>> live from the world economic forum in davos, switzerland, this is a special edition of "market makers," with erik schatzker and stephanie ruhle. >> i am erik schatzker. >> i am stephanie ruhle. two.we are, day it is beautiful out there, and it is about to get hot in here, speaking to the most influential people in the world. >> we will start with one of the most influential men in the banking world, james gorman. great to see you again. >> great to be here.

>> it is unbelievable. the sun is shining. let's make some news, shelley? to town last night. you have been able to hear a bit about what people are saying. talk about what people are saying, trust -- five years after the financial crisis, how is it that you think people trust banks so little? >> i am told we are the second least. fortunately, we still have congress. >> news reporters are third. >> in all seriousness, this is the most damaging financial crisis since the depression, and maybe well before that with all of the home foreclosures, bank failures, and the impact that had on the global economy. .t was devastating it takes a long time to recover the trust. it is not surprising.

>> is the industry not doing enough? >> the industry is doing a lot. >> like what? >> you need strong institutions, so they are recapitalizing, cutting leverage. they started shedding businesses that were at the roots that got banks in trouble. let's get more basic than that -- america does not understand when you talk about shedding proprietary businesses and lowering leverage. popular opinion is just so negative. what is your shed is he to tell the great american banking story ? >> i do not know if you can tell a story to an audience that is not ready to listen. we have to get employment to the states. if people are in jobs, they are much more willing to listen about what you will do for them, and for better or worse, we had the financial crisis. let's get the economy growing.

, no newy top 10 goals mistakes. let's not repeat what caused us to get into this position. on other issue is inequality, wealth inequality. where does james gorman stand on that issue? >> it is legitimate. look at the minimum wage since 1950, inflation adjusted. we are clearly creating societies where we have large groups of haves and have- nots. it was expressed by the public in the financial crisis, sometimes in graphic ways. >> do we need to raise the minimum wage federally or is it find state-by-state? raise.oes need to i do not know if it is federal or state.

we have had a lot of competition for lower-level jobs that have either been outsourced -- i think it is time we adjust that. >> low-level jobs do not exist in your world. you run morgan stanley. you have traders sitting in mortgages, high yield, saying i want to get paid $5 million or i will walk. how do you balance this? >> we have 66,000 employees, and the number getting $5 million or more is a small number. of course, we want to keep them, but we have respect for great members all over the organization. we have 20,000 people in support functions. thousands work as assistants to the brokers doing their business. we care about all of them, not just somebody making millions of dollars. that said, you have to pay competitive to what the job description is. >> does morgan stanley have an additional reason to care about inequality to the degree there are less of it, intentionally more clients?

you are in the retail business. >> it is not a business issue. it is a moral and society issue. broader, society issue. >> how much do shareholders care about doing public good? at the end of the day, shareholder say what have you done for me lately, why should i own morgan stanley? >> shareholders have choices, and a lot of companies participate in society, giving back. and morgan stanley, we are proud we have established centers and three children's hospitals in new york, london and beijing had >> do you think that is why people buy morgan stanley? >> no, but they value having moral standing. >> let me posit that it is a business issue -- so long as the not narrow,e does it fuels populism, that drives

politicians and regulators to do -- about the things they perceive to be sources of inequality, for example, making. >> i'm not an expert on what we should do from a public policy point of view, but i think it's time to take a hard look at the issue. the fact that it is front and center at davos, with the corporate community, the business community -- we are having an open discussion. >> your job -- you spend your life on the defensive, defending the industry, dealing with regulators. do you wake up saying i want to be a positive force and i am always on the defense? why am i doing this? >> you are watching a part of the job that i do not have, as i feel good about it. we pulled off the largest merger in financial services the last 10 years and the largest merger in wealth management in history.

-the-offenseetty on activities. i am proud of how our employees have pulled together. we have had to do with the financial crisis, but we have put a lot of that behind us. >> do you start to feel like we need to be -- do we need to be in the financial business? morgan stanley has consistently ranked number 1, 2, or three in global investment banking, number one, or two in mergers and acquisitions -- these are phenomenal businesses. the wealth management business is additive to what is a phenomenal investment bank. >> at the same time, there are people, james, that obsess over the size of your fixed income business. what do you say to those people? >> they had better get a life. >> i love it.

there are a lot of things to worry about. i worry about why there is not more snow in davos. listen, we are in the business of doing the right thing for our regulators, shareholders, employees, clients. how do you then evaluate -- that is what we are talking about, some people take it to extremes, but how should somebody add value a your industry? banking against the other investment banks? >> i think they evaluated pretty well. we had a good and -- for our size institution, we had a good year. rate andever be a mega foreign exchange business at the big, commercial banks are. that does not mean we cannot

have a strong fixed income commodities business. last year was a difficult year, absolutely. that is not the end of the story. >> will this year be better? >> i think this year will be better. >> would you see the biggest growth for morgan stanley in 2014? >> when economies are recovering, the first sector to come out of the recovery is financial services, and typically investment and asset management. we have growth opportunity. the equities business is doing great. mergers and acquisitions market is coming back. wealth management is doing great . frankly, for all of the heat on fixed income and commodities, they will have a better year in 2014. >> how about the heat you had to take for facebook? after the fact, do you feel like standing up and saying "i told you so?" it feels like it was a dam good deal. >> i would never.

tom sure you had a chance look at the tape when you told me it was a disaster -- >> we did not do that. that was the other guy. like i said in 12 months it would turn out fine. i was wrong. it was 15 months, and it turned out great. the story about facebook -- forget the ipo -- it is an amazing company, an amazing piece of innovation created in america by some very creative, smart, daring individuals. all hats off to them. >> does that mean you are a facebook user? facebook.t use i do not use social media. it is dangerous. >> what is going on with recruiting and retention -- why does it seem like wall street banks are trying to make life a little cushier for junior people? >> hugging the little bankers. >> what did you call them,

chubby kittens? >> chubby kittens. >> this interview has taken a lot of different directions. [laughter] it is the age-old question -- these folks get very well-paid. >> even the junior guys. >> even the junior guys for what they do, and it is not surprising it is very demanding. there was a young man that passed away, which has caused everybody to step away and say we have to do this right. trucks are you doing the same thing, giving the guys we can -- >> are you doing the same thing, even the guys weekends off? >> i am not sure that is the right example. i am not sure how you stop working if there is a deal on. if we are not managing the young folks properly, we need to deal with that. >> are young folks saying after two years in banking that i do not want to be in this business,

because 5, 10 years ago they were happy to grind out 100 hours a week. >> there was a pot of gold at the end of the rainbow. are passionatele about it. reasonableave to be so they can have a lifestyle, otherwise they become uninteresting because they bring a narrow perspective. i also recognize when there's work to get done, you have to get work done. >> james gorman, the always thoughtful and provocative ceo of morgan stanley. >> when we come back, we will speak to david rubenstein of the carlyle group. guess what else -- big picture. wants to getax home theaters to be imax. >> this is "market makers." we are live on bloomberg

television and streaming on your phone, tablet, and on bloomberg.com. ♪

>> welcome back to "market makers." i am erik schatzker here with stephanie ruhle in davos, switzerland, a quaint mountain village turned into perhaps the most powerful place on the planet for the world economic forum, and one of those powerful people is with us. david rubenstein, founder of the carlyle group. you are a billionaire, a philanthropist. this place is full of billionaires, but some of them are not so philanthropic. what are you going to do about that? >> i do not think i can control what other people do with their money but i think it is important that people who have a fair amount of money do something useful with it other than buying homes or jobs. . think -- yachts

i think he will need to get back to society and there is a launch that bill gates and i are posting for people signing the giving pledge. do -- >> howpeople many people do you think you can recruit, and remind us what the building pledge is. >> the building pledge is designed to get certain people to give away, during their lifetime or death, at least half of their net worth. it has about 120 people signed up to do so around the world, mostly the united states area philanthropy -- united states. philanthropy is more the united states preoccupation. it takes more work outside of the united states, but we are making progress. >> how will you get the next generation -- when you look at carlisle and the people under you, how do you get them to make ? real philanthropic commitment

how does one truly make the commitment and how do you spread that? >> if you are doing something as the leader of a firm, maybe you can set an example. if you can be a role model, others might want to emulate. if you explain what you are doing, you might have an impact on people that work for you. ?> are you having that impact >> there are people in the firm that are philanthropic that are quite junior, relatively speaking, and we also match what people give away up to a certain amount. >> -- >> david, is philanthropy the answer to any quality? -- inequality? >> no. it will not solve all of the problems of the world. a small percentage of gdp is involved in philanthropy. to solve income inequality, we

need to educate people better. when you have 25% of people in urban areas not completing high school, you are creating people getting good jobs, and might wind up doing things that are not socially acceptable , and a high percentage of people that do not graduate high school wind up in our prison system, the largest in the world. income inequality cannot be solved overnight, but education is probably the key. >> there is no question that if we educate people better and give them better career opportunities, we will bring some of those folks up on the bottom, let's look at it from the top down, does the capitalist system allow certain people to make too much and accumulate too much wealth? >> our capitalism system is not perfect, but our system has enabled the united states to build the greatest economy in the world and the greatest country in the world. when adam smith more or less invented capitalism, he did not say it was a perfect system.

i think it is better than other systems, but every system has imperfections. many peopleallows to make a lot of money, but many of them are philanthropic. you cannot be buried with wealth, and many people realize that. we need to make sure that research and development, education, things that people come up from the bottom, as i did. it is possible to rise up in our system. >> there is a lot of pressure for banks, for example, to pay employees less, and many have said that i will go work for david rubenstein. bank unfortunate that the -- that the money did not go from banks to teachers? >> you could always cite examples of how the world could weretter off if teachers paid more money, but the system is what it is. probably the highest paid people should be interviewers on bloomberg.

>> agreed. >> i cannot change the system overnight. i have to work slowly to convince people that teachers and public servants deserve higher salaries, but i do not think we should say the whole system is bad because a lot of people make a lot of money. >> one of the messages to business leaders here at the world economic forum is companies must define success in terms that are not purely financial. firm afforde equity to think like that given the difference between positive and negative return in some cases on your portfolio companies is so small? >> there is no doubt that at some point investors only cared about the rate of return, and now they care about if we are creating jobs, shipping jobs offshore -- it is more competition than it used to be. there is no doubt we are a capitalist organization with the goal to make profits, take the profits, and do something useful with them, and hopefully we are

doing that. the investors -- pension funds -- >> who are the pension -- investors? pension funds, what are they asking you to do? >> tension funds are more likely to worry about -- pension funds are more likely to worry about these issues. >> there is a balance. public pensions also want to get their returns. how do you balance? >> life is a balance. it is what life is all about. we get no return, but will be perfect and environmental factors. we try to have a balance. >> if you were to rewind the clock and look at the returns you generated, and some were great, especially in the early years. .> in the latter years, too >> fair enough.

if you factor in these issues, how much would you have to compromise? >> i think it is fair to say we are getting returns you would -- that are better than you would get. i cannot say whether we would be better off for the world would be better off if we did not get 22.5%.es of returns or i cannot judge it that way. the important thing to get a cross is private equity firms is that -- i worry more than about the rate of return. >> private equity firms have gotten into so many new businesses since the last financial crisis, can you handle the risk tolerance? do you have the risk management to look at all of the new businesses you are in when you were not in them five years ago? a bloomberg started off as terminal company, and now they are in the news business,

television business. of this?handle all >> do we have macro risks to be taking? >> my point is lots of companies start with one thing, and if they are good at one thing, they can do other things, as you are doing successfully. you can not it just by wishing it. you have to have good people. >> is there a limit to how big or diversified carlyle group can be? >> i do not want to sign -- sound silly by saying there is no limit, as we are trying to do things that we know will get a good rate of return, and as long as we do that, we will expand, but we do it carefully. one or two things a year and then make sure it works well. >> $185 billion in assets under management right now. what could it be? >> i do not know what it could be. it depends on how well we perform and what investors want

to give us. >> is there an opportunity or are there opportunities out there such as carlyle group could be a $500 billion firm? >> i would not say in a few years that would be ridiculous. underock has $4 trillion management and nobody says that is ridiculous. without $1 billion was a gigantic amount of money when we started, so we are large, but not as large as we could be. >> are there enough assets for you to invest in? >> remember, right now, private equity is roughly a $3 trillion business -- $2 trillion in the ground, $1 trillion in dry powder, but the public markets are roughly $70 trillion. we have only touched the surface in emerging markets. invested inhe money private equity is still invested in developed markets. to go beforeg way

emerging markets are saturated with private equity investment. >> can you invest in the middle east while there is political unrest there? >> there is not unrest in every part that we have a fund to invest in that part of the world, and like every part of the emerging market, you have to be sensitive to some issues and we think we are doing it. >> thank you for being with us. >> a pleasure. i hope you get a raise as a result of everything i said. >> come on often. >> david rubenstein, founder of the carlyle group. >> when we come back, we'll be speaking about the newest billionaire, and i am proud to say it is a woman. sheryl sandberg joins the billionaires club. , switzerland,avos you couple of minutes. you are watching "market makers ." stay with us. ♪

>> live from the world economic forum in davos, switzerland, this is a special edition of with erikkers" schatzker and stephanie ruhle. >> welcome back. you have gone to theaters to watch movies on the big imax screens, and now you have an opportunity to have your own imax theater at home for just $2 billion. we are joined by the company's ceo. i'm surprised. you said this is your 12th year here. when i think about who comes to i -- davos, i am not sure that i think about the ceo of iraq's.

>> where -- imax. >> we are in 55 countries. our biggest market in a few years will be china. had to goe here, you through dark hallways to talk about china. you meet people and build relationships. india is high on our list, places in eastern europe. canou stay focused, davos open doors for you. >> you want to meet people from the middle east, russia? asked him middle east, russia, developing countries. the middle east, russia, developing countries. dois that something people not understand, it is not easy to roll into town and set up an imax theater? said oncemy investors you do a deal in china, i count

it for zero because many investors were not attuned to globalization. now i think it is the opposite. they do not appreciate how difficult it is, and with revenues higher than they are domestically, maybe they should give you more credit, but i'm not sure they see the world that way. click save the complaint is the rich are getting richer, income the big complaint is that the rich are getting richer, income inequality. if you are selling a home theater for $2 million, is the rich getting richer? niche productery for a small market. if we sell 10 of those a year, for a film like " gravity, we did 20% in the north

american box office. the home theater is a nose under the tent because we have done another version of the home theater, which is to under $50,000, which we are going to start selling in china, the middle east and russia. wins a lot of" awards, do you make money off of that and how? >> we might. the way we would make money is if the film is released. for us, we are excited that the film really broke new ground and use special effects in a new way, and that is where imax takes off and that is how we index so high. i would like to see it win because it is a great movie, and also i think it was shoulder off -- shown off.

>> gravity has big-time celebrities. thew years ago, imax was in museum of natural history. not that you have big stars, is that a payoff? >> time flies. it has been about a decade. yesterday when wales, bears, and seals were the stard. -- stars. yes, it is a new business model. people will pay a certain amount for a documentary they are interested in. was fantastic, but when you can see "harry potter" and things like that, it is special. this year, part of "transformers " was filmed with imax cameras. it will look really spectacular. >> when i was in 19 years old

living in montréal trying to learn french, guess what i -- where i worked? an imax theater. >> no way. how much do you think people will continue to pay question mark when i go to the movies, -- pay? when i go to the movies i say it cost this much? >> in china, it is $15, $16. in new york city, it is $20. you have almost no complaints about cost because you get what you paid for. it is a special experience. we think about watching a film like "gravity" on a small screen versus a theater like imax, it is value. >> will her come a point where people think about imax, maybe not -- will there come a point where people think about imax, aybe not like apple, but like

electronics company where we see something that competes with the sony television? brand awareness in places like china is higher than it is in the u.s.. in russia, it is a big deal. they never really looked at the old movies. this is their view of imax. the in-home theater, that is a test. we will see with the uptake rate is, and we would not put our name on it unless it is special and transporting in a way, taking you somewhere you otherwise would not go. someday, if it all works, yes. >> are you thinking that way -- looking into the future saying how can imax be the name in the home that sony was once upon a time and maybe samsung is now? >> because our niche is different than those companies, we are definitely looking at how

we brought in our name in the home. -- brought in our name in the home. looking at checking -- pack and gaming -- >> which is not part of your brand at all. >> apple rethought the experience, and it is a long way off for us, that is culturally how we hope to think about it. future?ming in your >> i do not know. only if we can make gaming better. we have played around things like at a home theater, multi- --- multiplayer gaming. it is not there yet, but the things we like to dream about. >> what is your biggest problem? >> i think we grew so fast. a network has grown five times the size of the last five years, and we used to show five or six films a year, and now we show

are defied. we used to have like 1000 transactions. five years later we have 20,000 transactions, and you want to keep your cost structure in rack. the pace of growth. >> it could have been because erik schatzker work there. het he actually invent -- >> actually invented the modern imax projector. he asked me not to say that. >> what do you think is the next stage individual experience? imax has been part of that evolution. you mentioned virtual reality. that seems a long way off. >> there are a lot of steps along the way. about $50en investing million over a couple of years to develop the next generation rejection system, which is laser, and it is not like "austin powers." it is a much brighter way to deliver images with much higher

contrast. especially in 3-d, if you think about it, you put glasses on your face, which washes out a lot of the color. this will be brighter and make you feel like you are in the movie. on the sound side, we are doing research so that you can move objects in the theater around you. in the near term, it is really enhancing what we do today, but in the longer term it has to be something interactive. >> what kind of money do you have to put into research and development? >> this project is $50 million over three or four years. we bought some patents from kodak for about half of that. >> smart. >> thank you for joining us. , the me, richard gelfond ceo of imax, and erik schatzker, the inventor of the imax theater. [laughter] >> when we come back, we will talk about billionaires. this is a magnet for them. what is ond out

their mind from matt g miller, our man on the billionaire beat. ♪

>> breaking news here in new york. someday hedge fund managers making big moves. carl icahn has just tweeted that he has bought shares of apple since first tweeting about their large position in august. he says they have kept buying. purchase investment in apple has now surpassed $3 billion. he also says the apple board is doing a disservice to shareholders by not having market increases in the buyback program. details to come in an in-depth but are good -- letter. david einhorn has been taken

positions in anadarko and bp. shares have risen following the headline. bp shares are also moving higher on the news. this is all according to a fourth-quarter letter published by greenlight capital. david einhorn also close their position in airbus. we will monitor these headlines -- carl icahn increasing his stake in apple and david einhorn taking a position in anadarko petroleum and bp. erik schatzker, stephanie ruhle, ,ou are out in davos switzerland, and i will send it back to you. >> where daniel loeb is. we heard yesterday that activist investors are creating their own each in the market. here to talk about it, our own "surveillance" anchor, tom keene. what do you make of this?

every day we talk about perceived value out there, and speaking to mario the belly, the idea is is there value still in the market. some would disagree. others say there is value, and with the dearth of making and deals, activists are having their moment. >> it is day two. what do you make of the world economic forum? >> every year i am convinced there will not be a shift, it will be morning. it shifted about two hours ago. >> you are with us yesterday. it was still boring yesterday until two hours ago? >> yeah. >> degrees of excitement. >> when i saw how many chubby kittens -- this is more chubby kittens than yesterday. >> hold on. what happened two hours ago? or threeeme of two people yearning for a simple

corporation, simple system, a simple davos. everybody is saying forget complexity. you lead yesterday with the first interview with brian moynihan where he talked about a more narrow framework. to me, that is simple. ra talk about it. to stephen pagliuca from bain capital. you want to talk to him about the boston celtics. i do not blame you. skills you can take the acquired in private equity and use them to build championships in sports. lli beaks about it every day. nash speaks about it every day. there are very few people in the valley that mouth off a lot.

>> mouth off a lot. >> be nice. it is wednesday. it is be nice wednesday. the idea of listening and having the patience to put through a plan, even if it is a short-term plan, just to persist through it . i think that is what he was talking about, the metaphor from business over to sports, or even the other way. stephen pagliuca looks at this year for the celtics as a year of rebuilding. >> jeffrey immelt has been rebuilding for four years. >> that is the opposite of the way we saw people investing in 2006-2 thousand seven. you had they trading firms all over the place. -- 2006-2007. you had day trading firms all over the place. none were long-term investors.

>> patience is the mantra for davos this year. you think that extends for 2014? sometimes what goes on here as a runway. >> it has a runway, and momentum is part of it. james gorman was brilliant about this -- the calculus of the discussion, and by that i mean the acceleration, the inertia force or the momentum, and we are starting to get that. the crisis is over. we have to move forward. then you get to the debate of inequality. can that constructive work forward? >> is it not completely out of left field when you hear ray dalio say meditation is one of the reasons is successful. goldie hawn is here.

you are doing an event on the power of happiness. people at home realize this is a big part of davos. >> is this bloomberg "dr. phil?" the agendapart of here. >> that is a bit of a sideshow. >> the dinner you are doing about happiness -- >> that is not transcendental meditation. that is measuring success in terms of things outside of growth, can we measure things only in numbers and dollars or is there a some -- some other way to do it? >> you do not think transcendental meditation is a good idea for people that are power addicts? >> i was mistaken. i am a sideshow. there we go. [laughter] william jefferson clinton

picked up on an article by porter, the idea of some form of benevolent elite -- a benevolent or duration. there is -- corporation. there is a change. whether it is for real, the jury is still out. >> we have to go into a commercial because you have to dog.nto a downward >> i cannot wait to see your coat tomorrow. >> we are going to be back. in a few, we are talking about sheryl sandberg. she leaned in and made billions. ♪

>> you are watching "market makers" live from the world economic forum in davos, switzerland and we're going to talk about billionaires. they welcomed a new member to the club, sheryl sandberg. she became a billionaire yesterday.

our billionaires editor at large matt miller has been following on the billionaire trail. not so many this year. >> on the schedule, it says there are more than 80. we have had a couple of meetings canceled. we have not been able to take as many pictures as we have in years past. >> i saw your billionaires at lunch picture. >> we saw a couple. >> are you saying not as many american haters, russian -- american and russian hitter? arebout one quarter americans. india brings a big contingent. .he rest are typically russian you will then see a sprinkling of old europe. but maybe they did not come because they knew david rubenstein and bill gates would

asked them to sign the pledge. [laughter] >> this place attracts a lot of wealthy and powerful people, but the leaders are in a class all to themselves. >> that is right. they come in on helicopter. there is a rumor going around that are private chains -- trains bringing people back and forth. we have not verified that. then, they get the special car passes. if you are one of the truly rich billionaires that has been coming for a long time, you get a aa pass that will get you through some of the tunnels and underground areas. >> last night the proprietor of our hotel give us a private ride in his car because we could not get a taxi and i think that is the ip treatment. i want to talk about sheryl sandberg. she will be here this week. womenthe only self-made -- woman here?

>> no. there are only a handful no, really. at the top, you have christy walton, alice walton, women that inherited money from their fathers or husbands. it is quite rare to see somebody had such a career, especially at such a young age. >> what do you want to find this week? matt miller on the billionaire hunt. >> what i really want to know is if this conference, this exuberance that people feel that nothing could go wrong -- for the past five years, we have had some sort of looming crisis. last year it was the euro crisis and everybody was trying to figure out any morsel of information someone would leave behind. now, everybody is confident stocks will go up. we will get rich, and probably see more mergers and acquisitions. >> matthew miller, we'll will be

back in two on "market makers." ♪

a specialhis is edition of "market makers" class welcome back. i am stephanie ruhle. >> i'm erik schatzker. some ofere talking to the world posses most powerful people. >> many of them are probably big fans of hotels. it owns brands and joining us to talk about it is fritz, president and ceo of the hotels and joins us now. there we are. noarly, people here have

problem paying for hotels. i spoke to the ceo this morning and he is not building ultra luxury high-end. he goes middle-market. where do you see opportunity? >> we are focused on i and. our footprint of luxury hotels around the world has doubled. in spite of the financial crisis, we see growing demand for high-end hotels and we also see it for the meridians as well. the high-end of the market is glowing -- growing globally. it is a golden age. >> are you winning the business? or our trip advisor and priceline and expedia? more and more people are using those sites to get great deals on high-end hotels. digits in terms of our total sales volume. app and callnd centers and corporate relationships, that is where the majority of the business comes in today. >> is there no such thing as a travel agent anymore? x the whole business has

completely changed and will continue to change because what is happening is we are going from a pc-based and commerce based use of technology to one that is mobile and interactive. it is built on relationships. the more we know about you and where you are, the better we can be at delivering hospitality the way you want it. you get as a result, does the loyalty program ceased to be important? >> it is interesting because people might've thought that a few years ago. >> that is the assumption i would make. are these people prepared to drop 800 euros on a room? >> right. if you will pay that money, would you want to get your points? >> yes. here is the secret. rich people love great deals. come fromupants today the loyalty program. the brands that have the highest --cent >> aren't some of your partners, the people for whom you manage hotels, pushing back gecko i can

speak from personal experience that it is harder to get a room than it used to be. not only is it harder, but it can only get the most basic room. of a you are an owner hotel and we have a loyalty program that could bring you isf of your occupancy, that very inexpensive marketing when he think of it that way. it he hard to get a room means hotels are full. the occupancy in north america right now is at record levels. i am not saying it is at precrisis levels. it is better than ever because of a relative of shortage. europe for all of its problems last year, 74% occupancy. >> you kind of hit on it. are at record occupancy, what are your rivals at? are they also? does it matter how good your hotel is? >> one of the things we do is

track the performance of our hotels individually against their local competitors. we have consistently done better in the last three years, i think because of the strength of our loyalty program. we are working hard with our customers. side, on the corporate people like the law firms and banks and tech companies. they are growing and traveling more and going to knew more -- markets in search of growth. one final thing is since we have been a market leader in china, the chinese spend more outside of their country traveling than americans. because we are the market leader 55% ofhigh-end of china, occupancy in china, those people stay in our hotels as well. >> who pays a full fare? people who have points are doing it because there is a discount. -- clients are not paying full price, so who is? >> it is supply and demand. rates will go up if hotels are full.

we know the hotels will be full. we will make sure we will get full price because our job is to manage hotels to get the best returns for our owners and we know we need to do that by making our guest happy. christ you you have more pricing than ever before? >> we do because of the high occupancy. and because today, the revenue management systems we have are more sophisticated. we have a better idea of what occupancy will be. we are getting better and better making sure we charge at the right price. we know we cannot go crazy. we will turn people off. we're always the finding that balance. >> in new york city, how much does a sweet cost in a high-end hotel? >> and extraordinarily expensive place to operate. a city everybody wants to go to. 52 million visitors last year. 22 hotels in the greater new york area, and they are full.

>> why no love in brooklyn yet? >> we have more to come. pressure tonder redesign as consumers want to have these boutique hotel experience is? it is not just about getting a room with a view on a high floor. people want the super cool hotel communal lobby where everyone is hanging. >> it is interesting. we started with the w brand and it was not a luxury brand when it first came out in new york. it has been told up market in the last 15 years because of demand for that. welaunched the brand because wanted to do for the midmarket what w did, which is bring a whole new attitude and informality and a different design language and take the idea of a midrange hotel and turn it on its head. we will be about 100 aloft sometime next year. where does a hotel company moving upmarket in an industry

that employs tens of thousands of people at minimum wage, have to say about inequality? >> first of all, a lot of the jobs we have -- >> i am not accusing you of employing people at minimum wage per the hotel industry does. >> there has been a lot of talk about income inequality and appropriately because it is a serious issue. we live in a winner take all economy. with a greatp idea, you can sell it globally. if you have great skills people want, you can get a great job. if you do not, life is tough because there are a lot of people without experience looking for work whose jobs may have been replaced by technology. the hotel industry cannot solve the problem, but we can be part of the solution. a hotel goes to different parts of the world, whether africa, south asia, southeast asia, brooklyn, and we open a hotel and create jobs, entry level jobs for people who do not necessarily have experience, but

the great thing about the hotel business is it is one of those industries where people start out behind a desk and can get very senior jobs over the course of their career. >> what happens when you close the hotel? >> we will occasionally exit the hotel. we opened 74 hotels last year and signed 152 deals to hope -- open new hotels in 2013 alone. are coming in. >> what do you think of the extended day deal? >> the hilton deal meeting seven years ago? >> no, the deal that we are so oversubscribed, everybody wanted dealce of it. the hottest at the time. are you surprised? >> it is interesting. i could say this. i do not know the cause and effect because i'm not a market next -- expert. pretty well.d what happened was, those guys minute, story, wait a

in the end, it worked out pretty well for us. are they fairly valued? i leave that to stock tickers and analysts. i just run a company. >> thank you. thank you so much for joining us. >> we will be back in a couple of minutes talking about the bank of america merrill lynch. you saw the ceo yesterday. his investment bank rose to the top last year and you will meet in corporate and investment banking also, you have not seen much of this high-tech security since the last james bond flick. we will take you inside one of the most exclusive hotels right here. ons is "market makers bloomberg tv and streaming on your phone, tablet, and bloomberg.com. you can watch all of our interviews on demand on apple tv. ♪

>> welcome back. it is time now for today's against business headlines. we start with carl icahn, who has increased the size of his stake in apple. he bought another half a billion dollars of apple's shares in the last two weeks. investors pass the 3 billion- dollar mark. icon says we will hear more from him soon in an in-depth letter. will nothis board markedly increase a stock buyback. another blow to sears. we learned the struggling retailer plans to close its money using name sake location in chicago. it is been closing stores and cutting costs. loss may hit $360 million. that stoppedorm

northeast has moved on to canada. storms left more than one foot of snow and hundreds of flights and millions of school kids with a day or two off. temperatures expected to say at record lows. new york is expected to drop at seven degrees not counting wind chill. we have breaking news. growingrnment protests violent. you are looking at pictures there. at least three people are dead after a aired night of street violence. authorities say they were shot with live ammunition. been going on for months, ever since the new ukrainian government decided to turn down closer ties with the eu in favor of russia. the prime minister says police do not have a live ammunition and opposition -- opposition leaders should be held responsible for the deaths. there are concerns these deaths could fuel further violence on the streets. it is a situation we will continue to monitor. eric and steph, i will send it back to you.

i thank you. thank you for bringing us up to date on the tragic developments in the ukraine. welcome the head of global corporate and investment banking. nice to see you. clearly, we only need to think for a moment about what is going on to realize the world is not a happy place everywhere. pulse onave as good a business in the economy as anybody here. what does it feel like to you? >> much more positive than the last number of years. they highlighted the absence of any very significant economic besis or issue we ought to concerned about. it is not to say things are perfect everywhere, but a lot more positive than the last number of years. >> you're are not seeing corporate america feel worried focused, butey are on the other hand, liquidity is very strong and rates are still

extremely low on an absolute basis. has been of profits well managed so far so there is no shortage of liquidity. i do not think that is the number one topic in the u.s.. ,> what is? >> growth overall even though it is strong in the u.s.. there are patches that are not the case -- where that is not the case. the ongoing debate about health care and other costs is laying on the minds of especially medium-sized companies. those are more at the forefront at this point. >> will we see american ceos or global ceos start to do more? nec soft and to a deal for -- the japanese all of a sudden doing some of the largest m&a transactions in the world. what does that suggest to you will happen? >> we have seen a pickup for sure. in particular cross-border activity. our sense was that would

accelerate at a reasonably substantial rate in 2014. we have seen most of the activity have some u.s. angle. a u.s. buyer or u.s. seller. the international markets have been relatively muted but our sense is that will change. having said that, the u.s. continues to be the main driver of growth. that will continue to be the case. we will definitely see change. >> when you say mid size companies are concerned about health care costs, when you speak to the ceos, would they like to see a full repeal of before the care act? >> they are more focused on defining exactly what costs for them will be and that is the debate that comes to the dash to the forefront. >> we liken it to banks coming down to what they will look like? >> it is hard to draw that parallel, to be honest. it is a question of significant change having happened. at his causing uncertainty. that is what they are trying to figure out. >> two -- to what degree has it

affected banking? >> it has been a big driver. it affected everything, from capital levels -- >> the investment banking part. people say m&a and capital markets are immune to the effects. business i would not say is immune. if there are changes in market conditions, liquidity, investment behavior, lending, and so on, that has an impact. in a narrow sense, we have had relatively little impact there. >> when we look at corporate bond yields, they flew off the shelf. deal after deal you brought was hot no matter what it brought. will we see that in 2014? >> it does not seem biggest change at the moment. taperingrn of future is certainly in the markets. at the moment, we still see high levels of activity and very

attractive market conditions. i would anticipate that would change at some point. >> does it surprise you investors are willing to take worse terms than they would years ago because they are searching for yields? >> not in particular. the point you made is the key one. they are searching for yields and where else will they find it? >> what happens if interest rates rise and the window closes for some companies? it is no longer affordable for them to tap the credit markets. what does it mean for a firm like yours? merrill lynch generates more investment banking and jpmorgan and a lot of it had to do with the debt market. >> the whole point of our business and our approach has been a balanced business. you have to take advantage of market conditions while they exist. it has been the place for investment banks across the board to make money. the underwriting business has been a big contributor to our success. the whole point is to be balanced.

the truth is once the market changes, that has an impact on revenue performance for sure. >> district death disproportionately? >> we have -- in the lot in the last number of years. to build a global platform. >> you have been hiring? >> electively. and we have been investing in client relationships and the infrastructure in our business. secondly, making sure it is not just a debt business, but in m&a business. >> what does it mean to invest in client relationships? >> they need smart people to cover them. >> would you not always be doing your best to cover clients? >> of course. typically, when you are a universal bank as we are, you will end your clients money. that is the second way of investing. treasure businesses

are i.t. businesses. the best people are in high demand. >> has that always been the case? >> there was a lull where there was not much of a market. to try to be a universal bank and provide the biggest clients and services across the board from equity to fixed income and banking. >> i guarantee he will not say that. >> are there examples where he --l say, >> absolutely. the two leading firms are jpmorgan and ourselves. that should tell us something. >> how many universal banks do you believe the world can support?

a small tear of the leading firms. regionall be more players. question,k to your you have to be very disciplined about client selection. who you lend to and -- where you invest, where there is a flow. >> in 2006 in 2007, were you saying the same thing? was that a mistake we saw and banking we >> broadlyn today? speaking, there was a lot more all aspects of our business we have today. it has changed. in a good way. >> thank you very much.

of global corporate and investment banking at bank of america and merrill lynch. here with us at the world economic forum. >> more in just a few. stay with us. ♪

>> is time for bloomberg to go on the markets. little change right now for the s&p 500. nasdaq futures at a two-year high because of the frigid weather expected to stay in place. also, stronger after economic u.k. threeut of the months after sales at north american stores sold twice as much as what analysts anticipated. 14% profited sales overall

missed analyst asked ms. because of increased small estimates. we will be back and -- with more periods deafening and eric will be speaking with the ceo of technology after this. ♪

>> live, this is a special edition of market. >> welcome back. i am joined by my partner here. erik schatzker. forum,ld economic innovation is always the guest of honor. it is disruptive innovation that changes the world. joining us now to talk about what industries are right for change, author of the innovative dilemma and professor at the business goal. unfortunately for all of you, at the end of 2013, i decided to stop using the term does i am so

sick of it. what does it mean? it drives me nuts. >> innovation is key to companies going. it is just as important to us today as it was 15 years ago. there is so much invention still be done -- still to be done. so much more in the future we do not know yet. >> give us a glimpse of what you can see coming that we do not know. >> you look at video today. we generally stills -- still watch it over the other mechanisms. once you see it, you want it. there is a factor of traffic coming. devices.at the mobile when people click, they want it to be there instantly. it will be there through technology innovation. hasreating new projects been happening for years.

why does it seem like when they talk about their vision, it is all about innovation. are you kidding me? mistake when i called that. it has so many different connotations in the english language that they can use the word to justify whatever they want to do in the first place. there are two types of innovation. if you get it right, you could make really good choices. most of the innovation is out there. these are the ones you are talking about in general. they make good products better. they are very important because expectations demanded. as a general rule, sustaining innovations still create new growth this is his. the reason why, if i successfully convince you to buy my new product, you do not buy the old product. when toyota convinces us to buy

the hybrid prius, we do not buy a camry. sustaining is very critical. they are replace it is in character. a product somarket much more affordable and accessible that a whole new population of people can buy it. those are the ones that are true disruptions and they create growth. >> do we go overboard with innovation? there are a lot of great ideas that do not have any commercial future, and yet they are celebrated. whether it is in cambridge massachusetts, the idea that you have to innovate or die seems to rule the conversation. is that the right way to think? to give a lot of oxygen to innovative ideas. it is so easy to snuff out the spark and say no as the company gets bigger. then, you mix out on the few who

really take hold. it is a good thing to give them options and give them a chance because the important ideas that change society can flourish. >> are we saying yes to often? it is a disruptive innovation. what do you think? need to have a marketplace that eventually says no. you cannot let everything grow forever and you cannot afford to pay for that. you need a combination of letting it get started and then a weaning process to have the markets say, what really make sense. >> people are saying no to innovation far too frequently. what is going on in the last 20 is investors, on average, freerying to maximize a

cash flow. they put their money into the company in the x notation that within a short time they will take more out than they put in. then they take more capital to another company and take more out than they put in. we find ourselves with our economy that is a wash. it is everywhere and the cost of capital is nearly zero. corporation after corporation cannot invest. they cannot invest. >> lie? >> because the way they measure, the return on investment, the measure is, can i get my money out? >> do you feel these investors? >> we are viewed as an innovative company and are trying to change the future of the internet. short-term investors do not like it. i gave them the message we will

be investing more. long-term investors have applauded that and they are invested. >> you are not managing the short-term investor. >> no. we are managing for the long- term. and the growth of the internet. >> what needs to happen for more people -- what needs to happen for more people to think like tom. >> we need a martin luther of the 21st-century who will go and of the church,ll which i call finance, and stick it on their with a set of principles. one of them is that you do not measure profitability by internal rate of return. it measures how quickly you can get money out. up and say, wed

will not measure profitability this way. we will never -- measure profitability by how much money our enterprise makes and what opportunities this creates for build thengthen and future. >> you're asking for patience. can we get that? >> i believe most investors truly want to invest for companies here for the long term and are strong and competitive and managers want to do the same thing. vocal set ofall investors in it to maximize free cash flow. >> would you call those activist investors? >> some are. in diversectivity ways. they do not understand what makes a company viable.

most people, we just need to help them understand why things they do.e way most people are smart and they will make good decisions if you just tell them. >> carl will not be the guy who will mail the protest up to the church door? who will it be. the martin luther of the great reformation in financial investment? >> tom is a good start. to use the same ones over and over again, but very successful company like amazon do not measure profitability. there are so many other dimensions of success that you can choose. i am on the board of a company success that measures by their investors in making software engineers become better it is a marvelous view into the

future of a company. >> do we need a new ratio? .he pe and peg ratio is there a new one to discover? >> a hard one to measure and you do not really know until you see it play out over a few years. before you even notice on the outside world. it is probably tricky. >> what you think about the call? >> it is great. society would be better off. be doingyees want to the things that have impact, versus just getting the extra penny back the next quarter. for everybody. >> you look at their balance sheet and every year, look at

our balance sheet. debt.is there is no we are ready to invest. next year, we are ready to invest. they do not have the heart to do it. when you measure profitability by short-term measures, once you have dictated how we will measure things, people who do andhave the courage line up deliver the way we measure things. today, the way we measure things , by how quickly and how much the innovations that appeared to .e the second best option is nothing. the third best option is to invest to create new companies. >> i will do my favorite thing,

speak for eric and i. thank you so much. came here. we an amazing conversation for us to have with you. thank you. the ceo of akamai. we will be back in just a few and you are watching a very special edition of market makers. class a tough place to get into in the swiss mountain village. this is a hotel. would not have it any other way. ♪

>> for the rich and powerful, only the most luxurious hotels will do. intercontinental is where we find our international correspondent, hans echols. nichols.

♪ a mountain layer easy to defend. seems to be quite expensive because of a perimeter set up. area during secure the world economic forum. we have more than a handful of that of states coming. i cannot tell you which ones. >> who decides which head of state gets it? >> the world economic forum. nestled in the foothills like . giant egg, the newest name

>> a dedicated cigar lounge. at $1100.rt during the west, -- >> how much? more than normal rates? >> yes. that is reflected in the rate. isthe price drop there slightly different as opposed to a normal weekend. higher. >> after this, the hotel is banking on the commerce market. first, it has to get through its first hall. >> you are staying at the intercontinental. >> we know what it says. talent, i willl let you know. we have a formula, breakfast

costs 65 swiss francs. we will see what breakfast costs during the normal season and that will settle how much the premium is they are paying. you do not want to say price gouging. at its wholes season, how much money do they make compared to the rest of the week? >> 7.46%. no one knows that number. a you are looking at conference is this. they have medical conferences. this is a center and long has been. there is competitiveness. there is a new w there. .otels >> they say there are five stars

but they're kind of three and a half. it is true. talk to that will here this week. is not a five-is star hotel. >> the man on the street is an executive who flew in privately. >> we will have to leave it there. i am honored to be here in switzerland. i think every day, it has got a star. not like him. thank you so much. me.hank you for having i always appreciate coming on. >> when we come back from switzerland, we will tell you the great spokesman coming up tomorrow. stay tuned. ♪

>> that will do it for market makers today. the sun has fallen. we will crank it up once again.

steve schwarzman will be here. so will the ceo of a coca-cola company. >> the number one employee of all time at imax theaters. that is it. we will see you back here tomorrow. ♪

>> is 56 past the hour. we are on the markets. i am out steel. we are diving straight into

derivatives because it is time for today's options insight in focus is the s&p 500. y etf. on sp you have been saying a lot of people want to be part of some kind of smp rally but are scared to put money to work. what is your solution? >> i get the question all the time. they say they are excited about the market but are worried they are so far dented that maybe he could be in order. people say there to afraid and to sit on the sideline. if that is your sentiment, a better trade could be to sell. we will keep the money in cash. you only have to come to the market if it does comes down -- does come down. while you are sitting on the sideline waiting to get paid. in this situation, i am looking at the april 1 70 put. i collect the dollar 72 on that.

if the s&p goes down below. 184. we are seeing about an eight percent correction in the market. a lot of people would have love to get a market at the moving average. portray?e making 13132 it does not seem to be a lot of money. >> actually, when you look from an investment standpoint, if you will invest in the market, 17,000 dollarst, in cash, and i would buy at 170 if it is below that. it is above that, i returned 1300 $20 there that is about a

seven percent return. a lot of people would be very excited to get that return in the market. the risk reward will say, is the market going to be up more than seven percent before april? otherwise, you will be on the market instead. . higher probability >> what is a good hedge here also? >> this is designed to be lower risk. you wanted, you could buy below it and put significantly you money involved, or, could trade the minis and only do 1700. if that was too much principle to put up. >> what is the probability this i do not called? >> have a crystal ball. we are looking at an eight percent correction.

it can happen. it happened many times in the market. i want to settle the sidelines and collect and consolidate. you would not actually start losing money until 168 would be where you break even. you lose a dollar every time he goes below that. >> no fair. at theu take a look economic environment, will kind of catalyst would trigger the down flow to the level you are watching? and 2000 13, now,e saying the market -- it is turning into a yell and call. worse, the data gets

fed will increase tapering or tape or less. better,mic data gets they can signal that rates will come up sooner than expected. i will keep the market consolidated. that is where we have been so far this year. >> thank you so much. how to put money to work without taking a ton of risk. we are on the markets again in 30 minutes "lunch money" is up next. ♪

"lunch money welcome to "lunch money," where we tied together the best interviews and stories. around the world, securing synergy -- vladimir putin gets help from president barack obama. is starting aan new chapter and we will tell you about that. says hospitality like barbed wire and media. an investor goes up against giant dish in a key wireless auction that starts today and in the movies, jack ryan is facing a life-threatening challenge but this one of the offscreen. we will get it