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CNN IN THE MONEY
Government Plans for Worst Case Terrorism Scenarios; Video Game Industry Create $25 Billion A Year; America's Consumer Culture Hurts Oil Prices
Aired March 19, 2005 - 13:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
MARY SCHINDLER, MOTHER OF TERRI SCHIAVO: President Bush and the politicians in Washington, please, please, please save my little girl.
RUDI BAKHTIAR, CNN CORRESPONDENT: New legislative action is planned by Monday. Schiavo's husband says it was her wish to die if she became incapacitated.
Secretary of State Condoleezza Rice toured a military command center in South Korea. It would be headquarters for any confrontation with North Korea. The U.S. is demanding that North Korea return to six-nation talks on disarmament. I'm Rudi Bakhtiar here at the CNN Center. More news at the bottom of the hour. IN THE MONEY begins right now.
CHRISTINE ROMANS, CNN ANCHOR, IN THE MONEY: Welcome to IN THE MONEY. I'm Christine Romans in for Jack Cafferty.
Coming up on today's program, putting your cash where the danger is. The Homeland Security people have drawn up a list of their worst- case terrorism scenarios. See if that could lead to smarter planning to protect America.
Plus, more is less. We'll talk with a doctor who says we're wired to acquire and it's hurting us. Find out if it's time for you to go easy on the plastic.
And, why you'll pay to make your brain work harder. Video games have turned into big business, about $25 billion big. We'll ask a major player about the attraction.
Joining me today, a couple of the IN THE MONEY veterans, "Fortune" magazine Editor-at-large Andy Serwer and money.com Managing Editor Allen Wastler and on Wall Street this week, all eyes on oil prices. Gas prices also creeping up, near records here. This is a trend that just will not go away.
ANDREW SERWER, "FORTUNE" MAGAZINE: I think what's really disturbing is we had those record oil prices Christine back in October and then they unwound. They went way back down towards Christmas and everyone expected, well that's it. We saw $55-a-barrel oil and now we're going to go way down to $45. We're going to be OK again. We jack back up. They say it was the cold weather. There's a lot of speculators in the market right now, a lot of hedge funds. But it's very confusing, because demand from the United States and China is really very strong right now. It's a double-edged sword. The economy is recovering, but that sends the price of oil up and there's so much confusion about how permanent these prices are right now.
ALLEN WASTLER, MONEY.COM: Everybody says China, China, China, but they only consume about a third of what the United States -- and we suck it in, baby. We're just glug, glug, glug, drink it up. So I kind of wonder if the speculation argument that people -- look, the stock market hadn't been that great, bonds, they've already topped out. Let's pile into commodities and bid it up, bid it up, bid it up.
ROMANS: Some of these hedge fund guys they have calls for $3-, $4-a-gallon gas. They say until you get up to gas like that, consumers in this country are not going to pull back. We're going to get in our SUVs. We're going to heat our homes. We're going to just guzzle as much oil as we always have.
SERWER: There already is $3 gasoline. I saw the sign in Malibu, for premium right now, it's over $3 a gallon. Average is over $2.05 right now. We're looking at possibly $2.25 this summer, as much as that. And obviously of course...
ROMANS: Does it stop you...
SERWER: Well, it doesn't stop people from taking trips, but they do on the margin go to places like Wal-Mart less. It really does affect everyone just on the margin a little bit and it's like a giant tax on the economy, like they say.
ROMANS: All right. The U.S. Department of Homeland Security trying a fresh approach to fighting terrorism. It works a little like this. Imagine the worst, than do everything you can to stop it from happening. Michael Chertoff, the new homeland security secretary, warned this week that his department can't prevent all terrorist strikes in America. What he wants to do, instead, is focus money and resources on blocking the most serious attacks. And just days ago, the department's list of those worst case scenarios hit the papers after it was released by mistake. For a look at whether Washington is trying this one the right way, Michael Wermuth joins this from Washington. He's the director of the homeland security program at the Rand Corporation. You read this list of worst case scenarios and it's chilling. Is this fear mongering, or is this real important planning for police departments and fire departments around the country?
MICHAEL WERMUTH, RAND CORPORATION: Well, clearly, this document is designed to be a planning tool. And it does include some -- what you describe as worst-case scenarios. It really is a list of potential kinds of events, not just terrorist attacks. It includes some natural disasters. But it's a list to dry to display the spectrum of the kinds of things that governments at all level, federal, state and local, might have to respond to, as a way of informing those government entities at all levels, perhaps even some in the private sector, of the kinds of capabilities that would be required to respond to an event, such as those that are listed in this document. WASTLER: Mr. Wermuth, when I first saw this report, what I was really worried about is, hey, terrorists, if you're short on ideas for what to do, we just drew up a bunch for you, take your pick. It seemed like you just gave -- the report just gave a menu of what to do to terrorism. Should I be worried about that? Should the American people be worried about that?
WERMUTH: There's not really anything in this document that hasn't already been hypothesized as a potential terrorist attack. And of course this list is not all-inclusive. You can think of any number of other things that terrorists might do. Again, it really isn't something that is supposed to be giving out ideas about how terrorists might do things. It's not the how. This is really more the what would happen if -- so it doesn't suggest targets or locations or time sequencing or anything else. It really is -- you know, sobering, as it is, it really is a pretty good list that's really part of a much larger package of things, to help people, particularly government entities think about something that might happen in their jurisdiction or in a neighboring jurisdiction and what they might need to respond, you know, to that. It's -- this is -- you know what people have to be careful of is assuming that this list, first of all, is the list of probable events that will happen.
SERWER: Right, I'll tell you what will get me worried, Michael, and that is, if they didn't have a list like this I mean, who are we kidding here? I hope the government is going through various scenarios, looking at these kinds of things. My question to you is this though. Al Qaeda, which is sort of I guess, the blanket term for people who would do us harm around the globe -- are they masterminds meeting together, a la some sort of James Bond movie or are they in disarray, somewhere in the middle? Are they capable really of pulling something like this off?
WEREMUTH: Well, it -- to use your term, they're probably somewhere in the middle but capable of pulling something like this off. There are some very high-end scenarios here, thermo nuclear devices, massive anthrax distribution. They're probably not capable of doing some of those. But there are some kind of middle case scenarios in here, a radiological dispersal device, a dirty bomb, if you will. Some of those things are certainly plausible. There is, however, no indication from this list, or anything else that is at least available from the open source, that al Qaeda has capability to do any of these more sophisticated things. Of course this list includes what's now being called an improvised explosive device, a bomb if you will. You know, so those scenarios are also on this list. This goes from the high-end to the low-end. It includes an earthquake scenario. It includes a really massive hurricane --
ROMANS: Let me jump in here, because you talk about an earthquake or a hurricane. When I talk to people who are experts in the infrastructure of this country, our dams, our bridges, our roadways, they grade it maybe a "C", a "D"-plus for safety. They tell me that you look at earthquakes or hurricanes and the most important thing is the response. It's money for police officers and firefighters and that they worry that all of this disaster planning for things that may or may not happen is taking attention away from just being good at any kind of disaster response.
WERMUTH: Well, clearly, if you look at this entire list of scenarios, this is supposed to be an all-hazards approach. In fact, it even goes further, when you look at the basis upon which this list was developed. Homeland Security Presidential Directive Eight really is intended to get to a list of capabilities if you will, capabilities-based planning is the term that's been borrowed from something the Defense Department's been doing in recent years, to suggest that if you can describe capabilities that you'll need in a lot of different scenarios and actually develop those capabilities, it won't really matter too much whether it's an earthquake or a hurricane or perhaps even an intentionally perpetrated attack. If you can develop capabilities across a broad spectrum, then hopefully you'll be able to mitigate, reduce, limit, the damage that will occur, whatever the incident is.
WASTLER: Michael, scanning the lists, there was some pretty horrific stuff, but me being an Internet guy, I sort of scanned it for cyber terrorism and it seemed kind of light on that. Considering that it was accidentally leaked onto the Internet, one would think well, maybe that's something our government needs to bulk up on then. What's your impression? Is the government thinking about cyber terrorism or is it something that just doesn't play big because most of us think of it as a nuisance?
WERMUTH: Well cyber is one of the items on this list. It of course is only one. There are a lot of us who believe that cyber attacks could be used certainly in conjunction with some other type of attack, to disrupt emergency response capabilities, for example, if you can jam computers of emergency medical technicians or fire or law enforcement. That might compound an attack that on -- you know, on the surface might not seem so bad, but the use of cyber and the ease with which cyber can be used is something that ought to concern everyone. The department does, of course, have a cyber czar if you will, looking at these issues all time.
ROMANS: Michael Wermuth, Rand, thank you so much. A chilling, but important discussion. Thanks.
Come up after the break, high on shopping. We'll speak with a psychiatrist who has been looking at what buying does to your brain.
Also ahead, the digital playground: see how video games hook the hottest demographics, kids with money to burn.
And get back at a bad boss without going to jail: we'll show you our "Fun Site of the Week." Now promise not to tell your HR department about this one.
ROMANS: According to a guest we had on a couple of weeks ago, one of the hottest real estate investments right now is a storage facility and it makes sense. As a nation, we are obsessed with stuff, from high tech to low tech and everything in between. The new book "American Mania, When More Is Not Enough" looks at how we got that way and why we need to change. Peter Whitbrow is the author of "American Mania." He is also the director of the Neuropsychiatric Institute at UCLA. Welcome to the program.
PETER WHITBROW, AUTHOR, "AMERICAN MANIA": Thank you.
ROMANS: So we are wired to acquire. There's something in us, in humans that makes us want more stuff. And in this case, a lot of times, it's stuff we don't need.
Yes, it's true. Not only do we have many, many more storage units now, we also have larger and larger stomachs. It's exactly the same phenomenon. We do not know how to deal with affluence. We didn't grow up under affluent circumstances and affluence is something completely foreign to the human being.
SERWER: But Michael (sic) are you saying this is sort of a uniquely American problem. It has to do with mobility and that we're people who live around? In other words, I don't live with my family. I'm not going to church with three generations of my family so I buy three cars instead? Is it sort of like that?
WHITBROW: It's a little bit like that but it's not completely like that. It's a universal problem. You see it in England. It's happening in Europe. Wherever we have enough -- more than enough, we tend to buy because we love novelty.
ROMANS: But it's not good.
WHITBROW: But in effect, it's not good for you but America's ahead of the curve because we're the survivalists. We leave our social structures behind us when we come to America and so what happens in the long run is that we have no social constraint. We migrate within the country as well. So how you learn this prudence of saying, well, maybe 400 pairs of shoes is not necessary, or I don't need that extra ice cream, how you learn that is very different from the instinctual thing that drives you to buy the damn stuff in the first place. So the balance between the two and this, of course if you go back to the enlightenment when we first started, it's Smith's theory all over again. On one side, you let self-interest grow. That's the engine of wealth. But he, very clearly, said that to prevent that from running away to greed, you've got to have that sort of social investment, where I don't want you to dislike me because I have got more than I should have, or I sell rotten meat and so on and so forth. I'm a person who's very, very good at the market. But the market is no longer in our hands.
WASTLER: But Doctor, we see Bernie Ebbers this week -- he got what was coming to him --
SERWER: He sold some rotten meat.
WASTLER: He sold some rotten meat. You also have the Rigases of the world. There are mechanisms we have, even though we've gotten to be a little bit more sophisticated than Adam Smith's days, where we are able to bring social constraint. Eventually, you will constrain. WHITBROW: Eventually, you will. Eventually, the government does do that. You're absolutely right. But think about it in a local circumstance where an individual is learning the prudence that we were just discussing earlier, as to how do you prioritize your life so you contain what it is that we have, in this extraordinary, wonderful, pleasure palace that we built for ourselves? How do you constrain that? That is learned individually, from very important people early in life. And, you know, it's too bad that Ebbers didn't have that early on. He might have decided, than rather than try to game the system and go to jail for a few hundred years, he would have, in fact, been able to hold back and say yeah, that isn't good: isn't good for me, isn't good for the company, isn't good for the nation.
ROMANS: But what are the pitfalls I guess, of this greedy, selfish behavior that Americans are exhibiting? What could happen?
WHITBROW: Well, my pitch in the book -- and I believe it -- is that it's bad for the individual and ultimately it's bad for the society. But I focus it on the individual. If you're gaining weight, 60 percent of the males in this country are now overweight, 30 percent -- 25 percent, 30 percent are obese. That's all happened in the last 20 years. It's going to disturb your physiology and, in fact, in the long run, decrease your life expectancy. Everybody is growing more anxious; 30 percent of the population say they're anxious now. It was only 15 percent. All this has happened because, I think, not only have we globalized, but also the electronic revolution has, in fact, enabled us now to work in a frenzy. You know, most people are living especially on the coasts, between distraction and frenzy. And they -- and it's just not healthy. And so if you pitch it at the local level, you can see that, on the individual level. But the fact is, that you also recognize that this behavior and our acquisitiveness, puts us into economic circumstance, because --
ROMANS: Look at the trade deficit.
WHITBROW: ...because we have incredible deficits.
WASTLER: Doctor, speaking of the individual, I've decided I'm above all this, obviously. So I went and looked at your quiz. You had the quiz and I didn't do too great on the quiz. I got six out of 10. I'm pretty sure Andy would fail, too. But some of the questions --
WHITBROW: That's cautionary.
WASTLER: Like getting mad about having to stand in line, eating your lunch at the desk. Those seem like fairly common place, innocuous things.
WASTLER: How do these -- how are these the telltale signs that I'm a mania, part of America's mania?
WHITBROW: By the way, I eat at my desk, too.
WHITBROW: So the fact is, that all of us are pulled into that. One of the things that helps us decide how to manage our lives is being able to focus on what you're doing and not trying to do two things at once. You'll be amazed the number of people, who when they're doing something, are actually thinking about what they should have done 10 minutes ago or what they're going to have to do in half an hour's time. So they don't focus on what they're doing. So therefore, they're not quite clear about the priorities that they -- you know if we don't want to be on this show, then I would say, oh, I'm never going to do that again. Actually, I'm enjoying myself. But it's because I'm focusing on the moment and listening to what you're saying, et cetera. A lot of people don't do that. So the point of the mania quiz is that if you're trying to do two things at once, the symptoms are, in fact, there, when you get in line. You know, there are lots of other people in the world. So lines are necessary because you can't all be at the front immediately, huh. If you feel absolutely angry that you're not immediately serviced, there's something wrong with your social behavior because you know there are lots of other people who also want that service. So we just need to be more mindful of the moment, but also recognize that we live in a social context here. You can't have everybody have everything all at once. That's sort of a giant Ponzi scheme where everybody's first and everybody gets what they want immediately. It doesn't work.
SERWER: Many of us try to do that.
WHITBROW: Yes, that's right.
SERWER: Anyway, interesting stuff, food for thought, and we'll try to keep our mania to a minimum. Peter Whitbrow is the author of "American Mania, When More Is not Enough" and he's also the director of the Neuropsychiatric Institute at UCLA. Thank you for coming on the program.
WHITBROW: Thank you very much.
SERWER: All right. Coming up after the break, GM's uphill drive. We'll tell you how Wall Street reacted to the carmaker's latest news.
Also ahead, the basketball showdown where the whole country plays. See what March Madness adds up to in dollars and cents.
And cry us a river: Bernie Ebbers aside, Allen Wastler's going to tell us why the average CEO doesn't need your pity.
ROMANS: Now let's take a look at the week's top stories in our "Money Minute." Two investment firms and a real estate company teamed up to buy all of Toys 'R Us for about $5.7 billion. Toys 'R Us has struggled to keep up with Wal-Mart's lower prices, but it became an attractive buyout target because of its well-located stores.
Shares of Viacom jumped higher after the company said it's considering splitting into two separate companies. One would be dominated by its fast-growing cable networks. The other would be led by its CBS Television unit. Viacom says splitting things up could be the best way to keep share prices higher in the long run.
And if you're looking for a growth industry this year, try cell phone porn. Mobile phone users spent an estimated $400 million downloading pornographic pictures on their cell phones last year and the research group Strategy Analytics says that could jump to $5 billion this year. And you thought cell phone users were annoying when they talked too loudly.
SERWER: Another big story this week was GM's surprise warning to Wall Street that it expects a big first quarter loss. General Motors says weak sales and stiff competition are hurting the bottom line, not to mention rising oil prices. Investors punished the stock, sending it down 14 percent on Wednesday alone. And GM shares are at a 12 1/2 year low. That makes GM our stock of the week, guess. It's not just 12 1/2 year low. I went back and looked at the chart and this stock is trading where it was 43 years ago, in the 1960s, early 1960s. Listen to this, in 1960 -- in 1975, it was $14. In the late 1960s it was $50. But point to point, it's almost exactly where it is now and that's because its market share has declined and the Japanese have made inroads and you see something like this happening over your entire lifetime. It's amazing.
ROMANS: Bottom line this is a company -- General Motors -- which, you know, is the big name in automotive in this country. And it is having trouble selling its products into the biggest car market in the world.
WASTLER: That's because its products -- nobody likes its cars. They don't have hot models that anybody wants anymore. They're also in for some big trouble because the Fed keeps rising interest rates and when you buy a car, usually, you have to take a loan. If the loan's going to cost you more, I think I'll wait on that car for a little bit.
ROMANS: If it's cheap do you buy it? I mean does it have to have some kind of new strategy?
SERWER: It's got a value trap. Every five year it looks cheap, it gets cheaper and what you said about interest rates very important. Because GMAC, their financing arm, has been their big profit center, that's going to be hurting. Healthcare costs are going to be huge. They've made bets on SUVs and pick ups. That's been good. But you see the pendulum swinging there. And I think we have to say this. We have to say that what's good for GM is no longer good for America.
ROMANS: It hasn't been for so many time.
ROMANS: At this point, you look at Ford. A few years ago, even, people were saying Ford's a great buy, Ford's a great buy, and it's just been going down, down, down. GM also really weak. Maybe making cars isn't Detroit's best thing anymore. Maybe we've been completely overturned by foreign automakers. SERWER: Well, we can make good cars and when you talk about Ford, they're ramping up production in the Mustang right now. But basically the Japanese Toyota, of course, the best car-maker in the world and they really have eaten our lunch here in this country. I think it's still possible, it's so difficult with GM, with its legacy of factories and health care costs. They talk about jobs, who's going to be the next CEO and Rick Wagoner, what kind of job he's done at GM. I just think that's almost an impossible job to run General Motors now. I wouldn't wish that on anyone. It's just very difficult.
ROMANS: Is there some reason for GM shareholders to at least say, well, at least now it's 7 percent dividend.
SERWER: It does yield over 5 percent. That's some solace though, but when you go absolutely nowhere for 43 years, that's a very tough ride.
SERWER: All right, coming up on IN THE MONEY, amazing how much can ride on somebody putting a ball through a hoop. We'll look at the economic impact of March Madness.
Also ahead, the baby-sitter you only pay once? Video games do more than just keep the kids occupied. See how they become an entertaining powerhouse.
And the killer -- see how to knock off the boss on our fun site of the week.
SERWER: The NCAA basketball tournament is in full swing and you don't need to understand the difference between a pick and roll and give and go to get in on the action this year. Colleges, corporations, even the quirky guy in HR who entered the office pool this year. At the last minute, they're trying to cash in now. Why all the hype? Let's find out. Rod Kurtz is editor of "BusinessWeek" online. Welcome, Rod. They talk about football being the number one sport in America. The NCAA tournament, not far behind, right?
ROD KURTZ, BUSINESSWEEK ONLINE: It's great to be with you. My job all week has been to talk about college basketball. It doesn't get better than this. Andy, you're right, this is a huge event. It's a huge economic event. You mentioned the Super Bowl. Yeah, it draws a lot of people. Let's look at some numbers with the NCAA tournament. Throughout the 16 days, they're going to get more than 700,000 spectators to this event. So, I mean, we're talking about a lot of money coming in here and it's interesting to look at some of the numbers.
ROMANS: Why the attraction? Why the attraction to athletes who are still pure and untainted and don't have big, you know, contracts?
KURTZ: We hope so.
ROMANS: I mean, why the attraction?
KURTZ: Well, I think -- you have to start with the fact that this is really a national championship. It's held in cities across the country. It involves teams across the country, 65 teams and it's a great story line. The little tiny college that barely made the tournament can knock out the number one seed. It's single elimination. You can move on and it's really -- you have some dramatic finishes to the games. And I think part of that brings in a lot of non-sports fans. You talk about the brackets. Everyone at work can fill out a bracket and they have a vested interest in what's going on on the court, even if they're not basketball fans.
ALLEN WASTLER, MONEY.COM: Every year, Challenger, Gray & Christmas, HR outfit on the West coast, comes out with -- they take how much time people are likely to spend watching it out, multiple it out by the average wage and they come up with lost productivity and this year it's $889 million and they do it for this. They do it for the Super Bowl. They do it for everything. We don't really put much stock in these numbers, do we?
KURTZ: You have to be -- you're absolutely right -- you have to be careful with these numbers. I mean $889 million, it sounds look a big, scary number. The way they did this, to cut to the chase, they estimated that big college basketball fans, and they're in the millions will spend 13 minutes a day checking Web sites, checking their brackets, talking by the water cooler and they add up the average wage of the average worker and then come up with this big number. Thirteen minutes a day is not a lot of time. You can waste 13 minutes very easily doing a lot of other things, chatting on instant messenger, sending e-mails, checking headlines. So I think you have to be careful. I don't really think this is going to send our economy into a tail spin.
SERWER: Well, it actually helps the economy Rob. When your team loses, you go out and get anti-depression medicine. My team, Maryland, didn't even make the tournaments.
KURTZ: The pharmaceutical industry is watching.
SERWER: So I'm in the not invited tournament, the NIT which I guess we're not talking about today.
KURTZ: Well my Penn Quakers were bounced in the first round so -
SERWER: Oh, the Quakers were killed by BC, that's right. Hey, listen to this though. One thing that really tees me off about the tournament, especially in the early rounds is you can't watch the game that you really want. They switch back and forth. There are too many games. When are we going to be able to watch the game that you really want online or in pay-per-view? I know you can on the margins right now. How come they won't put these things online, just watch the game you want?
KURTZ: Actually, there's a handful of sites popping up that are offering some of these packages that allow you to tune in online. That gets back to the productivity: people are scared, employers are scared that people are going to be watching all day long. But in terms of getting out and seeing it on a big screen, I think the best option is really to go to your local sports bar -- watch the satellite TV.
SERWER: Oh, the sports bar. My wife doesn't like that.
ROMANS: Let's talk about the pools, the brackets -- sports bars have them, so do offices. Should companies be trying to kind of push back against that a little bit? I know it's pretty rampant. There's so many different pools you can be in for so many different parts of the tournament.
KURTZ: Right. I've got two brackets filled out myself, so guilty as charged here. But I really think employers are better off accepting this as a cost of doing business. I was talking to an --
ROMANS: It builds team work in the office place.
KURTZ: Exactly. It builds morale and the last thing an employer wants to do is look like the bad guy and try to restrict Internet access.
SERWER: We could have a meeting at the sports bar.
KURTZ: Right, exactly.
ROMANS: It is illegal though, right?
KURTZ: Andy, I like the way you think. But I really think this is something that companies can use to their advantage and curry favor with their employees and not look like the bad guy. I think it does build morale. I was talking to an economist the other day who likened this to America's version of the World Cup. It's two weeks where we're all swept up in this and there's really no sense in trying to stop it. I think it's become so big and as I mentioned, it brings in a lot of non-sports fans. Everyone's swept up in this.
WASTLER: All right. Well, Rod, we're going to watch the games and we appreciate you joining us.
KURTZ: I'm headed out right after this.
WASTLER: There you go, Rod Kurtz, editor of "BusinessWeek" online. There's lots more to come up here on IN THE MONEY. They don't call it a joystick for nothing. We'll look at how video games turned into a multibillion dollar business.
And, they don't all wind up like Bernie. We'll tell you why you don't have to feel too sorry for CEOs.
WASTLER: You may not be hooked, but chances are you know someone who is. No, we're not talking about drugs. We're talking about video games, games like "Grand Theft Auto" and "Halo" have reeled in kids of all ages, particularly those in the 18 to 34-year old demographic. So what keeps them playing? Let's find out. Trip Hawkins is founder of Electronic Arts, the top publisher of video games in the U.S. And his latest venture is "Digital Chocolate." a company developing games for cell phones. Trip, welcome.
TRIP HAWKINS, DIGITAL CHOCOLATE: Thank you.
WASTLER: I just -- not too long ago, I didn't watch TV for a whole 000week, actually a little more than a week. I played "Half- Life 2" instead, right up there, just playing away. And I had so much fun.
HAWKINS: Great game.
WASTLER: Trip, am I future and should the TV industry worry about me?
HAWKINS: Well, you know, people are interactive and we're not potted plants. We don't want to just sit in the corner. We like to get all our senses involved in our media. That's a big part of the digital revolution that's taking place. I think we're finding that a lot of people. They don't have the appetite to dive in at the deep end of games like "Grand Theft Auto" and "Half-Life 2." That's more of a hard-core market. And this is what I think is fascinating about the mobile phone is that it's turned into a social computer and a much wider audience of people are now carrying around a computer and doing all kinds of fascinating things with it.
SERWER: Hey, Trip, I mean are you suggesting that the console business is dead, the Play Station, the Xbox, the Game cube? And you've got the phone, you've got the web. Is that the future of gaming? If so, how do companies make money?
HAWKINS: Well, the video game business is a huge business, but they serve a core audience. A little bit like a theatrical film- making. The average American actually only goes to the movie theater about five time a year now. But of course, you see a lot of storytelling on television and what's happened is with the digital revolution, this idea of a game, an electronic game, it can be a console game. It can be PC game. It can be an Internet game. There's a lot of casual games on the Internet that actually have bigger audiences than the traditional video games and now you've got games on your mobile phone. So with all of these different ways to play, it's opened up a much larger audience.
ROMANS: Trip, on the mobile phone, I mean if my morning commute on the subway is any indication, this is a big market because a lot of people are always playing these little games on their phone. Can you get the big "Grand Theft Auto," "Halo," the ones that -- the really elaborate games on to that little thing or do you need to design special games that are more simple and easy to use?
HAWKINS: It's a very casual market and in a lot of cases, the customer only has a few minutes while they're waiting in an airport or they're waiting in line somewhere. And you want to give them something that's more like instant gratification. Hence, the name, Digital Chocolate and our slogan which is to "seize the minute." We don't want to seize the whole day.
ROMANS: It's also addictive, chocolate you know?
HAWKINS: Basically, people want to be socially connected. I think that's the key thing, is what they're looking for in a gaming experience is a lot more like the social communities that have become very popular on the Internet. And the key to having it with a mobile phone is that you always have access, because you're always carrying that little computer around with you.
WASTLER: Trip, as the industry gets bigger and starts raking in more and more dough, it's beginning to have some growing pains. Labor issues all of a sudden have popped up because people want more and more and different games. They burn through the games. They push the developers. You got to write more code, write more code. They put in extra hours. The old thing of paying them with stock options that out the window right now. How much more trouble are we going to see as this industry grows up with its own infrastructure, so to speak?
HAWKINS: I think you're seeing the production of traditional video games is becoming very much like making a big-scale movie. As you know, in Hollywood, everything is unionized and there are different labor specialties doing all the different kinds of creative work and it may go that way with video games because they're becoming very expensive to produce.
You have a lot of people involved over a long period of time and it's a challenge. I mean here in Silicon Valley, of course, there is a strong culture of entrepreneurship and stock options and that's a very different way of compensating people, but you have to figure out how to take care of people correctly if they're working extra hours and making big sacrifices.
SERWER: Trip, talk about the future of this business and how to tie in different medias. Matt Damon and Ben Affleck had this show called "The Runner" that was supposed to go on ABC. The lawyers killed it, where it was going to be television and online. You could track this person you were searching for all over the country, sounded very cool. What are some things like that over the horizon?
HAWKINS: I think those are really intriguing ideas and they provoke a lot of really useful, creative discussion. But again, that's kind of a very hard core experience. I think most people want to have a more casual involvement. So we find for example, a product like "Bubble Ducky" that's an extremely simple game to play and yet it's addictive, that's the kind of thing that a lot of people want to participate in. But then over the phone network, they're able to connect with other players and, they're able to see where they rank against other players and that creates this feeling of social community. That, I think is really the wave of future, is things that have the feeling of being very very casual approachable, easy to get into but that are really allowing you to have a better social life.
SERWER: All right, Trip Hawkins, the CEO of Digital Chocolate, founder of EA and a Silicon Valley legend, thank you very much for coming on the program, trip. HAWKINS: My pleasure.
SERWER: All right. There's a lot more to come on IN THE MONEY. Coming up, how to get revenge with just a twitch of your index finger. Stick around for a website that lets you whack the boss without whacking the boss.
And if you've got a stupid boss story for us or you just want to let off a little steam, fire up your e-mail. Our address is email@example.com.
ROMANS: Call it CEO whoa. Bernie Ebbers' recent conviction and the firing of Boeing's Harry Stonecipher reportedly has some corporate leaders running for cover. But before you shed a tear for America's chief executives, let's see how much they're really suffering. Allen Wastler has that and the fun site of the week. Oh, sort of don't cry for CEOs.
WASTLER: All these poor CEOs. Martha Stewart went to jail -- Bernie Ebbers is just like -- now, let's not forget, this week we got two big pay packages were announced. One was for Charles Prince, heads up Citigroup. Citigroup, OK, Citigroup, which was just ordered by the Fed, no more acquisitions until you straighten out regulatory problems. You had a little problem there in Japan. Ooh, you're bond trading in Europe. We don't like that too much either. $20 million, Mr. Prince --
SERWER: That makes sense, he's got a lot of different businesses.
WASTLER: It was a pay cut, we will say that, but still $20 million
ROMANS: $20 million was a pay cut.
WASTLER: I wish I could mess up like that and $20 million. The CEO of Occidental Petroleum.
SERWER: Oxy Pete (ph).
WASTER: $31 million. Of course oil was booming this year, $31 million just to ride a commodity up?
ROMANS: This jury in the Ebbers' case basically said, if you're making $20 million, if you're make $30 million, you have to know every single thing that's happening in your company because that's a lot of money. This whole CEO "ah shucks" defense, I'm just the strategy guy.
SERWERS: (INAUDIBLE) CEOs over the past couple of week, haven't we?
ROMANS: Absolutely. These people are making a ton of money. Beware, because the jury is going to hold you responsible for everything that happens.
SERWER: So you want to be poor and irresponsible. It's safer.
WASTLER: You might have a point there. Actually William Donaldson started getting on this bandwagon too. This week he gave a speech down in Duke University, and pointed out that we've got sort of the imperial CEO thing is still going on with these high pay packages. The reason is, every company's board of directors sort of gets together and says, well our company's got to be the best so our CEO has to be paid -- everybody is above average. That is not going to work. Need to bring that down.
ROMANS: We've been saying this for five years and nothing changes. These people still get paid an awful lot of money. The studies show, the more a CEO makes, it has an inverse relationship with the stock price.
SERWER: The one good thing, they are getting the boot, right and left. We're seeing a lot of CEOs being outed.
ROMANS: We could talk about this forever. But now let's turn to something nice. Let's talk about how to get rid of the boss, instead of paying the boss $20 million.
WASTLER: We're talking about video games and high fallootin individuals. Video games are a way of -- I will play "Grand Theft Auto" and I will beat up things and I won't do it in real life. I found a Web site for where you can go whack the boss just beat him up...
WASTLER: Ah, go get him. Yes.
ROMANS: Where can I see this?
SERWER: I wonder what that guy's compensation was? Never mind. It's not worth it.
WASTLER: You can go to the show page at money.com/inthemoney and there it is. You can whack the boss to your heart's content.
ROMANS: Like whack a mole, whack the boss. Excellent. All right. Thank you very much. Whacking your boss.
Come up next on IN THE MONEY, it's time to hear from you as we read some of our e-mails from the past week and you can send us an e- mail right now, too. We're at firstname.lastname@example.org.
WASTLER: Now it's time to read your answers to our question about which one of your expenses has risen the most over the past year. Mario wrote -- "for me, it's been the cost of gas. But I realize that higher gas prices will soon lead to higher costs for other necessities like food because shippers will have to pass their higher expenses on to us." Rick wrote -- "my health care costs are through the roof. And this is one instance where average consumers have something in common with most big businesses. No one can afford decent health plans anymore. That's the politicians fault for handing that responsibility over to the business world when they should have fixed the problem themselves.
And Joe wrote -- "the cost of educating my three children in college and law school is my fastest-rising expense. And with more outsourcing going on, I'm worried their education won't land them a job anyway." Now, for next week's e-mail question of the week -- do you know where an item is made before you buy it? Send your answers to email@example.com and you should also visit our show page at money.com/inthemoney. That's where you can whack the boss and get the address for our fun site of the week.
ROMANS: All right. Thanks for joining us for this edition of IN THE MONEY. Thanks to "Fortune" magazine editor at large Andy Serwer and money.com managing editor Allen Wastler. Join us tomorrow at 3:00 p.m. Eastern when we'll look at the challenges facing America's relationship with China. Some say we're beginning to lose our economic and military leverage with China at exactly the wrong time. That's tomorrow at 3:00. See you then.
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