Morning Brew Daily - US Banning Russian and Chinese Smart Cars? & The Apple Developer Working with OpenAI

Episode Date: September 24, 2024

Episode 416: Neal and Toby discuss why California is suing ExxonMobil over their alleged role in the plastic pollution crisis. Next up, why the US is thinking about banning technology from Russia and China in cars. Then famous Apple developer Jony Ive is working with Sam Altman and OpenAI, what could they be cooking up? Then turning commercial real estate into luxury apartments is all the rage in Manhattan and KMart calls it quits. Finally what is 'fridgescaping'? To learn more about how Wise could work for your business, visit https://wise.com/business Subscribe to Brew Markets here Get your Morning Brew Daily T-Shirt HERE: https://shop.morningbrew.com/products/morning-brew-radio-t-shirt?_pos=1&_sid=6b0bc409d&_ss=r&variant=45353879044316  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

Consider this comparison. PWC data found the percentage of CEOs who report revenue gains or cost reductions from AI is almost equal to the percentage who say they're still stuck. What separates these two groups? PWC points to a clarity issue. Even for CEOs, it's hard to tell what's AI hype, what's reality, and where this tech can make a tangible difference. Learn where AI can actually make an impact and what successful adoption looks like at

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, the legendary designer of the iPhone has emerged from the shadows, and you'll never guess what he's working on. Then attention Kmart shoppers.

The last Kmart in America is closing its doors for good. It's Tuesday, September 24th. Let's ride. If you are looking to be inspired this Tuesday morning, Look no further than American endurance athlete Tara Dower. The 31-year-old ultra runner just hiked the entire Appalachian Trail in 40 days, 18 hours in five minutes, setting a new fastest known time record for men or women in the process. But hiking is most certainly the wrong word for what Dauer just did.

To complete the 2,197 mile trail in the time she did, she averaged 54 miles per day. Neil Dower shaped 13 hours off the previous record, and this is honestly being hailed as one of the greatest athletic achievements, really, of all time. It has to be. I mean, this is insane. Most people who through hike the Appalachian Trail, which is going from Springer Mountain in Georgia to Mount Katahdin in Alaska or the other way, or Maine. The other way, that is another hike altogether. Takes five to seven months, and you start preparing to leave at, like, March so you can conceivably maybe finish by October. or November, and she does it in 40 days doing the equivalent of two marathons a day.

Yeah, she just sprinted this entire thing, and my jaw is dropped. Her strategy actually was not to sprint the entire thing. It was more of a tortoise rather than hair approach, because she actually averaged a slower average speed than their previous record, but she just went further every single day. What's more impressive, too, is she actually had to come from behind to set this record. She fell behind pretty early on because there's this big rainy spell in New England and she had a make-up time in the process. So truly just one of those things that you cannot wrap your head around until you set foot on the Appalachian Trail and see what she was dealing with.

One of the greatest athletic achievements of our lifetime. Now let's take a moment to hear from our sponsor, Wise Business, the app for handling payments and multiple currencies. Neil, yesterday I woke up and did the show not only with my shirt on inside out, but backwards too. I think what's worse is I didn't even notice. Now imagine us as international business owners. I often do. Managing payments in different currencies, euros, yen, pesos, it'd be a struggle. It's why we'd need wise business.

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only at Yamava Resort and Casino, celebrating its 40th anniversary U.N. Must be 21 to enter. Mean Girls Day isn't for another nine days, but California has already had enough of the plastics. Yesterday, the state's Attorney General Rob Bonta, launched a first-of-its-kind lawsuit against ExxonMobil, accusing the oil giant of overhyping its ability to recycle plastic and causing a spike in plastic pollution.

Oil companies have already been hit with dozens of lawsuits from states for their role in climate change, But this California challenge about their role in plastic production presents a whole new set of risks. The state seeks unspecified damages that Bontas said would amount to multiple billions of dollars. So what is this about? California is accusing ExxonMobil of duping Americans into thinking their plastics were being recycled when they were in fact not. Exxon is the top producer of single-use plastic in the world since it makes the petrochemicals from oil that are used to create plastic. Through various tactics, Exxon convinced the American public that this plastic was being recycled, California claims, but in reality it wasn't being reused at all. Overall, only 5% of U.S. plastic waste gets recycled, according to the Energy Department, while plastics production is only skyrocketing.

Global consumption of plastic is expected to triple by 2060 to 1.3 billion tons. Toby, California, trying to hold Exxon accountable for plastic pollution opens a new front in the battle between states and oil. company. Right. One of this suits kind of vectors for attack here is that they say that people are more likely to buy these single-use plastics because of this belief, which they say is a false belief, that it will end up being recycled. But you look at those recycling numbers, 5% is not a great rate for recycling there. To be fair, though, Exxon did fire back and say, hey, California, it's not necessarily all on us. It's also on your inefficient recycling program. They said, instead of, this is a quote from our spokesperson, they said, instead of suing us, they could have

worked with us to fix the problem and keep plastic out of landfills. And if the goal is to keep plastic out of landfills and create a better recycling system, maybe working together is the way for it rather than suing. But it does open up this can of worms and it does open up more petrochemical companies to maybe future lawsuits like this in the future. Yeah, one of the claims that California is making against Exxon is that it just misbranded, it's plastics. It, put those chasing arrows on its products. And when a consumer sees chasing arrows, it's those three arrows that go around in a triangle. You think, okay, this is recyclable. And Exxon, according to California, just waged a decades-long campaign to mislead consumers. Another

vector of attack on Exxon by California is this claim about advanced recycling. Now, Exxon and other oil companies have started to engage with this new technology, which they call advanced recycling, which uses a different process to heat down plastics and lead them to be recycled and used in other products. And they've touted this across the board. California says this is merely a PR stunt. And when you look at the actual numbers, 92% of plastic waste that Exxon processes through this advanced recycling technology at their plant in Texas doesn't become recycled plastic at all. It just goes back into fuel. So that is another line of attack that California is saying Exxon, you're just misleading consumers here.

And I do think this report speaks to maybe a reason why recycling plastic has failed because there are technical and economic limitations. Even when recycling is possible, it can be more expensive than producing new plastic. So it's not a very economically viable strategy, which is why you have Exxon may be touting it more as a marketing thing than actually a viable business plan for them. But, yeah, Bontas is going after Exxon on violation of state nuisance, national resources, water pollution, false advertisement, and unfair competition law. So it's kind of throwing the kitchen sink at Exxon, hoping it will stick. Some legal experts have waited and said that it might be a little tough for this actual suit to stick because of the can of worms.

It might open. But you're right. It's not just an Exxon problem. There's a lot of plastic that is produced every year. There's not a lot of it that is being recycled. So I don't think this is probably the last we're going to hear. of suits like this. Right. And the first thing you think of with plastic pollution is like, oh, it's going to, it doesn't degrade. It breaks down into microplastics and then it's found

in our body, but also as a main driver of climate change, according to the Lawrence Berkeley National Laboratory, the plastics industry is expected to make up 10% of global emissions by the mid-century, which is up for 5% in 2019. It is the largest source of demand for oil right now, which I didn't really know. Everything from your social media apps to the chips powering the AI boom have become battlegrounds for national security concerns between the U.S. and its international adversaries, but now the fight has reached your car. Yesterday, the U.S. Commerce Department proposed a ban on the sale or import of smart vehicles that use specific Chinese or Russian technology. After an investigation that

began back in February found that the fancy screens and sensors that have become ubiquitous in modern cars have also created potential security risks, the Biden administration made the decision that the best way to avoid these risks is to ban the technology altogether. What has officials so nervous is that the Chinese or Russian governments could use smart cars to track Americans' movements or cause road pileups by sabotaging or shutting down cars in mass. Right now, there aren't a ton of Chinese or Russian vehicles on the roads, but lower-priced EV models, especially from China, have been proliferating around the world. So this decision would effectively ban those cars from ever gaining a foothold in the

the U.S. Yeah, I mean, if there wasn't a sign already that we are in a technological cold war with China, then this is it. And officials made a distinction between what they're doing on the commercial end to ban Chinese cars from competing with United States manufacturers and this particular action. They said, so we've already raised tariffs on Chinese vehicles to 100% trying to prevent them from coming into the market and take away market share from the fourth. and GMs. And they said this particular action is purely national security related as nothing

to do with unfair Chinese subsidies that are flooding the markets of domestic markets around the world. So they tried to make distinction that this is purely just because we can't have Chinese malware in any of our devices or any of our critical components that power the United States sort of military or national security apparatus. And you say this is, they're also trying to say that this is targeting a specific type of car, which is a smart car, one that's connected to the internet. But in reality, all cars are smart at this point. They all have these onboard data system. They have those advanced driver assistance features, vehicle operating systems as well. And a lot of those have, or if you introduce those to the U.S., it does

propose this security risk, because if you can see a person's location, you can kind of deduce the pattern of their life. You can see where they drop their kids off at school. You can see make assumptions about their health information about what hospital they go to. So the possibilities really are endless. We've spoken about this on the show before just how much data our cars are collecting on us these days. So that is why this has become the new front, the new battleground for this technological war that the U.S. is waging on multiple fronts. Yeah, but two can play this game too. And I remember a few years ago that Chinese government banned Tesla's from going on certain roads near government compounds or where Xi Jinping was about to go have a conference with his

buddies because they feared the same thing that Tesla, an American company, could collect data on particular roads and send that back to the United States government. So this is a tit for tat, honestly, technological war that is going on right now. And good thing for American auto manufacturers right now is there is not a lot of Chinese hardware or software in their vehicles right now. It's just kind of getting started. There's a very little amount currently, but the U.S. government said this is a preventative measure because they're looking at what's going on around the world where your Chinese cars are just absolutely taking over. I mean, in Europe, 20% of new electric vehicles sold last year were made in China and the United States says we do not want that to happen here.

You ever have a moment and think to yourself, I wonder what Joni Ive is up to? Well, wonder no more because the New York Times recently caught up with the legendary designer. and it turns out he's been working on a lot of projects and bringing in a lot of money for his secretive new company. Ive, if you don't recognize the name, is the former cheap designer at Apple, where he's spent nearly 30 years becoming probably the most influential designer of the last century. That's because he led design efforts for iconic products like the iPhone, the Apple Watch, the iPad, the IMac, and he doesn't get nearly enough credit for that sound on the click wheel for the iPod. At the height of his career in 2019, I've stepped down to get off the Apple Hamster wheel.

and explore new areas of interest. Like real estate, apparently. According to the Times, Joni bought $90 million worth of buildings on a single block in San Francisco where he lives with the goal of redeveloping it into something much nicer. He's also got a steady stream of high-profile clients

for his design studio Love From, including Ferrari, Airbnb, the luxury brand Montclair, and even King Charles III, for whom he designed a coronation emblem. The Times reports that Ive is now bringing in up to $200 million in revenue per year from his independent design work. And even Tim Cook would have trouble matching that salary.

Seems like Ives post-Apple career is working out pretty darn well for him. Yeah, this New York Times profile was extremely interesting. He actually said to the reporter, like, hey, I haven't talked to a reporter in a long time now. He's been very secretive since stepping down, kind of at the peak of his powers. But he's become kind of this industrial designer that's turned into a rare celebrity of sorts. He's the co-chair for the Met Gala. He actually got to help J.J. Abrams design a new lightsaber in the latest Star Wars movie. So the dude kind of does what he wants.

And he says he's just followed his intuition recently. And one thing that his intuition has led him to is this kind of partnership with Sam Altman. They're trying to make this physical device, this physical representation of AI in the world. We've seen a lot of people try it so far. maybe if you were a betting man, you would put your money on Joni I because he has just created so many beautiful products in his lifetime. So he is doing a little bit of this, a little bit of that, a little bit of product design for Ferrari,

but at the same time he designed a garment for Montclair. So he really is spreading his wings and doing whatever he wants, and it sounds like he's having a good time. Yeah, we'll see what happens with this AI device because many of those products have failed completely. We talked many times about Humane, which was also a project from other, former Apple employees.

They are looking to sell after getting more returns on their pin than they've sold this summer. There's also this rabbit device that did not work out well at all. So Sam Baldwin actually was asked about this yesterday, and he said that it is not going to be a phone, but it is going to be a gadget and that anything will be a long ways off. But this project is actually happening. We learned that they bought office space in this area where Joni Ive lives in San Francisco. They spent $60 million on it.

they've hired 10 employees, including former leads on the iPhone. They're working in partnership with Lorene Powell Jobs, who has Emerson Collective, which is a company. So there is movement. They might raise a billion dollars in startup funding by the end of this year, according to the time. So we'll see what happens there. But also, yeah, Joni just seems to have his hands in a lot of different things right

now. He's designing the new interior for the Ferrari EV. He's worked with Airbnb. So if you've seen updates to their app, that is his work. it's pretty cool seeing what he's doing in his post-Apple career. I highly recommend you go Google the Monclair, Joni Ive collaboration jacket, because you say, how could a jacket really be that revolutionary? But they really focused in on the buttons. They are these magnetic. It's a new type of button that is magnetic that fastens multiple layers together. And it's kind of, imagine like the

mag safe for your laptop charger, but on a jacket now. One thing that made me a believer, though, because I was saying, how could it possibly be worth $2,000? How could Montclair justify the the price that they're paying for to work with Joni Ive. But Johnny Ive nailed in on the sonics of the button. So it's this mixture of bronze, aluminum steel that he wanted to get the sound right when it clicked together. So it just shows the level of detail that Ive goes to and why he is considered one of the most legendary designers of all time. Up next, you're going to learn about fridgecaping. It's time to refresh your yard during spring backyard days at the Home Depot. Get low prices guaranteed on propane grills

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The bank's old office building has a lot more people crashing there these days. That's because its former headquarters on Wall Street in New York have officially reopened as a residential building where having a corner office now means you probably just have a bathroom with a view. It's emblematic of a broader trend sweeping through New York's financial district. As office traffic remains below pre-pandemic levels, more and more buildings are finding new life as residences. In fact, half of all new developments are.

in Manhattan in the first six months of the year involved office to residential projects, according to aerial property advisors. Now, before you start daydreaming about life in FIDI, studio apartments are priced at $4,000 a month, while a three-bedroom will set you back $10,000. But Neil, Goldman Sachs' old HQ reopening as apartments is definitely a symbolic shift. It is symbolic. I wonder if you can actually extrapolate this to the across the country, because this is the holy grail of what's been going on for the past couple years in the commercial real estate industry. Because you have all these offices that people aren't coming to. Not everyone is Amazon and bringing their workers back five days a week.

The New York's vacancy rate is 14 percent. Other cities across the country have even higher vacancy rates. And it would be ideal to convert those empty offices to apartments. It's not as easy as it sounds. this one particular project seems like this particular building seemed amenable to an office to apartment conversion. But since 2016, across 40 U.S. metros, only 37 office buildings a year have been converted on average.

So this is not a, I wouldn't say this is a huge trend. I think this is we're trying to do this here and there where the buildings are possible. And city governments across the country are trying to spur this conversion by offering tax breaks and offering various other incentives. But it is nice to see it happening in certain respects. Yeah, the only reason why this is happening at all is because it is cost effective in this specific case. Estimates put it around 60% of what it might cost to construct a new building,

which is why they're going forward with turning this building into office apartments. But you're right. A lot of these offices that are vacant are because they're kind of old. They're not Class A offices. They're more Class B, Class C office buildings that are sometimes often worse, less than the land that they are built on because they were just built so long ago, maybe even in the 30s, 40s, and 50s. So it makes more sense to knock them down.

That being said, though, there are developers that are plowing ahead with them. FISA's old headquarters on the east side of Midtown Manhattan is being redeveloped into actually more than 1,500 units of housing. And then recently there was this 29-story office property in Fidei that sold for $116 million. to do the same as well. So you are right that maybe it's not a countrywide thing, but at least in certain pockets of New York's, sometimes it does make economic sense.

Yeah, it does. But would you live in an old office building? There is a huge problem where there's huge interior spaces where there's no windows. That's one of the main problems. And the elevator bay is just not even close to certain apartments. So that's why it's not economically feasible. But if you could.

I mean, at a certain point, if anyone's ever looked for an apartment, And sometimes beggars can't be juicers. And you're like, I don't care. As long as it's got four walls and a roof, I am in. So, yes, I think I'd be amenable to it. Okay. It is time to pay our last respects to another American retailer that couldn't translate big box to big bucks in the internet era.

On October 20th, Kmart will close its final full-sized store in the mainland United States, a location in Bridgehampton on Long Island. Kmart does have one smaller convenience store version in Miami, as well as stores in Guam and the U.S. Virgin Islands. islands, but the closure of the Hampton's location all but ends Kmart's decades-long run as the U.S.'s do-it-all discount retailer. And what a run it was. Like me, Kmart peaked in the 90s when its product lines were endorsed by celebs like

Martha Stewart. It sponsored NASCAR races, and Eminem and the Beastie Boys named dropped it in their verses. At one point, Kmart had 2,300 stores and 3,500,000 employees. Then, like the 49ers on Sunday, things started to take a turn for the worse. Kmart got out-discounted and out-qualified by Target and Walmart. Its merger with Sears was an epic failure, and in 2002, it became the largest retailer in U.S. history to file for Chapter 11 bankruptcy. It's been lipping along ever since, and soon Kmart will be just a memory.

And I'm not even sure a pleasant one. I know. I don't have many memories of it, but also, Neil, how old were you in the 90s, by the way? I was nine. I hope you peaked a little later than that, but you're right. Kmart was just doomed by, they got out big box. You said it very well. It's not that most retailers fail because people just stop wanting to buy their products,

but actually Kmart didn't fail for that. People just started buying the products they sold at other places, at Target, at Walmart. They couldn't compete with Walmart on price. They couldn't compete with the wave of e-commerce that hit as well. Also, you have to mention private equity in this equation, too, because there was this big merger in 2005 that married Sears in Kmart under this private equity giant. But what we saw actually was more of asset stripping happening.

The person who did it was less interested in investing in Kmart stores and making them better and more interested in really the land that they sat on. So it started just kind of selling off their properties for pieces, which led to just this long, slow decline of this once great American institution. But yeah, I do not have a ton of memories from Kmart other than seeing them close down in various places across the country. Right. Yeah, that's what we've been here.

about the last few years or a few decades. Eddie Lampert is that hedge fund guy. And yeah, he has been very notorious for, you know, essentially plunging Sears and Kmart into bankruptcy. I guess the one thing that Kmart will be remembered for is those flash sales, those blue light specials that they had this blue light in the store. And they would just ring and say, attention shoppers, you know, 15 minutes. You can go grab some sales that are happening in the children's department or whatever.

So maybe that'll be one of Kmart's legacy in terms of, Introducing dynamic pricing for the first time. I guess so. They also started layaway programs, too, which are you can, customers who don't have credit, you can reserve items, pay for them in installment. So it did innovate, but it just couldn't out innovate, you know, the times and the competitors. You've heard of landscaping. You might have heard of tablecaping, but on today's edition of Toby's trends, I want to tell you about fridgecaping, a type of refrigerator beautification that is sweeping through social media. Fridgescaping, involves arranging your foodstuffs in an aesthetically pleasing way worthy of a place on your Instagram or TikTok page. Think color coordinated Tupperware tops, label-free mason jars, and even some non-edible elements like flowers that can make a theme like The Hobbit or Bridgerton shine through. This trend has also created a debate around the practicality of going full home decor on your refrigerator. On the one hand, it's sort of a forcing function to make you clean out your fridge and keep it clean in the future.

And many find it therapeutic to have a fun and pretty low-stakes creative outlet. On the other hand, sometimes arranging your food with Instagram and mine isn't the safest thing to do, especially if you're exposing perishables like dairy to new containers

or leaving your fresh fruit uncovered and on display. You know, I've seen the inside of your fridge. It could use a little scaping. It could definitely use some scaping. I know when I first heard about this, my eyes rolled into the back of my head, and I'm thinking about,

what, you have time to, like, not only clean out your fridge, but also design it and add photos, framed photos and flower pots. And I'm like, whoa, that is crazy. But also, then I thought, you do you. You know, whatever makes you happy and whatever brings you joy in your house. And if you want to decorate the inside of the fridge so that when you open it, you get this burst of, you know, joy or happiness. And also it makes you clean it out. I mean, the first thing you have to do, this is the most important thing.

The first thing you have to do when you start fridgecaping is clean your fridge, which is something I haven't done in a while. So I, you know, kudos to those people. So, you know what? I did do a deep dive when I first started cleaning out my fridge last year into fridge management breast practices, which is interesting. And if this leads to less food waste, the fact that you are seeing your fridge and in like sort of taking out the perishable items and not letting them go to waste, then sure. I do think that one sector of our listeners that are definitely rolling their eyes right now are parents with kids. Because you're saying it is entirely impractical to think that having multiple people,

especially multiple children using your fridge, it's not going to maintain this decorative aesthetic. It's not going to maintain your scheme that you cooked up. So if you're maybe an empty nester or you're someone who, you know, is unmarried right now or live with your girlfriend or boyfriend, maybe take on fridgecaping because you're right. A fridge is something that you open every day more or less. So why not make that something that sparks joy? I feel like Marie Condo right now.

But yeah, I'm kind of in on those. I am on delight fridgecaping, which is just fridge organization and cleaning. But putting something from another container where it's designed to last the longest into another container where it could go bad even quicker than I don't totally get that. Anyway, that's all the time we have for today.

Thanks so much for starting your morning with us and have a wonderful Tuesday. For any feedback questions or comments on the show, send an email to Morning Brew Daily at Morningbrew.com. And don't forget to share Morning Brew Daily with your friends, family, and coworkers. So you don't have to explain why converting an office to an apartment is so difficult. If you need a little nudge, Toby has some sharing tips.

I want you to share today's podcast with someone you'd hike the Appalachian Trail with. Now, I want you to choose wisely here because being stuck in a wet tent in rural Maine will test the best of friendships. but let this podcast be the sign that you actually should drop everything and give the iconic trail a try. We're doing the 40 Days version and the seven months version. We're doing whatever it takes, Neil, and we're going north to south. Yes, from Alaska all the way to Georgia. Okay, let's roll the credits. Emily Milliron is our executive producer.

Raymond Lou is our producer. Olivia Graham is our associate producer. Yuchinawa Ogu is our technical director. Billy Minino is on audio. Here I am just recycling another hair and makeup joke. 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.