Morning Brew Daily - Sweden Takes On Elon & The IRS Gives Out a $1B Holiday Bonus

Episode Date: December 21, 2023

Episode 218: Toby and Kyle explain why Sweden Unions are battling with Elon Musk and Tesla. Plus, electric scooter company 'Bird' has filed for bankruptcy and Rite Aid is in trouble for using facial recognition . Next, the IRS canceled $1 billion in tax penalties and US consumer confidence is at its highest since 2021. Finally, the heir to Hermes wants to give billions to his, gardener. Listen to Morning Brew Daily Here: https://link.chtbl.com/MBD Watch Morning Brew Daily Here: https://www.youtube.com/@MorningBrewDailyShow Learn more about your ad choices. Visit megaphone.fm/adchoices

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pwc.com slash US slash brew AI. That's pwc.com slash us slash brewAI. Good morning, brew daily show. I'm Toby Howell. And I'm Kyle Heggy. Today, Tesla is in a bit of a tussle with pretty much all of Scandinavia. And why we might see the first billionaire gardener. It's Thursday, December 21st.

Let's ride. So yesterday, Minnesota unveiled a newly designed state flag after months of deliberation. It's a much simpler design with two contrasting blue halves, by a star. But we have a resident Minnesota expert here, so I would be remiss if I didn't get your opinion on it, Kyle. Do we like it? I love it. And in fact, I did research as a true Minnesotan does. And the word of the day is vexological. It's people that love flags or into flag design. And there's apparently five principles. It's keep it simple. Use meaningful symbolism. Use two or three basic colors. No lettering or seals. And be distinctive or be related.

I think they nailed it, so I'm a big fan of the new flag. It checked all the boxes. That's so interesting. Thank you for teaching that word, too. But as part of the new flag commission process, they opened up this design competition to the public, which resulted in thousands of less than stellar submissions. A lot of hand-drawn stuff from kids. One had the Lochness Monster on it.

One person screenshot of the text that said, I'm not an artist, just an idea guy. And someone else submitted just an unchanged California flag for consideration, which I respect. Showing the creativity of Minnesota. Absolutely. One dude just submitted a picture of his yellow lab. That's it. Just his dog, which I think should have won.

The dog was going viral. I saw that. Yeah, absolutely. Before we jump into the news, we have a quick word from our sponsor, Yahoo! Finance. Kyle, we're about to head home for the holidays, and I'm sure you're going to get some questions from your family about your appearances on this show. So let's do a little practice here.

I'm ready. All right, Kyle, it's me. Your grant aunt Matilda. I have no idea what her accent is. How the heck do you stand? on top of everything that is going on in the business world? Well, I never sleep, Aunt Matilda. Just kidding. It is Yahoo Finance. Yahoo Finance is a one-stop solution with trusted news, market data, and an unparalleled suite of resources that helps

everyone from beginners to experts stay on top of things. Absolutely nailed it. If you two want to impress your great Aunt Matilda, head to finance.yahu.com to learn more 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 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 to home depot.com slash price match for details. There is a big battle going down in the Great White North between Tesla and Scandinavia. Tesla has found itself locked in a tense labor dispute with union workers in Sweden that pits Elon's notorious anti-union tendencies against the deeply entrenched labor ideals of Scandinavian countries. The tension dates back to just before Halloween when mechanics at 10 Tesla garages walked off the job because of a lack of a collective bargaining agreement, and it's only picked up steam from there. Transport union members have said they'll stop collecting trash at Tesla centers.

Key parts manufacturers are refusing to make components for Tesla cars. Other unions won't paint Tesla as clean their company offices or service their charging stations. Heck, the postal service has stopped delivering license plates for new Teslas. Kyle, what started with just 130 or so car mechanics has spiraled into an almost union of unions that Tesla can no longer ignore. Yeah, this story is fascinating. I feel like they've assembled the Avengers of Europe against Tesla, and it was really interesting.

There's these so-called sympathy strikes, which are basically prohibited in the U.S., but they're legal in Nordic countries, where even if you're not like a direct, directly involved with the employer, you can still go on strike in solidarity. And so I love this, that like all of people, not even just in Sweden, but like dock workers in Denmark

are refusing to unload Tesla's, Finland and Norway might have threatened to actually do the same. So it is basically Tesla versus the Avengers of Europe. Yeah, it is certainly spreading. I want to zoom in on the license plate deal in particular too because postal workers have stopped delivering them. Tesla then sued the Swedish Transport Authority, kind of demanding that they'd be allowed to retrieve these plates. But then they lost an early battle in court, which is the case is still working its way through courts.

But now auto analysts are saying this attempt to kind of take prompt legal action and squash this before it can grow. Completely backfired. And now it's made the unions even more steadfast and even more sympathetic to the action. that are spreading across the country. Yeah, and the way unions operate are very different in Nordic countries than they are here. I think 9 and 10 people in Sweden are part of a union. And it's like this Nordic model. It's less laws and it's more a partnership between employers, trade unions, and the governments.

And they all collectively bargain. And that's just how they run things. And Tesla does not like the term collective bargaining. Not at all. Yeah, nine out of 10 workers are a part of a union. I think the big fear for Elon here is specifically the union spreading to Germany. Tesla still has a relatively small footprint in Sweden in some of the other Nordic countries, but Germany is a totally different story.

They opened its first European Gigafactory there in 2022. It employs 11,000 people. It makes both batteries and Model Y's there. And it's also just the company's biggest market in Europe. So far, it's sold 55,000 vehicles, which is about three times as many as in Sweden. So that would be a massive thorn in Elon's side if Germany in particular joins like these union efforts. Yeah, Germany is the country to watch, but also what's interesting is big money is getting involved. The Denmark pension fund is actually divested from Tesla, and Norway's biggest pension fund is threatening to do the same, writing to the board chairman.

Like, hey, you got to figure this out, or we're going to divest our money as well. Yeah. I said Germany is the big fish here. Yeah. But that would all be small fries compared to if the United Auto Workers Union in the United States, which there's been rumors, like ever since the big win, going against, like, the other big three automakers. They've been, the UAW has set their sights on Tesla. So this is kind of setting the States for maybe a much bigger union showdown of Elon versus unions.

Yeah, this comes to the U.S. We might not be getting our cyber trucks on time. So, Toby, let's move on to our next story, and I actually have some bad news. It is another rare bird that has gone extinct, except this time the reason wasn't the climate crisis or encroaching predators. It was because of the ultimate killer, lack of profitability. And if you haven't realized yet, I'm talking about the electric scooter company, Bird, which filed for bankruptcy on Wednesday. Now, why is this big news? Well, Bird was actually one of the fastest growing startups ever to reach a billion dollar valuation, aka a unicorn.

But it turns out this wasn't really a unicorn, but rather a horse with a horn taped to its head. So I mentioned profitability. Bird had a hard time achieving this at the all-important cash flow level while maintaining growth. And this is like a capital-intensive business. build, grow, and maintain a fleet of electric scooters, so it is hard on a profitability standpoint. And in addition, dealing with cities and regulators who often found this much more of a nuisance than a net gain for their city, including Paris, which recently banned these dockless e-scooters, with a referendum which passed with nearly 90% of the vote.

So, Bird is recently at $0.8 a share. Toby, are you buying this stock? No one is buying this stock, Kyle. Bird was once valued at $2.5 billion. Yesterday, the stock closed at a $1.3 million valuation. This is a company, Kyle, that had raised more than $500 million in the private markers. It was supposed to usher in this future of micro-mobility in cities. Screw cars.

It was all about Bird computers. Now, though, I tweeted this from the Morning Brew account yesterday, that this has been one of the most prolific destructions of values that we've seen. I mean, We work would like to have a word with it, but bird going from raising $500 million plus in capital to being valued at $1.3 million, that is a fall from Grace right there. Yeah, and I think $1.3 million, this is not financial advice, but Morning Brew might want to acquire bird. I don't know, put the bird scooters in our office, like let us drive around floors. It could be really fun. But the micromobility thing is really interesting. And essentially, Paris was saying, we love micro mobility. It's the dockless feature. These scooters would end up all over the city, knocked over. people are like throwing them in rivers. And what they want is regulated bike lanes and then docked bikes so that they have to go home

and there could be some order to the chaos. Other cities, though, are like, we don't have the public transportation system that Paris does. And these actually were a boon to those cities. So it seems to be like a city by city basis here. Yeah, it really turned kind of after the pandemic started because when Bird was first starting out, there was kind of this enthusiasm around micro mobility. I certainly took a spin on some of them. I was more of a lime guy, but people just really turned on scooters.

Yeah, you saw tons of complaints about abandoned scooters. They're also just kind of dangerous, especially people were getting on them after a night out at the bar. Or getting on them on the sidewalk. That was the worst part is people would feel like they own the sidewalk and you're mowing people down. Bird tried consolidation too. Even as its stock was in free fall, they actually acquired its rival spin this past summer. but the economics just never quite worked out. Vehicles depreciated.

As you said, it's a very capital-intensive business. So they're going about this bankruptcy and trying to sell off their assets. It's this so-called stalking horse agreement where its lender set a baseline bid before they open things up to X-Nor-Sooters, like potentially Morning Brew. But I'm so confused, though,

because who would actually want to buy birds' assets, which are these depreciating scooters? Yeah, like, it's user-based or, like, the app infrastructure. I don't know. I'm sure there's something valuable kind of in that mess, but as of right now, it seems like the best use case is writing around the morning brew offices. So I backed a bit. Bird has a great name, at least. So you could get the name in this deal.

Yeah, the name is worth something. All right, let's move on. When you walk into the drugstore ride aid, you might want to pick up a few items, maybe a toothbrush, maybe some deodorant, but definitely not a misdemeanor. Yet due to some faulty facial recognition technology, that's exactly what's been happening in right AIDS across the country. the FTC has handed down a five-year ban, barring Rite Aid from using facial recognition after the chain falsely accused multiple customers of crimes. Now, I'm sure most of you probably didn't even realize that Rite Aid was using AI-powered software to identify people they deemed, quote, likely to engage in shoplifting or other criminal behavior. But the imperfect tech has led to some employees acting on false positive alerts, which ended up wrongly accusing people of criminal activity when they were totally innocent. Kyle, I think lots of us are aware we're being watched and surveilled all the time,

but to be put in a database and targeted by an algorithm as a potential person of interest, I can see why the FDC decided to hand down this ban. A hundred percent, and I honestly, I feel bad for everyone involved, but also as a right aid employee, like they had like really like terrible photo images they were using to like try to find culprits. Imagine getting a ping like, hey, this person is a thief. And then like going up to them while they're trying to get goldfish, being like, you're a thief.

It was a totally terrible system, and it was an abuse of the technology. But this is much bigger than Rite Aid. It's much bigger than Face ID on your iPhone. This is something that a lot of people are focused on. Clear recently announced that they're going to move from kind of biometrics, where you have a fingerprint or your iris scanned to complete facial recognition technology. They're rolling this out at airports. They're involved with the Department of Homeland Security.

So people kind of have two fears. The first is government overreach. how are governments around the world going to use this technology? And it's not something where you can like change your face. So they, once they have this data, you're kind of locked in forever. There's already been cities that have banned police and government from using this technology. And then it's just simply privacy concerns. We're always worried about where our data is going.

Like what if someone reads my Slack? Now it's like what if someone literally has my face and can track me wherever I've gone? So there is some serious issues here. I think a lot of people are focused on the right to application of this technology. And in terms of right aid, we saw the wrong application. Yeah, certainly the wrong. And facial recognition is gaining ground in retail and also in some events venues. I mean, remember earlier this year, Madison Square Garden came under a lot of fire for using facial recognition technology to turn away lawyers involved in lawsuits against the company.

So they basically saw them entering Madison Square Garden and say, no, uh, we identify you as someone who's actively suing us and prevented them from being on premises. So it is definitely Pandora's box. And, I mean, Rite Aid did this all the wrong way. It incorrectly identified thousands of customers. One instance, they prompted the search of an 11-year-old girl. Yeah, what are you doing? It generated 900 plus matches to one person's picture in its database in 130 stores across a five-day period. So it was just like targeting people.

And obviously, a lot of this technology was employed in places in black, Latino, and Asian communities, according to the FDC. So it was affecting a disproportionate amount of minorities. So it was just absolute not a good system from top to bottom and definitely kind of expose some of the fears associated with facial recognition. Yeah, I just don't want like a chain store using facial recognition technology or like my local bodega being like, so we know you were at another bodega and now you're like kicked out. We recognize you from the, like it's just, it's not a good use of the technology.

We got to protect the faces, count. These are the moneymakers right here. All right, before we jump into the next part of our show, we're going to take a quick break. Today we helped a Latte for Sam Coffee shop Get an insurance quote

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But it's not coming from Morning Brew. It's actually coming from the internal revenue service, and it might not just be you. The IRS is actually going to waive penalty fees for people who fail to pay back taxes. That total less than $100,000 per year for tax years of 2020 and 2021, aka the big COVID years. Now, nearly 5 million people, businesses and tax exempt organizations, most making under 400K per year, will be eligible for this relief starting this week, which shows about 1,000. $1 billion, the agency said. And the IRS basically temporarily suspended mailing these automated reminders out to people to pay their overdue tax bills during the pandemic because they had a

lot going on. And basically, leadership just said this pause is kind of showing respect to people because we weren't able to really let them know that they had some back taxes. The quote from IRS Commissioner Daniel Werfel said, quote, it was an extraordinary time in the IRS had to take extraordinary steps during COVID. And he said, if people paid the failure to pay penalty, they will get a refund. So if you paid it, you're going to get a refund because he said, quote, people need to know the IRS is on their side. Toby, do you feel like the IRS is on your side? I thought that quote was hilarious too, because I don't think anyone's ever felt that way.

But yeah, this definitely feels like the IRS messed up, realized it. And so now they're just going to kind of let it slide, especially when it comes to these fees. But let's be clear, though, taxpayers do still have to pay the underlying tax bill. They just not the fees incurred for failing to pay that. Also, if you're rolling in the dough, you're out of luck here because businesses or individuals who had income that totaled more than $100,000 per year are not eligible for this penalty cancellation. But I do think this is just kind of emblematic of a wider problem facing the IRS right now.

The IRS just got super overwhelmed during the pandemic. I actually did start to feel bad for them because if you look at kind of their staffing issues, last year the IRS received 230 million phone calls from taxpayers. The agency only employs around 15,000 workers to pick up the phone. So if we do the math there, that means that each person is tasked with answering about 15,300 phone calls. And so that resulted in only 11% of taxpayers on the other end, actually connecting with another human. And so this is just emblematic of some of the staffing and the shortages that the IRS has been dealing with. And that's why they ended up kind of forgiving these penalties.

I actually agree with your take. Like, I think this is a hot take, but I do feel bad for the IRS. And I want them to remember that when they're looking at my taxes this year. I do feel bad for the IRS because everyone hates the IRS because we don't want to pay taxes. So then we don't fund the IRS. And then the service gets worse. And then we're more mad at the IRS. And it's this vicious cycle when, in fact, this is a very important institution because,

it's how the government gets revenues. And there's some amazing statistics here. Between 2010 and 2021, the inflation-adjusted IRS budget fell by nearly one quarter. Tax enforcement staff declined by 31 percent, and the number of revenue agents collapsed to 1954 levels when there was like probably five people in the U.S. So even as this, the taxpaying population has doubled, the tax code is so complex, and they're just not properly resourced. And then people hate them because of that. So they're in a really tough spot, and I do actually feel bad for the IRS. Yeah, remember, so last year, President Biden and Democrats enacted this $80 billion bill in new IRS funding for the next decade. But then that funding was supposed to come in hell, but during the

debt limit debate earlier this year, Republicans successfully negotiated a $20 billion cut in that funding. So the IRS is still playing catch up, even though some additional funding is coming their way. Right. And when we look at like deficit in debt, and that's obviously, a big focus and we want those numbers to be low. The amount of unpaid taxes has jumped to $625 billion per year, and we just don't have the enforcement mechanisms to get that money. And if you asked anyone like, hey, would you want the U.S. to have $625 billion to help with the deficit in debt? They would say, yes. So there's some interesting tensions here. And please, IRS, remember that we had your back.

Somehow this turned into a pro-IRS spot. Didn't see that coming. All right, the numbers are in, people, consumers are feeling extremely confident again. Data published yesterday show that the U.S. Consumer Confidence Index rose in December by the most since early 2021. We're now sitting at a five months high as Americans are growing more optimistic about everything from future business conditions to the labor market. Heck, maybe people just feel great about the Christmas spirit and it's in the air and they're feeling more positive. The conference board, which measures the index monthly, found that the confidence jumped not only across all age groups, but across all income levels as well.

And although people still reported being nervous about inflation, many said they were planning on making a major purchase like motor vehicle or maybe a refrigerator over the next six months. And also most Americans intend to go on a vacation in the next six months as well. But the reason I'm bringing up this surge in confidence is to once again revisit this idea we've explored on the pod for you guys before. And that is this disconnect between how most metrics say the economy is doing and how people feel the economy is doing.

this poll finally seems to show that the gap between those two is narrowing, Kyle. Yeah, this is, one, shout out to consumers. They're confident, we love it. There's a lot of hard stuff going on, but they found a way to be confident. But this kind of reminds me of this like vibe session, the vibes plus recession idea. I think Kyla Scanlon, a great reporter, kind of coined that term, where like things were objectively good in the economy for the most part, but like people felt like a recession was near.

the vibes felt off. And I feel like this report is like kind of merging what's actually going on with how consumers are feeling for the first time since maybe COVID. Yeah. Consumer confidence is one of those metrics that we don't really talk about very often on the show because it's such a fickle beast. It does kind of reflect the vibes of what consumers are feeling. But this improvement is likely driven by the rising stock market coupled with a decline in mortgage rates. We're simple creatures, Kyle. We see stocks go up and mortgage rates goes down. We feel better about a lot of things. Another thing that heavily factors into consumer confidence is lower gas prices. The national average price of gas was $3 as of last

Friday, marking its lowest point in 2023. So when you kind of look at some of the things that consumers care the most about, which is usually inflation, gas prices, the stock market and the housing market, all of those finally have combined to have consumers say, all right, we're feeling a little better about things. It is interesting. There's wars. There's equality. There's politics. And we're just like, no, no, no, price go down. That's all we want. And as you said, the top issue affecting consumers remains rising prices in general and fear of kind of ongoing inflation. But overall, this was a really rosy picture of the current consumer, which I do think maybe is buoyed a little bit by the holiday spirit. We're all spending money now for the holidays.

No, it is true. Another thing to note here, though, is that there's not actually that strong of a correlation between confidence and consumer spending. So even though the survey says that there'll be a rise in buying and vacations, that's just about consumers' intentions. A lot can still potentially chain, obviously, because this is kind of a forward-looking metrics. You may say you're going on a vacation the next six months, but then six months from now, you might not be feeling very vacation-y. So, yeah, just as a precursor there, the two are not necessarily like 100%. I love it. We are very confident and we might be lying. All right, let's move on to our final. story, and this one is so interesting. Toby, you know there's that study recently that showed,

like, what young people want to be when they grow up? And it was YouTube stars, it was influencers. Well, I'm actually going to break out a new job that you're going to want to look into. And that is becoming a gardener for a reclusive, childish heir to a giant fortune. Now, you might be thinking, one, like, this can't be real. And two, what's the benefit of that? Well, I have news for you. Nicholas Pooch, who is 80 years old, he owns a 5.7% stake in the luxury Fashion House Hermes is seeking to adopt his middle-aged gardener, leaving him the bulk of his $13 billion fortune. And this story truly has it all.

Pooch, he was currently one of Switzerland's wealthiest individuals, had previously pledged his money to this foundation that he actually started. And now he's like, actually, I'm going to give it to my gardener. So they're trying to sue him, get the money back. And then, too, Pooch, he's a fifth generation descendant of the founder of Hermes. and he actually left the supervisory board of Hermez in 2014. There's been a big rift with his family because of an LVMH acquired some stake, and it felt like the family didn't really come together and fight that off,

and he was one of the main drivers of that. So there's family intrigue, there's fortunes being passed, there's lawsuits from foundations, and there's a gardener who might be walking away with $12 billion. It is a crazy story. It definitely has those succession vibes. like this would be a succession storyline or plot that we'd be following. But I do think that the foundation is certainly going to fight this because they're saying,

from a legal point of view, this unilateral cancellation of the contract of inheritance seems void and unfounded. So they're definitely taking a legal stance against this. But also, why is he doing this? I do think it's because of that family outcast that you mentioned. So LVMH had been slowly, like quietly building up a stake in Hermes over the last decade. And apparently, Pooch was the one, I don't know if it's Pooch or Puk. What I would do?

Pooch had been slowly selling his shares to Bernard Arnault in secret. And then when the family said, let's come together and fight this off, he was like, uh-uh, miss me with that. So you're totally right. Like, it's got intrigue from top to bottom of this story. It's very interesting. And the downside of the story is it's right before the holidays. and I know when my parents give me a Christmas gift, that's like a Lego set. I'm going to be like, I heard an Airmas Gardner got $13 billion stad.

So this kind of set my expectations high for Christmas, and I don't think I'm going to quite hit the fortune. Swiss adoption laws are tough, though. Adopting adults in Switzerland must have lived with the adoptee for at least a year when they were a minor. So that's another roadblock standing in the way of this billionaire gardener story. What are the gardener's actual parents thinking? He's just going to go home and be like, you're not my dad anymore.

That is, that's very true. The gardener has a family, though, like, obviously it would be great for him. But, yeah, just, just a story that has it all. That has it all. All right, Kyle, that is a wrap on our show today. An absolute pleasure, as always. Let's roll these credits. I have a long flight to Seattle coming up, so please send me email so I can read to keep myself entertained.

Our email address is Morningbrewdaily at MorningBrew.com. Emily Milliron is our editor and producer. Samantha Velas and Raymond Lou are our associate producers. Euchana Waagu is our technical director. Billy Minino is on audio. Hair and makeup is also trying to get adopted by a rich, reclusive billionaire. Devin Emery is our chief content officer, and our show is a production of Morning Brew. Have a great day, everyone. I wish you well.

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