Morning Brew Daily - Meta and Google Cut DEI Programs & Can TikTok Save Peloton?

Episode Date: January 5, 2024

Episode 229: Neal and Toby discuss why companies like Google and Meta are cutting DEI programs. Plus, Google is also beginning to get rid of cookies and ESPN strikes a massive $920 million deal with the NCAA to air over 40 college championships. And a big part of that deal is thanks to women's basketball. The guys share their stock and dog of the week, including why Peloton's new partnership with TikTok could help the company. And finally, Target runs out of special Stanley cups and the personal finance author that is $1 billion in debt. 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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Terms and conditions apply. Good morning, Brew Daily Show. I'm Neil Fryman. And I'm Toby Howell. Today, corporate DEI programs are under siege following the resignation of Harvard's president. Then we'll tell you why the guru behind the book, Rich Dad, Poor Dad might not be someone you should be listening to. It's Friday, January 5th. Let's ride.

So there's this trend going around social media of people making lists of what's in and what's out for 2024. Toby, you are a tastemaker of the highest order. give the people what's in and what's out this year so we don't fall out of step with society. Okay. First, I'm going to start with a little health thing. Out is having tummy aches. In is fixing your gut health. So many people complain, oh, my stomach hurts, my stomach hurts. Eat some kimchi, you know, fix the gut health.

Let's get that biome going a little better. Okay, out shutting the heck up. In is yapping. As podcasters, yapping's in this year. It's going to be a big year for yappers. And then finally, you're going to like this. one, out is constantly having external stimuli, and in is doing the dishes or doing chores with intention, just being very present in the moment. So being more present is in this year. Any comments,

Neil? I like him. I'm not going to follow him, probably. But I do like the fermented foods trend. I think that's going to be big. All right. That's huge. Before we jump into the show, we have a quick word from our sponsor, Veem. So as you know, Neil, I like to run. It's something Veeam and I have in common, actually. As in VIM helps you recover data faster to keep your business running. No, it's more VIM has multi-layer protection that keeps my data secure to keep my business running. All right. Toby versus VIM marathon race at the end of the year. Let's do it. Head to VIM.com today to discover more. That's VEEAM.m.com today.

It's time to refresh your yard during spring backyard days at the Home Depot. Get low prices guaranteed on propane grills starting at $179, like the next grill three-burner gas grill. Or get $50 off a select Weber Spirit grill and bring big flavor to your backyard. Then set the scene with Hampton Bay string lights that bring it all together. Shop spring backyard days for seven days at the Home Depot. Now through May 6th, Exclusion supplies. Youombedo.com slash price match for details. Let's begin with the three most controversial letters in business, DEI.

They stand for diversity, equity, and inclusion programs intended to boost minority representation, and critics of these initiatives are on the attack following the resignation of Claudine Gay, Harvard's first black female president who championed those efforts. Corporate DEI programs surge following the murder of George Floyd and the Black Lives Matter protests in 2020, when companies were forced to reckon with their lack of diverse workforces. Chief Diversity and Inclusion officers were the fastest growing C-suite position in 2020 and 2021, according to a LinkedIn report, with 169% growth in hires. But now, DEI is increasingly under fire from conservatives who accuse the programs of discriminating against white people

and for promoting the interest of certain minority groups at the expense of others. The debate over DEI and Claudine Gay at Harvard has even led to a nasty war of words between billionaire CEOs. This week, both the hedge fund manager Bill Ackman and Elon Musk have called DEI racist, leading to a defense from Mark Cuban, who called them good for business. Still, the term DEI may be in retreat as emboldened critics, sense blood in the water, and prepare legal challenges to companies' diversity programs. Nearly a third of people hired in diversity-related roles after George Floyd have already left. Yeah, you now have a group of people working to dismantle DEI at the corporate.

level, it didn't just stop at these universities. Some lawyers, some investors are potentially looking at corporate law in order to pressure these companies into rolling back their DEI. I mean, the argument is that this preferential hiring may have deprived companies of hiring like the best talent, which is under corporate law, potentially a breach of the board's duties to shareholders. So they're taking a shareholder-specific argument to this. So this is not necessarily only a culture war anymore.

going to boardrooms and using corporate law? A lot of this stems back to last summer when the Supreme Court made this decision to overturn the use of affirmative action in university application policies. They said you cannot use race-based admissions anymore. That was expected to spill over into the corporate world with, like you said, these legal challenges to corporate and business diversity hiring programs. And we're seeing that play out in a big way right now. Yeah, absolutely.

But then you look at someone like Lulu Lemon founder Chip Wilson, who's been very against DIY for his pretty much entire tenure with the company. And then after he left the company as well, he recently just came out saying that he ripped Lulu Lemon's DIY effort saying, as a company, you quote, don't want certain customers coming in, saying that Lulu Lemon shouldn't be for everyone. But then you look at Lulu's performance as a company since kind of embracing a more inclusive ethos. It was up 55% last year, up over 200% since 2020.

So if you are taking just a specific corporate lens to it, there are companies that succeed under this framework. And potentially it shouldn't be like this sweeping rollback of DEI efforts. Right. So Mark Cuban has been one of the most forceful defenders of DEI and on X, Twitter, whatever you want to call it, kind of responded to Elon Musk with this forceful response. And he went line by line with diversity, equity, and inclusion. and explained why it's good for business,

and I'll just read a few of his responses so people can get a sense of his arguments, said on diversity, good businesses look where others don't, define the employees that will put your business in the best possible position to succeed. And on inclusion, he wrote, great companies, create environments that reduce unnecessary stress on their employees.

So he responded to Bill Ackman and Elon Musk saying, you guys don't want DEI programs? Don't have them. I think my businesses will succeed if we implement these kind of programs that create diverse workforces. For decades, companies have followed users across the web monitoring which sites they navigate to using cookies. But Google is finally killing that practice once in for all.

It's moving forward with a plan to phase out cookies for Chrome users in a test that will initially be available to 1% of global users. But a lot of people use Chrome, though, so 1% means 30 million people will be living cookie-free as of yesterday. The change is made as Google is trying to balance increasing consumer-private. without disincentivizing companies from using their advertising products. It's been a tough wire to walk, though, and already people from the digital ad industry are complaining that they weren't prepared for a post-cookie life that strips away their ability to effectively target users. If you're one of the 30 million people initially, you may see some less relevant ads

popping up across the web initially, but at least you know that your privacy is still intact. This is a culmination of a lot of years and a lot of pressure on big tech to clean the up its act when it comes to user privacy. Is this about time, Neil? This is a huge deal. This is a $600 billion digital ad industry that's being completely turned on its head. I mean, even Google admitted we are making one of the largest changes to how the internet works in its history. And that's because cookies have been around since the dawn of the internet. They help in many ways they help us. I think people don't realize that cookies are the reason that when you log into a website, you don't have to auto fill all of your logins and your credit card

information anymore because a cookie essentially identifies your computer along a network. But there are good cookies and bad cookies. There are first party cookies, which are the ones owned and operated by the website you go to. And then there are these third party cookies. That's the one Google's killings. Those are operated by advertisers and analytics companies that want to track you across the website. So that's why if you're on a bomb, like a sock company website, buying some socks, you will. And then you go to another website read like a New York Times or Morning Brew article.

you'll see an ad for maybe a rival stock company, and those are the things that Google is trying to kill me. But it's not completely doing away with this, right? It has its own program that it wants to unleash. Yeah, there's this project called Privacy Sandbox that Google has been working on for a long time now. It involves a bunch of complicated new tools and new tracking methods. So technically, Google is pitching two digital advertisers that we are going to recreate the experience of using three third-parted cookies. They have this feature called protected audience, which should potentially give you the same sort of audience data without the third party tracking. So it's kind of reinventing itself, but I do wonder if it's kind of like cutting off its nose to save its face in a way.

Obviously, there's a lot of pressure from European, the UK's competition and market authority. They always come into the play when it comes to privacy concerns. but they're trying to satisfy these privacy concerns while also not tanking their business. And I don't know if they're going to be able to pull it off, but they need to pull it off in order to kind of keep their business a lot. I think this is going to be. Google is going to be fine with this.

I think the question is how fine are they going to be and whether they're going to be too fine that the regulators you talk about will crack down because the ad industry is up in arm, many of them are up in arms that Google is only doing this to enrich itself and make itself even more powerful. And I'll just go back to what Apple did, right? So Apple, limited tracking by its rivals on people who have iPhones. They said you can opt out of tracking. Meanwhile, Apple's ad

business surged. It tripled in market share while its rivals were, you know, Facebook lost $10 billion because of this ad tracking. So I think that's what people are concerned about that. Google is only doing this to enrich itself. And what's important is the UK regulator, can shut this program down if it seems like Google is doing some monopolistic practices. Right. And remember, Google accounts for 60, or Chrome accounts for 65% of internet traffic worldwide. So three times as popular as the next closest browser, it's Safari. So again, it's going to affect a lot of people.

Yep. Okay. Women's College Basketball is surging in popularity, and it's finally bringing the cash to match. The NCAA and ESPN announced a new TV rights contract for sports championship worth $150 million a year for eight years, three times the previous value of the deal. While the contract encompasses 40 different sports, the big payday is driven by women's ball, which represents 57% or $65 million worth of the deal's annual value. That's 10 times the sports value in the previous deal.

This is being called a huge win for the NCAA and new commissioner Charlie Baker, who secured a big revenue bump at a time when media companies are reining in costs all over the board. And it's also a big victory for women's college basketball, which must feel a sense of vindication after it spent years accusing the NCAA of giving it much fewer resources than the men's game despite its growth. Toby, I'd say one of the main themes on our show over the past year has been women's sports have been one of the fastest growing assets in any area of the media industry. And that's showing no signs of stopping. Man, I just think back to the viral video from 2021 that showed the huge difference between the men's and women's weight rooms at the NCAA tournament. The women's literally had a corner with like six weights, one rack of weights there, and the men's had this entire ballroom full of weights.

You juxtpose those two images, and then you compare them to the hype around Caitlin Clark, the hype around Angel Reese from last year, how big that run was and how much attention was focused on it. And it makes sense that finally they're getting kind of the monetary reward for the eyeballs that they bring to the sport. Right. I mean, that game between Iowa and LSU brought in 10 million viewers, which is a huge number that was double the previous year. Meanwhile, women's volleyball championship between Texas and Nebraska was also a record high. Women's softball. So this goes beyond just women's college basketball and extends to a lot of the quote-unquote non-revenue generating sports.

It's huge for the NCAA because up till now, really men's college basketball was their main primary moneymaker. That deal is worth about a billion dollars a year with CBS intern. and the fact that Charlie Baker can go in and say and extract a lot of money from these non-revenue sports, these sports that maybe were in the shadows over the past decades. And people are increasingly watching like women's gymnastics with Livy Dunn. I mean, a bunch of these sports, not just college basketball, are really becoming into the spotlight. Yeah, this is a much better deal for NCAA. ESPN got a great deal in 2010.

They agreed to pay 500 million to broadcast pretty much most of NCAA's championships for 14 years, which comes out to around 35 million bucks a year. This new deal, on average, brings in $150 million a year. So even amidst the tightening media landscape, it was great to see this bigger deal. All right, before we jump into

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Neil, I won the pre-show Blitz chess match, so I'm up first, and my stock of the week is Peloton. No, it's not opposite day. Peloton really is our stock of the week because it finally figured out that the way to reach the use isn't through cringy holiday commercials, but on TikTok. Peloton is partnering with TikTok to bring short form fitness videos to the platform, a move that has investors feeling nostalgic that the pandemic darling might have found its groove again. The partnership will show up as a totally new hub on TikTok you can find under the hashtag TikTok Fitness powered by Peloton. Peloton has been trying to reinvent itself recently as a fitness company for all with a tiered pricing strategy that will let that will let you access content on its app that you don't need its pricey stationary bike for. This partnership comes on the heels of Peloton teaming up with Lulu Lemon as well, so it's clear.

is trying to get the company back on track. Stock jumped 13% yesterday alone. Neil Peloton, is it back? Well, it's undergoing a transformation right now. Not only is it much smaller than it was, but it used to want to be the Apple of Fitness. I think it even said that it wanted to be the Apple of Fitness. It wanted to have this exclusive, really pricey hardware,

and pair that with the media package all in one place. And to access any of that, you needed to buy these bikes, these treadmills for thousands of dollars. That did not work. So now it wants to be. I want to say the Google of spreading its media across various different channels, inking a bunch of partnerships, saying you don't need the bikes or the treads to become a part of the Peloton community.

So it's, yeah, it's a pair of partnership with Lulu Lemon. It's getting its bikes into different hotels and corporations, things like that. And now it's getting on TikTok where, you know, TikTok, it seems a little ephemeral. Like you're not going to be a huge hardcore Peloton user because you're constantly scrolling. so it's not maybe this hardcore loyal base, but they're hoping it brings in a few more customers at the margin. Yeah, it's reinventing themselves as a more generalized fitness company. It is interesting, though,

because this partnership isn't just going to be workout videos. They want the instructors who are these mini-celebrities in their own right to kind of post their behind the scenes or get ready to me with me videos. It is interesting, though, because they could just do that without this formal partnership anyway, so I wonder why they needed felt they need to. They'll get promoted by TikTok maybe. It's good for Peloton. I'm just wondering why TikTok felt they need to do it,

because they would come to their platform regardless of that. But anyways, I do think it's smart to lean into the influencer part of their coaches. Peloton has been riding the stationary bike struggle bus, though. In the three months that ended September, Peloton lost 30,000 members. Its revenue fell to $595 million down from $757.57 million three years ago during the high of the pandemic. It's just tossing Hail Mary is right now. It's just looking for something. All right.

My dog of the week is Apple, which is apparently doing dry January because it's lost all of the buzz. The most valuable company in the U.S. has fallen 6% this week after it got hit with not one but two stock downgrades from analysts. These analysts pointed to a few different concerns keeping Tim Apple up at night. First is the gloomy macroeconomic outlook in China, which is a huge market for Apple and could dampen its iPhone sales there. Another bad omen, they said, is that Apple's booming and highly profitable services segment will slow down. here. And then there was this whole Apple Watch patent debacle that's not yet fully resolved and could dent sales over the holiday shopping season. So all in all, a rough start of the year to Apple for Apple, which has become the most unloved big tech stock on Wall Street. Yeah, you're going

to see that headline a lot. Apple is the least love tech on Wall Street because there's only 33 buy ratings from analysts right now. Compare that to 68 from Amazon. And of course, these analysts ratings aren't everything. And no one truly knows which way the stock is going up or down. But it's coming off a great year, too. It rallied nearly 50% last year. But if you kind of look at the broader tech sector, all of a sudden, there's some crack showing. The NASDAQ 100 decline for the fifth straight day. It's the longest losing streak in over a year, which is kind of crazy to that only a one-week losing streak is suddenly the longest streak in over a year. But some cracks are showing at the edges of these big tech

companies. Black Friday was a few months ago, but chaotic scenes reminiscent of the shopping scramble popped up this week when customers stampeded into Target to get their hands on an item they just needed to have. What product could possibly inspire such madness? Well, it's a water bottle, specifically a limited edition pink version of the 40-ounce Stanley Quencher that was released at Starbucks stores in Target locations. These water bottles have been a viral sensation in the past few years, becoming just as much a fashion accessory as a vessel for drinking.

the Stanley Quencher was the top search product on Amazon this holiday season, and people were filmed literally crying when they opened up their Christmas gifts to see one of these water bottles. The story gets even more bizarre because Stanley is not this hot new startup company. It's in fact 111 years old, and just a few years ago, it was doing a steady $70 million in annual sales. Now, thanks to its viral water bottle, it did an estimated 750 million in sales last year. Toby, can you please explain the Stanley Cup craze? It's adult beanie babies all over again. It's got Middle American an absolute chokehold.

It's like Birkenbags for a more accessible burqin bag, if you will. But this is no accident by any means. There's this guy, Terrence Riley, currently leading Stanley, who was also in charge of turning Crocs around. When he became an exec at Crocs in 2013, nobody wore them. They were ugly. They were lamb. Suddenly, when he left, they were on the feet of every celebrity, made a debut.

at London Fashion Week. He completely turned this brand around. And the same thing is happening with Stanley right now. For the past two years, yeah, revenue was doubled annually. Sales of specifically the quench are up 300% year over year. I think what he did was really reimagine the brand more as an accessory than a hardcore piece of camping gear. It used to be these green water bottles were literally used by B-17 pilots in World War II. They were extremely, extremely hardy camping accessories. He brightened the color scheme. He made more of a diverse color palette.

It catered it more towards women and their daughters. And suddenly you have this genius marketing product that people are lining up outside of Target to get. It seems like they're borrowing the streetwear the playbook with these limited edition drops and collaborations with celebrities. It seems like that has been the playbook that worked also with Crocs, and it's also working with this water bottle. They also had just one of the greatest organic viral moments that you can ever imagine.

There was this video where a woman's car had caught on fire, and she was just going through the charred interior of it. And in the cup holder was her Stanley water bottle. She pulled it out. It still had ice in it. That, you cannot dream of a more, of a better organic marketing opportunity. And obviously Stanley jumped on TikTok, respond to the video and said, we'll replace your car. They leveraged the most out of it. That's the stuff that marketing drinks are made of.

That's Pop-Tart level. I also just want to say the faces of NHL exist must be so confused because Stanley Cup is trending everywhere. And they're like, wait, is this us? But it's not. It's the real Stanley. How long is Stanley staying around, though? Because we've seen water bottle fads before.

They just seem to be a product where people latch on and kind of fade. We had the now gene rise and bust. and then we had hydroflask a few years ago. Now it's Stanley. I think the fact that they can do different colorways will kind of keep that hype going. Or maybe there's some innovation. I mean, they put a straw in their cup,

which I think people love. I don't know what the next waterball innovation is, but I'm excited to try it out. The key is that they're big, but they also fit in the cup holder because they're tapered. I think that is really crucial to their success. Yeah, for sure.

Okay, how many of you guys listening have read the book, Rich Dad, Poor Dad, by Robert Kiyosaki. I'm sure it's a fair many of you. It's sold over 30 million copies. It's an incredibly popular personal finance book that came out over 20 years ago. But its author is back in the news for a bizarre reel that's going viral on Instagram right now. The clip starts out innocuous enough with Kiyosaki, explaining that it categorizes debt into good debt and bad debt,

where good debt is used to purchase assets like real estate and bad debt is used to purchase liabilities like a fancy car. But then he says that this strategy has led him to be $1.2 billion. in debt. That is billion with a B. He freely admits to this fact and follows it up by saying he's in debt because, quote, if I go bust, the bank goes bust, not my problem. There's a perverted sense of logic to that, Neil, but this is a guy that millions of people look to for financial guidance, yet he's out here spouting kind of insane takes like this. And this is not his first controversial financial opinion by any means. These financial gurus, man, they are often exposed as anything but. Right. So I just want to go back to give a summary or the main thrust of the book

for people who may have not read it. It's called Rich Dad, Poor Dad, and it deals with two, quote-unquote dads in his life. One is his actual dad, who kind of worked for the man, worked for his paycheck, never got wealthy. And then one was his friend's dad, who was entrepreneurial, owned his own business. And the point of the book that he tries to make is that you should make your money work for you rather than you work for your money. So that is his guiding principle across all of this. I guess that leads one to get $1.2 billion in debt, though, because the point is good versus bad debt. Yeah. And so that's the kind of problem with this guy is that the general thrust of his book is something that a lot of people kind of can align themselves to you.

But then in the year's sense, he's kind of made a name for himself as maybe this fake, or not fake guru, but kind of maybe charlatan-esque, guru-esque, in the sense that he's kind of a perma bear, which is someone who is just constantly, that the economy will fall, that the sky is falling. Someone charted out his tweets based off the S&P 500. He calls for a recession, like, get all your cash out of banks, like things are falling, sky's falling, almost every quarter on record going back over years. And so he knows fear always sells. He kind of knows that when you are someone that people look to, you can find yourself back in the news, get on headlines by saying,

oh, a crash is falling because he wrote this book 20 years ago and people listen to him. So maybe the lesson here is whenever you read a personal finance book, take it with a grain of salt because the author could end up being $1.2 billion in debt. Do we think that's real? There's no way. How can you get $1.2 billion? That's a lot of Stanleys right there. All right.

That is our show for this Friday. Have a great first weekend of 2024, everyone. As always, you can drop us a line at our email, MorningBrewdaily at morningbru.com. Let's roll the credits. Emily Milliron is our editor. and producer. Samantha Velas and Raymond Lou are associate producers. Echenoa Ogu is our technical director.

Billy Minino is on audio, in, hair, out, makeup. Devin Emery is our chief content officer and our show is a production of Morning Brew. Great show today, Neil. I wish you all well. Not loving your AT&T or T Mobile Bill? Yeah, we've been hearing that a lot.

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