good morning. it's 8:00 a.m. at facebook headquarters in california, 11:00 a.m. on wall street and "squawk alley" is live. ♪ good tuesday morning. welcome to "squawk alley." i'm carl quintanilla with morgan brennan, jon fortt is back.

busy morning. we're going to start with facebook, though. new concerns about data privacy according to about 4,000 documents obtained by nbc news spanning from 2011 to 2015, the social network reportedly treated user data as a bargaining chip in deals it struck with outside companies. in a statement to nbc, the documents were cherry picked to show only one side of the story. it goes on to say the facts are clear, we never sold peoples' data. meantime as facebook prepares to get ready for earnings next week, our next guest continues to see upside growth potential. joining us here to talk about that goldman sachs lead software and internet analyst heather bolini is here with us. >> thank you, carl. >> your piece is reflective of the overall narrative and these stories keep popping up and engagement is strong and advertiser interest is strong. why isn't that changing as far as we know >> we asked the question every quarter ever since cambridge analytica this time last year

and it is about the reach, it is about the efficacy and the type of returns that advertisers are seeing on the platform. >> and this is across the board, according to your note this morning, but especially pronounced at insta, is that right? >> instagram, by far, that's where the momentum is. instagram stories in particular has turned out to be a very good ad unit for those that have started working with it. it's still not pervasive the not all advertisers are working with it but the direct response advertisers have taken to it and run with it. there's a lot of runway there. >> what are the chances that wall street's perspective on facebook shift there's quarter, because there's some deceleration projected. you think it's less than the rest of the street does. based on that, are perspectives likely to shift on how facebook guides whether it's sandbagging or just being realistic? >> i think there's a couple things you have to remember. they also had the start of the

forget me campaign so you can be forgotten on their platform if you want. when management talks about that mid-single digit deceleration which people are factoring in, they've got that. the management has to think about that and what the impact will be. there's a little bit of conservatism from that. they also understand that, you know, they need to keep all of us in check, so to speak. i do think they'll continue to be cautious because some of these third party forces, they just don't know how it's going to impact them. the advertiser feedback just continues to be really good in terms of this being a platform where they continue to want to spend more money. >> it's incredible. if you look at facebook and all the different events that have taken place, founders have acquired companies leaving, all the different privacy and data scandals that have happened along the way and issues along the way, it's been a roller coaster ride. stock is up 36, 37% year-to-date. it's actually up 9% over the

last 12 months now. talk to me about your valuation and how it stands against peers? >> one thing to keep in mind, in almost every meeting we have with clients around the globe, regulatory concerns come up. questions on privacy, so there has to be some impact on the multiple. it's hard for us to discern exactly what the magnitude is of that multiple depression, clearly if you look at where it's trading at versus its growth rate there is some impact. the best comp for this is going to be alphabet. if you look at where that's trading, it's trading -- depending on where your numbers are, the alphabet's trading at a slight premium to where facebook is. how long will that persist for is the question? one of the other big questions is also, though, as we start looking for 2020, how much total expense growth is facebook going to have to have to continue to make some of these changes that they've been making especially shifting to femoral content and

integrating the back end. to me that's a more important question we have to think about what expense goej looks like in 2020. >> so we've had some argument in recent months i guess that their initial guidance, their kitchen sink guidance on expense growth was hyperaggressive, it's not that expense, are you not sure >> no, no. i agree with that. they've done a very good job at always coming in at the very low end or below that. i'm thinking more about 2020 where there was commentary from mark zuckerberg on the third quarter call kind of recognizing that at some point they understand that revenue growth and expense growth has to come closer together. it's been very wide at this point. you've seen a margin contribution but for 2020 where is that going to be based on some of the changes he needs to make to the platform. that's one of the bigger debates that has to come out, you know, over the course of this year that probably is something elsewhere that plus privacy means you're not maybe going to get the same type of expansion

as you would have in the past but we still feel good about the top line opportunity. it's a question of trying to balance that. >> do you think they've had growth opportunities that they've missed because they've had so much else to work on? other products -- >> it's a great question. i don't think so. i do think they probably had to shift from being as front footed as they were in the past last year, so maybe it slowed down some things but he made it very clear on last quarter's call that they are front footed again and with things like instagram shopping and, you know, the monetization of messenger and them talking about what's japja they seem to be -- new product experience and new engagements. >> when you do do a some of the parts assessment of facebook, how are you factoring and what's app and what do you think the opportunity is there in making more money >> we just look at this on a pe

basis. it's trying to figure out what the business model for what's app is going to be. first and foremost, messenger is probably the closest one that they'll money ties next in terms of the next big platform. certainly prior to that we would expect instagram shopping to probably second half of this year be more of a story from the partners that we're talking to, that's where they're focused. messenger in terms of the next big platform, the one that people are expecting next and what's app, people are still debating how is this going to mon aties over time. is it going to engage with us that way instead of being traditional ads? people are taking a much more longer term view on that. >> you say they're front footed this year. i want your assessment on the clarity and effectiveness of leadership right now. it's hard time linewise. we get headlines about four to

eight years ago in the mix with stories about, you know, what's happening right now and you could assess some of the stuff right now as zuckerberg actually taking action to fix some of the things that happened a while ago. how do you read it >> i think you're right. the stories that have come out recently, a lot of them are on -- you know, it's old stuff, going back to 2011 to 2015 and i'm not saying those aren't important, but in terms of how the company has been trying to move forward, i think they'll been trying. he's obviously calling for regulation and wanting some rules and people debate whether or not he's doing that because it's self-serving or whether or not he really wants that to happen because it's what's right. those are the debates going on. we have to judge them on some of the changes they've been making over the last 12 to 18 months and they look to outsiders and it looks like they're trying to move in the right direction. keep in mind there's over 2 billion people using this platform. it is hard to police everybody

on the network. >> that's one of their key challenges. reiterate the buy, maintain 200. thanks heather. >> thank you. and now turning to hulu, at&t selling its stake back to the company valuing the streaming service at $15 billion. julia boorstin has the story. >> reporter: jon, now hulu's owned by just two media giant, disney with a majority stake and cnbc nbc universal. at&t selling it's 9.5% of hulu. it's $15 billion valuation is more than double what the company was worth in 2016. that reflects it's growing user base, 25 million u.s. subscribers to both its on demand option and it's tv bundle. that price tag also speaks to its value to disney in particular. it's looking to bundle hulu with the espn plus and disney plus when it launches in november. jon? >> julia, i'm guessing that

disney would like comcast, our parent, to sell its stake as well and there are reasons why comcast might not want to do that. how do the chess pieces look from those analyzing the situation? >> reporter: i think you're absolutely right. disney would like to have full ownership of this. it's a huge part of bob iger's direct to consumer strategy. the question is whether nbc universal comcast sees value in partnering with disney on this and owning a third is still a meaningful piece of this company, which is growing in value. many people comparing hulu's valuation 15 billion with netflix's valuation and saying netflix may be overvalued but hulu maybe undervalued. the question is how well comcast and disney can work together as co-owners of this? can they grow value if they both own it and how will nbc universal's direct to consumer service launching early next year, how will that complicate things?

i think a lot will be determined in the next six months as nbc universal works on that direct to consumer plan and we see whether these companies who are the biggest rivals in the media space can actually be partners on this. >> we have to remember, jon, they have been partners on this but with two other players as well in addition to at&t, of course, fox was the fourth party that was an owner in this company, so now that we've gone from four down to two, we'll see whether that makes it easier to grow hulu or whether they decide they're better off selling their one-third stake back to disney. >> the power dynamic has changed dramatically, julia, stick with us. lead edge also with us this morning on the state of the streaming landscape. great to have you. so if you're netflix, do you want to face an entirely disney owned hulu or a disney plus comcast hulu >> i think that we don't think about the netflix versus hulu

battle as zero sum. this is a war on the cable companies. a hulu bundled package is just going to provide an awesome new channel for people to subvibe to. the amount of value you're getting, that's a steal relative to what cable providers are charging you today. i think that's going to create a second channel that people subscribe to. >> i guess i'm asking, decisive action from one owner or huge content library potentially from two, which is more potent do you think? >> a comcast plus disney combination is definitely a more formidable competitor against netflix. you want as much as fragmentation as possible. that makes netflix's negotiating power that much stronger and it cost them less. the big debate with netflix right now is their content expense and how much money they're spending on content. if they can push those expenses down, they can crank their profits up and that's better for

netflix. in the long run, we think users will get tremendous amount of value from both products. you'll see pricing going up for netflix and hulu and it's still a win for them. >> julia, what does this mean near term for content on hulu if at&t is exiting this stake given -- and also longer term given the fact that it's building out its own service, how does that play out >> reporter: we don't have a lot of details on what at&t is planning to launch. they talked about this three tier service they're working on. we don't understand exactly what that's going to look like. the one thing i think is important to remember, morgan, when we talk about netflix and disney and hulu, in addition to its direct to consumer on demand option which is more akin to what netflix has, hulu also offers a skinny streaming bundle. we're talking about $45 a month for a smaller package of what you'd get from a paid tv

provider. now, this has been successful so far with hulu. it seems like they're having growth out of the gate with this. and the question is whether or not this skinny bundle which is very different than what netflix has is going to prove to be a real alternative and gain ground versus the more traditional fatter tv bundle that cable and satellite tv providers offer. hulu has all the rights from its parent company and it's older parent companies including warner media. as these rights expire going forward, does that change what hulu looks like and who wants to buy it. right now both comcast and disney have an incentive to want this service that they both own a piece of to really succeed especially as they go up against netfl netflix. >> netflix is one thing. there's one flavor, but if you look at disney and comcast you've got disney plus, you've

got hulu, you've got espn, you've got comcast nbc doing this ad supported thing. does it matter whether consumers are looking for essentially another big options or if they're looking for simplicity >> it all comes down to price. if i can get espn and live tv for 30 bucks a month or 40 bucks a month, i'm going to subscribe to it because that's great value. i think if i was -- if i'm in comcast shoes i'm definitely not selling any time soon out of my hulu stake. disney is going to put all of their weight behind that content. they'll keep prices low to get subscribers on board. >> you think at&t didn't want to sell but they've got other pressing issues. >> yeah. it doesn't really move the needle one way or the other in the case of comcast a third of the business is a lot of value and maybe this thing could be worth like netflix one day. i'd hold out.

>> thank you. >> thank you. >> we to get those netflix earnings after the bell today. we got a big show still ahead. value x jeff ubben is here. stay with us. we see harnessing natural gas unleashing the promise of clean energy. at emerson, when issues become inspiration, creating a better world isn't just a result, it's a responsibility. emerson. consider it solved. is this ride safe? i assembled it myself last night. i think i did an ok job. just ok?

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welcome back to "squawk alley." some of the biggest names in hedge fund activism are

gathering in new york city as the annual active passive summit kicks off. david faber is there live and joins us now with another exclusive interview. value x jeff ubben. david? >> i'm joined by jeff. this is the first time we've sat down, you and me since that microsoft investment, i think. >> it's funny. >> the firm has changed. your role has changed. you're no longer ceo. you're very focused on esg. but, activism itself, you're not an activist conference but i don't even think of you as an activist any more, should i? >> i mean we put the time in to get the know the company and the trust of the board and the other constituents and which is a lot of travel. >> you haven't run a proxy fight? >> then we get to the punchline and say, you know, we think you should refresh your board or,

you know, why don't you call your top ten shareholders and ask them what they think and most of those guys know us and then you have a conversation and you can get it done without a bunch of yelling and screaming. that's the way we like to do it. you hit the ground running when you're in the room, you know. it is travel intensive. in japan we went -- we put one of our partners on the board of owe limb bus medical and it's two years worth of work. you visit with the fsa and other leaders, corporate leaders in the community as well as the company to gain their trust and that's the way we do it. >> you benefit from the fact that you have locked up money, you have long-term capital as opposed to some activists or those that seem to have much shorter term money. marketing seems to be a big part of the whole endeavor. >> i think the incentives are everything, you know. if you have one year capital, you want to make it happen fast

and so you write letters. you get it done. there's many ways to skin a cat. we're just doing it differently. >> yeah. >> some of it is temperament. you don't like lawyers in your life so much or whatever it is. >> forget activism, how about active management, is it dead? >> feels hard. i don't know how much of the bid every day is really somebody that's buying in terms of value on the other side, which it feels like computers are computers and december was kind of just the race to the bottom. i think computers talking to computers. there's this huge volatility around quarterly earnings that didn't need to exist. it seems like somebody wants to beat somebody else to the punch on headline earnings and stuff like that, which rewires the brain of directors and they think again quarterly earnings is really important, but it's a little different, you know. i feel like maybe a bit of a dinosaur maybe. >> well value is still the first

name in your firm's name, can you be a value investor in this market or can you only be one when you have long-term focus and locked up capital? >> you've got to get to the other side. intrinsic value will win. because we have the long-term capital, we have the time to allow our thesis to play out. we tend to make money in year three, four and five not year one and two, if you look at it, so -- >> you still think that's possible in this market even though it seems to be computer to computer and -- >> it does. it has gone on a long time. it has created a market that seems to be difficult for value investors, you know. there's always a worry about the next cycle and high quality businesses can revalue higher and higher because they're treated as bond substitutes.

>> you've changed your focus to some extent because you're very focused on esg for lack of a better term. you have the spring fund. can you actually earn a return by making investments that are also conceivably good for the planet >> right. i have an investment theory that we want financial capital short and social capital long in the '70s which made sense. it was a material short world. and so the returns accrued to those that allocate well against the scarce asset. that's when we codified the whole concept of return on capital because that was particularly important when interest rates were 15% and tax rates were 70%. everything's flipped and today, you know, finance abundant, free money, low taxes, less return accrues to the abundant resource, the scarce resource is human/social natural capital.

and so those companies that can and this is where i get active, that can better address and think more teamly about environmental and social goals and needs, i think that's going to be where the reakout return are over the next 20 years. >> you do? >> uh-hum. >> and how do you approach that then and what are you looking for in terms of at least the particular aspects of a conceivable investment that speak to you about it? >> there's incite that i think i have because i come new to this world. i think the grid, the electricity grid, is the crown jewel in a clean economy. we've got to invest in hawaii electric and i think distributed energy will allow them to get off oil -- >> that was in particular. they were very leveraged to oil so there was a lot of -- >> but then i think electrified transportation would do really well in hawaii. it's kind of dense and you can drive your car battery home at

the end of the day and run your home or cell back to the grid. i think what happens is you have this incredible payoff in your 2025 and beyond where you're putting more electrons over a fixed network. they may not be your electrons, they may be third party electrons and that drives a kilowatt hour rates down because more volume over a fixed network so that becomes a huge social good. then we electrify many m other use cases, buildings, water heaters and what you get is you get, you know, the platform for a clean economy which revalues the grid. that's how i'm trying to think, you know. the home run, david, is a business model that generates savings versus the dirty solution today and retains the optionality for when we do price carbon the business explodes. >> so that day could be far away it seemed like it was near but

if the trump administration has its way and continues too for the next five and a half years there's not going to be a price on carbon. >> we announced a private investment in the spring fund yesterday. they sell on a per mile basis. because they're sourcing clean energy off the grid in the middle of the day at 2 cents or what have you, and they put it into a tank and storing it and the trucks off take all night long with an eight minute charge to go 500 miles, because that energy is so cheap, they're beating diesel handedly today on a per mile basis and then -- and then -- and those in the trucking business still on diesel if we reprice carbon, nickele is a $300 billion company. they had the fueling infrastructure in place and this is a first mover advantage because you're not going to

overbuild their infrastructure. >> you haven't even talked about autonomy yet when it comes to trucking. >> right. then pretty soon they've got all of i-80 with fueling stations and they're moving the truck autonomously and it's totally zero carbon and it's of the best application for autonomous. then you undermine all the logistics as we know it, trains, jet fuel. that's the big mega play and it's all about the environmental and social footprint. >> and there are people willing to put money there and there are people willing to put money into the spring fund as well? you can actually scale to a level that allows you to make meaningful investments and generate a real return >> it's not an easy sale because the moralists why are you in the wood pellet business because you're cutting trees down. it's a decarbonized technology. it might not be the answer. it's better to move off coal faster. the moralless maybe don't like it and guys like you that are

fiduciary duty guys are like, how do you know you can get a return what is this act thing and why do boards listen to you and the other guys wanted me to hedge with shorting stocks and i said, i'm not going to do that. maybe you grow slowly as you prove it out. >> jeff, we're out of time, unfortunately, but always appreciate your willingness to take a little time with us. thank you. >> good to see you again. >> founder and ceo of the 12 plus billion dollars value aact but you heard us talking about some of the other investments they're making as well. back to you guys. >> david, thank you. talking my language with all that tech disruption in trucking. let's get over to contessa brewer for a news update. >> ears what's happening right now. the french interior minster have toored the fire damage inside notre dame. they spent 12 hours battling the flames. it destroyed the cathedral spire and the roof, but spared the belltowers. police say they arrested more than 100 climate change

protesters after they blocked major bridges and intersections in central london. they're organizing a week of civil disobedience over the failure of the government to tackle causes of climate change. president trump's biggest donors have jointly sent a letter to congress asking lawmakers not to fund the president's budget request for a nuclear waste stored site at yucka magazine. look at those signatures. they argue that it threatens the economy of southern nevada. big bird and "sesame street" are embarking on a road trip. it begins june 1st in new york and ends in las vegas on august 3rd. count me in! i'm all for sunny days. that's our cnbc news update this hour. back to "squawk alley." >> thank you. as we head to break, take a look at the worst performing stocks in the dow so far in

today's session. pfizer, walt disney off of all-time highs and united health.

. when we come back, editor at large walt mossberg will sit down with us. dow's up 37. nasdaq just under 8k. back in a moment. announcer: the cnbc trend tracker live data board is brought to you by the cme group. cme group, wrehe the world comes to manage risk. global markets, beat of the rhythm of the world. but to us, it's the pace of tomorrow. with ingenuity, technologies, and markets expertise we create the possible. and when you do that, you don't chase the pace of tomorrow. you set it.

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apple stretch in services continues to ramp up as it sees iphone sales level off. does it mean its innovation and hardware is in jeopardy. walt mossberg joins us today. he's back. we got your back, walt. good to see you again. >> good to see you, carl. >> we're in a pretty interesting moment in a life span of apple. is it going to be hard to shake the perception of the company as a true phone maker reliant on the hardware, reliant on cycles? >> yeah. well, you know, i think it's hard to shake the perception of the company that way because the iphone is so ubiquitous and associated with apple that for people to think about it in

other ways is going to take a lot -- a lot of marketing. luckily, they are pretty good at marketing. but they have to execute. >> and that involves what? is that going to involve spending a ton of money on their original content do you believe they can break bread with hollywood in ways that silicon valley has a hard time doing historically? >> they have had relatively better relationships with hollywood than some of the other prur tech companies but i don't think that they are in the same business as, let's say, disney's new streaming service just announced. i don't know for sure. i don't have inside information. here's what i think is going on. we all know they have an original slate of programming coming and they -- they have huge names oprah and steven spielberg and reese witherspoon. i think that's not the main part of what they're doing.

i think the main part of what they're doing is software and it's this tv app that's been around for a long time it's on your iphone, it's on your ipad and it's coming to your mac, it's on your apple tv. i think what they are really going to do is, try to become a central single sign-on and subscription point for other people's services, kind of the way amazon has tried to do with prime and then later it with this slate of original programming. >> walt, i feel like this is forcing people to become acquainted with apple really for the first time. you mean, back years ago before the iphone, even before retail stores, apple wasn't some perennial hit maker where every couple of years they had some product that changed the entire world. they were this company that was following its heart, that had this religious devotion to

design and kind of like the liberal art student who they thought would never amount to anything. right now, is it a period where we have to believe in apple's core that it can do that again and come up with something else but it might take years? >> yes. i think that's absolutely right, but i don't think it's an either/or thing, jon. i think they -- they still are working on some new hardware and software initiatives, notably augmented reality glasses where i think they have invested a lot of money and have a lot of people working. they're not the only company trying to do that, but they're working on it in a very serious way, whether they'll succeed, i don't know. remember, the services business has grown very robustly at apple and if they pull this next thing

off, it will -- it will grow even more robustly but it doesn't measure up to the kind of sales and impact and presence that the iphone has or even -- or even the ipad. it's been nine years since their last big giant product which was the ipad, nine years, so they still -- they can pivot to do more and more services and they are and they've had some success, for instance, with apple music which i think you have to count as a success, but they're not -- they can't get out of the hardware and software business and i see no indication they're doing that. >> what about the smart watch, the apple watch in light of that, walt certainly a lot of scepticism around that product initially too. it's growing. if you look back at some of the comments tim cook has made lately, he's vocalized how key health care will be to the

company moving forward and into the future. is there a lot more opportunity there that's maybe being overlooked by investors? >> i think that's a terrific point, morgan. not only the apple watch which has become -- they are the biggest watch company in the world, which no one would have predicted when it first came out. not only is it the biggest selling smart watch but it's bigger than the whole swiss watch industry and the other product which you didn't mention but i know you are very well acquainted with, that's a huge hit, are air pods, the wireless, you know, earbuds and which are being copied like all apple products get copied and i think -- which -- as far as i know they're selling every one -- every pair they can make at quite a good margin and both of those products are really products that could -- could be the vessels for health, a whole

huge health business. obviously, the watch already has a lot of health features in it and health benefits to owners of the watch. if you fall down suddenly, the watch is going to call the authorities and your contacts, that kind of thing. it does cardio gram. the air pods i believe will eventually also have health sensors and health capabilities in them. >> huh. so when tim cook tells cramer that apple's legacy in 20, 30 years will be about health, you think that's something more than happy talk >> i do. i think it's what tim cook believes and he is, in my experience, he's a very sort of sincere person. i don't mean to suggest -- he is the ceo of a company, he does want to say something that is positive for the company and future looking, but he's not making stuff up.

they have large investments and large numbers of people, large -- i mean they have whole buildings devoted to health stuff and they're very, very serious about it. >> walt, your thoughts on apple still ring loud. really appreciate you sharing it with our viewers today. good to see you. >> good to see you. take care. >> talk to you soon. wires editor and chief will join us next with an inside look at facebook. stay with us. creating a better world isn't just a result, it's a responsibility. emerson. consider it solved. your daily dashboard from fidelity. a visual snapshot of your investments. key portfolio events. all in one place. because when it's decision time... you need decision tech. only from fidelity.

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here's what's coming up at the top of the hour. we're debating the big market coal from black rocks larry fink. plus the netflix set up ahead of the company's earnings are desk taking positions on that stock. find out on which side. and with oil prices above 63 bucks, our call of the day z-oerz in on one name that could be primed to rise a lot. we reveal it at noon. got unusual activity. the whole gang's here. see you in 15. >> all right. scott, see you then. now for market flash on united health. >> the united health was higher ahead of the open and ahead of its morning conference call after a beat and raise for its first quarter. there were comments on the call from david wickman about medicare for all. he thought some of these proposals coming from democrats would destabilize the nation's health system.

that is weighing on united health's shares, you see it drop sharply during the call. it's also weighing on others' in the space as well. united health hit a new low, humana and cigna also hit a new low. those headaches on the regulatory and legislative front continue to weigh on managed care. back over to you. >> humana down almost 8%. thank you, bertha. after the break, wired's editor in chief nick thompson takes us inside 15 mon ceoknvtition. stay with us. xfinity watchathon week has sadly come to an end.

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welcome back. 15 months of fresh hell inside facebook. that's the title of wired's latest latest cover story detailing a tumultuous period after mark zuckerberg said he would fix the platform five-month investigation by the magazine included interviews with 65 current and former employees, including mark zuckerberg and sheryl sandberg wired's editor in chief and the coauthor of this story joins us for more nick, as -- first of all, welcome. and congrats on wrapping this investigative piece. as somebody who used to write features for magazine, 12,000 words is quite an amazing amount of real estate in a magazine, something like 15 pages in here without advertisements given how tumultuous the last 15 months have been, what would you say is the biggest takeaway from

all of your reporting? >> well, we could have used 20,000 words there's so much to write about this company over the last year. so the story of the last year at facebook is i think a story of a company paying penance for decisions and priorities they had in the past where they prioritized growth over privacy and everything else. and they just were a bunch of bills that came due. they have that happening then they have all the problems caused by what they're doing right now. they have contradictory demands on them, prioritize safety, prioritize privacy, sometimes those things conflict and then they mishand stuff so you've got the past coming back to bite you, mistakes in the present and you're handling it wrong so you get a crazy year where you can write 12,000 words about the chaos. >> here's one of the things that jumped out at me in this article is that the company's big fear is ending up like microsoft, mired in antitrust regulation, court battles, unable to grow and innovate given how this is all played out and the response to some of these scandals and issues as they've come to light, are these

concerns ever more valid >> they are absolutely extremely valid. by far, the biggest risk to facebook right now is an antitrust investigation that mires them in just a legal and regulatory morass for years, just like happened with microsoft and then nobody wants to work there, they can't build new things, they're splitting apart, what's app and instagram so that is what they're worried about legitimately >> do people want to work there now? one of the big questions about the company just in the past few months you talked about the instagram founders leaving, chris cox has also left, is that a danger off in the future if they get mired or is it something they're having to work through right now. >> it's something they're working through right now. it's not as though there's an exodus but they've had more people leaving than in the past. they're up slightly. they do pay a ton and they are making money like, there are reasons why people would want to work at facebook but the whole, we're making the world a better place, building a new communications platform, and they'll be the new

language of understanding for the future of human kind, that's kind of gone >> you write a lot about the tensions between zuckerberg and the tensions as a result between the core app and insta does management mind if insta becomes the star >> yeah, that was actually super surprising to me one of the most interesting things i learned reporting the story is that they seem kind of resentful that instagram had been called the star >> despite it being called the best acquisition in tech of all time >> they didn't love that kevin systrom gets all the positive press and people were leaving to go to instagram. >> and they made efforts to stem that >> they made efforts to pull away the supports on instagram that is, ultimately, as we learned, the principal reason why systrom and kreeger left is zuckerberg said here are all the ways we are supporting instagram. we are not going to do these any longer systrom posts that internally at instagram, the company goes nuts, he goes on paternity leave and then he's like, you know what let's just make this permanent and that's it.

>> so what do you think the current mood is now that at least the street is hot on insta's growth above the core app's. >> there's been a -- there are different factions there are people inside of facebook who are like, this is awesome, we own them and now it's making a lot of money and it's great for us. i think that's the majority opinion inside of facebook i just think it was top management that had a harder time for psychological reasons >> one of the things that jumped out at me, really jumped out at me was this methodology for determining trustworthiness, including stories that featured politics, crime, and tragedy and how they wrote the algorithms around that. just incredibly -- just incredibly stunning, especially given the climate where we do have lawmakers and others that are coming out and complaining about things like censorship on social media >> it was such an interesting thing when i learned that. it's a detail where a top executive at facebook was like, i just learned this myself and i nearly fell on the f'ing floor so what happened is they had to figure out how to boost trustworthy news to do that you have to define trustworthy and you have to define news. those are both really hard

words. the way they define news is they poll a classification category from the past that makes it so that the news stories that are going to get the boost are only the news stories about politics, crime, or tragedy. so that helps push the facebook ecosystem and the stories that do well on facebook into being just those stories, which makes facebook kind of exactly what you don't want facebook to be. >> is facebook getting smarter fast enough? i mean, they're going to make mistakes, leaders make mistakes, they're a big, powerful company, they have to make some really big consequential mistakes to really trip up are they getting smarter fast enough >> that is the toughest question that i do not have the answer to they are definitely getting smarter. they are also stuck in a system where no one trusts them they can tell the truth and no one will believe them so how do they get out of that cycle they have to get smarter so much faster than the news cycle is building against them and they haven't shown evidence that they can do that. on the other hand, there's no doubt in my mind that

zuckerberg, cheryl, you know, the other people at the top of the company are really thinking hard about, okay, how do we get out of this, what did we do wrong, how can we do better and whether they have the solution or not, i don't know, whether a year from now we'll be having the same conversation, i don't know, but they have recognized the problem at least >> nick thompson, thanks for joining us >> thanks so much for having me here >> this new wired cover piece. appreciate it. dow trying to hang on to some gains here. session high was up 45 s&p still 29.08. back in less than three minutes.

well, major averages are higher, one to keep an eye on is the nasdaq 100, only about 0.5% or less away from that october 1st intraday all-time high of 7,700. you can see that right there another one to keep an eye on is the semi stocks. those continue to rally. the smh etf hitting an intraday all-time high as well. led higher by names like amd and others >> yeah, semis, continue to have a good session often called an economic indicator, although other economic indicators like industrial production today, the paper companies, the trucking

companies, not pointing to such bullish signals >> amd having a good day on that playstation news and of course we've got netflix and ibm after the bell >> yes, indeed and then tomorrow, we'll get morgan stanley, we'll get some pepsi, u.s. bank and others. let's get to the judge and the half for now >> carl, thanks. i'm scott wapner with stocks reaching for new records, is a flow of new money about to kick start the next leg of the rally it's 12:00 noon, this is the raft report. this is "the halftime report." >> investors are exposed >> blackrock's larry fink's call on stocks. is he right and is now still a good time to get in? plus, as we approach record highs on the s&p, which part of the market will get you the biggest return we're debating bank of america as the stock falls after reporting quarterly numbers. and want to get ahead of ibm's earnings this is the place. "t