Morning Brew Daily - Congress grills SVB regulators, Apple buy now pay later, Mammoth Meatballs!?

Episode Date: March 29, 2023

Episode 27: Neal and Toby recap the Congressional hearings of SVB and Signature Bank on Capitol Hill on Tuesday and how it will impact the banking sector moving forward. Plus, Apple is finally letting you pay late. And which jobs are most prone to AI taking over? And if you're hungry - there's a startup company in Australia serving up... Woolly Mammoth meatballs. Learn more about our sponsor, Grasshopper: https://www.grasshopper.bank/thedailyshow 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

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at pwc.com slash US slash brew AI. That's pwc.com slash us slash brewaI. Good Morning Brew Daily show. I am Neil Fryman. And I am Toby Howell. And you guys, we asked you to hit up our inbox yesterday and you totally delivered. One message in particular caught our eye, though. That is from Mike Clemens in Tampa.

He told us that he had shared Morning Brew Daily with all 2,300 people at his work. We absolutely love that type of hustle. We love the spreading of the good word. And that gave us an idea, though. So today we want to do a little giveaway. If you follow in Mike's footsteps and share us in your company Slack channel, your company team's channel, your company email chain, then send us a screenshot of your plug, and you'll be entered for a chance to win one of our beautiful morning brew mugs.

Neil is modeling it right now if you're watching on YouTube. Actually, you know what? It doesn't even have to be work-related. If you're a college kid, send it to your group chat, send it to your engineering club, your flag football team, your sorority, your acopella group as he was in. Just send it to a group of people and send us a picture of proof that you had, have done the plug. And you can email that plug to us at morning brew daily at morningbrew.com. That is morning brewdaily at morningbrew.com. We'll also say that email at the end of the show, but get to plug in people.

Yeah, these are great mugs. They're quite beautiful, and our logo definitely does not look like NPR. Just remind me, Toby, you're not just a podcast host. You are a growth marketer. Yeah, there you go. It's in your blood. It's in your DNA. I just love our listeners. Like, shout out to Mike for just going above and beyond. And he's from Tampa. We appreciate it. Yeah, we appreciate you guys. Probably picked up your antennae. A quick preview of today's show. Apple is getting into Buy Now Pay Later, and we'll talk about what that means for the company and for the industry writ large, which jobs chatGBT is going to take over to your new reports out saying it's definitely going to take over many jobs.

So let you know which ones those are so you can, you know, look for a new position very soon. And then finally, prehistoric meatballs. I'll kind of explain what that is. I'm so excited for that one. Okay. But first, so if you remember all the way back to two weeks ago, we had the two biggest banking in failures since the financial crisis. And now that the dust has settled a bit, it's time to figure out who exactly we can

throw under the bus. So, fresh off their feast off the TikTok CEO, lawmakers hauled in three regulators from the FDIC, Treasury, and the Fed to Capitol Hill yesterday for a hearing that focused on who to blame for the blowup of SVB and signature bank. This wasn't the spiciest of hearings, I will say. And there wasn't, you know, no one really expected it because it was about banking regulations. after all, but there wasn't a lot of consensus about what to do or who to blame. The Fed's vice chair of supervision, Michael Barr, blamed SVB management for many of the things

we've talked about already, taking risky best with their assets that were exposed to interest rate hikes, maybe having too much of a concentrated client base in startups. And he said SVV's failure is a textbook case of mismanagement. So he's scapegoating the execs at SVB. Lawmakers also criticize SVB management, but they are not. also asked tough questions of the Fed and other regulators who first flag problems in November 2021. And then Barr, the guy at the Fed said he hadn't, he didn't, he wasn't made aware of those problems until February, 2023 when things were already going south for SVB. Yeah. It was definitely

a little bit of a tug of war where everyone was pointing, it was like the scene in the office where everyone's pointing their, the finger guns at each other. Or the Spider-Man meme. Yeah, the Spider-Man meme where no one wanted to take blame, which is, it's a very, we could have seen this coming. But yeah, regulators were kind of like, listen, we kind of knew SVB, but we can't overstep our bounds. Like, we only have a certain amount of power. And they actually said, use this opportunity when they're in front of Congress to say, like, hey, we would love a little bit more authority here. If you don't want something like this to happen, like don't deteth us, like give us the ability to regulate as regulators. And so, yeah, they pointed to when the Trump

administration in 2019 kind of rolled back the stress test that was implemented post 2008. And they said, hey, we couldn't stress test Silicon Valley Bank. That's part of the reason that contributed to this. But yeah, just a little cluster of people all pointed the finger guns at each other. So they're actually going to be back at the house today. So we'll see if there are any more fireworks come up. But yeah, that 2018 regulation seemed to be like the biggest sticking point. You have progressives like Elizabeth Warren who want to increase a regulation and scrutiny on mid-sized banks,

which got a lot of red tape removed in that rollback. But the problem is Democrats also – some Democrats also supported that rollback of Dodd-Frank. So it seems like that this is just not going to happen and they're going to figure out something else or they may just not figure out a new regulation. Yeah, for sure. And then looking ahead to something that's still kind of on the table for lawmakers and regulators to work together on is that FDIC insurance cap. So right now it's $250,000.

There has been a ton of talk about raising that federal limit to a million dollars or even beyond. So that's another thing to keep an eye on as like these conversations evolve. My prediction is nothing going to. Nothing is going to. You don't think it's going to raise? No. All right.

There's the divided Congress. They can't get anything done right now. everyone's focused on the election year coming up, so I just don't see anything kind of significant coming out of this. All right. We'll see if Neil is proved wrong. Now you're on air. That's the problem. All your takes are recorded.

I should just talk to you. Yeah, exactly. Side line. Okay, so that was the banking crisis. Let's move to Buy Now Pay Later. So Apple has joined the space. Apple Pay Later is here now. Starting yesterday, Apple is inviting randomly.

selected users to access a pre-release version of Apple Pay Later. So I'll give a quick breakdown of how Apple Pay Later works. So when you go to pay for something with your iPhone using Apple Pay, you'll have the option to, in quotes, pay later. If you select that option, you can pay for things between $500 to $1,000, and it basically gives you a short-term loan for that purchase. Then your Apple Pay Later payments are displayed in your wallet. They also have this cool calendar view, which integrates with your Apple calendar that shows when your payments are due. So it's very snazzy stuff from Apple, like nothing that we wouldn't expect. So this comes out a little bit of a weird time, though.

So Apple is definitely late to the buy now, pay later game. And it's a game that's no longer as fun as it once was. So honestly, I kind of want to zoom out a little bit to how handicapped and how cut off at the knees the buy now, pay later, like industry has been. So let's go back to 2021. We'll talk about Klarna, which was Europe's most valuable fintech startup at 45.6 billion. Now its valuation has plummeted 85% to just $6 billion. So it's really not a good time to be in the buy now pay later game.

Maybe, but I feel like Apple is going to eat everyone's lunch with this. As they usually do. This seems like an absolute no-brainer. My rule of thumb with software is if you make me press fewer buttons, then you will have a loyal customer for life. So why would I go to a third-party app if I'm already using Apple Pay, which 85% of retailers already accept?

And why would I go to, yeah, after-pay, Affirm, and click on a third-party when all of my information's already on Apple Pay. And they'll probably give me this nice, easy pop-up to pay in installments. So, you know, Affirm shares fell 7% yesterday. They tried to spin it, though. And so I saw a few different analyst takes on this.

Some was like, okay, all the other companies that have been sinking are going to continue to sync now that Apple is going to take market share. And then another one was like, this is legitimizing the buy now, pay later model and sort of creates, like, grows the ecosystem because, hey, Apple's getting into it. Maybe this is a thing that warrants, you know, more investment and is an actual market that makes sense going forward. For sure. Yeah. I do think you touched on the major point is like Apple has had this. all out is sold on the physical wallet for years now. They've been ever since Apple wallet has rolled out. They've really been trying to make your entire way you interact, like, financially with the world

through your iPhone. And yeah, so you're definitely right that this is a stamp of approval for buy now, pay later. People do use it. That's what I was going to say. I don't think, I think these valuations of the Klarna's and the affirms of the world were just inflated like crazy, maybe Peloton-esque, like we were talking about, but people aren't, people are still using this service. And I don't see any reason why people would stop using buy now, pay later services now.

Maybe the overall e-commerce has gone down a little bit since peak pandemic. But I don't, I still see a, you know, generally bullish outlook for people not wanting to pay full. Right. 51% of Americans say they have tried a BNPL service as of 2021. Obviously, like, the negative is that more than a third of payments on. by now, pay later have fallen behind on payments. So there is the idea, like, maybe this is preying on consumers that think that they are saving a bunch of money, but then the payments come due and you start falling behind.

So it's still a complicated world, but Apple entering it is definitely something that... The stamp of approval. Right. It's going to be good overall. All right. Let's move on to our third story. It's a story about corporate restructuring, which doesn't sound super sexy. I'm titillated.

Oh, my gosh. I'm titillated, though. We're going to do our best to make it sexy. So the headline news is that Alibaba, the e-commerce, Amazon look-alike out of China, is shifting from a conglomerate to a holding company. So it's actually splitting itself into six units. Some of those units are its e-commerce division, its cloud computing division. So it's splitting it, it's kind of segmenting itself into these six different business units.

It did this because over the last. few years, Beijing has been on its butt. I can say that word. It's okay. I've been on its ass. Regulators have been hammering Alibaba for basically being too big, being too monopolistic. Not only that, Beijing has been really pissed off at Alibaba's founder, Jack Ma. And the root of that bad blood stems all the way back to a speech he gave at a conference in 2020,

where he basically criticized the country's financial regulations for being too rigid and not very friendly to businesses. That really, really pissed off Beijing, and it led to Ant Group, Ma's other company. It was supposed to be the biggest IPO ever. It was called off. And Jack Ma has kind of gone into hiding. So coincidentally, in conjunction with this announcement that Alibaba is being broken up, Jack Ma kind of popped back up and re-entered China alongside the news. And so Jack Ma is kind of like the canary in the cold mine for the tech sector in China. And yeah, him returned. has been very bullish. Alibaba jumped 14% on this news. So it's kind of a big deal, and it's almost like a happy ending to this saga over the last couple of years. It seems like it's placating

both shareholders and regulators in China. But I like what Alibaba is doing here because they're basically going full hunger games. Because in these big companies, you can siphon the money from the cash cows to the loss making units. And maybe that stifles innovation a little bit because the loss making units are like, well, I know I'm going to. getting money. So I'm thinking about maybe Disney Plus getting money from the parks. You know, Disney Plus is losing billions of dollars each year. And so that's basically saying, okay, Disney Plus, you're on your own now. You have to figure your stuff out, make money. And so there's been a lot of analysis of this six different units saying like, okay, you got to figure your stuff out.

Become profitable. Make innovations by yourself because we're not going to shift e-commerce money, which is Alibaba's cash cow to you anymore. So, you know, share your stuff together. Shareholders were bullish, but it's also, I think, overall bullish on tech now because now there's a roadmap to, like, China was really like, we hate these big companies. We're going to regulate you guys. And now other big tech companies in China have this roadmap to like, this is how you play nice with Beijing and also increase value for shareholders. And a final note about Jack Ma, because he's the cutest little billionaire entrepreneur we've ever seen. Really interesting story. You should look him up. He was an English teacher, got rejected from KFC. then ended up co-founding, you know, a $500 billion company. He's been in his Eat, Pray, Love era recently. He's been traveling, and according to this one Wall Street Journal, in just the past year or two, he's been to Japan, Australia, Fiji, the Netherlands, Bangkok, Mallorca,

and he's just finding himself, okay? But he's also researching sustainable agriculture and sustainable food practices. That seems to be his jam. I think he was asked in 2019 if he would just start a new company. He said it would be in farming. So he's been at tuna farms. He's been just chilling, learning rice cultivation. So way to work on yourself, Jack.

Way to work on yourself, brother. Love that for you. All right. Before we jump in the next story, we're going to take a quick break. It's time to refresh your yard during spring backyard days at the Home Depot. Get low prices guaranteed on propane grills starting at $179, like the next grill three-burner gas grill. Or get $50 off a select Weber Spirit grill and bring big flavor to your. backyard, then set the scene with Hampton Bay string lights that bring it all together.

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While supplies last ends June 30th, terms at AKA.m.m.S. College PC. All right, Toby, one of the main worries folks have with generative AI tools like ChatGPT is that they could put a lot of human jobs at risk. And to find out to what extent that's true, several new studies, exploring AI's impact on the workforce, just been published. And I read them. And my main takeaway is we should all hit the gym. Oh, gosh. We need to start bulking up because white collar workers, knowledge workers, like accountants, mathematicians, writers, and nearly 20% of the U.S. workforce is the most at risk from having their jobs outsourced to chat GPT. That was from a study from Penn and OpenAI, which created chat GPT. And then even if your job won't be replaced by AI, it will definitely be impacted.

So 80% of all workers are in occupations where at least one job task can be performed more quickly by generative AI. That allot is in information processing roles. So think PR specialists, court reporters, blockchain engineers. I don't know why they went there. There must be like 10 blockchain engineers are highly exposed. So the least impacted, as I kind of hinted at, are these physical labor jobs, motorcycle mechanics, short order cooks and athletes. I love how specific. So are you reviving your dream of going to the PGA tour right now?

I think so. Well, notice podcasting wasn't on that list at all. But yes, I also love how specific the job titles were in this study that it wasn't an auto mechanic. It was a motorcycle mechanic. And it wasn't just a cook. It was a short-order cook. So this report was very illuminating. It's nothing that isn't really intuitive, though, when you think about what Chappi GBT is best at.

So I wasn't totally surprised by any of like the jobs appearing where they did on this list. I'm choosing to take a more optimistic approach and optimistic look at at these reports because it can feel very doomsday. Like the AI is coming for all our jobs. There was a Goldman Sachs survey from Goldman Sachs economist a couple days ago that thinks it's going to boost worldwide productivity AI. So they think that annual global GDP could enjoy a 7% percent. boost over the subsequent decade, that would be equivalent to roughly $7 trillion added to the global economy just because people are so much more efficient when they are augmented by these AI tools rather than replace.

If we can hit the sweet spot where your job isn't automated by it, but you can use it as a productivity tool and we all make more money and we work less. This is the concept of creative destruction. And there's this new technological innovation that brings us to a better place. there is collateral damage and it sounds really unpolitically correct to say it, but jobs will be displaced and people have to retrain themselves. But overall, you can take the optimistic look and be like, look what the internet did. If you had to research something beforehand like we do every morning, we'd have to go to the library.

Look for the book. Take out the book. Check it out. Take it home. Read it. Oh, but guess what? We can only take five books. So we have to return it and go get another book.

And now we can just go on the internet and think about all of the, unlocking of productivity that that unleashes. And we can think of chat GPT the similar way. So I guess my takeaway was learn chat GPT, make it your friend, make it make you more productive so you can work less and, you know, chill in the afternoons. There you go, Neil and Toby, the optimism, bringing the optimism today. I actually want to bring us to another kind of story where you can take either an optimistic or pessimistic view of it. So substack, the newsletter company, is inviting its newsletter writers to participate in a fun raising round for the company. So Substack sent out this email yesterday to its community, basically asking for money.

People can contribute as little as $100, and the overall goal is to raise $5 million from their community. So now I think there's two ways to look at this. You can be optimistic and say, wow, that's great for Subsdack, for letting its community take part in the value of the company that they are kind of creating, and that it's a really great thing to give ownership to people who use the product. And then there's the cynical view, which is, wow, sub-sac must be a little strap for cash right now. It's hitting up its community. It's a very different fundraising announcement. And then a further thing that you could take a

cynical view on is that sub-sac didn't really include its financials in this email. So it kind of hinted at the cumulative amount of revenue that was being brought in by the platform. But there was no 10K. There was no yearly financials. So then, Again, if you want to be pessimistic, you say you're asking your community to participate in a round that it's a very opaque round. They don't know how much of the company they're owning. They don't know what the company's financials are. So where do you fall on this optimism, pessimism? I don't think it's, I don't really don't totally ascribe to the cynical take because it's not really a play to raise money. They're raising two. The goal is $2 million. They bumped the goal. It was two and then they bumped it to five. Okay, but initially when you set out to raise $2 million, that's not a lot of money at all. So they could have raised $2 million from other people. I think this is about getting their newsletter writers, their top performers with some skin in the game, so they'll just work their butt off and, you know, bring in more subscribers and increase the total ecosystem.

Or as a recruitment tactic to say, like, okay, you're thinking about which newsletter platform to do. You're thinking about making a newsletter. Come on board and you can get an equity stake in our company and enjoy the fruits. of the success rather than just your subscriber, you know, funds that you bring in. Yeah. So just looking at the amount of money that they wanted to raise initially told me that this was not necessarily like, we need cash kind of deal. Yeah. I'm way more pessimistic about it too. Because if it was truly adding, wanting your community to benefit financially from it, it would have been, you would have armed them with the requisite data to make a like informed decision.

Like, give us the financials. Why are there no financials in this email? I think it's a little marketing stunny because you're right. You can definitely spin the narrative that, hey, we're having people join in, kind of what you spoke to. So, yeah, I think you have to take it with a little bit of grain of salt, but I can also see it from your perspective. Wow. I'm so persuasive. Just a final note on substack. If you're a really popular substack writer, you can make a lot of money.

So they didn't release total financials, but they did say that the top 10s. Substack publishers combined are generating $25 million a year. So 10 newsletters, $25 million a year. That's pretty good, and we know the newsletter business pretty well. Finally. Finally. It's time for some mammoth meatballs. Go.

So the Australian food company named Vow said yesterday that it has made a meatball from the extinct woolly mammoth. And you're probably thinking the woolly mammoth has been extinct for 10,000 years. How do they make this happen? So we do know the DNA sequence of a woolly mammoth muscle protein. So they took that, added a splash of elephant DNA, and then inserted that completed gene into a sheep muscle sale where it was grown into 400 grams of meat. Now, this thing, I think it had 25,000 genes of sheep and one gene of half mammoth.

Yeah. So calling it a mammoth meat ball is a little sketch. But the whole point of this, and it was created by, this kind of tells you that it was a marketing stunt. It was literally the brainchild of a marketing creative agency. Yeah. And the point is just to raise awareness around cultivated meat, cultured meat, lab grown meat, which is a little distinct from impossible foods beyond meat where you grow meat from cell cultures. And the whole point is to move us away from slaughtering animals and making a more sustainable form of meat. So that's the news. But my question for you is, if you had to go back in time or you could bring back an animal from

10,000, 20,000, 15 million years ago, prehistoric times. What animal do you want for dinner? I know. When I saw this, I immediately thought of the giant sloth, weirdly enough. There used to be these like six foot, eight foot tall sloths that roamed the earth. And for some reason, because what makes meat good is that they don't engage their muscle fibers too much. Like you don't want a hardworking animal, a gamey animal. Sloths are literally the chillest, too fatty.

Slowest animals. It might be too fatty. I mean, you never know. But fat is good. Like you want that marveling. So I think, I think sloth meat, giant sloth meat might be kind of yummy. All right. I thought of a few ones.

Teradactyl wings. Okay. A little level. Bone in. Bone in. Buffalo sauce ranch. Throw in the football game. And I mean, you probably can't even enjoy a better meal than teradactal wing.

Okay. That's definitely lean. Yeah. So, and then I was looking, actually looking this up. There are a few articles on which dinosaur would taste the best. One of them, they said was the, I'm not going to pronounce this right. Ornithomismos, why can't I do that? Ornithomimosaurs, which are ostrich-like, and they do have that good marbling.

They have a good fat composition because they have slow-twitch muscles. They eat plants. You do not want a dinosaur that eats either fish or other animals because it just, they're eating like spoiled stuff, so your meat will be spoiled. And so this ostrich-like dinosaur would create a slightly wild-tasting red meat with a slight taste of dinosaur, perfect for Memorial Day barbecue. And then there's the sauropod, which has the really long neck. This is the largest animal that has ever walked the earth.

Scientists say that this neck. Delicious. Ways a couple tons, just absolutely tender delicacy. Feed the cookout. So, yeah, sauropods, pterodactyl wings. I'm hungry. The misisors. Let's get out of the studio.

Yeah, let's get out of studio. Eat some taradactyl. All right, great job. Toby, as you mentioned, at the top of the show in your growth marketing era. We want to hear from you. Make sure you take a screenshot of sharing the podcast with all of your coworkers and colleagues and friends and students.

And you can do that at Morning Brew Daily at MorningBrew.com. Morningbrewdaily at Morningbrew.com. Thanks to our awesome crew in the back. The show's supervising producers is Bryce Belloff. The show's technical director is Justin Orlando. Lord of the Lower Thirds is Sam Wolf. Magic the Gathering Wizard is Dan Bousa. Hair and makeup got turned into a meatball.

Devin Emery is our chief content officer. Our show is a production of Morning Brew. Great show today, Neil. Let's run it 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

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