Morning Brew Daily - Bullish or Bearish: The Great Debate

Episode Date: October 9, 2023

Episode 165: Neal and Toby get bullish or bearish on a range of topics, including; is a 4-day work week feasible? What about the future of plant-based meat, and is the global population decline a real problem to be concerned about? Will we see a trillionaire in our lifetime and is higher education worth the cost anymore? Plus, where will San Francisco be in the next 10 years and is AI worth the help in your dating apps. Finally... is the hype around Pickleball worth it. 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 Freyman. And I'm Toby Howell. On today's pod, it's Indigenous People's Day, and we have a special episode for you. Special indeed. We're testing out a fun new format called Bullish or Barish. It's Monday, October 9th. Let's ride.

So we teased it a little bit, but here is what the format of the show is today. We've come up with eight big picture topics for Neil and I to debate. Some we chose ourselves and some we sourced from your suggestions, so thank you for those emails. For each topic, Neil and I will adopt a series. stance. Are we bullish, aka optimistic, or bearish, aka pessimistic, and then do our best to defend the position we take? Neil, may the best debater win, I guess? I have been preparing for this my entire life. These topics are really juicy, probably too juicy, but it's going to be fun. I can't wait to beat you. I'm excited and also a little nervous, but let's dive into our first

topic. Up first, are you bullish or bearish on the four-day work week becoming the norm for corporate life in America. I'm going to say I'm bullish on this happening because in high income countries, annual working hours per employee has been cut in half between 1870 in today. So let's take Germany, for example, annual working hours there were in 1870, we're at 3200. And in 2017, that it's now 1,300. So that's a 60% decline. In the 19th century, people worked as many hours between January and July as we do this entire for an entire year nowadays. So I don't see any reason why in 2023 with all of our productivity growth, all of our technological innovation, why there'd be any reason for this long precipitous decline that's been going on for 150 years to stop now.

And eventually, you know, you work a few hours to the point where it's just four days. I do think that leading with that stat probably wasn't the way to go because starting the 18-100 is a much different, so obviously I'm very much different world than a more modern society. And so if we go back to just like the 1930s when John Maynard Keynes was, the popular economist was at the height of his powers, he said that his grandkids would have a 15-hour work week because of similar arguments you made. There's going to be increases in productivity. But what Keynes kind of forgot is that work is less a product of technology and more a product of culture. So the current culture, the current world, that we live in is one where work has become part of kind of that Maslow's hierarchy of needs.

We derive a lot of our community and a lot of our self-actualization from working with people. Like this pod gives our life meaning, but it does to a certain extent. And so all these productivity kind of forecasts ignore the cultural impact work has in our life. So I don't think that the advancements in AI are going to suddenly cut our work week in half and that we're all going to stop going to work and just have all this leisure time. because of the place culturally that work occupies. I think a lot of people, as the pandemic showed, would be more than happy to not have work be a central part of their life. And over the past few years, we've seen a lot of people rebalance their work in life and focus more on life and less on work.

So if you have employers saying, we're going to offer a four-day work week because, you know, we think you're more productive because you're all using ChatGBT BT now, then I think everyone would be happily accept that and have no longer have work be. a part of the culture. I mean, Henry Ford was the person who instituted the five-day work week back in the 1920s because of pressure from the United Auto Workers Union of all groups, and they're currently on strike. And one of the reasons that he did that is not total benevolence is because those two days over the weekend allowed the workers to spend and, you know, throw their cash around the economy and spend on leisure and whatever the equivalent of Taylor Swift tickets was in the 1920s. So there might be economic, incentive to give people, if they're making as much money, more days off so they can go spend it on travel and other leisure and recreation activities. All right, let's reach a compromise,

four-and-a-half-day work week. That's where we're going to land. If someone dangles a four-day work week for you, you would reject that? I would reject it. You say, that's such a part of my identity. The people need the pod on Fridays, Neil, okay? All right, so we'll do the pot and then we go golf and all day. Yeah, exactly. Four-and-a-half-day work week. All right, let's move on to our next topic. Neil, are you bullish or bearish on plant-based meats, capturing a larger market share in the coming years. Look, I know that plant-based meat is in the trough of disillusionment right now as far as this hype cycle is concerned. It was so big in 2018 and 2019. Everyone thought it was going to be the future of protein. And now companies like Beyond Meat

and Impossible Foods are in the dumps. They're laying off staff and their stock prices have plummeted. But I think it's going to come back. I think I'm bullish on plant-based meat. I mean, we're in the early days of, I just think what is a major shift away from meat? in general. Beef consumption is declining everywhere. I think a lot of people are becoming aware of the climate impacts, the ethical dilemmas that go with factory farming. So I think, you know, plant-based meat is in a good position to capture it. I think they have to get costs down. There's a lot of stuff they need to do to improve. But I just think this is the first wave of innovation that's coming, and there's going to be plenty of others that come behind it to lower costs, make it more

palatable to consumers, make it taste better. But I do think this is the way the world is moving. So I think plant-based meat has a bright future. I mean, you kind of glossed over just how bad plant-based meat has performed in the markets. I mean, it's down beyond meat, which is the biggest plant-based meat stock out there. It is down 75% this year. It's currently trading at around a $500 million market cap. That's down from a peak of $12 billion. So that trough of disillusionment that you mentioned is much deeper. So you remember the dot-com bubble, right? You don't go to anywhere that has a dot-com nowadays. We're in the marinara, oh no, the trench, whatever the trench is called. Mariana's or something.

Mariana, I almost said Marinera trends. But yes, that trough is deep. But I also just think they made a strategically unwise decision with the way they framed plant-based meat right from the get-go. Remember, one of the big things that they always would talk about is that it bleeds, it looks like meat, it handles like meat. And I think while that was a cool novelty in the beginning of plant-based meat coming out, I actually think that alienated a lot of potentially like vegan and vegetarian customers because they're not actually looking for that.

And then meat eaters also aren't necessarily looking for their fake meat to bleed because one of the big things about a lot of meat eaters is that they view it as a vice food. So when you go out to a nice steak dinner, it tastes really good. You spend a lot of money on it and it's one of those treats. Plant-based meat is never going to get there because it's just one of those foods that doesn't quite taste right. It's never going to reach that level of vice status. And so it's not really appealing to either subset of the population. So I just think they made a strategic error with that whole like blood thing. I'm just following the money.

And Nestle is the largest food company in the world. And they're devoting 10% of their entire R&D budget to plant-based foods. And one of the executives there said that they believe that this plant-based protein market is going to eventually account for 30 to 40% of the entire protein market in the world. And these are, this person literally's job is to do this. And they have tens of billions of dollars flowing into R&D and development here. Their literal future is staking on what happens in the future of protein. So I'm going with them.

Nestle's never been wrong before. But the one thing I will say, the last thing on this topic is lab growing meat, which is a little bit different because that actually is meat. I am bullish on that just because I think we're going to be able to create almost a better protein, a more tender chicken, a more tender. you can remove all the impurities. So while plant-based meat, I'm not bullish on lab-growing meats, I am. I'm also on bullish on lab-growing meat. We agree. Let's go. All right.

Next topic is very similarly super light. It is global population decline. Elon Musk and some demographers are warning of an existential threat to the human species because birth rates are declining everywhere. Populations are aging. And if this keeps up, we'll be left with just zero people on this planet. Other experts have pushback saying this is not a problem. Toby, are you bullish or bearish on this being an actual problem?

I am bearish on it, meaning I don't think it's as big of a problem as a lot of people are making it out to be. I think it's an overly pessimistic line of thinking. I mean, if we go back to the 1968 book that we all know, population bomb, that book forecasted a 20th century starvation catastrophe. But obviously, that hasn't come to pass because technological advances have met increased need. and worldwide people have started to have less kids. And so factor in our ability to meet the needs of a growing population and the fact that a shrinking population can lead to some good outcomes, like lower emissions, increased per capita income, increased gender equality.

And I don't think that this is truly the existential issue that a lot of people claim it to be. Okay. I mean, I disagree. I think it's a fairly big problem to have smaller populations, especially ones that there are a lot of older people in your country. We're seeing this in Japan. Actually, all around the world, there is low fertility rates. People are having fewer babies, and this creates a huge burden on younger people to work longer.

I'm not saying work more hours per day, but work longer in their life. And that is an issue that countries are reckoning with right now. Remember what happened in France this year? So a lot happened in France this year. I'm not talking about the bedbugs. But I'm talking about when French President Emmanuel Macron had to increase the retirement age from 62 to 64 because the pension fund was being depleted as their population gets older. And that sets off, that set off months and months and months of riots and protests.

So that, like, we're seeing the effects of population decline, aging populations come to the four in 2023. And the UN projects that within a hundred years, our global population will reach its peak and steadily go down. And I think that has, like, numerous economic knockoff effects that we're only beginning to confront. One other detail on this is that the science of population estimation is actually pretty wishy-washy because it's very hard to estimate how many people there truly are in the world. And when the UN said that we passed 8 billion people back in 2020, that was mainly just a ceremonial thing or like a PR stunt because we may have passed it 10 years ago.

We may be passing it 10 years in the future. So whenever there's such a wide degree of kind of variance and uncertainty, in these population models, I just don't trust that even that model is something that we truly have to be worried about, because it's kind of like, I don't know, estimations in the solar system where they do it in plus or minus 100 million light year type deal. So, again, even though the trend is heading upwards and we are probably going to reach peak population at some point, I don't think it's as pressing an issue as, I mean, Elon Musk is kind of staking his claim on it being the biggest issue we're facing, and I don't see it that way. Okay. All right. Let's move on. Our next question is a big one. Do you think one individual person will reach a $1 trillion net worth in our lifetime, Neil? And who would it be? And who will it be?

All right. So I do think so because growth is, I mean, look at the stock prices, look at economic growth, look at inflation. I think eventually there will be a $1 trillion person. And I think that person's going to be Jensen Huang, who is the co-founder and CEO of Navidia. Invidia. I'm sorry. Sorry. That's the company that makes the powerful chips called graphics processing units that are powering the AI boom. He owns 3% of Nvidia. The company is a rocket chip. The stock is up more than 200% this year. It's over $1 trillion in market cap. In the recent Forbes 400 list of richest Americans, he gained the most of anyone on the list in percentage terms. He is worth $40 billion right now, so he's a long way to go. But when you factor in potential stock price growth of invidia and all this stock-based compensation, he's going to get and he owns 3%.

I'm just, if anyone's going to do it, I think it could potentially be him. Elon seems too reckless with his money. He just lit $44 billion on fire. Bezos and Zuck have companies, I think, whose growth trajectories are slowing down. Tim Cook is only worth $2 billion. He's not a founder

of Apple. And I was going to say Sam Alman, he was the CEO of OpenAI, but he doesn't have any equity in OpenAI. So, process of elimination, I just came back to Jensen. Wait, so he owns 3% of Invidia. Yeah. How big would invidia have to be for him to become let's just do that math deal well it's not just that because he's

he'll get awards as it goes on i mean Elon musk got 60 billion dollars worth of stock-based compensation that wasn't tied to his like his actual equity i just in the company's actual ownership it was kind of this bonus thrown on so i don't know over the course of our lifetimes i hope we live to a hundred years old which is another 70 years that's my biggest pushback on this i am i embarrassed especially on jensen because i knew you would say that and it's because it's because I don't think one person is going to become a trillionaire off of a single company. It's going to be someone like Elon Musk who has multiple home runs, not even just like multiple companies, multiple giant home run companies.

And Elon's the closest we have right now. And Tesla, even if Tesla was just the one that pushed them to a trillion dollars, it would have to 10x over the next 10 years or over the course of our lifetime. or even like let's say SpaceX succeeds beyond our wireless dreams, it would have to become a trillion-dollar company as well. Neurrelink would have to become a trillion-dollar company. Once you start piecing together just how much, how big these companies would actually have to become

in order for seven to hit that trillion-dollar mark, I just don't see it happening, and especially not one single company powering something to a $1,000. Elon's closest right now. He's worth $250 billion, so he's a quarter of the way there. Maybe it'll be somebody like MBS, you know, who just seizes all the assets of his country. and is worth a trillion dollars by himself because he's just an autocrat.

The one thing that I did say, like, maybe we're just going back and forth debating this, and there's already a trillionaire over in kind of an oil-producing state, who just owns way more than we know about. So the oil money is the wild card here, for sure. Okay, we are going to take a little halftime break from the debate because I just want to talk about what bullish or bearish means. Like, where did those terms originate and how do they make their way? to Wall Street. So I went to Miriam Webster, and it said the term bearish, the pessimistic one,

came first. That term traces its origins to a proverb warning that it's not wise to sell the bear's skin before one has caught the bear. So the term bear skin and later just bear, to describe someone who expected stock prices to fall, was popularized during England's famous South Sea bubble scandal in the early 18th century that you might remember from history class. It seems that the bull imagery came about later as the appropriate alter ego to the bear. And those animals have just remained in the financial vocabulary today. That's a fun and probably the more correct definition, but I was also doing some digging as well. And another theory for why we chose these animals is it comes down to how they attack something.

So when a bowl is attacking something, it will charge towards the target and thrust its horns up into the air. Stocks go up. You're bullish on the market. But then when a bear attack something, it usually swipes down. down with his claws. So even though that's probably just totally not true, I love that theory because it actually does, if you are someone newer to the stock market, it's a way to remember which side bullish it is. Bear swipe down, bulls thrust upwards. Okay. Wow. I don't know what to say about that. It's definitely not true. Okay, let's head into our next topic. The State of Higher

Education. Many words have been written about the future of college and the value of a degree, especially with tuition costs soaring, tens of millions of Americans saddled with student debt. Toby, are you bullish or bearish on higher education in the United States, as we know of it today? I am bearish on higher ed because America is getting more and more bearish on higher ed. So surveys from Gallup found that the percentage of young adults who said that a college degree is very important, fell to 41% from 74% just 10 years ago, and only about a third of Americans now say that they have a lot of confidence in higher edge. Among Gen Z, 45% say that a high school diploma is all you need to ensure financial security.

And now almost half of American parents say they prefer that their children not enroll in a four-year college. So if we have a drop in demand, I also think that we'll have more colleges start to struggle to make ends meet. So about 95% of colleges rely on tuition to operate. And if a enrollment starts to decline, which those stats are pointing to, we're going to see more and more shuttered institutions. already since 2016, 91 colleges have closed. And so while, yes, colleges with fat endowments and big brand names, kind of like the Ivy League, will probably do okay and still attract elite talent.

That long tail of universities is going to struggle mightily. All right. So you said it pull numbers. I've got real numbers here. I've got application numbers. So for the 2023, 2024 school year, there were 1.2 million applications to 800. 141 colleges in the common app. That's an increase of 21% over 2019 and 2020. And the total number of

applications increased by 30%. So no matter what Gen Z or people are saying, they're applying to college more than ever. The pandemic was this opportunity for a reset for many institutions that we know of in life. I mean, we all went home from the office and we all decided the office wasn't working. So only 50% of people have come back to the office. I think there was that similar opportunity for college when everyone went home. And if there wasn't any value in college, many students would have just said, this isn't working for me. I'll just stick with online education, or I'll just go apply for a job and I don't need a degree, or I'll just go with, you know, a vocational school. But the power of college has removed remarkably resilient because it is the key to higher incomes

in today's economy. So I think it's sticking around. I just think the financial burden, though, is becoming so and so great. The cost of higher. ed has just ballooned over the last decade alone and just everything everything is more expensive and so while yes the again the top one percent of students will still filter towards college i do think these lower institutions are going to suffer because you're they're raising prices at the same rate as an ivy league is but without like the brand name recognition and so i just i just don't see how we can support economically the middle class of college institutions which is what is the vast majority of people go too. So I just see like the power laws of the internet kind of taking effect and the harvards

of the world getting even more powerful while the rest of the country kind of falls to the wayside a little bit. All right, Neil, our next topic for debate is San Francisco, just the whole city. Are you bullish or bearish on it over the next decade? Right. Just like plant base new, we talk about the beginning of the show, San Francisco is not in a great place right now, and yet I am bullish because of this one reason. It is still the top place for VC-fueled startup innovation, not just in the U.S., but in the world. That is the San Francisco Bay Area by a massive margin. No one else comes close.

According to CB Insights, 335 startups are currently working on generative AI, and $12 billion have been invested across all of those startups. Half of all of them are working in San Francisco. So I think this city remains the center of the tech universe by leaps and bounds. Don't worry about Miami. Don't worry about Austin. Those are just small fish compared to San Francisco. The center of gravity there is so big.

The smartest people in tech are always going to want to work there. The agglomeration economies there are so big. You can't work virtually. You have to meet face-to-face for huge, huge startup rounds of $100 million and $200 million. So for that reason, I don't think San Francisco can stay down for long. There have been a lot of policy issues and self-owns that it's done in the past few years, but has too many assets. I just think that the world is not just VC funding.

and I know that's what San Francisco is mostly known for, but like, let's look at the definition of a doom loop for a city and see how it compares to San Francisco. So an urban doom loop is kind of this self-fulfilling cycle that goes like this. Workers vacate a city because maybe remote work has caught on or other alternatives have pushed them out. Residents began moving to the suburbs. So then retail business start closing due to lack of customers. City tax revenue begins decline because there are less people to pay those taxes. And so the city responds by cutting some services, raising other taxes, which drives even more people and more money away from the cities, so on and so forth. That's a doom loop. Let's look at what's happening in San Francisco right now.

Cell phone traffic in downtown San Francisco is still at just 32% of pre-pandemic levels. So there's no one really walking around the cities, which has caused the retailers to leave, Nordstrom, Uniclo, Gap, Saxon 5th, H&M, I could literally go on forever. I have all left downtown San Francisco in the last two years alone. And then the city's tax revenue also, also. fell by $484 million in 2021. So that's got Doom Loop written all over it. And no amount of VC funding or AI startups can actually escape this real doom loop cycle that we're seeing play out in real time.

So I could not be more out on San Francisco. Wow. All right. San Francisco, you can't ever go there after saying that, first of all. Which I do think it's a lovely city. Okay. There you go. No, I think that the leaders there are going to have to make some tough decisions and work on

making more housing in downtown to create. a more livable city where people are there 24-7 instead of just commuting in and then going back to their residential neighborhoods, you have to put more mixed use downtown and have people live there. That's been sort of this strategy that a lot of cities have used to great effect, and San Francisco needs to do that, and it has really terrible housing policy. That cell phone stat, though, that blows my 32% of pre-pendemic levels. That does not seem like... Well, your cell phone's never getting in there.

That's for sure. Moving on to our second to last topic, just about every industry is trying to incorporate AI into their products. One of them is online dating. Industry Leader Match Group and other startups are launching new features and apps to automate everything from pictures selection to pick up lines. Toby, are you bullish or bearish on AI-infused dating apps? I'm so bearish. I'm so out on this. And it comes down to one word, and that is spam and bot accounts. I guess that's more than one word. But imagine this now. You can set up a portfolio with one, a fake AI picture, two, a fake AI written bio. and then three, have AI send fake AI generated messages for you.

So if platforms like Tinder aren't careful, they're going to destroy their entire apps just by introducing AI into the fold because as soon as that user experiments starts to tank a little bit because you see all these bot accounts, another Doom loop starts, honestly, and people start leaving the app. So I just think this spam problem is something

that these apps haven't really considered, and it's going to be a problem. That's definitely a problem, but overall, I am bullish because of one word, burnout. As someone who's on the apps right now, all you want, I promise you, is to make your life easier and to automate anything you can because it is a time suck. It is like applying to another job. In a recent survey, nearly 80% of users of dating apps said they experience emotional burnout

or fatigue with online dating. And on Hinge, there's this prompt with the question, what are you most excited about for the coming year? The top answer I see is deleting this app. people are so fed up with it. So if there are AI tools, light touch AI tools, I don't need heavy-handed things like creating my entire profile and writing everything and sending messages because I do, I'm not in on, you know, bots talking to each other, like actual dialogue. I think that's dumb. But simple light-touch help, like automations, like choose the best three profile pictures from my library. So I don't have to scroll through every single one of the pictures

I've took for, you know, optimize that. I think that is a great use case. I would use that. 10 times out of 10. But doesn't that also end up hurting the dating apps? Like say they make your profile amazing and you find the love of your life tomorrow, then they're making their apps too efficient and all of a sudden you're losing people. I mean, I guess that's a little bit of a short side. Well, Hinge's marketing platform marketing slogan is, you know, we want you to delete this app. They probably want, you know, there's probably this bell curve where they want you on for a certain amount of time

before they get rid of you and then they can tell you on their website as we found X number of people found love on our website. I think there are ways they can use this effectively. I also share a lot of the same concerns that you have. Yeah, light touch is probably the way to go for sure. Okay, our last topic of debate, Toby, this has been a lot of fun before we get into this. This is perhaps the most important topic we could possibly have. Are you bullish or bearish on pickleball being a major sport? I am so bullish. Finally, I get to be bullish on something. I'm bullish on pickleball because for the main reason is because it's so great for elderly people in particular if you want a sport to succeed you need it to appeal to a population that has one the

most disposable income and two the most disposable time pickleball hits both those things and racket sports just in general are scientifically the best sports for you to play as you age so a national institute of health study found out of all the types of physical activity that can lower the risk of death for older adults racket sports tops the list and so pickleball ball is a racket sport. And one of the reasons is because it taxed the cardiovascular system, the muscular, the skeletal, but it's also taxes the critical thinking systems. So pickleball, in my opinion, is actually just a very high speed game of chess. Great for the mind, great for the body. I'm bullish on pickleball. Okay, but what I meant was a major business

opportunity. You see all of these celebs getting into pickleball. They're trying to sign TV deals. They're trying to become the next big thing on television in terms of live sports. Do you see any potential there. I'm a little less bullish on the professional pickleball scene because at the highest level, it's actually not a great spectator sport because a lot of it happens in the kitchen, these small dinks back and forth, and it's not super compelling to watch. So while I see why VC money is flowing into pickleball, because it is just the fastest growing sport in America. It's absolutely blowing up. I don't think the professional scene is actually where the money should flow. I think the amateur scene, there will be a very robust, very, very, very, very,

prominent amateur scene for a long time, but okay, you got me there. I don't think the professional scene is, I'm less bullish on that. I think I agree with you 100%. I think I agree with everything you just said. So I think we should leave it with that. That was very interesting. What was the score count there? I was seven bullish, one bearish. I didn't understand how I kept going down. I'm like, why am I bearish on so many things? But it's not like my personality, but that was I was going into this episode. I was expecting I was going to be bearish on everything because, right, I'm the older cynical guy compared to you, but I don't know. Maybe the way we phrased the questions.

We surprised it. Anyway, if you want to weigh in on any of these issues, I'm sure you have a lot of thoughts about what we said. Feel free to write into Morning Brew Daily at Morningbrew.com. We'll be back with our regular news show tomorrow, but before that, let's roll the credits. Emily Miliron is our editor and producer. Samantha Velas and Raymond Lou are associate producers. Yuchena Wa Ogu is our technical director. Billy Minino is on audio.

Hair and makeup said, Toby made some good points, but mostly got it wrong. Tevin 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. All. Pay off your home, travel for life, drive a Ferrari.

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