headquarters out west, 11:00 a.m. on wall street, and "squawk alley" is live. ♪ ♪ uno, dos, tres ♪ ♪ ♪ lights go down, it's dark, the jungle is your head ♪ ♪ can't rule, your heart welcome to "squawk alley" for a wednesday morning. kayla tausche and me at post 9, jon fortt at the microsoft windows 10 event in lower manhattan. joining us at post 9 this time, inside.com founder and ceo jason calacanis and out west, market asset management president mark morris. good morning, gentlemen, all of you. our top story this morning is apple releasing fiscal fourth-quarter numbers after close. first annual revenue decline in 15 years for the quarter. sales and net income both lower

compared to a year ago for the third time in a row. apple did beat estimates on the top and the bottom lines, thanks to better-than-expected iphone sales. looking ahead, tim cook says apple is returning to growth, issued a bullish holiday outlook and commented on the company's product pipeline, including autos. take a listen. >> we're always looking at new things, and the car space in general is an area that it's clear that there's a lot of technologies that will either become available or will be able to revolutionize the car experience. so, it's interesting from that point of view, but certainly nothing to announce today. >> all right, so, jason, is he being unfairly criticized by the -- >> do i have to wake up? is it tim cook speaking again? it's like your uncle putting you

to sleep every time. he says so much of nothing when he speaks. listen, you want to talk about the cars or the phone first? >> let's do the phone. i think we need to touch on the phone. >> yeah, because the phone, obviously, we all know we're reaching peak smartphone, and when you look at that chart of sales, it's going up, up, up, and then flattening. now we have to ask, is it going down like blackberry and aol and all of those other great products or just trend along? i believe it's going to trend along. it's the best product made by apple. people who buy an iphone are not going to give it up, but they're obviously taking longer to refresh them. and what are the new features on this phone that are absolutely compelling? you can take a hipster blurry photo, which nobody does, and you can take it in the shower with you. okay, amazing. not the reason to upgrade your phone. so i don't think we see growth there, but yum, yum when you look at the services revenue, that's the yum, yum in all of this, $25 billion a year now trailing and it went up something like 20% year on year. >> 24%. >> and if you look at netflix,

spotify, uber and lyft, these are services businesses. they're getting good at services. they were terrible at services, and now they're getting good at it and it's going to be a highly profitable business, and i think it could double every four years. if it does, this could be something that could be very material. if you're not going to upgrade your phone, maybe you'll pay $15 a month to us, maybe you'll pay $200 a month for us in services. >> but morris, as a shareholder, as an investor, is it worth waiting two, four years to see what happens with services and whether or not that actually becomes a bigger cornerstone of apple's overall earnings? >> well, i think i feel the way jason does about services. i think we're more optimistic than he is. the rate of growth in service revenue is phenomenal. the opportunity there is astounding. the demand for apps is accelerating. people are spending more money on apple play. and in fact, their largest

market in that area now is china, where their phone penetration is still pretty low. so, if you're just looking at that as an aspect of a business, it's a plus. we just look at this company as really reflecting the kind of philosophy we have as investors. we want to own great businesses, great businesses that are going to build value at an above-average rate. and if we can find them at this kind of valuation, it makes it even more extraordinary. it's a cheap stock with -- >> does it matter -- >> i'm sorry -- >> i was just going to ask whether it matters to you, whether supply constraints matter to you or if that's just a great problem to have right now? >> well, number one, it's not the worst problem in the world to have. everything matters to us because while we take a broad perspective, we look at things very intensively. and i think the thing that struck me about the quarter was had you gone back a month and looked at those numbers, you would not have believed they were going to generate them.

and if you go to the iphone 7, which you might say is a step up from the 6, it's really showing very strong demand. and i think that one of the things that you have to realize is that there are a lot of intensive phone users. the phone, this thing that i have in my pocket is probably the single most important device that people have around the world. and if they can get a better one, if they can afford a better one, they will get it. so, the 7 is a step up in power, it's a step up in camera, it's a step up in battery. and you start adding those things up, and it gives you strong demand. and they're at the point -- one of the things they said yesterday was it's hard to make a forecast because we're selling as many as we can make. that's of a high-class problem. >> right. >> that sounds like a yum-yum from morris. i don't know he's going to give us a yum-yum, but it feels like a yum-yum to me. >> jon?

>> guys, i think what we're seeing this quarter is the elimination of down side. coming into this cycle, people were worried, the iphone 7 won't sell, there's not enough innovation. samsung with all this stuff that they're trying to throw into their higher-end funds is going to blow apple out of the water. does the services story really have legs? and we see answers for all of those. the iphone 7 is good enough to drive a strong upgrade cycle. it's a supply problem, not a demand problem. samsung has shot itself in the foot at the very high end with the note 7 recall and pulling that off the market. so, the question now is where exactly is the up side over the next four quarters for apple? you can look out beyond and wonder about cars, and i think that's a waste of time. you can look at the mac announcement where we expect to see this new interface, this touch panel on the mac, bringing touch i.d. to the mac and tying that more into the ecosystem along the theme of os-10 sierra or mac os sierra i think they're

calling it now. i think that needs to be the focus, how much more can apple squeeze profitwise out of this cycle and where's the next, bigger upsurge in growth? we're already looking ahead to the next iphone due next year. now that doesn't look like such a rough few quarters in between now and then, given that, again, elimination of downside, guys. >> let's talk some cash management, guys. obviously, the cash pile growing to $238 billion. if the cash horde was its own company, it would be the seventh largest in the s&p, the 14th largest public company in the world. jason, is that being used efficiently, that number right there? >> well, obviously, obviously not. i mean, there are so many amazing companies that you could put this to work with. now, obviously, the tesla train has left the station. i don't think they can buy it. but if you look at the services sector, they've been obsesses with services. they seem to be able to do that right. they did hardware well, they're doing services well. they're terrible at software. we'll get to that later. but if they're good at services, that puts spotify, a

ride-sharing service, perhaps, or a netflix or a hulu, someone like that into the mix, right? and when you see at&t looking at content, this makes it very interesting. disney's looking at twitter. there's some content play or services. and what i think they should do is they should take a book from amazon prime. how many people have apple music and icloud, and apple care? probably nobody has all three. why not put all three together? yum-yum, 10, 20 bucks a month, then they could build up. what if 10%, 20% of users do that? they have 100 million people giving them 20 bucks a month for the services in one package. so you don't have to make a decision three, four times with your services pack. i get spotify, netflix, you know, or movies, music, backup, care for my product, you know, and cloud storage. this would be an amazing product for them to launch. >> it's an amazing proposition. certainly the company has begun talking more about acquisitions in recent quarters. but morris, the problem with the cash is that so much of it is held abroad. if there was a deal to be had, would you want to see apple

bring this back to the u.s. or continue to use it where it's domiciled? >> okay, well, number one, if i look at it on a near-term basis, they don't have to bring it back right now because their borrowing power is enormous. i mean, this is just a bullet-proof balance sheet in a company generating free cash flow in excess of $11 a share every year. and i say in excess of that number. so, you know, we have a lot of investments that we like, but this one i think is at this point very prototypical. there is tremendous amount of optionality here. the balance sheets optionality. i think it did touch on one thing, kayla, and that's the fact that after this election, we may or may not get corporate tax reform. if we're fortunate enough to do so, that will just help a lot of american companies like apple to put their money to work far more productively. i'm not counting on it, but it

sure would be a nice thing. >> yeah, i mean, how obama hasn't solved this is just a complete failure of leadership. because we're getting penalized three times with the overseas money. one, we don't get the taxes. two, we don't get to buy american companies with it. >> is there nothing to buy overseas? >> no! >> not enough. >> tell me a great company overseas -- >> spotify. >> okay, now where's the second? okay, carl, i proved my point. >> and financial, maybe. >> maybe, but all the companies are here. let's bring that money home and create jobs here and let's buy the companies here. it's just absolutely a complete disaster that we can't figure out a way to come up with a number that's okay with tim and google to bring this money home. failure of leadership. >> certainly repatriation is going to be a much louder discussion in the coming weeks after this election is done. morris, jason, great to have you two guys. jon, we're going to talk to you in a few minutes. thanks so much. >> my pleasure. >> thanks, carl. meanwhile, we want to check in on the markets. the dow has gone positive just moments ago. the s&p has as well. it's up about just one point. the dow is up about 53. the nasdaq's still negative, of

course, apple weighing there. we're watching oil, which had come back considerably after losing about 2% earlier this week. and so, we're keeping an eye on oil as well, especially after we got inventories. and shares of pandora under pressure. the music streaming service disappointing on the top and the bottom lines for the most recent quarter, also issuing a full-year forecast below estimates. stock down 8%. and watching shares of alphabet as well. the company's google fiber division pulling the plug on expansion plans. alphabet access ceo craig barrett, who overseas goes goog fiber will be stepping down. when we return, shares of mondelez getting a bump. check out the action. company chairman and ceo irene rosenfeld will be joining us next on a first on cnbc interview. interit with paypal, google and more. brad smith's going to join the show. then, he's been called the one to watch when it comes to a twitter deal.

bret taylor coming up in just under 20 minutes.

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mondelez shares moving higher after raising profits forecasts for the rest of the year. joining us on the phone, a first on cnbc interview, mondelez chairman and ceo irene rosenfeld. irene, good to have you with us. good morning. >> good morning, carl. >> everyone's paying attention to your view on acorrie ps currency.

what's driving that revised view and how much of it is operating margin? >> well, a lot of it is operating margin. we had another quarter of very solid execution, despite the that is correct that it continues to be a pretty challenging environment out there. and so, the key drivers are continued margin expansion with improving vol mix, and all of that allowed us to deliver another quarter of double-digit earnings growth. we're up about 28% year to date and we're up 42% in the quarter. so, we're very pleased with the performance, particularly in this very challenging environment. >> yeah, you did say challenging macro. top line not yet where you want it to be. what's a reasonable expectation in the year ahead, given your space? >> well, as i said on the call, carl, we're not expecting change in the underlying macro environment, and so we're focused on controlling what we can -- our cost structure, our investments, our innovation pipeline, and that's what's allowing us to continue to deliver very solid earnings

growth, even in these challenging times. >> looking at organic net revenue. you talk about emerging markets up, too. but then power brands up 2.5. can you tell us what that means and whether that continues? >> yeah, we have a set of brands that we call our power brands. they represent about 70% of our revenue. and these are the brands -- they're the brands, the well-known brands that you would know -- oreo, milka, cadbury, tride trident. these are the brands that are typically growing faster than our average, and they have higher margins. and so, as we invest behind these brands, we not only help our top line, but we help our bottom line. we grew our power brands 2.5%, as you said, in the quarter. we're up over 3% year to date, in excess of our category growth. so, we're finding good returns as we continue to fuel these brands, and that's a key driver of the improvement that we're seeing in the volume and the mix underneath our revenue growth.

>> it sure feels like you're getting a lot more interested in chocolate, not just entering the category in china, but premium chocolates here in the u.s. how far does that go? should hershey be worried? >> well, as we said last month, we saw no viable path forward in our conversations with hershey, and so we decided to put our pencils down. so, yes, chocolate is a very attractive category. we think on an organic basis we have a number of assets that we believe can yield incremental growth. we just launched chocolate in china. it's the second largest economy in the world with very low per-capita consumption, so we think there's a real opportunity there. and here in the u.s., which is the largest chocolate market in the world, we have very strong trademarks in the form of oreo and green and blacks that will enable us to create a sizable business here in the u.s. >> finally, we mentioned currency at the top here. it's always hard to get companies to be clear on where

they see forex going, but does the dollar break out of this range here or not, do you think? >> we're not counting on it, carl, again, and frankly, our forecast coming out of the second quarter is pretty much our forecast as we come out of the third quarter. once again, it's put some pressure on us to price, particularly in a number of the emerging markets, but we think it's quite manageable within our overall algorithm. >> congratulations on that quarter, irene. it's good to have you on the phone. thanks for joining us first. >> thank you. >> irene rosenfeld, chairman and ceo of mondelez. and still to come on "squawk alley," a big announcement from intuit, inking relationships with apple, google, american express and others. why it's good news for small business. that's up next. and then, alphabet's brain drain. why changing its name may not have been enough to keep top talent around. bret taylor weighs in. you may think you can put off checking out your

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intuit announcing strategic partnerships with apple, google,

paypal and more. joining us now from the quickbooks connect conference in san jose is the chairman and ceo of intuit, brad smith. brad, great to see you. >> hi, kayla. thanks for having me this morning. >> walk us through how these partnerships came together, how you expect them to progress and how intuit will monetize them. >> well, several years ago, intuit made the move from a north american desk top software company to a cloud-driven product and platform company. and one of the key decisions we made at that time was to be an open platform. because small businesses use about 20 different applications to run their business. and so, we knew we wouldn't be able to build all of those products, and we wanted to make sure quickbooks became that operating system that everything worked with. so, at this particular conference, we have thousands of people here. we announced our integration with apple pay. that's the first small business product that works with apple pay. we announced extended relationships with paypal and also google with google calendar. we had over ten different innovations that we announced

from the main stage yesterday, and it was absolutely incredible. >> hey, brad, it's jon fortt. i can't throw a rock these days without hitting some new start-up that says they're looking to get into the small business, you know, business process space. you guys have sort of been scrambling to position quickbooks as a platform and accelerate your innovation, but tell me, what are the metrics that you're using to determine whether your product is advancing quickly enough to fend off these scrappy start-ups? is it net promoter scores? what can you look at to tell how you're doing? >> jon, we talk about the love metrics. are the customers we're serving getting the benefit they want? are they actively using the product? we can measure that in the cloud by the number of logins. the second thing is are they telling friends or family members? and that's the net promoter score you referenced. and the third is, are they actually adding on additional services? are they buying other products, whether they're ours or a third party?

and back to kayla's point about monetization, today if a small business adds one third-party app in addition to quickbooks, the retention of quickbooks online goes up ten points, and that's the number one metric you look at in a sas business. so, are they actively using the product? are they telling friends or family members? and are they adding on other services? and right now all systems are go when it comes to the quickbooks ecosystem. >> as part of the partnership, brad, with american express, you'll also be rolling out working capital to quickbooks customers. loans up to $750,000. i'm wondering what customer can't find a loan with an existing bank or alternative lender that's already out there that led you and amex to get into this space, and how do you protect against the down side? >> well, unfortunately, a lot of small businesses can't get access to that loan. many time, loans today are based upon their individual credit score, their fico score. and many small businesses have borrowed money, they've hocked

their credit cards, put a second mortgage on their home, so they don't show up as being that creditworthy. but inside of basquickbooks onl, we can see your records outstanding, your records of paying bills on-time and we have an alge rilthm and we have taken a 60% decline rate from other lenders and turned it into a 70% acceptance rate. we've facilitated over $500 million worth of loans, and now with american express and working capital, they can do things like taking out standing invoice and take a loan against that invoice. and we think this is incredible. this is important for small businesses. >> brad, what's the low-hanging fruit, if any, left for a product like quickbooks, besides just retaining the customers that you've got? when it comes to getting new customers, is it international? is it new businesses? is it something else? >> well, there's low-hanging fruit all around us right now, jon. there are 800 mim million small business prospects in the countries we serve. we currently have a few million, so we have a lot of head room for growth.

but the two primary opportunities that we're looking at right now, international expansion. ers we're now in a half a dozen countries outside of the u.s. and the other is the g.i.g. economy, the self-employed, those working for uber and lyft and task rabbit. that is a huge market where they struggle with real problems, like the ability to separate their personal and business expense, the ability to track their mileage and determine if that is something that's tax-deductible, the ability to send an invoice and get it paid with apple pay is an example. and those are the things we've been introducing from this main stage, and we think it really gives an important tool to one of the fastest growing sectors in the economy. >> small business growth is closely watched, of course, brad. appreciate your time this morning and congratulations on the partnerships. >> thank you, kayla and jon. thank you so much. >> brad smith of intuit. when we come back this morning, from facebook and google maps to twitter, bret taylor has seen it all. we'll get his take on apple and all things tech in a moment. later on, don't miss back-to-back can't-miss

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everybody. i'm sue herera. here is your "cnbc news update" at this hour. defense secretary ash carter suspending efforts by the pentagon to claw back billions in re-enlistment bonuses improperly paid to california national guard. he says it imposes an unreasonable burden on some service families, so he is halting it. the pakistani city of quetta is under lockdown days after a rampage through a military academy. it took four hours to end the assault. both isis and the taliban claim they were behind it. aid for mosul has finally begun arriving in northern iraq. more than 500 tons of donations is now in nearby erbil, including tents, blankets, food and warm clothes for the winter. and here's your cuteness alert! twin jaguar cubs are back on display at a zoo in osaka, western japan. one of the twin jaguars born in april became sick, but as you can see, he's better now.

the zoo says it will announce the cubs' names next month. all right, everybody say "aw." that's the news update this hour. back downtown to "squawk alley." carl? >> thank you very much, sue herera. let's get the close here in europe and in the uk. seema mody is also at hq. hey, seema. >> hey, carl. european stocks ending the day lower. energy being the worst-performing sector, which i'll get to in just a second. but our report from reuters also being circulated among traders. it says that the ecb is almost certain to keep buying bonds beyond march of 2017, which is when the qe program is expected to end, but the amount of bonds purchased will depend on the incoming data from now to the december meeting. what's interesting is that over the past one week, inflation data, it shows it's actually improving. the manufacturing data we got two days ago from europe also showing signs of growth, and that's really at the core of this debate facing policymakers. if the european economic

backdrop continues to improve, will that limit the number and size of bonds purchased in 2017? stocks again ending lower. and eurozone government bond yields pulling back, led by italy. a similar story in germany with the 10-year bund, which previously went below -- or i should say dipped back into negative territory earlier this week, coming back as well. some of the big movers are the energy space as oil breaks below $50, also weak production comments from the copper miner in london, antofagasta. shares of the luxury group hitting a high after gucci surprised to the up side. gucci represents about a third of kering's total sales, so an important part of the story going forward. carl, back to you. >> thank you, seema mody. turning back to apple, shares are under pressure after logging its third straight quarter of falling sales and profit, also highlighting the slowdown in china, but does the

company have an opportunity with the galaxy fallout? our josh lipton's at one market with details on that once again. hey, josh. >> well, carl, one big question for apple investors -- is the company capitalizing on samsung's blunder with the note 7? i asked ceo tim cook that, but he says it's too hard to tell exactly how much of an opportunity that is for his company right now. he is ramping up production of his new iphone 7 plus, he tells me, but that isn't because of samsung, it is just to try and meet all that demand. he did tell me, of course, that he welcomes all android switchers to the ios community. as for that iphone franchise, apple reported iphone units of $40.5 million in quarter, a drop of 4% year over year, but an improvement. in q-3, they dropped 15%. gene munster says the guidance implies iphone unit growth of

some 3%. another big question on the conference call -- why did revenue in greater china fall 30%? in part, cook pinned that pressure on tough comps. >> when you look at what happened in '15 in china, we had a surge of upgraders that came into the market for the iphone 6 or iphone 6 plus, and the upgrade rate increased relatively more in greater china than elsewhere around the world. and so, when that upgrade rate in fiscal year '16 returned to a more normal upgrade rate, which would be akin to what we saw with the iphone 5s, as a point, it had further to fall. >> now, analysts do raise another question, though -- is something structurally changing in apple's china business? ubs does note that high-end

smartphone penetration there is now around 90%. still, cook makes it clear that he remains, in his words, very bullish on china over the long term. guys, back to you. >> all right. thank you very much, josh. staying on apple, tim cook and company betting big on growth led by services, including, perhaps, tv. here's what cook had to say about investing in original content. >> i think it's a great opportunity for us, both from a creation point of view and an ownership point of view. so, it is an area that we're focused on. >> meanwhile, google parent alphabet announcing a halt to the google fiber project. alphabet access unit ceo craig barrett, who ran fiber, announcing he's stepping down. weighing in on all of this, bret taylor, ceo and co-founder and former chief technology officer of facebook and co-creator of google maps, if that weren't enough. bret, it's great to have you this morning. thanks for joining us. >> thanks for having me.

>> we've been kicking the ball around on apple all morning long. cash management, their aspirations in terms of m&a, whether or not they're getting larger. do you think they are? >> you know, i think they're one of the best companies in silicon valley in terms of execution. and you look at that in contrast to companies like samsung, they just continue to execute well around the world. and the big job for them is reinvesting those incredible profits to find a breakout business. you hear a lot of talk about television and watches and cars. the big question is which of those will be a breakout business to kind of compete for growth in the way iphone has been in the past. >> so, when they say they're willing to look at a deal of any size, as long as it has strategic value, do you sense a change in tone in that comment? >> i don't like to extrapolate too much from comments on calls like this. they haven't traditionally, you know, used m&a as a way of moving into markets like this. i think they're probably

thinking about more of like augmenting technology and developing most of these things in house. >> bret, we're trying to figure out how to label these companies as they evolve and grow. apple, of course, has apple news. it's been talking about original content. facebook has been resisting the title of media company, saying that it's a tech company. but it's the single biggest engine of driving traffic to publishers. how would you define facebook at this juncture? >> i do think that facebook is a technology company. i really think if you look at what they've done with products like facebook live and their incredible influence on media, they've really created a platform for other people to reach consumers. and i think they think of themselves as a platform, and i think that's kind of accurate. even though it has an incredible influence on media, they're not necessarily creating the content themselves, and i think that's a very meaningful distinction. >> bret, tell me where you think we are in terms of services,

opportunities for tech companies. we've seen apple basically fail before in advertising with iad. that didn't go so well. we've seen them have some troubles with icloud and with other services before that, but now they're trying a number of other things. they haven't gained scale in social, you know, with ping, things like that. what is it going to take to succeed in this current era of services, whether you're apple or anybody else? >> well, i think developing software services is a really different culture of a company than developing hardware. and i think that's why apple has struggled in the past to make that transition as a company, whereas google, on the other hand, started as a service, so it's been way easier for them to really tightly integrate the services into the android platform. you know, that said, as i mentioned, you know, apple's in the enviable position of having such a strong business that they can continue to invest, make mistakes, and reinvest. so, i have a lot of faith they

will make that transition. it's just interesting that when you actually look at the active developing rapid skills services, it's a very different engineering and product culture and i think that's what they're up against. >> we mentioned some of the google diaspera widening even more and what appears to be a pause in the future of fiber. can you help viewers understand what's going on there? i was just in austin over the weekend, and fiber gets a lot of visibility. should we expect that to change? >> i had a really hard time parsing that announcement, as i think everyone did. you know, it was a mix of optimism combined with the fact that they were shutting a lot of fiber down. i think at the end of the day, these businesses that require huge capital expenditures are really hard for a company like alphabet to move into, and i think that's the larger trend that i'm seeing, is some of these bigger bets around internet access, i think companies will probably move to technologies that require fewer

regulatory and much lower capital expenditures. and that's what, if i had to guess, i would be guessing they'd be going more towards wireless internet technologies and things that don't require laying wires and getting the regulatory approvals to do so. >> sounds like you're saying they're more afraid of the political risk than the investment risk. is that fair to say? >> it's hard to tell, to be perfectly frank, but my guess is it's a mix of that and the capital expenditures. >> one last thing. you know, this election season people are paying close attention to what they're calling trump tv, essentially the live newscast of sorts on facebook from donald trump's page. i wonder if you've seen it, if you've been impressed, and if that sets a bit of a template for others who want to have a broadcast feed, a television channel of sorts, on that platform. is that going to work? >> you know, it's hard for me to predict how that will play out, but i do think that we've seen a

really fundamental shift in the way social media has impacted this election. i do think if you look at, you know, for example, twitter, how much of the election has actually happened on twitter as opposed to the news being reported on twitter, i think it really changes consumers' perception of how they want to interact with the news. and social media's so much more participatory. i do think people's expectations of the news have shifted because of this election and i think that's a really exciting development. >> bret, we want to ask about twitter. you're on the board, so obviously you're limited in what you can see. but throughout the course of the last few weeks, as this spotlight has been shone on this service and potential interest from bidders, one of the harshest lights has been shone on the content and the bullying and the abuse that takes place there. are there any plans in light of how much people have been talking about this recently to change twitter's approach to that or to refine it more closely? >> yeah, i think this is one of

the most important issues twitter needs to address and it's something the company takes very seriously. it's very important that twitter is a safe place for people to interact and really get into the news and have that sense of safety. and it's something the company is taking extremely seriously. >> bret, we hope you'll come back, because we have more questions than we have time. thank you so much today, bret taylor joining us, talking about all things tech. thanks a lot. coming up on "squawk alley," forget about looking ahead to the next quarter, even the next year. our next guest has his mind set on the next decade and the major role artificial intelligence will play. then live from the microsoft windows event, jon fortt sitting down with company svp yusuf mehdi. more in a moment.

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market. let's bring in andrew mcafee, m.i.t. principal research scientist. you talk about the second machine age. when is it coming and how afraid should we be? >> it's already here. we're in the early stages of it. and whatever else happens over the next decade, one of the big transformations is that all of these science fiction technologies -- drones, self-driving cars, machine learning, artificial intelligence -- these are going to become part of our daily lives, and there's a lot of good news associated with that, but there are some challenges as well. >> there's a sense that people are working very hard to make a.i. not only as smart as humans, but perhaps smarter than humans. what happens in that case? >> we're already there over and over. as of march of this year, the world's best player of go, the asian strategy game, was no longer a human being. a couple years ago we thought that was at least a decade away. it happened in 2016. so, we're seeing what the a.i. guys call superhuman performance in domain after domain. it's not over yet.

>> tesla, elon musk insists that autopilot is safer than having someone drive you around. do you believe him? >> i think he's right as of yesterday, let alone what's going to happen with one year, three years, five years more progress with these cars. i got a ride in a google self-driving car in 2012 and i felt like an astronaut. you can go test drive a tesla today that's got close to that same level of functionality. >> 2012 was four years ago, though -- >> 2012 was four years ago. >> why don't we have these technologies by now? people are working so hard on them. >> four years is a pretty short space of time to go to mass adoption of a technology. we also want to make sure that they are not just as safe as human drivers but a lot safer. and there are weather conditions that still make the sensors a little unhappy, but we're going to solve these problems. >> a lot of futurists talking about universal basic income. once robots, mechanics take a critical mass of jobs. do you see that and over what period? >> i do see that, but over a fairly long time horizon. >> in our lifetime? >> maybe, yeah in our lifetime i

believe so, but not in the next five, ten years. we don't have a robot economy i believe over that space of time. for that reason, i'm a bigger fan of things like a negative income tax. there are people out there hustling, trying to earn a living, but the market wage is not high enough. let's top that up before we, you know, get ahead of ourselves and just start giving money to everybody. >> there's been so much talk about globalization in this election cycle and bringing jobs, especially manufacturing jobs, back to the u.s. what jobs should we be focusing on keeping here? >> we should be focusing on the jobs where we still have a real advantage over these amazing technologies. for me, that is creativity, identifying problems and solving them and deep interpersonal skills. you two are not about to be replaced by a piece of technology. >> let's hope not. >> you never know. we literally do not know. >> the mantra is never say never, though. >> that's right. >> andrew mcafee, fascinating argument that's going to be taking place over years. here in the flesh. >> for now. >> the human, andrew mcafee from

m.i. technical. >> thanks. we'll go live to the microsoft event in downtown manhattan where jon fortt is stationed. jon? >> reporter: here's a tease, carl. microso microsoft's got a desktop, surface studio. look how thin it is. we'll tell you about the price and this display on the other side of this break on "squawk alley."

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senior vice president of windows and some other stuff, but let's get straight to the device. first of all, before you start drooling, this is $3,000. right? you packed a lot of technology into this. int intel core i5 and i7. this screen is gred every incredibly high resolution, and there's a new way of navigating. test drive it for us. >> what this surface studio does is it lets thank you create a desk top in a creative studio. one of the most beautiful screens ever created. thinnest desk top display. i want to show you the graphics capabilities. take a look at this. this is 13.5 million mega pixels. you get unbelievable color calibrated for real leaf. this is as close as you'll get to real life. you can then use it with microsoft office. we've designed it to give you more of a productive sperngs. you can scroll through documents, for example, edit. these things are life-like. this is an actual piece of

paper. then finally if if you want to get into creative mode, check this out. i can push it down into creative studio mode, and now i'll introduce you to a new input method called the surface style. >> it looks like a puck. >> i can put it on the screen. here's color wheel. with the surface pen, watch this. as i'm driving, i can change the color as i'm editing, so you can get effectively two ranges of color capabilities. you can come in and edit this document. finally, if i show you here a new application called mental canvas. it lets you sketch in 3d. pull this back up. this is a 3-d sketch. slide it. >> again, $3,000 for this. what is the strategic idea behind it? maybe by positioning it at the high end, you're getting

yourself out of that hot water. are you trying to set the bar? what are you doing here? >> great points. it's around the market. work station, creative canvas and drafting table, and the video conference solution all in one. we think we can grow the market for this with this new category. >> you have other new hardware over here. updated hardware. run us through that. >> this is the brand new surface book i7. this is now twice as powerful. graphics performance as the previous surface book, and we've added 30% more batteries. 16 hours of battery with this device. you can do super high end and play gaming. you can do cab design.

>> preorder is tomorrow. you'll be able to walk into microsoft stords and see both of these devices tomorrow. >> preorder both of these tomorrow. delivery, you're not saying when? >> we'll have a limited quantity for the surface studio in this holiday, and we'll ramp up production in q1 of next year. >> so you're teasing us. i get it. >> on the surface -- new surface book, the performance base, that you'll be able to get -- >> do we talk about this? >> this is the surface pro four. sflo it's now in three dimension. you can take your camera. take a picture. now you can also scan in 3-d, drop that object in, and use it for presentations. >> hopes that this will sort of reinvigorate. mixed signals. ian gartner not showing a lot of action there year-over-year except in the west and in

laptops, in fact. what we've seen with windows is trimming this growth up. windows devices all up. in the core p.c. category, two in ones are growing. devices like the studio are going to grow. high of end gaming pieces are growing. outside of that you look at hollow lens, surface hub, xbox, and windows 10 is now powering that. strategies with windows 10 is to grow the devices and drive that innovation forward. >> lots to talk about 3-d and hollow lens here today. also, microsoft raising its game. squawk alley will be right back at the other side of this break. , is the stuff that matters? the stakes are so high, your finances, your future. how do you solve this? you don't. you partner with a firm that advises governments and the fortune 500, and, can deliver insight person to person, on what matters to you. morgan stanley.

>> up 51 points. art cashin, kln, said -- all of this as inventory numbers at the bottom of the hour got a squeeze going on crude, and that lifted stocks to some degree. we just talked about microsoft. not that far off from that all-time high. almost $61 still. >> yeah. it was a squeeze up from cashin that drove oil and brought the market into $50. it remains in focus for the afternoon session. we should also take a look at wal-mart. economic times they could reverse their $1 billion investment in flip cart, which is india's amazon equivalent.

we covered a lot here, and we're telling our viewers. >> cmg still under pressure. that's after the bell. let's go to scott wapner and the half back at hq. >> cnbc exclusive. the ceo of under armor here with me. just one day after its stock saw its worst day since 2008. shares down again this hour as wall street questions the company's growth. >> good to see you. thanks for coming on. >> thanks for the platform. >> what have the last 24 hours been like? >> you know, as -- we've been in the deep end of the pool for