Morning Brew Daily - Home Schooling is Big Business & The Perks of Being a Hollywood CEO

Episode Date: November 1, 2023

Episode 182: Neal and Toby explain why home schooling has gotten so big and why millions of dollars have been poured into it. Plus, some fairly big stock movement already this week, who are the biggest risers and fallers? Also, Tesla resolves a lengthy lawsuit and global companies are finding it hard to leave Russia. Finally, what is the true cost of being a Hollywood CEO? Listen to Morning Brew Daily Here: https://link.chtbl.com/MBD Watch Morning Brew Daily Here: https://www.youtube.com/@MorningBrewDailyShow Learn more about your ad choices. Visit megaphone.fm/adchoices

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pwc.com slash U.S. slash brew AI. That's pwc.com slash us slash brew AI. Good morning brew daily show. I'm Neil Freyman. And I'm Toby Howell. On today's pod, do you know what the fastest growing method of U.S. education is by far?

You'll find out soon. Then Tesla notched a crucial legal win in a self-driving case involving a death, but more weight on the horizon. It's Wednesday, November 1st. Let's ride. Neil, just want to start the show off by saying, Thank you to everyone who sent us photos of their Halloween costumes. We saw The Joker, a golf hole, old Greg, and of course, a bunch of Neil and Toby's.

What's Old Greg? Neil, it's an old internet video. Come on. You got to know it. People who know Old Greg, no old Greg. But thank you to everyone who dressed up as us, specifically you guys went above and beyond, except for, I will say, one person substituted their dog instead of me. So I like that.

Way cuter anyway. Yeah, way cuter. But Halloween is over now. It's November. The people want to know, will you be doing no-shaven November? I don't know if I'm going to do no-shaven, but I'm thinking about Movember, which is when you grow your mustache out during the month of November, to raise awareness of men's health issues. And that seems like there's a there there instead of just growing your beard out because you're lazy and just to do it and you look like pretty bad. I certainly will not be.

Not because I don't want to. It's because I simply can't. But maybe this is the year that the mustache comes in. Before we dive into the news, we have a quick word from our new sponsor, Brex. Brex. Brex. Brex. Brex. Yes, Brex. Brex is a spend management platform that provides an all-in-one solution for everything from travel to corporate cards and everything in between. The coolest part is that they've set up all these AI-powered automations and conversational agents to help you manage everything your business can throw at you. We'll be telling you a lot more about them throughout this month, so stay tuned. Oh, yeah. Get excited.

The big takeaway for now is that if you hate doing expenses, and who doesn't, visit brex.com for more info. Study and play. Come together on a Windows 11 PC. And for a limited time, college students get the best of both worlds. Get the unreal college deal, everything you need, to study and play with select Windows 11 PCs. Eligible students get a year of Microsoft 365 premium and a year of Xbox GamePass Ultimate with a custom color Xbox wireless controller. Learn more at Windows.com slash student offer. While supplies last, ends June 30th, terms at AKA.m.S. slash college PC. Let's start by talking about the fastest growing form of education by far in the U.S. homeschooling.

A new analysis from the Washington Post showed for the first time just how many American kids are being homeschooled, and it is a lot more than it used to be. In 18 states measured, the number of homeschooled students jumped 51% in the past six school years compared to 7% growth in private schools and a 4% decline in public schools. In the 390 school districts in this analysis, there was at least one homeschooled child for every 10 in public schools in the last school year. The Post estimates that there could be up to 2.7 million homeschooled children in the U.S. compared to 1.7 million in Catholic schools.

But this new era of homeschooling probably doesn't match your perception of a conservative, rural, maybe religious family teaching their kids at home around a kitchen table. No, homeschooling has become a booming industry fueled by government vouchers, non-profits, and for-profit companies. VC-backed startups like Prenda and Kipods compare themselves to the Airbnb and WeWork of Education, since they serve as marketplaces for parents to match their kids up with teaching options outside of the school system. Since 2010, annual private investment in ed tech has increased from $500 million to $10 billion last year. Toby, this is kind of crazy. I don't think many people knew just how quickly homeschooling. is growing. I definitely didn't. Yeah, the infrastructure has just been wildly built out in the last

few years. And there's also lots of different types of homeschool. So it's not just, as you said, sitting with your mom and dad at a kitchen table and doing work. There's hybrid schools, which lets students split their days between school and home. There's also co-ops, which are mostly entirely parent-run, which also might bring in a professional educator. But then there's also these things called micro-schools, which sometimes provide all-day supervision, which allow parents to work full-time while also sending their children to homeschool. And that's what a lot of these startups are doing. Prenda calls itself the Airbnb for education. And then also, Khypods is another one. It compares itself to WeWork. These comparisons are funny to me, where students work independently

in a communal environment. So there's lots of different methods and methodologies being applied to homeschool, not just the kitchen table approach. Do you think this is similar to what happened with streaming and cable where streaming said, we're going to be different than traditional. TV, we're going to be different than cable, and then, you know, 10 years down the line, what they do is just form the cable bundle again. So these companies are saying they're providing an alternative to school, and then they're basically taking kids into these areas and having them work together with a teacher. Right. They're like kind of like school. They just reinvented school again. But yeah, there's a lot of VC money flowing into that. Prenda has raised $5 million, but then out

school, which is a platform that allows parents to design kind of their own curriculum from crowdsource courses. It's brought in $255 million in VC funding. And then as you mentioned, too, the government is playing a big role in this because there's these things called education savings accounts, which can help families out with thousands and thousands of dollars of grants. So a lot of support is coming from both the private sector and the public sector. Yeah. What stood out to me was the diversity and geography and the type of student. This is not a rural phenomenon. This is happening in the high-income areas of New York City. It's happening in low-income. income areas of the United States as well. Just consider in New York City in 24 of the 33

school districts, the number of homeschooled children has at least tripled over six years. And you might think this is also a Republican phenomenon, but that used to be the case. The Republican outnumbered Democrats three to one in homeschooling, but now it's about equal. And the reasons cited are a variety of different things. It's guns in schools. It's the encroachment of politics into schools. Another one is people don't think that their public schools are doing enough of a job serving special needs students in schools and that accounts for one in three homeschool kids. Yeah, I mean, again, we've talked about the infrastructure and support. And then just the final stat that stood out to me, it's from my home state of Florida, Hillsborough County, which kind of

encompasses the Tampa area. There were 10,680 children being homeschooled, which is bigger than a lot of entire school districts across the country. And that number has grown. and 74% since 2017. So it's only getting bigger and it's only going to become more of a growing phenomenon. Alternative education system. There's a lot of people concerned that this is happening, obviously, because it is completely outside any government regulation. You don't know what's being taught.

And public schools serve as a very important community driver in local areas. I mean, you go to your Friday night football game and, you know, it's a place where people can come together. So the decentralization of schools is, I think, like a huge thing to watch. Yeah, definitely a trend to watch going forward. For our next story, it's not quite stock of the week. Dog of the week time yet, but there were some crazy swings in the market yesterday, so we're going to do a little roundup of some of the biggest movers in both directions.

As always, we are just humble podcasters, not financial advisors, so please do not take any of this as financial advice. The first stock I want to talk about is Pinterest. Shares jumped 19% yesterday after they reported very strong earnings that gave signs that the anemic advertising market may be coming back, at least with the Gen Z heavy audience that uses Pinterest. And boy, do the use love it. Pinterest monthly active users actually passed its pandemic era highs to reach a new record of 482 million, with most of that growth coming from younger users. Revenue hits $763 million, up 11% from a year ago. The big shift,

it seems, is that more than half of its users were viewing the platform as a place to shop. Remember, Pinterest has all these almost mood boards where users can assemble a collection of things like crochet patterns or Halloween costumes they like with linkouts to buy them if they want. And Pinterest is leaning more into that side of the business. Neil, this was a stock that was mostly left for dead post-pandemic. It's still down 65% from its high in February of 2021, but it looks like it's finally turning a corner. I mean, so many social media companies want to be a place where you shop, TikTok, Facebook, but it seems like Pinterest is poised to be the leader.

in the space, it just appeared like it was doing a terrible job at it. The average revenue per user was just around $6 last year below Snap and Facebook. So if, you know, analysts are seeing like Pinterest, if you just like get your act together and figure out how to make money off of your users that are coming and are only a few clicks away from buying things on this visual search platform that is better positioned than any other social media platform to be a leader in e-commerce, then you could start to make a lot of money. So I think they're starting to see that is doing a much better job at monetizing all the users that are coming to it. One thing the CEO specifically called out was that they are trying to be a more positive platform.

And then in the same breath, he said, I'm quite happy we're not a place you go to get the news. And I don't think we want to be. So that's another way that Pinterest can differentiate itself. All these other platforms are grappling with the fact that they are a news platform as well. Pinterest is just vibes, baby. Like, you're just on there for a good time. You just want to have an aesthetic and just kind of live there. So it is carving out this very positive, nice corner of the internet for itself.

We have to move on. Zillow and other online brokerages like Compass crashed hard yesterday after surprise court ruling may have turned the residential real estate industry upside down. A few weeks back on the show, we discussed how the National Association of Realtors, one of the most powerful industry groups in the U.S., was being sued for conspiring to keep commissions for home sales artificially high, violating antitrust laws. Well, in a decision that came as a bit of a shock, a jury, yes, Yesterday found that the NAR and other brokerages were liable for $1.8 billion in damages. It is a major victory for Missouri home sellers who brought the case and called attention to the fact that a home seller in America typically pays a 5 to 6% commission on the sale price, which is split between their agent and the buyer's agent. This commission price is much higher than in similar countries to the U.S.

And critics say it's inflamed the housing affordability crisis. The Realtors Association said it was going to appeal the decision and has claimed that changing. up the current system would make for a worse experience for buyers and sellers. But this is a big L, and it looks like these real estate agent legal battles are just beginning. Yeah, and this is not ending because a worst case scenario is that the federal government just seeks to ban commissions in general, which would totally upend how real estate agents have done business for pretty much since the beginning of time. So last time we talked about this story, we did have a few real estate professionals reach out saying, like, hey, it's tough to make a sale, and these commissions are how we get paid. So

any change in that affects our livelihood as well. But the biggest change would be if we just do away with them altogether. So that's definitely something to look for going forward. All right. The second and last stock we want to talk about is JetBlue. JetBlue has had a miss here a few months than that guy who had diarrhea on a Delta flight. Its stock hit a nearly 12-year low yesterday as it's getting rocked by turbulence from every ankle. The biggest question mark facing the company is its pending merger with Spirit Airlines.

It's heading to court to defend the acquisition this week. after the DOJ sued in March to block its $3.8 billion all-cast purchase of the budget airline. The merger would create the nation's fifth largest airline carrier if it passes, but the Justice Department thinks that the proposed transaction will increase fares and reduce choice on routes across the country. Then you add climbing fuel prices that are surging right as the post-pandemic domestic travel boom is cooling, and you have a recipe for disaster that no amount of direct TV-equipped seatbacks can fix. I don't know if I have anything to say after that.

That was remarkable. All I say is if you fly JetBlue right now, you might have a good chance of getting a middle seat that's open next to you because it seems like JetBlue anticipated that air travel would be a lot higher than it is now. JetBlue mostly serves the domestic market, as we've talked about recently on this show, Southwest and other domestic carriers are not doing well right now. They're posting losses as compared to the Delta Americans and Unitutes of the world, which have capitalized on international travel. So JetBlue is dealing with lower demand for people just traveling around the United States, and it's got this merger trial that's going on. So tough times for them. Spirit's also not doing well.

Shares fell to more than 12% yesterday to do a three-year low. So both sides not doing great in this equation. Okay. Finally, Nvidia, In video. I'm sorry. The tech giant that makes the graphics chips powering the AI revolution is in a bit of a slump lately. The reason is it's been caught in the geopolitical crossfire between the U.S. in China. Shares of Nvidia, there we go, dropped to a near five-month low yesterday after a

Wall Street Journal report that it may be forced to cancel up to $5 billion worth of advanced chip orders to China. The U.S. recently implemented new restrictions on exports of advanced U.S. chips to China over concerns. Beijing would use it to beef up the tech capabilities of its military and cyber warfare apparatus. And Nvidia has some large customers in China you may have heard of, Alibaba, TikTok owner, ByteDance, and Baidu, sometimes called the Google of China. NVIDIA says the new restrictions won't be a material blow in the near term, but it is a sign that the White House is serious about not sending U.S. made cutting edge tech to China, and that could dent the sales of some American tent giants.

Yeah, I mean, I think this is one of those cases where Nvidia has just been priced kind of on a knife's edge. They're trading at 20 times sales, 40 times earning. So you don't have a ton of leeway when it comes to any negative news. So anytime you see something impacting sales, you might see an outside stock reaction. And again, the stock is still doing really well. But it's down 17% since August. And it's kind of also bringing the entire NASDAQ malaise around with it.

The NASDAQ is down 10% since it's high in July. So I do think we're seeing Nvidia as kind of this bellwether for the market as a whole. And yeah, anytime you have some restrictions hit it, it's going to affect the stock price. All right, Neil, before we jump to the next half of our show, 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 to 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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price line. Neil, Tesla has been under a great deal of pressure recently as falling demand and narrowing margins have put a dent in its hood. But yesterday, it prevailed in a key court case that cast scrutiny on the involvement of its autopilot system that was involved in a fatal crash in Los Angeles back in 2019. The jury found that there wasn't a manufacturing defect with the self-driving software of the car that veered off an interstate and ultimately led to the crash and death of its driver. Now, this isn't the only case focused on its self-driving tech.

Other wrongful death suits and a proposed class action suit are heading its way as well. But in this particular case, the narrow definition of the suit ended up helping Tesla. Jurors were asked to consider specifically whether there was a manufacturing defect in that particular Tesla, rather than take a broader look at the system design as a whole. So Tesla won't be off the hook for future legislation just based on this result. Neil, a good result for Tesla, but still a nervy time ahead for them. It is. This is the second win that Tesla's had over its self-driving tech.

There was a non-fat fatal autopilot crash in California again earlier this year that Tesla won. But as you mentioned, there's a ton of legal battles coming this way, and it's hoping that the precedent set in this case will help it out going forward. But this whole autopilot, full self-driving thing, it's been going on for eight years. Elon Musk says it is crucial for the company's business because he wants to make self-driving cars. And this is going to be a major profit center for the company and its reach day insane valuation because of, in part, because of the promise of self-driving tech. But from misleading marketing to crashes, to fatal crashes, to fatal crashes, to investigations by regulators, like, it just hasn't had a win recently.

This is a small win. But, I mean, it's still in a huge hole. It still has a lot of negative perceptions around it. Yeah. I mean, you know my stance on this. You mentioned the marketing issue. I just think it does have a branding issue. It's called full self-driving.

but Tesla always tells you to remain alert and keep both hands on the wheel, even though it is called full self-driving. So I do think that's where a lot of these cases kind of come from, is that their drivers have increased confidence in Tesla because of how it markets its software, but it's obviously not a full driving software as of yet. And then also just to zoom out, Tesla could have joined our last story because its stock has dropped by about a fifth of its value in less than two weeks. and it's truly just, I said it's getting hit on all sides by a lot of things.

It's working in a very capital-intensive sector, developing new unproven cars like the cyber truck in a world where everything is getting more expensive to make, all while trying to lower prices to beat slowing demand. So, tough place to be in right now. I think it would be okay if it wasn't valued at, you know, upwards of $600, $700,000, like 10 times the amount of the next valuable automaker, and that's because of this amazing growth potential, and they think that Tesla's not even to become a car company, it's going to become a software company.

That's because of this full self-driving feature, because you can charge $200 a month per user for something like this. So you have all this recurring revenue. It's very different than a typical auto maker model. And then you have the president of the UAW, Sean Fain, saying, I'm going to go unionize your workers right now. So we'll see what happens. That's obviously not going to be for the next few years.

But, yeah, Tesla is in a little bit of a slump. and Elon Musk on his earnings call yesterday, I don't think anyone's heard him sound that negative in a really long time. Moving on, one subject we haven't covered much on this show is the Russia-Ukraine war, but that is changing today because Western companies are learning that you can get out of Moscow anytime you like, but you can never leave. And here's what I'm talking about. The massive Danish brewer, Carlsberg, has accused the Russian government of stealing

its business in the country and said that it would not enter agreement with Moscow since that would legitimize Putin's swiping of its assets. And it's not the first multinational consumer goods giant to accuse Russia of stealing its business. Here's the quick backstory. Like so many other Western companies, Carlsberg has tried to leave Russia after its unprovoked invasion of Ukraine last February. Carlsberg has a subsidiary in Russia called Baltica, which is quite huge, employs 8,400 people or one-fifth of Carlsberg's total workforce.

In June, Carlsberg found a buyer for Baltica so it could finally scaddle from Russia. But on the heels of a new Russian law that allows the government to play. place foreign assets under its control, Vladimir Putin ordered the temporary seizure of Karlsberg's stake. And, Carlsberg is saying, look, we're not going to come back to the table to figure this out because you just swiped a huge business from us. Carlsberg wrote down $1.4 billion on its Baltica business last year, which is not Trump change.

Anyway, the point of this story is the economic war between Russia and the West that began last year shows no signs of slowing down. Yeah, it's so messy over there because, I mean, again, Carlsberg said we tried to exit the company. We tried to end this licensing agreement for its brands in the country. But then the CEO says, of course, I cannot guarantee that happens, but that's our expectation because, yes, as you said, Putin kind of just stole the business. And then also back in December of 2021, Russia adopted these rules requiring the government to conduct an assessment of the fair market value of any asset for sale by a foreign company. And then the seller is required to sell the asset at a 50% discount of

that value. So again, Russia started applying these crazy, crazy rules onto Western companies. companies trying to leave. And it's this messy situation that, again, Carlsberg started this process kind of back in June, July, and now we're still talking about it all the way in November. Yeah, and Russia says it's in retaliation for the West seizing its assets, which we've talked about a lot. And so to zoom out, more than a thousand Western companies have left Russia. Remember, there was that major exodus in spring last year. But Yale researchers who have been documenting the process of Western companies leaving Russia, says that at least 400 foreign companies are still there, some voluntarily, some because of all this red tape that we've talked about,

Heineken, Nestlever, and Mondelez, those huge consumer giant companies are still operating in Russia, and a bunch of other ones are trying to get out but can't, like, Hard Rock International, VW, Lucky Strikemaker, British American Tobacco, and Philip Morris International. They've all started this process of trying to sell their Russian businesses, and it just is not working out because they would have to basically sell them for nothing, kind of like what's happening to Carlsberg. and now there's this threat of that, well, if they don't get out soon, then all of their assets will be stolen in Russia and held under temporary seizure, which who knows for how long that will take. Such a headache.

All right, Neil, for our final story of the day, I want to dig into this story from the Hollywood Reporter on some of the lavish job perks, big media and entertainment CEOs get. Obviously, they bring in hefty pay packages, but they also get a bunch of major and minor perks that you may not think about. For instance, Liongate's CEO John Felthimer gets his $16,000 country club dues paid for by the company. But by far, the biggest expenditures came in the travel and security departments. Netflix spends a million dollars a year flying Reed Hastings around, but that's less than half the $2 million meta spends settling around Mark Zuckerberg. But nothing can quite compare to private security spending. Apple drops $591,000 on security for Tim Cook, keeping Jeff Bezos safe runs Amazon 1.1.2. $6 million, which is ironic because what are those muscles for? But again, it's Zuck coming in way

on top with Medis shelling out a whopping $25 million last year to protect its head honcho. No word on how much of those costs go directly to his jiu-jitsu lessons. Neil, lots of little nuggets in this report. Which perks were your favorite? Well, to zoom out, first of all, I just want to talk about the actor strike is going on, and this is like a big deal for the actors, and they're talking about CEO pay and all these perks that are happening. Like, you can't give us a little 1% increase in residuals because your, you know, Netflix's, executives, Reed Hastings, and Ted Sarandos combined, they get $1.5 million for PJs. So they're talking about like, oh, you're pinching pennies with your vast $100,000, 60, you know,

vast workforce and you're spending all these millions on all these executive perks. So that is like a main contention of these. strikes. One of my favorite one is, okay, there's a couple. One is the W.W.E CEO, Stephanie McMahon, and her husband, who is Triple H, got paid $717,000 and $800,000 last year to appear as on-air talent because, I mean, Triple H was on-air talent, and now he's an executive in WWE. I also like James, or I don't know, like is not the right word, but James Dolan, who is the CEO of MSG Nowworks and the Sphere now. He gets paid $600. He gets $600,000 worth of travel on a helicopter to go from Long Island to Manhattan every day.

And I know I live in Brooklyn coming to Manhattan, but I'd still love a nice little helicopter journey. Well, also, MSG executives get free tickets to games and concerts, which I think is the best part of it, because I would certainly want to go see the sphere. And then also, I think it's funny that Warner Bros. Discovery provides CEO David's Laslav with home office audiovisal and computing equipment and also reimburses him for limited home office expenses, including internet access. So they pay for his Wi-Fi at home, which is so funny. A lot of companies, when everyone moved to work from home to subsidized home office. Right, but not a lot are paying for their multi-million dollar compensated CEOs.

Okay, the final question here is you're a CEO. What is one perk that you want? You just need to have this. You're going to put this in your contract. This is just a very relevant thing for me right now, but it's going to be. into winter and I don't have a lot of good pants. So if they could just compensate my Lulu Lemon pants, that would be great because those things are so expensive, but I just need a lot of pants right now.

So just give me some pants, Morning Brew. That's all I'm asking for. Okay, that's all the time we've got for our show. Let's make it in November to remember. As always, please don't hesitate to write to our email Morning Brew Daily at Morningbrew.com. Let's roll the credits. Emily Milliron is our editor and producer. Samantha Vela's and Raymond Liu are associate producers.

Eugenua Ogu is our great. technical director. Billy Minino is on audio. Hair and makeup went to scoop up all the candy on discount today. 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 Buck Slot 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. Club Serrano members can earn daily instant prizes and security. a spot in the finale May 29th.

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