Morning Brew Daily - 'Maxinomics' Explains Tariffs, the Space Race, Can the US Buy Greenland? And More

Episode Date: January 20, 2025

Episode 500: Neal and Toby talk to the man behind ‘Maxinomics’ Phil Andrews about why tariffs are more powerful than we think, the history behind the space race and why today’s space race is an entirely different animal. Then, can Southwest survive the rapidly changing airline industry? Plus, Phil explains what he means by ‘calories per dollar’ and why Chipotle wins out against McDonald’s in this measurement. Lastly, why the Sunbelt is losing its shine.  Find Maxinomics on YouTube: http://www.youtube.com/@Maxinomics  Follow Maxinomics on X: https://x.com/maxinomics Follow Maxinomics on IG: https://www.instagram.com/maxinomicsmb  Subscribe to Morning Brew Daily for more of the news you need to start your day. Share the show with a friend, and leave us a review on your favorite podcast app. Download the Yahoo! Finance App (on the Play and App store) for real-time alerts on news and insights tailored to your portfolio and stock watchlists. 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 US slash brew AI. That's pwc.com slash us slash brewAI. Good morning brew daily show. I'm Neil Fryman. And I'm Toby Howell. Today, if you want to learn a lot in a short amount of time, this is the podcast episode for you. It's a special holiday show featuring the smooth-talking, fact-dropping, Phil Andrews of Maxonomics. It's Monday, January 20th.

Let's ride. Today is Martin Luther King Jr. Day, a federal holiday that has many of you. home from work. It's also inauguration day where Donald Trump will be sworn in as the next president of the United States. And to cap it all off, the college football championship game is tonight between Ohio State and Notre Dame, a ton going on. A ton going on. That's a great way to describe this episode that we taped ahead of the holiday. We talked to Phil Andrews, who is the man behind the Maxonomics brand for Morning Brew. This guy is a human encyclopedia. He can talk with expertise on topics ranging from

autonomous cars to Costco's store design to whether the U.S. should buy Greenland. A true man of the world. We learned a lot from Phil and know you'll also get a lot out of the conversation. But first, a word from our sponsor, Yahoo Finance. Neil, one of the beautiful things about investing is the earlier

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You win? Details at Yamava.com must be 21-20. Please gamble responsibly. Monopoly is a trademark of Hasbro. Hasbro is not a sponsor of this. motion. Maxonomics. Phil, welcome to the show. Thank you so much for having me. It is a pleasure and an honor to be here. So first question, your YouTube channel and social media accounts are called Maxonomics, but your name is Phil. What is going on there? Who are you? And how did you end up at Morning Brew?

That's a great question. I'm glad I get to say this because so many people call me Max, they see me on social media. and they assume my name is Max. Rightfully so, the name Maxonomics was just the name that was chosen for the third web. I came about via a variety of websites that served investing data to the retail investor and just the general public. Maxonomics was the third one. It was just kind of the name that stuck when it was time to have a name. And so here we are. I came from that background of the internet. And in writing for a bunch of different websites, I ended up making video. People were like, you were really good. You should get on videos. Like, no, no, no, no, I don't do video. And yet here we are. So after a little bit of time, Morning Brew reached out and we formed a

partnership. And here we are. Now I'm on the Morning View Daily podcast. It is pretty interesting ride. And where are you located? Like, what city have you spent the most time in your life? I have lived in a variety of different places around the United States. But right now, I am just outside of San Francisco. I'm about an hour south of San Francisco, enjoying a little bit of the sun. That's where I call home. But I am originally from Philly. So I'm Phil from Philly, and you will hear it occasionally come out of my mouth. I'll say water.

I say water and a few other things like I'm from Philly because I'm from Philly. Great. Now it's time to pick your brain a bit. Should the U.S. buy Greenland? I can't see a reason why the U.S. wouldn't want to buy Greenland. And of course, if the people of Greenland agreed to join the United States, there's a variety of resources, the land area. It's becoming more and more strategically valuable, given that the planet is warming up and a lot of the ice on top of Greenland is melting. So I don't see a big downside to the United States owning Greenland.

I think it's probably been said, you know, the Alaska purchase was a huge deal. What a benefit, what a boon. the Louisiana purchase was probably the best move that Thomas Jefferson made out of all of the good moves that he did make. So why wouldn't Greenland be a benefit to the United States? Again, I don't think it should be taken by force or, you know, threatened to be taken over. If the people would Greenland want to join the United States, we would gladly take them. And they do want to be independent from Denmark. And I would remind our listeners that the U.S. did buy a territory from Denmark in the early 20th century.

and that would be what is now the U.S. Virgin Islands. So no Virgin Islands without a land sale. The more you know. Today is also inauguration day and the soon-to-be President Donald Trump's signature economic proposal is tariffs. Your most recent YouTube episode is titled, tariffs are even more powerful than you think. Why are tariffs more powerful than I think?

And also, how did you get inside my head? I am curious to know how that is. inside your head. But the tariffs are far more powerful than you think. For a variety of reasons, you could probably go on for about 30 minutes on the history of tariffs, how they've shaped the world, how they have changed, particularly since 1995, when the World Trade Organization came about. But tariffs are just this very powerful tool that govern access to a country's consumers, a market. The U.S. market is the largest consuming market in the world. You and I, we buy stuff every year that accounts for about 70% of GDP or about $20 trillion worth of spending from

us. And $7 trillion of that is spent on goods, things like cars, dishwashers, mugs, pencils, whatever it happens to be. And the United States with the lowest or the 14th lowest tariff rate in the entire world has kind of opened up its market to every manufacturer that wants to sell to the United States. And this has been great for consumers in a lot of way and way for prices, but low tariffs incentivize manufacturers to move manufacturing outside of the United States. And this is what's been happening for about the past 20 years and in huge droves in the early 2000s. So tariffs are this incredible tool that has kind of been put on ice over the past 25 years and is just now coming back. And I think we'll start to see the impact that

tariffs had because what the World Trade Organization did not to go on is it, removed the ability for a country to unilaterally change its tariffs for different countries. And the U.S. pulled out of the WTO in about 2018. And so tariffs are coming back into Vogue. Well, what do you think we can learn about the tariff regime from last time when Trump implemented them in 2018 that might help us understand what's coming for consumers and businesses in the United States and around the world should they be implemented this time? Obviously, there are so many question marks. We don't know how high. They're going to be. or where they're going to go or on what goods they're going to be placed on. But is there anything

that we learned last time that can maybe be applied to, you know, our new era going forward? Of course. And the blanket implication this time of it's just going to be 25% across the board for all goods. That's a huge number and, you know, pretty scary in a variety of different ways. But the one thing that I would say is for President-elect Trump, I would believe what is coming out of his mouth. While some of this is certainly a negotiating tactic, this is a man that typically does follow through on a lot of the stuff that he says, or at least attempts to. So I wouldn't think that this is just some grand gesture to try and get a better negotiating position. I would expect to see tariffs come in at a pretty decent clip across a variety

of different categories. As much as it affects the U.S. consumer, we did see the price of goods that tariff put Trump's on, or that Trump put tariffs on in 2018 rise. But the broad inflation level, it had almost zero effect on broad inflation. So it's going to depend a lot on how these are instituted in different categories. But for the most part, it's hard to predict the effect until we see exactly how they're going to come in. So I would take a bit more of a reactionary standpoint here and say, they're coming. they're going to come in a variety of ways on a variety of goods, exactly what that's going to be is to be seen.

Did we actually see a boost in domestic manufacturing on the industries that were affected by tariffs? That is kind of the protectionist mindset when it comes to tariffs, is that by applying these tariffs, it will hopefully incentivize people to move their manufacturing to the United States and hopefully strengthen those specific industries. Did we see any of that last time around?

I don't have great numbers on whether or not the categories that we put tariffs on. It brought manufacturing back. And I honestly think it would probably be too early to tell. Six years is a short amount of time to install an entire new manufacturing base. But what I can tell you is a little bit of the inverse of that in 2000 to 2010, five million manufacturing jobs left the United States. And one of the big problems with that or why that occurred was because when China joined the WTO and the WTO became an institution in 1995. And companies around the country looked at this and said, okay, well, if the United States can't raise tariffs in the next 20 years, like they can't unilaterally go in and just next year change tariffs on, say, mugs, then I can confidently move my manufacturing outside of the United States and not have to worry that that's going to change and all my profit margins are going to be destroyed.

So that incentivized so many companies to leave in between 2000, 2010, 5 million manufacturing jobs left. And there just hasn't been this threat of tariffs that have incentivized companies to set up shop here. And I think we're still in this period of, all right, are tariffs really back? Like, are we really doing this again? And if they are, as a new manufacturing company, am I willing to take the risk of setting up shop outside of the country? Or do I definitely want to set it up here and not take that tariff risk? So to your question, I don't have specific numbers on whether or not that has occurred. but I think it's too early to tell. This is a much longer process, I think, than that.

Let's shift gears here a little bit. If you take a scroll through your Instagram page, you'll see a lot of videos about the airline industry, specifically Southwest. That airline recently announced it is changing its famous boarding system to include assign seats and premium perks. What do you think about Southwest, kind of ditching its roots and falling more in line with the broader airline industry? One of the reasons that Southwest is doing this, in my opinion, is because they don't have anything to offer loyalty customers. So if you're an American Airlines, I don't know if either of you have, you know, an allegiance, Delta United, whatever it happens to be. I happen to be on American Airlines just because I got on it 10 years ago and it's very hard to get off.

It has been beneficial. But American Airlines gives me free stuff for a variety of different categories of flying. Southwest just gave all of that stuff away for free, right? There's no first class. There's very little in terms of like early boarding. There's no lounge. Like there's nothing that Southwest had to offer to as a loyalty perk. And that has been good and bad.

A lot of customers would say they love that about Southwest, but a big part of the traveling public now, especially our generations, the millennials and lower, love perks. They have travel credit. cards. They have loyalty points, and they want those perks. You know, the ability to be upgraded to first class is like a nice thing. So Southwest doesn't have any of that. And a lot of people are kind of tired of just the random boarding process. So I'm a little worried about Southwest as a company. However, they have great brand loyalty. So we'll see. Seems like a business decision too,

because Delta has shown that when you offer these premium seats, that's the way for forward for the industry. That's basically how you make the bulk of your revenue. Delta CEO said a few weeks ago that 2025 was going to be their best financial year ever. So Southwest maybe is just not in a position where it can continue what it has done for decades and needs to adopt this more segmented model because this is how you make money as an airline now. It's just not profitable otherwise. Yep. Industries change. Southwest seems to have gotten the message that premium is in vogue right now. And speaking of perks on flights, Delta and And Giraff Kings just announced a partnership.

It's very vague, but do you think we'll ever see gambling reach the skies? I'm wondering from a regulatory perspective how this would happen because it's state by state. Gambling laws happen state by state. And frankly, I'm not sure how that would play if you're taking a flight from California to Texas. How do you get over all those regulatory hurdles? because there's been very light on details, I think that Delta and Draft Kings are like, yeah, this would make a ton of sense.

We've got people sit in our seats for a couple of hours. Let's let them gamble. But I think executing this is going to be much harder than it seems. And actually, at the federal level, gambling on flights is barred on all U.S. commercial flights. So there is the potential that they go to the Trump administration and lobby, but it might render itself as a much more limited partnership than we want.

I was about to say we want, but like maybe then some people want. I think as you fly over each state where it is legal, it drops in and out when you're over that state's specific airspace. So as you're flying over Vegas, get your bets in. And then once you hit, you know, Iowa, it's, it's done. Let's go up in altitude a little bit. You posted a video recently about the new space race. What is the new space race?

If you look at a chart of orbital launches, this is taking a rocket and putting it outside of atmosphere and into space. In 1967, 141 orbital launches happened. We didn't hit that number again, 141 launches until 2021. In 2021, we did 145 orbital launches. And if you look at the chart, it's just, right, like a stock chart that you really want to be in. It just has gone vertical. 263 orbital launches this year. And the number is only going to continue higher. The what's happened here, is that the cost to put something into space has gone so low that we've hit this moment. That's basically the shipping container. If you look at the shipping container back in the 1950s, it changed everything about the world,

how you can move goods around. It costs about $6 a ton to load something onto a ship back in the 1950s. Today, because of shipping containers, it's about 16 cents. And this is what SpaceX has done for rockets. And, of course, companies like Rocket Lab and a variety of others that are, starting to spin up. So as the cost has dropped, people are looking and saying, okay, well, what part of space is valuable and do I want to occupy or want to be a part of? So the new space race has been a function of dropping costs and then everybody's saying, well, I don't want to

miss out. So this has been an entrepreneurial thing, but also militaries at this point in time. So this is the first time in space history that we have not just nation states and militaries, but we now have entrepreneurs saying, all right, let's go to space and do some stuff. Let's stick with this future-looking perspective. We've been promised self-driving cars for a decade now, but there finally seems to be actual momentum with Ramo racking up rides in San Francisco and expanding to other cities. How close is our autonomous future?

Are babies born in 2025 ever going to need to learn how to drive a car? I think that the answer to that is probably probably, probably no. I mean, an infant today, they would 16 years from now, we're looking at 2040. Probably not. Yeah, Generation Beta. Yeah, the Vedas. We'll call them something else. Yeah, whatever the term is for AV, AV riders that don't have driver's license. I mean, a lot of people in New York don't have driver's license. And a lot of kids get around by Uber now. It's way safer. I'm not a parent. I don't know if you guys are parents. But one of the things that whenever I've talked to parents is like we would prefer for our kid to not have to drive. There's 35,000 car accidents that cause fatalities around the world or in just the U.S. every single year.

So if that number can be lowered, and I think it's hard to argue that autonomous vehicles aren't safer. I mean, we can get into little details, but over time, it will become safer because autonomous vehicle doesn't want to look at its phone ever, or have a chat or drink coffee or whatever it happens to be. So I think the answer to that is yes. You live near San Francisco. Have you been in a self-driving car? And what's the experience like? I've spent a bunch of time in Waymo's. I've probably taken 20, 25 trips in Waymo at this point in time.

The first thing that you notice when you get in a Waymo is that it's private. There's no driver. I mean, I'm sure there's cameras and speakers in there, and I'm sure if somebody really wanted to listen to you, they could. But you get in there with somebody and you can talk about whatever you want, at whatever volume you want. You can choose the music. Like you can have a party.

It's like your own little world for a little period of time. So it is very nice in a variety of ways. You know, the windows don't go down. You set your preferences once. And when you get in the next way, though preferences are there. The experience is quite elevated compared to what we have experienced with Uber and Lyft in the past. We'll be right back with more Phil after this. It's time to refresh your yard during spring backyard.

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one of the things Costco does is maintain its own identity so well with the kirklin brand i think it's probably underrated i mean everyone talks about everyone loves kirklin but like costco wine the kirkland brand is good i mean and so are a lot of their white label kirkland products. So they give you this ability to just go in, wander around, and spend money on things that you really do need at a really nice price point without being pushing. There's really no sales. Things are just kind of placed where things are just kind of placed where people can go find them, and they don't change anything. The $1.50 hot dog is such a really good, it's such a good example. The CEO or CFO years ago, or a couple years ago, I think you guys probably remember this.

He's like, definitely use the curse word. He's like, we are not going to change the price of the hot dog. I think that that's what people want is they want that stability of a product and a brand saying, we are what we are. We're not changing it. Just keep coming and we'll keep giving it what you want. We've been talking about food a little bit. And you have posted some videos about fast food.

Topolting's market cap right now is around $76 billion. McDonald's is $200 billion. What does calories per dollar? dollar have to do with the gap between those two market caps potentially narrowing over the coming years? Sure. When you go and anytime we get food, right, it's, it's calories. We are eating calories. That's that's kind of the point. So how much, how many calories can you get for a dollar was the premise of that whole video and series that I did because it's what we do. I don't think that we instinctively think about it, you know, how many calories am I getting? But if you look through all

the menus of fast food and sweet green and kava and chopola, you can see what kind of price point each of these sits at. And when you look at McDonald's menu and you look at Chipotle's menu, they each give about 100 calories for every dollar that you spend. And of course, if you go to McDonald's, while it is delicious, I am a, I'm a sucker for chicken nuggets. I think they are a gift to humanity. They're so good. But it's not good for you. It's obviously not good for you. And if you go to Chipotle's menu, it's fairly solid food, right? You can see all of the ingredients. The lettuce is fresh. There's, there's corn, there's produce. You can see all of the ingredients that are there. So for $10, you can get 1,000 calories at Chipotle that are of higher quality

than you can get at McDonald's. And this has opened up a lot of markets for Chipotle. Fast food can go into smaller rural areas that don't have a fluent customer base because they have a lower price point. Chipotle is the first really kind of healthy fast food quick service restaurant that is able to do this, which has unlocked just this magnificently big market. So the runway for Chipotle at about 7,000 stores now, they could expand by, you know, 500% across the United States over the next 10 to 15 years. A wise man once said that three out of every 100 people added to the U.S. population in the last decade have ended up in Phoenix. That wise man was you, Mr. Phil.

What is the number one reason behind the growth of the Sunbelt? And what is the biggest risk factor that could slow its role? It was cheap. I mean, it was so cheap. And of course, the weather. I think that there's a, there's a, the reason for the growth is, one, the weather. A, a lot of people wanted to get out of the Northeast where, A, property prices are extremely high.

It's hard to build. It's cold most of the time. And if you move down into the sunbelt where now electricity is, uh, Much cheaper. It's prevalent. Like, you can run AC throughout the year without a window unit. Like, the advances in air conditioning have made the sunbelt in the really hot areas like Phoenix and Arizona and Southern Florida. Attractive. Like, without air conditioning, this really wouldn't have happened. There are a few advances that have happened over the past 30 years that have just made it better and better. Not that people didn't live there beforehand, but this has helped for things like industry.

You can now set up a big office building in Phoenix, and it will remain cool, and people can work there. So you can have more jobs in these types of areas. So this is a big part of the growth. But I think the housing prices are not cheap anymore. And if you talk to anybody in the Sunbelt, in places like Phoenix, in places like Nashville, they complain about the influx of people. So before, you know, it was this initial thing like, oh, you're moving to Nashville, and people like, oh, yeah, it's great here. but now everybody knows that. It's not the niche cool thing anymore.

And I think that that could be a little bit of a problem. Okay, the year is still young. So Toby and I put together a few predictions for 2025. We'd love for you to rate these takes on the likelihood of them happening on a scale of me dating Duelipa to Tony Romo predicting a football play. In other words, not going to happen at all to very likely. So Toby is going to go first. My first prediction, the AI bubble pops, NVIDIA stock falls 50% as big tech companies reduce their spending on chips. I think that Neil has a pretty good chance of dating, duly pop.

So I'm not going to put it in that bucket. But I think that the chance of AI. Oh, is she engaged? I didn't know that. Well, things can change. Things can change. I don't think the AI bubble pops. I do not think in video stock falls 50%.

This is an area where we're seeing huge productivity gains. I wouldn't be surprised if you guys use it. I certainly use it all the time. It helps me in a variety of ways. So I think the productivity gains throughout the economy are kind of under the surface. It's hard to measure within financial statements right now, but there's a gold rush here. I can't see it going anywhere. It's only going to get better.

I wrote code for the first time a little bit ago, and the tools available for writing code are so good. And so the people that write code are also the people that develop AI, and I just can't see them pulling the plug on this. They're just going to want to make their job easier and user. Okay, next prediction. Apple intelligence fails to ignite a new round of iPhone buying, putting CEO Tim Cook in the hot seat to find Apple's next big thing. It has been underwhelming, hasn't it? It really has. I kind of thought that they would do a better job with it.

I thought they would do a better job with it. However, Apple tends to roll things out a bit slower. I think this falls in the middle. Tim Cook hasn't been on the hot seat for a little while. There have been some failures. I think one of scale zero to ten. Yeah, Vision Pro was a big swing, but big flop, yeah. Yeah.

I get this a six out of ten. Getting close to Tony Romo. There you go. All right. Next one, tariffs reignite inflation, and rather than cutting rates, the Fed heights rates at least one time next year. low. I say this is a possibility I would never assign a zero, but I think the incoming administration

will want to avoid inflation at all costs because if you get tagged with inflation, your group is going to be out of office. So I put this at a two, though I think that there will be plenty of headlines around this. We're taping this on Wednesday, January 15th, and there was just a pretty solid inflation report that brought rate cuts a little back, a little bit back. in place. So some good news over there. Next prediction, Google is forced to sell Chrome by the U.S. government. I haven't been too close to this case, honestly. But I think that that does not happen with the, I don't think that that happens. Yes, I don't have a ton of color on whether or not Chrome is going to be sold. I just don't know. You don't need a reason. You can just go with your gut.

I'm going with, no, I don't think it happens. And I think it would be a mild dent in Google's So far, we're 0 for 5 on predictions. They've all been pretty strong. Our highest is a two so far. So let's see what you think about this next one. Our second to last one, Starbucks's stock more than doubles after returning to sales growth under new star CEO Brian Nicol. This happens over the next 12 months. Yeah, 12 months. It doesn't have to be more than doubles, but Starbucks stages a comeback is the general thrust of it? I would say there's a strong yes there. I would go in the in the seven to eight to nine. I might high five Tony Romo on this. I think Starbucks has has a renaissance over the next 12 to 18 months. Because you trust Brian Nicol or because you think that they're going to

figure out their cafe situation, make it a more pleasable experience to get coffee there again? I think they're going. I trust Brian Nicol to do exactly that. He's very good at this. And already what you see is him slimming down the menu, all of the things that I think we all went to Starbucks and were like, why are they serving olive oil drinks? Why is the menu five pages long? Like, it can be a much more pleasant experience. I think a lot of people like Starbucks. The brand has such good affinity. So I trust Brian Nicol to get this back on track. All right. We went one for seven. Actually, Neil has one more prediction. All right. Will Maxonomics hit 100,000 YouTube subscribers?

I would say, man, talk of my own book here. Yes, absolutely. I think YouTube hits on 100,000 subscribers pretty early in the year. I really like what we're doing. It's been a lot of fun and the momentum is great. And if you like what you heard from Phil today, you can definitely go to his YouTube page, watch incredible videos in the podcast description. And you can also find them on all social media platforms under the handle at Maxonomics. Phil, I only wanted to call you Philonomics one time during this show. So thank you so much for jumping on. We hit a lot of topics there. So I hope you all enjoyed listening at home as well. Go check out Phil's stuff. He's on all platforms and he makes awesome stuff. Thank you for joining us, Phil. Thank you so much for having me. It's been a pleasure.