The Best One Yet - “Verizon's ‘pros before cos’ problem” — Wine tariffs, Softbank layoffs, and Verizon

Episode Date: January 10, 2020

Verizon whips up a new pricing model for its cable TV, but it’s basically creating subscripturation in our lives. Softbank startups like Zume Pizza and Getaround are starting the year by firing employees (we’re in a new decade of unicorns). And 100% wine tariff threats may mess with your Friday evening pinot plans.Learn more about your ad choices. Visit podcastchoices.com/adchoices Hosted on Acast. See acast.com/privacy for more information.

This is Nick. This is Jack. And this is snacks daily. It is Friday, January 10. Nick, remember Iran versus USA war? Yeah. Big thing happened this week. Apparently, that has concluded and markets are relieved. So they're at a record high.

Record highs for markets. Best snacks daily we have ever produced. First story. Verizon is making an absurd claim. They claim to be disrupting the cable industry with the new service. We had to take a look at this. By the way, we're still on hold. We're still on hold with Verizon.

By the way, Verizon is the cable industry. You can't disrupt yourself. I would like to speak with a representative. Second story. Zoom Pizza. We covered this on Snacks Daily a couple months ago. They just sadly laid off 80% of the employees. So did Get Around another startup in San Francisco.

So did we work another startup in New York City. We're noticing a trend here. They're all invested in by SoftBank, so we're going to break down that pattern. And there's a pattern of how the CEOs announce the layoffs. Third and final story. Wine tariffs could double the price of your weekend vino game. We're looking at what 100% tariffs look like in your Cabernet. Full disclosure, this is just a threat by President Trump.

It might not happen at all. Now, before we jump into all that, we got to talk about a big number that gets announced today. The unemployment rate. It comes out like basically the first Friday of every month. Circle your calendar. It's a big day. We're going to learn today the unemployment rate of the United States of America. That's the jobs report that comes out every month.

And we're going to learn how many new jobs were created in this country. Econ fans are pumped right. Technically, it's the second Friday the month, but who's counting yesterday was a holiday last week. Must have been a holiday thing. Now, here's the thing. Unemployment right now is at a ridiculous low. 3.5%. That is the amount of Americans who are jobless and looking for work.

Do you have any other stats? You want to share over there? Yeah, 2.2%. How's that sound? That's pretty nice. That's the unemployment rate of the great state of Vermont. Jack, let me drop you a few hundred miles back to New York. Yes, go ahead.

The great state in New York. Yeah, the unemployment rate's at about 4%. but we have 15 times as many humans. So? Do you have Ben and Jerry's? They're black and white cookies. I'm just going to throw them away. There are more people waiting in line for brunch on the Upper West Side right now than in the entire state of Vermont.

Size doesn't matter, Nick. Size doesn't matter. Which led us to a really interesting revelation. The jobs market is so tight right now that fast food joints are getting incredibly competitive about hiring new people. This week, we learned that Taco Bell's general manager of just a local. local Taco Bell. They're going to make like $50,000 to $80,000 a year. Typically, that's the historic salary for a general manager of a Taco Bell location. But now, for the first time, a GM at Taco Bell has a starting salary of $100,000.

We're talking six digits dropped on the general managers of Taco Bell. This is unprecedented. This is how tight the labor market is. Taco Bell is offering six digits. And you know what that means? Can Taco Hut general managers? Right. The restaurants that have KFC Taco Bell and Pizza Hut. All in one, they should be learning three times this. They should get 300. Someone make that happen. Let's have a three stories.

member FINRA slash SIPC For our first story, Jack, please hold for 43 hours. Verizon claims its new service will disrupt cable TV. Ironic because Verizon is cable TV. It actually makes no sense. Now Verizon has three key divisions.

It's based in New York. You probably love this company. Pitch me, man. Pitch me on here. They have wireless, which is what everyone uses for their iPhone. They have Fios, and then they have media. The media division, is basically Yahoo and all of its internet websites.

Can we break down this Fios term for a second? It's actually in a brief. It's a brief. Talk about. Fiber optic service, Fios. Way better Fios. Since 2005, Verizon has offered cable TV and internet through Fios. You pitched that so well.

I feel like you're going to come and steal the copper out of my home. Give me the commission. Time Warner Cable, Cox, Xfinity, Optimum, Charter. They all offer the same great service. Here's what you get. Horrible customer service. A 12-month contract. and a monthly bundle for $79.99 plus seven lines of fees.

And those seven lines of fees are going to make your $79.29. 121.72 every month. But wait, there's more. Because you are special. We're going to jack up the price after 12 months. Oh, that was just a promotional price? You caught us at our... Now it's twice as much?

You caught our Easter 3 p.m. ordered special. And now you're only going to get 120 gigs instead of 240 in your living room, but only in a section of living room, fine print, seed details. Snackers, as you guys... can tell Nick and I hate cable companies. So that's why we were fascinated when Verizon announced yesterday this quote, Verizon disrupts the cable industry. Again, it is the cable industry.

Verizon announced a new way that they're going to sell cable TV and internet. It's called mix and match. You got to go with the alliteration if it's a new product. So you basically can just pay monthly for internet and TV. Sounds similar to a monthly subscription. You pick what you want, you leave what you don't. If you like this, you'll add it to what your Harry's raising. The laser's monthly thing, it becomes a subscription.

Every month, you can, actually, any time, I think, you can change your TV bundle, you can change your internet speed. There's no 12-month contract you need to commit to, and there are fewer fees. Verizon said no fees, but I looked into the fine print. You're still paying that $12, like, equipment fee every month. So this actually makes a lot of sense, because let's say you're traveling for the holidays like you just did and you're not home for half the month. Maybe you change your bill to be the slower internet speed. The reason Verizon's doing this is they want to stop the flow of cord cutting. some data that shows how bad it's got it.

Well, just last, I mean, cord cutting has been happening for years, Nick. I've been cut since 2014. It's like, I mean, I've been cut since 2016. It's basically like the faucet got turned on and it keeps running. Now, just last quarter, Verizon lost another 67,000 paid TV cable customers. Here's what Verizon's thinking. If people hate cable fees and services less, maybe they won't cut the cord and run away. This is an anti-cord cutting disruption of the cable industry.

So, Jack, what's the takeaway for our buddies, over? Over at Verizon. Cable is a classic pros before Coes industry. Let that sink in it. We're talking profits before customers. Let's celebrate Snackers. The death of the old cable industry ways. We all hated the old cable industry ways.

It's not dead yet. It's still dying. Court cutting isn't complete. Squirming around over there. But let's look at a counter example to cable. Amazon. Amazon is loved by customers. And it's key value, customer obsession.

Now, cable TV industry, on the other hand, their obsession is with profits. Profits over customers. Customers hate those 12-month contracts, but profits love those 12-month contracts. Pros before Coes. Cable was able to do that because they had a local monopoly. In your town, you probably have one offer for cable. You have no choice. No choice going on here.

But now you do have a choice because you can cut the cord into streaming. Pros before Coes is why the cable industry is dying. For our second story, the wine industry is in panic. 100% tariffs on European wine could be coming. soon. Now, it's Friday night. You're going to go home post-podcast recording. What do you, what are you popping open? What do you let it breathe in the household? I was the wine salesman of the month at the Olive Garden for three straight months back in 06, but I'm going to suppress that instinct for my wife's benefit. Are you going like an Anderson Valley, Pinoa, Napa,

cab. If you open up a Maomi and let it breathe, you could have a good night. You get Jack too close to DeCanner. It's a dangerous situation over there. Let me tell you, if you want to hear Jack Juan for hours about something, ask him about his recent experience with a Kianti. I have the fastest key chain in California. He wants to show them your scar on your left finger. Show them, Jack. Now, the headlines we noticed this week were pretty straightforward. They were pretty scary, actually.

It was like, get ready to kiss European wine goodbye. We saw it in the Wall Street Journal and the New York Times. Now, the reason was because President Trump threatened to expand the trade war between the U.S. and Europe by punishing exports of European wine. That's right. The trade war is not just U.S. say in China. It's like there's other countries involved. So we need to talk about the situation with tariffs on French wine right now. It's a two-core story. This one you can definitely let

breathe. All right. Tariffs numeral U. That's pretty good. Thank you. 25% tariffs on European wine since October. Those are actually in place already today. Now, the reason the U.S. impose those on Europe is because Europe subsidizes Airbus. Which is Europe's airplane manufacturer. And that's unfair to Bowen, which is our airplane manufacturer. These tariffs, already exist, and it's not just on French wine. It's also on scotch whiskey, Italian cheese, and French wine, because this is a European punishment. Here's the thing. You may have heard about this, but you haven't noticed this when you've been to a grocery store. Most likely. That's because the stores selling these products and the distributors who import them. They're the ones who are

paying this import tax right now, and it's not seeing customers. All right, let's spit this one out. Go over to tariffs number two. Okay, 100% tariffs. France passed an unprecedented tax, targeting U.S. tech companies like Google and Facebook recently. We covered it last fall on Snacks Day. President Trump responded with a threat to impose a 100% tariff on French wine. Yes, just France this time. It's not the Italian cheese. It's just French wine.

So let's say it's like a really big Friday night for you tonight. And you're celebrating with like a not expensive Bordeaux. Yeah. And let's talk about how expensive that Bordeaux becomes. So your local liquor store, they probably pay 15 bucks for that bottle of Bordeaux. Normally they would mark that up and charge $30 to you to buy it so they can make a profit. Because they're like doubling the price and yeah, they're marking it up. Now that store is going to have to pay $15 for the bottle like usual, but then also a $15 tariff.

So now it's $30 for your liquor store and they're going to mark that up 100%. You're paying $60 instead of $30 for that order out. Just so that they can make a profit. Now, French wine specialists, liquor stores, restaurants, they're in a panic because they can't have their wine double in price. Americans are going to reject that. Jack, you're going to get Italian wine instead or maybe even German wine. So, Jack, can you bathe me in a gorethummer over here and tell us the takeaway for the wine industry? These 100% tariffs would hurt Americans much more than they hurt the French.

France actually has more leverage than China has when it comes to responding to our American tariffs. Think about it. If America doesn't buy China's steel, then China is in serious trouble. But if America doesn't buy France's wine, France is actually kind of okay. The rest of the world is really interested in France's wine. Ironically, China still really interested in France's wine. So China might be desperate to sell to the U.S., but if France sees these 100% tariffs, they're not going to respond probably by lowering the price of their wine. No, instead, the price would just double for us Americans.

And most likely, they would just be not in stores anymore because that's just too expensive. This is a great example of international trade policy, basically being threats and blusters and just mirrors and stuff. We actually don't think these 100% tariffs are going to happen. We're going to see a headline soon. It says tariffs dropped in exchange for blah, blah, blah. Pretty much a negotiating tactic. For our third and final story, SoftBank-backed unicorns are laying off workers in huge numbers.

SoftBank is the Japanese venture capital firm that's invested in a lot of the companies that you know, and those companies have recently laid off a lot of workers. Now, Jack and I jumped in Snacks' out, and we looked at the memos that the CEO sent out to actually announce these firing. The story's about layoffs, sad, but the pattern we found in these letters is pretty hilarious.

It's like there's a formula that they're following here. Very formulaic. If you're the CEO of a company that's raised billions of dollars and you have to fire like hundreds of people, apparently this is how you start. This is what you do. All right, to the beginning of your memo has to have an obnoxiously arrogant line

about how well you're doing. Of course. What comes next year? Then you are very ambiguous about the actual firing. Use some words that don't, that aren't fire. That don't make sense. that mean fire.

And then you conclude this memo with a virtuous claim about the future of your company and its path to profitability. For example, the new way for it. Oh, my God. Our company, 2.0. I can't believe they just that. Blue skies ahead. We're going to start off. Emerging from the ashes.

Our analysis with Zoom pizza, which snackers, you know, because Jack and I ordered the pizza like a month ago. It was great. Zoom pizza had trucks that had Robo pizza ovens, right? Red flag. here, when we ordered it, we thought the truck was coming. Instead, like a Camry came. Nick and I scampered outside, excited to see this, like, robo truck. Scamper, you got a scamper. And it was just an Uber Eats vehicle. So that was red flag number one. This company, Zoom Pizza, raised $375 million just from SoftBank in 2018.

That's right. SoftBank gave Zoom Pizza a check for $375 million and said, expand your Robo Truck Pizza delivery. Well, this month, January 2020, they are now laying off 80% of their staff, which is like 400 people. That is brutal. And the way the CEO announced it in a letter to employees began with a line, we are blessed with an opportunity to invent brave and innovative solutions. What? What kind of an opener's that?

Who wrote that? Who vetted this thing? And then he said, many of the current roles no longer exist. That's how they announced the firing. That's our ambiguous reference to firing. I don't even follow where they're going. If they don't exist, they're not current roles. Right.

How can you even write that? I don't know. Didn't make sense. So that was Zoom Pizza. We noticed the same thing happened for a company. company called Get Around. Get Around is the Airbnb for cars. You can rent out your car when you don't need it for the weekend. Someone else can use it. Someone else pops in and hopefully they clean it. Maybe you leave something like zero. They received a check in 2018 of $300 million from SoftBank to expand their Airbnb for cars.

And we just learned that now in January 2020, they're laying off 25% of their staff or like 150 people. Now, the World Wide Web has a copy of the CEO's letter to employees announcing these layouts. Entitled The Next Chapter. Honestly, it sounds like a- And it opened up with some epic humble bragging about the six times growth to 5 million users who are on Getaway now. Then there was this line which kind of implied

maybe people are losing their jobs. They're reducing field operations. What does that mean? Who works at a startup and knows themselves as a field operator? Spoiler, it means layouts. How do you even operate? There are no fields anywhere. And then finally, it gave specific instructions

about what room to go to which after the all-hands meeting. sound fun. We think it's like a blue pill, red pill situation. Blue Room is, you're getting laid off. Red Room is you're a survivor. For another month. Now, we've noticed this pattern, not just with the companies we just mentioned, but SoftBank companies have been dealing with this for months. Let's take December just a month ago. Wag, which is a dog walking app, recently let go 182 people. Uber, which is one of SoftBank's OG investments, laid off 1,000 people last year. And WeWork has already laid off 2400 after the epic failure of an IPO. And there's more.

expected to come. So Jack, what's the takeaway for our buddies over at the Japanese venture capital firm SoftBank? 2020 is the end of an era of the anti-profit startup. Snackers, jump in your pod time machine back to the same month last year, January 2019. We were talking about IPO Paloosa, the excitement for Uber, Lyft, Pinterest, Peloton, and Slack, who were all getting ready to IPO. One year later, today we're talking about the exact opposite. IPOs have stopped happening. Startups are firing employees. Companies are firing employees. Companies are are pivoting their business models in search of profits. Now, SoftBank, the Japanese venture capital firm was the one fueling Uber's rise,

even though it's an infamous money loser. You get $300 million. You get $300 million. Snackers, no joke, we calculated it. Uber loses $543,000 every hour. And SoftBank was also the key investor that allowed WeWork to fly to gargantuan heights. SoftBank's portfolio is full of these anti-profit startups. Their focus was one thing, just being the biggest disruptor there is,

regardless of profit. Now that concept has been rejected hard at the end of 2019 and harder into 2020. Stock markets were very harsh to SoftBank backed companies. It's the end of SoftBank's anti-profit era. Jack, can you whip up the takeaways for us before the weekend? Verizon is ending its pros before Co's cable TV instincts. It needs to stop the flow of court cutting, so it's making cable less aggravating. French wine would likely double in price if the 100% tariffs go through. But we don't think that the tariffs thing will actually happen. It's It's probably just a negotiating tax. Third of the final story.

SoftBanks' herd of unicorns are laying off workers by the hundreds. There's been a reckoning for anti-profit startups. And there's a formula for how to fire people, apparently. Now, our fact of the day is a follow-on fact of the day. Rarely does this happen, but it's good when the, it's just good. Phil Spector from Boston Mass. Heard yesterday's snack fact from Scott from Scot. We assume he spat out his Dunkin' Donuts and immediately tweeted us at Robin Hood Snacks

with a follow-up Hershey's stat. So Hershey's chocolate. We talked about it. Hershey's Pennsylvania. The guy's name is, I think, Milton Hershey. It's a great name. Milton's a good name. So Hershey initially wasn't trying to make chocolate at all.

No, no, no. He was in the caramel business, which he actually sold and then got into the chocolate business. Now, here's the thing. He knew that his name Hershey had to be on these bars that he was going to sell for it to be a marketing success. Branding genius. But the thing about caramel is it like, I don't know, it's a little softer.

It kind of like melts away. Yeah, that Y isn't sticking through. He couldn't get the name. to stick in there, so he tried chocolate instead. And the name stuck perfect. Oh, by the way, extra snack fact here that Jack and I discovered, apparently Mr. Hershey was supposed to be on the Titanic. He had booked tickets to the Titanic, but then, like, last second, a business meeting came up.

Yeah, yeah, too much chocolate. Probably had a meeting with Reese's. Snackers loved being back with you to start the week. We could not feel better about it. Something was missing in my life. It wasn't meat and dairy, although I am vegan this month. It was just a reminder. It was the snackers.

I didn't know. Have you mentioned that yet? We'll catch you guys on Monday. The Robin Hood Snacks podcast you just heard reflects the opinions of only the host who are associated persons of Robin Hood Financial LLC and does not reflect the views of Robin Hood Markets, Inc, or any of its subsidiaries or affiliates. The podcast is for informational purposes only and is not intended to serve as a recommendation to buy or sell any security and is not an offer or sale of a security. The podcast is also not a research report and is not intended to serve as the basis of any investment decision. Robin Hood Financial LLC, member FINRA, SIPC.