Fortt and leslie picker. Interesting morning as we await the fed decision this afternoon. Tim cook speaking with japans nikkei while visiting some apple stores and ink suppliers defending the companys job creation in the u. S. And complaints the company has faced over competition cook saying, quote, a monopoly by itself isnt bad if its not abused the question for those companies is do they abuse it. That is for regulators to decide, not for me to decide joining us to talk about this and a lot more, managing partner susan line and ciscos chairman emeritus, john chambers. Good morning, guys. Good morning. How you doing good. Lets try to put these comments in some context. Why do you think theyre happening now out of cook, at least . Well, i think theyre happening because theres a general concern over privacy and over moves to increase privacy at both facebook and apple products but i think for him, this was an interesting moment because its the first time hes really tried to defend a monopoly hes not said they are a monopoly, but hes trying to create this image of the beneficial or benificent monopoly which is a way to stave off whatever regulation may be coming i think its inevitable that there is going to be regulation. Because were in an era where big is bad in tech is that not true, john i think the Technology Large companies have misused their power. I think 90 of americans used to view tech was good today less than 50 do so i think its an issue way beyond monopoly. Both the democrats and republicans said antitrust is coming, monopoly is coming however, i am a tim cook fan i think hes been more an example of how to deal with this, how to deal and be visible, learn how to work with government leaders regardless of political parties, china, u. S. , india, and be very candid about the criticism and listening to it and adjusting where appropriate. But i think because of some of the mistakes some of these peers have made, youll see some of the Large Companies really challenged on this it isnt the question are you the market share leader, whether youre an amazon or whether youre an apple. Apple only has 13 of the smartphones. But do you misuse that power in terms of pricing, where you misuse is in terms of killing startup innovation and setting a pace others cannot compete with fairly. John, thats a lot of my issue with this conversation we say its around antitrust but i think it is. Its around bigness. The argument for apple as a monopolist is the weakest argument i think across the board. Yes, theyre big, but even their Smartphone Market share is small. Their market share and pretty much everything they do, computers, is small. You have to go to talking about apple products as a market in and of themselves, make an argument that the apple has a monopoly is this really an assault on bigness more than it is about abuse of monopoly power . And if so, is that healthy for the Startup Ecosystem even three really good questions in the sequence you raised them, first is the companies largely brought it on themselves and you watched us during the 90s the top even apple . Yeah, even apple. We worked very closely with washington, with the democrats and the republicans. And when they had legitimate concerns, we addressed them together and said how do we work through those issues but i think probably tim and satchya at microsoft have done the best job at trying to strike a balance between the two. Part of it is the rebellion against big. When the pendulum swings to an extreme, i think they do have to deal with some of these issues some of the companies didnt work it out together, youre going to see government get involved senator Lindsey Graham said that directly the other day does it hurt startup innovation . Big time susan, you know them extremely well. I would say that where they do have a real issue around monopoly is apps, right . Access to the app store. And they take a 30 fee on top of any subscription app that you see, which is why spotify lodged their complaint against them recently, because they cant compete with apple music with apple taking a 30 cut or a 30 tax on top of their subscription fee. So thats where i think they have some problems not in their share of market on computers or share of market on phones, but in their dominance of the app market. But, john, the word abuse as it pertains to tech is in and of itself subjective theres no clear line on what constitutes abuse as its written into the current regulation so how do you think that Tech Companies should be looking at this what constitutes abuse how do you think regulators should be looking at this . What constitutes abuse, in the words of tim cook . Well, i think you have to take a step back the old word definition of capitalism is gone youve got to both make money but you better be socially responsible or youre going to get hit. Second issue is its Crisis Management 101 you dont hide be realistic how much was selfinflicted, how much was done by others, what youre going to do to fix it and what youre going to do along that line so you have to outline how youre going to do that very carefully. I use microsoft as an example, that went through the real challenges and they were valid in 2000. Yet they learned from them dramatically if you watch as sachya is doing that now, hes doing a very good job. I think tim is a good example of navigating it pretty well. It is be visible, recognize that people who are criticizing you have valid points and say how do you create a win for society and for yourself businesswise . John mentions Lindsey Graham and there is pressure on apple and facebook over access to encrypted data senators grilled the companys executives yesterday over their practices during a Senate Judiciary committee hearing. Heres graham. I hope the Tech Community working with Law Enforcement can find a way to do it. If yall dont, we will. Democrats and republicans presenting a relatively united front as they invoke child abuse and mass shooting cases where encryption has blocked cases to key evidence graham even said whatsapp is a tool the terrorists use. Im not sure how i take that being a user of whatsapp where is the line . Ive got three different issues again the first is Lindsey Graham is sending the message to the companies if you dont solve this issue and realize the legitimate requirements of Law Enforcement, we will solve it for you. And he doesnt bluff dont let the southern accent fool you this is exactly what the dems and republicans did two years ago with the social media companies. Said if you dont move, if you dont help us solve it, if you keep stiffarming us, well move within it. The counterargument is if you have security weaknesses or give all of your code out so anybody can get into your system, you can use any application to abuse it clearly there are some Security Issues with whatsapp that people are aware of that some bad people use. Susan, this puts the government in this weird spot, this weird place, i think, because im not sure that i trust the government with this level of access and information. After all, a lot of the tools, the hacking tools that have been used, right, by hackers, by terrorists even were taken from the u. S. Government. Absolutely. So if they cant even keep this stuff safe, why should we give them access why isnt the meta data good enough why do they have to read our private communications so you are not aflown being concerned about this this is exactly the issue facebook raised after this conversation i think that their point was that we cant give you special access that the bad guys cant get access to too. And theyre really between a rock and a hard place because a recent poll, harris poll, found that only 22 of respondents were comfortable giving facebook their data, right . 78 , no way. And so they have to do something to deal with this privacy issue. They got hit for it hard after cambridge analytica, after the 2016 election, and encryption is the way that they are trying to go at this to say, okay, we are going to encrypt this in a way that we cannot sell ads against your private conversations so on that level, i think we should be applauding it. Its definitely going to be a more positive move for the European Union and for a lot of consumers. You bring up a good point because on one hand you have the government saying privacy is key here, we need to protect the data youve got the doj potentially reviewing the acquisition of fitbit by google for that very reason, so privacy is a central issue unless it pertains to Law Enforcement. So does not make the case, does that make the governments case more challenged as they try to weave through those tenuous areas . I think the complexity is up three to four fold versus just ten years ago. However, the Technology Companies have to understand that if they dont move on this and work with government to solve it, government will regulate it. Senator graham i know very well. I was cochair of john mccains president ial election. Senator graham was there with him every night. What hes saying is we dont want to solve it for you if you dont work with us to solve the legitimate needs, were going to do it we make it too complex at times. Its like should you be able to listen to a phone call the answer is no you go to a court order and say were concerned about somebody doing something. The judge agrees, then you should be able to open it up take those basic principles. Dont let everybody fool with the complexity and tell the Tech Companies to go solve it and if you dont, well solve it for you. That is what macron is doing in france and what modi is doing in india and thats what democrats and republicans are doing in congress. So i think the biggest red flag for them right now is child pornography. This is going to become a really hotbutton issue around privacy. The number of child pornography images that have been caught on facebook and other social platforms is staggering. And so this arguably is going to make it easier for pornographers to share stuff now, they say theyre working on technology that would allow them to identify that kind of material before it actually gets posted, but thats years away. Last comment and then well wrap it up okay. So whats important here is the unintended consequences when you make government regulation its often aimed at the big guys, the 5 billion fine or things of that type. The ones that get hurt are your startups and my startups. Totally. So you need to understand not the implications for the big guys but job creation will come from startups. Weve got to understand when we do regulations, what does it mean to the startups of the world. Really good context on two big issues thank you, susan, john, good to see you both. Up next, an exclusive with the ceo of bank of america, Brian Moynihan later, u. P. S. And cvs joining forces for delivery. Well speak to both ceos and how theyre defending against the growing threat of amazon a huge show still ahead. Squawk alley is back after this quick break welcome back to squawk alley. Lets get over to our wilfred frost, sitting down with a special guest. Wilf, take it away. Jon, thanks so much for that. As you said here at the Goldman Sachs financials conference. Joined by the chairman and ceo of bank of america, Brian Moynihan. Great to be here, good to see you again. We heard from you this morning presenting at the conference and some other banks are very optimistic about the consumer it seems. Talk us through that you have some unique data about how retail sales is going in the holiday period. Well, you have to start a little bit from the structure and the u. S. Economy is twothirds, 70 consumer driven. So if the u. S. Consumer is doing well, we know the economy will do pretty well if you look at our spending just in general last year to this year, its up about 5. 5 to 6 and thats across 3 trillion of card usage, checks written, cash out of the atms. Its a big dataset its grown faster through the year if you look at the holiday spending, wednesday before thanksgiving to cyber monday, up double digits, strong. People are spending. So thats good news for the u. S. Economy. So that helps sustain this long, long growth session weve had. Even longer because the u. S. Consumer is employed, wages are growing and they will spend. Its a terrific win in the sales of the u. S. Economy. When you see the pickup has happened for the consumer, what do you think has driven that is it cyclical factors like rates being low or is it something structural that isment during this cycle, the middle class has grown in overall wealth at the end of the day whats driving it is the average consumer in america, about 150 Million People work, they have a job. That job, theyre growing in promotions and doing things. A teammate that started in 2010 for us at 50,000 has had 10 per year salary and wage growth per year so theyre making more money and spending it. So thats happening across if you look at the recent data, youre seeing a faster growth rate in the Median Income level than weve seen so far in this recovery so thats all good news but its all driven by great employment, americas success in the worldwide economy. The ability to pay people more and thats whats driving consumers to spend theyre not going to spending if theyre worried about their job or getting paid. Is the corporate sector weaker its more muted you really have to think about triangles. The Largest Companies being in smaller numbers at the top were the largest lendinger ee lender to Small Business in the country. The confidence level of those small, mediumsized businesses is okay. Mostly because theyre exposed to the u. S. Economy. When you get bigger, you have the trade issues, you have to worry about china slowdown, europe sluggishness, japan sluggishness, brazil, because youre involved in worldwide commerce our observation has been as you get higher up, the nervousness of whats going on, but theyre still employing a lot of people, fighting to get people to do the work on the other hand, the corporate loan growth rates slow down largely because people are trying to figure out when does this all mitigate. Weve got a fed decision coming this afternoon. As we sit here today compared to 12 months ago, weve seen the fed ease significantly in the time in between. Given that optimistic view on the economy you just gave, are you surprised at the extent of their aboutturn, of their pivot since 12 months ago . I think they made it clear in the minutes that basically they have to be there to provide this insurance policy to make sure this very long recovery and growth cycle stays in there. You know, if you look at the chair greenspan in the 90s and stuff, there have been times when you have to go in and help because of the impacts of trade, the impacts of things that are sort of outside the United States so its not an observation by me to say they have put the insurance policy and they have said it. Now that they put enough in and i think theyll hold thats what the market says and thats what we believe in the company. Weve seen some price wars in the Online Brokers and its led to some consolidation. Do you fear that Charles Schwab a beefedup Charles Schwab is now a major competitor in a way it wasnt before to bank of america . It was always a major competitor weve been competing with them for years. The whole zero dollar trade came at people in a way that surprised me in 2006, we announced zero dollar trades. Its not a new concept thats the thing you have to think about. The way we do it is in ku conjunction with our broad partnership. Largely we want people to bring the whole relationship with us we are massively competitive and the growth rate of the customers is very strong, no attrition a Great Rewards Program across all their products and services, so we tie it in the broader thing. We are not in a standalone, get a person who just trades were into giving us your full financial relationship and well deliver the whole company for you. Similarly in other areas of the tech youve invested in, its really delivering on the numbers. You released some this morning is it in a position now where you think it is better than any challenger thats out there . Its better we believe our products and services are better than any challenger and any mainstream competitor, whatever characterization you want to put. We study everybody, see what customers need the different is able to get scale out of our investments so we have 35 million digital customers, 29 million mobile customers. The mobile customers did a billion and a half interactions with us and set up 600,000 appointments at our branches so you have to have high touch and high tech in the interplay 30 of our sales are digital if we invest a dollar per customer, its 35 million dollars. So we can heavily sustain that Competitive Edge 65 million customer interactions, unique product, so we think we can be competitive with everybody we study the competition and have to be. Given all of that, and scale has become so, so important. Tech is a leading part of that if you were on the board of a regional bank, what would you advise them to do . How are they going to compete with the scale that you so clearly have i think the idea of scale being valuable in National Brands, et cetera, are very important. When i started in the business as a businessperson in the early 90s as a strategist, the world said theres going to be some massive consolidation. It just takes time and alignment of boards and strategies but the idea there will always be all kinds of banks in the United States, small, medium and large. The idea of being larger is being proven out not only by the largest but also the midsize banks who get more scale and the ability to get efficiencies. But whats really different is the ability to have a National Brand. Only in the 80s have you been able to have a