Morning Brew Daily - Tiger Woods and Nike Split & United Finds 'Loose Bolts' on 737 Max Planes

Episode Date: January 9, 2024

Episode 231: Neal and Toby discuss the historic partnership ending between Tiger Woods and Nike and what it means for both the brand and golf icon. Plus, an update on what United found on their Boeing 737 Max fleet, what is the latest with the rocket that tried to take human remains to the moon and OpenAI responds to the NYT lawsuit. Toby shares his favorite trends and why animal shelters have never been fuller. Finally, why Western New York is the place to move right now. 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 Neil Fryman. And I'm Toby Howell. Today, loose bolts, warning lights, tumbling stocks, the fallout over the open door Alaska air flight is just beginning. Then you quite literally will never guess which city Zillow crowned as its hottest

housing market of 2024. It's Tuesday, January 9th. Let's ride. There are going to be a lot of happy people. in the office today because the University of Michigan, where it all began for Morning Brew, took down Washington 34 to 13 for the school's first college football championship since 1997. But this is the end of an era for a sport because next season is going to look very different. The college football playoff is expanding to 12 teams and conference realignment

will further obliterate any concept of geography. Among the changes, Michigan and Washington are going to be Big Ten rivals. The university is a university. The university is a lot of the university. The University of California is joining the Atlantic Coast Conference, and the PAC 12 will have just two teams. All right, being to the PAC 12s, positives about the game started at 730, which was nice. You finally got to go to bed on a reasonable hour. Negatives about the game, it was kind of boring, and there was a bunch of holding calls. Also, I am putting, I'm officially putting myself forward for candidacy for a new college football team to support. I went to schools that didn't have I don't really have any allegiance.

So if you want to send it an email, if you want to post on social media, kind of recruiting me, I'm a free agent. Wow, that's huge. Listeners, definitely right in with Toby's a complete free agent. If you think you have a compelling argument for your school to get Toby on board, I mean, he has a podcast. He's going to popularize your school. So definitely right in.

I'll be your number one fan. Before we jump into the show today, we have a quick word from our sponsor, VIM. So we're nine days into the new year, and I bet people's resolutions are getting stress tested for the first time. Maybe that gym habit is already slipping, or your pledge to reduce sugar intake has been derailed by some post-dinner sweet treats. But try taking a page from VIM's playbook and work on being radically resilient. Radical resilience for companies who use VIM means both protecting your data from being compromised in the first place and recovering it safely and reliably if something does go wrong.

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While supplies last ends June 30th, terms at AKA.m.m.S. slash college PC. It's the end of an era. Tiger Woods and his longtime apparel sponsor Nike are calling it quits after 27 years together. Now please, people listening at home,

if you hear some static, just know it's my tears hitting the microphone. Tiger and Nike are as synonymous with each other and excellence as arguably any athlete outside of Michael Jordan. From the famous red shirt he dawns every Sunday of a tournament to the iconic shot at the Masters where his ball perched on the edge of a cup and flashed a Nike sign at a breathless nation before falling in. He just can't separate the two.

But separate they have. And his farewell post, Tiger, tease that he already has, quote, the next chapter brewing. What that may be has been the subject of speculation. Some thought maybe he'd join Roger Federer at the Swiss running company on, but its president quickly nicks that rumor. Others have linked him to the apparel brand, Grayson, who signed his son Charlie Woods and his longtime pal Justin Thomas to deals recently. Neil, maybe he goes Fulkem K and launches his own brand. The main takeaways here are we're going to be getting an announcement soon, and I am sad. I am sad, too, but let's go back to the beginning of this, 1996, when Nike and Tiger first made their,

their partnership. Then four years later, in 2000, Tiger and Nike signed a $100 million deal. Over this 27 years, this has been extremely lucrative. For both Tiger and Nike, the deal in total has been worth over $500 million. And there's a question. It's like, how much value does a celebrity athlete drive for a particular brand? Well, that one shot that you mentioned where the Nike ball perched on the edge of the cup of the 2005 Masters, that reportedly earned Nike $1 million in free publicity just from the replays of that clip. And then you had these scientists, these economists who also wanted to examine this question. So they published this paper in the journal Marketing Science in 2010. They looked from 2010 how much more, how much money

Tiger brought into Nike's golf ball division from the endorsement. And they found that Nike's golf ball division scored an additional profit of 103 million from the just Tiger Woods endorsement effect. And so as a result, about 57% of Nike's investment in Woods was recovered just in U.S. Gulf Bell sales alone during those 10 years. Nike has always stood by Tiger 2. Obviously, he's been a major source of revenue for them. But even when kind of those extramarital affairs in 2009 derailed his career, a lot of companies

ended their relationship with Tiger, Nike stood by him. Tiger Woods also stood by Nike, though. because it's been anything but smooth sailing for Nike's golf division. They got out of the golf equipment business back in 2016, but he still kept them on as an apparel sponsor, and he no longer plays their balls. He no longer even walks in their shoes anymore because he's had some leg surgeries,

and he said he wanted more stability. So it has been a relationship that you could see the cracks developing. There's no real tension. It just seems like it's time for both parties to move on. Still, though, it's going to be very hard to picture him in anything other than that. that iconic red and then iconic swoosh on Sundays. The question of what comes next is very interesting

because there is perhaps a template that Tiger could follow, and that guy is Roger Federer. He broke up with Nike in 2018 after 24 years. He moved to Uniclo, but the more interesting part is he took a 3% equity stake in this shoe company called On Holding, and that went public recently. That knitted Federer $180 million just from that public offering, and that brand is going bonkers.

Its stock is up more than 50% this year. It's clawing away market share from Nike and Adidas. So Tiger might want to do this, you know, find a smaller brand like you were talking about, take an equity stake just like Federer did. Even though I feel like Federer is more of a fashion icon than Tiger, if we want to be real about it. Whatever the next move is, you can bet that there is going to be equity involved, whether it's its own company or, like you said, joining another brand.

Okay, next let's circle back. I know, I'm so sorry, on some stories we've discussed recently to give you the latest updates. The fallout from the Alaska Airlines 737 Max 9, whose door panel blew off mid-flight over Oregon on Friday, has continued to spread with hundreds of more flights canceled, and the FAA directing the U.S. Airlines with Max 9s to inspect their fleets. And those inspections turned out to be fruitful because both United and Alaska found loose bolts for this door plug that were in need of additional tightening. And a phrase like additional tightening is not what you want to hear with a plane of you're about to fly in. The investigation into what went wrong also got a boost when an Oregon school teacher named Bob found the door plug that had broken off in his backyard and called it into authorities. In a press conference, U.S. National Transportation Safety Board Chair, Jennifer Homondee explained this piece of evidence would be key to the probe and said, thank you, Bob.

But even with heroes like Bob, this story is still playing out in Boeing, its top supplier, Spirit Aerosystems and the entire aviation industry remains on edge. Yeah, we were really curious to see what the fall would be. It turns out that Boeing finished the day with $12 billion wiped off its market cap. Spirit Aero System also declined 11%. So you saw some of that fallout that we expected. There's also just so many, the more you dive into this, the more questions that arise. There's the issue of the cockpit recording where the cockpit recording was left on a loop

and after two hours, it reset, so we'll never know what was being said by the pilots during that time. So that's a new thing that people are looking at. There's the potential that the bolts were never even installed at all. There's been speculation about that. There's also the cockpit door blew open to when the air pressurized, and that's apparently by design. So that's under review as well to see if that's really the most effective way for a cockpit door

to function in this situation. So, again, the more you investigate this, the more question marks appear. around Boeing in their policies. One big revelation that also came out yesterday was that the 737 Max 9 for Alaska Air was not being used for flights to Hawaii, which is flights over long distances of ocean, because they found a warning light that could have indicated a pressurization problem had lit up on three different flights. Now, authorities said that we're not sure whether this warning light has anything to do with

the door plug coming off in this flight, but it's just another clue. I feel like we're Sherlock Holmes here following various tracks, various clues. But we have to talk about what survived from this crash. Not only everyone, but two iPhones that fell 16,000 feet were recovered in Oregon, and they were found to be not only intact, but working. Someone's luggage receipt was still up on the screen from their Alaska Air Flight. I can't believe Apple gets this lucky. They get the best press sometimes, and two iPhones falling from an airplane. They're going to turn that into an ad somehow. Absolutely. Okay. Up next, looks like there won't be any human remains placed on the moon after all, because Astrobotic, the company that aimed to be the first private American firm to land

on the lunar surface, abandoned its attempt to touchdown less than 24 hours after launch. Things went wrong just after we recorded this pod yesterday, a few hours into the flight. The lander suffered a propulsion issue that made it unable to oriented spacecraft toward the sun and recharge its battery. The company eventually did get the lander facing the sun, but a fuel leak was messing too much with the thrusters, and it said a soft moon landing was impossible. It's certainly a setback for what would have been the first U.S. spacecraft to touchdown on the moon since 1972. An astrobotic probably has a long, lot of frustrated customers whose cargo it was carrying, including the human remains. It was supposed to deposit on the moon.

But if we need another reminder, rocket science is hard. We jaced it, Neil. We absolutely tagged it. We said it was going to be the first one since the Apollo missions. But yes, these things happened. Soft landing in the economy, I guess is easier than soft landing on the moon. I had to. Interestingly enough, though, this is probably a success for the Vulcan rocket that was developed

in a joint venture between Lockheed Martin, Boeing, called the United Launch Alliance. We spoke about it yesterday on the podcast. This was the first ever flight for the Vulcan Centaur rocket. which is trying to get on par with some of the SpaceX rockets that launch payloads into space. And that did do well in the early stages. It got the payload to where it's supposed to be. That's when the problem started. So you can always find some nuggets of success, even though that this mission as a whole appears to be a failure.

Right. I'm going to focus on the failures because there have been quite a few recently when it comes to moon landings. You have landers from Russia, a private Japanese company, and an Israeli nonprofit, all crashing into the moon when they tried to land since 20. There was that success from India landing on the far side of the moon last year, but overall, there's been more failures than successes in trying to get back to the moon. It seems like this is our white whale. Rocket science is hard. I guess that's all there is to say. There is another opportunity, I should say. This is not the only U.S. company trying to go to the moon earlier this year. There is a company called Intuitive Machines based out of Houston that's going to launch another lander next month. So that could be. the saving grace for the U.S. space industry. Finally, OpenAI has published its big response to the New York Times, which sued the tech company and its major backer Microsoft around Christmas for using its copyrighted articles

to train ChatGBTGPT and other AI models. Remember, the New York Times suit was so explosive because not only did it accuse OpenAI of illegally stealing articles to train ChatGBTBT, but it claimed that ChatGPT was able to memorize and regurgitate articles word for word. Yesterday, OpenAI pushed back on those claims, saying this regurgitation was a rare bug in the software that the company was working to eliminate. OpenAI said that the times may have intentionally manipulated prompts and cherry-picked examples from many attempts to get the outcome it wanted to present in the lawsuit. So we are now getting a preview of the different arguments the two sides are going to make and what is likely the biggest legal threat to OpenAI since Chat, GPT, popped on the scene in 2022. too. Yeah, even though Open AI is getting their ducks in a row to fight this New York Times suit,

remember, this is not just something contained the New York Times. A bunch of content creators are suing Open AI as well because they feel like they've been unfairly profited off their work. John Grisham, George R. Martin, and another group of authors sued Open AI for, quote, systemic theft on a mass scale back in September. Sarah Silverman and other authors and comedians are also suing Open AI in meta and this dual claims of copyright infringement. So even though Open AI can paint this picture that maybe the New York Times is cherry picking or messing with the model to get it to do what they want, this is a wider problem. They still have to address.

In two different claims yesterday, one for UK regulators and one in this lawsuit, OpenAI was saying, look, we can't make ChatGBT or these AI models without using copyrighted works. Like, we have to. They would just suck without them. We have to use them, and we can use them under what's known as fair use law, which makes content on the internet, you know, available for some purposes. So it's pushing for the argument that, you know, look, we really can't make these things without copyright.

We should be allowed to under fair use. You have to let us. But we'll see what happens because eventually it seems like Open AI in the New York Times might come to some agreement on some sort of licensing deal like OpenAI has done with other publishers like Axel Springer and the Associated Press. But it's not even just in the text world. I mean, you have Getty images suing these image generators, and you have universal music, which owns music suing a bunch of AI companies as well.

So it spans the entire media spectrum where you have the media rights owner saying you can't steal our work. And so these legal fights are going to play out because there really is no precedent for this. So judges can't just go back and say, like, oh, yeah, on case law back from the 60s and 70s. companies took these and so we know exactly what to do. I think I'd rather be in the rocket science business. All right, before we jump to the next half of our show,

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And that trend is that America's offices are emptier than at any point in at least the last 40 years. I know this feels like an extension of the work-from-home debate that we've been having ad nauseum for the last three years, but there's more to this than just worker preferences. The U.S. has massively overbuilt office space in the last decades. A whopping 19.6 percent of office space in major U.S. cities wasn't leased as of the fourth quarter, according to Moody's analytics, which is the highest number since at least 1979, which is as far back as the data goes. huge gluts in supply arose in the office building boom in the 80s and 90s, and we're still suffering from that extra space today. It explains why the U.S. lags so far behind other countries and coming back to the office, return to office rates in Paris and Tokyo, for instance, have both climbed to over 75% while

the U.S. sits below 50% still. So this is why I'm saying it's not just a pandemic thing. Other countries are back in the office, but we're sitting here with lower than expected rates and way too much office space. Right, and it's because the office space that you're talking about is old, and companies that are going back to the office do not want what's known as, like, Class B or Class C space. They want the Hudson Yards of the worlds, the super flashy modern buildings, because they also have a smaller footprint because of changes in the way offices are designed. We've moved away from the Mad Men style. Everyone gets their big corner office. I mean, I'm just sitting there with you, plebs, here in the office because we have an open space. So you need. Less footprint. You want a more modern design, a more modern building to attract employees, because if you're going to ask employees to come back to the office, you better have some good stuff for them. So this whole thing is conspiring to this massive glut, and it is really,

really shocking to see how different the American experiences than Europe and Indonesia, where more people are going back to the office now than they were during the pandemic. Yeah. If you look at the graphs of office vacancy rates over that four decades, stretch that I talked about them, you see them plunge office vacancy rates when they go down when times are good. So like during boom times, you want, it typically means that office is our full and people are going in. But right now, even though we are in this soft landing period, like we've kind of, I don't want to call it a full boom time, but the economy is doing very well. And you still see elevated rates of office vacancy. So that to me shows that this is a trend. And we're

bucking kind of historical norms right now that even though the economy's doing well, offices are still empty. Okay, moving on, during COVID, more than 23 million American households, nearly one in five people nationwide, adopted a pet. Now, as they head back to the office, maybe, and face higher expenses, they're returning those pets, overwhelming shelters. A recent article by Bloomberg explained that animal shelters are in crisis mode right now, with stray dogs taken in rising 6% from January to November of last.

year and jumping 22% since 2021. Some have started to turn animals away, and last year, New York City shelters temporarily stopped taking in new dogs and cats for space considerations. There are a lot of factors that explain why people are returning their pandemic puppies, but here are two that I think are most powerful. One, after years of COVID rules cramping their influence, landlords are reasserting themselves and have reinstated new rules on pet ownership that had gotten lax during the pandemic years. Second is the cost of keeping a pet has just become too great for many people during a period of high inflation.

Dog owners paid an average of $34 annually for veterinary visits, $354 for food, and $3504 for boarding in 2022, according to the American Pet Products Association. Toby, it looks like the great COVID pet boom is behind us with disastrous effects for animals and shelters. Right. The disastrous effects are so many people still want dogs, like the U.S. pet population, jumps 6% in 2020, 4% in 2021. Historically, it's growing around 1% annually, so we definitely saw these outsized jumps, and now people are coming to terms of the fact that, yes, it is expensive. You might not be working from home anymore. You can't take care of the dog all day, so you have to go back in the office.

And we're seeing shelters bear the brunt of it, and you just have all these really awful ripple effects on how are you supposed to deal with the amount of kind of unwanted dogs in the system right now. Meanwhile, pet companies have not been a smart investment at all. PetSmart, Petco, Chewy are all down bad. Petco is on its shares have crashed to their lowest level. On record, they're saying that it's a very challenging consumer environment. So while people are still spending so much on their pets, you know, 78% jump in the past couple of years,

it really has not, that high level of spending has not kept up. And these companies are just absolutely crashing and burning right now. Yeah, and I think, especially in Chui's case, like it was meant to be this e-commerce revolution. It was modernizing this older way of doing business, and some cracks have developed in that kind of facade, if you will. Here's a sentence you probably didn't think you'd hear this morning. Buffalo, New York is projected to be the hottest housing market of 2024, according to an analysis from Zillow. Sure, maybe the hottest QB, but hottest housing market. According to Zillow, it's true, naming affordability.

as, quote, the most powerful force driving real estate right now. That's propelled the Great Lakes, Midwest, and South regions to the top of the company's 2024 rankings. Zillow used metrics like typical home value, average mortgage payment, and the average number of days they houses on the market for each city, and here is the rest of the top five. Coming in at two is Cincinnati, Ohio,

Columbus, Ohio, Indianapolis, Indiana, and then Providence, Rhode Island rounds out the top five. Some of the big movers this year were, Charlotte, who was number one last year but fell to seven, number one last year, but fell to seven this year, while San Antonio, which was four in 2022, and 13 last year fell all the way to 49th for 2024. I still can't get over that first sentence, though. Buffalo, New York is going to be the hottest housing market. Well, they're calculated it based on demand for jobs, based on supply in the market, right? Because that's what's going to create upward pressure on housing prices.

And there's just apparently a lot of jobs coming to Buffalo now. And one of them, which is most interesting to me, is probably semiconductor. So the Syracuse, Rochester, Buffalo region was just named one of the tech hubs that is eligible for up to $10 billion in funding under the Chips in Science Act. And so policymakers at the federal and the New York level are trying to make this region into this chip highway, they're calling it. Meanwhile, Micron Technologies is building a $100 billion factory just north of Syracuse, also kind of in that general region. And that's going to be the largest memory chip factory in the country. So there's a lot of money, especially in chips, going into this area. So, you know, Buffalo, the houses are affordable now.

Maybe if you are living in New York City or another place when we haven't seen an inch of snow in two years, you want some snow. will go to Buffalo, which gets 133 inches of snow every winter. I'm sure they still play pond hockey there. So, you know, I can understand why this is happening because, you know, there are other hot housing markets. This is not saying this is the hot, this is the best housing market in the world that says this is the one that's not maybe, this is very affordable now, but it's one that's going to pop over the next year.

Yeah, when you start piecing the puzzle together, you do see why Buffalo made on top. I don't know if that hundred plus inches of snow that is going to do anything for their tourism board. We've talked all about how the people are going to southern states, the south, and now here we are saying, hey, 100 inches of sale and some pond hockey. Still a good way of life. Okay, we have to wrap it up there. But before I shout out our team behind the scenes,

you want to try something new and close out our show with one thought you may want to focus on over the course of the day so you can be your best self. In golf, this is known as a swing thought where you clear your mind of all the noise that's buzzing around in it and just zero in on a single mindset. So Toby, what is our swing thought of the day? Timidity is dangerous, better to enter with boldness from Robert Green's 48 laws of power. So as for that, raise, go up to that girl, share this podcast, act boldly today. Morning Brew Daily listeners.

All right, you heard the man, act boldly. And let us know what you thought about the show at our email, Morning Brew Daily at morningbrew.com. Let's roll the credits. Emily Milliron is our editor and producer. Nala and Dugga and Raymond Liu are associate producers. Nuchenawa Ougu is our technical director. Billy Minino is on audio. Hair and makeup needs additional tightening.

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. All. Pay off your home, travel for life, drive a Ferrari. In celebration of the world premiere of the Monopoly Big Board Buckslot machine

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