Morning Brew Daily - Goldman Sachs CEO On Hot Seat?, High Cost of Vaping, Biden Chip Plan

Episode Date: March 1, 2023

Episode 7: Neal and Toby discuss the consumer product drama surrounding Goldman Sachs CEO David Solomon. Also why vapes might be getting more expensive, and how President Biden is taking some excess profits from chipmakers in the US. Plus the case for a lunar timezone, and who would ever order the same thing as your partner at dinner? Listen Here: https://www.mbdailyshow.com/ Watch Here: https://www.youtube.com/@MorningBrewDailyShow Sources: Goldman Sachs CEO on the hot seat: https://www.morningbrew.com/daily/stories/2023/02/28/goldman-sachs-might-ditch-consumer-banking Possible Billion Dollar Vape Acquisition: https://www.wsj.com/articles/altrias-latest-vape-could-be-even-pricier-than-its-first-501821f0?ref=biztoc.com President Biden’s Chip Subsidies: https://www.reuters.com/technology/us-require-companies-winning-chipmaking-subsidies-share-excess-profits-2023-02-28/ FAA Investigation: https://apnews.com/article/boston-airport-close-call-jetblue-learjet-e25f0cdb4b9c4c7a30628ac9acee95bf Lunar Timezone: https://apnews.com/article/moon-time-zone-space-2b0124415c14755e08a58e1b5ed5362a Ordering the same meal debate: https://www.washingtonpost.com/food/2023/02/28/bidens-order-same-dish-redhen/ Learn more about your ad choices. Visit megaphone.fm/adchoices

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Good morning, Brew Daily show. I am Neil Fryman. And I'm Toby Howell. It's Wednesday. We got another show. Wednesday, got another show. But the big news is we're fully swagged out. Yeah.

You're not, totally. But we have new morning brew daily mugs that came this morning. And I got to tell you, the coffee tastes so good coming out of them. Even better out of it. And, you know what tastes even better is having everyone go and watch this podcast on YouTube. So you can see the cool new swag we're wearing. Neil, you have the smiley face brew sweatshirt on right now. It's one of my favorites.

Yes. It is awesome. I don't know the color of this shirt because I'm sort of aesthetically illiterate. I guess tar heel blue. I like it. Yeah, North Carolina. Maybe not quite, but you can get it at our store. It is super comfortable.

Yeah, I like it. And then I really, really like these mugs too. A YouTuber said, hey, you guys should sit on the desk and have a little morning brew daily mug. So do you have the YouTuber's name? Yeah, James Gillespie, I think. Shout out James Gillespie for recommending these mugs to us. He's a YouTuber.

I know, a YouTube commenter, yes. We love our YouTube commenters. So, again, if you're only an audio person, go check us out on YouTube and see what we look like sitting in the studio. All right, just want to preview what we have for you today. We're going to talk some controversy over the chip money that the U.S. is handing out. There's another close call at U.S. airports between planes. And finally, because everyone's talking about this. We'll talk about time zones on the moon.

And by everyone's talking about it, I mean just us. Just us, but hey, we're each other's best friends. There we go. That's all that matters. Where we're going to start is on Wall Street with Goldman Sachs, where things are not looking so hot. David Solomon, who is the CEO, is in the hot seat after the company's push to court regular folks. People on Main Street has mostly flopped. There was this investor day yesterday that Goldman Sachs had, only their second ever.

It was super high stakes. They wanted to hear what David Solomon had to say about the bank's performance, which has been pretty bad. said Goldman was considering strategic alternatives for its consumer platforms biz, and that includes things like its credit card partnerships with Apple and GM. So Toby, do you think this is actually a problem for David Solomon? Is he safe? I think he is on the medium hot seat, and the reason why is because whenever you kind of lead an initiative, this was David Solomon kind of hung his hat on the consumer business and say,

this is where our growth is going to come from in the next few years. And so whenever you do that and it falters a little bit, of course, you're going to be held liable. But, I mean, Solomon does have some supporters still. A lot of people were saying that they'd rather have a CEO who actually tries something and fails than someone who just kind of sits on their laurels. So I don't think he's like imminently about to be fired. But yeah, his seat is warming for sure. Yeah, well, the bank is just not doing well in general besides the consumer biz because it, its powerhouse, which was investment banking and trading, has kind of hit the fritz.

Profits have fallen for five consecutive quarters, and people are just saying that Goldman has not reinvented itself in the way other banks have in this post-2008 era, which is where they place a lot more regulations post-financial crisis on investment banking and trading. And so rivals like Morgan Stanley have moved into asset management and wealth management where they're talking, you know, Goldman Sachs was going after you and me, like regular folks, on Main Street. And then Morgan Stanley was courting millionaires and saying, look, you have a lot of money. Just invest it with us. This generates super reliable returns. Right. And that's why people are kind of mad at David Solomon is that was Goldman's bread and butter was asset and wealth

management. And now they tried to appeal to, yeah, Main Street. And those are really hard relationships to develop because you need that layer of trust. And like Chase Bank and Bank of America, they had built up that kind of pedigree with people who are banking with them. So it's really hard to just come in and say, hey, we have this new bank guys, like, come trust us with your money, especially with, like, the reputational hit that Goldman Sachs took in 2008. So looking back now, you can kind of see why this might have been doomed to fail. But yeah, we're 2020 hindsight, I guess. It does seem weird to go and open up a checking account with Goldman Sachs.

Right. But you don't think there would be some sort of, like, elite status. conferred on you if you just whip out your Goldman Sachs credit card. Or if you're like, oh, yeah, let me just, it's a debit card, but yeah, it's Goldman Sachs. I just, that's kind of my chain account. Oh, you have PNC? Well, I bank with Goldman Sachs. Well, that was, I think that was their problem.

They named it Marcus. Like, they tried to distance itself from that premium Goldman Sachs brand. But maybe if you're listening Goldman Sachs, listen to Neal and play the status card, because, yeah, it is a little bit of a thing. I'm definitely not a bank strategy. But I just want to mention that Goldman is, they just had one of the biggest round of job cuts ever, which is that they laid off 3,200 workers and this consumer business lost $3 billion since 2020. Yeah. Again, the seat is definitely warming for Solomon.

He's only been there since 2018, I believe, which it feels like he's been there a lifetime. But yeah, DJ, do you want to say the DJ? DJ, DeSol. Yeah, so he didn't even touch on this, but he is part-time DJ. And there was this big New York Times article how they were recently saying that, yeah, there might be actually some conflicts of interest between his DJ work and his, you know, role as a bank CEO, which, you know, I'm obviously not an expert in that. But he definitely plays his DJ card up a lot.

Maybe he should be focusing a little more on, you know, turning his business around. Yeah. We always have to mention that whenever we talk about Goldman. Okay. Let's actually move on to another kind of maybe ill-fated investment decision. So Altria, who makes Marlborough cigarettes, huge, huge tobacco company, is in talk to buy the e-cigarette brand, In Joy, for $2.75 billion. So a couple of things that make this noteworthy. First of all, the price tag. Enjoy made around $150 million in sales last year, so that is valuing it at 18 times, like, trailing sales, which is just a massive valuation.

And then two, this kind of marks the end of the chapter, the ill-fated chapter in Altria's history of when they acquired Jewel. So I actually want to start with Jewel. Do you remember how much that they paid for Jewel back in the day? I remember, yeah. It was, well, I think they paid, they bought a 35% stake, and it was worth $38 billion. They value Jewel at $38 billion, and today it's worth only $700 million. So one of the worst acquisitions, maybe of all time. I'll never forget that valuation or talking about Jule because my brother's like Fidelity

retirement account, we look through the portfolio. Yeah. There was Jewel. Oh, really? Yeah. Oh, no. It was like the weirdest thing, but Jule was one of the top investments. Yeah. And so it's not doing, it was $38 billion, one of the biggest startups.

Right. At the time, Jewel had around 63% market share of the U.S. nicotine market. Just to put that in perspective, enjoy currently. has 2% of the market. So this is sort of, seems like a super desperate move just to buy Altria just to get like a strength, just a small foothold in this market because it is a growing market, but they're, you know, they're just moving on from Jewel because they're just saying this is a completely failed enterprise.

Right. I think you're dead on when you say that they know that they messed up with Jewel, but they still want a foothold in this market. And one of the main reasons why they want this foothold is because cigarette sales have continue to decline. Like, this is not a new trend, but we're going to toss a chart up here for our people watching on YouTube. But it's showing the quarterly year-over-year decline in cigarette sales.

It's just a steady increase down into the right, like the worst kind of chart. So Altria is definitely looking at it and saying, all right, people aren't smoking anymore. They like e-cigarettes. It's been very hard to get FDA approval. That's another reason why I enjoy such a big deal, is that it's a lot. the FDA signed off on it. It's not FDA approved. It's actually an interesting little nuance. It's FDA approved to be marketed to consumers. So enjoy. You can find them in like your local bodega and there's, there seems like there's tons of... There's plenty of bodega selling vapes around here.

Right. So it looks like a little bit of a desperation play from Austria, but also they do, they needed to make a play. So I guess this is it. And then the final though is super interesting. I was reading this article about trends in teen vaping, and we all heard about this epidemic that was happening in 2019 and 2020, actually, vaping has dramatically followed over the past few years. And people say it has something to do with the dynamics of the pandemic. But I pulled up some stats, but basically, teen use of electronic cigarettes was 19.6% in 2020. It went to, or no, it was 27.5 in 2019, decreased to 19.6% in 2020. And then in 2021, it was down to 11,000. 0.3%. Honestly, I'm not sure I trust all those stats. If those are teens self-reporting,

but yeah, no, it is interesting to see the decline. And I think part of it is, Jule was famous for making flavored pods, so you could have like mango flavored. This is how you smoke. Yeah, mint flavored pods. Also, yeah, I know these. I just did research, mom. I don't know these flavors off the top of my head. But, and the FDA's dropped a hammer on the flavored pods specifically. So now you can only really get like menthol or tobacco flavored. So that may be some of the reason is like they're kind of gross now to smoke. Yeah.

Well, maybe they are. Let's move on to some topic that I don't know. I freaking love this stuff. It just gets like I could just watch this kind of or read this about it like I watch sports. But do you remember the Chips Act that created this pool of money to incentivize chip production in the United States? Yeah, I also remember it because it's a very well-named act. Totally good. The Chips Act.

So there's been movement. So yesterday, the Commerce Department for the first time opened up applications to grab some of that $39 billion that has been pooled away. But how they're doing it has caused a major controversy and debate over the role of government in spurring economic development. So there are so many strings attached to getting this money for chipmakers. So you have to provide affordable child care for workers if you want to get your hands on this. You have to share excess profits with the government.

You have to limit stock buybacks. You can't expand, this is crucial, you can't expand in China for 10 years. So getting this money comes with a lot of red tape, and it's caused a lot of debate about, you know, what the Biden administration is doing here. Yeah, I could not believe that the first string attached was affordable child care for a chips act. Like, it really didn't compute my mind. And, I mean, we spoke about it, but if the chip plants and chip manufacturers need workers, and so they're trying to incentivize them to provide health care so you can bring in better workers.

So I guess that makes sense. But yeah, I could totally see how a lot of people are a little mad at this. We're at this crux moment in kind of the future of technology in the United States. We need to ramp up chip production. We need to match like China's output. And yet here are all these red like strings attached to it. I can see why that's annoying for both the chip manufacturers and people who are not fans of big government.

Right. And we should talk about that chip shortage that spurred the chips act to begin with. Do you remember 2020 and 2020 when they couldn't find any chips? And that sort of spurred this whole move to become more self-reliant on chips because those little things, I don't even know how small they are. They're millimeters wide. Kind of run our industrial architecture right now. All I remember from that time, so it was back in 2020, supply chains got all messed up.

The chip shortage was a big deal. And what I kept thinking was, how are everything running on these chips? And the biggest thing was automobiles, but also smartphones, the military. But yeah, the auto shortage was like a really, really big deal. Factories were just sitting completely idle. They had the cars, like, pretty much built, but they just needed the semiconductor chips. And so, yeah, the stat I like to show is a, workers at a Ford Motor Factory in Michigan and Indiana worked a full week just three times in 2020

because of the chip shortage. That is not good. That is what we like to call a supply chain bottleneck right there. Yeah. That is what we like to call. So yeah, we'll see what happens with this. Obviously, critics of this are saying, yo, are you trying to make chips or are you trying to slam all of your other policies into this? And then the government is responding saying, this is what we need to do. I'm not going to write a blank check to these massive companies. They need to put up or shut up. So it'll be really interesting to see what plays out. I hope people got really hyped about industrial policy.

As hyped as Neil, yeah. It is, no, I think it is really fascinating that affects all of us, obviously. Let's move on to U.S. airports. This has not happened to me recently and not happened to most people, but there have been a lot of close calls recently. The most recent one was in Boston on Monday night when two planes. nearly collided at Logan. There was a jet blue plane and then they're taking off and then there was another plane taking off at the same time.

And when I say two planes are taking off at the same time on intersecting runways, usually not a good thing. So the FAA is looking into this. Yeah, no, not good at all. And the reason why we're kind of talking about this is that incidents like this have seemingly been increasing in the last few weeks. Like we can rattle off a few off the top of our head. We also have a chart kind of of how many of these instances have happened recently.

We will post that on our social media, on our Twitter and Instagram as well. Yeah. So if you want to check out some of these visual elements, definitely go follow us on our socials at MB Daily Show. Plug aside. Plug aside. The chart shows that actually the number of serious incidents has been decreasing. So we've seen all of these headlines recently, which I all get to in just a moment. but in 2022, there were 18 serious runway incursions in the U.S., which basically means the most serious type of incident where there could be a crash.

And then in 2007, there were 32. So this is a downward trend. But there's been just like a lot of headlines that makes people think there is a pattern, which there doesn't seem to be. It just kind of seems to be a fluke. But there was, do you remember in December, Hawaii Airlines took off at Maui, and it climbed to 1,400 feet and then plunged to nearly to below 800 feet. It makes my stomach. I took off from Maui in December on a Hawaiian Airlines play. There was a close call at JFK in January between two planes that were taking off at the same time.

And then probably the closest call was in Austin where there was a FedEx cargo plane landing and a Southwest Airlines plane taking off and they came within 100 feet of each other. That is really, really close. 100 feet is absolutely nothing. Right. And there was a quote from a national transportation safety board official who basically said it could have been catastrophic if not for certain actions, including the actions of the FedEx crew. And it made me think of the movie solely, which is about the pilot who landed the plane in the Hudson River. And like, I'm wondering if we're going to get a solely like movie for the FedEx flight of just the heroic actions taken by the one guy transporting all of our goods on his plane.

But yeah. I hope so because, I don't know. I don't know if this has reached your TikTok, but all I get right now is Sully clips. I've been, I've been just deep in Sully content. I put away everything I'm doing when something comes up on TikTok about Sully. Yeah. And I just watch, I've watched, like, the entire movie on TikTok right now. It is so engrossing.

It's crazy. Tom Hanks, just being so cool as a cucumber landing this plane in the Hudson. Yeah. No, it's a great. I've never seen the movie, but I feel like I know. I'm glad you made it to Sully talk. It's a good place. place to be of the internet. Okay, now I want to take us to maybe one of my favorite stories we've

ever done on the show thus far, and that is lunar time zones. So here's the debate that's going on right now. The European Space Agency met this week to kind of hash out a plan for establishing a universal time zone on the moon. And the reason why this is suddenly becoming kind of to the forefront of debate is that we have a ton of missions coming up in the next few years. from all countries, they're going to, we're probably going to establish a lunar base in the next kind of decade or so. So people basically need to get on the same page of what time is it on the moon because the current way you tell time in space and on lunar missions is by you use the time zone of the country that launched the mission. So with more international cooperation,

that's not going to work long term. So, Neil, are you excited for this, this lunar time zone that's going to be established? I mean, it does seem, if we look throughout history, that technological innovations sort of drive us to reconsider and reorganize the way we think about time. I mean, the first thing I thought about this was when we first established time zones in the United States in North America, which was in the 1880s when there were trains, you know, going faster than literally anything else we've ever conceived of in human history. So they actually had established time zones across the country to, you know, make shipments and passenger rail actually work on time and establish schedules.

So the first thing I thought about was like, yeah, of course we got to establish. Yeah, this is the modern version of it. Yeah, this is the modern version of it. But it seems to be a really confusing endeavor. Let's just say I don't want to be in these meetings because my brain will just immediately turn to spaghetti. There's a lot of nuances and complexities, obviously. but clocks on the moon don't run in the same time with the Earth. They gain roughly 56 microseconds per day, so they're ticking a little bit faster.

On top of that, a moon day is different than an Earth day. Yeah, what is it? A moon day, yeah, it's a lot different than Earth Day. It's 29 and a half Earth days, actually, for one rotation of the moon to happen. All right. So, yeah. This is absurdly complicated, and I just want to know when the NFL games are on when I'm on the moon.

I know. That's all I need. We can't wait. We have the London games right now in the NFL. I cannot wait for the lunar games to happen. Yeah. Yeah, I love all the complexities of this. It is really important, though, because satellites also use atomic clocks to kind of pinpoint their location. So you really do have to, and we're going to have moon satellites soon. That's another thing that's in the works. And so you do need, I don't know how they're going to make it work, because if a clock is running above the moon at a different time from a clock running, on the moon, how do you reconcile the differences? There might be two lunar time zones. This whole thing makes me think we're going to have to reorganize society, not just time, but in general, for space. Right.

We're going to have to have, like, what currency am I going to use? When I buy real estate, you know, my crater front property, like, who am I going to buy it from? Am I going to have to pay taxes to the U.S. government? I'm not going to have to pay taxes to the UAE government. I'm just really interested to see how we are going to reorganize society, the economy, politics on the moon. And I think this time zone thing is just one part of that. Yeah, absolutely. Let's return to Earth for a little bit of societal debate as well.

Our final story for the day is Joe and Jill Biden went out to eat, not necessarily newsworthy in itself, but some people were kind of looking through what they ordered. I'm going to take you through their order. A couple of glasses of wine, grilled bread with cultured butter, chickery salad, and two orders of rigatoni with fennel sausage ragu. So that is what really, really tripped people up. They ordered the same entree. And Twitter kind of lit up with debate. Is this okay?

Is this acceptable to order the same entree as the person, your significant other, that you're going out to eat with? Absolutely inexcusable and probably disqualifying from office. This is absolutely not okay. I mean, so I'm very much against this. There are a couple caveats that I want to put forward. The first one is that you have to be close enough with the person. So if I'm just meeting you for the first time, then we can order the same thing because

there is a sort of relationship threshold where you get to talking about food choices. I don't know. I feel like if I'm meeting somebody for the first time, that's not something. We're still just asking about, you know, your siblings and all that. So you're feeling each other out. It's a little presumptuous to start, you know, doing. Trying to split food orders. To doing order management.

And then the second one is that if it is a single-purpose restaurant. So there are, I love these restaurants. I want to go to a restaurant that only makes one kind of thing, and they're the best at the world at it. So I'm thinking something like a ramen or I've been to some Thai places where they specialize in this broiled chicken. Yeah. I was going to say there's a Cuban place near me where if you don't get the Cuban sandwich,

you're like, you're literally doing it wrong. Right. Yeah. So those are my rules just to go full Larry David here. I realize there are people that don't even share their food to begin with. At all. Emily, our producer, we were talking earlier, and she's like, well, I never share my food. So if you want something, you better order it yourself.

Order yourself, yeah. Which is crazy to me. I was surprised at how, I thought for sure, people would lean towards the you have to order something different. Because if there's like rules for going out, this is a time to explore new things. So you don't want to reduce the likelihood that you both get a good meal. if say you both order the same thing and it turns out to be bad, you just ruin the whole night there. So you've got to hedge your bets a little bit by distributing the orders. But yeah, Twitter was kind of more divided than I expected where 60% of people said, yeah, this is not acceptable.

But 40% were like, yeah, we do this. I think we're just foodies. I know. Well, I guess our followers are moderate foodies. Moderate foodies. Okay, that's all we have for today. Awesome show, Toby. you kicked butt.

Remember, we want to hear from you, our listeners and viewers, so make sure you can email us at Morning Brew Daily at MorningBrew.com. We're on email all the time. We're Morning Brew. And weigh in, please on the... Please weigh in on this debate. Tell us we're wrong. Have to give an awesome shout-outs to our amazing crew.

The show's producer and editor is Emily Milliron, who probably doesn't like me right now. The show's technical director is Elias Alba. Hair and makeup couldn't make the show because they're on moon time. Supervising producer is Bryce Belaw. Lord of Podcast is Dan Bousa. Devin 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. Pay off your home, travel for life, drive a Ferrari. In celebration of the world premiere of the Monopoly Big Board Buckslot Machine by Aristocrat Gaming, Yamava Resort and Casino at San Manuel is giving one person a $1.6 million dream package. The biggest prize in Yamaba's history.

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