Morning Brew Daily - Companies push 'premium' products, Amazon HQ2 delay, ChatGPT student survey

Episode Date: March 6, 2023

Episode 10: Neal and Toby discuss the economic strategy that companies are taking pushing higher end products to maintain profits. They also dig into Amazon pausing construction on their new headquarters in Virginia, and why college students aren't completely sold on ChatGPT just yet. Also what happened with HQ Trivia? Learn more about our sponsor, Huel: https://huel.com/dailyshow Listen Here: https://www.mbdailyshow.com/ Watch Here: https://www.youtube.com/@MorningBrewDailyShow Learn more about your ad choices. Visit megaphone.fm/adchoices

Many employees can't afford a hefty medical bill that pops up out of the blue, but it happens. And employees who are financially stressed are, understandably, more likely to be distracted at work, costing their employers greatly in lost productivity. Luckily, AFLAQ plans help with out-of-pocket expenses not covered by health insurance and can be offered at no direct cost to businesses. Learn more at aflac.com slash morningbrewerdaily. That's aflack.com slash morning brewdaily. Good morning brew daily show. I am Neil Pryman. Toby Howell? It's a great Monday. I know, my favorite day of the week. I'm especially peppy today. So if I'm looking super happy and Toby is not, it's because my Liverpool thrashed your Manchester United yesterday, 7-0. And we watched it together. We watched it together. And the game was not suspenseful, but not because it wasn't 7-0. It's because we knew every goal was about to happen about a minute before it happened. Because I, this is a fun fact, I live above a bar, and that bar is a huge Liverpool bar.

So every time, and my feed was a little delayed, so every time Liverpool would score, we'd hear and feel the bar beneath us, like go wild. It was like, it was the worst. I have bad memories from it. Thanks for bringing out. Sorry. And Toby would just be like, God, it's a goal. And they would be like, you know, on the other side of the field. And I was like, Toby, I didn't hear it.

Right. Anyway, great game. We got an awesome show for you today. We're going to talk about Ford's. self-re-possessing cars. And then we're going to take a trip down memory lane with the HQ trivia documentary, and then we'll go into the week ahead. I'm excited for it.

All right, so let's start with the corporate buzzword of 2023, which has been all around earnings reports, and it is premiumization. And that is the concept of focusing on selling premium products to your wealthiest customers. And every company seems to be leaning into this strategy right now. The New York Times came out with an article this weekend that showed that premium has been referenced in almost 60 earnings calls in investor days in just the past three weeks. I thought AI was like the buzzword of the year, but premiumization, it makes a lot of sense when you get down to the brass tax of what it actually means. Wealthier customers have more money and therefore can buy more expensive products.

So it does feel like they just branded maybe a simple business concept. But some of the examples that were included in the piece were pretty eye-oper. opening to me. Right. And I'll run through them, because typically you associate this with airlines and first-class passengers and maybe credit cards like American Express that are focusing on super wealthy customers. But we're talking donuts, Krispy Kreme.

Last year it offered super bargain deals, and now it aims to generate excitement around our premium specialty donuts. Which I know you're super hype about. We have six flags raising prices in order to elevate the guest experience. And then WD40 is also adding things like. smart straw to its cans to get consumers to pay more. That's the craziest one, the WD-40 one. But I actually love the Krispy Kreme one, too,

because, yeah, Krispy Kreme is known as a budget donut brand, I guess, if that's a thing, $0.99 for a donut. But if you go into Krispy Kreme and you see their premium, I just immediately, the curiosity is peaked. So I think it's more of like a marketing thing than an actual bottom line generator. But, yeah, I love it from especially Krispy Krikes. Two examples that we had been talking about on this show that didn't appear in the article, but I was thinking about. One is Starbucks.

Obviously, I think they pioneered this thing in the 90s with coffee and turning coffee from a commodity into this experience where you have to pay $4. But you want to get it because it is $4 and you think it's like the best coffee in the world. But their recent olive oil infused coffee, that is going after the luxury market. That's going after rich people who don't just want a regular cup of drip coffee. Right. Olayato. Olayato. That's the name of it. And then the other one I was thinking of was AMC with their pricing plan that kind of divides theaters into airplane seats and charging more for the prime position.

Right. This is one of those things that before I heard of it, never really thought of it. And then once you hear about prehumanization, you see it everywhere. It's a thing. When I was looking it up, it was referenced in all these marketing industry publications. Yeah. Not marketing industry, but publications, but like research publications. And it's kind of this industry jargon that's made its way to the mainstream now in this era we're living in.

And obviously, people are concerned that as companies focus more on the wealthiest customers, then they'll leave fewer options for lower-income Americans who are suffering. They're not looking for premium options. They're just looking for any options. Thank you for teaching me about this premonization. I'm going to see it more and more places, and I'll think of you. Okay, let's jump into our next. Next story, Amazon is pausing construction on its much-hyped HQ2 in Arlington, Virginia.

So some quick background on the development. So the project actually consists of two different complexes. One's called the Metropolitan Park and one is called Penn Place. Met Park is actually going to be finished by this summer and will have the ability to house 14,000 workers. Only 8,000 workers are going to be there initially. but Penn Place, on the other hand, that's being put on cold. It's not canceled, but it's being put on hold. So, Neil, there's a few directions we could go with this story.

But I actually want to take us back to 2018 when there was this almost like Bachelor-style competition from local municipalities to lure Amazon to its town. Do you remember that crazy air? Of course I remember, because it was one of the first years at the Brew and we were covering it a lot. And also, I'm kind of a commercial real estate, economic geography nerd. And I kind of worked in this industry beforehand of economic development

and luring companies to particular places. So this was, of all the news stories that I could possibly be focused on, this was number one. And it was just an absolute circus. And so now that that circus happened, Arlington, Virginia won, which was a little surprising. So they split it with New York. And then New York, after all of this recruitment, New York was like, actually, we don't want it. So they stuck it in Northern Virginia. Yeah, the Long Island city backed out. And so Virginia got it all, but now do you think Virginia's happy, or do you think they feel like they got the short end of the stick? I think no one could have foreseen COVID. I think this is like the huge bomb that was dropped on commercial real estate, and Amazon's not

the only one, only tech company that's cutting back an office real estate. We just look at meta that is trying to offload a lot of property in New York. And they're also pausing construction in New York, and then Twitter, which is failing to pay its rent payments. in multiple cities. I don't know if that's a conscious decision more as they're just deciding not to. Yeah. But it's just down the street from us here in New York City. It recently listed 200,000 square feet.

So I think Northern Virginia and other cities are still grappling with this at a massive level because the commercial real estate is just in the absolute dumps right now as the United States we talked about last week. Still 60 to 70 percent of people are still working from home. So this crazy stat that's 17 percent of the entire. entire U.S. office supply remains vacant. Yeah. It is a dire time for office space in general.

Yeah, Google is asking their employees to share desk, which it's just a market decline. Google used to be the paragon of office culture. It had unbelievable benefits. And now they're asking people to squeeze kind of like us. Share a desk right here. It's a new era. And we should say that this ties into Amazon's broader cost-cutting. It is cutting 18,000 jobs and sort of pausing a really expensive commercial real estate projects

is just one of these more austere measures that these tech companies are taking right now. For sure. Okay, I want to talk about this fun poll that we did, Morning Brew. Some original reporting right here. I've heard of it. We teamed up with this company called Generation Lab who polls young people. And so we wanted to talk to college students about chat GPT and how they used it. because, you know, as this thing has come as a rosen, a lot of college professors and administrators are like, man, this is going to really shake up college education, higher ed, like, really existential questions.

So we just wanted to talk to college students. And then my takeaway from the poll was that it really hasn't made massive inroads on college campuses, as you might have expected. So the headline numbers for me were that 40% of college students still had never even heard of chat GPT. So they're not reading the brew. Right. Of those who, so say that you have heard of chat GPT, the majority have never used it. And then of those who have used it, 55% of people said that, you know, I don't really use it ever. So what's your takeaway?

Was I right? My takeaway from that is here college students have been handed this once in a generation. I'm not going to call it tool for cheating. I'll call it an academic augmentation tool. I cannot believe more are not using it. 60% is very low to me, in a sense, because this tool should be just slamming the college market. And apparently it's not.

Maybe it's because we're in more of a bubble than we think that we're talking about it more often. But I really thought ChatGBT escaped into the mainstream, but this is kind of showing maybe it's not as far. big as we thought. I think it's a little intimidating to use. I know you disagree, but I think there is a barrier to entry for people to know how to query it and get useful things from it. Because that was a big concern of people who didn't use it. They were just like, I don't have a use for this. It is not useful to me. So that was kind of interesting. But speaking of the augmentation tool,

we did find that 17% of students who've heard of chat GPT said they know of friends who used it for cheating. Yeah. See, that's the stat that I think finally the students are telling us the truth, because that is how you would use it. Yeah, interesting to see ChatsyBT and how it probably isn't as widespread as we may have thought. Yeah, any final thoughts? My final thought is that there are power users. We kind of have this whole narrative that no one's using Chatsybt on college campuses or they're not using it that frequently. but there's a small subset of people that this is their life.

And the way, not their life, but they use it a lot and they find it useful. And the way that I found that out is asking them whether they had it bookmarked on their browser. And a quarter of them did. Okay. So there are people. There is a cohort that, you know, is chat GPT ride or die. All right. I like that cohort.

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Okay, Neil, let's jump to the automotive industry. Ford Motorco has filed for a patent on technology that could remotely shut off either your radio or air conditioning, lock you out of your vehicle, or even prompt it to ceaselessly beep inside the cabin if you don't make your car payments on time. This is extremely alarming, obviously. It's just a patent for now. But as you dig deeper into this patent, you keep finding more and more absurd cases for it. if the vehicle has like semi-autonomous or autonomous driving, it could literally drive your car

to the repo lot or to the junkyard if it doesn't have good resale value. It's very interesting. Obviously, it's just a patent, but what was like your first reaction when you heard this news? Yeah, freaky, dystopian, everything they warned us about with connected cars. There are some amazing things about self-driving vehicles and all the software that's being put into cars. I know you love how, you know, this update that Tesla can issue over the software. software. But this kind of shows the downsides in that. I read this article in The Verge, and it was a really good point. He was like, you, cars offer freedom, right? Like, you get a car when

you're a kid. You're like, this is freedom. I don't have to listen to anybody. It's all just happening in my car. No one can, like, kind of peek in me, and I can get away from my parents. And the idea of a connected car, like, kind of eliminates the entire concept of freedom in cars. So that was a really interesting point that I thought. It is. It also just speaks to the broad subscriptionification of cars. That's like premonization, but I just put it up subscriptionification. Six out of ten. Where I think Tesla, yeah, did kind of start it with their, you can buy software updates

that improve the performance of the vehicle, the biggest one being self-driving capabilities. But BMW last year rolled out an $18 a month subscription for heated seats. So it is, it almost is the premonization, too, of cars, where if you want these additional features, you can pay for them. And it's just, it's so crazy. I can't imagine growing up with just like the muscle cars of old. And now today you're like paying to access features of your car. It must be really jarring. It's a different, it's a different error for sure. But this industry also, like the repo industry also has a bad reputation as being super predatory anyway. So the fact that they can just tell your car to drive itself to the lot is just raising all kinds of alarms.

Ford responded. And they were like, look, we, we do pay. patents all the time. We do like three per day. Don't worry about it. We have no plans to use it, but you can't help think in the back of your mind that this is where the car industry is going. And it comes at a time when people are really falling behind on their payments, too. So it's like all too real for people. I think I read this Bloomberg article that said that Americans are falling behind on their car payments at a higher rate now than in 2009. So we talked about the premiumization of the economy. And this is what happens at the other end when debt is piling up and the fact that now there's your car contrape.

self for the freaking junk guard is a little freaky. I know. I do just want to touch on the point of Ford. I wanted to quiz you on how many patents a day, but dang it. Yeah. So Ford is granted. They were granted 1,342 patents last year. So, yeah, even though that this particular one kind of made headlines, it does seem like Ford files so many patents.

It is more than three a day. Did you read it? Like, someone put a lot of effort into thinking about this. Right. And I don't think Ford is the only car company that is actively thinking about this. Right. So it is, yeah, maybe. It's a little freaky.

You get caught behind on your car payments, and now you're sweating because they turned off the AC. Yeah. That's my nightmare. I read all of the different lists about what could possibly happen, but my nightmare is just driving on the highway in August 95 degrees, and your back, no AC, and your back is just sticking to the seat, sweat pouring down your face. That is the worst. I'd rather have my card drive itself to the drunk card. That's funny. Okay.

Neil, I'm really excited for this next story. And to start it, I want to take you back to 2018. So I'm just going to set the scene a little bit. The Winter Olympics were about to be hosted in Pyong Chang. Prince Harry and Megan Markle were set to be married at St. George's Chapel. And HQ trivia was about to set its concurrent view record of 2.38 million players. a lot of people. The reason why I'm bringing this up is it's because a documentary released last night, actually, from CNN kind of detailing the rise and fall of both the show. It

heavily featured the show's old host, Scott Rogalski, who is actually a former Brew employee as well, former host of Business Casual Podcasts. But to just kind of further set the scene, we actually have a quick audio clip from the show's trailer that we want to play for you all. Each new trivia was everywhere. You could actually win real money. It just kept getting bigger. Bigger prizes. Bigger celebrities.

People dressed as me for Halloween. I was doing Today Show. Colbert. We had a Super Bowl commercial. This company is going to make at least $100 million. It just got so popular. And the app is not ready to work with too many people on it. Freezing.

Disconnection. An aerobility. It crashes. That's when the crack started showing. First of all, all these business documentaries have the same kind of vibe. I know. Like the Wii work, all those. Very dramatic.

But, yeah, Neil, what is kind of your first thought when you hear the Quiz Daddy Scott Ruggowski's soothing voice again? We played it a lot during the early days of morning brew. We would stop everything we were doing, and we were grinding really hard in those days. and we would just play, and it was super popular, and everyone at the WeWork we were in would play, and so it was this great communal thing. I only have super fond memories, and I think I only got one question away from winning.

Yeah, I mean, if anyone could, it would be you, so. But you're deep on this story, so I want to know the juiciest bits of tea from WeWorks implosion. Sorry, HQ Trivia's implosion. Yeah, the reason why this is still such a hot-button issue is because people have such good memories for it, and they're like, why did it go away? And some of the reasons are not as sexy as you might think.

It was just kind of mismanaged. There was some infighting between the two co-founders, who were actually the co-founders of Vine. I feel like a lot of people know that, but not everyone. And, yeah, so the juiciest bit, though, is one of the co-founders, Russ Yuzapov, was kind of a little bit jealous that maybe Scott Ruggowski was the face of the brand that he created.

He was the more outgoing, the more public-facing figure. His other co-founder was more the technical side. And so on the eve of this power struggle between Russ and the other creator, Colin, Russ actually left a voice message to Scott Rogalski saying, Scott, we're going to make you CEO. And we're also going to start a reality TV show following your path as the CEO and host of HQ trivia. And it was like kind of a subversive power play. He was both jealous of Scott and also saying, like, oh, maybe you should be CEO.

So that was kind of like the big takeaway that there was a lot of infighting, a lot of drama going on behind the scenes. And it's still relevant today because so many companies have tried to replicate the success of HQ trivia. I think Facebook launched a game show platform that they shuttered a year later. TikTok is trying, they did it just last month. We talked about on the show that they were doing a live trivia in the form of HQ inspired by HQ, and it kind of was a massive flop. So we really haven't seen any interactive live game show capture the success of HQ trivia, even though I remember back in 2018, everyone said live interactive was the future of TV, but nothing's captured it. The spiritual successor,

weirdly enough, is probably be real in the sense that everyone does the same action at the same time. And even that is struggling. It's kind of following the same trajectory as HQ trivia, where massive adoption, it's a huge thing for a lot of people, and then slowly daily active users kind of level off. Yeah, this thing is really hard to execute. Scott was a great host. They had great little experiences, and so they just did a great job with it,

and it sucks that it all fell apart. I think the spiritual successor is Wordle. There's nothing that has captured people in terms of, like, the trivia puzzle game space, like Wordle in the past couple years, and you don't have to play that concurrently, but that's super popular. That's probably why, yeah.

Okay, for our final little tidbit, we are going to look at the week ahead, which is absolutely packed. On Friday, we were preparing for this segment. We were like, what the hell? You know, is there anything that's going on next week? There's a lot. And over the weekend, I was compiling this. It's known as Hell Week on Wall Street because stocks are running through the woodchipper right now. There's a couple different things that could halt their run, and it's a very short run at that.

Jobs report on Friday. Continued job growth would mean, the Fed has to hike interest rates longer, which hits stocks. It's sort of this good news, bad news situation. Jerome Powell is also testifying on Capitol Hill on Tuesday and Wednesday. And whenever he talks, it's a huge event. Whenever he said anything. And then finally, Biden is unveiling his budget on Thursday.

Hopefully we can kind of escape through Hell Week. I love that there is a Hell Week on Wall Street. All right, I'm putting you on the spot. Are we up or down for the week, S&P 500? I think up because here's the thing. People know Hell Week's coming, which means it's already priced a thing. That's a classic. What else do we got?

Some daylight savings time, which we talked about on Friday, which definitely drew some very intense opinions. But it's still happening. Daylight saving time begins Sunday morning. I'm so excited. It's going to be good. I know, but getting up is going to work. We do report for the show relatively early in the morning, so we're going to be in the dark. I really like it being light out when I wake up now.

So I'll just have to deal with that. That's a me thing. That's a me thing. And then March Madness is almost here. This is the conference championship week. It's arguably just as fun as March Madness. Oh, exciting. And then Selection Sunday is March 12, so everyone prepare your brackets.

We should start. We've been kind of planning. Are we going to do a Morning Brew Daily bracket pool? So if you have any ideas of something you'd want to do alongside us, then send it in our way. Absolutely. And then the final few things to look out for this week. We have the Hindu Festival of Holy on Wednesday, which was a blast at Maryland with all the paint. Yeah.

I always remember that. So fun. So fun. International Women's Day is on Wednesday, and then the Academy Awards are on Sunday. And I watched my third Best Picture movie over the weekend, which was the Banshees of Inashiren, which was great. So what's your early pick? Tar. Okay.

You heard it here first. Tar, best picture for sure. Me and Lydia Tar. We're buds. Okay. That's our show for the day. kicking off Monday on a high note. Remember, we want to hear from you.

So make sure you email us at Morning Brew Daily at MorningBrew.com. And a few shoutouts to our amazing crew. We cannot do this without them. Show's producer and editor is Emily Milliron. Show's technical director is Justin Orlando. Supervising producer is Bryce Belloff. Lord of the Long Island Railroad is Dan Bousa.

Hair and makeup was designated for assignment. Devin Emery is our chief content officer. Our show is a production of Morning Brew. Let's run her back tomorrow. Yamava Resort and Casino at San Manuel is California's number one entertainment destination for today's superstars. Catch the Jonas Brothers return to the Yamava 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.

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