Morning Brew Daily - One Year of ChatGPT & Why Most Billionaires Are Now... Nepo Babies

Episode Date: December 1, 2023

Episode 204: Neal and Kyle discuss why the stock market is hotter than ever. Plus, it's the one-year anniversary of ChatGPT and why we are in the era of nepo baby billionaires. Also, a recap of the Cop28 Climate Summit and how much money did Red Lobster lose on their endless shrimp deal? And finally, Forbes shares their Hall of Shame 30 Under 30 list. Listen to Morning Brew Daily Here: https://link.chtbl.com/MBD Watch Morning Brew Daily Here: https://www.youtube.com/@MorningBrewDailyShow Disclosure: This is a paid advertisement for Autonomix’s Regulation A+ Offering. Please read the offering circular at invest.autonomix.com 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 Freyman. And I'm Kyle Hagee. On today's pod, Nepo billionaire babies are taking over the world. And people are eating too much shrimp at red lobster.

Today is December 1st. Let's ride. It is December 1st, and it's time to declare the holiday season officially upon us. Ooh, big declaration. Winter markets are full steam ahead. Christmas lights are being. hung up all around the country, and you can't get anything from CVS without hearing rocking around the Christmas tree.

Kyle, do you have any rituals that kick off your own holiday celebrations? I'm going to say the holiday season has not started yet because it only starts when I watch Home Alone. I have not done that yet. I think there needs to be a moratorium period between Thanksgiving and at least December 1st before the holiday season kicks off. So I will let everyone know once I watch Home Alone, and then you can begin celebrating. That was this week, though.

I know. I have time. It doesn't start kickoff. Could be December 1st. I'll try to watch it this weekend. You have to tell you have to come back on the pot and tell everyone, oh, you're going to watch it this weekend. I'll try. Okay. Because it kicked off for me last night, a little candle and I put on the nutcracker. And that, that to me is we're in full holiday swing. All right, that's a good tradition. Okay, before we get into the news, a quick shout out to the show's sponsor. You know, Kyle, there have been a lot of iconic returns over the years. Tiger at the Masters, Gandalf. Oh yeah, Matthew McConaug. the McConniscience, Patriots 283 over the Falcons, and even Martha Stewart with a great comeback. And today, another chapter will be written in history's greatest comebacks because Yahoo! Finance is back to support the show through the end of the year. Yes, this is such a great partnership because we actually use Yahoo Finance to research for the show. It is the best platform to get a full view of the financial landscape. Check in on your stocks and see what the Fed is up to. So no wonder it is the Internet's number one finance platform trusted by over 150

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Let's go to the numbers. Yesterday, the Dow hit a new high for 2023, while the S&P and NASDAQ both posted their best months. since July 2022, with gains of at least 8%. The S&P's $3 trillion surge in November put it just 5% away from its all-time high. And the S&P has done something that's happened fewer than 10 times since 1928, climbed more than 8% in November. So just to hammer the point home, this was a historic month.

And the good vibes aren't just confined to the U.S. Global stocks posted their best month since 2020 when COVID vaccines came out, while global currencies also rose. So what explains this? Holiday cheer, of course. But probably more important than that is November was the month when investors decided the Fed's mammoth interest rate hikes were in the rearview mirror. With inflation coming down to normal levels and the economy holding up better than expected,

Jerome Powell's job appears to be done. Yeah, well, I think the markets heard I was about to watch home alone, and so now they're gearing up. I'm personally still looking for my log into my 401K, so I hope once I find that, things look good. It's interesting because sometimes one stock or a bundle of stock, really pushed the market forward. Salesforce had a 9% post-earning surge, which helped the market. But also, this is something that had a lot of breadth.

It said 87% of the stocks listed on the S&P have actually gained in November. Typically, it's this magnificent 7, which are Apple, Amazon, Alphabet, Navidia, Meta, Microsoft, and Tesla that boosts the market. But this is seeing kind of wide-ranging effects. Also, mortgage rates continue to drop. It's the fifth straight week rates have moved lower. So buying a house for the millennial generation is now not impossible. It's just basically impossible, which is interesting to see.

That mortgage rate job has to do with something I did want to talk about was because as stocks surged, bond yields fell, and that helped stocks. Bond yields were up near 5% the 10-year treasury yield. That was putting a lot of pressure on stocks, and that was investors kind of signaling that the Fed wasn't done with its interest rate hikes. But now that Jerome Powell seems to be done with this, bond yield. yields collapse this month, and that reduces borrowing costs across the economy, and especially for people that really touches them in the housing market.

So we've seen mortgage rates drop. I do have a few game balls to hand out. Okay, let's do it. Okay, so my first game ball is Coinbase. This was the month that Binance's CEO pled guilty to crimes and SBF was convicted. This is not a great month for crypto in general, but Coinbase, the crypto exchange, its stock is more than tripled in 2023 and it had a 62% rally

in November. So the vibes are good with Coinbase maybe as the other crypto exchanges kind of fall around it and so Bitcoin as well just reached an 18 month high yesterday. So some weird stuff going on in the crypto market, but the people,

the institutions and the tokens that remain are doing okay. Yeah, it's that even obscure cryptocurrencies are rising now with this news. So your Dogecoin is probably doing quite well. I don't want to say anything about Doge going. That could get me in trouble. My other game ball is to Kathy Wood, who is this investor who rose to prominence during COVID on her futuristic bets on next generation technologies. That did really well in 2020. And then

her funds kind of collapsed in 2021 and 2022. But her flagship ARC Innovation ETF rallied 31% this month, which was its best month on record. So Kathy Wood, who was heralded as this amazing investor in 2020 and then kind of bashed as this no-nothing in 2021 and 2022 is having a bit of a renaissance in November. Kathy's back. And I think this, you know, we've talked about a recession for a long time, this like soft landing. It seems like we might be pulling this off.

The MSCI World Index went up 8.9% this month and emerging market shares have gained 7.4%. So actually, I think we've done an underrated job at kind of handling this quote-unquote recession. Neil, let's move into our next story, which is it's a big sell. We have a big birthday to celebrate, which was yesterday. Do you know whose birthday it was? Tell me. Well, it was Ridley Scott.

It was Chrissy Teagan. It was Ben Stiller, but we're not here to talk about them. We're here to talk about Chat GPD, which turned one-year-old on November 30th. Chat-GPT is also known as Chat Generative Pre-T transformer. That's its full, full government name. GPT for short, this is the large language model, obviously created by OpenAI. And I have some fun facts to celebrate this birthday. So ChatGBTGBT actually set a record as the fastest app to reach 100 million active users.

It reached that milestone in two months, and it actually had one million users in just five days. For context, it took TikTok about nine months to get to that level, and it took Instagram two and a half years. And ChatGBT, your Open AI is expecting $1 billion in revenue in 2024, mainly from their paid $20 a month subscription. And we're already on to GPT4. So it's going through a lot of transitions. Neil, how are you celebrating our little chat GPD's birthday? I'm thinking. That's how I'm celebrating.

Like, what does this mean? Was this, is this the before and after moment that we've seen with so many other technologies? Netscape with the internet, Facebook with social media, the iPhone with smartphones, Netflix, with streaming? You know, did we, did chat GBT's release herald this new era of technology that, you know, whatever happened before will be completely different than whatever happened after? And I think we're still trying to figure that out. I think the majority of people would say probably yes, because unlike other, I don't know, I would say bubbles, like NFTs, the Metaverse, crypto, things like that. People didn't actually use that in their day-to-day.

It seems like companies are adopting generative AI features based on ChatGBT. It's consumed all of Big Tech. Every tech company has released a Chatbot rival to ChatGPT, though I would say ChatGPT is still the leader by far, which is good for Microsoft, which invested in Open AI. So I guess, yeah, this is a, this one year anniversary is, I think, a good time to reflect on chat JBT and whether we have just opened Pandora's box with generative AI, and no one really knows what comes next. Right.

I'm not sure if it's ushering in a new era. I want to say yes, but all I know is it's drafted every email I've sent for the past six months. It has it really? It is not. But I consult chat, GBT. I like the tool. But I did want to check in on its development, because it's one year.

year old. So I looked up, I actually asked ChatGBTGBT, like, what can you expect from a one year old? The first was cognitive development. Can it start to understand cause and effect? GBT4 can pass the LSAT, so it's doing quite good there. Vocabulary, you're at one year old. You're supposed to know a few words. ChatGBTGBT knows every single word ever. So also crushing it. You start to get social and emotional development, which can manifest as social anxiety or separation anxiety. I feel like it had some separation anxiety with the recent open AI drama. And then lastly, sleep.

You're supposed to sleep 11 to 14 hours a day. Chat ChattchapD doesn't sleep. It's got that grind set. So it's doing quite well except for sleep. So I'd say this is a healthy baby. Okay, Freud. Yeah, we'll see what happens with ChatGBT. I mean, OpenAI obviously went through a ton of drama in the past few weeks.

Sam Altman was officially proclaimed back as CEO. But that schism, that fight also opened up the question of AI safety. because the fight did appear to be, well, no one actually knows what the hell went on in that bored room, does appear to be like we, you know, people were worried about what we were building and what this AI has unleashed and whether it will eventually destroy humanity

and the people who are pushing back on it and saying, if we stop development of this, it is akin to murder because AI could solve a lot of health care issues and solve a lot of the other existential crises that humans face. Right. What's your hot take for the next year in chat, GPT? I think it's going to keep getting smarter. I do think it's going to infiltrate pretty much every element of society.

To your point, it's a very practical, and we can see use cases, and people are actually using this now. And the last thing I'll say is, like any good birthday, there's always someone who isn't celebrating the birthday that's having a better time. And this might be Navidia, because they're actually the only chip company to join the $1 trillion market valuation based on all of the resources going into cloud computing and chips for these large language models. So they're having a good time as well. They are. We got to move on. Kyle, the great wealth transfer is upon us. And no, I'm not talking about the outstanding Venmo request.

You still need to pay me. I forgot about that. For the first time on record, new billionaires accumulated more wealth through inheritance than entrepreneurship, according to UBS's annual study of billionaires out yesterday. About $151 billion was inherited by 53 heirs in the year through April, while $141 billion was accumulated by self-made billionaires. This is a big deal. It signals a turning point in what's known as the great wealth transfer, the largest transfer of wealth in history. Over the next 20 to 30 years, wealth worth around $5.2 trillion is expected to be passed from aging billionaire boomers down to their millennial errors. And what these nepo billionaire babies do with their inherited fortunes is really a matter of global importance. Will they become philanthropist? Will they stay in their family businesses? How are the values of the new billionaire class different from their parents? parents and how will their financial decisions change as a result of this? So these are all big questions that because of the milestone we just hit are really worth thinking over. As UBS said in its report, the Great Wealth Handover has long been anticipated, but now it's underway and

gathering momentum. This is just the tip of the iceberg. Yeah, I think this is actually a really interesting story. I mean, you mentioned the numbers. In the U.S. alone, they're expecting $73 trillion will be inherited by 2045. Not just billionaires, just in general boomers handing it down. to their kids. Yeah, so a giant wealth transfer. And I think of the old adage, like the first generation earns it, the second spends it, and then the third blows it. And we're kind of moving into the second one of spending.

And you mentioned, like, people are actually struggling, I mean, quote unquote, struggling with how to spend this money between the first generation and the second generation. There's some really interesting statistics that the first generation, the generation that earned the money originally, has a higher percentage of people that want to, like, enable the future generations of their family to have a great life. They're way more likely to have philanthropic goals as opposed to the second generation. And they're way more likely to support the arts, support culture. As the second generation is actually focused on continuing to grow the business or grow the brand,

they want to feel like I actually earned this money, so they want to invest it more in business. So I think we're going to see a shifting landscape of what billionaires focus on, depending on if they earned it themselves or if they inherited it, which will be quite interesting. Right. It seems like there's going to be fewer pure plate philanthropists, kind of like the George Soros of the world, and there might be more impact investing. That seemed to be a big topic in this survey. These second generation billionaires are interested in kind of combining positive social movements, you know, like climate change and geopolitics, things like that,

making sure our world order is stable, but not just giving to philanthropies or pure play charities, but by doing like impact investing, which is environmental, social governance, that ESG word has been, acronym has been thrown around a lot. So it seems like they want to deploy market forces to make the change that they want to see because it doesn't seem like they are particularly trusting of existing charities or philanthropies like their parents. Yeah. And honestly, I will say these are the best kind of Nepo babies because some Nepo babies get like a secondary role in some Netflix film. These Nepo babies got billions and billions of dollars. So you're lucky, and I hope you use that money for good.

All right. We'll get to the rest of the show after this 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 $179, like the next grill 3-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, see Home Depot.com slash price match for details.

Yamava Resort and Casino at San Manuel is California's number one entertainment destination for today's superstars. Catch the Jonas Brothers return to the Yamava Theater stage on April 30th, the powerful vocals of Demi Lovato on May 17th, and the signature Southern Country Rock of Eric Church on July 19th. Tickets on sale now at Yamavatheater.com. only at Yama Vah Resort and Casino, celebrating its 40th anniversary. U-N. must be 21 to enter. We are back, and Kyle, I have a burning question for you about the COP28 climate summit,

but first I just want to give a little background to our listeners. The 28th edition of the COP, which stands for Conference of the Parties, kicked off yesterday in Dubai. The main agenda item for the nearly 200 countries attending is to take stock on whether the world is on track to meet the targets of the 2015 Paris Accords. which aims to keep warming below 1.5 degrees Celsius above pre-industrial levels. After this 1.5 degree warming threshold, some of the impacts of climate change are expected to become irreversible, and it's seen as a crucial benchmark and one were not projected to hit.

Another goal of this climate summit was to establish and invest in a fund that will have rich countries compensate poorer ones for the economic impacts of climate change. And on the first day of the conference, that has already been agreed upon. So to many people's surprise, this climate summit has already kicked off on the right foot. Okay, now to my question and the made point I want to discuss regarding COP 28. There are 70,000 people attending this summit, or basically a population of a large town. And concerns are bubbling that this bloat and everyone looking out for their own interest will hamper the ability to reach an actual agreement. So, Kyle, 70,000 people too many for a climate summit.

Yes. I mean, we've all done a group project with like five people and four don't do anything and one has to do the entire PowerPoint. So I think 70,000 is too much. And this isn't just conjecture. They actually did a study in 2021 looking at how many people attend this. And the suggestion from the European capacity building initiative was to prune this back to 5,000 people to make it much more focused. So I think 70,000 probably too much. Also, they need to work on their acronym conference of party.

like get some pizzazz in there. But you talked about this deal that was struck on Thursday between 190 governments to create some fun to give back to climate damages, which I thought was, to your point, a huge win. The UAE host of the summit said it would contribute 100 million, Germany pledged 100 million, UK pledged 20 million pounds. So they're getting some momentum here. And just in general, as you know, the world is basically on fire. So I think more focus on climate and continue focus on climate, at least is getting people in the right headspace to tackle this really important issue. Right. But maybe there's too many people. I mean, this attendance has more than tripled since 2019. Just last year, there were about 50,000 people. And then the year before that in Glasgow was 38,000 people. And in the early days, it was at that kind of sweet spot number at 5,000. But there is, to me, I'm obviously cynical about this. I think there's so much money sloshing around at these conferences now.

I mean, it was already, even before it kicked off, there was controversy that the host Dubai was using it as a way to cut side deals for fossil fuel projects with other countries. Right. There's so much money in climate green energy right now. I mean, the UAE also yesterday, or actually this morning, announced a $30 billion fund from its sovereign wealth fund to find climate projects. So if I'm someone in a bit of power, if I'm a CEO or anyone who can pull the strings anywhere and I have. some of an interest in clean energy, I'm going to the summit to try to, you know, get some of that money for myself.

So it seems to be like a bit of a money grab, and it could be devolving into what's going on at Davos, which is the World Economic Forum Summit, which has become a bit of a joke recently, because you have all of these billionaires and CEOs flying in on their private jets to Switzerland to decry climate change and other social ills, even though they're using, you know,

they're polluting with their private jets, which emit 100 times as much carbon as commercial airliners. It's the downside of when anything gets too popular. Are you doing it for the right reason? Are you doing it because there's external benefits to you that are outside the scope of what you actually want to be doing there? So we'll have to see how COP plays out this year, but it seems like it's off to a decent

start minus some of these side deals. Neil, we have to move on to our next story, and I have some very bad news for you. All of our late nights at Red Lobster, they just got more expensive because they are raising their prices on their endless shrimp deal from $20 to $25. Now, this ultimate endless shrimp has been a red lobster guest favorite for about 18 years, but they made a big change this year, which is it used to be seasonal. They've made it all day, every day instead of just on Mondays. And the results were definitive.

People really love shrimp. And because people love shrimp so much, this actually resulted in an $11 million quarterly operating loss for red lobster. I mean, if there's one thing Americans are going to do, it's going to tear up in all you can eat buffet. So I could have told Red Lobster this was coming, but Neil, at $25, are we still going to Red Lobster? Yeah, of course we are. Okay, good. But this company needs saving. This was a big deal.

This $11 million loss was not expected, and execs were like, we really messed up here. And they basically movie pass themselves. Movie pass offered, what, unlimited amount of movies for $10 a month? and then it stopped being a company. And Red Lobster didn't look at that and say, we should probably take a lesson and not give something that's super popular to, you know, at not the right price point.

What was crazy to me is Red Lobster did this before. In 2003, they did endless crab, and it almost drove them to bankruptcy. The president was literally ousted over this. There was a massive cleanup job that happened because they offered endless crab, and then crab prices climb. and their financials took a massive hit.

So I'm not sure why they didn't learn from all of the past promotional messups in history to find out what was going to happen here because it's pretty clear. And their promotional material said, insider tip, avoid grabbing the extra biscuit to leave room for endless amounts of shrimp. Yeah, they're telling people don't give us money for other things, just keep going on shrimp. And it seems like, okay, every 10 years, Red Lobster forgets its mistakes and makes the same one. So in 10 years, we'll have to go and see their next.

endless buffet. I was looking in the past for other examples of maybe promotional things that kind of went awry. There's obviously movie pass, which is come back in some zomified form. You have L.O. Bean's return policy, which was super generous. I think they cut back on that in the past few years. And then there was one I stumbled upon from American Airlines. It's called AirPass now. And it still exists, even though they're phasing it out. But they offered a lifetime membership for $250,000, which allowed you to fly. first class unlimited anywhere in the world. And they got Mark Cuban on it. They got Michael Dell. They got Willie Mays. But they only got 66 people on it. And they ended up losing

a million dollars from just two customers. And this was an absolute debacle. There was an internal investigation over it. And so that's just another like promotional scandal that I found. The lesson of corporate America is like all you can eat or all you can fly. Like stop doing those because Americans will abuse that system. Neil, let's move on to our last story of the day, which is about everyone's favorite award. I'm not talking about the Nobel Prize. I'm not talking about a Grammy or a Tony. It is the Forbes 30 under 30. This is a list that Forbes rolls out at a pace that feels like every week. I know it's not every week, but it feels like it, that highlights individuals under 30 across a variety of categories that are, quote, unquote, killing it. They're doing

big things. While I think this is good in theory, Forbes has a bit of a almost like meme problem, because some of the high-profile cases of 30 under 30 recipients have behaved badly. and this list has kind of become a lightning rod online or people joking, this is a list of future criminals. And so Forbes has leaned into this meme, kind of making a hall of shame, which includes familiar names that won the award like Sam Bankman-Fried and Martin Schrelli, the Farma Bro.

So, Neil, one, how did they not give you a 30-under-30 award? And two, what's your take on all of this? I like to stay below the radar. And I don't, you know, at this point, I don't know if Forbes 30 under 30 is a badge of honor or a badge of shame given the overall reputation of this list. I think this is good by Forbes, kind of leaning into it and kind of owning the joke for themselves, but they clearly don't have a great track record.

They just pick too many people. Talk about bloat about the climate conference. They have expanded this to include hundreds of people in so many different industries over the years, and some of them are bound to commit fraud. Yeah, I do feel kind of bad. Like, one, I hope Forbes is now thinking. about how they pick people if they're going to make fun of the people, like you picked them. So maybe review your review process.

And then, too, I do think, like, overall 30 under 30 has this negative connotation. But I think it's actually really exciting. It gives shine to a lot of people maybe working in social impact that wouldn't normally have a Forbes press release or something that cool. And so this idea that now it's kind of been muddied, it does make me sad for the people that are actually doing great work. But I like your suggestion of maybe flying under the radar. Yeah, if you got it, would you like blast it out at this point? I mean, I'm 30, right? I'm 30, so I'm in the clear.

Looks like I'm not going to jail because I did not win the award. So I would blast it out if I want it because I would hope the work I'm doing is actually good. Yeah. And for SBF and Martin Shrelly, they were on to other things. All right, that is our wrap on our shows for the week. Hope you all have a wonderful weekend. Kyle, any fun plans? I'm going to watch Home Alone, and holiday season is going to officially kick off.

Very nice. If you want to reach us, send an email with thoughts, questions, concerns, praise to Morning Brew Daily at MorningBrew.com. Let's roll the credits. Samantha Veles is our editor and producer. Raymond Liu is our associate producer. Eugenua Ogu is our technical director. Billy Minino is on audio.

Hair and makeup is waiting for that inheritance to hit. Devin Emery is our chief content officer and our show is a production of Morning Brew. Everyone, have a great weekend. I wish you all well.