anticipated meeting in recent memory. the bank of japan announcing it's keeping it's massive monetary policy stimulus in place. it's wednesday, january 21st 2015 and squawk box begins right now. good morning everybody. welcome to squawk box here on cnbc. we're live from the world economic forum in davos switzerland. we're spending the week in the beautiful swiss alps in the tiny town of davos flooded with more than 40 heads of state and government and 2500 other business leaders and investors. why do they want to come here? to talk about each other. macro issues to generate investment ideas and make connections and deals. we all alived yesterday and we have been getting comfortable in our home for the week.

we have no plans to slow down. our goal is to bring you access to many of the biggest news makers in attendance. steven schwarzman will be joining us in a few minutes. >> we have three big stories we're watching. earnings season is in full swing. then this afternoon, american express, ebay and discovery financial and december housing starts and building permits at 8:30 eastern time. both ratings are expected to rise by a percent and a debate is stirring after the state of the union last night. the economy the big focus. the president calling for tax hikes on the wealthy to finance tax breaks for the middle class. >> so the verdict is clear. middle class economic works. expanding opportunity works. and these policies will continue

to work as long as politics don't get in the way. we can't slow down businesses or put our economy at risk with government shutdowns or fiscal show downs. we can't put the security of families at risk by taking away their health insurance or unraveling the new rules on wall street or pass battles of immigration when we got to fix a broken system. >> we'll talk a lot more about that speech and the president's proelzs in a few minute with the former clinton speech writer. joe. >> andrew what a beautiful shot we started the show with. did you guys see that. >> no. >> beautiful. >> you can hear the bells ringing. >> that's why we're here. that's why people come here. and they also come because no one goes to bed until 2:00 in the morning. >> did you go to bed last night? >> well i got here this morning. all right. number of stocks to watch this morning, ibm posting better than

expected quarterly earnings but fourth quarter revenue and new profit target falling short of consensus. that sounds like more of the same when you talk about revenue from four years ago. >> that's part of the plan. >> they got rid of $7 billion of empty calories. >> you can say it's part of the plan but it also decreases the flow. it allows you to post earnings that go higher but when revenues fall every year and you keep buying back stock and you're not increasing revenue, that's the complaint. >> that is the complaint. >> there were some investors and analysts that indicate they're now more on plan than people thought. >> i hope so. ibm, i like ibm. it's ibm. sponsor the masters along with at&t and exxon. if it goes theway of kodak or digital equipment it would be a

tragedy. we'll see. amd. warning it's current quarter revenue will fall short. it's about a $2 million cap company now. weak sales of graphic cards. netflix, shares soaring in early trade. adding 4.3 million subscribers in the last quarter. the big driver overseas groethd offsetting a slow down in the united states. >> let's get a check on the markets this morning. we have been watching what the futures have been up to. if you take a look you'll see at least in this hour the futures are relatively flat. you're looking at the s&p barely budging. dow futures down by 7 points. also if you take a look at the early trade in europe this morning, at this point you'll see that the european markets are relatively flat as well although the ftse has a gain of three quarters of a%.

in asia the bank of japan with it's stimulus. encourage banks to boost lending and you see in asia overnight the shanghai was up by 4.7%. this is coming after early in the week when you saw the huge declines. the biggest declines in about eight years. oil prices autopsy cross the board. 46.95. if you have been watching the the bond markets you'll see that right now the 10 year note looks to be yielding. drum roll please. 1.815%. in the currency market this is the big story here with the swiss national banks move last week that threw a wrench into currency markets vmt caught a lot of people off guard. you can see it this morning. the euro is down against the dollar and gold prices gold picking up a litted by bit of a bid.

$1,298. >> president obama focussing on the middle class in his second to last state of the union address. here with us this morning to talk about that and a lot more the chairman and ceo of blackstone. good morning to you. >> good morning. >> we owe you a congratulations too because i heard that your son is an oscar nominee now. he produced the imitation game. >> he is nominated for 8 academy awards. >> eight. who's counting? >> that's not so bad for 35 years old. >> not so bad. congratulations on that. you just flew in this morning. i don't know if you had a chance to listen or read about the state of the union address last night. >> well i didn't see it but i did read some stuff. >> your sense of the issue of both taxing the wealthy to pay for some of these programs and some of the issues he wants to address through education. does it make sense to you? >> well there's a consistency

in terms of what the administration has been trying to do on a tax policy basis. i have been told by political people that there's no chance of this happening. >> sounds good though. that doesn't stop him. >> no but i think the issues meant to be addressed are very important. the middle class has to increase it's wealth. and we have to get better jobs and it's going to have to be done among other ways through education. >> right. >> we all have different views as to what level is the most important for education. you have to start at the beginning and you also can take enormous steps that can take people of very low income and get them to perform at very high levels. >> i was at dinner last night and said top one per cent.

>> is that in your mind? is that a problem and how do you attack it? when you think about the ideas of raising taxes on the wealthiest, is that the right or wrong way to do it or is there any component of that that makes sense to you? >> you have to rebalance the system and how you rebalance it is on effect on the table. >> can you take away from the wealthiest? and would you be among those? or is it literally just the lift up? >> i think the question of do you give people fish or teach them how to fish is part of the issue to make it very simplistic. we're going to have to provide the capital for the people not just in the united states but this is a global issue with the economy. if we don't do that we'll have long-term problems. we have the ability to do it.

>> it's earned success. it's not transfer payments. it's not something that allows you to persist. that might be the point to allow you to earn a living. >> proposals for colleges. >> that's fine. use the money to give people the opportunity to be productive. no one wants to be the ward of an entitlement state. the stockholm syndrome overtakes you. >> i'm just asking the question. >> there's an interesting thing. >> my wife and i support the inner city program in new york city where 70% of the students are below the poverty line. 97% of them graduate from high school and 99% of them go on to higher education. if you could do something of that type throughout the united states we wouldn't be having

exactly the dialogue you're having because these people are fit for purpose. they're capable. they have an education. they can join that economy. if you don't get that kind of quality education, and you can do it as a middle class or below middle class person you really -- you're really disabled for the modern economy. >> there wasn't a word about tax reform. again after six years what we hear are redistribution efforts. was there anything about, are we going to do trade? i didn't stay up and watch this last night? the only tax reformed he talked about was the same one he talked about for six years. >> you called it a war once. >> still is a war. still is the divide? >> no i just think society has gotten a bit more used to being divided. i happen to think this is a very

very bad idea. and you run a company, what you want is to unify your people and move them in a direction. almost every organization works that way. i think we have a lot of work to do. this is in the united states. and some other countries to bring our people together. that's the way you get the most out of a society. >> there was use they were going to change the allocation of how it's giving out money to hedge funds -- not to hedge funds but to private equity. but the issue is they're going to give out less money, or the same amount of money to a fewer number of funds. what do you think about it? >> there's a trend we have been talking about for years. there were too many private equity if i weres of a variety of different performance so what institutions are doing is to go

for ones that provide the best performance. give them much more money. it helps them have fewer staff to lower their cost. so it makes sense and it will continue. firms like blackstone should be the major beneficiaries of this type of trend. >> i think of blackstone as the new bank given what's happening in the world. >> don't take deposits. >> i appreciate that. the reason i'm about to go into this question we have jamie diamond on later. there's a lot of speculations and questions about whether some of the big banks should break up. specifically that bank. what do you think of that? >> the large banks have been through the ringer. there's been all kinds of dodd

franks. they're under enormous pressure. i don't worry about the safety and soundness issue with large banks. large banks perform quite a important function. large banks are everywhere in the world. there's a reason for that. >> one quick question from the news last night -- >> i don't know where you were going. go with it. >> black stone in the news that you were acquiring 36 properties for $1.7 billion. >> i don't know about that. >> okay. >> he has so many deals inside that shop. >> it sounds like it's well below your pay grade. >> we have so much stuff going on now. >> i did want to get your thoughts on where we stand right now in terms of the housing market and the apartment industry right now. >> the housing market is coming

back as you can see. it's been -- it was depressed down 40%. it's coming back. there's been more multifamily than there has been historic standards in terms of new builds. that should change over time. we're expecting another year of significant increase probably around 8% in value in the markets we operated on. it was 14% the year before. we're renting homes to people which gives them the ability to be in a really good home when they can't afford the down payment which about half of americans cannot afford downpayments today with the reformed housing market. and so if they want to be in houses, one way to do it is renting them but i think the prospect for houses going up in

value is quite good and the increase in houses being constructed should also be going up. >> we have to run but i would remiss not to ask the question what do you think about the franc and what the ecb may do with the future of europe. >> the consensus is that the ecb will be doing some kind of stimulus and that should weaken the euro a little more and as to the swiss franc there's nothing but blood on the street and on the walls. >> if you think negative interest rates can't happen in the united states think again. that was his note from this morning. >> we saw that right before the crash actually happened for a day or two. so it's unlikely. but we've seen it in europe. >> another famous european central banker said the central banks in this world are unhinged. there's no connection between actual inherent value of a

currency and what's happening right now. and we're in trouble. so we'll see. but they're playing the music. thank you for being here this morning. >> it's great to be with all of you. >> thank you. >> coming up taxes, paid sick leave and free community college were among the big topics in last night's state of the union. reaction coming in from washington. here's some reaction from the nfib. they say that the president's tax plan is fair in the way that hurricanes are fair. they hurt everyone. his goal is to ensure that the tax code just doesn't work for us. those are where the jobs come from that would help increase wages for what we're trying to do here. up next we'll be joined by the chief speech writer for president clinton. i bet he would write speeches for another president clinton if he gets a chance. we'll be right back.

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welcome back everybody. president obama pushing his plan to help the middleclass. >> everyone in this congress still refuses to raise the minimum wage i say this. if you believe you can work full time and support a family on less than $15,000 a year try it. if not, vote to give millions of the hardest working people in america a raise. >> joining us right now is the former white house communications director and chief speech writer for president clinton. he is now worldwide chairman and ceo. you know a thing or two about the state of the union addresses. >> so i woke up here at 3:00 a.m. so i could watch the speech live. i wanted to be ready. it made me think about 20 years

ago today when i was young and did my first state of the eun won with president clinton they're never easy to do. i thought as a speech when you think about the craft and writing a speech this was a very well done speech. the speech writers and president did a good job from that standpoint. >> are these the issues you would have addressed at this point in time? >> a big part of the speech was setting the frame work for how to judge president obama's legacy and to say that we turned the corner and that the things that they want the country to believe have been done in terms of growth and recovery very important from the standpoint of how immediate history is going to look back and judge us period but the other one is 2016. without being too political about it i do think he was trying to help to set the agenda for the 2016 presidential

election. there's a jump ball right now and you see it already forming over what i call grow and share economics so republicans talk about growth now they're both trying to talk about them together. and with growth happening in the economy the democrats reverting to talking about sharing. that's where the fight is going to be in 2016. >> hilary rodham clinton was sounding off saying she agreed with the president on these things. >> so the fairness question is going to come into play. here's the real question that is important. we talk about growth and we think it's moving along already but it's unsteady at this point. that's the big, big question. >> now we think, well we didn't really say it but it's almost like we have growth. where's the sharing? we don't have the kind of growth

that's possible. our economy is still below what it's capable of and 4% growth if it's consistent year after year and then you get the wage growth along with it a lot of these questions, they fade a little because it helps everyone. >> you think about the international economy and china and problems going on there. >> listen to the president very passionately say you can't live on $15,000 a year. try living on $17,000, you can't live on that either. you need to grow great jobs that pay 80, 90 $100,000 and let the private sector create those jobs. >> that's where the education issues are important the biggest problem with kmun colleges is not that people can't get into them or pay for them it's that

they don't graduate from them. 66% to 80% don't graduate. spending $60 billion over ten years done change that and community colleges are already free for most poor and working class students because they qualify for pell grants. so is this a speechless campaign the president is on. >> look you have to get them there and keep them there and get them through. i don't think it's an either or proposition. it's a yes and proposition. how do we get both of them things done and pay for them both? that's a big challenge at this point. but there's no question that what a high school education used to do it doesn't do anymore and who knows whether even two years of community college will be enough. >> it's scary because it's not just our problem. in fact we have serious issues in the united states. look at the unemployment rate across europe for people that

can't. >> and what that leads to in-turn. >> there's not enough wealthy people in europe to redistribute to these people. we need to start from the ground up with all of these issues. >> if we can come back from one thing last night that's a good positive thing from the standpoint of growth the president spoke about trade. talked about trade packs and he spoke to his constituentcy and the republicans are waiting for him to come out front about this. he did it and one of the interesting things is the way he framed that conversation. if you go back and look at it he talked about china and he's making it a competition between the u.s. and china which people say. but interesting as a motivating factor for the american public to be thinking about it in those terms. >> i want to thank you for joining us today. >> thank you great to be here. >> health care of course a big topic for washington and corporate america and well here in davos as well.

we'll talk to a chairman that knows that inside and out. squawk box returns live from davos switzerland. we're back in a moment. [woman] can it make a dentist appointment when my teeth are ready? [girl] can it tell the doctor how long i have to wear this thing? [man] can it tell the flight attendant to please not wake me this time? the answer is yes, it can. so, the question your customers are really asking is can your business deliver?

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switzerland. we all have gloves but we're not -- we wear them -- >> we're okay. >> the sun is great. it's warming me up. the air is a little cold. >> but i feel like mickey mouse. >> there are heaters under here. >> why did you have to -- >> no they're not. they're over here. >> i have one right here. it's wonderful. >> i don't. i have a blanket on my lap. >> watch the segway. it takes oil to run these heaters heaters. that's an anchor. that's what we do. >> you're so smooth and good at it. >> saying the cartel's policy is creating volatility. it's a big energy producer and they're not bitter and toyota is warning it sees a drop in annual vehicle sales.

volkswagen could have a chance to steal the industry crown this year and the key reading of nonresidential activity in this country, not this country, in our country, right? >> in the u.s. yeah? >> okay. so see now i'm all messed up because we're in switzerland, right? okay. so anyway the other country where we're usually from rising last month the -- this country is -- >> yeah i got it. >> i might have actually known to switch it up. >> maybe i did too. >> all right. let's talk about the future of the health care system. it's a big topic when world leaders get together. thank you for being here. >> great to be here. >> you made huge news when you

decided to raise the wages of your lowest paid workers to $16 an hour. this is happening when everybody is talking about the minimum wage and what's going on. why are you doing it? >> i'm engaged in social media so my employees were sending me messages about how difficult it was to make ends meet and i thought why don't i look at the data? i had the data of our lowest compensated employees. we had people largely single working mothers that were working a lot of hours for us. they had a number of their children on medicaid because they couldn't afford their own policies and they were on food stamps. so i said here we are a fortune 50 company and we're going to put these people into poverty and i didn't think it was fair. we were looking at how we upgraded and invested in our work force. we'll call it an infrastructure

investment in the quality of our employees in their healthy lifestyle so i thought it was a really good thing to do. >> you're talking about a lot of the employees that have first contact with your customers. these are employees working in call centers. the ones processing the claims and dealing with these things and you made the point that the insurance economy is no longer just about big companies deciding and making the decision that you will go with etna. this is more of consumers making their own choices. >> definitely. we need knowledge workers and people that instead of reciting the rules actually help solve problems. >> when you say you're going to upgrade your stamp does that mean certain people will be losing their jobs and you'll be replacing them with people more talented. >> we're going to give them the chance. we needed to engage them first.

they were worried about whether or not they could afford health insurance and we impacted their benefits with an eye of how can we raise their income high enough. >> you asked how much this would cost. >> sure. >> how much was it. so you didn't have that many people making below. >> 5700. >> and what were they making before. >> anywhere from 13 to $14 an hour. >> so $26 million looks like the total cost. sounds like the total cost. >> on an annual basis. >> do you believe you can make 26 million more dollars to pay for it because of what you're doing or do you think about it like that. >> i have people that think about it like that so they want

to know where are we going to find the sayings to offset the $26 million. we shouldn't look at it that way. we destroyed business after business in this country by look at spreadsheet with numbers we call truth. instead let's look at the benefits we can derive as a result of the investment and stand back and say is this a risk we're going to take. >> but you can't give everyone $50 an hour because your company would end up out of business. so there is a number mark. it's great to be fair. what did you call yourself enlightened but there's a number where you're going to be stupid and drive your company into a noncompetitive position. you can't do 50 an hour right. >> i'd rather do it at any own company than the government take it. >> but there's a number you can't raise everybody too. you can't do 50 dhrs an hour.

>> do you think other ceos would come up with the same answer? >> i'm already doing it. >> you could have taken a 50% pay cut and paid for this with your just sally. >> no, not 50%. >> one year you could have. >> the way we need to do is bring people along in this recovery. not just push the numbers to the bottom line. >> you say you've heard from ceos. what have you heard from employees and shareholders? >> the employees love it. i was at jp morgan the morning when it hit the wall street journal. so it was topical. >> the conference? >> yeah the conference last week and our investors are fine with it. >> nobody called to say what are you doing? >> i got a lot of questions but when i gave them the answer -- we have $120 million in-turn

over costs. >> losing employees. >> rehiring, retraining. so there in alone is an opportunity in and of itself. >> with the way you're phrasing it every ceo in the company should look at doing something similar and if it will work do it because if it keeps the government away god speed. >> i agree. >> the cool kids are wearing vests. >> this is a beautiful coat. >> stylish. >> but people don't understand just how fashionable it is because you won't wear the sunglasses. >> they look good. >> come on. >> mark i want to thank you for coming on and talking to us about it because it's a hugely

important issue and something we'll be watching through the next year so see how it works out. >> it's a better alternative than government distribution. >> saturday nights are right for fighting. anyway, still to come this morning, imb cfo. mark you have a pair of those too. >> i do. >> it's unbelievable. we are in europe. the view of the global economy and a college drop out that says he can change the world by teaching kids to code. plus at&t ceo stops by to talk business, price wars and some of the new rules coming from washington an mayd maybe new rules that aren't coming. stay with us. squawk box will be back.

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imb coming out with quarterly earnings that beat the street. revenue came in on the lighter side. joining us in a cnbc exclusive is imb's cfo and he's working so hard at ibm. you're not in davos. you needed to be in the states but congratulations on what some people are calling some signs that maybe it's turning around. it's a huge company but maybe you're seeing some fruits to your labor.

>> we certainly are. we saw a $7 billion cloud business for us last year growing at 60% which for us is a pretty big dproeth number on a pretty substantial business and that puts us at the forefront of cloud service providers as well as in total we talked about a $25 billion set of businesses focused on the strategic imperatives of ours growing at a solid double digit rate so we see a lot of sign posts here that the business is on the right trajectory and the strategy is paying off. >> so the cloud strategy that the company is employing, these are signs that this is the right way to go because martin i guess there is probably a moment of reckoning, what was it three or four months ago you remember the stock was up above 180 or so and the company had to concede that there were things that weren't moving as quickly as it had been

hoped. there were earnings projections that weren't going to be hit. maybe the previous ceo shouldn't have guaranteed. having dealt with that now, are the bad days we're talking about behind the company? what did you say at this point? can you confidently say that? >> we feel very good about how we're starting the year. as i mentioned we have $25 billion of revenue in our strategic imperatives and the rest of the business still delivering very high value so we were able to generate about $21 billion of pretax income across the entire enterprise so within the entire enterprise we're moving to higher value and we saw for 2015 we talked about higher margins again to finish 2015 and then interestingly and very importantly for us in those high growth areas with the strategic imperatives we see higher growth profit margins than we see in the average business of ibm in total.

so as we shift to value and our strategy is very much around the shift of value. as we shift the value in the cloud and analytics we see very good margin opportunities and very good growth prospects. the other elements we feel good about is we announced a new mainframe and we'll get a full year out of our power 8 cycle. so some momentum coming into the year. >> martin i know you talk about moving to a higher margin higher value chain proposition. the question is can you do it fast enough because clearly the higher margin piece of the business is still smaller, and how can you ramp that up at a time when everything else comes down and let me ask you this revenue down across all of the map, america 9% europe 13%, asia pacific declining 17%. how should we think of the revenue part of that puzzle?

>> let's talk about revenue first. clearly the biggest head winds in revenue are related to the strong dollar. this has been widely covered by the news. we have seen a very substantial head wind in the fourth quarter in terms of currency and we project based on current spot rates that 2015 will face a 5 to 6 point head wind in translation just to currency alone. we see head wind we have undertaken during 2014 as we execute that shift to higher value. we divested about $7 billion worth of revenue. now that $7 billion had a $500 million loss associated with it so very much empty calories and that helped us move to higher margin. >> yeah, that's the question i guess martin and i don't know. the dollar wasn't vongstrong three or four years ago as it was now.

it's still something that pointed at a very difficult time that imb has been having to try to raise revenue. will it ever be a company that grows in terms of revenue? or is it going to continue to shrink and be more profitable and that's the best you can hope for? >> no i think we do see growth as the strategic imperatives continue to make up a larger and larger portion of our business. over the last ten years if you look at a ten year period including currency and divestitures our revenue grew about 1% compound growth rate. within that 1% we have been able to triple our profit base during the same time. so the shift to value is clearly, clearly evidence in our margins but we're not going to be a 10% grower or 12% grower but we live and have built a model around the low growth environment we feel comfortable with. with currency and divestitures that's going to be a head wind

but overtime we do fwroegrow. >> martin you made a very compelling case about the ability to engage in buy backs at the same time that revenue might be shrinking but in a company like yours that's still working. do you think that the company retro retro retrospectivley should have used that money in a different way? >> not at all. we're very pleased we were able to take out our shares over the last few years and as we talked about about three months ago we hit a milestone where we reduced our share count by down below 1 billion shares. we feel good about the amount of capital we have been able to return and our investors made it very clear to us that in their mind they're happy for us to reinvest in the business and opportunities that are going to generate margin. they are obviously supportive of

an acquisition model that can enhance the capabilities that we organically but they also expect we continue to pay a dividend and expect us to return excess capital to them in the form of share or purchase which we have been able to do. >> okay. martin, thank you for joining us this morning. congratulations on the earnings and we look forward to what's to come. >> thank you. >> in the meantime coming up on our program, a young business lead who dropped out of college to follow his dream. how he's teaching millions of students around the world to code. he plans to bridge the skills gap in the process. he joins us right after the break.

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welcome back to "squawk box." we're live from davos, switzerland, this morning. they have a mission to create a generation of codars. the co-founder zach simms is back with us. you've got a beard. it's very nice. >> thank you. >> we've been talking community colleges in education, given the state of the union last night and what the president wants to do. one of the questions that occurred to me he wants to make community colleges free. some of your programs are free already.

>> absolutely. >> is there any possibility, one of the biggest problems with community colleges these days people don't graduate 60% to 80% don't graduate. you can take some of had those people and teach them to code? >> absolutely. still retraining four things in technology and programming, i think that's also part of the education. >> how do you do it? one of the things we've talked about on the program, people that go to your site to learn to code are very ambitious. oftentimes very educated to begin with? >> we run online programs in five different cities detroit, miami, a couple others designed to be that component for people who need that extra support. we run some at community colleges. >> how does that work? did she basically take a curriculum, it's really expensive, most of it is online. >> what the lowest education you think you could actually have to code? >> good question.

we start to teach people when they're in middle school. students that are in middle school. i guess that's a baseline prerequisite. >> when you say there's an in-person component, is that a class you actually go to is that a tutoring program? >> it's usually a t.a. sitting with 15 student misa room and walk them through the curriculum. >> what kind of job could you get if you go through that program? >> starting at zero to an entry level job to jobs that pay $80,000 to $100,000 a year. >> that's incorrect. >> really? >> yeah. we're seeing people career changing. >> wait a second html if you weren't with html you're not going to get an $80,000 a year job? >> no. but if you put that curriculum you'll get an $80,000 job. >> michael bloomberg apparently pledged to learn to code. i believe that's here in davos.

did he actually do it or pass the exam? >> i don't know. we don't look at user data like that. >> what do you mean you don't know? you don't know? >> i don't know. >> joe? >> yeah. >> do you think you could teach him, pascual, right? >> a high-performance pasqual, i think. i'm still using cobalt on my commodore. do you know what i'm talking jab. >> i do. i've never seen a commodore. >> actually my sperry takes up four or five floors. my sperry rand unifact thing. >> i have no conception. someone sent me something on carbon feedback radiation, and it was in code. a lot of -- >> how expensive is the program? >> everything online is free. in person it's $250 for a

12-week program. >> what happens to your company eventually, are you trying to go public? >> we want to find a venue to help. that may involve the public eventually. >> just keep it scale-borne granular, is that good advice? >> what? >> scaleability is underappreciated. >> you sound like -- >> i knew like four words. i couldn't code if my life depended ton. >> i know. a virtual who's who of business leaders. when we come back we have more leaders who are stopping by today. things are getting started here. up next at&t chairman randall stephenson. we're talking immigration reform and a lot more. "squawk" will be right back.

good morning. welcome to the beautiful swiss alps. the world's most powerful and influential leaders in business and government they're gathering here. we're giving you an "all-access" pass. randall stephenson. airasia ceo tony fernandez. and health care visionary zeke emanuel and to bes could grow. >> the backdrop for this year's gathering, oil prices near multiyear lows. the economy's in trouble. no topic is off the table. the second hour of "squawk box" begins right now. good morning, everybody. welcome back to "squawk box" here on cnbc. we are live from the world economic forum in davos,

switzerland, i'm becky quick with andrew ross zoshgsorkin. economists are looking for a 1% increase. new figures show that toyota retained its ground as world best-selling automaker in 2013. beating out volkswagening by a small margin. and a busy after the bell session for corporate earnings is just ahead with dow components american express. also we'll have ebay and companies set to report this afternoon. >> okay. we've got the stocks to watch this morning as well. we've had one already this morning, united health earned $155 per share. and helped by the number of factor including surge in premium revenue and better profit margins. ibm posted better than expected quarterly earnings. but the new full-year profit target short of consensus. and shares of netflix soaring in

early trading. adding 4.3 million subscribers. and the big driver overseas growth offsetting a slowdown in the u.s. joe. the first newsmaker of the hour competition going through with telecom giant at&t looking to increase its footprint recently announcing a deal. joining us is randle stevenson, chairman and ceo of at&t. we're a long way. >> anti-texas. >> it looks a little like texas. >> that is beautiful. we're in davos, man, we know each other, do you scratch a little bit -- are you comfortable in this whole setting. is it stockholm syndrome start affecting you? do you still start redistributing while you're here, or what do you do while you're here? >> it's interesting that you say that, because i come here routinely, as you know. and in our industry it's

been -- the last three or four years, people in europe looking at what's going on in the u.s. what's driven all of this investment in growth in broadband, the mobile and internet. what's intriguing to me is people are saying what do other bill policies look like and what's causing this. in the u.s. we seem to be looking towards policies in europe knew we've gotten to a place of deep penetration and broadband. we're seeing a little between the two in our industry. >> so you're doing great things in international investments that will help the company, i think. but is the most important thing that we're all the waying for, what's going to happen intermittently in terms of how we decide on net neutrality? we saw that some republicans recently are -- seem willing to accept a little bit more regulation if we don't go to the utility model that the president has been actually pounding the table for. is that the most important thing

in the future of what you're dealing with? >> i think it's the most important thing for the industry and the u.s. obviously, internationally, everybody's dealing with the same issue. but it's intriguing, the president has said leed like to go to a title 2 utility-type regulation of our industry to protect net neutrality. and so a couple of congressmen have said well why don't we put in place those provisions that the president is aspiring towards, and give the fcc the authority to enforce those provisions. but there still seems to be an interest in just going down the path of full regulation of the internet by the fcc. so it's going to be interesting over the next few weeks to see what plays out. i don't think it plays out completely in the next couple of weeks. because likely what will happen will trigger lawsuits. and it's going to probably have us in a period of uncertainty for a period of time. >> a period of time being years? given the lawsuits that may happen? >> if history's any indicator of what will happen in the future

the lawsuits will go through the process, ultimately, probably resulting in the supreme court -- >> that's a different take than the last time we talked to you, i think. at that point, i think we were hoping the way -- i know wheeler's hoping he can find a way to avoid some of the lawsuit? >> yes, that's what we've been working towards. is finding a way to give the fcc the authority to impose the no-blocking, no-priority access and so forth. but there does seem to be a desire to give the fc c broad ability to regulate. >> what does that mean? >> figure in the wind it sounds like things were changing? >> yes. >> what does that mean with your transaction to directv. what do you think it means with the transactions with comcast, this parent network and time warner cable? >> our contract there's no broadband attached to it. net neutrality is all about

broadband. buying directv doesn't change it in any way shape or form. we're buying a company that's a stand alone business. if the fcc were to rule on net neutrality, what it does, i believe it takes it off the table for time warner i would guess. >> i don't want to know what is it does to the investment. i want to know what it does to your stated -- the idea that you will not make any new huge infrastructure investments, other than what you said you'd do given the uncertainties. so you're going to be on hold then, you're going to be on hold until the supreme court decides? >> i think the industry is going to be on hod. and how does that help anyone? >> obviously, i have a biased perspective, i don't think it helps anybody. one of the implications of going to a full regulation in our industry. and i had this conversation with some folks this last week and that is we're trying today to

obsolete our old technology. we want to take it out of service and replace it with either wireless or internet protocol technology. we're working with the fcc to do that. we think we might be able to get that gun by the year 2020. think about it for a moment if we put the wireless industry and the broadband under this regulation. since i've been ceo, we've gone from 2g 3good, 4g and now we're working on 5g. think about the upgrade to technology. on the broadband, dsl, to fios in the home. >> we had had barry diller on the show in europe just last week he challenged the idea that you've told people publicly if this legislation happens, you would pull back. and he made the argument that you're going have to keep spending, that the consumer's going to want so many of these products anyway, that your hand

is forced? >> that same argument was made back in 2000/2001 time frame, if you call when we had a similar thing in our time frame. we saw it over the next three or four years pull back dramatically. the u.s. went from leading the world to trailing the roeld world. those rules were held out in 2004. what happened? this industry is investing more in the united states than any other industry over that period of time. so, it's going to have an impact on investment. does it happen overnight? does it happen tomorrow? no. >> barry diller also said that he like the status quo. >> he does. >> the status quo where net neutrality is being maintained by market forces. >> he likes the fact that -- >> it's almost like he likes gridlock. where there's arguing on both side. and costs continue to come down.

>> he said -- you could invest if there was gridlock. >> the positive aspect about the debate that's going on is i think you're hard-pressed to find anybody who argues that net neutrality is not important. we need a neutral internet. we need where all the content developers, all the developers have access to the internet on equal terms. i think everybody agrees with that. where everybody is getting stuck with that is beyond that. everybody is of the mind we can give the fcc the authority they need to impose those rules but let's not take an industry and put it 1934 design regulations. >> even democrats like wheeler, understand if you're going to make huge investments the way the private sector works, you're able to get a return on those investments and you're not the red cross at at&t. and you're not a type of philanthropic endeavor to wire everyone. and you've got to be able to -- they should stay out and with a decent return? >> i'd turn it around a little

differently. and that is look at what's happened at the light touch regulation in this country over the last few years. >> right. >> it's drawn investment like no other. i think what we ought to do before we do anything we ought to ask ourselves cautiously what is the implication of this on investment. >> before were go i have a practical question for you, when you sat down i said i might give up my land line because i don't really use it. i thought for the audience is there a case to be made for keeping your land said line today? >> well sure. depends on what your use. if you look at our customer base the young demographic tends not to have a land line. they've grown up with just mobile only. i still use a land line at the house for security reasons, all right? >> right. >> and the land line is the basis for home monitoring and so forth. and actually what's interesting when we sell people broadband and tv 30% or 40% still take a

land line telephone. just different people have different uses for it. my mom told me she was going to take hers out. i told you, she's ma bell she's not allowed to do that. >> she's the official ma bell. >> you won't have a land line and you won't have a car. you're not a normal american person, trust me. >> but you carry two mobile device and you make up for it. >> so randall your glasses. >> no. >> how do you feel about these? >> wear those in texas? >> before you go the spectrum, i know that option is something you can't comment on right now, it's a quiet period for everyone involved in it. but it is something that a lot of people are thinking about for the industry. just the idea how much is the spectrum worth. some raise questions about it you can lay out your reasoning

for why you think this is valuable? >> i can't comment on a deal with us. whatsoever, i think if you watch the newspapers though it's really interesting to see the interest that the auction is drawing. and it's an indication of how much of our world is moving to this mobility world. and i think it's also another reason why we ought to be very cautious about the structure that we put all of this in because it is driving an incredible investment. >> randall, thank you. >> for the texas economy, it will be okay. >> the texas economy is. >> this is staggering, and the interest rates, those two things we didn't get to talk about. the world is topsy-turvy. >> and the fed maybe not hiking. going to bring qe back. yes, he did. >> thank you. >> thank you. when we come back this morning, airasia's top

executives here we're talking business growth. and his company's attempt to manage through crisis in the wake of a deadly air disaster. stick around, "squawk box" been right back. opportunities aren't always obvious. sometimes they just drop in. cme group can help you navigate risks and capture opportunities. we enable you to reach global markets and drive forward with broader possibilities. cme group: how the world advances.

♪ welcome back to swx swx. for six years in a row, airasia

won the title as world's best low-cost airline at the world airline awards but at the end of the 2013 took a trach turn with the crash of one of its planes in southeast asia. 162 passengers and crew members were killed. here with us is the ceo of airasia toni fernandez. toni, i want to read you some of your tweets. you've been very responsive. much more than any airline we've seen and very open. you wrote, it is so sad though seeing our aircraft i'm gutted and devastated. but hopefully, we can find the rest of the plane and families for closure. my heart is filled with sadness for all of the families involved. my condolences, all words can not express how sorry i am. you have met with some of these families. before we get into the business issue, what do you say to them? >> you know it's not something you can actually put into words. it's very difficult because, you

know, they've lost loved ones. and we have lost some of our family members, our crew that is not blood relatives. the only thing i coco provide comfort, provide assurance that we'd be there throughout. i gave them my phone number whatever they needed we were there for them. it's a small thing in relation to what happened. >> toughest day for you? >> toughest day in my life. it's still tough. but somehow, i find strength and keep the resolve going for those people involved. >> let me ask you this you have been much more responsive on twitter and elsewhere than most ceos of airlines. you've been out there, you've been vocal. when people think they've found the fuselage when they think they found all of it. you say, i think we've found it. usually, the lawyers say not to

say anything. >> i think transparency i think people want to know. they've got to hear it from the man in charge. >> has anybody told you you've got to stop this we don't want you doing this? >> well i think it will be difficult to control me so no one did. i just think it is i'm the boss i've got to lead from the front and people need to know what's happening and i've got to set an example for my staff. >> there has been some controversy about the timing of this flight and whether you actually had a permit to fly at the time that this plane was in the air. >> yeah. >> did you have that permit? >> yeah we did. many different types of permits. and there was one administered between the dgc and ourselves. the actual permit. >> what do you think is going on with that allegation made? >> well nothing, really. it's just one of those things. >> this a cya for somebody else? >> no i don't think so.

there were 60 other flights discovered having similar issues. the rights to fly come from various countries. singapore had already approved it. >> toni i think takeoffs in landings every day, it's incredibly safe other than any mode of travel. when something like this happens, in terms, less than 1 out of 1 trillion is what we're dealing with. but there's a perception in your part of the world, there are certain matches in terms of power train and maintenance and the like. do you do it from top to bottom? >> i think safety is -- it goes on every day. airasia, we followed it to the dot, airbus training. >> is that like that in that part of the world?

>> every regulatory authority, you fly to different countries. there are so many checks and balances. you have your own. >> it's been on different watch lists? >> yeah ourselves, we were taken off that list. i think every regulatory authority has the rights to maintain it. and you follow systems and checks and balances for it. for, we followed the best. we followed the approved training methods of airbus. and for 13 years we carried 250 million people we flew 250 aircraft, we never had an incident. i followed a very old-fashioned methodology, i hedged our booking. so we no risk. if we sold 12 months ahead. we hedged 10% we're fairly well hedged. >> a boon? >> one of the pluses in a tough

spot of the year. >> does it make sense to track planes with satellites and would you be prepared to make that investment? >> yes, we have something where information is downloaded every minute. >> but there isn't this effort to find that black box? but that black box effectively exists in a cloud? >> when malaysia airlines happened, i said there should be a system where information is sent live to the cloud. it seems amazing that that doesn't happen. i think that's going to happen soon. unfortunately, tragedies such as what's happened last year pushed this thing. >> there appears to be a global pilot shortage how do we address that? and how big an issue is that for expansion of airlines like yours? >> well we took a step early on by having our on training center. you have to modify your growth as well because you can't just churn out pilots and the quality goes down. there's enough people throughout, there's enough training simulators.

it just takes time and patience. >> by the way, how are the bookings looking? >> very good. we have tremendous support from the world. but really support from your pocket. that shows you where the support is. passengers have come out very strongly. bookings are up yesterday, which is quite remarkable for the amount of coverage we've been getting. so that's a good sign. >> up from a year ago? >> up from a year ago. >> an incredible optimistic future, in terms of the middle class, everybody is going to want to fly. a nice opportunity. >> yeah when i started this airline, i came out with a tag line, now you can fly. one of the great stories, the victims' families saying whatever happens don't stop your dream. you allowed me to see another country. >> exactly. >> and it's important that people are allowed to fly. >> toni we appreciate you being here. >> thank you. coming up cnbc teams up with facebook. the results of our efforts and

interesting conversations with some of the biggest names in davos. a busy week still ahead. when "squawk box" returns from the world of economics. in davos. you just got a big bump in miles. so this is a great opportunity for an upgrade. sound good? great. because you're not you you're a whole airline... and it's not a ticket you're upgrading it's your entire operations, from domestic to international... which means you need help from a whole team of advisors. from workforce strategies to tech solutions and a thousand other things.

so you call pwc. the right people to get the extraordinary done. ♪ ♪

coming up we have health care visionary zeke emanuel and toby cosgrove. they'll be joining us to talk about one of the biggest issues on the table with both employees and employers. stick around, live from davos.

welcome back to "squawk box." right here in davos, switzerland, as part of the coverage of the world economic forum, we're teaming up with facebook to bring you face-to-face with leaders and thinkers. i caught up with arianna huffingson about her experience working for aol. what does she think about the deal speculation around the country we've been talking about? >> we have a parent company that really supports us. incredibly supportive. we've grown dramatically from $30 million to $236 million since the acquisition. we're now in 13 countries. we used to be in one. >> what do you think of the idea

aol merging with somebody else like a yahoo!? >> there have been so many speculations about that, and nothing is happening, so who knows. >> we also talked about meditation meditation during sex. it became a very -- >> what! >> a very bizarre conversation. all week we're asking you to take part in the face-to-face davos. sheryl sandberg and melinda gates are going to be sitting down this week and check out the rest of the interviews at dav vatcnbc.com. there's a health care revolution around the globe. it's always a big conversation in davos. last night, president obama announcing a new initiative at precise diseases. >> tonight, i'm launching a new medicine to curing diseases like cancer and diabetes and to give all of us access to the personal information we need to keep ourselves and our families had healthier. we can do this.

>> dr. toby cosgrove is the president and ceo of the cleveland clinic. zeke emanuel is the university of pennsylvania's chairman, welcome, gentlemen, to both of you. >> great to be here. >> the president in the state of the union address, but what is the state of health care what do you think about it toby? >> we're going through a huge change in the united states right now, with tremendous new people being either qualified for insurance, with quality improving, hopefully with the health care costs curve bending over time. this is causing changes in the industry. consolidation is going on across every aspect of the health care industry. it's really enormous change that we're undertaking. >> zeke how would you characterize this? >> i think it's the biggest revolution in 100 years since 1910 when we got hospitals to be really good. and i think we are transforming delivery of care. we're going to do less in

hospital, more in a distributed way over the next decade using telecom. using i.t. focus on keeping people healthier out of the hospital. and that transformation from taking care of people who are sick and actually keeping them away from the health care system. that's going to be the transformation we're going to see over the next decade. and we've already seen a big bending of the health code with the pca, part of that is recession, part of that is other things. but that is going to continue, i think. and it's go to be a big boon for america when we keep our health care costs under control and we can spend our money on other things like education and other things. >> zeke the deductibles have gone up for a lot of people. will that continue to go up? i'm not sure that's a bad thing because people -- well when people hear that, they utilize

it less than they really needed to? >> i agree with you. the change in health insurance has focused people's attention. >> all of a sudden, i've got health care but i can't afford to use it. >> well, part of that also is to make them focus on the discretionary issues and shop on price. part of the issue, we're now getting a lot of push on price transparency. tell us how much it's going to cost. and we're then going to look at places that are all good quality and go for the lowest. >> not a lot of transparency is there yet. and that's part of -- >> again, this is part of what i'd like to say, it's not like flipping a light bulb. this is a transition that's going to take a decade and work about halfway through. by the end of the decade i think you'll see almost complete price transparency in america. >> and prevention wellness is obviously very important. now, i'm running every day and working out every day because i don't want you pulling the plug at me at 75. if i keep myself healthy do i

get like -- can i go to 76 or 77 if i can -- crossword puzzles and stuff, right? >> let me ask you a question it may be counterintuitive, it may sound cynical. the longer wee keep people alive, sound goods and preventive and keep costs lower. i assume the higher the costs are going to be at the end of the life when we all get to 90 and 100 and more we're dealing with things like alzheimer's which is a very costly disease? >> but i think zeke's point is you want to have a quality of life. >> we all do. >> so the issue is really not when you look live to 75 or you live to 85. the issue is you can be productive and you can be part of -- >> i'm sorry? >> 74. >> you're 74? >> yes. >> i'm a little nervous. >> we'll see you next year then. >> i think that your point is

very important, we do have to focus on quality of life at the end of the life. and we know we spend a lot of money there. and a lot of people are not happy what we're doing there. so we need to improve that. i think actually your question is before that before the last year, in the last four or five years, what are we doing, and how much of that is meaningfully adding to people's quality of life. and so here's the big question before us and we won't know the answer for this is are we actually going to reduce the disabilities as we age? or just increase the disabilities increase the amount of alzheimer's, et cetera? that's one of the big challenges, and the president's precision medicine the initiative as well as on the brain, partially to address some of these disability questions. now, i have to say, i am in general a skeptic about all of this science because i do remember, in 1972 we started a war on cancer. >> that's what i was going to bring up. >> one has to ask the question is this the war on cancer in a

different guise. >> but this is knowledge. and we can't turn our back on this aspect of things. we've learned a tremendous amount of things about it already. we've changed the therapy for cancer. we've changed the expectations about children being born and what we can predict about their capability, and their defects. you know this is science, you can't hold it back. you have to encourage it god knows where it's going to take us. >> but i am -- >> instead of being a gradual, with cancer -- you sequence the gene, and once you get -- >> that was over 15 years ago now. >> i know. >> but with the computers, more information, we're going to find out. >> i think we need to start underpromising and overdelivering. and part of the problem is we always say we're on the verge. on the verge. it takes time to do these things. and i think the idea that it's going to be utopian. we're going to have precision

medicine. we're going to have that tomorrow or the next year we have to be sober. the next five years on the cost control, one of the interesting things is no one attributes that to advances in science. no one says oh we developed these better techniques and they kept the costs down. >> no but they will say technology? >> no no technology has not -- >> when you start talking about checking medical records that goes along with that. >> in the last five years that has not been the reason we controlled costs. it has not been technologies. new therapies, i would be skeptical that the new therapies are going to keep costs down. it's how we transition medical care, getting more out out of the medical care. doing more out of the hospital. doing more stuff that is directed towards the patient to keep them healthy. i think that's an important issue. >> part of it is the high deductibles. people are now going and looking at they're going to have to pay

for -- first thing they're looking at is radiology tests and lab tests. we think there's a tremendous opportunity to reduce the costs of those. particularly what they're doing with a tenth of what medicare costs. >> zeke is wearing a fitbit. >> i've got one on now, too, now. you guys -- the cleveland clinic is offering a cheaper program if you wear one? >> exactly. not the fitbit we use a smaller device. >> the question is are we going to get to a time where it's not just a lower bill but a higher bill that if we find out that zeke is not walking as much as he should or not sleeping as much as he should? >> well i think it's a combination of stick, and yeah krot carrots. it's going to be a little bit of both. clearly, we find a financial incentive of keeping fit makes a big difference in people. and we've seen that across the

entire organization. in fact we've seen the results of that. we've changed, for example, by bringing people in who have diabetes and disease management. we've seen a 20% reduction in hospitalizations, with people in diabetes and the same for congestive heart failure, and the same for asthma. so you can make a difference in tracking people and looking after them on a regular basis. and fitis the way to do it. i don't know if becky has one on yet, fitbits have not become a fashion item that's going to be work by everybody. >> no. >> i think this is really important. in and of itself it will not transform anything. it needs to be part of a bigger collection of encouraging people who exercise to eat better. >> right. >> to transform. so it will be integrated with health in those areas. habit, again, we know it's hard to change our habit.

also has been to be sbeg greated ed integrated in the health care system. in and of itself, just the fitbit is unlikely to make the big change. you heard what toby said keep peopling with diabetes et cetera, that's where we transform the whole country. >> good luck trying to eat well this week. fondue chocolate, everywhere you go it's heavy, heavy food. >> the change is what we understand in taking care of yourself. that's going to require education. the education facilities, the government, it's going to take employers to do it. and it's going to take the health care organization. so it's going to be a big change in the organization. >> and it's going to be a big change in where we put our dollars as well. if we can save dollars in how we deliver health care we can invest it in people keeping well. >> gentlemen, thank you both. coming up will the ecb

start qe we'll give you the fii. hopefully not tmi for tmfrr. the italian prime minister thinks it may be time for qe. plus netflix, stock up more than 17%. and bank of america buying moynahan on the results of lower oil. [woman] can it make a dentist appointment when my teeth are ready? [girl] can it tell the doctor how long i have to wear this thing? [man] can it tell the flight attendant to please not wake me this time? the answer is yes, it can. so, the question your customers are really asking is can your business deliver?

opportunities aren't always obvious. sometimes they just drop in. cme group can help you navigate risks and capture opportunities. we enable you to reach global markets and drive forward with broader possibilities. cme group: how the world advances.

welcome back to "squawk box." let's take a look at the futures right now and see how things are setting themselves up for the morning here in davos, switzerland. you can take a look right now, the dow looked like it opens down, 53 points down. nasdaq not looking great either 8 points off. s&p opening 5 points down. also a credit ecb decision looming, there's a possibility that the central bank will introduce its own measure of quantitative easing to fight the eurozone economy. earlier, cnbc caught up with

mateo ramsey. >> europe every other country of the world invest in the growth, in the different idea of economy development. now, for ecb, there is the possibility to give a different message, we qe. >> and switching gears back to stocks netflix says it will complete its expansion into 200 countries within two years. that's faster than expected. the streaming site said 3.4 million subscribers last quarter beating its own guidance thanks to higher than expected interest overseas. shares are soaring on that news. i thought they sent you dvds in the mail. you can get it right through -- >> they started that?

>> yeah. >> seeing the future. >> that's smart. >> you are a netflix -- >> no i'm watching the motorcycle gang -- >> oh, yeah. >> maybe you don't want to join in. amazon prime for the first time, the show that won a golden globe -- >> how was that? >> -- fantastic. you can watch the whole thing like in an evening. >> have you seen whiplash"? >> i have not. >> everyone says you need to. >> because i don't like the other ones i've seen. we'll switch gears again. yesterday, bank of america ceo brian moynahan told me lower oil prices there are impacting the u.s., the bank and the broader economy.

>> we have a $800 billion loan disclosure. and a big part of that is different countries that have oil revenue sources. but as you look at it and as we look at it in the u.s. especially, a plus and minus, both from a micro and macro sense is the regime in the last crisis was to keep stress testing all the time. we run stress tests consistently, have been running them and it doesn't have a huge impact on us. >> checking out oil prices this morning, you can see they are slightly higher up 29 cents for wti, trading $47 a barrel. $47.76. up next the ceo of one of the world's leading software services and bill mcdermott.

and lary fink and much more. andrew hunter debating who will win the big race between the tortoise and the hare. what do you think andrew? rabbits are faster. it's not a rabbit, it's a hare. what's the difference? maybe figure that out before debating the best wide reciever of all time. wait, are you odell beckham jr.? vote on twitter for your chance to win a mercedes-benz big race viewing party. push your enterprise and you can move the world. ♪ ♪ but to get from the old way to the new you'll need the right it infrastructure. from a partner who knows how to make your enterprise more agile, borderless and secure. hp helps business move on all the possibilities of today. and stay ready for everything that is still to come.

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simplicity can be the best form of sophistication. sap is the world's largest business software company and is aims to streamline the user experience, bill mcdermott, ceo of sap joins us now. we talked awe before, i just want to know what is happening to running a business in a place like europe right now with what we're seeing in swiss national bank and with negative interest rates and qe coming? but you'rard at that 30 basis points on bonds, it's crazy. >> yeah yeah. in terms of euro we announced yesterday's earningings, as you know joe, we're pretty

fortunate because we are the ultimate european supper company. >> you're that sports car now? >> right. exactly, companies are trying to run real tile and coalesce all of the data and information for take care of their cushion andtomer, and network the business network and it's become more and more prevailing. >> would you say you've had a year of -- i mean the stock has been weak? has it been a transition year. are you like ibm grap. ling with the world of cloud? >> we have an unique situation, it's a paradox. on one hand we're growing our cloud 72% in the last quarter. we're now the largest cloud user in the world based on users. >> ibm says they're more. >> i'm talking the software the company, 70 million users using

software is the most of any software company. the core business which is nearly a $20 billion company grows 7%. and the absolute operating income is also up. but we were tagged to a margin rate as a company. and frankly, in a cloud world, where you recognize revenue radically, you wait longer to cash in. and that is a transition to quote you, joe, on the business model, that we're going through. having said that we said yesterday we would increase revenue $10 billion in the next five years. and we grow the cloud 7x and we add another $7.5 billion in income in the next three years on top of what we're doing. our situation is quite different than other companies that have reported. >> trying to run this company, that is i think, part german part u.s. you see the way that workers, or that european companies that have a different

role. and germany has a different role in terms i think there's part-time workers that they'll have. more worker friendly where we're -- we kind of throw people to the wolves. having seen both which works better? which is the way -- which line should we be walking for income and equality? >> you got to be on the side of the people. one of the things i think that we have i think, as the benefit of as a european company, is employee representatives on the board. so if you look at our external board of directors, we as have half a dozen internal representatives that have the same voting rights as external directors. that really does bring the people culture, into the boardroom. and you get the voice of the people in the boardroom. i think that's really important. because building trust with the employees, especially in these times of great change is essentially to running a growth company. i would argue for that. >> u.s. companies should buy your model? >> why not? why not have the employees

represented in the boardroom? why not have full transparency on the issues? why not be able to openly discuss the strategic move? >> who has more to learn from the other? european from the united states or united states from european? >> i think we both have something to learn from each other because the u.s. as an unbelievable culture for venture capital and innovation. and that's fantastic. and fast decision making is as helpful when you're running a big company because in this global economy, you've got to move fast. on the other hand, i think sometimes, you have to bring people along in the strategy and be very thoughtful to the concerns -- >> and both of them could co-exist then? >> of course. i think i'm kind of an example of that you know, i've only worked in american companies going up to sap. i've been with sap 50 quarters. so i have some facility with both cultures. and i think if you have bring a softness with an american edge in europe and bring the people

centricity, and the customer centricity to europe and america, you can -- >> you keep saying europe i should have said germany. because no one wants the labor issues of spain and portugal and even france. it's great to have great labor relations with 80% of the population because 20% isn't even working? no one benefits from that. >> we've got to get everyone working. >> yeah, we do. >> and that's the american sad figure. because labor laws over in parts -- or europe is not a monologue. everything has got to work. >> thank you for having me on the show. coming up when we return from davos, we're joined by black rock's larry fink and andrew liveris and larry saunders. "squawk box" returns in just a moment.

"squawk box" slive from the world economic forum in davos. the world's top business leaders, central bankers and powerful head, of state gathering in the snow-covered swiss alps mountaintown. and larry fink will talk

china and weighing in on oil prices. plus steve miller on health care reform and the idea of too big to fail. "squawk box" live from davos, switzerland, begins right now. welcome back to "squawk box" right here on c nba. first in business from the world economic forum in davos, switzerland. i'm andrew ross sorkin with becky quick and joe kernen. the loan program designed to encourage banks to boost lending and mortgage applications rising more than 14% in the latest week tipped by refinancing. and microsoft will shell out future versions of net windows. and that ceo is speaking with leaders and that ceo is getting on a plane and coming to davos.

joe. >> that's 90 minutes away from opening bell on wall street. i don't know what happened. >> it was flat earlier. >> it was a terrific start to the year. it's going to be interesting that 8% to 10% that was guaranteed to us by every single soft side person that comes on here, maybe it's just the monetary that paulson talked about early on. maybe we end up when said and done with good gain for the year. a little scary the way it's thrown out. when you throw in the other markets like oil interest rates, swiss francs you don't see things like this there's and underlying point that we don't quite understand. perhaps looking at something

coming andrew. >> maybe not. >> speaking of that we have someone who has been watching the markets for a long time and knows a bit about this. larry fink is the chairman and ceo of black rock. marketing moving in ways that nobody would have anticipated six months ago. what's happening? >> that was a very chosen dialogue. >> very succinct. >> i'm quite surprised how everything is turning the mood is very bad as suggested, but even the interpretation has moved to the more negative. it's just cycles that we go through. we go through these really big bouts of negativity. and then you get some stability going. all the actions i see will lead to a higher volatility market.

what the bank of japan has announced. and i do believe all this will lead to interest rates, they're going to stay lower and longer. in europe we're going to have negative interest rates whether in switzerland. negative rates now in germany. and with the ecb probably could buy hundreds of billions of dollars of bonds, it's going to lead to probably more negative rates in europe. some people would say that tells you that as joe suggested that they're going to be very negative. but it could be that we're not issuing enough bonds. and the demand from bond is so overwhelming from the private sector to complete with the public sector. that is our interpretation of what is going on. and so this is going to lead to great behaviors out of bonds into equities. i would say here in davos, probably the most sought after thing after the swiss action were pillowcases.

i'm sure linen stores are just -- have lines because can you imagine earning negative 75 basically, to allow yourself have to money in an account. what that is leading to a bunch of bankers leading to heavy buying dollars. and you're going to see migration probably into other instruments. but the official institutions are forcing these behaviors. now, we'll find out in two years whether the behavior is good. will the economic activity pick up enough to validate the equity prices. but lower energy prices is probably the largest redistribution of wealth that we've seen in in our lifetimes. and it's harpedd to interpret those. unquestionably watching their stock flat 30% 40%, user seeing

huge invasion with capital of wealthy people. people driving to los angeles, they're saving $20 to $30 a week in oil. that's going to translate into a $1200 savings. >> the thing that everybody was concerned about with fiat money and race to the bottom was inflation. everybody was worried about that, this is the way this is going to end. this is going to end badly. it didn't work that way, what if it gets to the point that globally we're out -- globally what if there's another global slowdown, you can't do qe on steroids? what do we do? >> el were,well, we have to actually, i suggested to some central bankers they're narrative has to change after this week and next week. they're narrative is going to have to be politician, you're going to have to do things. >> they've been saying that.

>> but they've got to be louder on it. two, i'm leading two sessions here in davos, i think what we're miscalculating how technology is driving the world more rapidly than we think. the sharing economy, we started sharing music. so the music industry has been wiped out in terms all of its profits. we now many companies in technology are having really weakened earnings we're sharing our hard drives with the cloud. but that's a big reduction in cost. and now, we are talking about what technology has done to energy. and it's created a million xs, more than demand. and if we stayed at $100 a barrel we're going to have 200 million barrel supplies. what i'm not worrying about the sharing economy calling uber or zipor whatever else more and

more people are not buying cars. if you think about it when you buy a car, the first moment it depreciates. you have maintenance. if you live in new york you have to store it. but my point is these are deflationary pressures that we're seeing in every industry. and i don't know how you contain this we're shocked about what technology has done to the oil sector which is obviously deflationary. and i'd call that good deflation. but there are other things that we're going to be seeing. maybe it's in automobiles, maybe it's something else. where we're seeing technology transforming howby live. transforming how we have to allocate our savings and our capital. and, so, we're living in this right now, watching it. and right now, it feels really deflationary. or disinflationary at the very least. you're correct, joe. central banks are losing the ability to effect a change. >> can bubbles form during --

>> yeah. >> because there is a lot of pretty but it's still not curing the deflation? >> i'm raising the question are we tackling the right thing? are we not understanding this huge tidal wave of what technology is doing. you know, in the state of the union speech the president talked about, okay we've moved on now. whether some people may not believe that. some people may believe that. but my point is we spent way too much time talking about what the 2007/2008 financial crisis has done. we've been using that as a means for all the issues for the last five years. could it be a trend that's even more overwhelming with how technology is transforring. and this energy thing is the most vivid -- >> you're not suggesting stop it you're just say, analyze it? >> analyze it and what will be the impact.

i'm going to asking people questions in what i'm reading. it is our view that we're misunderstanding the technology wave and how it's changing our lives. >> you mentioned the state of the union. you've been a supporter of the president. he talked about taxing the wealthy. specifically, i wonder what this would do to your business and some of your clients? he talked about the capital gains and that would force people to sell. >> to have a theoretical argument something that has no chance of happening -- even if it were to happen what would happen? >> i'm going to talk about one and then capital gains in a second. i agree with joe. probably not going to happen. but it's going to change the narrative. and it may happen in two years, and i think it's important to have narratives like this. it may, though mean as you're

watching the republican party, they're moving closer to the center. so that -- does that mean that democrats move farther left? i don't know. but i actually believe that the candidate who will become the next president of the united states is going to be the one who is most centrist. let me tap the one area that i believe is a great missed opportunity. all the issues i had with activism. all my issues related to retirement and we're not saving enough. i believe in capital gains. we had, you know a narrative -- this is only a narrative. but i believe the narrative should be we should change the capital gains tax to beginning a policy in which long term begins on the third or maybe the fifth anniversary. and everything else is ordinary income. >> right. >> ordinary income so

raising -- even if you hold it for two years? >> is that long term? is that a long-term commitment? >> right. >> see, i don't believe that's long term. >> would you create a progressive tax? if you hold for three, it's one rate, if you hold it for five it goes down even more? >> or ten like a small business person. maybe it's 5%. >> and if you could change leadership and the entire direction over the course of three years. if you're an investor and you want to buy in and you believe in the story, the story changes 2, 2 1/2 years down the road europeanalized? >> penalized? >> you have the same issue today. >> the folks who argue on the other side say this would take away -- it would totally change the dynamics in the market in a bad bay, do you believe that? >> i would argue liquidity.

but that liquidity i'm not concerned about. i just came from a big meeting on long term ism and how do we effectuate more long-term thinking from the board from the management perspective. mark weissman cpp, we're going to have a big conference in march about this. how to focus people in the long teller. how to have investors focusing long term and how to have better policy. and i think that's the biggest mistake. >> very quickly, the swiss national bank moved and it shocked the world. no one knew about it in the markets. >> by design they didn't want the markets to know. >> but the idea they didn't talk to anyone along the way. >> so yes. i think switzerland was a crossroads, as the ecb was preparing for more stimulus

you've seen the swiss -- you've seen the euro depreciate quite a bit against the dollar. and i think, you know there's only so much capital the swiss national bank has in preserving its -- its currency at a certain level against the euro. it was very clear, the world was shocked, from my perspective, i think, having a statement saying, well we're going to reconsider our policy. it might have been an easier policy. >> to ease into it? >> to ease into it. >> but the idea -- if publicly disclosed at the same time i don't know if that's a problem. >> right. so you had the swiss economy, you have their currency basically tied -- you know tied with the euro. the same currency that greece has. so you got the swiss economy and the greek economy with the same currency. so look at the rest of europe right now, they're still trying to do this with portugal? how is this going to work if

that's what happened when -- >> if i don't worry about it joe -- >> think about the dislocation between the swiss -- >> my biggest worry if this is thought that disruptive it's 18%, 20% revalue-evaluation of the swiss franc is not -- if the economy economy is not that disrupted by this increase which in my view it's going to be disrupted. and if it's not, i'm wrong, germany can look at it and say i want out. >> right. >> and that's what i'm worried about. >> how many other countries have currencies that are at a level that is just ridiculous compared to their internal dynamics? >> but everybody says it's hard to do this because it's so disruptive. >> we'll see. >> because it creates a steep recession. if it doesn't create a steep recession, then this whole narrative about germany --

>> isn't is there an argument to be made that we should just take the pain? >> well i don't know about that. we're watching right now, the sex six-- next six months nine months it's going to raise the narrative about germany and the euro change. i promise you. >> thank you. >> thank yous guys. when we come back, andrew liveris is going to join us. and then larry summers is stopping by aig nonexecutive chairman steve miller will be here. live from davos. we're back after the break.

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world's second largest chemical manufacturing company by revenue. here with us it andrew liveris, he's president and chairman and ceo of dow chemical. just right off the bat, andrew, is this going to -- do you have more to do with input with oil? or do you sell oil-related products? is this good or bad or balance, it's good isn't it?

>> i'll start by answering this time last year this was never a question. we are experts in oil. it's the last three months of our life. everybody has now got a view. nobody had a view a year ago, right. go find me that person i want to go half. >> looked like it was having a hard time staying at 95. i was saying look you can't hold 95. why can't it hold 95, with isis and with iran and all of this happening, it was top taef? >> let's yea we're here in the question you just asked how many the output portfolio -- >> it sounds like they're making excuses without seeing it? >> no absolutely not. demand is held up. this is supply driven with i think a financial overreaction. the financial community, the hedge, the downside stabilized

if it's not weak demand which i just said it isn't yet, but it's a supply side factor. supply side as i just heard from your previous guest is say stimulus, too. all the economies that have this as a discount right now. strong demand in the united states is getting stronger. china now has a new stimulus. so china should get better from here. europe if it doesn't have all the structural problems including deflation and all of the things we worry about in europe ultimately it should find it's way to europe. it's a good thing for dow and the global economy. >> if it stays at 45 -- >> becky as i said a while ago, 45 would have been wildest dreams. i remember wringing my hands from 30 to 45. it's just the move. it's the volatility of the move that answers joe's question a bit. look at the numbers of dow. $20 million of input costs.

just got to 12. 30% of the portfolio has a price effect. weak demand exacerbates that price effect but should happen immediately. it means demand is actually still there. so, yes, is there going to be an effect? yes. this should be ultimately good. where is that going to stabilize at? i can bet you it won't be 85. >> the united states will make a difference in its own production of hydrocarbon. that was wrong. we did double production, right? >> yes, that's supply side. >> i remember people said oh yeah, you know on the margin between, no one knew that it really was -- >> let's say it's going back to 80. 70. >> the futures say 72 right? but the futures haven't been right the last five months. it's going north of 45.

i believe that. supply side again -- >> andrew -- >> no one's right. supply side i've got lots of experts, i'll buy 20 a year. what are they saying about the u.s. effect they're saying what you just said. rememberer it's light, and we don't have the refineries. we're still importing oil, because we don't have the right kind of oil, if we do keystone, a few things from canada, we might have the right fuel. this is still an issue here. we're not producing the right type of oil, but, yes, it is shutting down new drilling. and it has that effect. >> andrew last time i saw you, we were in dallas together. the day you were on literally, ten minutes you got off the set, dan disclosed his stake in the company. you since brought dan back in in december. at the time, you were staying you were taking shareholder

friendly steps. did you put him on the board because you thought he would mount a proxy fight? >> first of all, dan's not on the board. third point, it would be hard to get representatives on the board during this whole process. if you remember quite rightly started right here at this desk a year ago. we spent the year talking, and we assessed during that period of time the gaps between what third point was saying and what the shareholders believed. at the end of the day, activists create noise for their beliefs and what's the gap here. we believe we settled in the right place. we brought on fresh new faces. two of which were unoppose. these are great candidates. they're on board. >> if you were to sell dupont would you bring that under the tent. >> totally uncomment. i will not comment on a

competitor in any situation, if our situation, i believe we helped an amicable situation. >> what kind of suggestions if this is new blood and things that they're bringing what type of good ideas have you heard? >> well throughout the discussions that went public from time to time transparency in our business model. we have a diversified integrated engine. it's not dupont it's bsf. i explained it on the show before. how to do transfer pricing. how to report segments and upgrade segments. that's an examplech fresh perspective. >> you're an 0on the board of ibm, you just heard it yesterday, do you think they can grow revenues? >> ibm is pivoting like a small company. >> andrew? >> go patriots or seahawks?

>> i love russell but i love them. what network has the super bowl? >> i think it might be nbc. >> thank you, andrew. >> take care. when we come back this had morning, former treasury secretary larry summers on last night's state of the union address an state of the economy. stick around. we'll be right back. she inspires you. no question about that. but your erectile dysfunction - that could be a question of blood flow. cialis tadalafil for daily use helps you be ready anytime the moment's right.

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welcome back to "squawk box." we're live in davos, switzerland. if you could be with us on the commercials. among the stocks in the news. retail banks have reported quarterly results. we'll tell you about those, u.s. bancorp and northern beat inging profits. northern trust is ep hadded by stronger equity markets. that's a quick update with the markets. the next guest from the royal economics forum is participating in six panels this year. >> six. >> count them. >> including one on how the u.s. can avoid a centennial slump. larry summers is former treasury secretary. now a professor of harvard university. his latest op-ed, centers on growing middle classes in the

world's industrialized countries. good morning larry. that's what i want to start with. i tried to figure out how to phrase these things to you to figure out out how we can do it. i listened on the president's solutions on how to deal with income equality here and middle class here. then i realized it's everywhere. and it's worse in other places. the prospect for young people in terms of getting jobs. and sometimes, i think, if we don't just in gender quote from the ground up i think about places in europe where if you just did more transfer payments if you did just more taxing the wealthy and giving tax breaks to other people, if you did it that way, it's not going to work. which makes me wonder why it's going to work here. we need to do more with growth in the profit sector. not minimum wage more distribution, more entitlement.

>> that doesn't surprise me you that think that joe. >> okay. >> we're here in switzerland, that's in europe. so when you say here that's referring to the united states. >> we did. >> let's talk about the united states first mill incomes have not kept pace for a better part of a generation. in united states for the first time in our history, net investment in infrastructure is essentially zero. and i've said it on this show before it's a time where we can borrow money at 1.7% for ten years. to finance repairing kennedy airport, if that's not the right -- this isn't the right time, i don't now when that time will ever come. and we need to be making those kinds of investments. >> okay. >> as a country. nobody is talking about some massive increase in transfer payments or entitlements.

we do have to work at putting people to work. infrastructure is one good way to do that. moving barriers to private investments is another. >> right. >> that's why i thought that freeing up the ban on oil, exports is so important. that's why when i'm talked about infrastructure, i thought it was so important to build out our telecommunications infrastructure. you're more likely to have a call dropped when you're talking to boston in driving from new york airports into new york than you are driving from beijing airports into beijing. and it shouldn't be that way. so it's not just public infrastructure. it's public investment. and it's private investment. and those are important drivers of growth. but here's what you also need to recognize. you also need to recognize that if growth's going to work, it has to be inclusive. if we have the same income distribution same distribution that we had in 1979 there would be a trillion dollars more for

middle income families for families in the bottom 80% that would be a 25% on their incomes on average. $11,000 per family. so it's not enough to drive growth. we've also got to make sure that the way in which we have that growth is equally distributed. and that's a large part of what our report is about as well. and there are a number of elements to that. it goes to the need for progressive taxation and especially, this should be on the agenda here in davos, international cooperation, so that we have a race to the top, rather than a race to the bottom. when it comes to questions like taxation and regulation. and it also means making sure that work is properly valued. it doesn't work to have workers be a disposable commodity pitted against each other. and that goes to a range of

employment practices, and it goes to basic benefits. why should the united states still the world's richest country, be the only one where you can't get time off to take care of a very sick relative? or you can't get time off to take care of a new child? >> okay. europe has a lot -- europe has much better at -- as you said moving that. how are you going to fix europe's economical equality? how are you going to fix 20%? how are you going to fix businesses being started up because of labor laws? >> when you hear this back i want you to think about it because it doesn't really go with your world here. think about 25 to 54-year-old men, a group that is probably the strongest expectation that everybody will be working. a higher fraction are working in france than in america. let me say that again. a higher fraction are working in

france which you're always so quick to criticize, than higher fraction work in germany. a higher fraction work in the united kingdom. so we with our flexible dynamic approach that doesn't pay attention to social protection are not doing better at creating jobs that everybody can hold. europe, europe's problems are heavily macro-economic. europe is haunted by the specter of deflation. europe has not found a way to make the monetary union work. europe has an extraordinarily brittle economic and financial structure. and until that's addressed in some quite fundamental ways of which the quantitative easing we'll see tomorrow is just one element. until that's addressed, europe's going to have a very hard problem. so let's not confuse

macro-economic blunders errors of austerity. self-inflicted deflation. let's not take from those mistakes some idea that it's a bad idea to protect people and to look out to another class. >> there's plenty of labor issues in europe. >> there certainly are entrenched issues but that is not -- that is not, you look at what's happened to over the 20-year period if you look at what's happened to employment as a share of the adult population if you look at what's happened to gdp as a share of the adult population, you have to be careful in generalizing about europe. >> the whole europe -- >> the whole europe problem is macro financial than you're recognizing. >> having completely multispeed economies with the same currency? >> we agree on that. >> that's crazy.

>> we agree on that but that's why europe is not a test of looking out for the middle class. >> when you say the hero is broken you agree with that do you believe we can take the pain and break the whole thing up? >> no given where we are now, that would be a serious mistake. >> do you think it's a bad experiment? >> i don't think the euro has lived up to the hopes -- come close to living up to the hopes of those who inaugurated it. i think they failed to heed the economic advice that monetary union needed to be associated with much greater cooperation and fiscal policy much greater cooperation in financial regulation much greater cooperation in standing behind banks. much greater efforts to promote mobility. that is what they were told. and they let the politics trump the economics. and they're paying the price for that right now. >> larry, wouldn't the utopia

and what we shoot for in this country, wouldn't it be our companies winning competitively, globally, and having workers that are trained to fill the positions to allow those companies to win globally so people can earn their success and earn a good living from the ground up. and that would be education. if you want to figure out a way, we can figure. you know if you want to do transfer payments that go right into bolstering the ability of people to have success, then we'll do that. instead of just moving it from this side of the ledger to the other side and hoping that that sticks -- >> joe, i don't really know what you're talking about. it doesn't seem that complex to me. i am for -- you know i'm the guy when i was president of harvard, was honored to have the chance to say any student with an income under $60,000 didn't have to pay anything at all to go to harvard. and the obama administration has done a great deal to make

college more affordable. with the largest expansion of the pell program in history. and then a major step forward with the president's proposals in the state of the union. so you are absolutely -- you are absolutely right about the importance of encouraging -- >> and then the jobs have got to be waiting for them in the private sector when they get out. >> nobody should think that economic growth does not come primarily from the private sector. but basic research isn't going to be done by the private sector. the infrastructure that moves goods ever faster in to just in time economy isn't going to come from the private sector. >> you're right on that. >> the education that's going to be performed isn't all going to be performed in the private sector, but, look you're absolutely right -- >> you call me what you call me during the break -- >> i've said it often.

>> will you call me on this cable -- >> joe your censors might be -- >> attila the hun, yeah. we're not on a delay. >> all that i would say about you -- but you've got to recognize -- >> i do. you do too. it's davos. >> it's a crucial role for supporting. >> okay. >> i've said often, confidence is the cheapest form of stimulus. and i think we do need to pay attention to supporting private sector confidence. but i want to ask you something, because you sit here and you follow this every day. >> yeah. >> if this has really been a period of such a oppressive terrible attacks on business the way you suggest, why is the

stock market tripled? why has there been a period when the valuation of companies has never done better? never done better? you would think if we're really launching all of these extraordinary attacks on business -- >> we have a really resilient economy. >> maybe the extraordinary attacks on the economy are not quite as large and quite as damaged as you suggest. >> with the middle class policies does it. >> and also said you're right on that will you give him that? >> this is davos. >> larry summers, thank you. when we return today, he started his career at ford was the chrysler executive under lee aya co-and the ceo of delta.

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welcome back to "squawk box" live from davos, switzerland, we're joining now by steve miller. the chairman. board of aig. good morning to you. >> good morning. >> before you get into you had a response to larry summers who was just coming on. you guys said something briefly on your way in and out. >> larry and i agree there's a problem with the middle class we're just on disagreement on what to do about it. he also was saying stock market is up in the u.s. and yet, we are complaining about regulation. and the answer is most of the companies that make up the stock market are global companies. there's a lot of success around the globe.

the problem is there's not enough hiring in the u.s. and that's because all of the regulatory and health care new things, have caused it to be very discouraging to hire people. >> and the wealth engendered by the central banks and the feds have helped all the growth and wealth prosperity that they complain about all the time. and now they're using the stock market as the barometer of health. >> and one more log on the fire the tax dollars bringing work overseas to the u.s. i want to talk about the industry of your business for the moment. metlife recently sued the government to say they will not. the ceo came on the show. aig has has not had that

argument. and some executives say it's a good thing. do you think it's a good thing? >> well it's something whether i think it's a good thing or not, we're going to live with it for a couple of reasons. number one, it's a second set of eyes. i have the regulators from the federal reserve actually sit in my boardroom, so i don't have to go and tell them what was said. they can see this is an active board that's watching the store. and when we say 2008 will never happen again, part of the answer is, i've got the fed looking over my shoulder. we couldn't do that if we wanted. >> would you support metlife's position would you like to be doing what metlife is doing but weren't in a position to do it? >> certainly, we're not in a position to do it. we were the reason for the whole regime based on '08. but with metlife i don't agree them taking on the fed. i don't think they can win.

the legal argument is that it was capricious, i don't think so. they've had taken two years to think about it that's thought cap ricious capricious. >> so you think that metlife is systemically okay thing to do? >> yes. different insurance companies differently from banks otherwise you're at risk of destroying the insurance industry. >> hank greenberg has a suit as you know against the government, related to the bailout of aig. a decision you decided not to join his suit. there's some people who think now that they've seen the trial he might have a shot. >> he might have a shot. we thought three things. one, we didn't think he could win. secondly, we thought the damages could well be zero. and third, we thought a multiyear battle that may go on for another year in the courthouse could utterly destroy our business because of publicity that goes with it. >> with the trial, has any of your view changed at all?

>> no. >> you'll be disappointed if he wins and you won't be part of it? >> good luck to in the last half hour. you were one of the new members put on to the board, some of the new blood that he talked about coming in. i wonder what you think about thing at dow where the situation stands, what you would like to see done as one of the new directors. >> well, i joined the board on january 1st, the stock has gone down 20% since i was announced, so my contribution isn't much to speak of. i have not been to a board meeting, but i will be visiting one of the big refinery facilities in texas next week trying to get myself oriented so i can be an intelligent and contributing board member once i start the board meetings in a couple of weeks. >> thank you. >> thank you. >> flex time, will you be here with me? i mean it was -- >> help with larry summers? >> when we come back we are

heading to the new york stock exchange to check in with jim cramer. we'll be right back with jim after this break. stig around. more "squawk." why are we so committed to keeping you connected? why combine performance with efficiency? why innovate for a future without accidents? why do any of it? why do all of it? because if it matters to you it's everything to us. the xc60 crossover. from volvo. lease the well-equipped volvo xc60 today. visit your local volvo showroom for details.

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let's get down to the new york stock exchange and jim

cramer joins us now. impresseded by ibm? i don't know if you saw the cfo, is that stock or company finally in recovery mode do you think? >> no. cash flow, i thought, weak for the fourth quarter. one more estimate cut. you go into the year expecting a down year from last year that's very discouraging. i really i listened to your interview with s.a.p., every time that ibm does more in the cloud it seems to hurt the gross margins. ibm is very upbeat about doing poorly. >> very upbeat about doing poorly. worst performing dow component. do you know offhand, jim, when -- when would buffett have to disclose whether buying more or selling? >> you know it's not clear what he -- when -- he has a lot of different rules from the rest of us but the thing that's very clear about ibm, there is no mote. i know that buffett likes to buy businesses with motes. everybody wants to be in the same business they want to be in the cloud, transition, do

security, they want to be able to offer soup to nuts solution. you know what? ibm did a -- supposed to do $20 in 2015. now they're talking about $16 and change. i don't even know if they can do 15. it's just a very discouraging situation. and it's what's really discouraging is when you go through the scroll they refer to cloud, cloud, cloud. cloud is a small part of the business. there's an unrealistic tone. they will listen to what i say, they'll say we're realistic. about what? not doing as well as last year? how many companies know in the second, third week of january they're not go doing as well as last year? maybe an oil company? >> a lot of friends here cramer. they say what about that cramer? what about that list? does he do that every day? what about cramer. they know you, my friend. >> thank you. >> see you later. >> when we come back a look back at big interviews of the morning and a look ahead to

what's to come tomorrow live at davos. take a look at futures. constipated? .yea dulcolax tablets can cause cramps but not phillips. it has magnesium and works more naturally than stimulant laxatives. for gentle cramp free relief of occasional constipation that works! mmm mmm live the regular life.

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well we've had great guests from davos and now it's time

for the "squawk" sound check. >> i think we have a lot of work to do. this is the united states and some other countries, to bring our people together and that's the way you get the most out of a society. >> as we shift to value in the cloud and in analytics we see very good margin opportunities and very good growth prospects. >> i think you're hard pressed to find anybody who argues that net neutrality is not important. we need a neutral internet. we need where all of the content developers, all of the application developers have access to the internet on equal terms and so forth. i think everybody agrees with that. >> that's just a small smattering of the lineup from today. tomorrow, great lineup including commerce secretary penny pritzker reid hoffman, james gorman joe jimenez, michael dell and susan

desmond-hellmann, 6:00 a.m. eastern time. >> love that. we do russell -- randall and then we leave out the but. everybody's going to tell me but, he went on to a long explanation after the but. anyway make sure you join. >> be here at 6:00 a.m., hear the whole thing for yourself. >> join us tomorrow. we'll be here again. >> across the atlantic. ♪ ♪ >> good wednesday morning. welcome to quack"squawk on the street." carl quintanilla with jim cramer david faber. stock market juggling a lot from ibm, netflix to turmoil in yemen and ukraine. that looming ecb decision. premarket, implied down 50 points. oil in the green. gold above 1300 for the first time since the summer. ten year yields a