Morning Brew Daily - Boeing Caught in US-China Crossfire & Zuckerberg Takes The Stand

Episode Date: April 16, 2025

Episode 562: Neal and Toby talk about the latest chapter in the US-China trade war, with China holding out on two things: rare earth minerals and Boeing deliveries. Then, Mark Zuckerberg takes the stand in the trial against the FTC where old emails are being dubbed the ‘smoking gun’. Also, LVMH loses its crown to Hermès in market cap. Plus, Twitter founder Jack Dorsey and Elon Musk agree on something: IP law should be deleted. Do they have a strong case? Finally, American Airlines offers free WI-FI, OpenAI’s naming flubs, and the baseball to photographer career path. 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. Visit https://planetoat.com/ to learn more! Listen to Morning Brew Daily Here: https://link.chtbl.com/MBD Watch Morning Brew Daily Here: https://www.youtube.com/@MorningBrewDailyShow How much progress have we made this year: https://year-progress.cnln.dev/ 00:00 - Year in Progress 03:00 - China Makes a Move vs US 07:40 - Meta vs the FTC 12:35 - LVMH Sto Drops 17:40 - IP Law Debate 21:45 - Headlines  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, Jack Dorsey and Elon Musk want to eliminate all IP law, but should we? Then China turned the trade war up another notch by halting the export of rare earth metals. It's Wednesday, April 16th.

Let's ride. So our coworkers found this fun website that tells you how much progress. we've made in the year so far and puts that into context in other areas. As of this morning, we are 29% of the way through 2025, which means in a 40-hour work week, it would be 12.33 p.m. on a Tuesday. And a marathon, you'd have about 19.2 miles left to run. And in the book, The Hobbit, Bilbo would be performing riddles in the dark. Honestly, I took a lot of optimism from this because I don't want the year to fly by. It still feels like, we're in the early inning.

So I want to have 19 miles left of the marathon that is 2025. And I want it to be early afternoon on a Tuesday. There's still so much to get done and so many podcasts to record, Neil. Though I will say the first part of the year has definitely felt like a Monday. But yes, a very fun site. Do you have the URL on you right here? We'll put it in the show notes. Go check it out.

It's pretty fun to just mess around. And now a word from our sponsor, Planet Ote. Neil, you ever notice how some puzzle pieces just click into place? Oh, that sweet little snap. I'd like to add a little tap, tap, tap for good measure. That's the sound of destiny. Ah, you're one of those types of puzzlers. But that feeling of satisfaction is exactly how it feels when you pour planet oat into your coffee.

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Over the past few days, the U.S.'s chief trade adversary has pulled two major levers. The first was suspending exports of so-called rare earth metals, which are critical to a range of technologies from electric vehicles and smartphones to wind turbines and missiles. These materials are often turned into powerful magnets crucial to heavy industry, and China controls 90% of the world market. When you zoom in further to sector-specific needs, it gets even more concentrated. 99.9% of the world's dysprosium, for instance, which Nvidia used is to create. capacitors on his chips comes from China. So any reduction in supply has the chance to cripple critical industries. If exerting its iron fist over rare earth elements wasn't a big enough warning shot,

China also ordered its domestic airlines to stop taking deliveries of Boeing airplanes. For Boeing, whose self-inflicted issues could fill lots of overhead bin space, this marks a major setback in one of the world's most important aviation markets. China is projected to account for 20% of global aircraft demand. over the next decade. So, Neil, you have China moving to limit these all-important metals, which could lead to disastrous consequences for everything from American manufacturing to military power and hitting a struggling U.S. manufacturing giant while it's down. In other words, it's fighting back.

To bring the poker metaphor back, this is China sitting next to the United States and maybe bleeding a little bit, showing its cards that it can play because these are extremely powerful cards. Boeing is the largest exporter by dollar value in the United States. Nearly a quarter of all of its output went to China, which is a huge aviation market. Bank of America strategist came out yesterday and said, we see this. We don't see this as sustainable. The Trump administration can't ignore Boeing. Boeing stock fell on the news yesterday. It looks like this is just going to be part of a broader negotiation. It's a bargaining chip that says we can block Boeing now. It might not last that long. and it'll be part of broader negotiations.

But it would just be so devastating for Boeing, which, yes, has had its own internal issues. But if it can't sell its planes to China, a massive market, I mean, that would be a huge financial blow. And China's like, listen, we have Airbus too. They buy more of their planes from Airbus anyway. So yes, it would impact China's ability to, you know, sustain its growing airline industry.

But they're saying we could probably get by without Boeing for a while. So, like, we don't necessarily need you. We have this other manufacturer to, step in and fill the gap. I do want to talk about these rare earth metals, though, because they are very important. They impact so many aspects of your life. A good proxy for how it might impact your life. If it beats, it probably depends on these rare earth minerals. And it's not just the metals themselves, like literally getting them from the earth. It's the refining capacity that China has that makes it such an integral part of the supply chain. Even if you have deposits within your country,

which some countries do. Ukraine has been one that has been tossed up a lot in negotiations where Trump is like we can source a lot of our minerals from there. But if you don't have the refining capacity that China has, then these minerals are functionally useless. You need to turn them into these powerful magnets that are used in things like batteries, wind turbines, LED lightbulb, semiconductors, like the list goes on. So it's not just that they have the supply. They also have the ability to turn them into something useful. And the U.S. does have one rare earths, Just one. It's in California, but as you said, we can extract the rare earths from that particular mine, but they still need to send it to China in order to get refined into magnets that are used in all of these various products.

So they are working, this mine in California is working on developing a refining process, but it's going to take years. The big question here is what this means for national security and the military, because defense contractors are warning that if there's no supply of rare earths, then, And, you know, they won't be able to make weapons. Obviously, China is a big geopolitical adversary. One incredible stat is that every F-35 fighter contains around 900 pounds of rare earth materials. And some submarines need more than 9,200 pounds of the materials. So you can't really make these things without China, which is a huge problem.

Yeah, and these weapons are the cornerstone of kind of Americans' military. So if you lose the cornerstone, you can see why the Department of Defense is all up in arms, trying to figure out our own domestic supply chain, our own domestic ability to refine these things because without them, you're right, it takes a lot of metal to create the U.S. military and we are just massively exposed to China, which is why they're pulling this all-important lever. Mehta's landmark antitrust trial against the government kicked off on Monday in federal court, and it unearthed some past emails Mark Zuckerberg would probably not want everyone to

see. As a reminder, the FTC is accusing META of illegally stifling competition. in social media through its acquisitions of Instagram and WhatsApp back in 2012 and 2014 and once those two behemists spun off. This is pretty much existential for meta, given that Instagram accounts for over half of its ad revenue, and WhatsApp is the most popular messaging app on planet Earth. As the trial kicked off, a surprise witness took the stand, Zuck himself. The government's lawyer presented him with a binder of past correspondence, and like anyone who scrolled many years back on their Instagram feed, he probably thought,

Well, I regret sending this. One of the key emails called a smoking gun by the government was a message sent to then-C-O-O Cheryl Sandberg in which Zuck talked about the rise of Instagram and the importance of, quote, neutralizing a potential competitor. In another email to Sandberg post-Instagram acquisition, he wrote, Messenger isn't beating WhatsApp. Instagram was growing so much faster than us that we had to buy them for $1 billion. That's not exactly killing it. The FTC claims these comments were a crystal clear example of metaperson. suing a buy or bury strategy that cemented its unfair dominance in social media. And Toby, these emails weren't the only big revelation so far from the trial.

Yeah, I would call there was a smaller smoking gun within the larger smoking gun. And that was Mark Zuckerberg himself suggested spinning off Instagram a year before the FDC even opened its first antitrust investigation into the company. He suggested internally the, quote, extreme step of spinning Instagram out as a separate company. he wrote that while most companies resist breakups, the corporate history is that most companies actually perform better when they've been split up. So the FDC was looking at their chops and saying,

listen, he's almost arguing our case for us right here. But the reason why Zuck was kind of proposing this pretty drastic step is that he was looking into the future and saying, hey, there is, and sorry, his words, a non-trivial chance we will be forced to spin out Instagram and perhaps WhatsApp in the next five to 10 years. He was looking at kind of the regulatory landscape, especially with the Democratic president coming into office.

He mentioned that as one of the big factors as well. So that was something the FDC was definitely looking at saying, like, he clearly knew that maybe they were towing the line here of antitrust scrutiny and that he was taking the initiative and suggesting it, which is, you know, supports their case because they're arguing for a very similar thing right now. These emails were honestly only just about the only good news that the FDC has so far in this trial. It's been two days because legal experts say, this is going to be an uphill battle to get meta to spin off Instagram and WhatsApp.

And one of the biggest challenges that has come to the four so far is the definition of the social media market that meta plays in with Instagram and WhatsApp. The FTC says that the market is a personal social network. So you just communicate with your friends and your family. So that means meta doesn't compete with TikTok or YouTube or iMessage. It competes with only Snapchat and a company called Miwi, which even Zuck said he hadn't heard of. So it's this tiny competitor. So it is accusing META playing in this very small sandbox.

Meta has responded by saying, come on. Like, we compete with TikTok. We compete with YouTube. And for an example of this, the lawyer for META showed that in January, when TikTok was down for 12 hours, he pulled out data that showed that Instagram got a huge spike. And he's like, this is exactly, we directly compete with them. No TikTok, then people go over to Instagram. Yeah, and I will say the defense is kind of getting some laurels on social media too

because the slide deck they've been using has been, you know, animated and he's making jokes. The lawyer is making jokes like that slide that you just depicted like a boxing ring with app logos in it. So they're almost taking it like saying, they're like laughing at the suit basically and injecting humor into their defense because it's so laughable to think that they're only. competing with Miwi and Snapchat, when there is just this massive overall landscape of apps, like TikTok, that you can switch interchangeably between meta and them.

And then the final, just kind of like funny detail that has come out so far, is that in that smoking gun email later in the chain, you scroll down, and for some reason, Cheryl Sandberg and Mark Zuckerberg start discussing Katan playing, and Cheryl Sandberg's like, hey, I'd love for you to teach me one of these days. So if you're scrolling through headlines about meta, and you see Katan mentioned, And it really was just because in this very important moment in the company's history, somehow settlers of Catan came up. So if you are a Catan fan, press the button Katan mentioned in this story.

The King of Luxury has been dethroned. Yesterday, France's LVMH was surpassed by Hermes as the most valuable luxury company in the world. The abdication of the Golden Throne came after LVMH had a howler of an earnings report, reporting that revenue dropped 2% from the same period last year, much lower than expectations. That caused its stock to drop 8% its worst one-day performance since March 2020, clearing the way for cross-down rival Hermes to take the top spot. This is about more than a changing of the luxury guard, though.

It's a warning shot across the entire sector and perhaps the economy more broadly. LVMH, because it owns 75 brands, is seen as the industry bellwether. It sells champagne, Tag Hoyer, Washington. watches, Dior jackets, Tiffany engagement rings. If there's something you want to buy but a store manager needs to grab a key to go unlock the case, it's probably LVMH. To be sure, luxury has been stumbling in the years following the pandemic, but now it's facing a potentially daunting double whammy.

Chinese consumers, a key clientele, are pulling back, and President Trump's trade war has injected a massive dose of uncertainty across the economy. LVMH's CFO said tariffs put the company in, quote, unknown territory. Unknown territory is an interesting place to be because is it structural where people just don't want these goods anymore, where they think the economy is crashing, or is there something else going on here? And LVMH kind of tried to push analysts towards the latter because one thing they called out was the Japanese market had this huge boom in demand last year from China shoppers coming over

and taking advantage of the weak yen to buy very cheap luxury goods. I mean, if you thought everybody in your life went to Japan these past few years because of the weekend, you weren't imagining that. A lot of people did go over there. And so the CFO said we are not having the benefit of the push this year. So that's one issue that was kind of just a one-off thing last year. But you're right. Like the U.S. is facing very weak consumer sentiment.

And a lot of the deceleration in the U.S. came from specifically not the higher end, but like Sephora and their wine and spirits division. those are not necessarily the upper echelon of goods that LVMH offer. So the U.S. is definitely a warning sign facing weaker consumer sentiment, as well as the Chinese market, which you're right, is also facing headwinds of their own and within their own economy. Meanwhile, I mean, let's just talk about Hermes, because now it's the most valuable luxury company in the world.

It's running a stellar playbook. I was very surprised by this because LVMH has 75 brands, and I was saying, does Hermes have any other brands? No, it's literally that, but they sell the Birken bag, they sell the Kelly bag, which, you know, is very high end. And you have to, they've maintained this aura of exclusivity around these products where you have to wait months and interview to get these bags that could cost, you know, more than $8,000. And so kudos to them. I'm just running the luxury playbook super well. And the final note on this story, which is, you know, somewhat adds to the lore, is that Bernard Arnault, who is the godfather of LVN,

M.H tried to buy Hermes back in 2010. He was unsuccessful, and now he's getting laughed by them. He is. Up next, let's talk IP law. 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 Theater stage on April 30th, the powerful vocals of Demi Lovato on May 17th, and the signature Southern Country Rock of Eric Church on July 19th. Tickets on sale now at Yamavaheater.com. only at Yalava Resort and Casino, celebrating its 40th anniversary. You in? Must be 21 to enter.

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One size, absolutely does not fit all. Get a quote or find an agent today at thehart.com slash small business. Jack Dorsey set the social media site. He invented a titter this past week when he posted four simple words, delete all IP law. Then the new owner of his site, Elon Musk, added fuel to the fire by replying, I agree. The seemingly casual exchange between the former and current owners of the site,

now known as X, deserve scrutiny because what? Where is this anti-IP sentiment coming from, and why do some of the most powerful people in tech agree on this issue? It's not totally clear what compelled Jack to log on and start some discourse, but its thoughts do come against a backdrop of AI companies staring down multiple lawsuits claiming they violated copyrights when they feed content to train their AI models. OpenAI and Microsoft are currently locked in a battle with the New York Times for the unpermitted use of their articles to train its large language models. so the AI industry has begun to mount a counterattack. In the UK, AI companies are pushing to reform copyright protections in order to make owners opt out if they don't want their work to be used to train AI systems rather than the other way around.

Also, in Jack and Elon's corner are some pro-AI believers who say that automated IP fines for AI infringement may become the substitute for putting poor people in jail for cannabis possession, as tech evangelist Chris Messina put it. But critics have, fired back, delete IP law, and you delete one of the main incentives to create at all. Ed Newton Rex, a former executive at Stability AI, told Fast Company. So, Neil, it was just a simple post, but it set off this very serious debate on how to handle IP law in the age of AI. It's a very

sensitive issue right now because of what generative AI is doing and how it is trained. I mean, just the concept of IP rights, let's just take a step back. Why are they important? Why are they established. It's because they encourage creativity and innovation. You have to give inventors and creators exclusive rights to their work. They need to know that it will be protected in order to make that and they will be able to make money by licensing that. If you know, you don't have any copyright protections, what's the incentive for you to make something if it's just going to be stolen? That is the argument of IP law to begin with. And it is actually goes dates back to the U.S. Constitution. The U.S. Constitution says establish copyright and patents in order to promote

promote the progress of science and useful art. So doing what Jack Dorsey and Elon Musk are saying by deleting all-IP law is certainly an uphill climb. But it has sparked a discussion about whether copyright protections could be loosened in order to give AI companies an easier pathway to train models. They say it's a national security issue because China doesn't care about that. And the U.S., you know, has these stringent laws. And so does the U.K. But it's certainly coming up in governments and legislations. legislators right now. Yeah, so some of the arguments for reforming or, I mean, deleting is a little extreme IP law. One, the current system wasn't built for this new age. There's so many legal

gray areas. Is scraping the internet for training data fair use? Or is it theft? The law doesn't really know yet. So there probably should be some level of reform there. And you're right. Creativity can't really scale up if everything is locked up. If every piece of content needs licensing, innovation is going too slow. So in this arms rate against China, that is one of the main reasons for just freeing up these AI companies. And then like the third kind of, I don't know, metaphorical or philosophical approach to this is that AI can't necessarily copy in the traditional sense. They don't memorize or reproduce exact texts, or at least they don't do it intentionally.

They synthesize pattern. So the argument I've seen is like saying that a writer can't read books before writing a book of their own. Of course, it's just an input. And then you create this different output. So those are some of the reasons for why tech people and AI evangelists say that we need to change the current system because right now it's far too onerous, far too much of a burden on innovation in these very important space right now. On the other hand, artists, inventors, creators on the other side, you know, could not be more upset about this and say that, you know, we will produce less. We will just, they're like the impacts of people creating less if IP law is scrapped or watered down as these.

executives want will just be, you know, so catastrophic for the artistic community, for the creator community, for anyone who wants to invent something, huge ripple effects across the economy. Let's sprint to the finish with some final headlines. American Airlines is finally joining the Mile High Wi-Fi Club, announcing plans to offer free internet on flights starting in January. It will be the last of the major U.S. airlines to let you browse the web at no charge while up in the air. JetBlue has offered it for years.

Delta started free Wi-Fi in 2023, and United is currently outfitting its fleet with satellite Wi-Fi from Starlink. Americans will be powered by IntelSat and V-Sat and made available to members of its A-Advantage loyalty program, which is free. Toby, free Wi-Fi is no longer a perk from airlines. It's table stakes. I just want to shout out JetBlue here because without JetBlue, I don't know if we get to this point where it is table stakes because they pioneered the perk, really. they've been offering free Wi-Fi since 2013. The only outlier here, or the only major outlier here, is Southwest now, who just loves doing things differently and still has not said whether they are considering adding free Wi-Fi onboard.

They give you texting. They give you the ability to stream their movies, but they still don't let you browse the internet for free. So we'll see if kind of the laggard of the industry, the duckling that's always tried to do things differently, falls in line, or if they still just want to be, you know, unique and different like they always have been in the past. The crazy part of the story for me was when they said that they're going to, you know, introduce this in January.

It's, that's January 2026. Yeah, we're getting there. Speaking of the progression of time. What's in a name, Shakespeare once mused, and now Sam Altman is doing the same, mainly because the names that his company Open Eye uses for its models stink. Yesterday, Altman posted on an X. How about we fix our model naming by this summer? And everyone gets a few more months to make fun of us, which we've very very,

very much deserve until then. What's he referring to? Well, if you fire up chat GPT, you can choose which model you use. There's GPT-40-01 Mini, O1 Mini, O1 Mini, Deep Research. There's also a new class of models named GPT-4.1, GPT-4.1 Mini, and GPT-4.1 Nano. It's so bad, Neil, I can't even get them out. Obviously, these conventions have led to a lot of confusion amongst users, especially those unfamiliar with what separates one model from another.

But based on Altman's tweet, it looks like chains might be coming as soon as this summer. I mean, the one rule for naming is don't make it bad. It doesn't need to be good. Just don't make it bad and confusing where you're actively harming yourself. And it seems like that is exactly what OpenAI does. I don't think he even likes the name ChatGPD. In fact, Sam Altman has said no marketer ever would have picked Chat Chabot. He has the name for this, but he may be stuck with it.

because of how ubiquitous it is. Now, I really hope OpenAI gets its act together before it releases a new product that is rumored yesterday. Multiple reports said that it is going to be launching a social media competitor to Instagram and X. And obviously, the subtext of that is that Sam Altman and Elon Musk hate each other. So if Sam Malman launches a product that goes against or that competes against X, I mean, that could even lead to more fireworks.

but, you know, do not name it anything that you've named any of your other models. You want to know what the funniest timeline here is that Jack Dorsey's arguing to delete all IP law. So then Sam Alman goes and names his new social media site Twitter and say, how you like that Apple's Jack Dorsey? Let's see if you like IP law now. Finally, if you, like me, have been combing through every single photo of Roy McElroy's victory at the Masters, you may have noticed an interesting name on the byline of some of those picks. 13-time MLB all-star Ken Griffey Jr.

Yes, the former Big League slugger who played 22 seasons and hit the seventh most home runs of all time is now a credentialed sports photographer, and he's good. His photo of McElroy hunched over on the 18th Green of Augusta, screaming into the turf as he let out years' worth of emotion and frustration, perfectly captures the burden lifted from golf's biggest star. Griffey Jr. picked up photography after hitting his mid-year, 30s to be a good dad. His daughter said, wanted to make sure dad is paying attention.

So he started bringing a camera to her games. Since then, he shot everything from NFL to MLS games before capturing Roy's cathartic Masters victory. Pretty cool post-baseball career, Neil. Very cool. And it's always a breath of fresh air when an athlete doesn't launch an alcohol brand like so many have. So very cool for Ken Griffey.

He said he was really nervous. He said, you know, how would these guys? feel if he's talking about other photographers, how would these guys feel if we all got into a batting cage and I was sitting there critiquing them? So, you know, he had butterflies going into this Masters. It was his first one. He has photographed all these other

events, but, you know, Sunday at the Masters is just another level. He's also not the only former baseball player, former MLB player, to take up photography. Randy Johnson, the big unit, that big lefty, has also taken up photography in his post-baseball

life. He is, you know, I've seen him take pictures of wildlife and other things. So you can see Randy Johnson in the prairie photographing gazelles. Very cool for these guys. And the thing is they are good at it, which is super awesome. Let's wrap it up there. Thanks so much for starting your morning with us and have a wonderful Wednesday. You're well over 29% through this week.

For any questions, comments, or feedback, send an email to Morningbrewdaily at Morningbrew.com. Let's roll the credits. Emily Milliron is our executive producer. Ravenloot is our producer. Our associate producers are Olivia. and Olivia Lake. Garry Peck is on audio, hair and makeup would be Zuck in Katan.

Devin Emery is our president and our show is a production of Morning Brew. Great show today, Neil. Let's run it back tomorrow.