Morning Brew Daily - Google rolls out BARD, Banks on edge ahead of Fed meeting & White Claw Vodka

Episode Date: March 22, 2023

Episode 22: Neal and Toby discuss Google's rollout of 'Bard', the AI software set to compete with Microsoft's ChatGPT. They also preview the pivotal Fed meeting as banks look to stabilize. Also, hosing prices fall for first time in 11 years. And get ready, White Claw is getting into the liquor business. By the way, if you have ever wanted a new Dodge Challenger, you only have one more chance. 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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Terms and conditions apply. Good morning, Brew Daily Show. I am Neil Freyman. I'm Toby Howell. If you watched the World Baseball Classic last night? I saw the highlights. What? Listen, I'm not a baseball guy, but I will say that it came across my Twitter feed,

which is good for the game of baseball, right? Well, apparently it was the most, it is likely going to be the most watch baseball game in history. And it shows how, you know, the sport has spread from Cooperstown, New York all across the world. For people who didn't see it, it was the USA versus Japan and the championship of this World Cup-style tournament that hasn't taken. place six years. And it was an absolute storybook ending. You had Shohei Otani, who is this Babe Ruth

figure who hits and pitches. He was, he came in to close out the game. Japan was a three to two, and he ended up pitching. The last at bat was against this other superstar Mike Trout, who is on his team, the Los Angeles Angels, and he struck him out and Japan won. It was. I was hype for him. It was really exciting. Yeah, baseball. It's coming back. Is it back, Neil? Well, they get this pitch clock going. These games go under two hours, 30 minutes over the course of the MLB regular season. I mean, I'm always going to watch. But that was just so dramatic and a really awesome baseball game, I have to say.

We are not talking about baseball today for the rest of the show, unfortunately, but we are talking about big Fed decision coming up in just a few hours. Our housing prices finally dipping. We'll get into that as well. and then we'll end on sandwich subscriptions. I love it. I love the end of our shows. But the beginning of our show is about AI, as it often is.

The headline news today is Google has kind of found out of the cat out of the bag. In this case, that cat is Bard. It's kind of answer to OpenAI's ChatGBT. So Bard works a lot like ChatGBT and Microsoft's Bing Chatbot, where users are presented with this blank text box, and they're invited to ask pretty much any question that can be answered by the AI. A key difference is that beneath every barred response

is this little button that says Google it. And the reason I bring that up is because Google's business model is search. It makes $162 billion off of Google search. So it's really trying to thread the needle here because they don't want to get left behind in the AI race, but they also don't want to cannibalize their search business. So we haven't gotten a chance to play around with it yet, Neil, but what are your initial thoughts on this Bard rollout? Well, I was looking at some of the sentiment.

People were using it. It's just a select amount of people that can use it right now in the U.S. and the UK, and it'll roll out to more people in the future. So I got myself on the wait list. But the overall vibes I was getting was kind of meh compared to Bing and chat GPT. I mean, I saw someone put in what is happening with Credit Suisse to Bard. And it said it didn't mention. the sale to UBS. And then the only source it cited at the bottom was Wikipedia.

Yeah. Well, remember, these are trained on language models or models that are from like 2022 and 2021. So it can't be like super, super up to date. But yeah, you're right. I have seen some people say that it's a lot faster than the other competitors, but that's probably because there's just not as many people on it. And also, yeah, you're probably right.

Some of the novelty factor has worn off. So what could it really do to like crazy wow us? But yeah, I think you're right on that sentiment. So Google has definitely been slowing its role compared to Microsoft, which is just shipping AI features kind of every day. And that's because, yeah, you mentioned this search thing. It can't cannibalize $162 billion. So how do you make money from BART? Yeah.

Because basically Google Search is you get this list of results from your query, and they sprinkle ads throughout, and so many people see that, and advertisers pay a lot for that. But with this single chat box, like, text box that Bard produces, I just don't totally see the ad product. And I think Google doesn't totally see it either. So it's still figuring out how it's going to make money from Bart. Right. I could see it going to subscription route. I mean, Google has never really charged for any of its products because search just funds everything. But I could see Bard potentially being like, I don't know, $10 a month, $20 a month subscription fee. So it's probably not going to ever come close to the massive amount of money they make

off search. But, yeah, the business model is tricky on this one. I could see, like, Google search powered by Bard. Kind of like Bing is Microsoft doing with Bing. Just copy Microsoft Google. That's how you do it in the tech world. They could copy it. But I was wondering how much the first mover advantage is important here.

because everyone knows chat GPT and Microsoft's Bing. They were definitely the first movers in this AI chatbot race. And Google's kind of slow in its role coming in a little later. So I looked up what the first smartphone was. Yeah. It was IBM's Simon Personal Communicator in 1994. Wow. We were all using IBM these days.

So what a chat GPT is just IBM's smartphone. And then in 10 years, you know, this. company that we haven't even heard of comes along and revolutionizes this. Interesting. The 1,000-pound gorilla in the AI room, though, is this misinformation that these language models tend to produce. So a study just came out where it found that OpenAI's new AI tool, GBT4, is more likely to spread misinformation than its predecessor GBT3.5. And that was, according to a report from NewsGuard. So this is what's always scary about all these AI innovations is that the threat of misinformation becomes more and

more real. These bots, like, hallucinate. They give incorrect information. They get the context right, but they get the actual facts wrong. So it's a real issue. Do they even tell you when they're uncertain? I mean, that's the joke. It's like they're kind of like McKinsey consultants, no offense to them, where they just say things very confidently, but sometimes incorrectly. So yeah, they they often don't. Google does have a little disclaimer that says Bard may display inaccurate or offensive information that doesn't represent Google's view

so they're kind of hedging their bet. But yeah, you're right. It's an odd it's unfortunately something that's going to be have to be worked out. And we actually do have a little clip from OpenAI's founder Sam Altman talking about AI and this kind of misinformation problem. I think people should be happy that we're a little

bit scared of this. I think people should be having. You're a little bit scared. A little bit. You personally. I think if I said I were not, you should either not trust me or be very unhappy I'm in this job. Okay, Sam. Yes. I mean, you said you didn't really like him in that clip necessarily. It came up a little pretentious and squirrelly. But it does show that he is, I mean, whenever we have the founder of OI, it's like Frankenstein's monster, he's a little scared of the creation that he has created. And yeah, so I'm. a little nervous when you have the founder of the biggest AI company saying, yeah, I'm nervous about you're not comfortable with the fact that he's a little bit scared. Yeah, I'm not. Come on, Sam. Reassure me,

please. I mean, just as I was, I just feel more the more I'm more I read about this new AI stuff that's happening every day. It feels like November 30th, 2022, when Open AI release chat GPT will be like a seminal moment in human history. And don't just take it from me. Bill Gates wrote this blog post. yesterday where he says, the development of AI is as fundamental as the creation of the microprocessor, the personal computer, the internet, and the mobile phone. November 30th, 2022, write it down. All right. I'll remember it. I'm moving away from AI for just a hot sec. I'm sure we'll come back to it tomorrow or at least

the next day because things are happening so fast. Well, the only thing that's more dramatic than Otani versus Trout in the last 48 hours is definitely the Fed meeting today. It's the most intense one in years since the COVID pandemic hit initially. The big question is whether the Fed will keep raising interest rates to battle inflation or hold them steady to make sure there isn't a Silicon Valley Bank 2.0 collapse. And some even think the bank could even, or the Fed could even cut interest rates. So I just want to preview how this day is going to go. In a few hours, at 2 p.m., the Fed is going to release its decision in this statement, and they'll also release some economic projections along with it. Then the big thing is that Jerome Powell will get on the podium for a press

conference at 230 where he's going to be grilled about pretty much every topic, from inflation, to interest rates to the banking turmoil. I don't want to be him today. I know. It's so brutal. I saw some outlets describing it as a legacy defining moment in his career. It's a policy meeting. It's so funny that that is legacy defining. But, yeah, the rate hike is obviously the thing that's most at play here. I've seen some analysts say that it's a 90% chance that it's going to hike at least 25 basis points, which is smaller than initially planned, but not as small as a zero rate hike. So, yeah, it's definitely, again, we say thread the needle on the show,

but they are trying to thread the needle here and not let inflation escape out of control. but also not, yeah, kind of tank the economy. Another interesting wrinkle is that if you don't hike interest rates, what message does that send as well? Because this is all signaling. So if you don't hike interest rates, then you're sort of signaling to investors that you're actually freaked out about the banking crisis, right?

And then they're like, crap, the Fed is really... I know. It's so hard because there is what they're doing, and then there is meta-reading of what their actions say. So, yeah, you mentioned it. his time at the podium may be more important than whatever they actually decided in the meeting. Plus, the Fed is in this crazy hot seat, I mean, over Silicon Valley Bank and the banking turmoil. Politicians are grilling them from both sides to the aisle. Senator Elizabeth Warren said Powell has failed and should be gone because not only were they raising interest rates,

which led to the failure indirectly. You can make a very convincing argument that it wasn't the Fed's fault over the interest. straight decision that led to SBV's failure, but there was perhaps a lack of oversight and controls, and Powell was leading some deregulation, and so they are not, no one's really happy with the Fed right now. Tough seat to be in, very hot seat. Okay, Neil, we're going to actually keep it in the macro environment. We're going to talk a little bit about housing prices.

Neil, I guess the headline news is we may be actually able to afford a house at some point in our lifetimes. Okay, yeah, as long as people keep listening to this podcast. That's because for the first time in 11 years, the median sales price for a home in the U.S. actually fell year over year. We did it. We did it. We did it, Joe. Now it's, it wasn't a huge drop. It was 0.2% compared to last year, but that's the first drop since 2012. So we're talking about it. And so I'll talk a little bit about why it happened. Part of the reason why they're getting homes are getting slightly more affordable is because mortgage rates have actually been at near record highs for a while. That puts a damper on demand, which leads to slightly cheaper homes. So it's all connected to everything that

Drome does. It's very rate sensitive. But yeah, it's good. Home prices are falling for the first time. 0.2%. I don't know about that. But what struck me about this is that people are so sensitive to mortgage rates. Because they were at 7% late last year, and then they dipped two in the sixes in January and February. So you have all this pen-up demand. And people are reading the brew, seeing where mortgage rates are going, and then they see a little dip, and then they go on and pounds. Yeah. No, it is definitely. So home sales actually rose from January to February, 14 and a half percent, because, yeah, you're right. They see they're very, people are rate sensitive, just like the housing market is rate-sensitive. So, yeah, in the short term, any decline in mortgage rates is probably

going to spur a little bit more home buying. But in the long term, if any of this unrest in the banking sector kind of bleeds through the economy, we might see another like mini housing pullback in terms of new home sales. It seems like everything is dependent on mortgage rates and everything is dependent on what Jerome Powell does. It all ties back to that one dude. It's going to be the most watched press conference. We had the most watch baseball clip. We're going to have the most watch press conference. The Otani Trout metaphor is extended. a long ways. For the housing market, I love to look at Austin, just to gauge the temperature. Because Austin saw this major boom during the pandemic. And I don't know, people just love to talk

about Austin housing prices because everyone kind of wants to move there. So they are down, actually, 8.9% from their peak in 2022. But they're still up 44% from their March 2020 price. So it seems like there was this crazy boom in Austin and other hot pandemic housing markets that It has sort of fallen back to Earth a little bit, but not even close to where we were. So our home prices are still way, way, way above. I think the median is $363,000 right now. So affordable. The median price for an existing home in the United States.

Let's go get a house, Neil, in Austin. All right. Before we jump into the next story, we're going to take a quick break. Own it all. Pay off your home. Travel for life. Drive a Ferrari. In celebration of the world premiere of the Monopoly Big Board Buckslot

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Never fly during a Scorpio full moon. Just tell the manager you'll sue. Instant room upgrade. Stop taking bad travel advice. Start comparing hundreds of sites with kayak and get your trip right. Kayak, got that right. Neil, let's go back in time to my college. years. White Claws were the hottest drink on campus. There ain't no laws when there's drinking

claws was ringing out from every party, dardy, and dorm room. But zooming back to the present day, white claw competitors have kind of flooded the market. The hard seltzer market and their market share has dwindled. Now it's trying to reinvent itself. So the brand is releasing a line of white claw vodka, straight vodka and flavored vodkas and canned vodka sodas in an effort to kind of enter this new category. So yeah, Neil, there's obviously some competition in this. It's obviously a different direction for White Claw. What do you think of its new path towards deeper into spirit?

Yeah. Well, first of all, when you mentioned that White Claw was your drink of choice in college, that just makes me feel old because I was, because when I was in college, it was the Four Loco craze. Oh, God. And you were probably in elementary school. The brain cells. So I had a lot more fun in college because we had four loco and you had White Claw.

But I am bullish on this. I mean, alcohol is all vibes, right? All branding. That's why all the celebrities get into alcohol because you don't actually have to make a particularly good product. You just put in fancy packaging. You get some influencers to drink it. And then you see a cool person drinking it and you're also drinking it. So White Claw, I think, has, even in this seltzer froth going on right now, I think White Claw has a good brand.

And if you slap that on vodka and make it look pretty, then people will get it. Yeah, and I also think it's a good idea that they are flavoring the vodka in their, like, classic flavors. So you see the black cherry, you see the mango. There is some brand recognition there and some cultural cachet. I thought what was very interesting, what allowed White Cloud to kind of enter this market was actually a regulation change that allowed alcohols to not. It used to have to be without distinctive character, aroma, taste, or color. but then those restrictions were eased and allows you to add a little bit of sugar, a little bit of flavoring of vodkas. And so that's why White Claw can release a black cherry vodka because it doesn't

have to be odorless or tasteless. We should talk about the juggernaut in this space, though. Titos. Titos. The rise has been absolutely incredible. Now when you go to a bar, everyone, you know, you just get a Titos and club. Yeah, it was perfect. So they represent 25% of vodka sales in the U.S. right now, which is crazy because they're kind of a little bit an upstart. What I think is they nailed is you have the cheap vodka which are like in the plastics, just disgusting. You don't want to drink them. And then you have the higher upscale like the great goose.

And they put their, I think their bottle makes a big deal where it feels, it feels, it doesn't feel like luxury, but doesn't feel cheap. And it just is that perfect staple that allows you to, it's not horrible, but it's not too expensive either. I think what also helps Tito's is the Made in America thing. Right. Right. Like, you know that they're... It's all vibes. You know they're from Austin, right? Yeah. I think a lot of people know that they're Texas brand and people in the fact that vodka comes from, you know, Eastern New York for the most part. Yeah. They much prefer drinking Tito's something called Titos than a Smearnoff or a Svetka. Yeah. So I think that's been, I think this been super helpful. That's smart. I actually also just quickly want to touch on the White Claw founder because this guy is pretty cool. His name is Anthony von Mandel. And he kind of like,

invented the category of Spike Seltzer, hard seltzers. Because he had this realization that back in the 90s, the only beer for, the only drink for men was beer. But he did a survey and 25% of men said, I don't even like drinking beer, but there's just nothing else for me to drink. Like, I don't really want to drink wine or anything. And so he invented Mike's hard lemonade in 1999 to like make men feel manly about drinking their little spike drinks.

And, yeah, he's rolled out. into White Claw and he's now they he has a brand that does like over four and a half billion in sales all from that one realization that guys drink beer but don't necessarily want to be drinking beer and if they can find an alternative I don't want to I don't want to drink beer but I don't want to drink of white Claw either I know well you're not maybe you're not in the 25 percent then I'm not but this guy he's a it's a family business it's not a public business and apparently as a 15 year old kid and he was like you have to earn your place in this family business I love this guy I'm not he's very very

He's awesome. Logan Royesk. Okay, moving on to something else, a little more, also quite manly, historically. We have a little challenge for listeners. So we're going to play an audio clip. And we're going to ask you to think about what if you can identify what it is. That is the purr of the last gas-powered muscle car Dodge is ever going to make. End of an era.

At the Las Vegas Motor Speedway, the automaker unveiled the truly outrageous Challenger SRT, Demon 170 on Monday. And when you need to clarify that this car is street legal in your marketing materials, you know that the power produced by this V8 engine is simply just stupid, okay? Zero to 60 and 1.66 seconds, 1,025 horsepower and what Motor Trend calls a complete indifference toward handling. But who needs handling when you can literally drain a fuel tank in less than seven minutes of full throttle driving? I love this car. It is unabashedly of muscle. car from a bygone area. It's barely street legal. When asked about the fuel economy, Dodge's CEO said, it's horrible. He literally just admitted it. It's subjected to a $2,100 mandatory gas guzzler

attacks. And then I also think this is funny that each owner receives a special glass decanter with their vehicle purchase because the gas that it consumes is more highly ethanol. So it's like this alcohol. I know. So there's all these little like small details that just make. this so over the top and I love it. They're only making 3,300 of these ever. So, along with the decanter, this is going to become a collector's favorite, you have to think. Yeah, absolutely.

Yeah. And then also, the name itself is street demon. They priced the car at 96,66, in reference to, like, the devil, the demon. So they really, it's a gimmick car. But, yeah, it's the signal the end of a bygone era. It's a little sad. I guess we can talk about the business part of it. So Dodge is, I know, it's like way more boring than just talking about the car.

Yeah, so Dodge's owner is Stalantis and based on fuel economy regulations and this wider shift towards electric vehicles. They're phasing out the gas powered muscle cars, all three of them under the brand by this year. This is the last one. And then starting next year, they're going to start producing some electric vehicle versions. And everyone's kind of concerned about whether the electric version will replicate. You won't get the per. You'll get the power. Electric vehicles can produce the power, but you just don't get the purr.

And that's why we started with that clip, because that sound is just so iconic of the engine firing. So, yeah, Ford is kind of leader here. They kind of moved all of their mainstay lines, the Ford F-150 and the Mustang to fully electric. So there is a blueprint for Dodge here. But, yeah, it's a little – I'm not even a car guy. And it makes me a little sad that we're losing. And it's sort of the best, though, in the end. Yeah.

Okay, Neil, a little less exciting story than a Dodge Challenger to finish off today's show, Subway is bringing back a limited run of its footlong pass subscription. It costs $15 a month and offers a 50% off footlong sub each day in April. And so, Neil, I know you want the economics around this. If you use the pass every single day in April, you'd save an average of $150. or about $5 a day. But to put that in like more less absurd terms, because you're not going to use it every single day,

if you use it three, at least three times, you'll break even. I probably maxed out at 15 days of subway a month. You're a subway guy. Well, in college, you know, after the Four Loco, you would go get a subway. So is I. I actually have a very funny tidbit.

I was also a huge subway guy in college. I might have. That's a girl. the subway sandwich artist, like, DM'd me and said, did you graduate? Like, I don't see you in here anymore. So, yeah, that's, maybe I have told that story before. I'm, I'm a little, I mean, obviously, this is why businesses are doing it is for recurring revenue, right? Like, so you don't know how many people are going to come into your, your subway station, or subway station, subway stop. Yes, I live in New York. Subway stop every day, subway shop every day.

And you want just, you know, the cash flow coming in at a very regular, basically. but I don't know in this era of subscription fatigue when the average American has 6.7 subscriptions compared to 4.2, 3 years ago that people need food or restaurant subscriptions. There's so many options out there. Why would I want to tie myself to Subway? It sounds good for Subway's bottom line. I don't know if consumers really do want this. I'm going to actually just list some of the existing food subscriptions out there.

Last year, Taco Bell sold the Taco Lovers Pass, where for $10,000, a month, you get a free taco every day for 30 days. Panera has a subscription called the Ultimate Sip Club, which is a coffee and, like, lemonade subscription. Funny thing about Panera is it was just coffee and they launched it in February 2020. I remember that very distinctly where it was like, yeah, come and get your coffee on their way to the office and then the world shut down a month later. Tough timing. And then even P.F. Chang has a loyalty program. So there is definitely subscription overload. It's kind of like streaming services at this point. It's just not. I don't know.

I don't totally see it for the restaurant industry. Like I said, there's too many options to go grab food. People don't like eating the same food every day. Coffee, I think makes sense. If Duncan did one, I mean, they do have a loyalty program that sometimes I use. Our producer, Emily, said she'd buy one for Chipotle. I think a lot of people would, but I'm sure they've been talking about it in Chipotle C-suite. What would you buy one for?

Kava. I'm a big Kava guy. And Kava's a little expensive, so I'd love it. That's like a bowl situation. Yeah, I love Kava. This might sound super dorky. but literally the only food subscription I might get is a CSA, which is community-supported agriculture. And basically, they ship in in cities.

They ship in produce from farms during the summer and other months. And they just give you kind of like whatever. You have no idea what you're going to get. It's so much produce, squat, you know, whatever you could. Look at you. Go to the little farmer's market. No, I don't want to go to the farmer's market. That's the whole point because this will just ship it to me over the course of the day.

So that's like maybe too serious of an answer, but honestly, my friend just pitched it last night, and I think I might do it. Yeah, I like it. I like cooking veggies. That's all we got for today. We'll be back at it tomorrow and talk about the logo bracket. We're in the Sweet 16. We're in the Sweet 16. So we'll do a little analysis there. And also write in with all of your questions, comments, feedback, whatever food subscription you would get, because I am curious to see. what restaurants or food chains you would get a subscription to. You can write in at Morning Brew Daily at MorningBrew.com. Before we go, always giving a shout out to our amazing crew. Our producer and editor is Emily Milliron. Show's technical director is Justin Orlando. Our supervising producer is Bryce Belloff.

Our VP of Technical and Production Operations is Dan Bousa. Hair and makeup got replaced by AI. 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. Thank you.