Morning Brew Daily - The Missing $100M Fighter Jet & College Rankings' Massive Shake Up

Episode Date: September 19, 2023

Episode 150: Neal and Toby discuss Instacart's IPO on Tuesday at $30 a share which values the company at a cool $10 billion. Plus, the $100 million fighter jet that was temporarily missing and the massive overhaul of the US News & World Report rankings of colleges. Toby explains the trendiest features of iOS17 and the guys get into which streaming service cancels the most shows. Finally, the brand new hotel in Las Vegas that cost almost $4 billion. 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's show. I'm Neil Fryman. And I'm Toby Howell. On today's pod, the Marines lost a $100 million fighter jet for more than 24 hours before locating its wreckage. I've got one question. How?

Then it's officially Instacart IPO day. So sit back, order some mint Milano's and relax as Neil and I give you the breakdown. It's Tuesday, September 19th. Let's ride. Toby, it is international talk like a pirate day, one of my favorite holidays on the calendar. So did you know that Pirates of the Caribbean was a Disney ride before it was a movie? There are not that many of them. I do know that because I've been on the ride and I've seen the movie.

It's a fantastic ride. All right. Can you name any other film adaptations that were initially a ride that were returned into a movie? I think I can because I just watched this movie on an airplane, perfect airplane movie, Jungle Cruise. with the rock in it. I literally just watched it because it's one of those movies that you'd never go see in theaters. But when you're on an airplane, you're like,

I'd give it a shot. How wasn't it? So not very good. The ride's more exciting. I feel like talking about movies you watched on airplanes is a very podcast thing to talk about. Next show. Let's dig into that concept for sure. All right, before we jump into the news for the day,

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Neil, happy Instacart IPO day. The grocery delivery service goes public today and is expected to price its shares at around $28 to $30 a piece. That values the company at around $10 billion at the top of its range. Not a bad outcome, right, for a business that rode a pandemic-fueled growth wave all the way to the public markets. But some venture capital firms who backed Instacard are likely watching with more dread than anticipation. That's because Blue Chip VC firms like Sequoia and Andreessen Horowitz invested $50 million dollars each into Instacart at the absolute frothiest point of the 2021 private markets. Based on Insacart's IPO perspectives, those investments are down over 75%.

It's been very interesting to watch Nealas Instacart has emerged as kind of this Roar Shark test for the financial markets. People are simultaneously looking at it as a signal that the IPO markets are finally back after a long period of low activity, while others likely point to its haircut and valuation as a sign that the COVID era of venture capital where firms poured cheap money into late stage startups could be looked at as a failure as these big firms endure negative returns even as the crown jewels of their portfolios go public. Right. So Instacar in 2021 raised a round of funding $265 million and they were valued at $39 billion and now they're going public at $10 billion. I would say before COVID or before

or even this year, that was horrible. I think that happened to WeWork and everyone was like, I've never seen anything like this before. But it seems like Instacart is part of a new wave of startups that are like, look, we know that maybe we were overvalued a little bit during peak COVID when people thought that online grocery and all of these COVID trends would last forever. And now they're going public anyway because they need to go public at this point to pay off their investors that invested in them in their early stages.

Yeah. And actually, Sequoia is even though. that that one investment, the $50 million in 2021, they're taking a major haircut on that. Sequoia was there from the beginning. So they've bought shares all the way since their Series A round back in 2013. So they're probably going to come out okay. But some of these bigger institutional investors that come in in later stage founds like Tiro Price, they're the ones getting fully wrecked because they only entered into Instacart's round in 2021. So we are definitely seeing kind of, even though everyone's celebrating like, ah, these VC firms aren't doing

well, Sequoia is still going to turn. Who's celebrating? I don't know. People do love celebrating when the big blue chip firms do take a haircut on something like these venture-backed companies. There was this time from like 2017 through 2021 where there was so much investment in late-stage startups that were about to go public. You had funds raising billion-dollar rounds, pouring $300,400 million into these tech startups that were about to go public, and they are not doing well.

So you're seeing a lot of venture capitals kind of go back to the bread and butter of what they originally did, which was smaller scale investments earlier. Obviously, it's a higher risk, but you're going earlier in a company's stage and doing smaller investments rather than Andreessen Horowitz plowing like $300,400 million into a late stage startup. Same with Tiger Global, which was perhaps the poster child of this what they call growth stage investing, which is like, yeah, this company is huge and I'm still going to have funnative. it with hundreds of millions of dollars. They were spraying money around. Just to also zoom back in on Instacart itself, remember, Instacart has turned a profit for the last five quarters, which, again, it feels like an unprofitable like VC back company, but it's actually been doing quite well in the wake of the pandemic.

Also, one of the big things to look for is that this is going to be kind of a treasure trove from economists when it goes public because people, these economists will have an inside look into Instacart's grocery shopping data. and so economists are kind of licking their chop when this finally goes public. And then one final detail that I thought was super interesting was that after Arm,

which was the chip manufacturer, chip maker, chip designer, actually, went public. Instacart actually bumped its target range for the IPO by 7%. So they looked at the appetite for Arms IPO.

It did very well. It jumped 25%. And they actually raised their target range as well. So we are kind of seeing this slow rebirth of the IPO market in the wake of Arm. And so we'll see,

how Instacart does today. Instacar. We are so back. IPOs. It is the first venture-backed IPO in a very, very long time in more than two years. So the floodgates are about to open, which is great. We'll see how Instacart does today. All right, moving on.

Remember when the U.S. military lost a fighter jet for more than 24 hours and asked Randos to help them find it? Good times. For those who haven't been following the drama on Sunday, a pilot on a training mission in South Carolina ejected from the F-35, they were flying for unknown. known reasons. The pilot landed safely, but the plane kept flying and the military had no idea where it ended up. The episode became a social media sensation when Joint Base Charleston issued an appeal on Twitter for the public to help it find its missing fighter jet. Well,

after a frantic search that lasted more than a day, the wreckage of the plane was finally discovered yesterday in a debris field in Williamsburg County, South Carolina, about two hours northeast of Charleston. Still, this whole story is raising a lot of questions. Most notably, how do you lose a high-tech fighter plane that cost $100 million to build? The Marines, which runs the F-35 program, is investigating what happened and is conducting a two-day pause in operations to talk to its people about aviation safety and best practices. This was just the perfect 24-hour news story, Neil. I mean, you had a missing jet that people would just run rampant with theories of what happened to it. You have the gaudy price tag that people could get outraged about.

like how are we wasting so much taxpayer money on these jets? And then you have an official military account asking the internet for help. The funniest part I think of the whole social media side of this was the geogessor guy, who's, he goes by Rainbolt. I don't know if people have seen those videos of him just pulling absurd guesses, looking on Google Maps and identifying places. He said, everyone was tagging him saying, call him, call Geogessor guy, he'll find the jet. And he responded to the official tweet with just a picture of his face, like I'm on the case.

So I don't know. It was a crazy 24 hours of like internet memes. And now it wound to an end because we did find the jet, but it was just a perfect internet story for a while. But the F-35, I think the reason this attracted a lot of attention is because the F-35 program in general has become a target of criticism for cost overruns. It's expected to cost $1.7 trillion to buy, operate, and sustain all of these aircraft over the course of their lifetime.

So you have congressional leaders and some lawmakers coming out and being. like this is a rat hole. Like we're just pouring money into Lockheed Martin to deliver jets that maybe aren't top of the line as expected. And it's going to cost us so much more than we thought. So the F-35 has become a target in general. And I think this only played into sort of the outrage machine of why of this boondago that Lockheed Martin got.

$1.7 trillion for jets. That is a truly absurd number. I also wanted to dig into how the heck did we lose this jet because it is. is a stealth fighter and has a stealth mode, but still, what makes it a fighter jet this stealth? And a lot of it actually comes down to the paint that's applied to it. It is this radar, anti-radar paint that they put on it, and it's hand-painted. That's part of the reason why it costs so much because the whole jet is hand-painted. And the big part of it is you want to make sure it smooths out any latches or fasteners

or anything that radar could potentially hit off of. So who knew that when you're spending $1.7 trillion on jets, it'll all comes down to the type of paint you use. I did not know that, but I do want, from my, from my plane geek, dumb, I want to tell everybody that the F-35B is a hairier, which means it can take off and land vertically. Oh, that's a good fact right there. Look up videos online. That's totally worth $1.7 trillion because you can just take off and land vertically,

which is actually pretty important. All right, the annual rankings, everyone loves to hate and hates to love, dropped yesterday, sparking another round of debate over whether they should exist at all. I'm talking about the U.S. News and World Report college rankings. Facing lots of blowback that it favors elite, exclusive, and wealthy institutions, the publication gave its rankings methodology the biggest overhaul in 40 years for its 2023 list, demoting certain criteria that would favor private colleges and boosting attributes of large public universities.

Still, in the end, the high end of the rankings didn't change all that much. Princeton remained at the top of the list, followed by MIT and Harvard and Stanford tied for third. I'm not sure we needed these rankings to tell us they were really good schools, but either way, it's now in print. The new methodology did cause some major swings lower in the list, though. Small private schools like the University of Chicago, Wash U, and Brandeis took a big hit, each falling at least six places, and some large public schools soared. For example, Fresno State moved up 64 places to 185th place, and Florida Atlantic searched 53 spots to 209th. Toby, how are these rankings still around? I mean, they've endured so much critical.

criticism, so much blowback, and there's been a big exodus of schools over the past couple years. I think that these are never going to go away because just the status of a school, whether you like it or not, plays a big role in people deciding to go there. So even though we have seen this trend of school administrators opting out of providing data to U.S. news in order to rank them, I still think there's the rankings matter. And you see, and you even saw it in this latest report, like Rutgers, for instance, experienced this big bump. And they were just going on a PR tour about it. Like, look at us.

Like, we're rising in the rank. So I do think it's one of those things that if you're rising, of course you're going to talk about it. It's a good stat to point to. And if you're falling, you might be one of the people who say, these rankings don't matter anymore. So I just think U.S. news, whether we like it or not, it's always going to be a fixture of the U.S. college education.

I do want to talk about the methodology a little bit, how they changed it. So what they added was sort of economic mobility factors. and they rank those a little bit higher. So if you take people that do not, that their family, you're the first of their family going to college, then we're going to, and you get them a degree, like that is going to add to your score. Meanwhile, they removed certain criteria like class sizes,

the share of students in the top of their high school classes, levels of alumni giving, and things like that that are commonly associated with small, private, wealthy colleges. So they're kind of like trying to tip the scales a little more in favor of colleges that do a good job of, like, bringing people from a certain socioeconomic status to a greater one, which really people would say that is the point of colleges to increase economic mobility, not just, you know, keep the status of the

elite, which is what those small private liberal arts schools do. Right. It is the discourse around this is not going away anytime soon, especially when you have places like University of Chicago fell out of the top 10. And of course, they're going to point to like, well, what happened to isn't quality of education still more important than just these amazing? of people you bring into a school. So I don't know. There is no one thing that I do think should leave is around 20% of the weighting of the ranking is determined by a voting by a group of panelists from top colleges, which is a very subjective ranking. So a lot of people are pointing to that as like the last vestige of let's get rid of that piece of it. And then we can finally just have a more

data-driven approach to ranking colleges. But again, like prestige in the reputation of colleges is always going to matter. So I don't know. It's tough job ranking these institutions. All right, Neil, before we jump into the next story, we're going to take a quick break. Study and play. Come together on a Windows 11 PC.

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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. All right, Neil, we are back with another edition of Toby's trends where I, an over-veracious news consumer, educate you, and even more voracious news consumer of a recent trend I've had my eye on. And today's trend is about Apple's latest marketing tactics.

Now, we all know Apple is a goat marketer from its Apple versus PC ads to its think different campaigns, but now Apple is taking a different tact. They're using our own mortality as marketing. Seriously, here are some of the scenes we've seen from past Apple presentations. Someone using their Apple Watch to avoid getting mauled by a bear, drowning in a sinking car, getting stuck in a trash compactor, or succumbing to hypothermia after falling into a lake. The message is clear. Without an Apple Watch, you probably would have died. It's not misleading marketing per se. A lot of people do, in fact, credit the Apple Watch's emergency SOS features for saving their lives, but I'll also be the first

to admit that these ads are a little uncomfortable. Any ad that uses fear instead of hope always feels a little off coming from Apple. So why are they doing this, Neil? You got to stand out from the competition. With so many wearable devices coming on market recently, Apple has chosen its life-saving features as its main differentiator. So Neil, you are an Android guy, but do you think this marketing approach from Apple is the right way to go? think so. Oh, there we go. Coming from an Android man himself. Well, I, you know, I'm not, like, thinking about Apple products like I want to buy them, but I do think, like you said, you have to stand out. And the health monitoring stuff that has been, that Apple pioneered in their smart

devices has been copied by pretty much every other manufacturer, including my own Android compadres. So, you know, I think the Apple marketing team is super savvy. And I think they found that this resonates with people. And they've rolled out so many features that, that, that kind of help people in emergency situations that, you know. Yeah. So they have gone on, you know, you do your stories of them going off in, like, when people are on roller coasters. Oh, yeah, the heart rate.

Like, there's like an SOS alarm bell that goes off when people have been, you know, hitting a nice curve in a roller coaster. But they do seem to have helped in certain situations where you might not be able to reach an emergency personnel. And there's also, yeah, there's high heart rate detection, fall detention. There's even electrocardiogram and a blood oxygen. So they really are packing a lot of features into the Apple Watch specifically. If we do just want to zoom out for a second to, iOS 17 drops today, which is a major,

highly anticipated software update to the iPhone, and just to run down a few of the features that people are excited about. One, the keyboard has been overhauled a little bit, especially the autocorrect system. So rumor has it that it knows that we don't mean to write ducking anymore. I'll let you guys figure out what you mean to write instead. The search and messages feature has been overhauled too. Again, this is a very like Apple iPhone-specific thing, but searching messages has just always been a disaster.

Finally, it's becoming easier, and they're overhauling that. Roadside assistance is another one of these emergency features that Apple is introducing where you can connect to AAA via satellite in case your car breaks down. So again, they are still pushing this kind of emergency health feature as like their main differentiator. everyone go out i think one thing that in ios 17 that stood out to me was standby mode that seems cool basically you put your when you put your iPhone uh horizontally it becomes this smart display

with all these widgets where you can see the weather and and and other apps that kind of come to the surface from behind the app like icons so people you can just kind of use it as uh you put it down on your desk and you can kind of access a lot of information quickly that way i feel like i would use that a lot. I wonder if that's going to make people pick up their phones less. If like it becomes, so hopefully maybe it'll make us all more productive. Standby mode. All right. Yesterday, HBO made the abrupt announcement that it was canceling winning time, the well-regarded show about the 1980s Lake Los Angeles Lakers after just two seasons. So Toby and I are going to spend the rest of this podcast ranking sports dynasties.

Oh, God. Just kidding. But we do want to talk about is streamers killing shows because this popular refrain that In recent years, streaming companies have had a quick trigger to get rid of shows that aren't profitable to them, leaving loyal fans in the lurch. And in general, viewers are complaining that streamers cancel shows at a much higher rate than traditional TV ever did. But a few days ago, Variety Intelligence Platform and Luminate decided to team up and answer this question.

Are streamers especially prone to cancel shows? The answer is, no, not even close. The major streamers had a combined average cancellation rate of 12.2% over the past three years, which is a similar rate to linear TV and less than half of broadcast TV over that period. So this cancellation surge is simply a figment of your imagination. But there were significant differences between streamers. Max, which was home to winning time, had the top cancellation rate of any streamer at 26.9%. Apple, meanwhile, did the least canceling with a 4.9% rate.

What do you make of this? One of the big things that set out to me from this rankings was where Netflix fell on the list. it was kind of middle of the pack. And a lot of people point to Netflix as the poster child for pulling the trigger very quickly on canceling shows. But they actually just canceled shows at a 10.2% rate, which was fifth in the field. So one of the things you do have to factor in, though, is the volume of shows that appear on the platforms. Netflix has a ton of shows compared to HBO or Max in particular or Apple TV. Apple has no – that 4.9% for Apple is definitely misleading because Apple has no –

or catalog of content that they need to axe or anything. Everything there is a new show, so there's not a ton there. Right. So you definitely have to dig into these numbers a little bit. But I do think that it was funny that the cancellation numbers were pretty much the exact same from linear and streaming. And in terms of winning time, too, shows are always going to be such an emotional part of a certain subject of consumers' lives. Like you really, some people just really love certain shows. So you're always going to hear this online uproar. But it's always been a surprisingly black and white business decision to cancel shows. Basically, if a show gets high viewership relative to the cost of producing it, it gets renewed. And that's how it's always

been. That's how it always will be. So even though people try to make this into bigger things every once in a while, you just need the math to work out. And if the math ain't math, and then the show gets at. I think in the beginning days of streaming, there was this belief that no one, they would never cancel shows because Netflix at that time was spending $17 billion a year of content on content. So there was this never-ending funding towards shows and you know, you were like, all right, well, Netflix is firing from the hip. They're going to be so many shows. They're never going to cancel it because there's so much money to be had. Then now in the past few years, the mantra has been, we're cutting hard. Yeah. Like, investors are demanding that we become profitable.

So all of these streamers are saying, look, we can't really afford to lay out all of these, all of this cash for shows anymore. And even you see Max, cutting a lot of shows from its library because it even costs money to maintain shows. So Westworld, they slashed Westworld after the first season, or after the fourth season, and you can't even watch West World anymore. It's gone from Max. I know. It is sad. We got to go back to the glory days of unfettered, just content bazookas, basically. Neil, for our final story of the day, I want to tell you about a new hotel opening on the Las Vegas Strip. Now, this isn't just any hotel. It's the

Fountain Blue Las Vegas. For anyone who recognized, that name, you're probably a 007 fan because there's a Miami version of the Fountain Blue that appears in the James Bond movie Goldfinger. And now the famous hotel is coming to Vegas after 23 years and multiple different owners. But it's the original property developer, Jeffrey Sofer, who got it across the finish line. Listen to this timeline, Neil. Sofer acquired the land in 2000, but lost control of it during the 2008 financial crisis. Then two more owners came and went, including Carl Icon, before Sofer reacquired the still unfinished hotel in 2021. He finally finished it and now the $3.7 billion, $67-story hotel will open on the north end of

Las Vegas strip as Vegas's new tallest hotel. Neil, a lot of things sit out to me about this roller coaster of a real estate project, but it's certainly a risky bet that the typically quieter north end of the strip will emerge as a new hot spot for Las Vegas. Yeah, I didn't know we'd get into the various geography of the strip, but it does seem like that's a huge part of it because the North End has typically been much quieter, kind of a dead zone for the past decade, especially because Vegas got killed by the financial crisis in 2008, 2009. So it's been super slow to come back. But that area is coming back a little bit. It's what I think is great about it. It's near the convention center.

And probably many people who are listening to this has been delightful. Las Vegas for a convention or knows someone who's been to Las Vegas for a convention because it's emerged as this huge, you know, part of the convention economy. So it's, I think, really hopeful for the north end of the strip that this is coming. It's $3.7 billion worth of investment. You know, I always stopped at the Venetian. I think that's where you stop. I learned before the show that Toby has never been to Vegas.

I've never been to Vegas, which, yeah, it's not on rent. I've flown through Vegas before that. But if we want to keep talking about the north end of the strip, right across the street basically is another big project. It's a $4.3 billion Resorts World Las Vegas Casino that opened in 2021. And that is doing okay because right now if you go and look at the midweek room rates, they're as low as $99 a night, which is not exactly the price, the premium price you're hoping to fetch. Just for context, the Fountain Blue plans to have rates start at $300 a night. So they are trying to hit that higher end of the spectrum.

So even though foot traffic has kind of resumed to pre-pandemic highs in Las Vegas, we are still seeing this north end of the strip, maybe or maybe not getting the amount of traffic that these massive projects are hoping for. All right. Let's talk about finally some cool stuff that's coming. Like, we just got to talk about some cool stuff. So the live nightclub that is famous in Miami is also going to be in the fountain blue. And there's going to be obviously a day club version of it because it's Las Vegas. It's two stories, so that's going to be cool. And there are some cool restaurants coming in. There's Poppy's steak from David Poppy Einhorn, which I've seen videos of it.

But if you order this $1,000 55-ounce Wagyu Tomahawk steak, you get a 60-second sparkler show where they come out and they give you, they do all this pomp and circumstances. Then they open up what's called a beef case. It's literally a briefcase with the steak in it. Oh, my gosh. I can't think of anything that I would want less than a $1,000 steak. That comes to me in a briefcase. That's not even a good presentation. So maybe this is why I don't go to Vegas.

Vegas has a lot to look forward to coming up. It has the Formula One race, which is coming, which is going to be huge. And the sphere is opening. Finally. Did you just see the recent clip of it? No. They put an emoji on it and had it like looking around. And people are saying, we're coming around to the sphere actually.

The sphere is so cool, and there's going to be the YouTube concert later this month that's going to open it. That's all the time we have for the show. I just have one small request before we wrap up. Have a good Tuesday. Okay, one more request. Send us a message at our email address, Morning Brew Daily at Morningbrew.com. We'd love to hear from you. Okay, let's roll the credits.

Emily Milliron is our editor and producer. Samantha Velas and Raymond Lou are our associate producers. Euchennawa Ogu is our technical director. Billy Minino is on audio. This is kind of awkward, but we lost hair and makeup. 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.

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