The Best One Yet - Zoom’s major crisis, prison stocks lose their banks, and Snapchat’s 2nd class of startups

Episode Date: July 11, 2019

Conference call icon Zoom made your webcam vulnerable to snooping, and the flaw got discovered in a dramatic way. SunTrust bank decided to stop funding private prison companies, so we decided to look into private prison company stocks. And Snapchat’s venture capital arm, Yellow, announced its 2nd class of early-stage startups, which we explored to notice the trends of tomorrow.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 Thursday, July 11th. This is the best one yet. We've actually created a few snacks. The S&P 500 just hit 3,000. We like the snacks the most.

3,000. A beautiful round number. That's only five years after it, 2000. Now, we've got to talk about what we're covering today. Well, first of all, markets jumped because of the Fed testimony. It looks like it's going to cut interest rates this summer. Very true. Good for stuff.

Jerry Powell was speaking at Congress. All right. Now are three stories. All right, three stories. Conference Call icon. Zoom had a major, major crisis. It's webcam. Actually, your webcam got hacked.

Yeah, and we are looking at the fascinating timeline of how the whole drama happened. And then how the stock reacted or didn't react. Maybe not. Second story, SunTrust Bank based out of ATL, Georgia. It's no longer going to fund private prison companies. So that got us looking into private prison companies. Yes, it did. It was very interesting.

Third final story, yellow. Ever heard of it? Not the Cold Play Song. Not the venture. The Color Capital Division of Snapchat. We just learned about it. class of entrepreneur startups. And that reveals a key thing about some really interesting digital trends. But before we get into those, let's talk about Gaga. The Monsters? Lady Gaga. Huge snacks listener.

She is launching a beauty brand called House Laboratories. How you spell in that? House spelled like the German style. Why would you add extra vows? Lady Gaga is vaguely German. It makes a little bit of time. Now, this is the first beauty brand to launch exclusively on Amazon. And if you're Amazon, you're looking at your cosmetic sales, jumped 38% last year. It's a growing division for Amazon for show. So they're looking to partner with someone who's got some credibility, a Renaissance woman. She has nine Grammys. One Oscar. She just won that for a star is born. Yeah, she almost got one for breaking up the Bradley Cooper marriage. She also runs a nonprofit called Born This Way. And she decided not to be on the U.S. Women's National Team because she didn't

have time. That's like six truths and a lie right there. But Lady Gaga, we know your big snacks listener. Congratulations to you. Yes. I can't wait to see it on Amazon House. As well, as Kylie Jenner, Kim Kardashian, Gwyn Patra, and Rihanna, who also happen to have their own cosmic experience. Nicely done. We see a trend. Let's hit our few stores. You're tuned in the snacks daily.

We spoke to the lawyers and we got to get something legal out the way. The snacks about to hear ain't food. It's air candy. They don't reflect the views of the Robin Hood family. It's all informational just so. You know, we're not recommending any securities. It's not a research report or investment advice. Not an offer or sale of a security.

Right. Snacks is digestible. Business news for you. National LLC. Member Fenbara slash SIPC. For our first story, Zoom, the beloved conference call system, just made a really big mistake and then apologized and revealed some fringy stuff about the This was like crisis level, numero, uno.

This was not a good Monday. Red hot fire in the basement. Not how you want to come back from July 4th. Nobody's leaving this company until we fix this problem. We got to talk about it. Now, why is this company loved? Well, because if you open up your computer and you click a Zoom link, your conference call like begins immediately.

Right. They basically fix that problem where you know, you're typically like, oh, I got to find the like nine-digit, you know, code. That's a pin. Yeah, you don't have to dial like 800, 221, 7-8-4-2, and then do a 10-digit plus two pounds. I'm not the host of the call. Can we just start the call kind of a thing? So that same convenience, just clicking a link and starting a conference call, it's also presenting a security file. Right.

If an attacker sends you a malicious zoom link, it could open up your Mac webcam if you click on it and automatically give your attacker access to your camera. to be watching. So basically, after one innocent little click on a Zoom link, you might be snooped on by some hacker through your webcam. Not the worst hacking situation ever, but kind of freaky that they get access to your living room. Yeah, there was no private information that was leaked. You know, your social security hasn't been compromised.

Right. But what's so bad here is the interestingly bad way in which Zoom happened to handle this situation. So we're going to walk you through the whole story. This was discovered by a security researcher named Jonathan Lightshoe. Which means in German? In German, Lightshoe means light shoe. Perfect. Now, this guy has a full-time job as a tech worker. And what he decided to do here is reveal like the intricate underbellies of what happens in tech ecosystems. Right. But one more

thing. I checked out his Twitter account. This guy is a full-time tech worker on the side. Side hustle. He looks for vulnerable security situations at tech companies and makes money off them. Walk a little back. Take me back to March 8th, 2019. Well, he discovered the flaw at Zoom and he tweets at Zoom and says, yo, you guys got a webcam issue like it's a big vulnerability. Zoom's response is not tweeting back. March 26th, like two weeks later, he emails Zoom. He increases the formality from tweet to email. He says, if you don't do something about this flaw that I've found, I will tell the whole world the 90 days. And because Jonathan happens to be a really nice guy, he also offered a quick fix to solve the problem. All right. So the next day, he actually

gets an email response from Zoom from a security engineer who he writes back to. And that person's actually out of office. So he gets an out of office response. He's like, I'm trying to help you, help me help you. Eventually, this security engineer takes the report seriously and he says, wow, if you like don't tell anyone about this and just let us fix it, we'll give you a bunch of money. So this is a really interesting thing and not many people know about in the tech industry, but bounties. It's called a bug bounty. If you identify a bug at a tech company and you tell the company instead of taking advantage of a bug. Like a total outsider noticing a bug. Then they will pay you in exchange for identifying the security. It's an interesting way of like

keeping, you know, circle of life ecosystem. Now, Jonathan Lightshoe said no. Thank you. I don't want that bounty because I want to tell the world if you don't solve this correct. Moral focused guy over here. So June 21st, a couple months later, Zoom has confirmed that the flaw has been fixed. Suddenly, July 7th, Jonathan checks back in on all this and notices it stopped working. That brings us to Monday. July 8th. Jonathan Lightchew posts a massive article on his personal medium.com filled with gifs. It's full of memes and gifts. Yeah. Got a great amount of photos on there. So he walks the whole world through the entire system, how he identified the flaw, everything we just told you about. How the flaw makes you vulnerable. All the drama, the out-of-office

messages, that there was no profess response by Zoom. To add insult to injury, when users read this article and tried to uninstall Zoom to protect their privacy, they tried to do, Zoom set up some sort of auto-reinstall feature that really pissed people off. So then the beloved CEO of Zoom had to come out and end up apologizing for the whole situation. But he initially had been denying it. Which is making this so awkward. Just a bad. look by Zoom. So Jack, what's the takeaway for our buddies at Zoom? Wall Street votes immediately on how much this will hurt the company. Now, we just walked you through the whole game plan, the whole situation, the entire calendar. And Zoom stock is actually up in the last two days.

Now, we would have expected it would have gone down. And it would have gone down because profits could have got her. Profits could have got hurt if customers leave or if lawsuits came and they had to pay fines. Which can easily happen with a hack like this. Now, the stock reaction from Wall Street It shows that analysts expect neither customers to leave nor lawsuits to happen. Zoom made a mistake. It admitted it made a mistake, but it's not feeling any pain. For now. For our second story, another bank has decided to boycott private prisons and immigration

holding centers. And that got us looking to private prisons. Yeah. But first, SunTrust Bank is the bank we're talking about. It's based in Atlanta, Georgia. It's merging right now with BB&T, which is based in North Carolina. Name ever. The merger, after the merger, they're going to call themselves truest.

Apparently they didn't hire design team. T-R-U-I-T. Or they hired a really bad one. It's not a word. But that's what SunTrust decided to do. And they also made another big decision recently. Yeah, this week they decided they're no longer going to lend or finance private prison companies.

Now, this is an interesting trend because Bank of America, J.P. Morgan, and Wells Fargo are also boycotting funding private prison companies. Now, all of this has been triggered by the awful, awful news of just horribly inhumane detention centers that are holding migrant children at the border. Now, the prison companies do say that they are disappointed that the banks are caving to political pressure here. The prison companies we're talking about are two very specific ones. They are the two publicly traded big prison companies. And they sound like if you had to come up with a prison company, Jack and I were doing this for a random movie, you'd come up with these names.

Dr. Evil approves these prison names. One is called Geo Group based in Boccaratone, Florida. And then the other one is CoreC Civic. Based in Nashville, Texas. Sounds extremely cool. So you ready for the sales pitch of these private prison companies? Lay it on me. I want to build.

They're like, hey, governor of Tennessee, we will imprison your prisoners for cheaper than you can imprison them. It's going to be a better prison experience for everyone. Just leave it to us. Sit back. You guys might be maxed out of prison cells. You don't need to build another prison. We got plenty of beds and plenty of bars that work. So if you're Core Civic, here's what you're also presenting.

The fact that you've got 51 prisons with 73,000 beds, which we did a little back of the envelope math on. We found those stats on the investor relations homepage for CoreC civic. And we also saw their revenue, and we did a little math. They make $24,000 per prisoner per year. Now, more prisoners mean more money in this case. And we noticed that the stocks of these two prison companies, they doubled in the three months after President Trump got elected. But both stocks are down 20% since boycotts have started over the last month.

Now, what does this actually mean for the prisons? They're still going to find loans, I'm sure, from some banks out there. But it's going to be like B-Lest and C-List banks. We're not talking Wall Street highest end, highest tier banks. No, these banks that they're going to have to resort to, they're going to charge higher interest rates. Ones that don't necessarily have a brand name nationwide. Now, we want to clarify those two publicly traded companies, Geo Group and Core Civic, they do not run the private prisons that have unaccompanied migrant children. But they do run prisons that also happen to have migrants in them.

So, Jack, what's the takeaway for our buddies who are over at these private prison companies? Reputations and profits. There tends to be a trade-off between the two. Now, the banks are highlighting, quote-unquote, concerns from stakeholders, employees, and the community as to why they're not funding these banks anymore. Right. But last month, we covered a story where there were concerns from stakeholders, employees, and the bank continued doing the business anyway.

It was the exact opposite situation for HSBC. HSBC is the top bank of Saudi Arabia whose reputation is quite poor. So HSBC is risking their reputation, hoping to get profits. While these other banks like SunTrusts are risking profits hoping to get reputation. For our third and final story, this one's wild. We looked at what some corporate venture capital arms are investing in because it tells us what to expect next. We're going to start this story by discussing what a corporate venture capital arm is. Step number one, you got to have an ambiguously random name. Okay, for Budweiser, AB InBev, the corporate venture capital arm is called ZX Ventures.

They are quote unquote brewing up the future. We don't know what ZX ventures means. Who would? If you know, please tweet at Robinette's X. Let us know. Another one here, 1894 Capital, which is Kellogg, the food company. Assuming that's the date they were founded. I'm assuming that. We're going to make that assumption. M12. This is a great one.

This is a random one. Everyone, wait a sec. Do you want to guess? I guessed this correctly. I was impressed. We had just been talking about it, though. It was Microsoft. M12 is Microsoft because M stands for Microsoft and 12 is the number of letters in the

word entrepreneur. Impressive. I know. I like. They kind of played with them in mind. But today we're talking about yellow, which is the venture capital arm of SNAP. Exactly. Now, these venture capital arms are literally like venture capital arms.

capital firms, except they're part of another company. They're a way to kind of innovate by investing in other companies. Exactly. Snaps is called Yellow, and this is actually an incubation program. It's kind of like a startup camp situation without like the awkwardness of teenage years. Yeah, last year they had a full batch of entrepreneurs and they gave each of them $150,000 in equity. They said, go out there, use the office space we're giving you. We'll give you a little bit of mentorship, but come up with something awesome. Now, what's interesting is that we just learned about the second class or batch, because I like the word batch, of entrepreneurs to come out of this yellow incubator.

And they're focusing on online to offline things. So what we mean is, these are apps that recommend things for the physical world. Now, the interesting trend here is that these are apps that are solving a core human problem. That is decision fatigue. Exactly. In this great world of ours with the internet, you have a lot of options. You have unlimited options. Like, if you're trying to decide where to get dinner in San Francisco, you are in trouble if you just Google where to get dinner in San Francisco. Right. If you go on Yelp, you're going to find an unlimited resource and who really cares would Joe down the street thinks to the three-star random Chinese restaurant. We've noticed a trend that people want curated recommendations,

basically like old school review guides, and that's what some of SNAP's investments are doing. So these are a couple of this latest SNAP class. So the first one we're going to talk about, remember, these are private super early stage companies, is active spaces. Now this is like class pass. It's an app that helped you book fitness classes, but this has reviews and recommendations based on your workout. We're talking about it's going to tell you not just which spin class to do. But which spin class you can do, that's not Soul Cycle, not flywheel, but not too small that you feel a little awkward and like, you know, you already know what you're doing.

You know third's position. You don't need to be election on third position. Are you describing me right now? You're not to get your booty out of the seat if you're doing it. Second company had invested in is a company called Disco with a K, $25 a month. You get a subscription that gives you access to four concerts for that month that are tailored to your tastes. Exactly.

So they're figuring out what you actually like. Then they give you points every month, and you can apply those points to the concerts they actually want to go to because they're finding the right ones for you. Now, you might be asking yourself, what's in it for Snapchat? Which would be a good question. Those two companies, one of them is about being in the gym. Another one is being at concerts. People are always snapping those situations, right?

Exactly. Maybe Snapchat will find ways to incorporate active spaces or disco into Snapchat in the future. What they're trying to find here is innovative ways that tech companies are integrating with customers by solving everyday problems. And that's a feature that Snapchat could eventually use. So, Jack, what's the takeaway? for our buddies who are corporate venture capital arms like yellow. If you want to see where a company will be tomorrow,

look at their venture capital investments today. You can literally do this right now. Don't just go to Budweiser's website. Google Budweiser ZX ventures, their corporate venture capital arms. Yeah, it's not just a bar full of old-school beers like Budweiser, Bush, no. You're going to go up and click on the menu at the top that says portfolio to see who they've invested in. And the portfolio has tech companies.

It has craft brew companies. It has other kinds of drinks. like energy drinks? It shows you that Budweiser has actually invested in like an artificial intelligence company that's doing cool things to make humans look neat on their apps when they're taking photos, which Budweiser may use in its marketing. And they have lots of like delivery companies too, at home brewing stuff. They invested in Rappie, the Latin American Uber Eats, because they want to get into the delivery space. So Budweiser is planting all of these seeds for like 150,000 bucks each, hoping one of them blossoms into like the future bud light for their company. Jack, can you stop

Looking in the mirror over there. The takeaways for us, please. I'm zooming in on myself right now. Zoom. Refused to admit that it had a major security bug, but Wall Street really didn't punish it at all. What's fascinating about this is how it all went down. Two private prison companies are suffering because banks like SunTrust are guilty working with. It's profits versus brand recognition.

Third and final story, Snap's Venture Capital Arm is investing in companies that recommend gyms and recommend concerts. And if you want to be seeing what trends are coming next, check out the corporate venture capital arms. Now, snack fact today, sent to us by an unreal snacker here, Michelle Lim from Singapore. Okay, she highlights a outcome of the Marie Kondo effect. Marie Kondo is a Japanese consultant who tells us all to tidy up our lives. Yeah, if you're not enjoying folding something, she thinks you're an idiot. She thinks you got to get rid of it. Then figure it out, get out of it. Now, we have results. People are getting rid of it. Now, Goodwill industry is shared with

everyone. That, they operate, by the way, a bunch of like used good stores. Right, exactly. They've seen a surge in donations post-Marie Kahn. Okay, in the United States in Canada, in January, donations to Goodwill increased by 32% in Washington, D.C., 22% in Houston, 20% in Roanoke, Virginia, and 16% in Grand Rapids, Michigan. A bunch of critical cities right there. A lot of emptier closets, too. Michelle is a fantastic snacker. Michelle, thanks so much for that one. All right, Snackers, check out our daily newsletter to hear about Nintendo, which is coming out of the $200 mobile-only version of the Switch video game. Now, Jack and I would love to get some more Snackers of Shadow here.

tweet us a snack back with your hometown over at Robin Hood Snacks. If you do, we'll be with you tomorrow. Even if you don't, we'll be with you tomorrow. I'm looking forward to that. 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.