Morning Brew Daily - CA Rejects Sweeping AI Safety Bill & The $110B Cost of Hurricane Helene

Episode Date: September 30, 2024

Episode 420: Neal and Toby look at the massive costs and damage Hurricane Helene is causing in its path. Then, California governor Gavin Newsom just vetoed a contentious AI safety bill that would’ve been the first-of-its-kind. Next, buttons are making a comeback in cars and personal electronics as touch screens are losing their…touch. Meanwhile, Southern colleges are starting to appeal to the next generation of high school graduates. And China’s stock market is having one its biggest rallies in over a decade. Lastly, what you need to know in the upcoming 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. To learn more about how Wise could work for your business, visit https://wise.com/business/  Get your Morning Brew Daily T-Shirt HERE: https://shop.morningbrew.com/products/morning-brew-radio-t-shirt?_pos=1&_sid=6b0bc409d&_ss=r&variant=45353879044316  Listen to Morning Brew Daily Here: https://link.chtbl.com/MBD Watch Morning Brew Daily Here: https://www.youtube.com/@MorningBrewDailyShow 00:00 - SNL 50th Season  02:50 - Hurricane Helene Damage  07:45 - CA AI Safety Bill  12:45 - Buttons on Phones 17:15 - Chinese Stock Rally 21:25 - Southern College Popularity  24:00 - Week Ahead Learn more about your ad choices. Visit megaphone.fm/adchoices

Consider this comparison. PWC data found the percentage of CEOs who report revenue gains or cost reductions from AI is almost equal to the percentage who say they're still stuck. What separates these two groups? PWC points to a clarity issue. Even for CEOs, it's hard to tell what's AI hype, what's reality, and where this tech can make a tangible difference. Learn where AI can actually make an impact and what successful adoption looks like at

at pwc.com slash US slash brew AI. That's pwc.com slash us slash brew AI. Good morning brew daily show. I'm Neil Freyman. And I'm Toby Howl. Today companies are rediscovering an old technology, the button. Then California Governor Gavin Newsom broke out his veto stamp to strike down the U.S.'s first AI safety bill.

It's Monday, September 30th. Let's ride. Happy Monday, everyone. Hope you had a wonderful weekend. I'll tell you who had a wonderful weekend. Saturday Night Live returned for its 50th season on Saturday night, bringing back former cast members like Maya Rudolph, Dana Carvey, and Andy Sandberg to celebrate the milestone. To honor the show's graceful entry into middle age, Neil has some fun facts about its storied hosts,

musical guests, and cast members. I do. I have 50 fun facts here for 50 years of S&L. No, I just have a few. The person who hosted the SNL the most times, 17, is Alec Bull. The youngest S&L host ever was seven years old in 1982, and this came after a hit movie she starred in, Drew Barrymore, and the movie was E.T. And then the person who was the most frequent musical guest with 16 appearances is Dave Grohl. And then the highest grossing movie to ever come from an S&L sketch was back in 1992, and it was Wayne's World, starring Mike Myers and Dana Carvey.

And that movie earned over $121 million at the box office. Just a huge hit. And then finally, another fun fact, Lauren Michaels, who is the overseer of SNL, was asked in 2015, which actors he regrets overlooking for SNL? And he said, Steve Carell, Lisa Kudrow, Stephen Colbert, and Jim Carrey. All righty then.

I cannot believe Jim Carrey never made it onto SNL. That's like the Mandela effect there. I could have sworn he was a cat. member, Neil, thank you, as always, for those fun facts. Now a quick word from our sponsor, Wise Business, the app for doing things in other currencies. Neil, you'll never believe what happened on my morning run today. You finally outran that Central Park Scroll that always taunts you? Oh, I am going to get him someday.

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Eligible students get a year of Microsoft 365 premium and a year of Xbox GamePass Ultimate with a custom color Xbox wireless controller. Learn more at Windows.com slash student offer. While supplies last ends June 30th, terms at AKA.m.m.m.com slash college PC. Hurricane Helene made landfall as a category four storm last week and tore through parts of Florida and Georgia leaving chaos in its wake. In the days since, the full impact of the storm, has come into clarity as parts of North Carolina and South Carolina, and even cities in Tennessee and Virginia, take stock of their communities in what was a uniquely destructive hurricane.

More than 100 people have died across the southeast since Helene hit. In North Carolina, residents are still without phone service or power in cities like Asheville, while several counties are completely cut off from the rest of the state, forcing responders to airlift supplies in. In Tennessee, a critical dam was on the verge of failing for much of the weekend, before the water started to recede. In Atlanta, nearly a foot of rain fell over 48 hours, the most the city has seen in a two-day stretch since 1878,

and one small shoreline community in Florida's Big Bend had 90% of its homes washed away, according to a local sheriff. Neil, Accuweather is estimating that the total damage and economic loss from Helene will come in between $95 and $110 billion, which would make it one of the costliest storms ever to hit the U.S. Yeah, so this came in on Florida's, Gulf Coast and the Big Bend, but it does seem like most of the damage is in Western Carolina,

eastern Tennessee, that area. It's the National Weather Service Office in Greenville, Spartanburg, South Carolina said this was the worst event in our office's history. It unleashed the worst flooding in at least a century in North Carolina. And some of those images coming out of Asheville and those surrounding Western North Carolina Mountain Times are absolutely heartbreaking. Just entire neighborhoods wiped out. Streets, commercial streets, businesses, completely underwater. They've had to airlift supplies over the weekend. It was all about getting critical supplies to these people who did not really have that much self-service. It was going in and out. So you had people posting on Facebook. Has anyone seen my family? I can't reach them. So it was an

absolute disaster. Very far away from where the hurricane actually made landfall, but this area with mountains, with roads that are hard to access, created landslides and mudslides and flooding that they just haven't seen in so long. So they're saying this was really one of the most historic storms that we've had and there's a major death toll. And it also underscores the dangerously low levels of flood insurance coverage that a lot of these places have, especially away from coastal areas like you mentioned. Just 4% of Americans have flood insurance. It does not, that rate does not correspond to the actual risk posed by potential flooding. And that shortfall is caused by two main things, really. One is a lot of.

lot of homeowners are unaware that your normal home insurance does not cover floods or two, that they are, they're not aware that they live in flood risky areas because, again, if you live in somewhere like Asheville, North Carolina, it doesn't really cross your mind that flooding is a potential danger that could impact your home. Part of it is that FEMA only designates flood zones based, they don't actually consider rain as a potential risk when they are designating flood zones. So when you are buying your home insurance, you might not even know that you're in a flood risk area because of excessive rainfall. So that is another reason why this is shaping up to be a uniquely destructive storm because of the lack of flood insurance in the

areas that it impacted. Yeah, and we're still learning about the total damage. I mean, it came onshore on Thursday and many communities are still picking up the pieces. But it is another blow to Florida's insurance market where a lot of companies have been pulling out recently, because this is the third storm to hit, third major hurricane, to hit Florida's Gulf Coast in the last three years. It's been one after another. And it's not a densely populated area, which is why some of the damage in Florida is not as bad as it is in Appalachia

and Western North Carolina, in Georgia, in places like that. But you have to be wondering whether people are now reconsidering their population moves, where they're going to live, because of increased risk of hurricanes and other storms. And you're seeing companies like Zillow, the property list, Zillow, is actually featuring details about climate risk when you are browsing for a property. So you'll see stuff like the potential for wire fires, the potential for flooding, high winds, extreme temperature, stuff like that. You will see what types of insurance are also required when you are buying or looking into buying a property. And it is a real thing because Zillow pulled its users and 80% of buyers now consider climate risk when they are buying a home.

So yes, of course, it's going to impact where people are moving, where people are living, because these storms are just so powerful these days that it really does change kind of your entire calculus when you're deciding where to put down roots. Yeah, okay. So just hope everyone is okay in Western North Carolina and other affected places and all those supplies and the federal and local response gets to the people that need it. Moving on, California Governor Gavin Newsom was faced with a critical decision yesterday, one that would shape the trajectory of artificial intelligence in the country.

Before him was a bill, SB 1047, that would put first of its kind guardrails around large AI models in California and by virtue of California's size and influence establish a blueprint for AI regulation across the United States. The bill was extremely contentious and divided even the tech community. Large companies like Meta, OpenAI, and Microsoft came out against it, while Elon Musk, the AI safety-focused startup anthropic, and researchers who were instrumental in developing generative AI were in support. Taking into account all these competing interests, Newsom yesterday, said to cut the bill in two and each side would receive half. Just kidding, he vetoed it. In explaining his decision, Newsom said the bill was well-intentioned, but puts too much focus on the size of the AI models and not on the context in which they were deployed.

It is a blow to AI safety advocates who warned of the technology's extreme risks and a win to the big tech industry who said the bill would harm California's competitiveness as the AI leader. Part of the reason, too, why this bill was unpopular, it was just, it was a little vague because it had language in it, like, if there is an unreasonable, unreasonable risk that the technology will cause or materially enable a critical harm. And a lot of legal experts says that just opens things up to pretty much a legal minefield because nobody knows what. that language means and what it would do is actually kick some of these important issues into a court system. And if you are a technical person, you do not want a non-technical court system dealing with these issues of AI regulation. That being said, though, it is crazy that you had Elon Musk, of all people coming out in support of it because he has been very vocal and very outspoken about potentially the existential risks that AI does pose. So you do want

some level of regulation around this. Maybe this wasn't the precise way to do it, which is why Gavin Newsom ended up vetoing it, but this is not the last we've heard of AI safety bills. Absolutely. And let's take a look at what this bill actually did. And it does speak to those big existential ricks like wiping out humanity that AI could potentially cause. It required that companies who develop powerful AI models, ones that require spending of $100 million, which hasn't happened yet because that's an absurd amount of money. But eventually AI models will take $100 million to produce. And it requires these companies to take reasonable care to ensure that their technologies don't cause severe harm, such as mass casualties, or property

damage above $500 million. So think about what would happen if an AI were to cause property damage of $500 million. There were also other provisions like companies had to implement a kill switch that would turn off this technology at any time. It also called for AI models to be submitted to third-party testing before they were released. So this was a big catch-all bill. And because of California's influence in the tech. tech community. I mean, it's home to

meta, Google, all of the big open AI, all of the big tech companies. Basically, this would have been the law of land because other states would have followed in the absence of federal regulation. And actually, that $100 million to train cost is not a random number, because that was the estimated cost of open AIs,

what it took to train GBT for. It's kind of not latest model at this point, but second most recent model. And again, you are correct, too, that this did take aim at the big existential meaty questions because these threats aren't necessarily mythical. Open-AI recently acknowledged that its latest model, O-1, has a, quote, medium risk of being used

to make weapons of mass destruction. So when you put it in context like that, of course, you want a safety bill to emerge. But for Newsom, this bill was a little too broad. 32 of the 50 largest AI companies are based in California would have been a little too punitive and a little too restrictive on innovation in a state that is pushing them. AI ball forward the most. So this wasn't the bill to get it done, but eventually we will see one. People who enjoy flaming hot Cheetos rejoice, your arch nemesis touchscreens might be giving

way to a bygone navigational tool buttons. Since the advent of the iPhone, everything from your car to your stove has seemingly been obsessed with smushing every bit of functionality into smooth and swipable screens. But look around at the car market right now, and you'll find new models from Kia, BMW, in Volkswagen doing a U-turn from Tesla-like interiors and bringing back actual buttons and knobs. Even Apple itself, ground zero for the buttonless movement, has been reintroducing buttons to its gadgets. Its Apple Watch Ultra has a big old action button while the latest iPhone has a new camera control toggle on its side.

Neil, for so many years, every company tried to slap a touchscreen on their products. So what's behind this rebuttonization we've been seeing recently? Yeah, the Wall Street Journal wrote this article about how over this weekend, that buttons were going to be reintroduced after the shift towards touchscreen. I found myself just nodding along the whole time. This is a long time coming. Adding everything to a touchscreen was just a solution in search of a problem. Buttons worked perfectly fine.

The thing is, buttons and dials and levers in other physical controls are just more expensive to produce for companies. So when Tesla installed a huge iPad in the dashboard of your car, then every other company was like, hey, well, if they can do it, well, we'll do it too. And then all of the home appliance companies said, okay, well, if they're putting in cars, why don't we just do it on our induction ranges and our stoves? And that, this trend has been cheaper for companies, but it hasn't been good for consumers. They've complained. I've complained. And now we're going back. I wouldn't say it's a huge your turn because it's, what, one more button on an iPhone and there's some

controls being added back. And I do admit that touchscreens do have some utility. for various functions. But I think there are companies realizing that this is not as safe, at least if you're driving a car, and it might just be better for consumers. They'll stop complaining. It used to be that touchscreens were that futuristic, were that more expensive. It felt, it felt like it was nicer to have a touchscreen in it, but they've since become so ubiquitous that companies have found a way to produce them at scale. And it has become a cost-saving measure. So we are seeing a little bit of a vibe sift right now where a return to more haptic controls, a return to more physical controls is something that represents a more expensive or a pricier thing right now. You also hit the nail on the head, too, that they're just putting it on things that you don't necessarily want them on.

They put them on stoves and a reviewer kind of reviewed this touchscreen stove that said, if a pot boils over with water, it just renders the entire stove useless because the touchscreen breaks. And then to bring it back to Helene, actually, too, I saw people posting about they had electronic locks on their homes. And when it flooded, they could not enter their homes anymore because those locks short-circuited. So you are right that potentially we went a little too overboard on the touchscreen movement. It's not the best functionality to use in every single application. And now we are seeing more and more people reintroducing buttons back to their stuff, which it sounds like you're happy about it. Up next, you probably had a great weekend. but so did our winners of the weekend.

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Get a quote or find an agent today at thehartford.com slash small business. Welcome to winners of the weekend, the segment where Toby and I pick two things that are going up and to the right. I won the pre-show who could sit on the couch for longer watching football yesterday contest, so I get to go first. And speaking of going up and to the right, my winner is China's stock market, a rare

dub for the country's gloomy financial situation. The CSI 300 index of large companies on the Shanghai and Shenzhen stock exchanges posted its best week since 2008 last week with a nearly 16% spike. It was total euphoria all the way down. Imagine a baseball locker room after winning the pennant. And here is why stock surged. On Tuesday, China's government announced a series of major stimulus plans to shake the economy out of its slumber. That included $114 billion to support the stock market, lowering key interest rates for banks and customers, and allowing homebuyers to put less money down to make purchases. It was a low long-awaited economic bazooka by a Chinese president, Xi Jinping, that has been reluctant to pour

jet fuel into a country that's running out of gas. Chinese consumers just aren't spending, which has crushed foreign companies like BMW and LVMH that depend on the market. China also has a longstanding property crisis with an estimated 65 to 80 million homes just sitting there empty, 80 million homes. The question now is, are these stimulus measures too little, too late to turn around China's economy. At least for one week, investors breathe a sigh of relief. I mean, when we were preparing for the show over the weekend, it was looking like we were going to be talking about the best week in the last 16 years. Now it's shaping up to maybe be the best month in the last 16 years since 2008. There's been nine straight days of gains now because

no one wants to miss out. This just rocket fuel rally that is happening right now spurred by this government intervention. They went for that triple boost last week. They went to cut interest rates, they went to help companies and big shareholders buy more stock in stocks. And then also, they promise a fiscal something of yet to be determined in size. But I think that liquidity support for stocks was probably the biggest thing here. Banks are now allowed to lend heavily to companies to repurchase their own shares. They're also allowed major shareholders to buy larger stakes in companies. So they are literally injecting a ton of financial support directly to stocks,

which is why we're seeing these elevated and stabilizing share prices. The question is, is this the right stimulus, and this is enough stimulus to get China out of its rut. The problem with China's economy, maybe is the stock market, but more broadly, it's about a lack of consumer spending. And while we have inflation here that's calmed down moderately, they have the opposite problem. They have deflation concerns. Their price index grew at just 0.3% over the last year, which is,

spark concerns of deflation, and deflation is almost just as bad, if not worse, than inflation, because it sends the economy into a deep recession. So the fact that people aren't spending is the biggest problem in China. And none of these measures by Xi Jinping addresses that. Critics of his government intervention say, you need to give money to the people so they can spend, and which will spur domestic consumption, because that's just not happening now. You can give, you know, you can lower lending for lending rates for banks and give stimulus to the stock market, but that's really not the issue or the core of the problems here. Plus, you're not going to spend trillions on revitalizing the property issue, which is the biggest concern of all,

is that you have all these homes vacant and a huge glut of homes. So there's a lot, there's a lot of problems with China's economy, at least for a few weeks. These investors are sending stocks to the moon. One Goldman Sachs analyst said, I've had more. where Zoom calls with China in the last 48 hours than I have for the entire year. So this is very much a FOMO rally that is reminiscent, kind of not really, but of the game stock euphoria of three years ago where just everything is going up. On a much larger scale. My winner of the weekend is Southern Schools because it turns out that having fun at college football games and warm weather

is actually a pretty great way to spend four years in college. If you dig into the data, more Northerners are opting for school in the South than ever before. The number of northerners going to southern public schools has jumped 84% in the past two decades and 30% alone from 2018 to 2022, according to a Wall Street Journal analysis. Notice I said public schools there too. Schools like Duke, Tulane, Emery, and Vanderbilt have always had their fair share of northern imports. But recently, it's places like Georgia Tech, Alabama, and Tennessee that are attracting some snowbirds. At Ole Miss, there has been a 797% jump in northern states.

students attending compared to 20 years ago. Neil, beyond just better football programs, what is attracting these students to the South? Well, they're watching Alabama Georgia on Saturday night and seeing all the fun everyone's having and there and their, you know, Connecticut or Massachusetts basement, as I did, watching an SEC tailgate and saying, wow, I really want that. I mean, that is a joke, but also I think that is a big part. The tuition is cheaper in the South public schools in the South for tuition fees cost just $29,000, which is the median, which is the lowest tuition and fees rate of any region in the

country. Also, I would say the job market in the South is one big factor. The top five most promising locations to find work for newly minted college grads are all in the South, according to a new study by payroll provider ADP. So it's kind of a chicken and the egg situation because all these northerners going to the South for college are finding job markets, but they're also contributing it and creating and spurring the region's boom, because about two-thirds of college graduates go on to work in the same state where they graduate. So all these kids now go into Georgia Tech from Massachusetts are going to work in Atlanta instead of Boston after college, which is only going to boost Atlanta, Charlotte's, Miami, Orlando's economy after the fact.

So this is actually a big profound change. Oh, it definitely is. I do just want to dive into one school-specific recruiting strategy, though. Coastal Carolina in South Carolina, weirdly has a ton of northern people attending it. A thousand freshmen came from the Northeast in 2022. And this is what they do. When winter hits in the Northeast, they literally just blanket, send these marketing emails to prospective students featuring the sun, featuring their sunny campus.

And I can't think of a more effective marketing tool like, hey, I know you're blanketed it with a foot of snow right now. Look at how sunny and nice it is in South Carolina here. come to coastal Carolina, and clearly it's been working because a thousand freshmen from the Northeast in 2022, that is a lot. Yeah, okay, it's Monday. So to get you prepared for the week ahead, here is a rundown of the events you need to know about supply chain chaos could be back in a big way. About 45,000 dock workers at 36 ports on the eastern Gulf Coast could go on strike as soon as 1201 a.m. Eastern tomorrow if they and marine operators don't agree to a new contract today, which

would cause all of those ports to close. And those ports handle an estimated 60% of U.S. shipping traffic. So a strike would be devastating and widespread across a bunch of economic sectors from retailers to automobiles to produce. J.B. Morgan analysts say a work stoppage could cause $5 billion in economic damage to the U.S. per day. The small piece of good news, though, is that retailers have been preparing for this for months. They knew this was coming down the pipeline.

So potentially they already got your Christmas gift, your holiday gifts in the shop. But this is proving to be something that could be extremely disruptive depending on how long it stretches on for it. Because, yeah, that number, $5 billion of economic damage per day is hefty. But it looks like some retailers have kind of battened up the hatches and have some supplies on hand. Yeah, we'll definitely have an update if this strike comes to fruition tomorrow. Then on Tuesday, Tim Walls and J.D. Vance are hitting the debate stage. And with no presidential debates on the schedule before the election, vice presidential debate is going to be the 2024 campaign's final major primetime event.

Both candidates are going to stand, marking the first time since Joe Biden and Sarah Palin, in 2008 that VP debate participants won't be sitting down. Never knew about the sitting down thing. Yes, I do remember that they all just kind of sit at a table and have a little roundtable. The commission on presidential debates usually determines if the candidates will sit or stand because they want to create this aesthetic difference from between the vice president candidates and the presidential candidates. But this year, Biden's campaign has actually gotten very frustrated with the commission.

So they've kind of gotten around it by arranging debates directly with the Trump campaign. And, like, clearly standing up was the way to go, but never knew about the sitting down thing. Would you rather stand up or sit down when you're having a debate with somebody? I feel like it really determines on the height difference, right? Like, if you're taller than them, you'll want to stand up. If you're shorter than them, let's get seated. Okay. I mean, that makes sense.

A few other things. Open AI said it expects to complete its mega-sense. $6.5 billion round of funding this week, which would be the biggest VC investment in history. I feel like we kind of gloss over how big that number is $6.5 billion. But there's a lot of turmoil going on at that company, so we'll see what happens. Rocha Shuna, the Jewish New Year, is coming on Wednesday evening. Toby, will you join me in eating some apples and honey? I will not, but you will be...

Actually, I definitely will. Apples and Honey is delicious. You'll be heading home as well, so get ready for a Kyle show later in the week. Yes, I'm going back to New England. Well, everyone's going south. I'm going back up to Mass. And then Fat Bear Week is here. Alaska's Catmine National Park and Preserve will once again put its beefiest bears on display for the world to judge. This event is an annual tradition. It begins with a bracket reveal of the eight bears today. And then on Wednesday, the public will vote on which of these magnificent chunks is the chankiest.

Last week, or last year, Fat Bear Week collected 1.3 million votes. I need to get a good look at the candidates before I endorse everyone. I know everyone is waiting for my endorsement. but I'm looking at the chankiness before I... Okay, so you'll look today and give it update tomorrow. All right, that is all the time we have for today's show. Thanks so much for easing back into the work week with us and have a wonderful final day of September. For any feedback questions or comments on the show,

send an email to Morning Brew Daily at morningbrew.com. And please spread the word of Morningbrewdaily. Share your favorite morning podcast with your friends, family, co-workers, pets. As always, Toby is here with some sharing inspiration. I want you to share today's show with someone who goes to school in the South, specifically Georgia after that tough loss this weekend. They could use a little pick-me-up.

Let's roll the credits. Emily Miliron is our executive producer. Raymond Loo is our producer. Olivia Graham is our associate producer. Eichena Ogu is our technical director. Billy Minino is on audio. Don't even think about pushing hair and makeup buttons. Devin Emery is our chief content officer and our show is a production of Morning Brew. Great show today, Neil.

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