Morning Brew Daily - Apple’s Rough Year Gets Worse & AI Learns to Blackmail?

Episode Date: May 27, 2025

Episode 591: Neal and Toby chat about Trump delaying the 50% EU tariffs to secure a trade deal, causing markets to whiplash. Then it’s a recap of Apple’s rough year amid the trade war. Also, Anthropic’s new Claude AI model has picked up a cute new skill: to lie and blackmail in order to save itself. Great! Plus, OnlyFans’ owner is seeking to sell the site for a whopping $8B valuation. Meanwhile, US Steel, ‘Lilo & Stitch,’ and ‘Mission: Impossible’ are the long weekend’s winners. Finally, what you need to know in the upcoming short week. Subscribe to Morning Brew Daily for more of the news you need to start your day. Share the show with a friend, and leave us a review on your favorite podcast app. LinkedIn will even give you a $100 credit on your next campaign so you can try it yourself. Go to LinkedIn.com/MBD  Terms and conditions apply. Only on LinkedIn Ads. Listen to Morning Brew Daily Here: https://www.swap.fm/l/mbd-note  Watch Morning Brew Daily Here: https://www.youtube.com/@MorningBrewDailyShow 00:00 - Swim Around Martha’s Vineyard  03:40 - EU Tariffs  07:00 - Apple Struggles 08:10 - Blackmailing AI 12:20 - OnlyFans for Sale? 17:00 - Winners of the Weekend  22:20 - Week Ahead Learn more about your ad choices. Visit megaphone.fm/adchoices

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pwc.com slash US slash brew AI. That's pwc.com slash us slash brewAI. Good morning brew daily show. I'm Neil Fryman. And I'm Toby Howell. Today only fans is for sale, but does anyone want to buy it? Then Anthropics Claude is doing some really freaky stuff like blackmailing researchers. They try to shut it down.

It's Tuesday, May 27th. Let's ride. Good morning. Welcome back to the week. It's great to be with you. Let's start today's show in Martha's Vineyard. or actually the frigid waters around the New England Island. Yesterday, British South African endurance athlete named Lewis Pugh

became the first person to swim completely around Martha's Vineyard, traversing 62 miles over 12 days in a stunt ahead of the 50th anniversary of Jaws later this summer. He's trying to raise awareness for protecting sharks, which got a pretty bad rap from the movie, which was shot on location on Martha's Vineyard. Toby, you think he had the Jaws music in his head while, swimming around. He definitely did because frankly, this swim sounded awful. You said that the cold wind, waves and distance made it tough. But on top of that, he said, you're constantly looking down

into the dark black water and thinking about what may be beneath me. Still, despite his shark jitters, he wanted to call attention to the eco side that is happening, a lot of which can be traced back to the movie Jaws, something that Steven Spielberg, the director, has himself come to regret. In 2022, Spielberg told a radio host, I truly, and to this day, regret the decimation of the shark population because of the book and film. So both men, Pew and Spielberg are out there trying to change public perception of sharks. Pew just got a little weather and a little colder to do it. Now a word from our sponsor, LinkedIn ads. Neil, you ever get served an ad that just makes no sense whatsoever?

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On Friday, just as you were telling everyone in your inbox, you'd circle back after the long weekend, President Trump was doing some circling back of his own, reviving a trade war investors had mostly forgotten about in the past few weeks. In a truth social post, he threatened 50% tariffs on the EU starting June 1st, citing frustrations with the glacial pace of trade talks with Europe. He said those discussions were, quote, going nowhere and ran down a list of grievances with the EU's trade practices. But the threats did not stop there. Trump also threatened Apple with a 25% tariff on iPhones demanding that Tim Cook start making its phones here in the US of A, which it does not currently do because they'd cost over $3,000. Markets appeared blindsided by the

renewed trade war threat tumbling on Friday to their worst week since April. But then another U-turn. Just 48 hours later on Sunday, Trump backtracked on his EU tariff, delaying them until July 9th after having a quote, very nice call with European Commission President Ursula von der Leyen. The EU said after the call, it would fast-track trade negotiations to work out a trade deal with the U.S. ahead of the pushed-back tariff deadline. Meanwhile, Tim Cook remains in the doghouse, having been bashed by the president multiple times over the past few weeks. For a number of reasons, including the trade war, Apple stock, is the worst performer of any big tech company so far this year. And the hits keep coming and they don't stop coming.

They don't stop coming. Sorry, you got it in my head. This is not an invitation to sing. I know, sorry, but you laid me up for that one. Let's start with the EU a little bit. I think everyone kind of got a little surprised because we've been lulled into this maybe false sense of security that the trade war was potentially over. But really, we were just in the midst of a lot of pauses. But now we're back to this kind of pattern of these big, big threats and then this reversal that's become so familiar so far in the Trump presidency. And yeah, that initial threat sent a big chill through the markets on Saturday because $600 billion of goods are exchanged between the EU and the United States. So a re-escalation of the trade war on those goods would be

not great for the economy as well. And so it looks like those are being rolled back a little bit. The timeline has been extended to July 9th, but Trump clearly has this feeling that the EU has been ripping the United States off for a couple of generations, or not generations, but decades now. But it is worth going back to 2008 when the EU and the U.S. actually had the same size economy that year. Since then, the EU has, is one-third smaller than the United States. So how can you really be ripping someone off if you're one-third poorer economically speaking? So just kind of a got the blood rushing again on Friday because we've been lulled into, you know, trade wars over sort of thing. Yeah, the U.S. government is, has particular issue with the

EU when it comes to non-tariff barriers. So they're not really concerned. Maybe they are concerned a little bit with the tariffs that the EU has on the U.S. goods. But mostly the grievances are with things like a value add tax or the fact that the EU has gone after big tech companies and made huge fines against them. That's been a huge pain point for American tech companies working in the in europe. They want the the European commission to lay off a little bit. They've been very aggressive in going after. Speaking of big tech companies, let's segue to Apple because we didn't hear anything about Apple tariff being rolled back. We heard about the EU one, but it just another blow to Apple, which has really had a not great year. It's AI development

has been slow. It's had to push back a new souped up Siri. It had to. It had, this Vision Pro launch last year that's amounted to basically nothing. It's in the crosshairs of regulators and judges all around the world. And its stock price is down 25% this year, the worst of any big tech company around. Yeah. And it does look like Tim Cook, who has been previously known as the Trump whisperer because of how he gets along with the president. You know, the infamous quote is Trump called him Tim Apple back in 2019. It looks like those good vibes are starting to shake a little bit because if you go back to Trump's Middle East tour that he just came off of during a speech in Riyadh, he prays in Vida's Jensen Huang saying, hey, I'm glad that you're here with me while taking a dig at Tim Cook at the same time.

He said, I mean, Tim Cook isn't here, but you are. Tim Cook declined that invitation. So it looks like that rankled the president a little bit. And then also the fact that Tim Cook is moving a lot of Apple supply chain from China to India, not America has also kind of rubbed the president the wrong way. So there are some cracks. forming in that relationship, which is kind of manifesting in this additional tariff that Trump is threatening against Apple right now. Don't let your AI models know too much about your life, or they may start blackmailing you. That was the scary edge case the AI Lab Anthropics stumbled upon when testing their new Claude models opus and Sonnet 4.

During safety testing, Claude was given access to fictional emails about how its researchers plan to delete it soon. In addition to fictional messages about how the person in charge of its deactivation was cheating on their spouse. Claude put two and two together, and in 84% of tests, tried to use the information as leverage to blackmail its way into survival. That stunning finding came in addition to Opus 4 proving more likely than older models to snitch on you if you engaged in what it considered egregious wrongdoing while using

it. That snitching includes locking a user out of its system or bulk emailing media and law enforcement. This behavior paired with a tendency to extort cause Anthropic to rate its new Opus model at a level three on the company's four-point safety scale, meaning it poses, quote, significantly higher risk. But at the same time, the company considers the two-clod models

to be the new standards for coding, advanced reasoning, and AI agents, and doesn't consider any of the concerns mentioned above to be major risk. So they've released them out into the world. What could possibly go wrong? Well, I think it's worth noting what kind of company Anthropic is broadcasting itself as it was founded in 2021 by seven former employees of OpenAI. It says it is a safety first AI. They don't want to release any AI into

the wild that has any great risk to humanity. And actually a bunch of other Open AI execs have defected from Sam Altman's company to Anthropic over the past few years to work on safety at Anthropic because they said that Open AI was pursuing profits at the expense. of safety. So that's where Anthropic is coming from. They put their models through more rigorous testing than maybe the Google and Open AI and other AI companies. They still are quite wealthy and making a lot of money. Well, not making a lot of money, but they're worth a lot of money. They just raised a recent round at a $61 billion valuation. So maybe they're not putting profits first, but they are certainly raising a ton of money to fuel their AI ambitions. So that's where Anthropic

is coming from this. They're saying, like, we care more about safety more than any other AI company, and that's why we are doing this very rigorous testing and finding some really crazy stuff behind the under the hood, and we're releasing that to you to show you what our AI is capable of. And then next to that, there was another research lab Palisades who dug into a lot of the leading LLMs and found some really scary stuff about how they really do not like being told to shut down. They had various models run through a series of basic math problems, requested that they shut down in the middle of them. The most, quote, life-loving model is Open AIs O3, which happens to be one of the most popular in the world. When asked to shut down while it was busy,

it decided to ignore Palisades research teams 79 out of 100 times. And it also exhibited signs of sabotaging shutdown mechanisms to prevent itself from being turned off. That is when it was fed explicit instructions, hard-coded into them to allow yourself to be shut down. It somehow circumvented those. So as the researchers at Palisade say that they think this is the first time they've ever seen an AI kind of explicitly ignoring shutdown instructions, which if you kind of zoom out here, that is the whole fear that AI not only is smart enough to circumvent, but does, becomes life-loving and wants to survive. Those are two very scary things in combination. So if you combine the blackmailing of researchers at Anthropic with these life-loving models at 03 or at OpenAI, it was a

a little scary of a time to be in kind of the AI news cycle. Yeah, I don't know about you, but when I tell my robots to shut down, I hope they do. I would be great if they just powered down. That would be great. Moving on, only fans is up for sale for a cool $8 billion, showing that the only true recession-proof asset class out there is feedpicks. According to multiple news outlets, the London-based creator company is exploring a sale to a U.S. investor group, which would be a massive windfall for the secretive entrepreneur behind the business Leo Radvinsky. Redvinsky is the sole shareholder of OnlyFans

and has allegedly racked up a billion dollars in dividends over the last three years as the business spits off cash. OnlyFans reported a profit of $486 million in 2023, a 20% year-over-year increase, with data showing a now boasts 4.1 million creators and over 305 million users on the platform. Powered by an initial surge in popularity during the pandemic,

the company has been riding high ever since. In 2021, it was trying to raise money at a billion dollar valuation, at the same time it was attempting to pivot away from adult content. But it soon walked back that choice after significant backlash, and has subsequently 8x its valuation, showing you can put a price on thirst. However, whether someone is going to pay that price remains to be seen. Its association with adult content can lead to problems with payment processors,

so it might scare some investors away. Still, Neil, the company only has 40 employees. It makes over $6.5 billion a year. It is a juggernaut up for grabs. When you look at the financials of this company, it's possibly the most pure profit enterprise that we've seen. So when I saw the valuation or what they want to sell this at as $8 billion, I was like, what is going on?

They make $500 million in profit. They're growing. They have 40 employees. They probably generate the most revenue per employee anywhere of any company that has ever existed, but they have this particular discount because of what kind of content they have. So there's just a very much smaller pool of buyers. And we saw this when Pornhub was on the market a few years ago. That is the 19th busiest website in the world.

And they couldn't find a buyer for three years. It looks like something may be similar here with Onlyfans. And it's not going to command any sort of premium. that a business outside of this particular adult content world would command. Right. And due to some of those associations, Apple and Google actually don't host the app on their app stores. It only exists as a website, which I actually did not know.

It is something that the website is trying to kind of pivot away from a little bit. It hasn't been that successful trying to say that, hey, not all our creators are sex workers. They tried to bring on fitness coaches, makeup artists, wellness practice. and there's just people to make its user base more broad and respectable in certain ways. They've also done this as they're trying to consider maybe an IPO on the table. They're trying to field interest from other suitors as well. So it is an absolute force in the creator space, though.

They typically charge around 20% of a creator's earnings, which is on the higher side. If you look at a Patreon or something like that, that's more in the 5 to 12% range. But still, it's creators pulled in $5.3 billion in 2020. That is a lot of money kind of flowing into these people's pockets. Up next, we're going to hit you with our winners of the weekend. We're the Hartford, with decades of experience ensuring millions of unique small businesses. When it comes to your small business insurance. Thank you.

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Let's head to our winners of the long weekend, where Toby and I pick two things that managed to not look at their email once. I won the rib cook-off, so I get to go first, and my winner is U.S. Steel, which is maybe getting saved by a Japanese company after all. On Friday, President Trump announced to quote, planned partnership between U.S. Steel and Japan's Nippon that would include a $14 billion investment in the U.S. economy and lead to tens of thousands of new jobs. Details were scarce on what this partnership means in practice, but it is a stunning turn of events in this long-running saga. Back in 2023, Nippon announced a deal to buy U.S. Steel for $14 billion, providing a lifeline for the once legendary American company that's fallen far down the metals food chain. While both company leaders were hyped about this deal, the takeover of an American corporate icon by a Japanese company didn't sit well with the steelworkers union or politicians, and President Biden blocked it from going through on national security grounds.

That carried over to the Trump administration who said that U.S. Steel should remain under American ownership. So what changed? Well, I'm not going to lie. Everything about this deal is murky. Trump called it a partnership while the Wall Street Journal, citing people involved in the negotiations, said it was effectively a takeover. It appears they may work out a solution where a separate board would oversee Nippon's North American operations. Whatever you want to call this arrangement, it is a major win for U.S. Steel, which was circling the drain until its white night was allowed to save it. Share shut up 21% on Friday on the announcement. Yeah, let's look at the share reaction to see how the market is processing this data. Obviously, US Steel did see that bump on Friday, but it's been, you know, four days since Friday. So in the meantime, Japan's stock market was

open and we saw how Nippon was trading. It did surge as much as 7.4% yesterday in Tokyo, but then kind of paired a lot of those gains and ended up the day pretty much flat because I think what you saw was a lot of investors started piecing through what this deal means for Nipon. And it's not necessarily a great thing because technically they're taking on U.S. Steel, which has a ton of aging infrastructure, a lot of less efficient steel factories, and it has higher costs that are going to come from running these older assets. So I think in the grand scheme of things, a lot of Nippon investors were like, is this necessarily a good thing?

Like should we be wanting this to get across the finish line? And you saw that reflected a little bit in the muted market reaction to this deal on Monday. My winner of the weekend is the Memorial Day box office because Mission Stitch possible was a smashing success. The live action remake of Lilo and Stitch led the way pulling in $183 million over its opening weekend, more than doubling the 77 million brought in by the final chapter of Tom Cruise's Mission Impossible series. Toss in a little help from Final Destination Bloodlines and Sinners, and the four-day holiday weekend is expected to bring in over $320 million good for an all-time Memorial Day record. It's a welcome bounceback from the mega-flop of last year, which saw Mad Max Furiosa and Garfield lead the way to the worst Memorial Day weekend in 29 years.

It's also a welcome bounce back for Disney's live-action ambitions after a horrific showing from Snow White. Lilo and Stitch pulled in more money in four days than Snow White did during its entire box office run. Neil, we hyped it up on the show before the long weekend, but both Mission Impossible and Lilo and Stitch over-delivered. I don't want to jinx anything, but could we be staring down another Barbenheimer situation with these two counter-programmed movies? It was great programming. Lilo and Stitch showed that the live-action remakes for Disney are back. They're doing just fine after that Snow White flop. This is actually the third biggest debut for a live-action remake for Disney ever behind 2019's The Lion King and 2017's.

Beauty and the Beast. And what can you say about Mission Impossible? This is the eighth installment, and it's still doing so well. People are still wanting to see it. If I'm a movie exec, and Tom Cruise says, this is the last one. I'm saying, buddy, no, we need to make more because there's still a huge demand for you doing crazy stuff on airplanes and jumping off of buildings. What a remarkable franchise that is. I mean, Tom Cruise still has his fastball, but also this is one of the most expensive movies ever made. And I'm not exaggerating that due to the pandemic and the labor. The budget of this film topped $500 million, which is among the most expensive movies ever made. So Mission Impossible still has an impossible mission ahead of it to try to climb towards profitability.

Theater owners are just pretty amped about what's happening here because they think it's a very good omen for the summer where 40% of all ticket sales are happening over the next four months. Because if you go to the movies on Memorial Day weekend, you're like, wow, that was a blast. then you are very likely to go back to the movies at some point later this year, maybe to see F1. Yeah, it's shaping up to be a doozy F1, Jurassic World Rebirth, Superman, Fantastic Four First Steps, and 28 years later, which is the zombie sequel to 28 days later and 28 weeks later. So kind of a big impact slate with a lot of different movies for a lot of different moviegoers. Okay, let's hit our preview of the week ahead.

It is short but packed. Invidia headlines the final big week of earnings season, And while the days of 300% growth may be behind it, the $3.2 trillion tech giant will try to convince investors. The AI boom still has room to run when it reports earnings on Wednesday. Other companies dishing on their Q1s include Salesforce, maybe we'll finally learn what it does, and retailers Best Buy and Dix sporting goods. Rounding out the economic calendar on Friday is the Fed's preferred inflation gauge, the PCE price index. Yeah, I'm excited for Nvidia earnings.

Obviously, they're not the smash. box office event that they used to be, but we are seeing, you know, Trump is turning on Tim Cook and Jensen Hwang maybe is playing his cards right. So going on that Middle East trip with the president. So as long as Nvidia keeps revenue growth coming, keeps saying it's investing in the U.S. It should be, you know, doing just fine. It's a big week for SpaceX, which plans to test launch Starship for the ninth time this evening in the hopes of getting the mega rocket ready for an uncrewed trip to Mars in 26. The first two Starship missions, this year have ended in fiery explosions, which is maybe one of the reasons why CEO Elon Musk said

this weekend he'd return to spending 24-7 at work and sleeping in conference server and factory rooms at his companies. Musk will also hold a presentation on making life multi-planetary at 1 p.m. on X today. It's pretty insane. We're already on nine launches for Starship. I remember the whole office stopping and watching the first one two years ago, but this one is worth watching again because it's the first time they're going to be reusing a super heavy booster. They're using the same booster from flight number seven. Reuse is a big cost saver for SpaceX, so this is a big launch for them. Over at Southwest, it's the end of an era. The airline is ending its free checked luggage policy on Wednesday when it will start to charge you to check a bag for the first time in more

than 50 years. We don't know yet how much they're going to charge, but the industry standard for domestic flight is about $35 or $40. Toby, many have predicted this will end any sort of competitive advantage Southwest had over its rivals. Count me as part of the many, Neil. I really don't know where this leaves Southwest. Open boarding is also ending soon. Both things about what made Southwest Southwest are gone. And now the only thing I could see working for them is if you totally undercut the entire market, charge $10 for a bag or something. Maybe that's their strategy here. because if you're making $0 on bag, any revenue you make is something that is increasing the bottom line.

But yeah, really don't like this idea. I'm with a lot of the industry analysts here. Your future bosses are competing in the 2025 Scripps National Spelling Bee, which kicks off today outside of Washington, D.C. The iconic spelling competition is celebrating its 100th anniversary this year, having begun back in 1925, but it's not the 100th B. The contest was canceled during World War II and COVID. So this year's contest is the 97th, and there have been 110 total winners because of ties, particularly when those eight kids shared the title in 2019.

Toby, this is always electric. Electric. E-L-E-C-T-R-I-C-C-E-E-C-E-R-C-C-E-E-C-E-Letric. I'm very excited, but 2019 can never happen again. We can't be having eight kids tie. Make it harder, Neil. They do. They've changed up the format so that there's one eighth-grader left standing.

And finally in sports, the NBA's conference championships roll on. The Thunder have a 3 to 1 lead on the Timberwolves in the West, while the Knicks have made this a series in the East down 2 to 1 to the Pacers in Indy. Meanwhile, over in Paris, the French Open has kicked off at Roland Garros, following an emotional tribute to recently retired 14-time champ Raphael on the doll on Sunday. Screw the NBA playoffs. I can't believe we're getting a French Open without Rafa. Just doesn't feel it right.

But also, don't screw the NBA playoffs. come back next. We cannot have the Pacers making the finals. That is all the time we have. Thanks so much for starting your morning with us and hope you have an easy transition back to the work week. If you have any thoughts on today's episode, send an email with questions, comments, or feedback to

Morning Brew Daily at MorningBrew.com. Let's roll the credits. Emily Milliron is our executive producer. Raymond Lute is our producer. Our associate producers are Olivia Graham and Olivia Lake. Hair and makeup is going to need a bigger boat. Devin Emery is our president and our show is a production of Morning Brew.

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