baron cohen why don't people watch that movie. >> by the way, the vote about the investing club, you can get right in on it, the cnbc investing club with jim cramer sign up and find out more at or use the qr code right there on the screen. take a look at futures here, a lot of stuff to get to, including gm, a little bit of news on lulu, b of a quk t see cties in a minute. that building you're trying to buy, >> announcer: this cnbc program is sponsored by baird. get the baird it.. you ten-x it. it's that fast. if i could, i'd ten-x everything. like... uh... these salads.
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got of headlines on the pandemic this morning. johnson & johnson has asked the fda to prove its covid vaccine booster for emergency use. southwest joining the list of airlines requiring employees to be vaccinated. workers have until december 8th to comply. although they will be allowed to apply for religious or medical exceptions the other one i saw was j.p. morgan banning business travel for unvaccinated employees there is a general sense that the mandates are working and we had three major airlines on board. >> look, i think the narrative switched when the president really pressed down. i think that these days you're a
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pariah if you haven't gotten it. you're going to love this. if you're facing -- if one of the human-facing people, they don't want you they don't want you facing people if you haven't been vaccinated. >> right the mandates are taking place and slowly there is an expectation of people coming back to the office as well >> right >> that will happen sort of in stages some companies are middle of this month many are waiting until next year although thankfully the delta sur surge is no longer surging business travel and conferences and things of that nature, still not happening to the extent hoped for. >> i keep hearing the same thing, that first meeting and everything is zoomed
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nobody wants to see you that much. >> that's the way i think it's going to be. >> and that's going to hurt all of -- that business travel is the one where you sit up front and you have the shower and the state room when you're on that airbus >> i got to say, the imax held screening for bond vax required when the film began, anyone who said movie theaters are dead doesn't know what they're talking about. >> the film itself, it's why you go to bond, right? >> music. >> and the music >> yeah. >> it is long. >> i wife met daniel craig she said he was the greatest he's a loser she met him and he's a nothing no he's something you know yeah the mentions column. >> got it.
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>> we'll get cramer's mad dash as we take another look at futures here and we'll see if this u-turn from yesterday's losses can be held more "squawk on the street" in a moment
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let's get to a mad dash. 6 1/2 minutes from now bed bath & beyond, which suffered last week dramatically as a result of supply chain issues, inflation, it was bad -- or -- >> it was bad. no doubt about it. a lot of people feel he's lost
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his edge bank of america, merrill lynch pretty much agrees with that maybe they can course correct, but they're not sure they feel lots of promotions coming and this turn has halted. here's why i picked this -- i want to disagree >> okay. >> i think you need two, three months this month is probably bad too if this keeps going down david, they have a billion dollars in cash, no debt it's going to be valued right here at a billion. you got bye-bye baby doing very well could they break it up i think so. >> we talked years ago about buying back a lot of stock at much higher levels meanwhile, you've been supportive of the company -- >> since trinton gamcame in, yes
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>> the meme treatment a couple of times. >> what happened to those people it's down 7 1/2. what happened to them? >> i don't know. >> because of bond they can -- >> you're still a believer i don't think this quarter is good >> okay. >> i don't think it's good but i think at a certain point, you can't -- a billion dollars in cash, a billion dollar market value. i don't know you could sell that. >> right >> but the meme people, they're focused on still gamestop and amc. >> jim, we have to go, there i did it listen to me, amc, they were 20% individual and 80% institutional. adam aaron flipped it. they're 80% individual, 20% institutional and that's how you go up 2,000%, david. that's how you do it. >> you heard it rehe got opening bell coming up next.
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>> always fun to dig into piper sandler's teen survey. they say the firm on average, teens spend 32% of their daily video consumption on netflix which is a hardy number. it's down a touch from prior surveys. it was as high i think as 38 you really see some gains on hulu, other streamers, and cable tv is way back >> that survey, by the way, i find to be incredibly good because they spend a lot of time on snap. we've been talking about snap. it's the alternative to facebook maybe you could argue -- >> snap has a stock has had an incredible run it's up 158% this year >> advertisers have -- >> it's original view as a photo company is being embodied to a certain extent in terms of what they're doing in the strategy. >> nike has maintained its status, but how about this one
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elf. i think they're doing incredibly well ulta doing incredibly well lulu, of course, but the star is crocs. crocs has been an incredible stock. i have yet to be a person -- i have yet to meet a person who apologizes for wearing crocs but says they're so comfortable. >> benson hill is celebrating their listing. >> did you see that beyond meat is not a fan favorite of the teenager -- >> interesting >> i thought that was incredible >> you mentioned nike, though. and wedbush does initiate. they think some of these 20% declines take in the supply issues. >> i would love to see some confirmation that nike is not going to end you will being like adidas the chinese government turned on adidas and the numbers are
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horrendous from china. the chinese government, the support has not abandoned nike it's a very well run company if you want to start buying some, i think you can. i just think we tend to forget -- today we're not worried about what china is doing. but a week ago, is it going -- are they going for estee lauder. >> we were talking about evergrande it's not as though that has receded as an issue -- and now fantasia another property company may face some financial problems it's a great animated -- beautiful -- >> yeah, today we're not worried. i'm not buying it. the reason i worry about nike is, again, when i focus -- and i looked at the dadidas report lat week, they expressed some issues
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about human rights and that was the end. nike is a human rights based company. it's sensitive, i admit. but i just think that -- the numbers from china were very suboptimal there are a lot of better stocks to buy i don't see the need to go in there. i like tapestry more. >> is that going to apply to starbucks as well, which had a little dividend announcement today? >> starbucks is told you they would tell you it's made for china by china and starbucks have done a good job about that they have embraced the culture that was something that howard schultz started. i don't regard them -- $200 sneakers are an affront to the regime but if they come in around $6, i don't think it's an affront to the regime. >> i understand the regime, yes. i get it i get it the biggest losers so far has been the large chinese
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technology companies led by -- take a look at alibaba the stock is down 40%. >> they don't like that one either talk about conspicuous consumption, which the marxists have never liked i know senator cruz -- >> they're focused on certain things that we are in a way. trying to create common prosperity, obviously. they have a far stronger central government than we do in terms of being able to dictate what they would like to happen. but also dealing with regulations when it comes to online activities of teens xi said forget video games you get three hours a week that's it. >> he's a parent he's the parent of the country. >> a billion kids? >> i don't want to be across the board knocking the regime. >> the cutting back on video games -- >> and that cut back on the take
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two stock. it's nba 2 k. >> right and that's popular in china. >> which is a fun game >> you were mentioning nike. the journal has a story today about cotton which is -- we're exporting a lot of cotton to china because of the ban on imports in areas of the china where the uyghurs may have been involved and it's being exported to china for goods that are made there and then shipped back here >> you saw the ustr on our air yesterday. the cost of shipping a 40 foot container from shanghai to l.a. has finally ticked down. >> yeah? >> yeah. a couple hundred bucks down from 12,400 to 12,100. >> when you see some of these companies taking action and, like, costco in getting their own, that's the beginning of a movement where you're not
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captive. what do you think is the key export from asia >> key export from asia, everything that is under $5. >> the lantern bug. >> the lantern bug >> you have to step on them if you see them that's our only way to deal with them is to step on them. it's kind of an inefficient way. >> the ash borer hasn't been good i think that came from asia too. >> i lost so many trees to the ash borer. >> lost every ash tree in the northeast. >> cost a fortune to take them down you can still save them -- >> you can spend a fortune to try to save them baseball bats used to be made of ash. >> i don't know how we got there. you took us there. you were the one who decided -- >> 9:35, this is what we're talking about. why aren't we talking about oil? >> viewers are like, what's the
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oil doing. >> the lantern bug, you had to bring it up. >> b of a has a note, they say there's not a lot of good information about how the dip gets bought after repeated shocks and they're talking about a series of standard deviations that makes them think maybe it doesn't work anymore or may stop working. >> i think people are going to get more critical about what -- they're trying to find things that do not have runaway inflation. when you talk to ramon, he's a great ceo and this stock is up because he's able to have some pricing power versus others. that's how you get the numbers up i'm going to agree with that analysis i think you can -- that a lot of people have been blown out here. a lot of the young -- the democratized investors a lot of them have been blown out. >> you were talking about bed, bath. >> look at this.
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it's a chance. i think you have to pick up some stuff. >> someone is going to -- someone along that supply chain, though, is going to be without a chair and i see albertsons is cut today. >> they had such a good quarter. >> the risk to gross margin in a more price sensitive consumer environment. >> there it is again who has the power? there's a note today about proctor. i think proctor is doing incredibly well. but it sells 25 times earnings it's not like it's underrecognized. >> it's not a high multiple for quite some time now. but it's been performing well as a company. >> but you take proctor. they're doing well they got pricing power taylor did a great job i think that's an opportunity. >> to own even here? >> yes >> okay. that's not revelatory. >> that's not revelatory. >> you've been picking up disney, proctor, ibm
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i'm starting to see your shopping list come into view. >> i have to you have to get started. you can't sit here and say -- >> it's the nifty 50 all over again. >> kodak >> collins radio -- >> they got this deal coming for -- forget it that's a joke. >> the investing club -- >> remember bunch? you were there at that meeting, huh? look, i think that he buys ibm, it's kind of interesting, it's come down a lot i think things have come down a lot. if you don't look at stocks with the nasdaq down 7 1/2 and start thinking, if you kept some cash, i think you got to look. maybe do some buying >> there was a note out from tom lee last night that the vix structure has not inverted meaning we're not looking for
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higher volatility in the short term which means maybe we get through this little patch. >> i think we do i think that everyone has gotten incredibly negative. we listened to that excellent interview with janet yellen and you kind of come across and say, why aren't they downgrading our debt >> yeah. >> and you feel -- >> remember when s&p did that briefly. that was 2011, right >> 19% on that and remember the spirited attack on how the s&p did and the s&p kind of got it wrong look at this -- >> i mean, nobody seems to believe that the debt ceiling is not going to be raised, even though the president did raise some doubts about it happening senator cruz earlier on our air said, do it through reconciliation they can always do it and they will do it. >> it's not the way -- >> even if republicans won't participate. >> i don't understand their way of doing it right now.
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i do think that ic stocks -- let's take microsoft microsoft is having a great quarter and they raise prices. i don't think there's anyone who thinks that they're going to have a -- microsoft azure is doing well do you think that's a 20-point decline that i want to avoid why? they're doing great. you've waited. it's come down i think you do some buying trust owns it. i would buy some more microsoft here i think microsoft is the -- what kind of inflationary pressures do they really have? what -- do you think they're talking about trucks -- >> maybe hardware issues. >> box related not much it's owned by every semi -- microsoft is owned by every hedge fund as much as they possibly can that's how they all mirror the s&p. what what's wrong
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what's the problem >> you want to just go buy cintas or something? >> i've been in favor of chevron a long time. one of the things that mike worth did that was almost humorous, he upped his spend three to ten and it wasn't just to -- >> 3 billion to 10 billion. >> it wasn't a lazy susan which is what conoco did it was to commit to high growth initiatives in the out years and i think it was an exceptional presentation. >> we are keeping a close eye on energy -- >> in europe, i still come back to this -- >> trucking. >> low rainfall and slower wind speeds wind and water are not contributing to the energy grid in europe because of slower wind speeds and lower rainfall and they don't have any coal
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anymore -- not any coal -- >> germany is in coal baseline >> coal has been cut back drastically. >> it's coal country. >> would you rather own marathon or chevron >> i think chevron is more sustainable. the yield is safe. i just think -- i think chevron is an amazing company. i really do. i think that mike worth is a visionary and it yields 5% and it's a buy 5% with the money behind it, great, great properties, and the most visionary ceo in the business, other than, say, mr. shetfield. >> energy is helping out once again today. up more than 1.5% in a mixed tape the dow is up 100. still to come, the facebook whistle-blower is getting ready to testify before a senate commerce subcommittee in the next hour. when that happens, we are going to bring it to you live. in the meantime, bond
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report, we'll see how treasuries are fairing this morning we've had yellen on our air this morning talking about whether inflation in her words may not be transitory -- is transitory but doesn't mean it will go down in the next several months ten-year right at 1.5. we'll be right back. what the world needs now... is people. people who see flight a little bit differently.
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♪ market services pmi crossing the tape moments ago coming in with a final read of 54.9 for september compared to 54.1 we work our way through this busy week of data. adp tomorrow and the jobs number on friday. when we come back, the ceo of mgm resorts will talk vegas gaming a t rovndheecery. the dow holding on to an opening gain of 130.
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welcome back let's get over to contessa brewer live from the global gaming expo. good morning >> good morning, carl. and let me tell you, the talk of the global gaming expo has been the drama that is surrounding draftkings $20 billion bid for
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entain and bill hornbuckle is with me here today what does draftkings' bid mean to you and the future for bet mgm. >> we have a great relationship and partnership with we're industry leading at this point in the game. we're excited about where we're going. ultimately, what they're trying to do. if draftkings is able to acquire, they'll need to come to us, if they want to continue to operate in the u.s they can't do both we've had casual conversations to date. if we're able to acquire and get a larger piece of takeover of bet mgm, something we'd be excited to give. >> is that why you made the bid in the first place so you could own it all yourself? >> we see the space and understand what it can do for
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our universal company. so, we're excited by it. we'd love to own the other section of bet mgm i think we're going to focusen the next couple of weeks and see what happens >> you have an issue, in terms of hurdles and the new warnings from ministers means to you >> they just started public consultation i think everybody is focussed on the things that government wants. i know the market took a wow moment a couple of weeks back. they're all manageable within certain criteria i think we'll get through the vast majority of the regulatory environments ultimately, we like where we are. we've been really good corporate citizens through all of the pandemic and mccow respects the
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inindustry and i think we've been a critical part of that for 25 years >> mr. cramer. >> yes, hello. i had mad max from wynne he was adamant that what we thought was a vast crackdown in china was related to covid to make it so that everything is as controlled as possible obviously the olympics are coming up. all the discussions have been quite cordial and the idea someone wants to been the board or be involved is not anything that surprised the only thing that was surprising isthal stock plummeted on things you think he wanted to happen are you surprised at how negatively american investors took what's happening? >> a little surprised. none of this was news to us.
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we had casual and direct conversations on the vast majority of subject matters around licensing and what we do to support the community and all things capitol the idea of somebody in our building every other public concession of macau have somebody in the building it's not foreign to them and frankly, the idea is not forn to us we're not overly concerned by any of it. something we're paying attention to we have until the end of october to submit views and hopefully by, i think it's june 22nd, when our licensing comes to fruition, we'll speak to it and get to a better place >> i want to come back to entain for a moment you are their partner in the u.s. do you have any sense as to whether they are viewing the draftkings bid as it currently stands favorably >> i don't
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obviously speculation we hear from their shareholders, some of our common shareholders. but it would only be speculative on my behalf if it does happen, it's going to come through us and we'll look at whether it's bet mgm's interest and, frankly, our own it's time to tell. >> let's talk about where you're investing. you've just been awarded the gaming license in osaka. that's moving forward after a long time of effort and energy you just announced that you're taking on the operations here on the las vegas strip. how is covid and the ongoing variants factoring into your plans for expansion? >> the good news, i think, once and for all and with covid, we peeked in july an amazing quarter and records throughout july. we saw the delta variant come back it's impacted us slightly over
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the last couple of months. this convention is signs that we're back, we're vibrant. fundamentally we're not going to change we want osaka. we're excited about that we can't envision a day that osaka doesn't win one of three liegsances licenses but anything can happen. hopefully we get awarded one thch three licenses. hopefully because of other things, we think it's about diversification, lifting the customer base. and so, between our bet mgm venture, other aspirations, japan and an acquisition like the cosmopolitan i think we're in good shape. >> and your customers who love sports, how are they doing i was at a sports book on sunday and i couldn't believe how crowded it was and how
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enthusiastic the crowds were >> retail business in this community up 300% for the live game this past weekend, sign ups and sign ones up 183% year over year we're in 16 states, heading to 21 we have our eyes on a few more beyond that. business is progressing the way we thought it would and we're excited. >> appreciate that carl >> our thanks to you as well and by the way, do not miss tonight, premier of "generation gamble" 8:00 eastern time right here on cnbc incredible that wynne is down only 9 billion valuation i've got enbridge, which is important. remember i said they got to get their act together they are and they're starting to come on
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the show and i like it because they're starting to talk about esg. it's not green wash. al monaco has a lot of good things to say. >> we'll see you tonight, 6:00 p.m. eastern time. "mad money" with jim cramer. when we come back, the facebook whistle-blower testifies on capitol hill dow session is up 190. -capsule! -capsule! -capsule! capsule saves me money on prescriptions. capsule took care of my insurance. capsule delivered my meds to my doorstep.
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the document's pretty devastating because precisely what she said. you either have to be a single source of truth or you go for power. they went for power. >> i think the greatest concern i would have, from facebook's point of view is the developments raise questions about the sincerity and accuracy of their representations >> i don't see them changing at all until they have a change in plp. so, i'm not sure at this point, it's congress's -- congress and regulators need to act and it's taken them too long. >> i can tell you that stolen documents have been taken out of context. we're ready to answer questions that any regulators may have about our work
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>> in just a few moments, the facebook whistle-blower will testify before a senate panel. we'll take you there live as soon as she begins welcome to another hour of 'squawk on the street. live at post nine of the new york stock exchange. dow's up 220 energy helping out again but it does help that fang is trying to rebound after a tough monday >> definitely the case there we're 30 minutes into the trading session. we're going to start with j and, j, filing with the fda for emergency use authorize fragz the covid booster shot they already scheduled a review for data set to take place next week plus, bitcoin continuing its renewed climb. it's crossing above 50,000 today. data showing currencies posting for six straight weeks, led by bitcoin.
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and peps co shares are rising. and raising its annual revenue forecast as easing restrictions are booszing at movie theaters we're going out and buying stuff, carl. >> trying to rebound after yesterday's drop as we now see whistle-blower in the room at senate commerce to begin her testimony talking to senators of blumenthal and cloev char. it's where we'll start with waking up to the facebook catastrophe. we'll keep an eye on the live pictures but in the meantime, it strikes me we've talked to you for years about these issues and to see them converge in the number of stories this week, i wonder do you think we're at an inflection point >> i'd like to think so but time will tell. frances is so authoritateival and utter ly convincing, that
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she's taken issues we knew about before, provided documentation that demonstrates conclusively that facebook's management had been warned repeatedly about horrible problems and chose not to take appropriate steps. frances how longen know as moral failing of prioritizing profits over public safety the problem with that is the culture business in the country is that it is the dutee of corporations to maximize shareholder value. that's the ethos in which we live every company operates that way. the problem with facebook is not just facebook. it's surveillance capitalism, something that every major internet platform uses and now every major company in the economy has adopted it the problem isn't what they do that's illegal the problem is the things they do that are legal.
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and the question of what congress is going to restore any balance between the rights of corporations and the rights of citizens and for investors, that's a huge question because it goes way beyond facebook. >> are you of the mind, roger, to agree with, for instance, the times piece that it is stiffer competition from the snapchats and tiktoks that has pushed facebook to either more aggressive action or more active disengagement from those protective measures? >> no. i think it's been there from the beginning. i think what kevin observes is correct. facebook is like the old guy who tried to dress like a teenager they're trying to sustain really high growth rates in a mature business which is always a delicate proposition, no matter what category you're in and the way they're going about it, is not reflecting well on them the underlying problems
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represent much more than just a mature company grasping for additional growth. this stuff has been there from the beginning. the issues with instagram, for example and the problems with teenage girls, that's in the funldmental design instagram was built around filters that make people look better on instagram than real life it was built around envy but that's not there because facebook is facing threats to its growth that was there from the beginning. and these issues exist at google, youtube, they exist in different forms, amazon. and now you see it else wear with a.i. being applied to things like policing and mortgage lending and resume review where again knowing too much about people, allows a.i. effectively to conrole there choices available to people. the question is, is that the kind of society we want to live
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in and it's a question congress is going to face. and mrs. how longen too, her credit, has taken away the last excuse congress had for inaction there's so much evidence of the problem, that they just have to do something about safety, they have to do something about privacy and improving the antitrust laws the question is are they going to do it if they don't, the stocks are going to climb if they do, then there's going to be issues for lots of stuff >> very key questions and certainly that we've been debate with you for years now literally, years i am curious though because you just touched on it with the stocks the other conversation we've had is we've continued to see a stock like facebook grow and grow and grow in market value over the years the fact that in many ways, it's advertisers have no other choice they need to be on facebook. if they want to reach potential
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consumers and you can make the argument that the six-hour outage we saw across the platforms yesterday speaks to the power and prevalence of these facebook platforms, not only for consumers but businesses as well so, how does that potentially change because it does seem like a catch 22 right now >> i think it's a really hard problem for small businesses because facebook is a monopoly and offer a service not available anywhere else. incredible, facebook has that role for larger companies and scammers part of the problem that frances howgon revealed is that there's rampant use of facebook in things like human trafficking and illegal drugs because the entire supply chain of the industries is on facebook. and the product works really well for that kind of stuff because it's not policed the way real marketplaces woulded would be
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i think the real challenge on all of this is for us to remember simply. americans are very entrepreneurial, engineers are very clever. if for some reason facebook had disappear under tirely, how long do you think it would take for entrepreneurs to create alternatives it would be a matter of weeks. and facebook's business model is the problem, not facebook itself we can make social media safe. facebook with regulation or somebody new and we have to look at the this the same way we look at the food and drug industry in 1986 when we passed the food and drug administration drugs were unsafe. same thing with the chemicals industry in the '50s when we passed all the clear air and water acts this is not something never approached we've been there this industry will survive it's just going to have lower margins because right now there's a huge cost being born
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by the users that's just not fair >> we talk a great deal about him the portance of esg and it is only grown in immortant for so many who allocate assets. do you expect that facebook wim be grouped among the companies that are denied or on the no-go list for many alicators of assets >> i've given up trying to predict that kind of stuff when i first came on your air with carl in august of 2017 to talk about this issue. i expected the management of facebook to respond. things like the ethnic cleansing in myanmar were just beginning to me t was obvious they would sit there and go this is a problem. we got to fix it four years have gone by. and at this point, you know, investors have profited enormously from this brz model and i totally get that and the question is though, you
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know, right now the damage to democracy to public health is really huge. and the question is how much more can we take and do investors cash in profits and wait for the next cycle? that seems like a reasonable thing to make from this level, given that we can for sure make better versions of this. but whether the guys do this or not, i have no idea. i hope so, but who knows >> roger, stick with us. we're going to sneak in a quick break as we await testimony. and ism services did come in above expectations we last saw sfoivl 4
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welcome back to "squawk on the street." we await frances howgan's testimony. her lawyers have filed at least eight complaints with the sec that specifically focus on the internal research, verses the face where this could potentially go. >> well, look, i think the big question is what kind of regulation this could lead to. she said explicitly, she decided to do this
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she was so methodical to make sure she had documentation for it was because she wanted to make sure this could have an impact on regulation senator blumenthal is saying repeatedly this is facebook's big tobacco moment they need to be regulated as big tobacco was. and saying mark zuckerberg fleeds to come before the committee. there needs to be accountability and responsibility i think the fact that we haven't heard from them recently, there's going to be pressure for the two main leadors of the company to start addressing the issues they put out a lot of people, and morgan, the fact that we haven't heard from zuckerberg, i think, is going to be in focus i think it's going to come down to what types of regulation need to be implemented to better
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reign in the negative impact of the platforms. >> such a key point you make and in term ts of the debate, at least, senator blumenthal, who is the chairman of the subcommittee, for which the hearing is taking place, saying earlier today that big tech is facing its big tobacco moment of reckoning. meanwhile, you have a broad-based outage for facebook and its platforms yesterday. the timing of that, certainly interesting. given the fact that all eyes are on the hill today. chris kreds, the cyber security expert, saying we don't know why this happens but the how is clear. do you thing that we're going to see some lines of questioning veer into that area as well? >> i mean, look, it could not have been more of a perfect storm in terms of the timing and there were all these factors pushing facebook shares down
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i think the question today will focus on the types of harm that facebook can have on different types of users, whether it's the political harm sewing discord and unrest and violence, which is something that frances talked about or the individual harm on the individuals, particularly on teens. the comments blumenthal made a moment ago is what's inflicted by facebook will impact a generation as to whether there's talk about facebook and the outage. a lot of small businesses rely on facebook and i think that's a key part of facebook's strength. in its defense is it has become this utility for small businesses, the fact that it did go down yesterday, did have widespread impact on small businesses around the world, which is obviously very much a
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negative thing for those companies and for their ability to reach consumers but i'm unclear on how much today's questioning will veer into that. >> makes sense thank you. shares of facebook are up 1% right now. >> still with us to talk about the hearing, beginning any moment now, the early facebook investor waking up to the facebook catastrophe, as blumenthal, roger, calls the company morally bankrupt, is dinging zuckerberg for not coming to congress so far, saying he went sailing, rather than took responsibility and showed leadership. i wonder we were wondering whether this tweet from dak dorsey was a comment about the number of hours facebook was out does it strike you that the likes of youtube and twiter are absent from this conversation? or is there something specific about facebook's behavior, beyond the documents >> i think frances howgon and
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all the documents she brings out puts a laser focus on facebook but i'm with you youtube's behavior has been dreadful and obviously there are issues with twitter. there are issues of a different kind with amazon issues with microsoft. issues with smart televisions, smart phones i mean, the surveillance economy has been enormously profitable and surveillance capitalism, which is the yugs of surveillance data to then manipulate the choices in behavier for people effected, that is enormously profitable. congress's job is to ask, first, the questions about what that means and then to do the regulations that we need to have in order to protect people if they do that through the lens of facebook, terrific. if they limit it to facebook, then they're going to leave us with a problem that you're going to get rid of facebook and
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you're going to hardly notice because things will bejust as bad. >> roger, it's david again you kind of punted on the esg question you said esg guys. i would make the point that it's everybody. all asset managers are looking through that lens to a certain extent i think it could become important. because if you want to get these guys' attention, one way to do that is limit the number of people who can buy their stock and provide capitol. they don't need debt financing i'm surprised you don't think that could be a more effective means to curb behavior >> we had this exact conversation after cambridge an lit cuand after two other things that have happened and it didn't happen then. investors correctly determined there was more money to be made in the stock by being wanted than by protesting on all the harm
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the one point i would plak is surveillance capitalism has worked so well for google and facebook, that it's being adopted throughout the economy bmw is now putting alexa standard in cars that means you're surveilled constantly while in a car. they introduced a robot that follows you around your house recording everything the lengths people are going through for surveillance is insane all of this was made permissible after 9/11 but we now have this issue that we have to deare we living in a big brother world or are we going to have the right to make our own choices? and we're closer to that pivot point than i'd like to think so, we really need congress to do something about it today. >> we'll see where the conversation takes us,
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especially where regulation is concerned. to your point, we're talking about the dominance of big tech in daily lives and daily business goings on but it's so daominant where the markets are concerned. case and point, that we're seeing a rally, including facebook, which is up about 1% right now. despite the conversation that we're having and what we're expecting from lawmakers on the hill i want to get your take, since you're an investor, afterall, on the state of the markets more broadly and the fact that we are, despite this conversation, seeing the names move higher today. >> to me the moving higher is no surprise a little bit of a rebound strikes me the people who felt like wow, this is a huge problem made their move yesterday. and so you're just seeing a little bit of a rebound off of a that to me, the really important question is what does congress
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do and the bet they have to be making is either they believe congress is going to act, in which case you don't want to own facebook and probably don't want to own google and a bunch of other stocks or you don't believe they're going to act, in which case you want to own these stocks or own portuguese citizenship because our country is going to continue to spiral downward if that continues. these companies, let's fasit, in an unregulated environment, they behave like government and their rules dominate our lives and their a.i. is making increasingly important decisions in our lives, taking those decisions away from us in the short run it feels like convenience and in the long run, you come up against big problems i would ask epipeople to think through the effects. it may be good for the banking account but not necessarily for the other one.
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>> we're going to check with cnbc markets commentator trying to rebound following yesterday's dramatic start throughout the week. sticking the fact that tech is bouncing back. obviously, we've seen, and look no further than the nasdaq we've seen a pullback in recent weeks. how sustainable is this here >> initially the bounce makes sense because the nasdaq, 100, for example is about a stretch of the down side as it has been all year so, back in february, meearch, o had a similar move lower you also have just an amazing concentration of negative news applied to facebook and more broadly to add supported, internet and all the rest of it. so, maybe you have a short term saturation point in all the bad news yo you've had a valuation adjustment
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we've got the mode of the short term down trend where bounces are suspect, there's been a little less of a dip response. i feel as though there's a short leash you keep the mark on here. the s&p 500 probably had 100 points so, that's, i think, tactically, where we sit right now it's all happening in the context, interestingly, away from the stable growth stocks that's been ongoing for five or six weeks. as treasury yields went up it seems as though everything was weighted towards one side of the sdal the rest of the market is not doing as badly, even into the lows of yesterday with the s&p >> fewer than 10 points away from yesterday's interday high we'll watch that at 4355 manchin's on the takes a well, saying he would not rule out a
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1.9 to $2 trillion price tag on social safety net. er for that the number the white house has been floating privately. how much of that would be compromised and d.c. matter to the bulls? >> i think it would be a nice remove of this potential negative and just because the market is just a little bit under stress right now t proba, it would be negative relief bounce i don't think the dollars them selves are that significant to the economic outlook, to where the market feels like make or break. but getting something done, averting the debt ceiling crisis, as well as a budget and part of that social spending packet through it would be a net positive, i would say. >> all right thank you. always appreciate your viewpoint on a day like today. we're going to take another eawi t morveges higher stay with us we'll be back in about two
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keeping our eyes on the senate subcommittee there. some of the ranking members making opening statements before we do get to q and a meanwhile, dow's up 400 as we got the manchin bit on the tape. market seems to be looking past the 10-year at 152 julia, i wonder if you think the testimony is going to go beyond what you said on "60 minutes" sunday >> i think that there's a lot to cover here l look, she had 10,000 pages of data hire. i think it will be interesting to see what the lines of questioning are. i think there's going to be two key things that are raised by senator blackburn. he said they want to look at the ways facebook could be evading the children online privacy protection act and the idea that facebook might already be in violation of a law
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and that's something -- a federal law, and sthats something there's going to be a lot of talk about today. >> let's get to the hearing. >> members of the subcommittee, thank you for the opportunity to appear before you. my name is frances howgan. i used to work in facebook i joined them because i think they're here to bring out the best in us i'm here because i think they stoke division and weaken our democracy. they know how to make facebook and instagram safer but won't make the necessary changes because they have put their profits before people. congressional action is needed they won't solve this crisis without your help. yesterday we saw facebook get taken off the internet i don't know why it went down but i know that, for more than five hours, facebook wasn't used to deepen divides, destabilize
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democracies and make young girls and women feel bad about their bodies and it means millions of small businesses weren't able to reach customers and countless babies weren't joyously celebrated by family and friends around the world. i believe in the potential of facebook we can have social media we enjoy that connects us without tearing our de -- tearing apart our democracy, pitting our children together. i've worked at large tech companies since 2006, including google, pinterest and yelp i've focussed only recommendation systems like the one that powers the facebook news feed. having worked on fuour differen types of social networks, i understand how nuanced these problems are
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however, the decisions inside of facebook are disastrous, for our children, public safety, privacy and democracy. and that is why we must demand facebook make changes. during my time at facebook, first working as lead product manager, i saw facebook repeatedly encounter conflicts between its own profits and our safety facebook consistently resolved the conflicts in favor of its own profits. the result has been more division, more harm, more lies, more threats and more combat in some cases this, dangerous online talk has led to actual violence that harms and even kills people this is not simply a matter of certain social media users being angry or unstable or about one side being radicalized against the other. it is about facebook choosing to grow at all costs, becoming an
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almost trillion dollar company by buying its profits with our safety during my time at facebook, i came to realize the devastating truth. almost no one outside of facebook knows what happens inside of facebook the company intentionally hides vile information from the public and governments around the world. the documents i have provided to k congress show facebook has repeatedly misled the public about what its own research reveals about the efficacy of its artificial intelligence systems and its role in spreading divisive and extreme messages i came forward because i believe every huge being deserves the dignity of the truth facebook wants to trick you into thinking that privacy protections or changes to section 230 alone will be sufficient while important, these will not get to the core of the issue,
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which is that no one truly understands the destructive choices made by facebook, except facebook we can afford nothing less than full transparency. as long as facebook is operating in the shadows, hiding its research from public scrutiny t is unaccountable until the incentives change, facebook will not change left alone, facebook will continue to make choices that go against the common good. our common good. when we realize big tobacco is hiding the harms it caused, the government took action when we figured out cars were safer with seatbelts, the government took action and when our government learned opioids were taking lives, the government took action i imlower you to do the same facebook shapes our perception of the world, by choosing the information we see a company with such frightening
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influence over so many people, over their deepest thoughts, feelings and behavior needs real oversight. but facebook's closed design means it has no real oversight only facebook knows how it personalizes your feed for you at other large tech companies, like google, any independent researcher can download from the internet, the company search results and write papers about what they find and they do but facebook hides behind walls that keeps rel regulators from understanding the true dynamics of their system. they'll tell you privacy means data this is not true when tobacco claimed filtered cigarettes were safer from consumers, scientists could invalidate these messages and confirm that, in fact, they posed a greater threat to human health we are given no other option,
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than to take their marketing messages on blind faith. not only does the company hide most of its own data my disclosure has proved that when facebook is directly asked questions as important as how do you impact the health and safety of our children? they mislead and -- they choose to mislead and misdirect facebook has not earned our blind faith. this inability to see into facebook's actual systems and confirm how they work as communicated is like the department of transportation regulator cars by only watching them drive down the highway. today no regulator has a menu of solutions on how to fix facebook because facebook didn't want them to know about what is causing the problems otherwise, there wouldn't be need for a whistle-blower. how are they supposed to assess
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in a way that's aligned with the public good if the public has no visibility into how facebook operates this must change facebook wants you to believe that the problems we're talking about are unsolvable they want you to believe in false choices. they want you to believe that you must choose between a facebook full of divisive and extreme content or losing one of the most important values our country was founded upon free speech. that you must choose between public oversight of facebook's choices and your personal privacy. that to be able to share fun photos of your kids with old friends, you must also be inundated with anger-driven viralty. they want you to believe this is part of the deal i am here today to tell you that's not true. these problems are solvable. a safer, free speech-respecting, more enjoyable social media is possible
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but there's one thing i hope everyone takes away from these discloche is that facebook can change but is clearly not going to do so on its own. my fear is that without action, divisive and extremists behaviors we see today are only the beginning. what we saw in myanmar and now in ethiopia, are only the opening chapters of a story so terrifying no one wants to read the end of it. congress can change the rules that facebook plays by and stop the many harms it is now causing. we now know the truth about facebook's destructive impact. i really appreciate the seriousness which the members of congress and the securities and exchange commission are approaching the issues i came forward at great personal risk because i believe we still have time to act but we must act now. i'm asking you, our elective represents, to act thank you.
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>> thank you, mrs. haugen for taking that personal risk. and we will do anything we can to protect and stop any retaliation against you and any legal action the company may bring to bear or anyone else i think we've made thatvery clear in the course of these proceedings. i want to ask you about this idea of disclosure you've talked about looking, in effect, at a car going down a road and we're going to have five-minute rounds of questions, maybe a second round, if you're willing to do it we're here today to look under the hood and that's what we need to do more in august, senator blackburn and i wrote to mark zuckerberg and as asked pretty straight forward questions on how the company works and safeguards childrens and teens on instagram, facebook
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dodged, side tracked, in effect, misled us. so, i'm going to ask you a few straight forward questions to break down some of what you have said and if you can answer them, yes or no, that would be great is facebook's research,ilities own research ever found that its platforms can have a negative effect on children or teen's mental health or well being? >> many of facebook's internal research reports indicate that facebook has a seriousness negative harm on a significant portion of teenagers and children >> and has facebook ever offered features that it knew had a negative effect on children's and teens' mental health >> facebook knows its amplifications algorithms can
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lead children from innocuous topics, like healthy recipes, all the way from just something innocent like healthy recipes to anorexia-promoting content over a very short period of time. >> and has facebook ever found, in it's research, that kids show signs of addiction on instagram? >> facebook studied a pattern they call problematic use, what we might more commonly call addiction. it has a high bar for what it believes it is the you self identify you don't have control over usage and that is materially harming your health, schoolwork or physical health 5 to 6% of 14 year olds have a self awareness to admit both those questions. it is likely that far more than 5 to 6% of 14 year olds are addicted to instagram. >> last thursday my colleagues and i asked miss
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davis, who is representing facebook, about how the decision was made, whether to pause permanently instagram for kids and she said quote, there's no one person that makes a decision like that. we think about that collaboratively. it's as though she couldn't mention mark zuckerberg's name isn't he the one who will be making the decision, from your experience in the company? >> mark holds as unique role in the tech industry, in that he holds over 55% of the voting shares for facebook. there are no similarly powerful companies as unilaterally controlled and in the end, the buck stops with mark. the all is no one holding power than himself >> and mark zuckerberg is the algorithm designer in chief,
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correct? >> i received an mba from harvedered and they emphasized thank that we're responsible for the organization it is intended to be flat. the metrics make the decision. unfortunate larks that, itself is a decision. in the end if he's ceo, he's responsible. >> the buck stops with him >> the buck stops with him >> and speaking of the buck stopping, you have said that facebook should declare moral bankruptcy i agree. it's actions and its failure to acknowledge its responsibility indicate moral bankruptcy. >> there is an example in the company, where facebook has struggled for a long time to recruit and maintain the number of employees it needs to tackle
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the large scope of products it is tasked to take on facebook struggles to hire that causes it to understaff projects, which causes scandals, which makes it harder to hire. part of why facebook needs to come out and say we did something wrong. we made choices to regret is the only way we can move forward and heal facebook is we first have to admit the truth the way we'll have reconciliation and moving forward is by first being honest and declaring moral bankruptcy >> being honest and admitting that facebook aggravated pain to make more money and profited from spreading disinformation and sewing hate. facebook's answers to facebook's destructive impact always seems to be more facebook. we need more facebook. which means more pain. and more money for facebook.
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would you agree? >> i don't think at any point facebook set out to make a destructive platform i think it's atia challenge whee they set up an organization that the parts for expanding the organization are not cross pollinated with what focuses on the harms the company is causing. integrity actions, actions hard fought by the teams trying to make us safe are undone by new growth projects that counteract the same remedies. so, i think it's a thing of there are organizational problems that need oversight and facebook needs help in order to move forward to a more healthy place. >> and whether it's teens bullied into suicidal thoughts or the genocide of ethnic minorities in myanmar or fanning the flames of division within
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our own country or in europe they are ultimately responsible for immorality, the pain its caused >> facebook needs to take responsibility for the consequences of its choices. it needs to be willing to accept small trade offs on profit i think just that act of being able to admit it's a mixed bag is important i think what we saw from antigane last week is instead of just focusing on all the good they do, admit they have responsibilities to also remedy the harm >> but mark zuckerberg's new policy is no apologies no admissions, no acknowledge, nothing to see here. we're going to deflect it and go sailing. i turn to the ranking member >> thank you, mr. chairman thank you for your testimony
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i want to stay with mrs. davis and some of her comments because i'd asked her last week about the underage users and she had made the comment, i'm going to quote from her testimony, if we find an account of someone under 13, we remove them and the last three months, we removed 600,000 accounts of under 13 year olds, end quote. and i have to tell you it seems to me that there's a problem if you have 600,000 accounts from children who ought not to be there in the first place so, what did mark zuckerberg know about facebook's plans to bring kids on as new users and advertise to them? >> there are reports within facebook that show cohort analysis where they examine at what ages do people join
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facebook and instagram so, facebook likes to say children lie about their ages to get on to the platform the reality is enough kids tell the truth that you can work backwards to figure out what are approximately the real age os of anyone on the platform when they look back retrospectively and discovers things like up to 10 to 15% of 10-year-olds might be on facebook or instagram. >> so, this is why adam, the ceo of instagram, would have replied to jojo and she said to him, oh, i've been on instagram since i was eight. he said he didn't want to know that so t so, it would befor this reason, correct? >> a pattern of behavior at facebook is often problems were so understaffed that there was
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an explicit discouragement from having better detection systems. my last place was in the counterespionage team and at any given time, our team could only handle a third of the cases we knew about we knew it we built a basic detecter, we would have many more cases >> let me ask you this so, you look at the way they have the data but they're choosing to keep that data and advertise from it, right sell it to third parties so, what does facebook do? you've got these 600,000 accounts that ought not to be on there. >> probably more >> right but then you delete those accounts but what happens to that data? does facebook keep that data do they keep it until those children go to age 13?
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since, as you're saying, they can work backward and figure out the true age of a user so, what do they do with it? do they delete it? do they store it do they keep it? how do they process that >> my understanding of facebook's data retention policies -- i want to be clear i didn't work directly on that when they delete an account, they delete all the data i -- with regard to children under age on the platform, facebook does substantially more to protect the children and they have to publish, for congress, the subtleties and they could probably be more effective. >> staying with this underage children, since this hearing is all about kids and online privacy, i want you to tell me
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how facebook is able to do market research on these children that are underage 13, because miss davis was really -- she didn't deny this last week. groups with their parents? how do they get that permission? she said they got permission from parents is there a permission slip or a form that gets signed and then how do they know which kids to target >> there's a bunch to unpack there. we'll start with maybe how do they recruit children for focus groups, or recruit teenagers most tech companies have systems where they can analyze the data that is on their servers so most of the focus groups i read or that i saw analysis of were around messenger kids,
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which has children on it and those focus groups appear to be children interacting in person often large tech companies use either sourcing agencies that will go and identify people who meet certain demographic criteria or reach out directly based on data on the platform. for example on the case of messenger kids, maybe you would want to study a child that was an active user or less active user you might reach out to some that came from each population. >> these are children under age 13. >> yeah. >> they know it? >> for some of these studies i assume they get permission but i don't work on that. >> okay. well, we're still waiting to get a copy of that parental consent form that would involve children my time has expired. mr. chairman, i'll save other questions for a second round if we're able to get those. thank you. >> thank you senator klobuchar? >> thank you very much, mr. chairman thank you, ms. haugen, for
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shedding a light how facebook time and time again has put profit over people when their own research found that more than 13% of teen girls say that instagram made their thoughts of suicide worse, what did they do? propose instagram for kids now put on pause because of public pressure when they found out that their algorithms are fostering polarization, misinformation and hate, that they allowed 99% of their violent content to remain unchecked on their platform, including lead-up to the january 6th insurrection what did they do they now, as we know, mark zuckerberg is going sailing and saying, no apologies i think the time has come for action and i think you are the catalyst for that action. you have said privacy legislation is not enough. but i think you have not done anything to update our privacy
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laws in this country our federal privacy laws, nothing, zilch in any major way. why? because lobbyists around every single corner of this building that have been hired by the tech industry we have done nothing when it comes to making the algorithms more transparent, allowing for the university research that you referred to, why because facebook and the other tech companies are throwing a bunch of money around this town and people are listening to them we have done nothing significantly past, although we are on a bipartisan basis working in the anti-trust sub committee to get something done on consolidation, which you understand allows the dominant platforms to control all this, like the bullies in the neighborhood, buy out the companies that maybe could have competed with them and added the bells and whistles so the time for action is now. so i'll start with something that i asked facebook's head of safety when she testified before us last week i asked her how their estimate the life time value of a user
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for kids who start using their products before they turn 13 she evaded the question and said that's not the way we think about it is that right? or is it your experience that facebook estimates and puts a value on how much money they get from users in general? i'll get to kids in a second is that a motivating force for them >> based on what i saw in terms of allocation of integrity spending, so one of the things disclosed in "the wall street journal" was that i believe it's like 87% of all the misinformation spending is spent on english, but only about 9% of the users are english speakers it seems that that facebook invests more in users who make them more money even though the danger may not be evenly distributed based on profitability. >> does it make having sense a younger person get hooked on social media at a young age makes them more profitable over the long term as they have a life ahead of them >> facebook's internal documents talk about the importance of
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getting younger users, for example, tweens on to instagram, like instagram kids, because they need to have -- they know that children bring their parents online and things like that they understand the value of younger users for the long-term success of facebook. >> facebook reported advertising revenue to be $51.58 per user last quarter in the u.s. and canada when i asked ms. davis how much of that came from instagram users under 18, she wouldn't say. do you think that teens are profitable for their company >> i would assume so based on advertising for things like television much substantially higher advertising rates for customers who don't yet have preferences or habits. i'm sure they're more of the profitable users on facebook but i did not work directly on that. >> another major issue come out of this eating disorders studies have found that eating disorders actually have the highest mortality rate of any
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mental illness for women and i led a bill on this with a couple senators that we passed into law and i'm concerned that this algorithms they have pushes outrageous content promoting anorexia and the like. i know it's personal to you. do you think that their algorithms push some of this content to young girls >> facebook knows that the engagement based rank, the way they pick the content in instagram for young users, for all users, amplifies preferences. they have done something called a proactive incident response where they take things they have heard, for example, like can you be led by the algorithms to anorexia content and literally recreated that experience and confirmed, yes, this happens to people so facebook knows they are leading young users to anorexia content. >> do you think they are deliberately designing their product to be addictive beyond even that content?
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>> facebook has a long history of having a successful and very effective growth division where they take little tiny tweets and constantly and constantly trying to optimize it to grow those kinds of stickiness could be construed as things that facilitate addiction. >> right last thing i'll ask as we have seen this same kind of content in the political world you brought up other countries and what's been happening there. on "60 minutes" you said that facebook implemented safeguards to reduce misinformation ahead of the 2020 election but turned off those safeguards right after the election and you know that the insurrection occurred january 6th. do you think that facebook turned off the safeguards because they were costing the company money? because it was reducing profits? >> facebook has been emphasizing a false choice they've said the safeguards that were in place before the election implicated free speech. the choices that were happening on the platform were really about how reactive and twitchy
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was the platform, right? how viral was the platform and facebook changed those safety defaults in the run-up to the election because they knew they were dangerous. and because they wanted that growth back, they wanted the acceleration of the platform back after the election, they returned to their original defaults and the fact that they had to break the glass on january 6th and turn them back on, i think that's deeply problematic. >> agree thank you very much for your bravery in coming forward. >> senator thune >> thank you, mr. chair. and ranking member blackburn i've been arguing for some time that it is time for congress to act. i think the question is always what is the correct way to do it, the right way to do it consistent with our first amendment right to free speech. >> totally. >> this committee doesn't have jurisdiction over the anti-trust issue. that's the judiciary committee and i'm not averse to looking at the monopolistic nature of facebook honestly. i think that's a real issue that
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needs to be examined, perhaps addressed as well. but at least under this committee's jurisdiction, there are a couple of things i think we can do. and i have a piece of legislation and senators blackburn and blumenthal are both co-sponsors called the filter bubble transparency act essentially what it would do is give users the options to engage with social media platforms without being manipulated by the secret formulas that essentially dictate the content that you see when you open up an app or log on to a website. we also, i think, need to hold big tech accountable by reforming section 230 and one of the best opportunities i think to do that, at least for in a bipartisan way is the platform accountability consumer transparency or the pac act and that's legislation i cosponsored with senator shots which in addition to stripping section 230 protections for content that accord to terms to be illegal, pac act would also release due
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process for users around the content moderation process and importantly, in the context we're talking about today with this hearing, with the major big tech whistleblower, the pac act would explore the viability of a federal program for big tech employees to blow the whistle on wrong doing inside the companies where they work. and my view we should encourage employees in the tech sector like you to speak up about questionable practices of big tech companies so we can among other things ensure that americans are fully aware of how social media platforms are using artificial intelligence and opaque algorithms to keep them hooked on the platform so let me ms. haugen just ask you, we've learned from the information that you provided that facebook conducts what's called engagement-based ranking. which you've described as very dangerous. can you talk why more engagement-based ranking is dangerous and do you think congress should seek to pass legislation like the filter bubble transparency act that would give users the ability to avoid


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