Marketplace - The DOJ has a plan for Google

Episode Date: November 22, 2024

The Department of Justice has a proposal for breaking up Google: Force the firm to sell Chrome. In this episode, we’ll dig into why the DOJ wants the company to split from its web browser — the most popular one on the internet — and where AI fits into the antitrust case. Plus: Signs that Florida’s property insurance market is stabilizing, supply chain management is the secret to an NGO’s success, and automakers experience EV growing pains in the U.S. and abroad.

How we feel about this economy matters, of course. What we know matters too. From American public media, this is Market Plans. In Los Angeles, I'm Kyle Rizdall. It is Thursday today. This one is the 21st of November. Good as always to have you along everybody Let us stipulate here right at the outset that the vibes of this economy are real because as we know how people feel about their economic lives does matter. That said a good dose of data every now and then can be really useful something a little more

That said, a good dose of data every now and then can be really useful, something a little more objective that might tell us where the economy is at present, and sometimes a bit about where it's going. It's convenient then that we got just such a dose of data. Today, the conference board's leading economic index, sometimes called in the vernacular the index of leading economic indicators, it crunches together 10 different forward-looking indicators to suss out what economic growth is going to look like in the short-term future. Last month, it turns out, the LEI was down by four-tenths percent after being down in

September and August and all the way back to earlier this year. What might that portend, do you suppose? Marketplace's Mitchell Hartman is on the economic crystal ball gazing desk for us today. The leading economic index is designed to predict future growth. It uses data on manufacturing, home building, unemployment, interest rates, stock prices, and consumer sentiment. Economist Stephanie Gichard at the conference board says LEI was down last month. And it has also been declining for almost three years now. So it's bad, but the declines are also slowing down.

So this is a positive development. It means that there are still headwinds to economic growth, but less than a few months ago. And the LEI is no longer flashing warning signs of recession to come, which makes sense, says analyst Sam Stovall at CFRA research. Looking at real gross domestic product expected to be up 2.9% in 2024, 2.3% in 2025. Stovall says you can also look at the stock market, which I know isn't the economy, but is often a harbinger. The stock market is a good predictor of economic growth trends.

Historically, the market has anticipated the economy by six to seven months. And the S&P 500 has been hitting record highs. Objectively speaking, the economy is doing very well, exceptionally well. Economist Mark Zandi at Moody's Analytics says the Conference Board's leading economic index may still be in the doldrums, but most everything else looks good, starting with the job market. Creating a lot of jobs, across lots of industries, unemployment is very low. Economists not long ago were thinking recession, right?

I mean, not this go-around. For any warning signs of recession, Zandi looks to unemployment claims. As long as they remain low, layoffs are low, consumers are going to continue to do their thing. So, you look at the LEI, you think the world's going to fall into pieces. You look at the UI claims, you go, ah, no, that's not happening. Last week, jobless claims fell again to the lowest level in more than six months. I'm Mitchell Hartman for Marketplace.

Gotta love an economist that says, meh. Wall Street as the week heads into the home stretch. Traders do seem to have gotten their mojo back just a bit. We'll have the details when we do the numbers. It's been brewing for days, but now it's official. The Department of Justice has given a federal judge its plan for breaking up Google. The DOJ wants to force the company to sell off its Chrome web browser. It wants limits on the Android mobile operating system. And the government's got thoughts on Google and artificial intelligence too.

Quoting here, justice wants the court to stop Google from manipulating the development and deployment of AI solutions and other technologies that provide the most likely long-term path for a new generation of search competitors. That is a mouthful, I know, which is why we asked Marketplace's Kelly Wells to unpack it for us. Kelly Wells The DOJ's complaint about Google and AI is kind of all about the Chrome web browser, too. It is the most popular and it directs every search through Google's complaint about Google and AI is kind of all about the Chrome web browser too.

It is the most popular and it directs every search through Google's search engine. So does the second most popular web browser, Apple's Safari. That's a pretty tried and true monopoly strategy. Adam Epstein is CEO of the search advertising firm AdMarketplace. He says Google enjoys roughly 90% of search engine market share. The reason it's an AI problem is every time you look up the name of that one actor in that TV show or how to tie a double Windsor, you're making Google's AI program Gemini smarter. They can continue to improve their own search AI agent and keep searches away from their competitors. That's why the DOJ wants to limit Google's ability to manipulate AI development.

Shraag Shah is a professor at University of Washington's Information School. Getting that kind of diffuse a little bit will at least give some competitors fighting chance. Google called the DOJ's proposal a quote, radical interventionist agenda in a statement. The company says it would chill its investment in AI and endanger user privacy. Shah is not convinced. In fact, there are a number of reasons to believe that it would be actually better for customers if Chrome were to be divested.

Google has promised an alternative solution, and information management professor Thomas Davenport of Babson College thinks the company might have a point. And so it's unfair to Google, really impossible to expect them to do search without being able to use AI freely. And he says Google controls so much market share, in part because people like it. There are a variety of other search engines, but people just don't really want to use them. Adam Epstein of AdMarketplace says he expects the DOJ effort will change the search market,

and today's single search engine reality will feel quaint in a few years. I'm Kaylee Wells for Marketplace. There's been no small number of crises across the world these past few years. There are, of course, the wars in Gaza and Ukraine. And there are things like hurricanes and earthquakes and wildfires. All of them disrupt the global economy to one degree or another. Supply chains are what I'm thinking of in particular here. First and foremost, though, of course, they are humanitarian crises. Organizations like Save the Children are on the front lines of those crises.

And at the end of the day, running that kind of nonprofit is also kind of like running a business. Yati Sarepto is the president and CEO of Save the Children U.S. Thank you so much for coming into the studio. Thank you for having me. I want to start with you, actually. You come from corporate America, decades in corporate America. You're an econ finance person by education. How did you wind up in this field? Yes, I get asked that a lot. When I came out of grad school in Europe, actually, I joined

Unilever, a large multinational company, because I was very keen to actually get working abroad. And I figured if I joined a large multinational that will get me abroad and indeed it did within five years I was in Asia but I did think you know is there another way to use some of my skills to actually be have more direct impact on people if you are working for large consumer packaged goods companies you do try to make everyday products for everyday people all the time. And get them...

So you sound just like a corporate person. I'm just going to say. You do. You do. But that also makes you very aware of there are scores of people who actually could not afford our products. So I'm like, okay, how do I make that my impact more direct? And then I got sort of lucky.

I bumped into Save the Children. They said, oh, here's this, this is 12 years ago. We have this role. Would you like to join? And I went, well, let's give it a try. To give people a sense of scale. So you've been involved with Save the Children International for a long time. It's now you're running Save the Children U.S. Give us a sense of what it is that you do. What does your organization

do? So Save the Children was founded over 100 years ago by this amazing woman, Eglent Heine-Jeppe, in the United Kingdom. And she was particularly aggravated about the fact that children in Germany and Austria were dying of starvation after World War I. we're talking 1919. We are now an organization that has over 25,000 colleagues across 115 countries. We have an annual spent budget of almost $3 billion. And it's, you know, we do emergency responses, whether they are earthquakes or conflict affected settings. whether they are earthquakes or conflict affected settings, but we also do long-term education or livelihoods work across all kinds of countries, including here in the United States.

The other thing that struck me as I was thinking about this interview, there's this great video of something it was that you all did, and I apologize for not remembering the specifics, but the number of times supply chain imagery came up in that video. Big cargo airplanes, trucks, passing goods hand to hand. The idea that so much of what you do depends on logistics and supply chains actually just sort of surprised me in a way that really shouldn't have been surprising, I suppose. Yeah, yeah, yeah. People always say to me, oh, is it very different from what you did before

in the private sector? And I'm like, well, more things are the same. Getting stuff from A to B, on time, in full, with good quality, at optimal cost, is exactly what is required in this sector. So I think over the years, we've really professionalized that area of our work. When I joined now over 12 years ago, I would say we were definitely less organized and less structured and we had fewer systems than a large multinational consumer

packaged goods company would have. And it's hard, right? When you're an NGO, you always have to make trade-offs. Where do we spend our money? Does it go to children now? Oh no, we do need a supply chain system. But now I'm very proud, I think, of our supply chain infrastructure. We have over 300 warehouses.

We procure half a billion dollars every year, from blankets and backpacks and food to medicine and whatever else is needed to help children in emergencies. And it occurs to me you're doing it under the most horrible of conditions, not just hurricanes here in the United States, but Gaza, Ukraine, right? Oh yes, yeah. Yeah, I always say to my old private sector people

to do the supply chain under our, You ain't seen nothing yet, right? You ain't seen nothing yet, exactly. That takes a level of determination and creativity. That is quite something else. I think you said somewhere, or it was said about the work that your organization does, there are more children now in need who are in war zones or disaster areas than there have been in generations. Yeah, then probably certainly since World War II. Absolutely.

Yeah. What do you do with that? This is your job. What do you do with that? First of all, you accept that you cannot help every child everywhere all the time. You have to accept it. Otherwise you can't... That's quite the leap to have to make.

You have to make that leap. And sometimes we also have to extract ourselves out of areas because there's not sustainable funding for instance. And if you can't do it well, it's better not to do it. Which is a hard thing to do in this sector. Because people think, well, do something. And we're like, yeah, but something, if you can't sustain it, you're sometimes doing more.

Worse to go in and give false hope. Yes. False hope and also do it badly. Because if you do it and you start to make shortcuts on the safety with which you do it, the safety and security for your staff and colleagues, but also for the children that you serve, then you're better off not doing it. But still, it's sometimes hard to say, we would like to do this, but we can only do half of it. How do you know that what you do is working? This is the metrics problem, right?

How do you measure your success? And again, there it is sometimes different from the private sector, where I knew every day what we sold, what consumers thought. If they don't like your product, they walk away. And sadly, sometimes I wish the people that we help could walk away if we weren't good enough. But they sadly don't have that choice, right? So we have to internally be much better at wanting to do,

to deliver the best possible product or service at the best possible cost. But it does kind of ring hollow to have the metric be, we delivered 14,000 meals today to RAFA, right? That, I mean, yes, it's important. Yeah, you can count it, but it's not necessarily what counts. There you go. No, no, exactly. And we have to live with that. So sometimes we say, okay, what can we count that does matter?

Right? And there are always things that you can do to understand it. How many kids benefited from this education program? And in certain cases, you can absolutely test them, right? We test baselines. What are they like going in? What are they like going out? And is there a significant difference? But sometimes it's harder, right? If you stop early child marriage in a country which impacts 12 million girls every year,

they get married off before the age of, often the age of 15, because their parents see no other option, because of poverty, because of safety, because of cultural norms, etc. If you find a way to stop it, that we can measure then how many girls are not married off early, it does have a huge knock on effect, but you have to sort of use some proxies in order to get there. You are sadly in a business the need for which will never go away. No, and sadly, it's actually a growth market as we speak, which I wish I wouldn't have to say, but that is certainly the case.

Yates Repto, at Save the Children U.S. Thank you for coming in. Thank you for having me. Coming up. You had new properties, you had a lot of new roofs, which withstand winds a lot better than older roofs. Bad news becomes good news... sometimes. First though, let's do the numbers. Dow Industrial's up 461 points today, 1 and a tenth percent on the blue chips closed at 43,870.

They did. The Nasdaq gained six points, less than a tenth percent, 18,972. The S&P 500 jumped 31 points, about a half percent, 59 and 48. Big banks were a big part of the rally today. JPMorgan Chase ascended 1.6 percent. U.S. Bancorp grew 1 and three tenths percent. Citigroup added 1 percent. Wells Fargo increased about 1.6%. US Bancorp grew 1.3%. Citigroup added 1%. Wells Fargo increased about 1.7% today.

Bitcoin, BTC traded around $98,000 per today. That is nonetheless, or nevertheless rather, another record high. The value of Bitcoin has been on the rise since election days, you might have seen on hopes for a cryptocurrency friendly approach from the incoming administration. Mortgage levels have climbed back to levels seen last in July. The average rate for a 30-year fixed is now 6.84%.

That's up from 6.78%. Last week, seems like a lot of decimal points, but every decimal point counts in a mortgage. Bonds down, yield on the 10-year T-note rose 4.42%. You're listening to Marketplace. This is Marketplace. I'm Kyle Rizdal. Ford said this week it's going to cut 4,000 jobs from its European workforce, most of them in Germany and the UK. In Europe, the company said it's been losing money on passenger cars. Increased competition as well as the shift to electric vehicles, which Ford called highly

disruptive or the proctimate cause. Marketplace's Stephanie Hughes has more on the growing pains in the EV market. One big problem for EV makers who sell cars in Europe started about a year ago when the German government, in a surprise move, ended an electric vehicle subsidy program, says Tom Narayan, an auto analyst at RBC Capital Markets. Since then in Germany, EV sales have been quite sluggish. There's since been a big push by automakers, including Ford, to bring an incentive back. Meanwhile, automakers in Europe are motivated to sell EVs to meet a new continental emission

standard or else they could face big fines. Also, says Talis Blalak, an electrified roadways consultant, carmakers have more competition. With the much cheaper Chinese imports, especially in the United Kingdom where they don't have large automakers themselves, they don't have any tariffs. Here in the US, the challenges are a bit different. Blalak says there's been a lot of focus on the high-end electric car market. But now, pretty much everyone who wants a fancy EV has one. So we need to have lower-cost vehicles so that the average person that wants a new car

looks at an EV and says, it makes economic sense for me to buy that vehicle. Another challenge stateside, says RBC's Tom Narayan, we like big cars, like SUVs and pickups. Very expensive because you need an enormous battery. These are heavier cars. American consumers also don't always know when and where they'll charge an EV. Elisa Freeman lives in a suburb of Baltimore.

She affectionately calls her current car a spunky old Hyundai hatchback. It's been loved, and she's thinking about moving on to an EV. But she doesn't know exactly where she'd plug it in. I live in a town home, and I would have to put a cord across the sidewalk, which I don't even know if it's legal or not, so I'm looking into that.

Freeman says she's also just used to gas-powered cars. She's been driving them for 30 years. She knows how much the repairs will cost, and an EV is a whole spunky new beast to learn all about. I'm Stephanie Hughes from Marketplace. Hurricane Helene made landfall on Florida's Gulf Coast just shy of two months ago. Milton followed not even two weeks later. The storm killed nearly 250 people across six states. Damage runs into the very high tens of billions of dollars, if not more.

Some as yet undetermined percentage of which was insured, some not. In Florida, where the insurance market is already kind of fragile, those storms are going to pose a real test, as Marketplace's Amy Scott reports. Back in the summer of 2022, here's how insurance industry spokesman Mark Friedlander described the Florida market for our podcast, How We Survive. It's hanging on a shoestring right now.

Friedlander is with the Insurance Information Institute, an industry-funded research group. That year, several Florida insurers had gone bust. Others were pulling out of the state. And that was before Hurricane Ian caused about $60 billion in insured losses. So it was a little surprising when I checked in with Friedlander again recently, after back-to-back hurricanes Helene and Milton hit the state. According to our analysis here at the Institute, the Florida market is in its best financial position in nearly a decade.

What now? It is incredible, absolutely incredible what's happened. So what did happen? Freelander credits tort reform, new state laws that made it harder to sue insurance companies for denied claims. Insurers have blamed excessive litigation for driving up costs. Meanwhile, the inflation that added to rebuilding costs has cooled, and after years of raising premiums, Friedlander says insurance companies are in better financial shape to absorb claims. This year, he says companies have filed for an average rate increase of less than 1%.

That is a clear sign of a market that is stabilizing. And then on top of all this, we have nine new companies that have come to Florida this year. As devastating as Hurricane Helene was elsewhere, catastrophe modeler Karen Clark estimates insured losses were around $2 billion in Florida, and she now expects claims from Milton will be lower than her company's initial estimate of $36 billion, partly because Milton hit areas that had recently rebuilt after Hurricane Ian. You had new properties, you had a lot of new roofs,

which withstand winds a lot better than older roofs. She says homeowners weary from rising insurance costs may also be hesitant to file small claims. Because they don't want their premiums to go up. So the insured loss is going to be well manageable for Florida insurers. But better shape doesn't mean good shape. Chuck Nice is a professor of risk management and insurance at Florida State University. I don't think people realize how close we were to a collapse of the private market in Florida. We are a

much stronger footing today. However, it's still not where I believe it needs to be. As large private companies like Farmers Insurance and Allstate have either left Florida or reduced their coverage, NYSES Citizens, the state-backed insurer of Last Resort, has taken on more risk. Martin Weiss grades the financial health of insurance companies at Weiss ratings. Of the 100 or so companies operating in Florida, more than half have ratings of C or lower. And Weiss is concerned about how often insurers are rejecting insurance claims. Last year, Citizens denied just over half of claims. State Farm denied 47 percent.

Insurance companies have been denying homeowners' claims with no payment whatsoever at very high levels. Insurers say they're often turning down flood damage, which isn't covered by traditional homeowners' policies. But why says those tort reforms the industry pushed for have made it harder for homeowners to dispute those denials? I'm Amy Scott for Marketplace. This final note on the way out today in which AAA joins the EV bandwagon. You know how every now and then I do gas prices in this spot on the program?

Useful anic data, I think, just to give you a sense. That all comes from AAA, their website, which until today was labeled gas prices. Well, as EV penetration keeps gathering steam in this economy, there has been a rebrand. AAA now calls it fuel prices, and you will be able to find statewide average per kilowatt hour costs to charge your EV. 34.7 cents as a nationwide average, should you be curious, per kilowatt hour. Gas, because I know more of you are curious about gas and EV charging, $3.06 a gallon per national average.

John Buckley, John Gordon, Noya Carr, Diantha Parker, Amanda Peacher and Stephanie Seek are the Marketplace Editing staff. Amir Bibawe is the Managing Editor and I'm Kai Rizdal. We will see you tomorrow everybody. This is APM.