Morning Brew Daily - Remembering Berkshire Hathaway's Charlie Munger & The $16 McDonald's Inflation Burger

Episode Date: November 29, 2023

Episode 202: Neal and Toby discuss the death of Charlie Munger and his legacy at Berkshire Hathaway. The guys also get into Mark Cuban's recent moves involving selling the majority of his shares in the Dallas Mavericks and leaving the show "Shark Tank". Plus, the $16 McDonald's meal that is sending Americans over the inflationary edge and airlines are looking into sustainable aviation fuel. And finally, Sports Illustrated is accused of using AI writers and the drug that could extend your dog's life. Listen to Morning Brew Daily Here: https://link.chtbl.com/MBD Watch Morning Brew Daily Here: https://www.youtube.com/@MorningBrewDailyShow The 2024 Money with Katie Wealth Planner is now live—grab yours at moneywithkatie.com/wealthplanner. Learn more about your ad choices. Visit megaphone.fm/adchoices

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Good morning brew daily show. I'm Neil Fryman. And I'm Toby Howell. On today's pod, Charlie Munger, a titan of American capitalism, died at 99 years old. Then Mark Cuban is leaving Shark Tank. But that isn't even the biggest piece of Cuban news we got yesterday. It's Wednesday, November 29th. Let's ride.

Okay, Neil, I have three quick hits of good news to start off the show today, because why not start off with a little positivity? The 41 trapped construction workers in India were finally freed after survival. in a collapsed Himalayan road tunnel for more than two weeks. Google's first of its kind geothermal power plant is now up and running in Nevada. And three, I had breakfast for dinner last night and really enjoyed it. Of course you did. It's a classic. What did you have, though?

It could be anything from cereal to pancakes to French coast. I had three eggs, two sausages, and hash browns at a diner. Oh, so it was like a real breakfast. It was a real diner, yeah. And I enjoyed it a lot. Any good news to share yourself? You have trivia tonight. You're hosting trivia tonight.

Yes, I'm hosting trivia. I am a little nervous because it is a very intense crowd. There's a lot of actual competitive trivia players there, and I just want to make them proud. But I'm super excited. I'll be there. Plus I get a $50 bar tab for hosting. Just gravy on top. Okay, before we jump into the news, a quick shout out to the sponsor of today's episode, Brex.

One thing we haven't told you about Brex so far is how flexible of a solution it is. And that's coming from a guy who can touch his toes no problem. I'm sure you have great hamstring mobility, Toby, but what I think you're trying to say is that whether you're a startup, mid-sized company, or looking for a full-blown enterprise solution, Brex has got you. Yeah, Brex has the AI spend management solution for any business at any size, but let's focus on my hammies here, please. I can go palms flat, no problem. Okay, you can show me after we record. While Toby limbers up, you all should head to brex.com to find the perfect solution for your business no matter what size. It's time to refresh your yard during spring backyard days at the Home Depot.

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The outpouring of remembrances from the investing community shows just how much this man was beloved and how much wisdom he imparted over his very long life. Munger always lived in the shadow of Buffett, but he was still very accomplished in his own right. He was worth $2.6 billion as of last year and appeared to pull the strings at Buffett's conglomerate more than we realized. Even Buffett said of Munger, he was the architect and I was the general contractor. Together, Munger and Buffett posted one of the most remarkable runs of any corporation in American history. They took a struggling New England textile company and turned it into an empire-spanning railroads, insurance, and consumer goods. From 1965 to 2014, Berkshire stock

posted annual gains averaging 21.6 percent, more than twice the rise of the S&P 500 over that period. And if you invested $1,000 in Berkshire in 1964, it'd be worth over $10 million today. While Munger will be remembered for that track record, his legacy may be defined by the investing lessons he shared with the public and for being one of the most quotable people in America. After all, he's the guy who said, if people weren't so often wrong, we wouldn't be so rich. It was so hard preparing for this show because there's so many Charlie Munger quotes that just goes so incredibly hard. This guy played second fiddle better than anyone. ever. I mean, in public, especially at the famous Berkshire Hathaway annual shareholders meetings,

usually people would ask questions to the two of them, and Buffett would respond in these locations, paragraphs, and then Munger would come in with just one or two words that would just completely bring the house down. He routinely cracked everyone up just by saying, I have nothing to add whenever Buffett would say something. I feel like we should get that. I know, Toby, when you go on one of your rants or something, I'm just going to go, I have nothing to add. I feel like I've done that before. And I hope people laugh like they do. Charlie Munger. But also you mentioned kind of how where his fingerprints were in terms of Berkshire Hathaway. Munger pushed Buffett into, who is kind of a little bit techphobic into

some of the more forward-thinking investments. The biggest one is probably B-Y-D, which is the Chinese electric vehicle maker. That was all Munger's doing. And then if you want to go back to the very beginning, Charlie Munger told Warren Buffett to buy C's candies because at the time Buffett was like, I was a bargain bin hunter. All I was looking for was dirt cheap companies, no matter if they were good or not, I just wanted a good deal. And then Munger kind of told them, hey, we can buy good companies as long as that a fair price. Their relationship is so cute, for lack of a better word. They met in Omaha in the 50s when Munger went back to get his father's affairs in order.

He got invited to a dinner that Buffett happened to be at. Buffett saw that this guy was laughing at his own jokes. And Buffett was like, yeah, you know, this guy, I really relate to that. because I also laugh at my own jokes. They started talking over the phone for hours about investing, and eventually Buffett took Munger aboard, and they've ridden the sunset ever since. One thing that Munger would say about Buffett

is that, Warren, think it over, and you'll agree with me, because you're smart, and I'm right. Again, all it does is make me want to use these quotes back at you, but absolutely Munger is one of those people who kind of shape the world as he pleased. He majored in math, at University of Michigan, but then had to leave to enlist in the U.S. Army during World War II. He came back and talked his way into Harvard Law School, even though that he didn't have a college

degree. So he's just one of those people who wouldn't really take no for an answer and decided to do with his life how he pleased. And just one of those people that you're going to miss forever. And the outpouring of support yesterday was incredible to see. One thing that a lot of the LinkedIn Think Boys and a lot of the younger investors took from took from Munger was his so-called mental models of ways of seeing the world. I want to mention a few of them because people might find them interesting. One of them is called Destroy Your Own Best Love Ideas. Munger said, I'm pleased when I can destroy an idea that I've worked very hard on for a very

long period of time. And also another one is Know Your Circle of Competence. Munger said that he and Buffett were quick to throw potential investments into the too hard pile. If they couldn't understand it, they just moved on. And I think that speaks to a lot of the aversion that. both of them had towards tech stocks in the early days because they just didn't understand it. And they were like, well, if I don't have an area of expertise on it, I'm just going to leave it be.

And that's maybe a good lesson for all of us. Great lesson. Okay, let's move on. Mark Cuban, the billionaire former owner of the Dallas Mavericks, is leaving Shark Tank next year. So you might have noticed that I slipped two pieces of big information in there. And that's not only because I'm a highly efficient writer, but because we got a lot of Mark Cuban news in the last 48 hours. First, Cubes broke the news on his podcast that is 16th season on Shark Tank

would be his last. Then yesterday evening, we also learned that he would be selling a majority stake in the Dallas Mavericks for $3.5 billion to Miriam Adelson, the widow of late Kasunu tycoon Sheldon Adelson. The deal is an interesting one too because although the Adelson family will technically own the franchise, Cuban is staying on as head of basketball operations so he'll still control the actual team itself.

Neil, dealer's choice with this one, which piece of news do you want to talk about first? Let's start with the Mavericks, and this is a very interesting sale to a casino family. Miriam is the fifth richest woman in the world. I think this lays the groundwork for a massive casino complex in Dallas. Cuban said he wants to rebuild the Mavericks Arena, but make it into more of a huge entertainment venue in Dallas,

which is a huge and growing metropolis. Right now, gambling is not legalized in Texas, but you can imagine Adelson and Cuban, now that they have this partnership, are going to come together and push for it. And this could be a crazy complex because Las Vegas Sands, which the Adelson owns, is one of the biggest global casino companies in the world. Then you have Mark Cuban, who's like an entertainment powerhouse, coming together around the Mavericks and this entertainment complex.

Could I just see that happening in the next 10 years? I just can't believe he sold the Mavericks, though, because it was such a part of his public identity. Remember, he bought the team for $285 million. back in 2000. He made his fortune selling broadcast.com to Yahoo in the late 90s. But I just cannot believe that even though this all makes sense that they might be teaming up to build this conglomerate, he was the Dallas Maverick. So it was just a real shock to the system when we saw it. And a lot of people immediately started speculating, all right, is he gearing up for a run for president? Because you don't quit Shark Tank and quit the Dallas

Mavericks within a 48-hour period without something going on. Maybe. Again, I feel like you're a little skeptical about it because you looked at the prediction markets. Right, this morning. The prediction markets. I encourage everyone to go and look at these because it just gives a very interesting snapshot of public sentiment around various, various things that could happen. I look this morning, 25% Mark Cuban presidential run.

Oh, so it went up to, it spiked to 25%. Oh, interesting, because it was at 8%. It was at 8% last night. Now it's at a quarter. So we'll see. But let's talk about Shark Tank. Cubans leaving. A lot of people only watch the show for him.

Like, what is his legacy on Shark Tank? Tank. What do you think the legacy of the show is in general? Well, the only thing that I wanted to know when I heard the news is, is he up or down all time on his investments? And so on his podcast, he said, on a cash basis, I'm down a little bit, but on a mark to market, which is basically what the companies are currently valued at. I'm way up. So according to Mark Cuban, he is up lifetime on that, but it certainly is an end of an era for sure. And then some of my favorite kind of Mark Cuban philosophies of who he invested in on Shark Tank, he said, I like to keep it really simple. I have a rule the longer the back story, the worst the deal.

So if someone comes in there is trying too hard to lay on the sympathy or lay on how hard it was for them to get to the company, he immediately tunes them out and says, I can just tell from the body language and how they carry themselves if they are legit or not. So I always wonder, how would I have done up there? I think I would have wished. I mean, I got my pickleball shoe company. That would be perfect for Shark Tank. It would have been good. Shark Tank's kind of living in this, a little bit of a zombie state in its 15th season.

I don't know. It feels like it's lost a little bit of its luster. My problem with it is that only the same types of products are shown. It's like these Amazon gadgets, something you would sell on Amazon. And I think a lot of the startup enthusiasm has moved towards software and other things that maybe don't make for amazing TV pitches. But I still think it's an incredible show and it got me excited about entrepreneurship. I was never really into business.

But I would always have Shark Tank on in the background. And just it felt the conversations felt really organic as opposed to. to any other reality shows. It inspired a generation, absolutely. I hope it doesn't go away because everyone has that memory of watching Shark Think. All right, we have to move on.

Why is everyone talking about a $16 burger from McDonald's? Because it could help us solve the number one question perplexing economists this entire year. If the economy is so good, why does everyone think it's so bad?

We've talked about this on the show a bunch. And remember, Biden's economic approval rating is similar to the Great Recession when unemployment was almost three times as high it is now. So this is a question a lot of people want to answer. A new article from the Washington Post proposes an answer that lies in a viral TikTok video. In it, a man in Idaho goes to a McDonald's and orders a novelty item, a limited edition,

smoky, double quarter pounded BLT with fries and a sprite that cost $16. This video racked up hundreds of thousands of views and held up as a poster child of the massive inflation that has caused Americans to sour on the economy. But the vast majority of fast food burgers don't cost $16, and the Washington Post reporters use this video to argue that misinformation on social media is behind the bad economic vibes. They point to numerous other viral videos on TikTok besides the burger one that provide a false snapshot of the economy that say we're going through another Great Depression when we're not, that purchasing power is at its lowest level ever, also not true, and that these

sky's following videos can account for a good chunk of the negativity. but there are also plenty of counter arguments to that hypothesis, which we can get into. Bottom line is that the debate about the disconnect between the excellent economic metrics that we're seeing and sour economic attitudes is still raging. Toby, are you buying the $16 McDonald's Burger Theory? I just kind of wrapped up in the middle of it because yesterday I posted a video on our social media accounts, kind of explaining some of those similar points, how unemployment rate is hovering near all-time lows. the job market has been really strong.

GDP has recovered to grow out a faster rate than pre-pandemic. And everybody in the comments were like, no, this is not what I'm feeling. Every time I step outside, it feels like I'm spending $100. So I immediately threw myself into the middle of this debate. So Nate Silver actually put together some metrics that support this idea, too. So inflation, which is the price of a fixed passive goods, has increased by 16% since the beginning of 2020. but the personal consumption expenditures, aka PCEs, which is basically the sum total of how much American households are spending in all categories, increased by a lot more 25%.

So that might be why some people are feeling that pinch, that even though inflation has started to tick up a little slower, people are spending more money every time they leave their house, spending more money on things like fast food, on these premium fast food burgers as well. So maybe that explains some of the disconnect we're seeing. Yeah, I think the number one thing that people are realizing is the way to communicate this, if you're the Biden administration who wants to kind of get this message across that the economy is good, the way to communicate it is not to do what you did on social media and to say, what, be a little condescending and say, you know, the economy is doing well.

Why aren't you kind of realizing, like, why aren't you realizing that the economy is doing well? You're not opening your eyes. You're in this bubble where you're just listening to social media. and everyone says the sky is falling. I think the Biden administration and other people are realizing that people really are feeling the pinch. Inflation is up big time, even though wages are also up over the same period. And so I don't know if I buy this media misinformation thing. I do think media will always focus on the negative stories because those are the ones that get views and clicks.

But there clearly is something else going on here. I mean, probably a lot of it has to do with inflation. We saw that housing prices just increased for their eight straight month last month to their, like, to further record high prices. I think having that, like, starter home out of reach is a lot, is painful for a lot of Americans who thought that they could achieve the American dream and buy their first home. So clearly there is a lot of negative vibes going on. It's not just vibes. It's actual on the ground feeling bad. I'm right there with you, Neil.

Before we get caught up into the vibe session and the vibes forever, though, let's take a quick break. Wishing you could be there live for the big game, soaking up the atmosphere of the crowd, but too often, life gets busy, or the price holds you back. Priceline is here to help you make it happen. With millions of deals on flights, hotels, and rental cars, you can go see the game live.

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It matters where you stay. Hilton for this day. For anyone who's read Sports Illustrated in the past year, you're going to want to hear this. The once iconic magazine has been caught reportedly publishing AI-generated content from AI-generated author profiles and then deleting everything when confronted with the evidence. Take the writer Drew Ortiz. His bio reads that Drew has spent much of his life outdoors and rarely a weekend goes by where Drew isn't out camping.

The only problem is Drew doesn't seem to actually engage. exist. According to the tech publication Futurism, his profile picture on Sports Illustrated site also shows up for sale on a website that sells AI-generated headshots and his writing reeks of AI. There's one article he wrote that contains a sentence, volleyball can be a little tricky to get into, especially without an actual ball to practice with, which is totally something a human being would write. Sports Illustrated has since added a disclaimer to the article is saying that they were created by a third party, but still maintains that they were written by humans.

Neil, this is not the first AI-generated content snafu we've reported on, but it's a real tough look for Sports Illustrated to outright deny any AI side of hand when clearly something is going on. Yeah, just to dig into what happened a little bit, is that the Arena Group, which publishes Sports Illustrated, said it blamed a vendor, basically, Advon Commerce, who runs product reviews on Sports Illustrated site, and it said that Advon made up these AI-generated people to protect actual author identities, but Advon insisted that these articles were written by humans, so they pushed back on that futurism, the publication that kind of uncovered

this scheme, said it is doubtful that a human could actually write the sentences you just said. So Sports Illustrated was kind of blaming a third-party vendor and severed ties with it, but it's still just a horrible look. I think there's been so many instances of publishers trying to use AI and kind of trying to trick people. And all it does is blow up in their face and a road reader trust. And it's kind of the last thing that a brand like Sports Illustrated needed when it's already hitting close to rock bottom.

Yeah, this is not just happening at Sports Illustrated either. Futurism found similar situation going on at the street, which is the financial news publication that Jim Kramer founded. It was the same story with these weirdly specific. writer bios and headshots from the same AI marketplace. There's also formatting errors throughout all the articles. There's this one article that I found that has a numbered list on ways you can improve your financial status, but every bullet point just starts with the number one. So it's clear that something amiss is going on. It didn't go through human hands because there's no way you have

a one through five list and you just have the bullet point one, one, one, one, one, every time. And I think the main issue here is the erasure of bylines. Bylines exist for a reason, one, to give credit where credits do, but also to hold authors accountable for their words. And so when you're saying that Sports Illustrated say that they were, or the third party was using it to protect writers or anything like that, you need that kind of transparency in order to, that is one of the main functioning parts of journalism in America. So I really think that you're doing a disservice to not only the reader, but also

journalistic ethics when you're doing something like this. Yeah, I mean, it's clear from many of these examples that AI, chat, GPT, generated text is not ready for prime time. It has to be looked over by fact checkers. So you might as well just have a human write it in the first place. But the fact that it happened to Sports Illustrated, which over the 20th century was just this incredible publication. It was like the New Yorker of sports. People don't remember. But people would look forward to every week that had incredible photography, incredible journalism, incredible writers.

and to see it in this zombie state is like pretty jarring for people, and it looks like it's just not going to recover. It's sad for me because I was one of those people who'd look forward to it every day, so you're totally right. I was a big SI Kids guy. I know, me too. Human magazines. Such good memories from it.

All right, Neil, what the people listening may not know is sometimes, I look over at your desk, and I see that you've got flight radar up and are tracking a certain plane. Yesterday, that very thing happened, and it was a Boeing 787 Dreamlighter. operated by Virgin Atlantic that had caught your eye, besides being a beautiful aircraft. It was of interest because it was the first commercial airliner to cross the Atlantic using 100% sustainable fuel. The specific mix it flew on included processed fatty acids in synthetic kerosene. According to Virgin, this SAF or sustainable aviation fuel has 70% lower life cycle emissions,

which includes production as well as the burning of it, then regular jet fuel. Now, while this was a major step in the right direction for decarbonizing air travel, SAF usage is still close to zero in the industry, mainly because they currently cost between two to nine times as much as conventional fuel. Neil, you were tracking this plane. Do you also think we're tracking in the right direction when it comes to less polluting fuels? No. Just from reading about all of this, it seems like this is at best a stopgap solution

or at worst, a complete gimmick because these types of fuels will never be used at scale. too expensive there is enough supply to actually decarbonize the aviation industry and commercial aviation does account for 2.5% of all global carbon emissions but it doesn't seem like in other in other transportation arenas in other areas you at you see at least glimmers of hope there's electric vehicles there's green there's renewable energy for for powering power plants but but when it comes to aviation there does not seem to be a real solution here and everyone in the industry says this is kind of a gimmick, this is not going to work in long term, we need to find synthetic fuels for this instead of plant waste, which is basically what this is. And they're just

like, any solution is a long way off. The only solution we have to decarbonize aviation right now is to just fly less, which I'm not sure people will be willing to do. So I tried to put my science hat on for this one and see why these SAFs have fatty acids in them. But let me just read you what I came across. So hydro-treated esters and fatty acids, aka H-E-F-A, refines vegetable oils, waste oils, or fats into fuels through a process that uses hydrogenation. Okay, so I read that. Not too bad. I kind of wrapped my head around it. It gets worse. In the first step of the Hefa process, the oxygen is removed by hydro-oxygenation. Next, the straight, periphanic molecules are cracked and isomerized to jet fuel chain length,

and that's where they completely lost me. So if we have any jet propulsion scientists who listen to the show, please feel free to weigh in on what a jet fuel length isomerized, paraphranetic molecule is. I tried people. I really tried, because I like breaking these things down, but this one a little above my head. We have to do another story, and my brain is completely turned to mush.

Listen, this was me last night, yeah. I do not understand. What I do understand is that this is, not a sustainable solution for air travel. But it does remind me of my middle school math teacher who had this car and he would go up to all the restaurants and get their leftover cooking oil and vegetable oil and use it to power his car. And we all thought that was the coolest thing ever. That is the coolest thing ever. So yeah, maybe there's a future in the automobile industry. Maybe not the jet industry. All right. Finally, let's talk about a historic breakthrough that could

help your dog live longer. Yesterday, the FDA gave its expanded conditional approval to a drug from biotech company loyal for its drug that could lengthen the lifespan of large dogs by up to one year. This is a milestone for longevity research. It's the first formal acceptance by the FDA that a drug can be developed and approved to extend lifespan for animals or humans. What was once just in the realm of the sci-fi novels you love to read, Toby, may finally

arrive in the real world. There is a bit of a ways to go before you can give this to your pup. While the FDA's decision signals it as confidence in Loyal's approach, the FDA must still review the company's safety and manufacturing data. Regulators could still give conditional approval as soon as 2026, which would then allow the company to begin marketing the drug. Loyal has not yet demonstrated that it can lengthen dogs' lives in any large-scale clinical study, but a small study suggests it may blunt metabolic changes associated with aging.

This is a very exciting development nonetheless. First of all, what a section of the market to target. A man interviewed in the New York Times article about this said, when you adopt a dog, you are adopting future heartbreak. And it's so true. It's so unfair that dogs live so much shorter than us. But canine life extension has a chance to be absolutely massive. The big knock is, obviously, is that the drug hasn't shown through clinical trials

that it can actually increase lifespan, as you said. But this small spuddy did show that it might blunt the metabolic changes associated with aging. So it is one of those things where it does look like it will have some effect on how dogs longevity, but we're not sure if it actually lengthens and it extends life as of now. You said it's sad that dogs don't live long as humans, which is true. But also that makes them a better case study for studying longevity because it's really hard to do on humans. We live generally pretty long. I mean, Charlie Munger lived until he was 99.

it's not great to do these studies on humans because there's just not enough sample size. We don't churn through us that quickly, but dogs do live a lot shorter lives, but they have a lot of similarities with us in terms of aging. So these researchers say that we can learn a lot from dogs and apply it to other animals, including humans. I think the main question is, if you extend a dog's life, are you extending good years of the dog's life or you're kind of just prolonging the decline of their lifetimes? I also think there's some ethical issues here. What if Loyal starts charging kind of absurd amounts for this very emotional purchase? And then also, too, the dogs themselves cannot obviously give consent. So I don't know how you factor that into play.

But just before we get out in front of our skis here, there are definitely some, maybe some ethical issues to consider before you go forward. I know. The dog can say, like what if the dog doesn't want to live longer? Oh, man. I don't even own a dog. And I'm already getting sad about my future dog. dying on me. That is our show for today. If you're in the U.S. stay warm because there's a cold snap happening across the country. Toby hates it. I hate it. If you want to reach us,

go ahead and send an email with thoughts, questions, concerns, effusive praise to Morning Brew Daily at Morningbrew.com. Let's roll the credits. Emily Milliron is our editor and producer. Samantha Velas and Raymond Lou are associate producers. Yuchinawa Ogu is our technical director. Billy Minino is on audio. Hair and makeup is totally not AI generated. 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. 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,

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