Morning Brew Daily - States Go After Meta for Addictive Features & Is Bitcoin Back?

Episode Date: October 25, 2023

Episode 177: Neal and Toby discuss the lawsuit against Meta where dozens of states are suing the tech company for it's 'addictive features' and 'mental harm' it has caused children. Plus, Bitcoin is on fire and we are in the full swing of earnings season with reports from Microsoft, Alphabet and Spotify. Hear what Jamie Dimon said about banks and the unrest in the Middle East and why Excel may no longer botch scientific data. Finally, the story that is rocking the wax figure museum world. Listen to Morning Brew Daily Here: https://link.chtbl.com/MBD Watch Morning Brew Daily Here: https://www.youtube.com/@MorningBrewDailyShow Listen to Our Future Podcast Here: https://link.chtbl.com/ourfuturepodcast 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 Toby Howl. On today's pod, we'll play another round of Who is Jamie Diamond bashing this time? Then Meta is getting sued by dozens of states

in a far-reaching case alleging it contributed to a decline in teenage mental health. It's Wednesday, October 25th. Let's ride. Toby, the NBA season kicked off and the New York Knicks finally did something interesting. They're going to have the sphere in Las Vegas as their jersey patch sponsorship, which teams have been allowed to do for nearly a decade. This partnership is not a coincidence. James Dolan owns the Knicks, and he also owns the Sphere. So this is a bit of synergy to capitalize on the moment that the Sphere is having right now.

What is the marketer in you saying? Listen, I'm never one to turn down some free advertising, some synergies, as you put it. But my one pushback here is I can't think of something that translates, worse from real life to patch form. I mean, the sphere is 366 feet tall, 516 feet wide. And when it's on a jersey patch, the size of two inches or something, it just looks like a half circle. So I don't think you're going to get any jersey patch. That looks good. Well, I don't know. The best one to me has always been Harley Davidson sponsored the Milwaukee Bucks. So as long as you get a company that's really, really kind of native to this team is sponsoring, I think it's good. Of course,

the one we talked about earlier was this Mr. Beast Feastables sponsoring Charlotte and the newest one in terms of financial services, Robin Hood is now sponsoring the jersey of the Washington Wizards where both of the founders are from Virginia and they said it's a bit of a homecoming for us. All I want to do is get more than Brue Daily on a team. Sixers. Sixers. Crypto.com. I feel like it's due for a switch. We're up next. All right. Before we jump into the news, I want to give a quick shout out to our sponsor, Yahoo Finance. Toby, I'm sorry, I have to interrupt you. You've been saying this wrong for weeks. It's Yahoo finance. All right. I am not calling it that. Do I look like some 19th century bond trader to you?

I mean, kind of. There's just no way it can be finance because Yahoo Finance is all about making markets accessible to everyone, not just the vests on Wall Street. Okay, look, it doesn't matter what you call it. It is the best place to catch up on market news and data. So whether you say tomato or Tomato, the WHO, or the Who, or Finance or finance, head to finance. Yahoo.com or download the Yahoo finance mobile app to get it directly on your phone. 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 line.

that bring it all together. Shop spring backyard days for seven days at the Home Depot. Now through May 6th. Exclusion supplies to homedipo.com slash price match for details. Let's dive into our top story of the day where Instagram is coming under fire for, well, being Instagram. 42 states sued meta yesterday, accusing Instagram in particular of contributing to the teen mental health crisis through its various addictive features. Some of the main ones mentioned in the suit are the infinite news feed and the seemingly infinite stream of notification. that constantly demand your attention.

The suit alleges that these design choices and practices, quote, contributes to young users' susceptibility to addiction and offers a false promise that meaningful social connection lies in the next story, image, or video. Now, this is not a new thorn in Medaside by any stretch. These lawsuits date back to an investigation from 2021 in the wake of Facebook whistleblower Francis Hagen coming forward with evidence that the company knew its products could have negative impacts on young people's mental health. And while individual states have taken on the social media industry

in various shapes and forms in individual lawsuits, this is the biggest and most unified one yet from the state attorney generals. Yeah, I mean, you don't see a lot of blue states and red states coming together on a particular issue, but the fact that 42 states, nearly all of them, came together to crack down on meta and Sue it, shows that this is a really big concern for lawmakers, this teen mental health crisis,

and they're going after meta, and I don't think it's going to be the first social media company that's going to be targeted, because what you were just saying about the infinite scroll and the endless stream of notifications does not just sound like an Instagram problem. It seems like an industry-wide problem. Yeah, it's very unusual for so many to come together to kind of sue a tech giant. The thing that it reminded me of is states have previously done this for cases against big tobacco and big pharma. So anytime you have big in front of something, usually you'll see some sort of litigation. like this from states, but it is interesting to see it come for the health effects that tech has on teenage mental health. And he mentioned Francis Hagan, the whistleblower in 2021. This

lawsuit does seem to stem from her testimony, and the issue here is not just that meta may allegedly harm teenage users' mental health, it's that it knew it, based on internal research. One set of documents that Francis Hagan disclosed and revealed to lawmakers was that 32% of teen girls said that when they felt bad about their bodies, Instagram made them feel worse. That is data that meta-collected. So it was trying to lure young users allegedly, while also knowing that it was actively harming them. And that's what this lawsuit alleges. Yeah. And I remember back around that time, a bunch of attorney generals wrote a letter to Mark Zuckerberg urging him to specifically abandon its plan for Instagram kids. Remember that ill-fated, ill-conceived idea where

they were going to specifically target kids 13 and under. So they're saying, listen, you're already harming teenagers. Now you're trying to target kids even younger than that. So yeah, it's definitely there's, we're going to see more of these kind of extreme social media laws being passed. Remember, there's one going through Utah right now that would potentially limit kids screen times on apps, set a curfew for it, essentially. So I do think more legislation is going to follow this. I do want to take a step back because I'm just like personally interested in this topic, whether there has certainly been a major decline in teen mental health. All of the measures are pointing downward. scary, but there hasn't been conclusive evidence from major studies that ties social media use

to that decline in mental health. Many studies have found that either the relationship is fairly weak or inconclusive. So this meta-allegations may be separate from that bigger picture, but I'm just going to keep tabs on whether the link between social media and declining mental health is actually a thing. It makes a lot of sense, but when you look at the science, there is no direct link now, but there is still a lot of study to become. Yeah, I think we'll see it play out in the court of a lot, potentially over the next few years.

All right, moving on. Whenever we talked about crypto recently, it's been in the context of SBF's massive fraud trial or it being used to finance terrorism. But there may finally be a ray of sunshine peeking through the storm clouds. Bitcoin is on a roll these past few days, and yesterday it shot up above $35,000 for the first time since May 22. The cryptocurrency is crushing stocks this year with a gain of more than 100%. And while pinpointing why Bitcoin jumped or fell is typically a mystery not even Monk can solve, it's pretty clear why there's so much enthusiasm right now. The ETFs are coming.

There were several tidbits of news that a spot Bitcoin ETF by BlackRock, the largest provider of exchange traded funds in the world, could be approved imminently. And that's exciting to Bitcoin Bulls because it would allow investors to gain exposure to Bitcoin without directly owning Bitcoin. And you'd be able to buy a Bitcoin ETF on your own brokerage platform. making it more accessible. So, ETFs are expected to juice demand. Toby, are you calling it?

Are we out of crypto winter? First of all, great monk reference. I just got to give you creeds for that. Friday night on USA. Yeah, but I am not going to call that. I still think put your jacket on. It's feeling a little bit chilly in CryptoLand. I mean, you mentioned it a little bit,

but I just want to take you through kind of the last two years of what the crypto industry has gone through. I mean, remember, we had N of T's pop off, go mainstream, and then basically go to zero. in the span of 18 months. You had Terra, which was this algorithmic stable coin, that completely depegged from, it was supposed to track the dollar.

That led to around $60 billion wipeout. Then you had Celsius, which is a lending platform, implode as well. The SEC is going after Coinbase, and then obviously, FTC went kaput in the midst of all this as well. So it's not just a crypto winter. Take, it's a crypto bomb cycle, whatever you want to call it. It just hasn't been good.

So it is interesting to me that they are seizing on just the faintest glimmer of hope, I don't think this is faint glimmer of hope. I think people like BlackRock and the biggest ETF providers in the world, having a spot Bitcoin ETF is a big deal for the legitimacy of Bitcoin and the growth of regular investors to get into it. Right now, they do have Bitcoin ETFs. We should clarify, but they're only for Bitcoin futures.

You don't actually own Bitcoin through them, whereas the ETFs you would. I mean, buying an ETF, you can go onto any brokerage service and buy an ETF so easily. And so I just see this opening up a lot of opportunities, and I think the hype is warranted here. Let alone Bitcoin's value in anything besides being a speculative asset. I just think it would open up the opportunity for a lot more people to buy it. Yeah, it is just super ironic, too, though, that the entire premise of Bitcoin is that it's supposed to skirt the traditional finance system. And all this positive news is coming because the traditional finance sector is getting into the crypto world. So there's just that hint of irony there.

But, hey, they'll take whatever good news they can get. All right, we're kicking into the meat of earning season, so we figured we'd add a little seasoning to some of the headlines that you may be seeing by breaking down the biggest reports for your convenience. Neil, you've been winning a lot of these competitions to see who goes first recently, but this time it was me who won the intense pre-show game of Marco Polo. So I'm up first, and the company I want to talk about is Microsoft. Microsoft is taking a page right from Matthew McConaughey's book, Green Lights, because it is straight cruising right now, catching, green lights left and right. Net income jumped 27% as the company got a little leaner and cut back on spending. And a big part of that jump in income came from its Azure cloud division. After two years of deceleration, Azure cloud revenue growth accelerated once again to 29%. Remember, cloud

spending was one of the first things companies pulled back from as the economic outlook for the near future became a little murkier. So it's doubly impressive Microsoft was able to rekindle growth in that segment. But what stood out most to me is the Azure Open AI service now as 18,000 customers up from 11,000 customers in July. Yet only three percentage points of this past quarter's Azure growth was directly tied to AI, which means there's still a lot more room to run here. Microsoft just keeps chugging along. They are the company to be in AI for sure. So if you believe in the promise that artificial intelligence and generative AI will power the businesses of the future, then Microsoft

is looking pretty good. It's investment. It invested $13 billion in OpenAI, the maker of ChatGBTGBT. And, you know, again, I'm not a financial analyst, but this is looking like one of the best investments in recent memory. It's going to infuse OpenAI software into all of its products. The big thing people are looking for, which could really make or break this stock role that it's on right now, is the release of Microsoft 365 co-pilot.

That's going to be $30 per. person, it's going to sell this to companies, it's going to have AI across all of Microsoft Office suite and everything else it offers to businesses. And if companies pay up $30 per person per month for AI capabilities, then Microsoft could just be on a runaway train here. They are. Plus, they just closed the $69 billion acquisition of Activision Blizzard, which we didn't even talk about. And gaming is small beans for them. That could propel them growth in that in that area too. We won't see that acquisition kind of take.

We won't see how it affects Microsoft until next quarter, but yeah, that's another big one. Okay, let's hit alphabet earnings, which I'd have to grade at about a B. While its core business in search advertising posted strong growth, its cloud computing unit disappointed sending shares down yesterday. Unlike Microsoft, Google doesn't have a compelling case why it could become the leader in AI, and that's kind of what you have to do these days. Its chat GPT rival Bard doesn't get the heart rate pumping, and according to one analyst, its cloud platform is, quote, third rate.

Of course, CEO Sundar Peachey said, we'll do everything that is needed to make sure we have the leading AI models and infrastructure in the world, but I'm not sure he's convincing anyone. Good thing Google has searching YouTube to fall back on for a steady stream of cash. Yeah, I think there was the light at the end of the tunnel for Google here was shorts is just absolutely ripping. That's their TikTok competitor. It now has 70 billion daily views, which is just... How many are us?

I know, exactly. Not enough. 60 billion? So go check out us. But yeah, it's just... It's Cloud Division is small potatoes right now compared to Amazon Web Services and Microsoft. And yet YouTube is still ripping. $8 billion in revenue.

I'd give them a B plus. B plus. Yeah, I'm a fairer. Yeah, maybe I'm a little sour. Okay, finally, this week's Spotify, discovered profitability. The audio streamer posted a surprise operating profit for the first time in two years last quarter as its cost cutting and price hikes proved to be very successful. Remember, Spotify has held off on jacking up prices forever, but in Qthi, it raised prices by 10%, and people seemed

perfectly fine to pay up. Maybe that's because Spotify is really distancing itself from the pack in terms of its audio offerings. The company hasn't been shy about wanting to become your go-to app for all things audio, not just music, and its podcasts and more recently audiobooks seem to present a compelling bundle. On the heels of this report, Spotify stock shot up more than 10 percent yesterday, and its value has now more than doubled for the year. Analysts had warned for a long time that Spotify's business model was inherently flawed since so much of the money it brings in immediately goes right out the door in royalty payments to the music industry.

But it looks like it's proving the haters wrong, at least for this quarter. Yeah, it really invested a lot in podcasting, and it actually pulled back a little bit. It laid off a few of the workers involved with that specific segment. But now they're diving into audiobooks, and a lot of analysts are saying they're pretty much the only player in audio that are truly innovating right now, truly trying to push the industry in different directions. So even though they may have done, even though we love Spotify and for hosting our podcast and we don't want them to pull back too much, the overinvestment in the Joe Rogans of the world, the Alex Cooper's of the world, kind of impacted the bottom line a little

more than investors like to see. All right, Neil, before we jump into our next story or get lost in a Spotify rabbit hole, let's take a quick break. Study and play. Come together on a Windows 11 PC. And for a limited time, college students get the best of both worlds. Get the unreal college deal, everything you need to study and play with select Windows 11 PCs.

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when it comes to your small business insurance. Thank you. One size, absolutely does not fit all. Get a quote or find an agent today at thehartford.com slash small business. Let's head to Riyadh, Saudi Arabia, where the global finance elite are in town for the kingdom's future investment initiative, also known as Davos in the desert, in a reference to the hoity-to-dy gathering in Switzerland each year. Davos in the desert was started in 2017 as a way for the Saudi crown prince

Mohammed bin Salman to lure foreign investors to his country as he tries to diversify away from oil and become a massive player in tech, media, sports, and entertainment. There was concern that the Israel-Hamas war would overshadow the gathering this year, but what made news yesterday wasn't the conflict, but instead J.P. Morgan's CEO, Jamie Diamond, body-slamming Jerome Powell. Diamond, who is very good at complaining, said that Powell and other central bankers got their forecast 100% dead wrong 18 months ago when they infamously called inflation transitory and also lowballed their interest rate projections. In general, finance chiefs at the conference sounded very gloomy given the state of the world. Hedge fund billionaire Ray Dalio said he was pessimistic about 2024, given high levels of public debt and global conflicts.

And Diamond said he was cautious about what will happen next year. Still, despite all this sky is falling talk, I think the fact that Diamond, Ray Dalio, the CEO of Citigr, Jane Frazier, BlackRock CEO, Larry Fink, and 6,000 other delegates are in Riyadh kissing the Crown Prince's Ring, indicates that they still see money to be made in Saudi Arabia. Yeah, I mean, this is where the money is to be made, and it's just a who's who of global finance that is there. And the star of the show is actually the Saudi Investment Fund.

They all want a piece of that, and it kind of goes to show you how the rest of the world is looking at kind of the prospects in the American economy and European economy, that all of them are going instead to Saudi Arabia because that's where the big growth potential lies. And that PIF investment fund is just so, so big. I mean, the fund has seen its assets under management soar to around $700 billion from $250 billion in 2018. I mean, it's just the big piece of the pie that global investors want right now. Yeah, I mean, we've talked about how much they've invested in soccer players. They brought in Namar and Benzima. They tried to big and messy, but Miami got that, got messy from them.

They also basically bought the global sport of golf through Liv. And so they also have a bunch of other projects. I know you love to talk about this big city, this super city, this $500 billion city called Niyom, which is basically one long, big line. So Saudi Arabia, there's so much money there. They're trying to diversify away from oil. But I do want to talk about the conflict that's going on the Israel-Hamas war, because Saudi Arabia is really in the center of it. and many foreign policy experts speculate that Hamas launched its attack because Saudi Arabia was normalizing diplomatic relations with Israel. Those are one of the two biggest economies in the region. They were coming together.

Hamas didn't want that. So they launched this horrific terrorist attack that has put those conversations between Saudi Arabia and Israel on thin ice. Saudi Arabia all it wants right now is peace in the Middle East. When they started this conference, they said that they want to become the U.S. Europe, the new Europe. They thought that it, Dubai, UAE, they all wanted to become the new Europe. They wanted prosperous, it to be prosperous. So they are looking at this conflict with a very wary eye right now. Yeah, this conference has always been kind of a flashpoint for some geopolitical tensions. I mean, last year it took place even as Washington and Saudi Arabia were kind of in this

big spat over hiking oil prices. And then also in 2018, a bunch of business leaders actually boycotted it because of the killing of the journalist Jamal Khashoggi. So there's always a lot of, you some geopolitical tension or are kind of focus on this conference, even though it is primarily a finance conference. All right, Neil, our second to last story is for anyone who has ever put proficient in Excel on their resume. So I guess it's for literally everyone. Yesterday, an Excel update was announced that would finally fix Excel's overzealous

automatic conversion feature that would aggressively and oftentimes annoyingly reformat some strings of number in text as dates, regardless of whether the inputter wanted that or not. The biggest group of people who are dancing in the spreadsheets upon hearing this news are genetic scientists. Over the past years, around 27 human genes had to be renamed because Microsoft kept misreading their alpha numeric symbols as dates. Imagine changing the nomenclature of the very building blocks of humanity itself, all because Freaking Excel has its pattern recognition turned up to Russell Crow in a beautiful mind levels. But the long national nightmare is finally over.

Neil, are you proficient enough in Excel to have run into this issue before? I had never heard of this, but while diving into the history of how much of a headache this has been for genetic scientists, there was a study in 2016 that Australian researchers looked at 3,600 genetics papers. They found that about one-fifth of the papers included errors in the gene list because Excel, auto-corrected those genes to dates. It's dangerous. Like, it's crazy. These are peer-reviewed scientific papers that have one in every five has a mistake in it because

Excel just, I mean, I don't know if anyone, we don't use Excel on a daily basis, but even I know the feeling of you try to put in a string of numbers and it will turn it into March 1st or something like that. It's very quick to switch it. It's so annoying. And I just can't believe that the scientists came together and said, we'll just change how we do it. Instead of Excel just rolling out a simple software update. Because they've been petitioning Microsoft for years.

This has been going on for decades. And they were like, OK, Microsoft is this huge trillion-dollar company. We're just a small subset of science. We're genetic researchers. They're not going to change their whole enterprise software suite just to make us happy because we have a small headache. But Microsoft finally listened. I know.

I don't say, I think you've got to give geneticists more credit. Again, it's the fabric of humanity as we know it. So just a funny story. Final bit of Excel lore. It thinks that 1900 is a leap year when it's not. Do you know the leap years by heart? No. Okay.

Thank you. Okay. Finally, let me know if you had this final story on your 2023 bingo card. A wax museum in France has promised to fix a statue of Dwayne the Rock Johnson after it got blasted for not looking like the movie star, particularly debicting him in a lighter skin tone than he is. The Rock has a black father and a Samoan mother, but you would not know it from the statue.

When the statue was unveiled last week, it was mocked mercilessly, with one comedian saying the wax rock looks like he works at H&R Block. All this drew the attention of the rock himself, who played it cool but said he would reach out to the museum to update his wax statue, starting with the skin color. The last thing you want to do is get on the rock's bad side, so the museum is trying to get this right in round two. I just say we abolished wax museums altogether. It's so weird. It's so weird, but honestly, the wax sculpture team was going through it. They said his tattoos took 10 days of painstaking work and a lot of research to replicate. And here's my favorite detail.

In order to recreate Dwayne the Rock Johnson's 6' 5 frame, they literally went out to local gyms just to find a model who could match kind of his proportions and stature. Can you imagine you get tapped on the shoulder on the gym and say, hey, you've got to look like the rock. You mind coming and posing for our wax statue? So I do feel bad because they clearly went to the 10th yard or whatever the statement is. order to kind of make this accurate, and then they completely dropped the ball. They'll get it right. There are a lot of pitfalls we had here, and there's a long list of wax figures that look terrible.

There was one in the same museum, did Naomi Campbell in 2017. That was called the most cursed celebrity wax figure of all time. The Madame Tussauds in Midtown got hit for its Beyonce statue in 2017. But for me, it's not a wax figure, but for me, the most cursed statue of all. time is at the port one of portugal airport unveiled the statue bust of christiana rinaldo that is now in internet lore and i encourage all of our listeners to look it up because we obviously can't describe it but it is very funny they somehow made one of the more attractive men on earth the least attractive man you've ever seen so yes please go down to rabbit hole of ugly statues for sure all right that is

all the time we have for our show have a wonderful wednesday and thanks for all your hollewan costume suggestions, keep them coming at 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. Eugenwa Ogu is our technical director. Billy Minino is on audio. Hair and makeup is at an MMA gym, scouting out models for Toby and Mineswax figures. 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

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