WHEN: Today, Monday, June 17, 2019
WHERE: CNBC's "Squawk Box"
The following is the unofficial transcript of a CNBC EXCLUSIVE interview with Facebook Co-Founder Chris Hughes on CNBC's "Squawk Box" (M-F 6AM – 9AM) today, Monday, June 17th. The following is a link to video of the interview on CNBC.com: https://www.cnbc.com/video/2019/06/17/watch-cnbcs-full-interview-with-facebook-co-founder-chris-hughes.html.
All references must be sourced to CNBC.
BECKY QUICK: Joining us this morning is Chris Hughes, the Economic Security Project Co-Chair and Facebook Co-Founder. He's joining us today to talk about Facebook and the growing calls for a crackdown on America's biggest tech companies. Chris, by the way, also has a new piece in the quarterly journal "Democracy" titled 'Raise my Taxes' in which he calls on higher taxes for the wealthy. And he says progressive policies should be paid for with more taxes and government borrowing. Hughes writes, "More government spending, when smartly invested in useful programs, amplifies American prosperity." Chris, I want to thank you for being with us today.
CHRIS HUGHES: Thank you guys for having me back.
BECKY QUICK: We're going to talk about all of these things, including the new piece you have in "Democracy." But we haven't gotten to talk to you since you called for Facebook's breakup about a month ago. We introduced you as a Co-Founder for Facebook, you were Mark Zuckerberg's college roommate. And I just wonder: what's happened since and how you got to the point where you thought, 'Okay, I need to speak out'?
CHRIS HUGHES: Well, it's been a whirlwind of a month. You know, as you said, in early May, I put out a piece saying that Facebook had gotten too big and that Mark was unaccountable to not just government but also shareholders and the private market. And in the weeks and – feels like nearly months since there's been just a deluge of interest. And interest from venture capitalists, from the finance industry, interest from the government, interest from, you know, my parents and their friends, just everyday people who are wondering what there is to do about big tech. And I think that it's tapped into something bigger. And, I think there's a sense that companies in America, including Facebook, but not only Facebook, have gotten increasingly large. And because we haven't done anything on antitrust with any kind of anti-monopoly policy in decades, it's become -- they have become too large and too quickly. So, now we have to take a different path. And so, the FTC and DoJ have announced they're looking in to Facebook and Google. I think State Attorney Generals are looking more closely, according to the reporting in "The Wall Street Journal." So, I think that the time for oversight has arrived.
BECKY QUICK: Have you been interviewed by any of those government regulatory bodies or have you been -- have you had a request to come speak before them?
CHRIS HUGHES: I have talked privately with several folks in government who are really in a fact-finding stage. I think they're trying to figure out, 'Okay, well, what exactly is going on with Facebook? Is it -- is the problem privacy, democracy, elections? Is it that it's too big?' And my message to them is that it's all of these things. But the root cause is the fact that it is unaccountable. That there is no real competition in social networking. And so, when users are outraged about election scandals or privacy scandals, they have nowhere else to go.
ANDREW ROSS SORKIN: Let me ask you a question about antitrust law. And the question is whether the current law would apply and you think should be used or could be used to break the company up or whether the law unto itself needs to change? And the reason I ask is, it's not illegal to create a monopoly on to itself, so far as you do it legally. Right? You can either build a monopoly legally, and that's fine. And then the issue is whether you're maintaining that monopoly legally. And the question is whether you think Microsoft -- not Microsoft, I'm sorry, but Facebook has broken the law on its way to this monopoly status that I think you are arguing it has?
CHRIS HUGHES: Well, I don't think that the law actually needs to be changed. The laws that are on the books -- there are several that make it very clear that it's illegal to have monopoly power and abuse the monopoly power that Facebook has today. I think Facebook has a pattern of acquiring nascent competitors like Instagram, like WhatsApp, making promises such as 'We're not going to integrate the data from WhatsApp users with the folks who use our core blue product,' as it's called. And then what we see over time is an -- effectively a freeze on the marketplace, reduction in innovation and a loss in quality. I think there's a reason that we keep having these privacy scandals that come week after week after week. And it's because there is nowhere else to go. I mean just last year, everyone said, 'I'm going to delete Facebook. I can't stand it anymore.' And how many of your friends -- at least of mine – said, 'I'm going to Instagram?' Not realizing it's part of the exact same company.
MICHAEL SANTOLI: What mechanism is there for instituting accountability in the way?
CHRIS HUGHES: The market.
MICHAEL SANTOLI: I mean, in other words, fostering some kind of competition. But what do you do to Facebook to prompt that?
CHRIS HUGHES: Well, I think that we say that the FTC was mistaken what when it approved the Instagram and WhatsApp mergers in 2012 and 2014. So, we unwind those and we live in a world where Facebook, Instagram and WhatsApp, all three are separate companies. We combine that with the freeze on future acquisitions. And I think then -- listen, it's still a few very big players. It's more like managed oligopoly than it is a truly competitive marketplace as Friedman would like. But that's better because there's accountability.
ANDREW ROSS SORKIN: But here's the question about antitrust that's so complicated. At the time they bought Instagram, there were people who thought it was crazy. And that Instagram -- nobody -- I don't want to say nobody but a lot of people did not expect –
BECKY QUICK: That it was too much to pay 1 billion dollars. Yeah.
ANDREW ROSS SORKIN: – that Instagram would turn out to be the remarkable runaway success that it has. That's what's so hard about antitrust. Which is especially when you're buying start-ups or smaller companies, being able to look into this crystal ball and know what's going to happen later.
CHRIS HUGHES: Sure, I take the point. But I think two things: I think in Instagram's case, there were a lot of people who looked at what Instagram was doing, particularly on mobile. If we go back in that period, Facebook was freaking out because it wasn't adapting to the mobile platform quickly. Instagram was built for mobile and was built to specifically attack the position of strength that Facebook had -- the photo sharing capability. The growth rates for Instagram were higher than they were in early days with Facebook. So, while some said, 'Yeah, that's a pretty heavy price.' A lot of other people said, 'That's a smart move.' And so, the FTC, again, I don't think necessarily can be expected to always get things right. But they need to take a step back and say, 'We made a mistake in this case.'
ANDREW ROSS SORKIN: I know we want to talk about tax, but I have one last question, at least from me. Which is: we were debating Apple earlier today because Tim Cook has been very outspoken about the need for privacy. And I was saying I'm an Apple fan boy, but one of the issues raised in the larger debate is whether Apple onto itself, despite its privacy commitment -- commitment to privacy, has facilitated some of this in terms of the privacy issues given the platform and ecosystem that it built and the ability for example, when Facebook first was put on to the iPhone, you are asked, you know, 'Do you want to add all your contacts?' 'Yes.' 'Do you want to all your GPS coordinates to be automatically transmitted?' Where does Apple or even Google to the extent that they provide the operating system for all this land?
CHRIS HUGHES: Well, I think each one of the companies is separate. And I should say that I don't think we should break up all of the big tech. I think in some cases, structural remedies make sense. In other cases behavioral remedies make sense. Apple, separately from the other companies out there, has put privacy a little bit more at the center of what it has at least talked about doing. But at the same time, there are disturbing practices on the App Store, for instance. Like what actually makes it through the App Store and whether or not Apple can use the data from who's downloading what. So I don't think any particular company is, you know, is perfect here. I think they're all too big. And we should think about regulating effectively to create more competition.
BECKY QUICK: Hey, Chris, I just want to ask you about your decision to go ahead and write this open letter to Zuckerburg and anybody else who is out there. I read it and you were very personal about it. Because this was your college roommate. This is somebody you've been good friends with. You talked about how the last time you had seen him had been at his house with his wife and his child. Have you heard from him since?
CHRIS HUGHES: I haven't. I'm not sure I will. I, you know, I have talked to several other folks -- some who were at Facebook, many of whom were at Facebook with me in that period. And I have heard a lot of folks who are saying thank you. Thank you for saying this. Some say I think you're right. Some say I don't necessarily agree with everything in your piece. But I do think Facebook has become too powerful. That Mark has become too powerful. That the era of self-oversight should be over. So, I think that things are changing, both in Silicon Valley at Facebook and at some of these other companies. The question of how quickly and what role government will have to play to make sure that it changes in a positive, constructive direction. Those are the things that we have to sort out.
BECKY QUICK: I had an almost visceral reaction because you imagine friends and feeling like -
CHRIS HUGHES: Yeah.
BECKY QUICK: I'm sure he feels betrayed. I'm sure it was a difficult decision for you to come to that moment. Did you try talking to him first?
CHRIS HUGHES: You know, I had talked to him quite a bit about a whole set of issues here. And I had been somewhat critical of Facebook well before this piece. You know, I think that there are some friendships that are resilient enough to take criticism and to understand. There are some that aren't. And I -- you know, it's individual decisions that each person will –
ANDREW ROSS SORKIN: Which one do you think this is?
CHRIS HUGHES: I doubt Mark will be super excited about being friends again, but listen, as I said in the piece I think he's a good person. I still consider him a friend. I don't think -- the issue is that his power has grown too big because we're not regulating the markets the way we must. I don't have any -- you know, personal negative feelings for Mark. Although I'm not -- who knows how it works in his direction towards me. But it is very personal here.
BECKY QUICK: Alright. I would imagine. Chris, let's pivot the conversation and talk about income inequality. Your basic – your support that you have for a basic income. Joining us right now to do just that is Aisha Nyandoro. She is the CEO of Springboard to Opportunities. Her organization provides programs and services to residents of subsidized housing in three states. And Chris' economic security project provided a one-time grant that benefited her organization. Aisha, thank you for joining us today. It's good to see you.
AISHA NYANDORO: Thank you so much for having me.
BECKY QUICK: Explain what your organization does.
AISHA NYANDORO: So, Springboard, as a whole, provides programs and services for families that live in federally subsidized affordable housing. But specifically, what are doing as it relates to income equality and really beginning to close that gap is a guaranteed income pilot where we are giving resources to extremely low-income families and in effect $1,000 a month for 12 months with no strings attached. Trusting that we know what it is that they need for themselves and their families and that they're using this opportunity to simultaneously create income while also thinking about the future for their families.
BECKY QUICK: Chris, how did you get involved? What drew your attention?
CHRIS HUGHES: So, I had a chance to meet Aisha a few years ago. And her story to me and to many of the folks I spoke to was pretty powerful. She had a provocative idea. I think we should support single black moms in public housing with cash. No strings attached. And that raises eyebrows no matter what room you're in, left or right. Because, 'Okay, well, first off, why cash?' Well because we know it helps people much more effectively than just about anything else out there. It's flexible. It respects their freedom. If you need a car to go interview for a job, you can get cash. There's no government program that will enable you to do that. And then, secondly, why single black moms? She as has said to me consistently the racial wealth gap in the United States is historic. The median black family is worth one-tenth of the median white family. $17,000 versus $170,000. And we can and should take a step back and say there are multiple forces causing this. But it's okay to say that there are some parts of the society, some groups in our country who have been disproportionately discriminated against historically and we need to go out of our way to remedy to that. So, to create the kind of economic opportunity we want to see. So, it was that kind of a message that resonated with us and with a whole community of people. And we said, 'What can we do?' and she said, 'Let's start a pilot.' So, we're there.
BECKY QUICK: So, Aisha tell us about the pilot. How many people are involved in it? What have you seen so far? How long has the pilot been running? And what's your immediate takeback? What do you think you could be doing or should be doing?
AISHA NYANDORO: Yeah, so the pilot has been running since December. And the pilot in effect -- it's impacting 20 mothers and their families. And like I said it's providing $1,000 a month for 12 months. And what it is that we're seeing, quite frankly, is the urgency of this moment in time. These women that we work with in essence make about $11,000 annually. So, with the resources we are in effect doubling their income. And so, they understand what this means for themselves and their family. And we see individuals are creating opportunities to make sure that their families are self-sufficient and have economic security beyond the pilot. We have seen individuals pay off debt and that consumer debt quite frankly has been predatory debt that they have been -- that they have gotten in trouble with as they have sought opportunities to create better opportunities for themselves and their families in the past. We have seen individuals go back to school and complete certifications. Moms who have worked retail jobs for years are now actually looking for career opportunities because they have – because they now have certifications and skills necessary to help pivot them to the next step. And so, where it is that we feel that we could be doing differently, quite frankly, is having larger conversations about the large income, wealth disparity gap within this country. As Chris said, it's at really higher proportions. When we look at black women, in effect, they make 61% of what white men make. So, we need to talk about that and how we can be working together, better with programs as well as policymakers to make sure that we're getting at the systematic changes that need to occur in order to ensure that families who are at the very bottom of the income level in this country have the support that they need to actualize the dreams they put in place for themselves.
BECKY QUICK: Chris, I understand doing a pilot project and getting involved in this and I think it's great that you're putting your money to work in a situation like this. I think you're going to run into big problems if you say to the government, 'Do this without any kind of checks and balances on it.'
CHRIS HUGHES: Well, I'm a big fan of checks and balances as we were talking about in the antitrust segment. I do think that right now when it comes to government programs there are some of them but we need them to be stronger. We need to be to be more resilient and we need them to be more flexible. And cash, in particular, recognizes that. It provides basic freedom and dignity to choose what you want to do. Just as Aisha was saying, these moms in the pilot in Jackson, there's not one single thing they're all using with the money. Some are using it for education, some to pay off debt, some for transportation. And in some ways, I think that's the beauty of it. We have this. We have the earned income tax credit. It needs to be significantly largely, it needs to be more monthly and it needs to more consistent. You have people out there, Kamala Harris and Cory Booker and others talking about the power of this benefit and putting forward some pretty bold, even radical expansions of it. So, I think that there's a lot of momentum here on this policy intervention too.
BECKY QUICK: Chris is going to stay with us. We'll talk more about some of the ideas he has with us, but Aisha, I want to thank you for joining us here today.
AISHA NYANDORO: Thank you so much for having me.
ANDREW ROSS SORKIN: Welcome back to "Squawk Box." We are joined by Chris Hughes, Economic Security Project Co-Chair and Co-Founder of Facebook. Big tech, of course, coming under fire in Washington of late. I want to ask him about him about a lot of his views. I want to ask him about this, though: Democratic Presidential hopeful Joe Biden recently tweeting "I have nothing against Amazon, but no company pulling in billions of dollars of profit should pay a lower tax rate than firefighters and teachers. We need to reward work, not just wealth." Let's now talk about the growing calls for a crackdown on Facebook and a possible breakup of America's biggest tech names. I'm curious, specially on the Amazon-front, what you think of that. By the way, President Trump has his own views on this topic about Amazon. A little bit different. A little bit similar. Amazon came back with its own Tweet saying: we pay our fair share of taxes. We have done this legitimately and legally.
BECKY QUICK: That's in response to Biden.
ANDREW ROSS SORKIN: In response to Biden.
CHRIS HUGHES: In response to Biden. Yeah, I mean, I think in this case, it's possible for both sides to be right. I think that Amazon should pay more in taxes. And it's true, they're paying their tax bill. It seems that they're complying with the law. And I think that debate highlights the exact problem. I mean the Trump Tax bill lowered corporate rates significantly. And as we know, the money that companies made from that, 90% of that went back into buy backs. So, you know, we're looking at a place that rates – corporate income tax rates should be higher. I think they should be higher in Amazon's case. I don't think that alone is going to solve it. But I think Biden is correct and so is Amazon. That's why we need a different policy.
ANDREW ROSS SORKIN: Here's the question though, which is, and Amazon made this point in its own Tweet. They said effectively -- we think that Biden has a problem with the tax rates, not with us. So, the question is -- the problem these companies themselves and there was a listing of the companies in "The New York Times" that paid -- the biggest companies that paid the least in taxes. Or is the problem with the tax code? And I think it's the code.
CHRIS HUGHES: I think it's with the code. But I also think it's how -- the problem is also how we structure the companies. To my knowledge, most of those companies are paying their taxes legally in the sense they're complying with the law. It is also true that the tax rates on the companies aren't high enough. But it is thirdly also true that there have been calls for what's called a new kind of stakeholder capitalism which actually looks like with what happened with the big companies 40 or 50 years ago. And specifically, what that would mean is instead of saying corporate boards have one number that they need to be paying attention to, the bottom line, how much money is the corporation making, then they would be paying attention to the stakeholders. Just like GM used to do. The laborers, the environment--
BECKY QUICK: I think companies do do that right now. I think you're wrong to say that companies don't. If they don't care about their employees the company is not going to survive. If they don't care about their customers the company is not going to survive. Any company that thrives, it's because it is doing just that. It is paying attention to multiple stakeholders and making sure that it recognizes all of that.
CHRIS HUGHES: I'm not so sure. You know, you hear a lot from the companies directly that well, we're paying our tax rates. We are just complying with the law. So, we have -- we've got to pay the lowest amount possible.
BECKY QUICK: Chris, I mean it's --
CHRIS HUGHES: I'm not asking to donate any money to the IRS, let's be clear. But I am saying that wages in the United States are flat. They have been flat, for decades--
BECKY QUICK: We have seen many companies, including Amazon and Walmart and Target and other, that are paying above minimum wage in multiple places.
CHRIS HUGHES: And it is still true that labor -- that the income going to labor versus to capitalists is flat lined. And you see in other countries like in Germany, where they have this what's called Co-determination Model where, at a board level, customers, laborers, capital owners, everyone is at the table trying to figure out how it works. And guess what? Their household wages are significantly higher.
BECKY QUICK: But you think our system is really broken. This is not just about changing things around the edges. You're talking about a major --
MICHAEL SANTOLI: But you never had a trillion-dollar company that got that way -- trillion-dollar market cap company like Amazon when they didn't really care about the profits. So, we tax on the stated profits. We have a market that capitalizes the company almost irrelevant how much profits are being made. I mean, in some countries they talk on revenue. That's one way -- almost an alternative tax on the companies.
CHRIS HUGHES: And, what's more, I mean, the eCommerce space, again, it's not a particularly competitive market. I mean, Amazon owns a significant chunk of eCommerce. You do have Walmart.com. You do have a little bit more competition than you have in social networking. But I think it's wrong to say that, 'Well, these companies -- they're just going to die if they don't pay their laborers enough, because they are not going to be—' Because what we see in Amazon's case is consistently them paying, you know, near bottom of the barrel kinds of wages. And the company –
BECKY QUICK: Bernie Sanders just signed off on them. Bernie Sanders just said, 'Okay.' But you're not happy with what they have done?
CHRIS HUGHES: Listen, I'm not here to pick on any single company. I'm here to make a case that American capitalism, as it is currently configured, is broken. Because laborers and the ordinary American people are not making any more money than they did 40 years ago. And the fact that we're still wrestling with that and that people are outraged about economic turmoil when we have 3.8% unemployment shows us that something is structurally off.
ANDREW ROSS SORKIN: Let me make this more complicated. There's a story in "The Wall Street Journal" about Calpers. Calperswas one of the early, what might be described as ESG investors. Somebody who -- effectively a massive pension fund with impact to try to influence the outcomes on a social basis, whether it comes to workers, whether it came to divestments of tobacco. Other things like that. They are now apparently maybe making a decision to go back in to some of those things. So, there was a consultant that came to them and just said, 'By getting out of tobacco in the '80s you have lost the equivalent of $3.5 billion for your pensioners and maybe all of these social programs' -- I don't know if you saw this piece, 'Maybe all of the social ideas that you have been espousing are actually costing the pensioners and this should be rethought.' What do you think of that?
CHRIS HUGHES: I'm -- I mean, I don't know that much about that specific case. But I do think that any kind of self-regulation -- I'm sort of wary of this idea that we'll have other B corps or certain funds that say we won't invest in certain things because they're ethically problematic and we're going to invest in others. I mean, sometimes that might be the right decision but I think it overlooks the role that regulations should have played. You know, again, smoking is a tricky example but it's actually not that tricky. You know, tens of thousands -- I don't know, hundreds of thousands of people die from smoking every year. We have regulation on smoking. We have taxes on smoking. We have agreed that these things are not socially beneficial so we're not just waiting for you know charitable folks on Wall Street to make good, angelic decisions.
ANDREW ROSS SORKIN: Of the candidates on offer at the moment is there one or two that you think are most aligned that you'd like to vote for?
CHRIS HUGHES: I like the group. I mean, I find that Elizabeth Warren is talking about taxes and other issues really effectively. I think Kamala Harris, Cory Booker. Pete Buttigieg. I'm not going to go through the whole field, but I think that there's
ANDREW ROSS SORKIN: But anyone you want to endorse or as closest aligned to the views that you have?
CHRIS HUGHES: I think in general, the field -- there's a premium right now on putting forward creative ideas to solve real problems. You know, one idea is baby bonds. We were talking about the racial wealth gap in the segment just before. Cory Booker is out there talking about opening an account for every single American child, whatever state they live in and whatever race they may be, and saying that that account is going to be a kind of savings account that will grow over time. That's a kind of idea which would help close the racial wealth gap that I think, you know, virtually all American children would benefit from. That's creative. That hasn't been in our debates in a very long time. So, I think that from my perspective, I think these debates are really useful and I think --
ANDREW ROSS SORKIN: What about President Trump's argument on Twitter over the weekend, we talked about it last hour, that basically, if anybody but him is in the White House the stock market is going to crash. That these plans as well intentioned as they very well may be will be a drag on the economy. At least in the transition phase of them.
CHRIS HUGHES: I mean, you're not going to be surprised that I disagree with that at its core. I think what's a drag on the economy is the way that we have structured it right now. Because we don't have Universal Child Care in the United States. We don't have education at the level that we want it. We don't have any kind of real climate policy. And if we don't address these problems now, then we're going to see a real drag on the economy in each of those categories. So, I think that, you know, he's in many ways kicking the can down the road in addressing the things in a really fundamental way.
BECKY QUICK: What do you think of the wealth tax idea? Of taxing anything over, let's say, $50 million, or say anything over $100 billion or whatever it may be—or over $1 billion or whatever it may be. Let's say you take 3% a year from that, or 2% a year from that. And every year, that's an annualized tax that you pay. Would you be okay with that?
CHRIS HUGHES: So, I have a piece out last week or just this week actually making the case for higher taxes in the "Democracy Journal" making the case for higher taxes. Again, not because I think higher taxes--
BECKY QUICK: Not higher taxes. The wealth tax is different. I'm –
CHRIS HUGHES: The wealth tax is nicely different. So I think we need higher taxes on all kinds of things like ordinary income and capital gains and we need a wealth tax in the United States. The reason is this: right now, the top 0.1% owns as much wealth as the bottom 0%. We have almost become so tired of hearing the kind of stats that people are saying, 'Yeah, we know.' And yet, we are not doing anything about it. At the same time, we also know from recent economic research that the returns on capital over time are significantly more than the returns on labor. And if we look back in our history the only way in the United States that we have ever combated income inequality at the level we have through is through structural reform, with the kind of new tax, the progressive income tax in the 1910s or war. I certainly prefer the first.
ANDREW ROSS SORKIN: Do you think philanthropy should be tax deductible at the highest end?
CHRIS HUGHES: Yeah, I think that philanthropy is –
ANDREW ROSS SORKIN: The reason I say it, is if you are extraordinarily wealthy you can effectively live your whole life and never pay taxes.
BECKY QUICK: Because you get to give your money to the causes you want to instead of the government.
CHRIS HUGHES: Yeah, I think that are some limits on it. I think it's worth further scrutiny to make sure that everybody's paying it. –
BECKY QUICK: That's the first tax that he's raised that you haven't liked?
CHRIS HUGHES: Well, to be clear, it's a deduction for people who are doing a lot -- who are giving money to a lot of philanthropic and nonprofit causes. So, I still want them to pay their taxes. But, if they're putting an end to the soup kitchen in their community or the Economic Security Project, the group that I fund, then I think it's worthwhile for the tax code to recognize that. I also think that a wealth tax is particularly useful. We are talking about folks who have $50 million or more. That's not like, you know, just the ordinary rich. This is the super-rich.
ANDREW ROSS SORKIN: And you think it will have no drag on the economy at all?
CHRIS HUGHES: I don't, I don't.
ANDREW ROSS SORKIN: You think it would be an improvement? That's your--
CHRIS HUGHES: Specifically, if those funds were used to pay for something like Universal Child Care. You know why? Because labor force participation is at historic lows and if we funded Universal Child Care it would be easier for women in particular to get into the workforce, creating more economic growth.
ANDREW ROSS SORKIN: Okay. Chris Hughes, it is fabulous to have you here. Thank you for the conversation.
CHRIS HUGHES: Thank you for having me.
ANDREW ROSS SORKIN: Come on back. We will continue this because there's a lot more to do. Thank you.
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