Morning Brew Daily - Amazon Cancels $1.4B iRobot Deal & & Making $400k Without a Degree

Episode Date: January 30, 2024

Episode 246: Neal and Toby discuss the fall of Evergrande and what it means for China's property crisis. Plus, why Amazon is out on the $1.4 billion deal with iRobot and the Walmart store manager job where you could make $400k without acquiring a college degree. Toby goes in on Dry January trends and what were the most streamed shows of 2023? And finally, Amelia Earhart's plane may have been found in the Pacific. Listen to Morning Brew Daily Here: https://link.chtbl.com/MBD Watch Morning Brew Daily Here: https://www.youtube.com/@MorningBrewDailyShow Learn more about your ad choices. Visit megaphone.fm/adchoices

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Good morning, Brew, Daily Show. I'm Neil Fryman. And I'm Toby Howell. Today, you might want to put in your two weeks when you hear how much money Walmart store managers are making these days. Then one of the great mysteries of the 20th and 21st centuries may have been solved. And yep, that's all I'm going to say for now. It's Tuesday, January 30th.

Let's ride. Last night, Elon Musk tweeted out a big breakthrough at one of his companies. No, not X, not Tesla, not SpaceX, but Neurlink, his brain chip startup. Musk said that the company had implanted a device in its first live human subject on Sunday and that the patient is recovering well and the initial data was promising. It is a big step for Neurrelink, which aims to implant a chip in people's brains to allow them to control a smartphone or computer with their thoughts. Neurrelink is currently in clinical trials that are open to some individuals who have quadriplegia

due to ALS or a spinal cord injury. Musk also revealed that the first NeurLink product will be called telepathy, and would be geared toward people who have lost the ability to use their limbs. He said, imagine if Stephen Hawking could communicate faster than a speed typist or auctioneer. That's the goal. It's so interesting because obviously the first thought that comes to my mind is, all right, would I put this in my own brain? And for our jobs, I genuinely think it would be very helpful.

Think about reading an article and then just kind of downloading the important information that you just took into your brain onto a page. That would be very helpful for us. But also I was thinking, thinking is a very imprecise medium, is it not? Versus if you're using a point in click or a mouse or something, you can do exactly what you mean to do. But your mind wanders. So I'm very intrigued as to see how you can kind of quiet the thoughts, the background information. So I'm very interested in this development.

I do definitely want to have my thoughts have an editor before. They create some sort of action. But I think this chip coming for people like yours, me, is a long way down the line. This is definitely for people who can't use their limbs initially. And I think people are looking at it with equal parts, fear and excitement. But for people who can't move and want to communicate, I think this could be really incredible. And Neurrelink is not the only company doing this. There's a wide world, a wide industry of companies trying to implant chips in your brain.

So we'll see what happens here. Absolutely. Before we jump into the show today, we have a quick word from our sponsor, VIM. VIME is a data protection and recovery platform. It's like a bouncer at a club, protecting threats from getting in, but also helping you deal with anything that slips through the cracks. Honestly, Vime sounds like that friend who helps clean up after parties too, and suddenly your house ends up cleaner than when you started. What was wrong with my bouncer analogy? Nothing. I was just thinking about Vime and cleaning and bouncing forward, not just bouncing back. but sorry, I won't undermine your analogy again.

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Shop spring backyard days for seven days at the Home Depot. Now through May 6th. Exclusion supplies to you home depot.com slash price match for details. The real estate crisis engulfing China reached its climax yesterday. Evergrand Group once the country's largest property developer was ordered by a Hong Kong court to liquidate its assets, marking the downfall of a company that symbolizes China's years of hypergrowth and now its current malaise. unwinding Evergrand won't be easy considering it has over $300 billion in debt.

Plus, the liquidation was ordered by a Hong Kong court and it's unclear whether officials in mainland China, a separate jurisdiction where Evergrand did most of its business, will accept the ruling and seize Evergrand's assets to pay back creditors. Still, while all that gets sorted out, it's an opportunity to reflect on the dramatic rise and fall of China's property sector. Starting in the 90s, China underwent a housing, boom that subdivision developers in Arizona could only dream of. Fueled by generous lending terms and government land sales, apartments shot up across the

country, and the real estate industry accounted for as much as 30% of China's GDP. But a few years ago, that lending spigate got shut off by the government, leaving real estate developers like Evergrand in the lurch with hundreds of thousands of unfinished apartments and debt loads that make you wince. Evergrand has been a zombie company for years now, and yesterday it may have been read its last rights. I remember back in 2021 when it first defaulted on its bonds, it was nuts just because they are such a massive property developer.

It was also on the heels of the Evergiven getting stuck in the Suez Canal. And remember, the Evergiven was operated by a company called Evergreen. So at the same time, we had Evergrand, Evergreen, and Evergiven all kind of hitting the hay at the same time. But yeah, it is interesting because the big question is whether the judgment will be. accepted in China because, again, a lot of their projects, even though it's a Hong Kong base company, 99% of their projects are operated in mainland China. So it's going to be very hard for offshore liquidators to kind of go in and see some of those assets, whatever assets they

have. And it's a very big deal because if foreign investors cannot recoup some of their losses or some of the assets that they have in Evergrand, then it just looks bad as Mainland. in China as a whole. Yeah, for foreign investors who may be looking to invest in China, if your rights are not protected in a liquidation sale, then you might be saying, well, I'm not going to invest in you. And China already has seen foreign direct investment outflows for the first time in a decade last year. So this is a big deal to sort of the overall rights of creditors and investors in China. And you want to make sure that the courts have your back when you invest in a place. And this could put a, if they don't comply with the liquidation,

ordered by Hong Kong, then this could put a further chill on a Chinese economy that is already just in some dire straits right now. It was interesting too because obviously your first thought when a huge property developer goes down like this is, is it going to fuel contagion? And the answer is no, but that's mostly because most of Evergrand's peers have already also followed them into default. So it's not that it's going to be an isolated incident. This instance is so widespread already that there can't be any more contagion, essentially. There is such a huge problem of real estate in China. As I mentioned, it counted at one point for more than a quarter of GDP in the 90s. There was this crazy housing boom. There was people building apartments all over the country. Now there's a huge oversupply of housing. A Chinese official once estimate last year estimated that three billion people could fit into all the empty houses in China. It's kind of the opposite of what we're having here. But it's taking a whack to middle class incomes. 70% of household wealth in China is tied up in real estate as this boom happened over the course of the 90s.

It allowed them, you know, when property prices were going up, it allowed the middle class to spend and fuel this amazing economic boom in China. Now that property values are declining, there's this huge glut. Middle class is really feeling the squeeze. They're saving more than ever. They're not spending. And so real estate that forms so much of China's economy is also the reason for its downfall. Yeah, it's going to be a long drawn-out process. decision was a big one, but going to be a headache going into the future as well.

Let's move on. Amazon's attempted acquisition of Rumba Maker I Robot has run into a wall, then another wall, then did a slow 180, bumped into something else, slowly turned again before finally running out of battery. The companies have mutually agreed to the acquisition, to end the acquisition after. Stop me if you've heard this before. The deal met, quote, undue and disproportionate regulatory hurdles after European regulators signaled their opposition to the deal.

The ripple effects are already rippling. Amazon has to pay a $94 million termination fee while IRobot is laying off about 31% of its staff and saw its stock fall as much as 19% yesterday. If you forgot this deal was even a thing, I don't blame you. Amazon first had eyes for I Robot back in the summer of 2022 as it sought to expand its presence in the smart home market. But EU authorities, along with the FDC, thought the deal could hurt competition. in the robot vacuum industry and raise fears that Amazon could, quote,

de-lis its rival robot vacuum cleaners. You know, I feel like we've had so many antitrust conversations since this show started. Do you think this deal should have fallen apart like this? Amazon is going to have a lot of trouble buying any tech company nowadays because of its retail arm. Amazon runs this massive marketplace online. Whatever it buys, it's going to be under scrutiny because it could, theoretically throttle all of the competitors to its own products on the website, and regulators are just constantly going to look at that and say, this could potentially be anti-competitive.

So Amazon, this would have been Amazon's fourth largest acquisition in history after Whole Foods, MGM, and Ring. And I just don't know in the current heavily scrutinized regulatory landscape of major tech companies, how it's ever going to buy anything, again, that could possibly sell on its website because these are competing interests. So I don't know how it's going to. ultimately figure this out with regulators being as hardcore as they are right now. I know, but Amazon's position is like, hey, you're kind of screwing innovation here. Mergers and acquisitions help companies like

IRobot kind of compete in the global marketplace. Amazon would allow it to enter different countries around the world. Also, IROB CEO was saying you're disincentivizing this whole industry at this point, because why would you ever start a consumer robot company if you know that there's a very, very slim chance that will ever be acquired by a bigger company. And there is just kind of a, what are the long-term implications of a world where mergers and acquisitions are just so hard to get done? We've already seen so many this year. I mean, JetBlue Spirit fell apart.

Figma and Adobe fell apart. There's just so much antitrust scrutiny around these deals that you could make an argument that it's going to stifle innovation in the long term. And I'll just take the regulators point of view saying that our antitrust laws are just not equipped right now to handle this, what's going on with the concentration? of huge tech companies that, like I mentioned, not only sell technology, but sell everything, you know, that have huge retail marketplaces and are also in the cloud and also have a generative AI arm. So maybe they would counter that, you know, we're just in a new paradigm where we can't

let tech companies are literally doing everything under the sun and we can't let them keep adding to their capabilities and, you know, stifle the little guys. Also, this is the first time Amazon has ever been stopped from buying. buying another company. So we can play a world's tiniest violin from them here. They've been relatively successful in their mergers and acquisitions. Meanwhile, I robot is just in a bad place. You know, it laid off 30% of its staff. I think it's racked up 500 million in net losses from 2021. So that, you know, home Roomba pandemic boom has definitely hit a lull. Yeah, and hit a wall for sure. They're so cute. They're just bumbling around all the time. But do they work?

I've not really. But they're good companions. Moving on. What if I told you. you could make more than $400,000 a year as a Walmart store manager. If you're good enough at your job, that is a distinct possibility after the retailer said it was jacking up salaries and benefits for its store managers this week. It's a sign that Walmart, the nation's largest private employer, realizes just how important good store managers are to its overall business. At the biggest Walmart stores, managers can oversee up to 350 employees and $100 million in yearly revenue, and to be able to run this complex operation effectively is essentially a job for a mid-level executive. And to attract the best people, Walmart needs to pay them accordingly.

The company said yesterday that U.S. store managers would be eligible for stock grants of up to $20,000 every year. And a few weeks ago, it bumped the average salary for managers to $128,000 up from $117,000. Pair all that with bonuses that could reach up to 200% of a manager's base salary, and you're looking at a payday of nearly a half mill. No college degree required. It is crazy. When you put it in perspective of they are running many $100 million businesses at these super centers, they have huge amounts of employees, 300 people under them.

If you just talk to a small business owner who was operating a operation like that, they'd be probably making a lot more than $400,000. So when you first see the headline, you're like, oh, wow, that's a lot of money. But then when you actually look at what these people are doing, You almost think that they're underpaid in a certain regard. And like you said, it is part of a normal mid-level executive compensation package to have stock options and to have the ability to receive some of your compensation via stock. So this feels like the logical natural progression if Walmart wants to hold on to these very

valuable people to them. Yeah, Walmart leadership was very clear about this. They said, we want these store managers to have ownership, to have skin in the game. They want them to feel like owners and that they're contributing to the company and that When their stores do well, they do well. And, you know, that's something that you see a lot in the startup world. It's maybe not something that you see a lot in the retail world, especially people who actually work at retail stores. But Walmart realizes how key a manager is to drive profitability at a time when inflation is coming down.

And the huge profits that Walmart saw over the course of the pandemic might be reducing. You need an effective store manager to take a look at the landscape and say, how can we drive profitability at each of our stores? because really my income depends on it. Yeah, and while Walmart isn't maybe like the Tesla crazy stock options where it's going up 100, 200% every year, over the last five years, it's up 43%, so it's doing well. And also, I just want to pair it with, remember we had the UPS driver moment earlier on the podcast where UPS drivers were earned an average of 170,000 annual pay and benefits at the end of their contract.

It just reminded me of like those House Hunter show. We're like, what do you guys do? Like Walmart store manager, UPS worker, you're bringing in over almost 600K a year. It's a new economy we're living in for sure. All right, before we rethink our entire career pass and pivot to Walmart store managers, let's take a quick break.

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Kayak, got that right. We are back with another edition of Toby's Trends, For I, a bright-aid and bushy-tailed Gen Zier educate you, the people, as well as my intrepid millennial co-host, Neil, about a recent trend I've had my eye on. And today's trend is all about the growing popularity of people not drinking to start the year, aka observing dry January. Sales at three of the largest U.S. liquor stores hit a post-pandemic low this month. Pubs in the UK are struggling to weather what they are calling the driest month ever,

while Google searches for Dry January reach an all-time high doubling from a year ago. The widespread popularity of Dry Jan has led to some interesting second-order effects, too. Marijuana sales have also spiked this month as the alcohol industry's loss is the cannabis industry's gain. The share of teenagers aged 18 to 25 years old who have used weed in the past month have grown over the past seven years to over 25% while those who reported drinking has fallen around 9% to around 50%. Neal, it feels like dry January seems to have just exploded this year as people have just become disenfranchised, disenchanted with the negative side effects of drinking.

It definitely feels like this is the driest January on record. When you look at the weed versus the alcohol consumption for young people, like you mentioned, it looks like an X with cannabis consumption, skyrocketing and, you know, people going booze-free, declining. And I think what would you, what would you attribute it to is this? health effects? Is it just the wider acceptance of not drinking? But it's a very clear trend that I think is completely shaking up both the cannabis and the liquor industries. Yeah, you're absolutely right. Like the growing perception of cannabis as less harmful than alcohol within young people. Remember, marijuana has kind of this 30-year medical history at this point where it's been used to treat disorders,

chronic pain, anxiety, these other things. And then also, yeah, young people in general, it's just a well-documented trend that Gen Z is doing less drugs and also drinking, less alcohol. Gen Z drinks on average 20% less than millennials and 62% of people under 35 say they drink, which is down from 72% a few decades ago. But yeah, seriously, we're just thinking more long-term. If the younger generation continues to drink less, they will be physically healthier, but also if they continue to socialize less, then they may end up feeling a little less connected. So it's this kind of hand-in-hand thing where people are staying in, not drinking as much, but overall, it might be leading to a lonely or more like hermody society.

Speaking of a hermody society, in the least creepy way possible, I want to announce everyone that I know what you did last summer. I do. You watch suits. You must have watched suits because the legal drama was the most streamed show on TV last year with 57.7 billion minutes watched. Suits wasn't just the standout for 2023, though. It topped the office in stranger things as the most stream show on TV sets in a TV set in a

single year in history. These figures come from the annual Nielsen report on the top 10 streaming shows of the year and the success of suits, an older show that originally aired on USA and moved over to Netflix, was emblematic of broader viewing trends of 2023 because as Hollywood went on strike and new content dried up, it was all about reruns. Rounding out the top five streaming shows were procedural NCIS and Grey's Anatomy, plus two kid shows in Bluey and Cocoa Mellon. Overall, Americans live their best couch potato lives last year. The time people spent watching streaming services jumped 21% from 2022, Nielsen said. Yeah, it totally goes along with this kind of hermitty culture that we've been talking about the introvert economy of people just staying at home

watching a lot more old shows, too. It's not, that's what stood out to me so much about this list is that this list, there's no original content on the most streamed shows of the year. People are digging back into nostalgia. They're going back to the office, going back. to suits. And it really is interesting because we've also talked about kind of how, remember, studios are freely renting out their TV shows back to Netflix after yields of kind of this consolidation where Peacock wanted the office just on their platform, like USA wanted suits, but then finally they opened up the broader, back to the broader audience that watches Netflix. And it's led to this massive resurgence. Like Young Sheldon was licensed to Netflix in November

and started putting up huge numbers. Sex in the City will come to Netflix in April. So obviously Netflix has played a role in revitalizing these. Totally. It's all about Netflix. And it's also all about children's shows. If I was a streamer, I just invest everything into children's shows. As I mentioned, the top five in the top five were Bluey and Cocoa Mellon.

And to think about, talk about reruns. Kids can watch something every single day. The same thing over and over again. You know, my parents always tell, like they always tell me these days. how frustrated they were, that how many times I watched the Lion King over and over and over and over again, I think that leads to the top movie was Moana from 2016. So kids just can't get enough of the stuff they like and they'll watch it over and over again. So if I'm streaming, I'm sure all these streaming executives are looking at this and saying,

man, we are so under-indexed on kids' content. So we need to invest in more. But also, I just hear that Bluey is fantastic and it might be my next show. I have been guilty of re-watching Moana, by the way. That's one of the top-tier Pixar movie for me, too. So go watch that if you haven't yet. Let's move on. Got a lovely mystery to end the show for you all today.

Someone may have found Amelia Earhart's lost plane. This plane has been one of the premier enigmas of the 20th and 21st centuries. After setting off to try and circumnavigate the globe in 1937, Earhart Mysteriously lost contact and vanished right when she was one of the most famous people in the world. Until now, a promising sonar image that looks a lot like a plane has been discovered, and the location is about right, experts say. The guy who discovered it is a commercial real estate investor from South Carolina named

Tony Romeo, who recently sold off his properties to commit himself to the search. He told the Wall Street Journal that this is, quote, maybe the most exciting thing I'll ever do in my life. He's also clearly well-versed in Amelia Earhart lore. Romeo linked Airheart's disappearing back in the day to another celeb, quote, imagine Taylor Swift just disappearing today. And now it appears that he has one of the better leads in what has been a decades-long hunt for the lost aviators plane.

Neil, this story is awesome. This dude has spent $11 million looking for her, and he might have done it. I think he did. I think he did. I mean, when they interviewed experts from the National Air and Space Museum, they said, you know, usually I think they would dismiss these treasure hunters out hand and say, nah, they just found something on the ocean floor in the Pacific. But they were like,

you know what? That's pretty intriguing. It looks like a plane. But we need to go back to that area, which is extremely desolate in the South Pacific and make sure that the, you know, the code lines up. I forgot what it's called, the serial number on the plane to make sure that was the same as Airhart's plane. But if so, it'd be one of the most incredible discoveries. Even the guy who tried to find, who found the Titanic tried to find the Earhart's plane was one of a half dozen recent expeditions dating back to 1999 to find the plane. And this would be an incredible find. Yeah, this has confounded people. That guy that you just mentioned, Thomas Detweiler, said, it's the only thing in my career that I've ever looked for and not found. This has been like the goodie gras of treasure hunters

for a long time. Conspiracy theories have obviously run wild. Like people thought she was maybe captured. Maybe she actually just faked her own death and returned to live a quiet life in the U.S. This has been just one of those things that have encapsulated the people for a long generation because it is like imagine if Taylor Swift just dropped off the face of the earth. Of course people would want to know what happened to her. But now in our days, I mean, technology, we've mapped every part, every inch of the globe, which make, in this story definitely reminded me of Malaysia Airlines flight 370 that, you know, disappeared in 2014. And with all our modern technology, we still have no idea what happened to that flight.

So maybe if we find Amelia Earhart, eventually we'll find out what happened to that Malaysian Airlines flight. But it's just crazy to me that we still have no idea what happened to that particular airline. I did do a little nerd out research for you, Neil, because I wanted to see what kind of plane that Amelia Earhart was flying. It was a Lockheed 10E electric plane. And get this, it was developed. in 1930s to compete with the Boeing 247.

So it is crazy just like how long Boeing's been at this and how long it's been kind of a major player in the space. But yeah, it had this twin tail design, which Lockheed was famous for. So, yeah, did a little plane research, Ria, Neil. So we'll find out whether they actually found Earhart's plane because they need to go back to this area. They had this underwater drone kind of survey, 5200 square miles. And they pinpoint, they only realized until afterwards that they found what could be the plane.

So they have to go back, make sure the serial number matches up, maybe take a closer look at the plane. And that won't happen until later this year or next year. I'm on the edge of my season. Yeah, no, I can't wait. All right, that is all the time we have for today. Have a wonderful Tuesday. We'd love to hear from you. So if you have any thoughts on the show or any feedback, constructive or otherwise, don't hesitate to write into our email Morningbrewdaily at Morningbrew.

Let's roll the credits. Emily Milliron is our editor and producer. Raymond Lou is our associate producer. Yuchinawa Ogu is our technical director, Billy Minino, is on audio. Hair and makeup was last seen somewhere in the South Pacific. Devin Emery is our chief content officer and our show is a production of Morning Brew. Great show today, Neil. Let's run it back tomorrow. Yamava Resort and Casino at San Manuel is California's number one entertainment destination for today's superstars. Catch the Jonas Brothers return to the Yamava

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