Power Lunch - Deals Deals Deals, Diversity Division, and Driverless Drama 08/11/23

Episode Date: August 11, 2023

The deal making environment is heating up, and now stock exchanges are reportedly battling it out over new listings. We’ll debate whether it’s market euphoria or simple enthusiasm. Plus, corporate diversity initiatives are under legal scrutiny. Two experts in the field weigh in on Corporate America’s options. And driverless taxis are getting the green light to expand in San Francisco, but not everyone’s ready to take their foot off the brake. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Good Friday afternoon, everybody, and welcome to Power Lunch, as we wrap it up for the week. Alongside Kelly Evans, I'm Tyler Matheson coming up. We got deals, deals, deals, billions of dollars changing hands in corporate America this week. Is deal-making back, we will take a look at that and the wise and where force. Plus, conflict brewing in corporate America following the SCOTUS decision on affirmative action at universities. Businesses may now be facing similar challenges. Conservative groups suing over diversity hiring. We'll discuss that story in just a moment. Kelly. But first, let's get a check on the markets.

And the semi-ETF is in focus as the SMH has its worst week of the year. The Dow is up 50 right now. The S&P is down 9. The NASDAQ down 85. It's the worst performer. And this gives you a sense of why. The SMH hit a new 52-week high barely a month ago, and it's down 5% this week. Marvell, Micron, AMD.

Those are all some big laggarts. InVIDIA was a $480 stock a month ago. It's barely over 400 today. And some talk on the street around Archer Aviation. Down 3% after soaring as much as 23% after settling a lawsuit with Boeing over an autonomous flying dispute. It's actually down 6% now, really volatile name. And a big mover on result. Ion Q, the quantum computing and hardware firm, up about 12%, reporting a wider than expected loss,

but raising its booking guidance. We begin with the slew of big deals we saw this week. Tapestry acquiring Capri for nearly 9 billion. ESPN, striking a $2 billion deal with Penn Gaming and Campbell's buying Rayo's owner, Sovos, for a little over $2 billion. That's a lot of sauce. Deal making seemingly hot again, and the same could be said for the IPO market. According to the Wall Street Journal, the NASDAQ and NYSC are battling out for hot listings.

Here to discuss it all is Dan Premack, Axios Business Editor, are also with us, our own Mike Santoli. Mike, good to have you in the house, man. Nice to have you here. Dan, let me begin with you. Are deals back or are these just sort of moments of opportunity as seen by the acquires and the sellers? I think it's more moments of opportunity. You just happen to have a bunch of them this week, which is relatively unusual, particularly given that we're really in the dog days of summer. But overall this year, dealmaking in the U.S. is still down about 30 percent from last year. And last year was a rough year to start with. You know, I was fascinating. The REO's owner, Sovos, is actually based in the town where I live. I didn't even know this. I didn't even know this. I had no idea. But anyway, Mike, let me ask you this. As you look at this,

are we looking at a situation where deals are actually back or not? What do you see? I think the atmospheric conditions are getting friendlier for deals if you go down the checklist, meaning markets have stabilized, obviously, in the last 10 months. Valuations are up to a level where, you know, maybe a seller would be interested or a buyer might have decent currency to use. credit markets seem like they're willing to make deals. But interest rates are a lot higher than they were. Years ago, you could do a deal for 0%. Now you can't.

Exactly. So you have to pick and choose. I would also, by the way, add the KKR private equity deal for Simon and Schuster. That was announced this week as well. So you do have private equity with a ton of ammunition to be used if they want. But yes, it's going to be tougher valuation. CEO confidence is not really back. I mean, it's up off the lows, but it's well below,

if you look at the conference board surveys, where you typically see it when things are really humming on the on the M&A side anyway. Was there any big read-through for you, Dan, on the tapestry, what you might call it, Capri deal? I think the big read-through, again, you know, I do think these are kind of one-offs. In that particular industry, you saw a lot of kind of deconglomerization over the last several years when it came to luxury retail, and I think we're now sliding back in the other direction. And I think the real question for tapestry, that, you know, there's a huge loan on this, which, as Michael says, suggests that the credit markets are back to a large extent.

So that's good. On the other hand, there is a lot of debt on this deal, kind of the largest bridge loan ever. So I think you can see Tapestry do additional acquisitions on kind of some more orphaned brands going forward. It reminds me almost of the media industry, which has unbundled. Now at some point we'll probably re-bundle. And to that point, we did get this ESPN news more in the sports betting direction. But Disney, of course, the subject of much scrutiny, do you think the next three to five years, it sounds like, could bring a lot of activity across the business?

media space? Across the media space, yeah, and even in the sports betting space, I mean, I think, you know, ESPN took a very long time to get here. I think when sports betting became legalized, everyone assumed ESPN would, at least from a brand perspective, be one of the first into the pool, right? It's ESPN. It took them so long because Disney didn't want to be associated with gambling. Now that it's coming in, it's going in with Penn, which has less than a 5% market share. I think in that space, which is a pretty good space right now in terms of the way stocks are going and just their revenues and even some profitability, you'll probably see consolidation the next couple of years there, because in addition to the

fan duels and the draft kings and the MGMs and now ESPN, you also have fanatics moving into that market. So you know, Mike, as you look at that particular deal, you know who the big dog here is. It's ESPN. It's not Penn Gaming. Had they merged with some, or not merged, this is not a merger, I should be clear. Had they

done a deal with some other provider, whether it's draft kings or a fan duel or whatever, might have changed the scale a little bit. Here's my question, which I asked, I think was Barton Crockett the other day. Does this fact that ESPN is now going into a partnership with Penn Gaming make it more likely that ESPN is spun off from Disney? I think it's consistent with the possibility that it can be a separate entity. I don't know that it means it's decisively going in that direction or not,

but the idea that ESPN looking for other sources of revenue, I mean, clearly everything Disney is been talking about. As subscription fees go down and the cable fees go down, you've, You've got to find a place for the revenue. The gaming is an obvious example. And exactly. And, you know, people clearly are willing to pay for. I think it's more in the matter of Disney, everything they're talking about doing partners for ESPN, maybe with the leagues. It's to bring some cash in, reduce the capital burden on Disney, which is, of course, going to have to shell out for sports rights no matter what.

And maybe have that business model get a little bit right-sized for what it could be in the future. Penn Stock, by the way, punished, you know, on the news. so it tells you which way the economics of it ran. And also, that's another factor in are other CEO's going to want to do a deal? Right. Look at how your stock reacts. Iger himself hinted, yeah, they made us a good offer. I think they're paying a billion and a half over 10 years, you know, for the privilege.

Dan, want to talk IPOs because it sounds like we might be getting some in September, Birkenstock. Listen, the fact that there was an article this week saying that NICC and the NASDAQ were battling for listings, hey, that's got to be a sign. For Burkinsstock? Yeah, for all listings. It's a sign. I mean, it's also a sign that bankers are kind of.

of talking this up. Look, I've been writing and I keep believing that the IPO market is going to come back after Labor Day. You know, you see the kind of sustained success of Kava. It makes sense. You have this huge pipeline of prospective issuers. You've got Birkenstock, obviously, Arm, and a couple of those will go. I will say, though, now that we are where we are, what, the 10th or the 11th of August, I'm a little surprised we haven't seen more S-1s, those prospectus is flipping public because it does take about six weeks to get this thing together. And if you want to be going in the middle of September when everyone's back from vacation, now is when that S-1 should be coming out. We've seen almost nothing over the last couple weeks.

I love it. Birkenstocks and Jimmy Chu, same week. It's awesome. It's like Barbie, right? Barbenheimer. Yeah, right there. All right, Dan, thank you very much, Dan Premack and Mike Santoli. And we should point out there's a CNBC special.

Tonight it's called Taking Stock. Santoli will be there. Josh Brown will be there. And they will wrap up the week. It all starts at 6 p.m. Eastern. That is this evening. And deal making is definitely a key issue in the market this week. As was earnings.

A bunch of retail. names are now on deck as we turn our attention to next week and some economic data. Of course, we're all talking inflation after the PPI today. Here to discuss is Jim Tierney, Alliance Bernstein's chief investment officer for concentrated U.S. growth. Jim, welcome. Yesterday, inflation was going away, and today it's back. I think we're going to have bumps along the way here. It's not all one direction.

Certainly labor continues to be sticky, and I think that's the biggest issue that we have to pay attention to over the next few months. Or oil prices. I mean, I don't know how you feel about investing. in the energy space right now, but that also appears to be headed, I don't know, maybe a little bit more, a little bit higher from here. Certainly, you look at the oil, which was in the $70 range, and now it's above 80, and we're certainly seeing that at the pump. I think the bigger question, particularly relative to consumer earnings, is does that pinch wallets and pocketbooks as we go

forward into the fall, particularly with the student loan repayments coming in early October? Do you think that's a big factor here, the student loan repayers? I mean, it's going to take some of the liquidity that might otherwise go into the consumer economy and redirect it into debt repayment, but how big is it? I've seen numbers all over the place. I've seen anywhere from 25 to 45 million people with student loans and monthly payments on average, anywhere from 200 to 400. So I think it's on the margin. It hurts. Jim, one of the big themes for you this earnings season has been separating the, the, I got this wrong the other day, the wheat from the chaff, The strong from the week, shall we?

This hasn't really been a story about tech versus other industries. You're really seeing one company do great, one that's more struggling. Talk to us a little bit about these pair trades, if you will. Absolutely. If you look at during COVID, many companies saw the same impact on their industry or on their business. So a lot of companies went up and went down altogether. Now the things are normalizing, particularly supply chains. We're starting to see companies in the exact same industry.

One do really well. and one not do quite as well, and that's being reflected in the market, which as an active stock picker, that's really exciting. Why is Aptiv one that you're excited about? We're all talking about, you know, the upcoming strike, could affect GM, could affect Ford. How does it affect Aptive? Why are you bullish on that name? When we look at Aptive and what's going on in terms of the transition from internal combustion engines to battery vehicles, that's a huge upsell or a trade-up for Aptive. I don't know who's going to win, whether it's Tesla or Audi or someone else, but I do know there will be a heck of a lot more electric vehicles on the road five and ten years from now. And that's a huge benefit to Aptive.

So buying the picks and shovels providers is one of the themes that we chase. And certainly we think that's a very good story here in Aptive. Let's talk a little bit about a couple of the other choices you have. One is MasterCard and another is Schwab. Take us through those two. Sure. When I look at a lot of the data points, it looks like U.S. travel is starting to slow down. We certainly saw that in Disney's earnings where their hotel occupancy went from 90% last year to 84% this year on the domestic parks. But guess what was booming? International. Where does MasterCard make a whole lot of money? They make a whole lot of money on cross-border travel. So as that continues to pick up, particularly in Asia, I think there's further potential for MasterCard to grow their earnings at the that the street expects. In terms of Schwab, and it's a name that I've talked about before, the big boge there was cash sorting and getting that behind the company. They got that behind

them in the second quarter. They were able to pay down the FHLB borrowings, and that means you go from a negative interest spread to a positive one. And that's really going to help earnings as we get into the second half of the year, and particularly in 2024. And I don't think that's appreciated at $65 a share. Jim Tierney, thanks very much. Jim Tierney. Alliance Bernstein, CIO, thank you. And coming up, those devastating fires in Hawaii, raising concerns around the growing impact of climate change. So what solutions could technology offer in our fight against natural disaster?

We'll discuss that one next. Plus, the final day of our Back to School series. Today, we look at the state of the post-grad job market. Our lunch will be right back. Welcome back. Dozens of lives lost, hundreds of millions, if not billions of dollars worth of damage in the ongoing fires in Maui. As we consider the disaster, some questions emerged. So what impact could we see on Hawaii? Will natural disasters continue to worsen? And are there

solutions, perhaps ones involving artificial intelligence or technology? Contessa Brewer is following the fires. And Patrick Brown is a climate and energy expert exploring what role tech could play in fixing the problem. Contessa, we start with you. What's the latest? Tyler, the governor says this is the worst catastrophe in Hawaii's history. At 55, right now, the death toll is likely to rise when FEMA crews begin to search burned billings. The immediate problem the Red Cross tells us is that the west side of Maui is still inaccessible. Home Depot tells CNBC its Maui store is helping to source supplies. So they need coolers, ice, water, tents.

Those tents could be crucial as shelter because hotels are at capacity or closed. For instance, Marriott told us three of its hotels in the area affected on West Maui have closed because of power outages and guests have left, a Weston, a Sheraton, and the Ritz Carlton in that western area of Maui. Meanwhile, the who's who of Maui are working to respond personally. Mick Fleetwood of Fleetwood Mac owns a destination restaurant in Lahaina. He says his very first concern was his team. They're still searching for people. And it became very apparent to me in running this restaurant, which of course is destroyed.

like every other business in that town. So I became aware, we became aware that over 80 people who work with us for about two days, we didn't actually have everyone accounted for. Mick told me late last night that his team has been accounted for. Oprah Winfrey on Maui, she went to a Costco and a Walmart to buy supplies for a shelter there. Lauren Sanchez says she and fiancé Jeff Bezos are donating money. The need here is going to be enormous. Guy Carpenter estimates that 2,700 structures are in that Lahaina fire zone alone. And Accuether puts the total economic impact and damage estimate at between $8 billion and $10 billion.

It may be a couple weeks here, Kelly Tyler, before we get some insured loss estimates. But State Farm is the biggest property insurer on the island. They say they're working on it right now. They're trying to get in there and process claims. They've already had high catastrophe losses, too. I think a lot of these insurers. Contessa, thank you very much, Contessa Brewer. Joining us now is Patrick Brown, co-director of the climate and energy team at the

Breakthrough Institute. Patrick, you guys work on a lot of technological solutions to these climate challenges, but I don't know if there was an answer here in Hawaii. Yeah, I mean, one of the things that we look at is using AI to try to better predict wildfire danger. And so we think that that's something that could help that, you know, If you can know ahead of time where the danger is going to be that you could potentially, you know, shut off power lines and do these types of mitigation efforts that could reduce ignitions, at least in this case.

And so that's something we're looking at in California, but maybe something that's taken on board more in Hawaii as well. Sure. I mean, California areas that are prone to them, you can absolutely imagine how being able to use AI or any kind of technology to get ahead of the problem would be helpful. These wildfires, though, seem to come out of nowhere. Well, you know, the more that we build in areas that are increasingly prone to wildfires, which is more of the land surface over the globe, because as it gets warmer, most of the land surface tends to get drier. And so that means that you're going to have more people in harm's way of wildfires when they do occur.

And in this case, in Hawaii, there's also this issue of, non-native fire prone grasses and shrubs that are in that region that are very quickly dried out when we had this heat wave and lack of precipitation in that area over the recent weeks and months. And so that made it. So it was a situation where once the fire started, probably human cause, of course, that it was very difficult to contain. And it was a bad situation with very large trade winds associated with Hurricane. Dora. And so all spectres came together to produce an incredibly devastating situation. Do we know what the origin of this fire or these fires was?

I don't believe we do at this point. But most fires are caused by human error of one sort or another, correct? That's right. That's right. And so that can be good news, right? Because that means that we have control over that. And so efforts to reduce human ignitions, either just through, you know, awareness of reducing accidental ignitions from, you know, things as simple as putting out campfires, that type of thing. That can actually have a real impact on total wildfires. So if I were to ask you, where does climate change fit in the causation of this fire or the severity of these fires, where would you place it? In other words, was it a contributing factor? Was it responsible for? Talk me through that. Yeah, so I guess I would zoom out a little bit and not focus specifically on this fire because various factors can counteract climate change in specific regions.

But I study the U.S. West in general where we've seen this large increase in area burned over the past several decades. And climate is definitely a contributing factor to that. You know, we call the shorthand fire weather, we say it's hot, dry and windy. And climate change, so increasing greenhouse gas concentrations, increase the temperature. So that's the hot part. And they actually tend hot and dry kind of go together in the U.S. West. As it gets hotter, the land surface gets drier. And so it dries out of vegetation and makes fuels burn more easily.

So we don't see a windy component change, really, from climate change. That's a pretty weak signal if it exists at all. But we do see as it gets warmer, it gets drier. And so that is the, that's the pathway by which increased greenhouse gas concentrations increases fire proclivity. But the other major factor is this ill-advised policies that we've had since the early 20th century to immediately put out all fires. And so what that has done is it's caused there to be a large increase in vegetation, that's an unnatural amount of vegetation in a lot of our forests in the U.S. West and grass and shrublands. And so that means that we now have a drier situation with a lot more fuels than would be there naturally.

And so then when a fire does occur, it's much more severe and much more difficult to fight than it would have been otherwise. That is fascinating and counterintuitive. I never would have thought about that, Patrick, real quickly. Just because we're heading it on a different sort of weather climate topic, we're hearing predictions that hurricane season. You know, how good are these predictions? And are the same inputs that you described heat and so forth telling us to expect an uptick and activity over time or no? Yeah, they're pretty rough. It's pretty hard to predict most weather and climate phenomena at this seasonal timescale, you know, months out in advance.

The National Hurricane Center says 60% chance that will be above average. So you can just kind of tell by the wording there that that's not a super precise forecast. So that's above average in terms of the number of major hurricanes. So basically it is a lot warmer this year because we have an Al-Nino situation. And there's some contravailing factors with El Nino that can sometimes suppress hurricane activity in the Atlantic. But overall, as it gets warmer, you tend to see a small signal in the uptick in the most intense hurricanes. True. But it could easily go the other way.

Well, thinking about it in light of safety, human aspect, and also spiking oil prices with inventories where they are. So always curious about the verity of these predictions. Patrick, thanks for your time today. We appreciate it. Sure. Thanks a lot. Patrick Brown with the Breakthrough Institute. All righty, coming up, retail theft continues to be a key problem

for some of the biggest consumer brands in the country. With earnings on deck next week, we will continue to see, will we continue to see shrinkage impact results? We'll discuss that one next. Welcome back. Theft is an ongoing concern for retailers here in the U.S. Many companies claiming organized crime is on the rise, and it's biting into their profits. And they are trying to do what they can to get policymakers to crack down.

CNBC.com retail reporter Gabrielle Fon Rouge out with a three-part series on this ongoing problem. How do we know, or do we really know, whether, quote, organized crime is behind? behind a lot of the theft that we hear about affecting retailers from Target to Nordstrom to whomever. Right. Well, so that's the thing. We don't actually know. Retailers have a really hard time tracking shrink, tracking theft. It's not like when somebody walks out of a store, they're like, hey, I'm stealing this jug of milk, right? So this is all based on estimates. And there has been some survey data that shows that it's on the rise, but there's no definitive data that actually shows that this is rising. So retailers are very quick to blame organized retail crime. It is an

issue, but we're only getting half the story. I spoke to a salesperson at Nordstrom. I was in there for their anniversary sale a couple weeks ago, and this individual said, yes, we're seeing a lot more theft, and it is organized because people, it is not, it may not be organized crime, but it is organized theft in the sense that gangs will come in and they'll clear out the cosmetic counter or they'll clear out the watch counter, and they will go out, and there are cars waiting for them in a way they go and they scatter. So in that sense, it's organized.

Yeah, and that sense it is organized, too. When it's two or more people working together to resell the goods, for example, a booster might steal the items, then go to a fencer who's then going to resell the items, that's organized. But is it these large, organized crime families that you might think of, mafia style, things like that. You know, sometimes what our reporting has shown is that employee theft is actually a big part of this as well. That has long been the largest driver of shrink up until recently, but there's no definitive data showing which one is more. But you'll even see a little bit of organized crime in the warehouses, for example, You know, some of my sources who have first-hand knowledge of this. The stuff that falls off the truck.

Stuff that falls off the truck, exactly. Or they might know who's receiving the order. Put a little bit of extra in the bag. Interesting. So now we have companies who, you know, a couple of years ago, this was more anecdotal. Now it's really showing up in earnings. It's hurting their bottom lines. And they're, you know, they're getting mad and they're ain't going to take it anymore.

They're going, they're turning to the politicians for help is that, right? I mean, what can that offer? It seems clear that if you steal from a store, you're breaking the law. So what is the political solution here? Yeah, absolutely. So retailers have had a lot of success at both the local and the federal level. Over the last year, nine states have passed laws cracking down on organized retail crime. Congress is also considering federal action.

We already had the Inform Act that was passed, which is going to make it more difficult to resell stolen goods online. And now what they're turning their sights to is changing the way that felony thefts are charged. So currently, you know, you need to be able to steal about, let's say, $700 in Florida to be charged with a felony at one time. What Florida did recently is that they changed it to be on an aggregate basis. So if you steal $750 worth of goods over 30 days, that's how you get the felony. And that's also what federal legislature... Well, then you have to be arrested multiple times. Well, yeah, exactly.

And those are each individual misdemeanors. And when you're charged with a misdemeanor, the penalties are way less. You know, most prosecutors, you're going to get kind of deferred prosecution. You might get some, you know, programs or something like that. Felonies are obviously much stiffer. But what I've learned is that this may not be enough to deter. organized retail crime because it has a replacement effect. Just like what we saw with the drug market, you know, when drug dealers are picked up,

there's somebody there to replace them the very next day. It's the same thing we see with boosters. So these laws will target boosters, will target repeat offenders, but will it actually reduce crime? Unclear. As you look at this and have done all this reporting, how legit do you think the claims are of individual companies that shrinkage is really affecting their results to a to a degree that is measurable. Target said that they're on track

to lose a billion dollars this year. They're the only retailer to actually put a hard... Put a number on. Put a number on it. That, I trust. But how much of that shrinkage is retail theft? How much of it is damage? How much is it inventory getting lost? Bad inventory management, whatever. The only thing I think of when I look at Walgreens

and the many self-destructive things they've had to do to deal with what they say is high theft, you know, everything's behind in New York City, everything's behind a case. It seems to be their answer to this problem is something that hurts their own sales. I can't imagine they would do that unless they really thought, you know, hey, we have to crack down and try to protect ourselves. Yeah, absolutely.

And, you know, the advisors, the retail experts that I spoke to for the story, said when you see in a store that things are locked up, they're definitely dealing with organized crime. But we still don't know how much of that is actually impacting their numbers because they won't tell us. It's something they're not required to disclose. It's something they're really loath to talk about. Well, you know what?

We're heading into retail earnings season. So everyone listening out there, put some numbers. to it. It'll help make your case. It'll help galvanize policy if this, in fact, is as bad as they say. Absolutely. Thank you very much. Gabrielle Fon Rouge. Let's get to Contessa Brewer now for the CNBC News update. Contessa. Kelly, Tyler, Hawaii Governor Josh Green says residents of Lahaina will be able to go back to their homes today, but he cautioned Lahaina is a devastated zone. He's warning that residents should brace themselves before they try to get back. The wildfires decimated the historic town. We know at least 55 people are dead, so that makes this one of a lot.

of the state's deadliest disasters in history. Six suspects have been arrested in connection with yesterday's assassination of Ecuadorian presidential candidate. Authorities say the suspects are Colombian nationals and gang members. They were charged with trafficking illicit substances. California regulators have voted to allow more self-driving cars on the streets of San Francisco. Cruise, which is owned by General Motors, Waymo, which is part of Alphabet, will be able to deploy more vehicles in the city and start charging for rides day or night. So now that allows those companies to compete with Uber and Lyft, more options for the people of San Francisco, guys. This is a huge deal. We are going to come back to it in a couple minutes time.

Contessa for now, thanks, Contessa Brewer. Still ahead. Corporations are facing a potential new legal threat, conservative groups targeting their diversity hiring policies. We've got details when Power Lunch returns. Welcome back to Power Lunch. Following the recent Supreme Court decision, striking down affirmative action in college admissions, We are now starting to see a fight brewing over diversity hiring in corporate America. Conservative groups are challenging companies from Amazon to Starbucks, our parent company Comcast, arguing they are violating rules against race and sex discrimination.

A legal group headed by Stephen Miller filing a complaint against Kellogg's woke programs this week as well. So what is the future of DEI programs in the workplace? Rithubasin is a corporate DEI consultant. She joins us now. She works with companies including Netflix, McDonald's, Walmart, and more. and she's also author of We've Got This, Unlocking the Beauty of Belonging. Also with us is Danny Savalos, NBC News and MSNBC Legal Analyst, and it's great to have you both here. Rithu, I'll start with you.

Are companies nervous? They are nervous, and they have every reason to be because this is a great moment of uncertainty as it relates to what will be happening with DEI programming down the road, given the attack that we're seeing on this type of programming. So, Danny, let me just lay out a hypothesis. here, and it is this. Where companies are most vulnerable, it would seem to me, in trying to advance DEI programs, is where they might either explicitly or implicitly put quotas on hiring certain categories of individuals, either by gender or race or ethnicity or whatever. Am I nibbling around the right piece of cheese there or not?

You have the exact right piece of cheese because quotas have long been suspect, at least in the college context. Now, recently affirmative action was struck down at the university level. And keep in mind that the only reason universities were allowed to is because they had a special pedagogical interest in a First Amendment interest, I should say, in forming their own curriculum. Corporate environments, companies don't have that same interest, won't be able to show. that same justification, whether or not that is truly a special compelling interest, really, it's not for me to say something the Supreme Court said long ago. But now that's gone. So you're exactly right that quotas long being suspect, going back decades to the Supreme Court, they will probably be suspect. And the first on the chopping block, so to speak, I may be mixing

my metaphors, but quotas will be a problem for corporate DEI programs. So, Ritha, let me ask you how then do you thread the needle of achieving what I think many in the culture would view as a worthy goal, and that is to forward the employment opportunities of formerly disadvantaged groups, while at the same time not running a foul of what Danny talked about, and that was the idea of quotas or some explicit program that favors one class, or race over another, which would seem to be, based on the decision in the case a month or so ago, a difficult one. I think that this moment of up uncertainty reinforces why this moment is so challenging.

I think that for DEI leaders within organizations, it is a moment to be courageous and trying to push forward with the broad span of DEI programming that is necessary to create. equity for people from across cultural communities within workplaces. But in particular, what I would say is that while we trudge forward with certain buckets of DEI programming, the place where the courage is really actually needed is this targeted programming directed towards gender equity, racial equity, equity connected back to LGBTQ professionals and more. And so the problem in this moment is that because of the uncertainty, a lot of organizations will want to hold back. But this will be,

a moment of courage. It will need to be a moment where people walk the talk around some of the commitments that they have made over the last several years, the last few years in particular. Yes, we will wait to see how it all pans out in the courts, but along the way it doesn't mean that we necessarily should be taking our foot off the gas pedal. And the reason I say this is because these very programs that are in place targeting women and people of color and people from the LGBTQ plus communities, veterans, and more are needed to rectify the inequities, the fact that the playing field isn't level given historical legacies of oppression and current realities of discrimination.

Would it be enough for companies who might be in the crosshairs of this to simply remove any quotas? Is there any problem you think? And maybe this is more a question for Danny. But Rithu, do you think companies can kind of keep these programs in place, but without explicit quotas? I think that that's probably what we're going to see a lot of organizations doing, removing the quota target related programming and trudging ahead with the other DEI programming. My hope, though, is that doesn't happen. I would like to be in a place where we challenge these laws and let ultimately the courts decide what will happen, but recognizing that all of this is in furtherance of equity and workplace cultures. So, Danny, how do you further equity, particularly for those, as I said earlier, categories of individuals who may have been disadvantaged by prior discrimination?

How do you further those interests but not run afoul of sort of the non-discrimination requirements that are in the law or the equity interests of other people who may feel that, hey, someone else is coming along and taking a slot that I am fully qualified for? How do you thread that needle? It may not be a threadable needle, at least legally, and here's why. Whether it's Title VII, the Equal Protection Clause in the case of government employment, or Section 1981, all of these laws prohibit discrimination. And that is irrespective of the race being discriminated against or the gender or whatever the case may be. So a white male is equally potentially a victim of discrimination as any other minority. That's not me. That's been the Supreme Court for decades now. So the challenge, especially in a post-affirmative action era, is what kind of program would pass constitutional muster? We talked about quotas. In my view, legally, quotas are just the lowest-hanging fruit that challengers will go after. I mean, that is the easiest case to make. But arguably, any favorable treatment of any particular race or gender or any, any protection. class, which can include white and can include male, according to Supreme Court precedent on all

of those Title VII, Section 1981, and Equal Protection Clause could potentially make those challengeable in court. Could an aspirational goal, I'll lay this out here for both of you quickly, could an aspirational goal stated by a company to have, say, 50% of the hires be represented from formerly discriminated against or under the victims of inequity. Could could something like that actually become legally problematic? Danny, why don't you go first? An aspirational goal to say, have, we want 50% of our hires to come from formerly disadvantaged

categories. Sure. So you're talking about the statement with no action behind it. That would probably be on the safer side of the continuum. But if you had any action to it, I mean, it's like a corporation saying, you know, we like equity. That's great. I mean, equity may be a good thing in principle. It's what they're doing to achieve it. And if it's favoring one group over another, simply put, that's going to make it susceptible to attack, especially in a post-affirmative action era. You know, we talk about quotas.

Those are just the most obvious cases, but anything where you're just sort of providing favorable treatment. And, you know, there are some really good noble programs like visiting particular colleges to target particular groups. That's a great idea. I just don't know if even that would be constitutional now. Very quick, Ruth, final word to you. Two things. First of all, the fundamental problem here, and I say this as a former lawyer myself, and this is probably one of the reasons I gave up the practice of law. Entrenched in our legal systems and practices is a misunderstanding, a flawed understanding of what discrimination is and what equity is about. Equity is about rectifying the historical legacies of oppression and discrimination and the current realities. These aren't just historical experiences.

We know that women and people of color and people from across a number of communities that experience oppression continue to experience inequities in the workplace. And this is why we need this targeted programming. And the existing legal structure doesn't recognize that discrimination is, that having women's sponsorship programs or mentorship programs or quotas in place targeting people of color, this isn't about discrimination, this is about equity. And so we have a fundamental problem here because the legal system doesn't recognize the 2023 understanding of what equity is really actually about. Fascinating conversation. I hope we can pick it up again sometime soon. It's one that's really deep and profound and really important. Thank you both for your time today.

with Ubassine and Danny Savalos. Appreciate it. All right, coming up, we are closing out our Back to School series. We'll be right back. Welcome back to power launch. We wrap up our Back to School series with a check on the job market for graduating seniors. There's some evidence of job growth cooling for recent grads this year. So what's in store for the year ahead here to discuss Tom Gimble, founder and CEO of LaSalle Network,

a national staffing firm. What are you seeing, Tom? Well, things are definitely slowing down a little bit for recent college grads, more on the liberal arts side than in specific STEM, STEM position. So we're still seeing a high demand for technology. We're seeing a high demand for engineering and mathematics. It's good, not great, but we're heading into an election near next year. So it's for seniors to be, it's not that bad, but it was better two years ago. Are there enough STEM grads to fill the STEM jobs? No, we've talked about that before, Tyler.

That's where the immigration problems, we're educating so many people with STEM degrees, and then we're sending them back to their home countries where we need them here. We just don't have enough students here to fill the gap. And as everything moves into the cloud and cybersecurity, and we're dealing with AI, there's just too much going on too fast to think that we have the population whose brain, it's not just saying, I want to do that. You have to have the ability cognitively to do that, and not everybody does. Tom, since this is the conclusion of our back-to-school series,

what would you tell somebody who was going back to school, maybe trying to figure out their major, trying to balance majors with extracurriculars and internships and all the rest of it? What's kind of the hottest place where they can get the highest wage, the best opportunities? Well, I think what you said right there, Kelly, is where people run into mistakes, is going for the highest wage out of college really doesn't solve a problem. Now, I'm not a big believer in the whole social media find happiness phenomenon that's taken over the world in the last decade.

So I'm probably the naysayer, but let's talk about getting a job in an industry or doing something that you're actually good at that you like rather than chasing the almighty dollar when you're 23 years old. I think we interview tens of thousands of kids out of school every year at my firm. And when we have people that take the highest salary when they're 23 and not looking at where the long-term path is for what interests them, that's the mistake. So I tell kids in college, go ahead. I get the opposite around town a little bit. I see a lot of grads who are like, hey, I got hired with this major league team. And it only pays $23,000. But, you know, man, I love sports.

And I'm thinking to myself, maybe you should go to the boring workplace that's going to pay you better in the long run and have more opportunities for advancement. I don't know. Well, I think we know why certain sports teams are. so bad. It's not always the smartest. It's the kids who have the most longevity who end up running the teams, Kelly. I think in all seriousness that we've got to look at things is that the kids who go for the biggest pay check, they're doing that for, it's really a sense of values and what they think is important and where they are today. There's so many people that are doing jobs. You see the surveys as much as I do. Sixty-eight percent of the workforce is disengaged. It's not because

are doing something they love. True. Right? If you're really good at something, whether you're an accountant or you're selling phone services or whatever you're doing, that if you're good at it,

you're going to end up making the money, Kelly. Yeah. No, listen, I totally, totally believe that. All right, Tom, thanks for now. We appreciate it. Absolutely. Have a great weekend. You too.

Tom Gimble. Coming up, self-driving taxis are getting the green light to expand in San Francisco, so don't be a taxi driver, I guess. We'll look at what's next and whether these cars are ready for prime time.

Stay with us. Welcome back to Power Lunch. Robotaxies are getting the green light. And of all places, California. State regulators are allowing Alphabet's Waymo and GM's Cruise brand to expand their paid driverless taxi operations to all of San Francisco.

NBC Bay Area, senior investigative reporter Be God Chabin has been following the story. He was at the vote yesterday, which lasted more than seven hours. Other than the fact that these are their own companies, Be God, the fact that San Francisco would be leading the deregulation charge here, like boggles my mind.

You know, interestingly, for one of the places with the most autonomous vehicles operating in the U.S., San Francisco wasn't exactly laying out the welcome mat for this vote, which, as you mentioned, clears the way for two of the largest self-driving car companies in America to expand their robo-taxie services throughout San Francisco 24-7 with no cap, Kelly, on just how many vehicles they can put out in the road. Now, it's important to note, though, that both of these companies, Waymo and Cruz, already have self-driving driverless cars, hundreds of them operating throughout San Francisco 24-7. So what's the difference here?

They weren't able to charge money for those rides around the clock. For example, up until yesterday, Waymo couldn't charge passengers anything, so they were giving away rides for free. Cruise, on the other hand, was a little bit further along in the regulatory process, so they were able to charge fares, but only in certain parts of San Francisco during overnight hours. So yesterday's vote essentially gives them the ability. to essentially copy the business model of, say, Uber and Lyft operating at all hours of the day throughout the city. So I believe I saw your piece that you did for Nightly News the other night,

and it was fantastic. You went on a ride in one of these cars, if I'm recalling correctly, and the car had, well, let's just say a hissy fit, and it pulled over and stopped, and you were stuck, right? Would you tell us the story? You know, interestingly, I think it really personifies one of the largest dilemmas for these self-driving car companies in that their default when they're confused, Kelly and Tyler, is they are programmed to stop. They find a place to pull over and they stop. So in our particular instance, we were in the car for just about a minute when we got to a construction zone. So what exactly was that construction zone? Well, there were three lanes and the right lane was closed.

So something that, you know, the average driver would be able to deal with no problem. Our car got confused. What it thought the best option to do was to park diagonally on a busy thoroughfare in San Francisco. We were stuck there for 20 minutes. People were shooting us frustrated looks. People were honking at us. And the solution for our driverless car problem, Cruz sent a human driver, ultimately to take us to our final destination. Yeah, well, good thing it didn't happen in New York City.

You'd have gotten more than nasty looks. But you were riding with, just very quickly, you were riding with a driving instructor, and she graded the car a what? She said it was worse than her worst driving student. All right. Begad, it was a great piece. Begat Shebaughan, thank you very much. And thank you, everybody, for watching Power Lunch. Have a great weekend.

Closing bell starts right now.