The Best One Yet - “We’re in a Baby Bust” — P&G’s diaper problem. Tesla joins the club. Duolingo translates $2.4B.

Episode Date: November 19, 2020

When a pandemic means making fewer babies, Procter & Gamble has to adjust its diaper strategy (spoiler: fancy dipes). Tesla stock popped 20% this week because admittance to the S&P 500 club brings perks. And our “Unicorn of the Day” is Duolingo, which just hit a $2.4B valuation as the translation app tries to pull a Spotify.$PG $TSLAGot a SnackFact? Tweet it @RobinhoodSnacks @TBOYJack @NickOfNewYorkWant a shoutout on the pod? Fill out this form:https://forms.gle/KhUAo31xmkSdeynD9Learn 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 Thursday, November 19th. These stories are too good to mess around, Nick. I got to get right into it. This is the best one yet. Jack's not standing.

He's not at a standing desk. I should point that out. First pod in like six months that I've been seated. Jack's like, this is Jack. Low energy situation. First story, Jack, what do we got? You know the baby boomers, welcome to the baby busters.

Snackers, Procter, and Gamble, they got to whip out a whole new diaper strategy. Literally. That's actually a thing they're doing. second story, Tesla, just got tapped to join the S&P 500 Club. Share's jump 9% because Jack and I heard the initiation ceremony. It's pretty, pretty good. For our third and final story, it's the unicorn of the day, duolingo, so I got to say

glucauncha, yep, Mabrook, and congratulazione. Jack, how do you translate $2.4 billion valuation? Do you have these a 4x for that? These are the questions. These are the questions. But Snackers, before we jump into that wonderful mix of stories, we've got to a stage five zucking alert. Twitter just announced something called fleets. Jack, we're going to have to launch that hotline 1-800 zucking. I was going to have to make that happen. Fleets is a fleeting,

disappearing tweet, and it exists on your profile at the top in a circle around your profile picture. Jack, where have we seen this before? Oh yeah, looks identical to Instagram stories. Which looks identical to Snapchat. More specifically, Twitter just zucked LinkedIn, which had zucked Pinterest, who previously zucked Facebook, who zucked its very own Instagram, who originally zucked the original zucking of Snapchat. Which means that the original zucking was just copying someone else's product. It's basically plagiarism. This feels less like plagiarism, more like a contagious disease.

Yeah, it does. So Snackers, Jack and I are pleased to announce we are launching our very own Robin Hood Snacks Stories. All you got to do is... What's in our three stories? Yeah. We spoke to the lawyers and we got to get something legal out the way. The snacks about the hearing food is air candy.

They don't reflect the views of the robberhood family. It's all informational just so. We're not recommending any securities. It's not a research report or investment advice. Not an offer or sale of a security. Snacks is digestible. Business news for you. Robberhood Financial, LLC, member FINRA slash SIPC.

For our first story, Procter and Gambles for parent for a shrinking pandemic birth rate baby bust. Snackers, we may have a massive surplus of diapers in 2021. Beware. Snackers, we know what you're thinking on this one. First of all, the bad news. Let's just get the bad news out of the way. There are going to be fewer cute babies in 2021. The good news, fewer baby shower gifts that you're obligated to buy. Honestly, there's a good side to every coin on this thing. So Jack and I were looking at this story. And basically, you got an opposite of the baby boomer situation going down. We're going through a straight-up baby bust right now. Experts estimate that 500,000 fewer births will happen in the United States in 2021. That is 10 times a

bigger drop than we saw from 2018 to 2019. Babies born in 2021 are conceived in 2020. FYI. Thank you, Dr. Kramer, on that one. That was helpful. Now, the precedent here, because there is one, happens to have happened a few times. Yes. Actually, it turns out birth rates in the United States, they tend to correlate with the labor market. last big drop in the birth rate in the U.S. was in 2009. Financial crisis, fewer babies. Pandemic crisis, fewer babies. Here's the thing. Moms and dads like to make sure that they can afford a crib and maybe even college someday. So Jack and I are looking at the numbers here. And you got 500,000 fewer births potentially next year. That would be a 14% drop from like the normal 3.7 million babies born in a typical recent year. That means there's going to be 14% fewer customers for

diapers. Yes. Or on the flip side, 14% too many diapers in this country. You got a situation where one out of seven of your customers, boom, gone, disappeared. 2021 is going to be the best year ever for Captain Underpants. Yes, it is. He's going to win. Now, this diaper paloza of next year is a huge problem for Proctor and Gamble and Kimberly Clark who owned 80% of the U.S. market for diapers. They're basically the truly in the white claw of the diaper industry right now. Right, right. Procter and Gamble and Kimberly Clark, they make pamper's and huggies. So here's what Jack and I find fascinating. Since you're only having a kid now, if you can afford it, they're pivoting all their diapers to the era of the fancy diaper. That's what we're calling it at least.

Now, I'm having a kid, Snackers. I announced this a few months ago. So I feel like I'm the elephant in this room. That things must be going pretty nice over at the Kramer Household. So Kimberly Clark recognizes that people having babies are probably upscale. They're coming out with a plant-based diaper made partially of Sugar King. Not a typo. This is like the beyond-meeta diapers, because it's also five times the price of the cheapest diaper out there. Procter and Gamble, though, is trying to one-up them. Their new diapers, they basically come with an adjustable belt like pants, not the stretchy one-size-fits-all situation at Huggies. No, these fancy new P&G diapers are more khakis than they are sweatpants. Your kid can, like, go to the boardroom at age three.

But Nick, Procter and Gamble is stepping it up with diapers that are cackified. Snackers, Jack and I to sit down and stand back up when we heard this. Turns out Procter & Gamble has also partnered with Google for tech-infused diaper systems. This diaper system includes monitors, sensors, which can detect wetness, and then

alerts that will buzz on your phone when that wetness is detected. And because you got to show off a system to really have a system, you got to get the webcam, too, to confirm that wetness did in fact occur. The webcam confirms the baby hasn't just taken off the diaper, Stewie Griffin style.

Procter & Gamble's looking at this situation, they have had to come out with so many fancy diapers that they previously had a category called super premium diapers. They now have a category called super, super premium, no joke. I hope you can finance these diapers because this is like the mock eight from Gillette of diapers. So Jack, what's the takeaway for our buddies making diapers over at Procter & Gamble? If you're losing customers, test how much the remaining ones are willing to pay. Snackers, let's look at the iPhone. First iPhone came out 2007. was just $499 back then. Apple didn't really jack up prices and test the limits of price on an iPhone until the sales numbers started to fall.

2019, they come out with an iPhone that's $1,450 their most expensive ever. How do you make up for a drop in customers? Jack, you raise prices. How do you make sure they'll pay those higher prices? Jack, you upscale the product to a silly degree. Dipers and iPhones, same thing. For our second story, Tesla finally gets the green light. to join the S&P 500. They've been hoping for this.

That means, Nick, overnight, hundreds of billions of dollars worth of funds will dump money into Tesla stock. All right. So before we talk about Tesla here, I mean, we just got to talk about this wild week for Elon. Wild week. Well, he started off by testing positive for COVID-19. Yes, he did. That's a tough way to begin. We keep tested positive and then negative and then positive again, so going to round up to positive. He is recovering well, though. So good for him. And then his second favorite company, SpaceX, set for him. Americans and one baby Yoda toy out into outer space. And then yesterday, he passed Mark Zuckerberg on the list of world's richest people. King number three, trailing now only Jeff Bezos and Bill Gates.

Technically not a zucking, but kind of a zucking. I didn't even think of that. Now, the reason for that last one, his favorite number one company is Tesla. Yeah, and Elon owns 21% of Tesla stock. And guess what? Tesla just finally got the invitation to join the S&P 500 Club. Honestly, the initiation for this should be Elon has to read every single tweet he's ever sent out, ever. Now, the SB 500 Snackers, as a reminder, is a stock index that includes the 500 most valuable U.S. stocks. And if you're Tesla, you've had to wait for this invitation to the S&P 500, because they happen to have an inconvenient profitability requirement. Some clubs have a dress code, other clubs have a profitability code. Mr. Kramer, you're going to have to wear the blazer

in the dining room at all times. Now, Tesla, finally, after 10,000. years as a publicly traded company has reached four consecutive quarters of profitability. They actually just hit five. And the S&P 500 index, it's weighted based on how valuable all those 500 big companies are. So Apple's the most valuable company in the index, worth $2 trillion. It carries the most of all the other companies, 6.5% of the whole index. So Tesla jumping in with its profitable blazer, it's joining the S&P 500 as like the 10th most valuable company in the index. Based on today's stock price. And starting December 21st, Tesla's in the club. So Jack, what's the takeaway for our buddies over at Tesla?

This isn't just a vanity win for Elon. No, it's not. It literally increases demand for Tesla stock. Snackers, you may have noticed Tesla stock jumped 10% yesterday, and that is because of stock funds. Like ETFs or mutual funds. They're basically huge stock smoothies. An S&P 500 fund is like a huge stock smoothie

that include bits and tons of 500 other stocks. And think of those companies that like the blueberries, the strawberries, the chia, the cash, you're the whole nut situation. The S&P 500 index fund, it's one of the most popular retirement funds out there, and the ingredients are perfectly proportional to the S&P 500. So the S&P 500 index fund is 6.5% Apple stock. It's 4.8% Amazon and a little of the other 498. That's because the S&P 500 index is 6.5% Apple, 4.8% Amazon, and a little of the other 498. And on December 21st, that stock smoothie is going to include a dash of Tesla, too. Think of it like the bee pollen. means on December 21st, a bunch of heavy-hitting fund managers who are like slinging around billions of

dollars, they're going to buy a ton of Tesla stock to update their index funds. Basically, they have to buy a ton of Tesla stock because they have to reflect the S&P 500 index. This is like, imagine you have a textbook that you're written as a professor, and suddenly your textbook just got added to the Ecom 101 required reading list that has like 7,000 students. So in anticipation of all these buy orders driving up the stock on 1221, Tesla is up 20% since Monday. For our third and final story, Jack, Avidazen or Arriva Derghi. Trots des Schlechten Vettors.

That's the genitive. The hardest of all the figures of speech. Trick question, the answer is both Unicorn of the day. Dualingo just raised $34 million to hit a $2.4 billion valuation. But Duolingo is no Spotify. No, it's not. But Snackers, we are talking about the biggest thing out of Pittsburgh since, What do you think? Jerome Bettis?

I was thinking Bain because, you know, Batman 3, it's all in Pittsburgh, actually. It's all in Pitts. It's a lot of Pittsburgh. Oh, but also, maybe the biggest thing since Pittsburgh Black. Pittsburgh Black is underrated black steak on the outside, red on the inside. Yeah, if you know, you know. Duolingo is a learning app that teaches you how to speak like 40 different languages. Full disclosure, I'm doing this on the daily with Italian parlor Italian on your journo. If you open up the app like Nick does every morning, you see a little owl who's going to guide you through conjugating verbs. into the subjunctive two.

Oh, God. Honestly, can we just use the past and perfect every time? It's the worst. But what if you need to say, I would have wanted to if I could have wanted to? Can't I just say, I did?

No, this is actually a company in the ed tech industry, which is education technology. And it turns out, ed tech is just having like a total treat yourself moment right now. Your eyes are tired of Netflix. Your legs are exhausted of Peloton.

Yes, there. And you're still trying to cross off your list, one of those quarantine resolutions, pledged back in April, which is probably getting back on the board with your Italian language skills, which is why people are jumping into Duolingo. Duolingo's revenue has doubled to $200 million in the past year, and it's now the highest grossing app in EdTech. Congratulations, Ed. But what Jack and I find most fascinating about Duolingo is how it used to make money. Its first customers were companies that needed something translated. Like say, GE needed their washing machine user manual,

translated into another language. So basically, here's the how it would go down. That GE manual would be given to doolingo who'd feed it as text into the app, which you would translate as part of your lesson, which they would then crowdsource all the answers to to deliver to GE what they think the correct translation for that text was. So GE gets their washing machine user guide translated into Arabic. Yes, they do. Based on 10,000 homework assignments for students trying to learn Arabic on the Duolingo app. So that's awesome, but they don't do that anymore. Now it's got a pretty standard premium model.

Yeah, so basically some people are paying for premium courses on Duolingo. Others are getting Duolingo for free, but you're seeing a mattress ad. And Duolingo CEO, they're simply following Spotify's trajectory, but we see one problem with that. So Jack, what's the takeaway mattress, mattress mattress for our buddies over at Duolingo? Spotify is the gold standard of premium conversion. Snackers, converting users from free to paid is an artful. form that Spotify has mastered. And Duolingo's numbers, they show how important it is to convert people from free to premium and just how far away they are from Spotify's gold standard. So Snackers here at

Duolingo's numbers, 4% of Duolingo's language learners are paying for the service, and yet they make up 85% of Duolingo's total revenues. So that tiny subset that's paying for Duolingo, they are way more valuable to the company than the ones that are just like creating some ad revenue. But the problem is, there are just so few of them. Spotify, on the other hand, they have 144 million paid users who pay $10 a month, and that's out of 320 million total users. So Spotify has managed to convert, get this, 45% of its listeners to pay for the service. Meanwhile, Duolingo is only converted 4%. True financial fluency for Duolingo requires figuring out how to better monetize users. Jack, can you whip up the takeaways for us over there? 500,000 fewer babies are

expected next year in the United States. So the diaper giants are adding bells and whistles to test your willingness to pay. For a second story, test the stock is a required ingredient to all S&P 500 index funds starting December 21st. So the stock price bounced 20% higher, make an Elon Earth's number three richest man. For our third and file story, Duolingo claims their business models just like Spotify's the Freemian model. Only issue here, Spotify does the freemian model, you know, way better than Duolingo or anyone else in the entire world. Now, talk about. for our snack back to the day. This one tweeted in by Nate Evans in lovely Santa Barbara, California. Nate heard us mention a couple days ago that Sonos, the speaker company, is based in

Santa Barbara, California. I think that's considered a competitive advantage, Jack, for the company. It turns out, I totally agree, Nick. The hottest temperature ever recorded on planet Earth was in Santa Barbara, 133 degrees way back in the 1850s. They got to enjoy that record until 1913, when Death Valley nearby hit 134 degrees. By the way, you may have heard that Death Valley hit 129 degrees this summer. That is hot, but not even close to the 134 degree record. Jack, Molly and I had a dinner in Santa Barbara a few months ago. It was so hot. It was the hottest wave of heat I've ever felt. Shocking because it's on the ocean. Yeah, people looked at each other. We were concerned. Nick, I'm going to take this home by asking the snackers to H-Y-H-Y-S-D today.

Jack, I'm going to walk into the living room with a have-you-had-your-snax daily, spread it far, spread it wide. Snackers, this was great. We'll see you tomorrow. Can't wait. If you know, you know. And before we go, Snackers, what is congratulations for Twan win? A new Jeopardy contestant from Pomona, California, also a snacker. What is mattress, mattress, mattress? Derek and Flo, congrats on the anniversary over in Nairobi, Kenya. And happy anniversary to Ian and Teresa in Virginia Beach. And happy birthday Aaron Peckereck in Parma, Ohio. And Christine Lee in Toronto, and Naira Ramagiri in Houston. And Gloria Pelosi. Edison, New Jersey, and Asher in Gates Mills, Ohio, and Patrick McLaughlin in Garland, Texas.

And happy birthday, Zach Sims over in Atlanta. And congratulations to Mark and Lonnie for getting engaged in Lawrence, Kansas. This is Jack. I own stock of Amazon and Spotify and Beyond Meat. Nick also owns stock of BOMME, and Apple. The Robin Hood Snacks podcast you just heard reflects the opinions of only the hosts 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.