>> yes, very good. >> good having you guys here. >> thanks. >> you have a nal trade? >> small caps. and energy the bar's set very low. >> you should've stayed with semis. >> 30, 27, 98. that would be the all time today on the s&p "the exchange" begins right now. thank you, scott hi, everyo hernds what is ahead. amazonian problem. amazon's growth is slowing we're going to talk about the company's cautious forecast for the holiday season means for the stock and for the market and speaking of which, we are looking at new all-time closing highs for the s&p. if we can keep these levels down we're not quite there at the moment we're close. we'll talk about the names that are powering the move. they may surprise you. plus, don't look now but another unprofitable company is going public and facebook is launching an actual news feed but will it gain traction with users? that's all ahead in rapid fire

first, dom chu with the numbers. >> like you mentioned, we ar gaining traction in the markets overall because we are above those closing highs record wise for the s&p 500. but remember, if we got and at one point today, we hidid t 3027 that is the day record high for the s&p. we got there today but just six tenths of a point. one point below that record high level. s&p solidly breaking above that 3,000 level. if you're looking for some of the leadership out there, intel shares on the semi-conductor side of things, a real source of positivity for the markets overall. those shares gaining huge ground here up over 7% on the day and that means the overall semi-conductor industry, as evidence by this etf, it tracks the industry up 1% as well by the way, we'll put a star here because that is he a record high for the semi-conductor etf. and if you are looking at stock of the day, it has to be amazon. why? because at one point, you can

see here yesterday we had dropped 9% in the after-hours session in the heels of earnings look at this since then, we've gone all the way back we're only down about 1.5% now so there seems to be either buying fundamentally or, kelly, short covering amazon shares well after those market lows from yesterday i'll send things back to you. >> dom, thanks very much and welcome to "the exchange," everyone i'm kelly evans. amazon's year on year profits fell for the first time in two years. the company is sharply lowering guidance for the holiday quarter. cloud business revenue grew at its slowest pace since 2015. and advertising continues to take share growing nearly 50% year on year but the brightest news is coming from the smallest part of amazon's business. so what does this all mean for its future for more, i'm joined now by scott mushkin and our very own john ford. it's great to have you both here scott, i'll just -- i'll start with you you have a buy on the stock

about a $2300 -- i'll round it -- price target so how concerning is the cloud slowdown to you? >> well, i mean i think if you look at the cloud, they obviously have more competition coming in. but at the same time, with the ebit slow down, we think there's two important factors here we actually think they're going to spin off the aws. we do. we think they're going to spin it off. >> you think amazon's going to break itself off and spin off the cloud? >> we do so, you know, number one is they really ramped up the amount of marketing people that they have there. so obviously, the sales effort is ramping up. so that's really important the second thing is they locked down accounts. so they -- the accounts were locked down for a longer period of time. we think those two issues are basically setting the table for a spin-off in 2021. >> john, are you hearing -- tell me about the rumor mill on that one. i mean, i guess regulators would love it. are they trying to get ahead of that or -- because right now, the cloud business, john, has kind of been the cash machine and the profit machine while the retail business still gets on its feet.

>> yeah. for what it's worth, i asked andy, the head of amazon's cloud business this question every single year and every year, he says there are no plans to spin this thing off and i think in a way this sort of quarter gives you a reason why when one segment of the business, say, retail might be investing in one-day shipping, for example. you still got profits from aws to help counterbalance that. they could have actually with this whole hq2 thing chosen to take aws and give it its own location but all the questions i've asked amazon about that is that, no, you're not going to have separate aws facilities from the rest of amazon. seems to me they're keeping these things together at least for now. but, hey, i mean, i'm going to be seeing andy again in a couple of weeks and i'm going to ask him again. >> we want to know if any inflexion in his voice changes, john if there's any eye twitch or anything that hints at this. scott, he does make an excellent point, which is that these allow for the company to have different pieces doing well at

different times. and yes, if they're investing on the retail side right now around one-day shipping, t all e more important to have the cloud business to rely on? what are your expectations for the retail side? >> so on the retail side, it very interesting so if you look at the one-day ship, it really drove up revenues a lot of that's with consumable items. and one of the things our research shows, we did a consumer survey, and it says the amount of time people are shopping amazon, the frequency is actually really accelerated our data says, you know, 73% of the people are shopping amazon once a monthr more that's up from 62% last year. >> wow because of this launch wow. >> because of this launch. so the question is when we go into the holiday, amazon's going to have the eyeballs the frequency is up. what does that mean to other items? >> so you basically think the holiday forecasts are down for a good reason? you know, people are using it more but for a lot of the basics and things that aren't really holiday relevant it just costs them money to fulfill. >> right but we think there is a halo effect the halo effect is once you're there on the site and you're

clicking for tide, the chances for them to sell you a tv or something like that go up. so i think it's going to be really interesting in the holiday period to see this halo effect does amazon just blow those numbers away. >> sure. okay so, john, they're a little bit conservative on that front is the advertising piece enough to move the needle yet >> not yet but it certainly is an interesting story. the other revenue group they said was up 45%. most of that is advertising. and advertising was actually up more than 45%. they're using machine learning, a component of ai, to try to improve the way they target that advertising. make sure it's high quality. that's a very high potential group even if they just play within their own ecosystem their ecosystem is so big. >> again, in a way it's a good news in terms of a real competitor to facebook google ad d duopoly. we'll leave it there, gentlemen. thank you both

john ford, scott mushton and it is looking like it might go positive. we'll keep an eye on that. check out the major averages because we're looking at new all time closing highs at the s&p. and this -- in fact, the so-cal faangs it's been the likes of home builders, real estate, utilities. for more on the leadership, let's bring in craig columbus. and steve graso. a fast money trader. steve, what's -- what's the new momentum trade >> so think about it, though, kelly. all these things that were head wins for the market. recession fears, brexit concerns, earnings misses, powell having another miss all these things have -- i don't want to say that they've gone away but they've definitely dissipated or the market has become numb to them. if that's the case, the market is going to lift into the next event, which is powell. >> so you think the change in

leadership reflects the recession trade going away >> if -- if it's not -- not really the recession fear going away it's the fact that you wind up having -- companies have to fail and you can't show me an economy that is paused when you have a re-acceleration in the housing market there's never been a slowdown or recession when housing is just starting to reaccelerate that's never happened in history. >> craig, so also, the interesting thing that all of these leaders have in common is they're typically low interest rate kinds of trades we saw interest rates plunge in august obviously is that a big reason why this is the new leadership and is that sustainable? >> well, i think some of this mean reversion into value or cyclical value, when you look at the global leading economic indicators, they've been falling for like 18 months so you tend to get opportunity in cyclical value when the data starts getting less bad. as you just indicated, one of

the key points was that the dollar weakened in the third quarter. that's helped cyclical value now, value tends to extended outperform one key point is when inflation expectations are rising. and that is very contingent i think on the fed continuing to be dovish going forward. >> which side of that bet do you want to be on, craig >> so i actually think that deglobalization has reduced the new neutral rate so it allows the fed to have a couple insurance cuts in here. i think it would be very bad to have kind of a hawkish one and done cut i think we don't know what de-globalization is doing in terms of the ultimate effects of it but what i do know is 16 central banks cut rates in the third quarter. the yield curve steepened and the dollar weakened. i don't think the fed would want to reverse those things by being too hawkish next week. >> steve, although i guess that is the consensus but the idea that there might only be one more rate cut this cycle and in the way in the late 90s, you basically had three

rate cuts and then they were done. >> i think the market right now is sort of looking -- for the first time, the market is looking at what's in front of them so they are going to take the rate cut in october. they're going to push off december and think in their mind -- the market i'm talking about -- think in their mind what does year end saeneasonaliy look like? the odds of us having the same december that we had last year, in my experience, are going to be slim and none and that's why everyone is getting on board right now on a bullish slant on the overall market. >> all right so your favorite new leadership stock is >> well, i'm still with the home builders you know, so for me, i'm riding the home builder trade but also, you have to smatter in tech. >> in terms of sector since those late july highs,t's only fourth best performing it's barely been positive. amazon consumer discretion. a lot of those have even been

lagging. gentlemen, thanksment appreciate it. >> thank you. >> here's what else is ahead today on "the exchange." >> coming up, more than ever companies are walking a fine line when it comes to being in china. so how do they balance business with social issues plus, tesla's chairwoman says elon's big ideas are the key to success. she'll explain why another non-profitable company will hit the markets monday in a brand new industry this is "the exchange" on cnbc you know it's an suv! i know for fact your suv does not suck. why is that? it ain't got that vacuum in the back! we got to go. ♪ vacuum in the back, hallelujah! ♪

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welcome back the president saying in just the last hour that the u.s. is doing very well with china and that china wants to make a trade deal he didn't offer any specifics but the trade talks are just one aspect of what's turned into a major conundrum for companies who do business in china how do you balance your business interest with the vice president's call this week to defend american values joining me now, steve, ceo of the conference board and fred kemp who is ceo of the atlantic counsel. fred, you win for the tie. i'll start with you on a curve ball so to speak in honor of that what -- you know, you have the vice president on the one hand, he could have been tougher on china. then he was. on the other hand, he was a little bit tougher on nike and

the nba maybe than might have been expected. what do you think businesses should expect? and are the u.s. and china decoupling or not? because pence this week said if you think that's what's happening, that's not necessarily the case. >> so first, let's talk about the deal and then briefly about the decoupling so i read, as you know, the editor of the global times to see the tea leaves of chinese le leadership and his response to the pence speech was actually relatively positive he said, okay, you have the same old story about u.s. criticizing china. but pence also said we don't want a confrontation and we don't want a decoupling. and so that's the good side. but the chinese are in a mood right now not to do any deal that is going to give any significant ground structurally on their part. n off.ey will want some tas right now, trump is talking about not having new tariffs against $20 billion of farm purchases. that would take us back to 2017

levels i don't think the chinese will go anywhere near that unless they're getting some relief on the tariffs that are already in place. >> right. >> on the decoupling, it's going to happen anyway and the chi are doing it and they're calling off some of their people from doing deals with the u.s. and i'm hearing a lot about that. >> so, steve, what are -- what's a u.s. business supposed to do i mean, if you're starbucks, you have referred to china as your second home market. >> well, this is right and, you know, in some ways, there was thing new in this speech yesterday. there's no new policies that mirrored the other speeches. it was a section on multi-nationals where he called on multi-nationals to stand up for their values this is walking on egg shells for multi-nationals because they deal with all these countries and, you know, china is in some ways a business partner. but they're also an adversary in other ways so multi-nationals have to be very, very cautious here they want a trade deal no doubt about it. but they want china to follow wto rules. they want china to stop stealing

ip and so, you know, they're a little nervous about how we're doing this but they want a resolution here so they can go forward. >> for sure. and i -- and i understand if i'm them and if i'm them, i'm looking to washington for the messaging you know, to me, it's interesting that pence would say to u.s. companies, you have to stand up and you have to take the leadership role here look, they're the ones with business interest. you aeheard it from bob iger th week he told us it's important to be culturally correct in the countries you're doing business. is he wrong? >> yeah. no you have to be culturally correct. i mean, this is -- this is abc's, you know, business 101. and this is why these multinationals don't want to be put in between these two giants. they have to survive this such that when a deal is done, however it's done, that they can survive and thrive and do business going forward that's why, you know, dealing with politics, dealing with social issues is a very slippery slope. now, there was good news yesterday on the ip front where china has passed this law. said it's going to go into

effect in january. to protect ip from foreign companies just like they do for domestic we'll see if that works or not but that's a big step forward. >> fred, do you think if a u.s. company says, okay, the way i'm going to square this -- because, again, this remains an open question ten years ago, china looked like it was liberalizing a lot more than it does today so i understand people have to make long-term decisions and they can't forecast the future but based on what we know today, shouldn't u.s. companies say, we're going too go into china and do business because we think that will help liberalization? should they just say it's a big important market for us and we're going to comply with the local rules and the codes of culture? >> look. the reality is if they want to do business in china, they're going to have to do that i agree that china has taken a step toward intellectual property and it will take steps that are in its own interest. the situation, though, is i just had a friend who's a big private equity guy in technology was three weeks in china he talked to a huge number of

chinese companies and they're all talking about markets other than the united states and so a decoupling is taking place. partly at the behest of the chinese government, partly not where chinese companies are just looking to other countries and so what's happening, if a u.s. company doesn't show up, if it does give up the market, it's not as if the whole west is going to decouple from china our competitors are going to go in and take the markets that the u.s. leaves on the table. >> i know. steve, should the u.s. just walk away now should these companies walk away now from china each day brings fresh evidence they're looking to home grown companies anyway. >> we can't walk away. look, china wants to be number one and you know the whole belt and road thing is in order to gain control in ports and infrastructure around the world. you know, their actions in africa i don't think multinationals can afford to walk away. i think they have to engage. they have to do it, you know, constructively but i think, you know, the american multinationals are caught between, you know, the

u.s. policy and -- and china in this and i think they've got to try to take steps here to effect a positive outcome. >> all right a thorny one guys, thanks steve oddland and fred kemp. appreciate it very much. coming up, shares of this sports wear retailer up more than 50% this year thanks to major growth in asia. we'll tell you the name and how the company plans to weaer the ongoing china trade tiff. >> this will be a great harvard business case study later on. >> turns out wework already is a case study the professor who teaches it wrote us to let us know so we invited him on the show and he'll join us ahead. heartache, brutality and redemption. the mist crept into the pivot hole beside her... you're late. david! what did you think of the book? it's a...masterstroke of... heartache...brutality... ...and redemption. you didn't read it, did you? i didn't...but i will. the lexus nx, modern utility for modern obstacles.

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or make me feel like i'm not really "there." talk to your doctor, and call 844-234-2424. welcome back and, well, the cat is back. after ditching the basketball market 20 years ago, puma is back on the court this season. frank holland is inside flagship in new york city with more frank. >> hey, kelly. i'm going to finish your metaphor puma shares jumping 54% this year the german brand also outpacing rivals nike and adidas when it comes to global sales growth facing a 15% tariff on goods it sources in china and sells in the u.s. a key market. still, its ceo says it is not raising u.s. prices.

>> the fourth quarter will be the first quarter where the u.s. ties in china will have an impact currently, with no price increases, this is putting at least a short-term pressure on. >> puma has reduced its china sourcing from 50% about five years ago now to about 20% this market dominated by nike and adidas with shoes from big-name athletes like michael jordan puma listing some big influencers. naming rap mogul jay z the head of puma basketball when it entered the segment last year. >> partnering with jay-z made a lot of sense to us because we believe that the basketball sports is the sport that most merges the worlds of culture whether it's, you know, the music of hip top hop or art and fashion and style of the players-let getting into basketball was very much a strategy for the u.s. market. >> and for puma, it's all about attracting that millennial consumer they're signing a partnership

and apparel deal with brand cloud nine there are an estimated 63 million esports fans here in the u.s. >> they say it's been an inflexion point. frank, thanks very much. frank holland. try the creepers, frank. that's another story now, to sue herera sue. >> can't wait to hear that one thanks, kelly. here's what's happening at this hour, everyone a turkish-backed syrian opposition group says it has pushed back in attack by the kurdish-led syrian democratic forces in the countryside north of of aleppo the sdf still controls a thin sliver of land north of aleppo the taliban claiming responsibility for a suicide attack in eastern afghanistan which killed five people, including a child. a convoy carrying officials from the country's intelligence service was targeted 21 people were wounded hawaii congress woman tulsi gabbard says she will not seek re-election in order to focus on her campaign for the democratic presidential nomination.

gabbard got into a war of words last week with hilary clinton. clinton suggested republicans were grooming a democrat for a third party candidacy and believes the candidate is the favorite of the russians and dentists should not prescribe antibiotics for most tooth aches. according to the latest guidelines from the american dental association the association says antibiotics can cause serious side effects and overuse may result in strains becoming drug resistant. yikes. that's the news update this hour kelly, i'll send it back to you. >> okey-doke sue, thanks very much. here's what else is coming up today on "the exchange." ahead, wework goes to school the new online influencers are here facebook's news feed debuts and many are asking why? and another company gets into the frtial sckaconto buying business that's all ahead on "the exchange." corner of your growing business.

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brennan. welcome, everybody first up, facebook debuting a new feature today. it's a news feed but for real this time. the news tab will be rolled out to a few 100,000 users in the u.s. facebook will pay some of the approved publishers whose content will appear in the app will be curated by human editors but will personalize articles that reflect your interest over time my hot take on this, i think no one's going to use it. >> well, the question, though, is if facebook's going to encourage them to use it or drive them to the news tab and also, sort of how much people to turn to facebook for everything as we speak now, mark zuckerberg is on stage with robert thompson and robert thompson has been a huge critic of facebook. >> and google. >> and google. and rupert murdock, controlling share holder of news corp., he has said they're making money off publishers it's time. for years, mark zuckerberg said, no, we're not going to do it this is a real about face that

facebook is doing here. >> do you know how much they're paying >> so they are paying some publishers nothing because the real value is the traffic that they're driving to their websites because you'll get advertising revenue from those eyeballs, as well as potentially the ability to convert people to being paying subscribers sign up for more so it really is reversal for facebook mark zuckerberg is on stage right now talking about how he's so excite committed to backing professional journalism. we have to remember this comes at a time when you just had congress grilling him on the fact that there is a spread of fake news and what are they doing to protect election integrity? >> it's great for them to launch it's great for the publishers involved again, you have to go click on the other little tab to open it up apple news has been very successful but will this work will people read it? >> i think that's a big question and what's the upside for facebook in doing this because it kind of leads you down another path of curation another path where you're in control of something i know that bright bart is on

the platform, for example. it's one of those sites julia mentioned that won't be paid for being on the platform. but also, you know, if you've got someone at facebook that's kind of curating these things, does it open you up to criticism from the far left, the far right about whether you've got enough balance in the system and if you're curating it for people. >> and if they tailor it based on your political interests over time, morgan, does it go back to you're only seeing what you want to see >> i think we've seen this playbook before and it's in music. we saw this happen in the music industry and we saw it happen with the streamers hang with me here for a second but we saw the traditional means of revenue generation for the music publishers and also the record companies. >> newspapers or cds yep. >> and then what happened was things died down the business model started to shift and the two started to work together a little bit and became like the resurgence for the music industry and i think -- and i think this is the beginning of that happening for news and

publishing. >> you know, i like that hopeful take so much i'm just going to leave it right there. and maybe it will be and it'll all be fine and i should stop being such a cynic let's talk about -- now that we already did that talking about cynic, let's talk about this one okay it's a small trade for a stock but a giant leap for a brand new market of space tourism. richardered branson's virgin galactic is set to go public monday it will be the first publicly ever traded space company. >> yes with a paying customer, it has been to the edge of space twice. in some of these test flights, they are expecting to actually start doing this service for their paying customers sometime next year. this is -- this is a merger that is taking place and supposed to close before the end of the day today. yeah and social capital one and a half billion dollar valuation. they do have more than 600 people, customers, that have signed up. $80 million in deposits so far some pretty aggressive work has

to potentially be profitable. >> but why are we talking about profits? they don't even have a business yet. >> my question is how many of these millions of people are actually going to make it up there? what is their capacity, right? how many people will they actually be taking up to space every year >> i think that's going to be the key question what it's going to be is it's going to be six paying customers and two pilots for each of these flights. and so i think the flights will probably have some space between them at least to start because you're going to be doing testing and everything else. and then they'll pick up speed and i think -- or i guess frequency, tempo and then within a couple of years, potentially, the price starts to come down and you see it become more accessible to more people. but the long-term play here, if you can stick with it, and let's see what investors have to say the long-term play here is going to be hypersonic travel and how you trachvel more quickly aroun the globe. this is part of the reason boeing has also invested $20 million in this company. >> these pre-revenue, bio tech companies, you know, we've seen

some that are valued at a billion and a 1/2 dollars. it's not totally out of the realm of possibility but, younow, i guess -- >> we're still early days even though this company's been around and been in development for -- >> it will be a good test of investor appetite for the ipo market. >> yes. >> and it's a direct listing essentially because of the structure. >> what's notable about thiss it is kind of a new way of getting public because this was a private company that did a reverse merger into the public markets. and, you know, we've got people trying the direct listings obviously, the traditional model for ipos is under fire these days so if this is successful from an ipo standpoint, more might do it. >> tesla had a great week. we saw it spike more than 20% after its earnings it also said it was ahead of schedule on the model y and that shanghai giga factory is building new vehicles. here's what she had to say they were talking about tesla's big goals. take a listen. >> to achieve what tesla has achieved over the last five years, over the last ten years,

you have to set audacious goals and big goals to actually and then have everybody in the company work like crazy to get there. >> so that's why i like talking about this after talking about space tourism. okay audacious goals. big goals. we've seen that work very well on the case of a company like tesla. not so well in the case of a company like wework. so and she said, look, you have to have audacious goals and then the workforce to meet them or they have to be realistic but can't be theranos. >> one thing we talk about working in the disruptor 50 list which i get to work on every year get hundreds and hundreds of nomination squs then we see the companies that manage to take a disruptive ideal, an audacious goal, and turn it into a sustainable, long-term business. and this transition from crazy idea to profitable business is something which reid hoffman, founder of linkedin and paypal talks about being the transition to being a pirate to being in the navy. >> how often does that transition happen by the way >> for instance, it's leak ubikr

starts off putting cars on roads before they have deals with the local governments. or air bnb so a lot of these big startups go through this transition they have an audacious goal and then they have to figure out how to play by the rules to make it work. >> look, the original iphone was an audacious goal. it took a ton of work with at&t and everybody to pull that off. >> but i think if you are a publicly-traded company and you have stock holders that you have to, you know, appease, you have to set those audacious goals but then also meet them. and if not, you will be punished as a result. and i think it's also worth noting that, you know, elon musk has had some audacious goals that he hasn't been able to achieve that have upset share holders. actually, that is how the chairwoman robyn denholm -- without any actual funding secured for that take private and that is what cost him the chairmanship and she got that job. >> flip side of this is that we have heard some of the same type of commentary including today and even earlier this week from

glen shotwell over at space x. this seems to be the model for elon musk. at least with space x, it is a model that has worked and you could argue looking at tesla's numbers this week, it works to a certain extent for tesla, as well although, not always on time tends to meet those goals but not usually on time. >> and it goes right into the next little news item here but it has never been easier to put a dollar into one of these high-flying ideas because square is actually using the cash app, which has become super popular to include a new functionality to let people trade for free and for amounts as little as $1. jack dorsey, the ceo of both square and twitter says now anyone can buy instantly and for free right in the cash app this is the innovation that's allowing people to, you know -- i mean, what i actually like about this story is that the cash app, does it make it more popular and kind of fun and interesting and cool or whatever, however you want to describe it, to do stock trading? whether it's in the new virgin

ipo or whatever. with the, you know, in an app like this. >> it really seems like the barriers to entry to investing, whether it's buying stocks or just creating some sort of a savings account, the barriers to entry have really come down. and there are so many of these companies in the space that are particularly appealing to millennials. making it so you don't have to go meet with a broker. you can do it all instantaneously. and really encouraging people to invest and save in a different way. >> and you don't have to shell out thousands of dollars for an investment these days, you can put $1 into -- >> it's -- it's great. absolutely democratization. i wonder about the structure of a lot of this. >> yeah. it's going to be curious one to see how all this plays out it's especially interesting that you are seeing this type of offering because i think so many of the companies that people do want to be potentially investing in like maybe say amazon where they are trading for thousands of dollars for in the case of

berk s berkshire. but also, we talk so much about income inequality. part of the reason we've seen the richer get rich and those in the bottom sort of stay stagnant is because of asset appreciation over the last ten years. >> stock exposure. >> and there are many people, including young adults, who have not been able to partake so i think this is great because it actually makes it easier as you mentioned, democratization, it's a lower barrier of entry and enables more people to be able to invest. >> i mean, look, if you lose some money because you -- there's an education process there too. >> and it gets more people into the market. >> exactly for better or worse. finally, before we go, we have to ask if tipping is immoral because that's the question david brooks is asking in "the new york times" today. the opinion column this is the tipping system is not a maritocracy. it widens class divisions and he acknowledges that tipping's the world we should live in says you should still tip 20 to 30%

the other reason this was interesting today is because it comes on a new report on uber that says going over 40 million rides, customers tip just 16% of the time for about $3. i rarely tip. >> that was surprising to me. >> rarely tip on uber. >> it didn't start that way. >> because then there's the tie to like your rating and how you rank. >> yeah. >> but i think it's interesting that in restaurants, though, i've increasingly seen restaurants say -- either they say recommended tip 20% and here's how much that is. they write out the dollar value. or they just add it on i've been to so many restaurants where they say we've added an 18% gratuity anything additional is up to you but we're doing this to spread out the tip to the back -- to the kitchen staff that doesn't usually get to participate in tipping the way that waiters do. >> but you can do that with a pool house, right? and there are restaurants where you -- you -- you pool things but you're still operating off of tips and you put -- and you bring some to the back of the house. i mean, have any of you eaten at restaurants in parts of europe where there isn't tipping? service is not the same like here in the u.s. >> union square hospitality got

rid of tipping a few years ago and their service is often times, with exceptions, impeccable and, you know, i've certainly been to restaurants in new york where there is tipping and, you know -- >> bartending and working in restaurants and i got news for you. that tipping got me through. >> you're the young blonde. >> wait a second. >> did you read the piece? >> i was a brunette. i had black hair i had no hair. i had blue hair. purple hair. red hair and pink hair while i was waiting tables it was the same across the board and i did well with tips because i hustled. and you know what? the life lessons i learned there have been extremely important to this job and everything else i do in my life. >> amen and i want to see pictures thank you all. julia boorstin, leslie picker, and morgan brennan coming up, wework's demise has already become a case study for business students at the university of michigan

the professor leading the class will join us with some lessons his students are taking from this next. >> thank you emu & dougnt limu with this key to the city. [ applause ] it's an honor to tell you that liberty mutual customizes your car insurance so you only pay for what you need. and now we need to get back to work. [ applause and band playing ] only pay for what you need. ♪ liberty. liberty. liberty. liberty. ♪ ♪ ♪ ♪ ♪ ♪ ♪ ♪ ♪

welcome back to "the exchange." wework has gone from silicon valley darling to a cash strapped company that needed a bailout. its valuation dropping from nearly $50 billion earlier this year to less than 8. and just the other day, our own dom chu suggested the company could serve as a valuable lesson for business students. >> what i would say is an interesting development here, and this will be a great harvard business case study later on forcing out the founder and ceo, taking over the entire company, and doing it so for a discount valuation from where it was just six months ago. >> well, my next guest is a loyal exchange viewer who e-mailed us after seeing that to say he's already using wework as a case study joining me now, a professor auto university michigan law school of business. it's great to have you professor and i chuckled at what you said students were taking away from this they were asking how bizarre or

anti social can a founder be and still be effective and investable >> yeah. it makes you wonder if they're trying to calibrate themselves, you know, how rotten can i be? >> right but what are you hearing from students when you talk about this in class? >> you know, students are actually amazed that -- that professionals, the best vcs in the world, that top investors could be so -- so stupid at least in my students' mind. now, i know some of them and they're not stupid but they're dumbfounded. like, how can this possibly happen >> so they're not necessarily -- i mean, i don't know how many of them have experienced in a wework but they are great places. so nobody thinks, you know what, the details being what they may, the end product is a good product and, you know, no one's taking that tact >> so students love that kind of setup. in fact, we have it at our school we have all of these shared spaces and work rooms and that's how they live. they live communally so they get that part of it. the part they don't get is the

part that blew it up is there a business model? how does a guy like this get -- get to run a company how does he get total control? that's the part that mistifies them they actually like the sort of the shar space idea. >> what is the story in terms of this as a case study we are still in the thick of it. i mean, we haven't yet seen what happens. we don't know if wework comes out of this as a $20 billion company or as a zero. >> yeah. that makes it fun because this could either be softbank's huge folly where we -- another case talking about how big a mistake it was for softbank to throw good money after bad or we write the second cases where we sigh, boy, were they geniuses just as dom said on the air. they got in, they got the stock cheaper. they got control cheaper we don't know what the ending is but we know now is things we should look at in terms of management, governance, business

model, and valuation so we -- we've already learned some pretty big lessons. >> what would you say is kind of the main one here? >> i think you have to really look at the governance thing because you can't predict what the future will be guys can go berserk. although, i think this guy was a little berserk to begin with but the governance thing where somebody has complete control and the only way to get 'em out is buy buying them out at some price which may turn out to be cheap. that's dom's thesis. or turn out to be ridiculous you shouldn't be in that position and -- and, kelly, there's a weird thing here the same vc. that's one of the lead vcs this time around in wework was the vc that got into the wrestling match with travis calanick, the uber guy, who didn't work out and they had to get out. so, you know, do they -- do they ever learn >> well, we'll see if your students do at least professor, thanks so much for joining me

appreciate it. >> my pleasure. >> professor eric gordon and thank you for watching and meanwhile, wildfires are tearing through parts of california again it's turning the focus back to the utility company pg and e 'rgog tk outhe role it may have played in starting these fires next. i am totally blind. and non-24 can throw my days and nights out of sync, keeping me from the things i love to do. talk to your doctor, and call 844-214-2424.

welcome back multiple wildfires are raging across california with the focus shifting to pg&e the pictures you see here are from this fire fires are still burning in southern california. that's where sarah harmon is and she joins me with the latest >> reporter: we're at the tick fire north of los angeles. you can see behind any is an active situation with firefighters on the scene. just 5% containment at this point. firefighters have been battling fierce winds 30 to 40 miles an hour all morning long in santa clarita with gusts up to 70 miles an hour expected this afternoon that is a big deal because it means a hot ember from a home like this one can get picked up

by those strong winds, blow onto the roof of a nearby house and put this entire neighborhood in danger 40,000 people are under a mandatory evacuation order at this point 15,000 homes are at risk and despite those sobering statistics, we have been talking to residents this morning who have defied the evacuation order because they want to check on their homes. kelly. >> thank you the california governor has declared a state of emergency in sonoma and los angeles county because of these fires appreciate your report up next, instagram may be full of influencers but just how many of them use the products they hawk? that's up for debate the founder of an app featuring real customers and brand enthusists join me to discuss the new way to influence no. in the basement. why can't we just get in the running car? are you crazy? let's hide behind the chainsaws.

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influencing. welcome. >> thank you >> this started when you were on tv and brands would approach do you be a quote, unquote influencer, right? >> yes i've seen the dot on the belly of the influence industry and how much trust has been eroded it's to the point now only 4% of global consumers trust recommendations. i thought when founding this company it's got to be a way to identify the passionate customers to really build ta tru that trust >> the wall street says how a billion and a half of money was wasted on influencers. you are still looking for them joust want them to be authentic wins who are already using the product. tap into them directly tell us how this works >> it's all about helping brands

identify their top 1% of fans and customers. we ingest social media data to really identify on an ecstatic content level. how can the brand tap into those fans >> sure. some of the brands that you've mentioned you work with calvin klein, nike. if i'm on instagram, is it possible a good friend could be a influencer because she really does like the product and i wouldn't even know >> yeah, absolutely. we're looking at every day, normal creative consumers who generally love the brand you may have a friend you see talking about tom shoes and the brand can recognize that customer because until now

without zyper they could only recognize their top spenders we're saying it's not about the number of followers but do you love that brand. >> will it require a new d disclosure so they will say i love this product but i'm working with this company. >> it's critical there's transparency everybody who is in an active community for a brand is disclosing they are collaborating with the brand >> how big can this business get? >> hopefully very big. >> what's the biggest success story so far >> an incredible community of dior it's driving ten times the engagement of the the official account. great success company. >> i'm sure the companies will like the authentic consumers than the ones every one is

ignoring thank you for joining me i'll be looking for closely of what my friends say they like on instagr instagram. appreciate it. that does it for t exchange today. power lunch is next. thank you. see you in a moment. here is what's new at 1:00 the race for recor the s&p 500 just points away from all time high mplgt shares of amazon headed for positive territory what has investors buying this dip. charles barkley slamming vice president mike pence for his criticism of the nba's business in china. we have the shocking comments. "power lunch" starts right now