The Thursday Show: Pinterest's 'AI slop' problem. Plus: Trump's tariffs return

0:07This is Business of Home. I'm Dennis Scully and welcome to the Thursday show. Today we'll be talking about the latest news in the design industry, including Trump's new tariffs, Charles Cohen's ongoing legal saga, and Pinterest's battle with AI spam. To do all that, I'm joined by Business of Home's executive editor, Fred Nikolaos. Hi, Fred. Hi, Dennis. How's it going? Couldn't be better. How are you? I'm doing good. I'm doing much better now that we have our producer, Caroline Burke, back from KBiz. Thank goodness. We didn't lose her to the glamour and glitz of Cabis and the Vegas Strip. So all is right in the world.

0:45I understand last night you came in last minute as an emergency stand-in for Alexa Hampton. Those are big high-heeled shoes to fill. Tell us about that. Exactly. Big Louboutins to fill and not easy. So fun to get the call the night before the event saying, hey, could you step in and emcee the gala for the New York School of Interior Design? This is the New York School of Interior Design's big annual gala. This is Oscar night is what this is. And Conan O 'Brien canceled and they called Dennis Scully to get up on stage. How'd it go? Was it a fun night? You know, it was a great night. We had a lot of fun.

1:24It was actually a record-breaking fundraising night. We raised over$700 ,000 for scholarships at the New York School of Interior Design. We honored Alessandra Branca and the carriers and Beth Diana Smith. And it was really it was a it was a really wonderful night. And I don't know if people could tell the difference between me and Alexa Hampton, frankly. I mean, I think I I think I might have pulled it off. Two titans of the industry, as far as I'm concerned. Before we get down to business, I wanted to quickly shout out our editor and chief Caitlin Peterson's new podcast. It's called Ask Us Anything.

1:57It's a new series that she's debuting on her trade tale show. So if you want to check it out, get on over to Apple Podcasts or Spotify. It's a really fun concept for a show. So Caitlin, you know, talks to working designers about what, you know, what they're going through in their own businesses in sort of normal Trade Tales episodes. But on Ask Us Anything, she takes a secret, secret anonymous question from a designer about like a real problem they're really having in their business and then workshops it with a past guest. So you kind of get the fun, like real talk. You get, you know, expertise from another designer.

2:29It's a fun conversation. And the first episode just went up. So check it out. Speaking of podcasts, let's look back on Monday's episode, an interview with beloved L.A. furniture company, Lawson Fenning. Long time in the making. Dennis, what'd you make of this one? Long time in the making. And one of these brands that so many designers mentioned to me with admiration. And so I was excited to talk to them. They have managed to create this remarkable California-based supply chain with various workrooms that make their things. And they've really stayed very true to their California aesthetic and have just come to New York after a lot of designers have begged and pleaded saying, please, we want to sit in your sofas in New York.

3:18And now they're finally able to. Yeah, it was a great conversation. I loved how they talked about copycats and dupes, the subject that we love to get into here. Their strategy was like, we're getting duped a lot by hospitality designers. So we are going to sell to hospitality designers. We're going to go to BDNY this year, and we're going to find a way to work with the people who are knocking us off, which I thought was a very forward thinking, open minded approach to it. I agree. I loved that. I loved that that was their reason for going to BDNY. It wasn't, oh, we were thinking about getting more into hospitality.

3:50It's like, no, those are the people that have been knocking us off the most. So we thought we'd introduce ourselves to them. You may be familiar with us. Brilliant. Exactly. Good strategy. Show up, introduce yourself, and I hope it works out for them. That was a crowded show, so I'm sure they got to meet a lot of people. I'm glad to have them in New York, and it seems like a lot of designers are as well. Okay, we're going to get into the news, but first, a quick break.

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5:08And we're back. First up, Fred, tariffs. Welcome back to Tariff Talk. On Tuesday, the Trump administration officially rolled out 25 % tariffs on imports from Mexico and Canada and an additional 10 % on goods from China. Along with inviting backlash from top U.S. trading partners, the new taxes are already beginning to affect the home industry. Dennis, what do you think of these tariffs for as long as we have them? Well, exactly. How long do we have them? What time is it exactly? because they could be rolled back at any moment, which is, I think, perhaps the most important thing to remember about these tariffs.

5:45Yes? Yeah. I mean, a little bit of backstory here. So obviously, the first incarnation of these tariffs was a month ago. At the time, Trump threatened them, but then sort of pulled them back at the last minute when Canada and Mexico agreed to work more on border security. But it was only delayed for a month. Now we've reached a month later, and he's officially rolled them out again. Now, we're one day into them. They are real. They are happening. But we're recording this on Wednesday, March 5th at 1.47 p.m. And there's already speculation in the press that these tariffs are going to get rolled back or cut in half or something like that.

6:20So, you know, we just want to be very clear that we don't know exactly what's going to happen. And this may sound a little bit silly tomorrow morning when this show airs. But, you know, it has happened and it has having an effect. I don't know. What are you seeing out there, Dennis, when you talk to people and when you look at the stock market? Well, so, I mean, the stock market reacted pretty dramatically. And interestingly, we've been seeing a lot of the stocks that we talk about on the show, RH and Wayfair. I often look at Toll Brothers, which is one of the luxury home builders, and that stock has been dropping pretty dramatically.

6:54So we've seen across the board, the home industry stocks have reacted very negatively to this and really haven't bounced back even with the speculation that these might be quickly resolved. And I think the fear is that the stock market, which acts as a discounting mechanism, or in other words, it's trying to tell you what things are likely to look like in the future, it's basically reducing the value of these companies, saying they're going to have pretty tough sledding regardless of the outcome of this. Yeah, and it's worth taking a second to sort of explain why. So there's kind of two big buckets of reasons why these are difficult for a lot of these big companies.

7:35One is that simply we import a lot of stuff from Mexico and Canada, whether that's like lumber from Canada, or we make a lot of upholstery in Mexico and import it to the US. So if there's a 25 % tax on top of those goods or products or materials coming in, then companies suddenly have to spend a lot more money and some of that cost get passed off to the consumer. And so that's one sort of expense that gets added to the bucket. The other speculation is just that this makes consumers more nervous, makes them less likely to spend on discretionary goods. Of course, sofas are generally a discretionary good for most people.

8:09And also potentially could raise inflation, which then will make the housing market more complicated because borrowing costs are going to go up. So it's a combination of companies seeing their own cost structure increase because of tariffs and just a shaky macroeconomic environment that's sort of generally a little bit rough for business. So that's why you're seeing these stocks go down. But, you know, even on the sort of micro level, like I've been talking to designers and furniture manufacturers, and a lot of designers are getting notices direct from companies saying, you know, we are going to be raising prices by 15 % or letting designers know, hey, we've seen this.

8:42We're monitoring it. We're not raising prices. but there's a lot of communication from brands going around right now in a way that there really wasn't a month ago. No, no, no, absolutely. I mean, I was talking with a gentleman last night, interestingly enough, who came up to me at the NYCID event, who has sold his showroom to a partner, but who knows that one of their largest lines, one of their biggest collections is from Canada, and he's quite concerned about what this means, But both in terms of what the near term price impact question might be, but also what I'm hearing from a lot of people that I talk to is just what's going to happen to the relationship itself with Canadian trading partners.

9:22Many in Canada are very upset about what's happening and not wanting to bring on as many American products and are worried about trading with American companies. So it has possible lasting effects that go beyond, again, just the possible inflationary impact or some of the other issues. One perspective I want to make sure we acknowledge is, and this is something I've actually gotten some feedback from listeners about, is this idea of, well, yes, tariffs are confusing and they're destabilizing, but what about the American manufacturers that these tariffs are supposed to help? Because, of course, that's part of the idea behind tariffs is that you make imports expensive, and so people are less motivated to buy from other countries.

10:04They're motivated to buy from U.S. companies or start manufacturing in the U.S., thereby balancing out trade, so to speak. You know, and there are plenty of U.S. manufacturers of home goods, you know, to be sure. And I do think there are some people out there who are happy about these tariffs. I think the problem is just that even companies who manufacture in the U.S. often rely on importing materials from Canada and Mexico and China. Hardware, things like that, it's often manufactured in China, mechanisms and things like that. I've heard through the grapevine already that some U.S. furniture producers are seeing the cost of things like hardwood go up because, of course, a lot of it comes from Canada.

10:41And so, you know, that impacts their own cost structure, which means they may have to raise prices even though they're not, you know, importing furniture. So that's part of it. The other part and probably more important thing is just simply that people are concerned that even though they're producing in the U.S., if the tariffs sort of destabilize the economy and make people nervous and, you know, impact consumer confidence and raise the cost of housing, that the net effect on their business will be negative, you know, even if they're like eking out a little bit of advantage by not having a tariff on their goods.

11:10You know, we're still not out of the post boom slump in the home world, really. And so, you know, that's sort of the other reason why even U.S. producers are not unequivocally excited about this. Now, there are some people probably out there who are jazzed about these tariffs. But, you know, for the most part, there's a lot of caution and just kind of a wait and see approach, even from U.S.-based companies. But Dennis, what about you? What are you hearing from American producers? No, no. I mean, and I think you make a great point. Even the companies that could stand to benefit from this. So, for example, we mentioned Lawson Fenning earlier.

11:41They've got a completely American supply chain, but they don't in any way see this as good news for their business because it's creating stress and anxiety. It's creating tension and it's making people just – if it ends up making them hesitant, if it confuses them about whether this is the best time. And as you were just saying, the biggest battle that we've been facing in the home world is high mortgage rates, high housing costs, and none of this helps to address any of those issues. Yeah, yeah, no, I think that's absolutely right. And I think if the tariffs stick around for the long haul, there's going to be all kinds of complicated implications that are sort of hard to predict right now.

12:25In the more short term, a few things that designers should look out for. So if you haven't seen this already, I think you're going to start to see some vendors put a line in the contract about, you know, we can only guarantee this pricing for this amount of time or we can only guarantee this timing for this period because they're dealing with a lot of uncertainty. I've already heard a few designers reach out to me about this is that there's a, you know, there's a tariff clause or a force majeure clause. And I think in general, you should take vendors pretty much at their word about it because they're dealing with a lot of uncertainty in their cost structure.

12:54And so they don't know, you know, what price they can really offer. You're also going to see vendors, they may have loaded up on inventory and they want to sell that at a certain price and let designers know, hey, if you buy a bunch now, we can guarantee this pricing. Once that inventory runs out, we can't guarantee it anymore. That may be a sales tactic. It may be sincere. But if you have a need for a product that you know you're going to need to tap into in the short term, it might not be a terrible idea to buy now. Of course, these tariffs may go away and we may be business as usual in a week.

13:23So it's hard to know what to do in any given situation. I just think it's wise to keep a close eye on the contracts, talk to your clients about it, let them know there's going to be some unpredictability coming because, you know, it is real. This isn't just vendors trying to sort of shuck and jive. There is a lot of uncertainty out there. No, I completely agree. And stay close to those vendors that you think might be impacted by all of this. I know that companies are trying hard to communicate, but certainly try to be understanding during this time because a lot of your vendors aren't sure what prices they should be charging in the light of all of this.

13:58So it's a challenging time for designers and suppliers both. Up next, a Charles Cohen update. After months of legal back and forth with his lender, Design Center landlord Charles Cohen is once again facing down an outstanding payment. This time it's$187 million of his own funds, Fred. The story just keeps going. Should we just sort of catch people up to speed on what's transpired so far here? Let's remind them of the hot water that Mr. Cohen seems to be in. So Charles Cohen, billionaire landlord, he owns the Design and Decoration Building, also known as the D &D Building here in New York, the PDC in Los Angeles, and the Design Center in Houston.

14:39And until recently, he owned the Dakota in Florida. took out a big loan,$533 million in 2022 from a company called Fortress Investment Group. But the loan started to kind of get on thin ice a couple years in. He stopped making payments and Fortress sued Charles Cohen to get it back. And last year, as part of this whole legal kerfuffle, they basically won the Dakota at auction. So they're now the owners of the Dakota. But as part of the loan collateral, Cohen put up$187 million of his own money, not of buildings his company owns, but his own actual money. And now, you know, a judge has basically ruled that he is indeed liable for it.

15:17So Fortress is going to be coming for yachts. It's going to be coming for allegedly French chateaus, apparently, according to reporting in the Real Deal about this. So I don't know. This is another, you know, people always assume that Cohen would always have another billion dollars here, a billion dollars there, and would keep control of the design buildings. But this is another little twist in this drama. What did you make of it? I think that it's so interesting that the perception has suddenly changed. And you and I have talked about Charles Cohen on this show many times, always with the assumption that he would figure a way out of it.

15:51And you see some of the quotes from people in the various coverage, including our own Caroline Burke's article about this, that talked about the fact that he sounds like he's really run out of options here, and that a judge really any day now could enter a judgment against him for $187 million. And yes, he is going to have to perhaps sell some personal assets. We don't know if that's going to make him finally put some of these design centers up for sale or other things that he could. But it's one of the reasons that when you talk to lawyers and you're in business, they say, don't put a personal guarantee on anything, whatever you do.

16:29I mean, that's one of the first lessons is don't. And I was really pretty surprised that he did. Also pretty surprised to see how little value in the end the Dakota and the Florida properties ended up getting and that he's really on the hook for this$187 million personal guarantee, which could be quite serious. In addition to the rest of the$533 million. I mean, there's a lot of money at stake here, and it's not clear what all happens with it. I mean, you know, lawsuits can be slow moving, and companies clawing back money that's owed to them can be slow moving, and it'll probably be a long time before we see anything happen with the design centers, if indeed anything does happen with the design center.

17:08But the possibility that he'll need to sell them or that someone else will come in and make him an offer he can't refuse on the D &D, the PDC, and the Houston Design Center, it just feels like it gets a little more real with each passing day. And I don't want to add fuel to the fire. It's not like there's any specific rumors around this. It's just that when you look at these numbers, you see how much money he owes. You see how effective Fortress has been in court. You start to wonder what else is going to get sold. And certainly these buildings are still surviving and thriving, and people are opening up new showrooms every day.

17:38But, you know, there's certainly, you know, tension here and it'll be interesting to see what comes of it. I agree. And I think many in the industry are hoping that this might be the time that he finally does step away from the design industry in a meaningful way. But it's hard to know what the outcome will be. But I think many who are tenants in these buildings feel like it's been quite some time since the service levels and the attention to the buildings has been what it used to be. So we watch with bated breath to see what the judge decides. But this time it feels a lot more real than any of the other discussions that we've had in the past.

18:19So we are glued to this story and we'll update people whenever we get more information. In the meantime, Pinterest has been taking some heat. Fred? Last week, an investigation by news site Futurism found that Pinterest has been inundated with AI images. only they're not called AI images, Dennis. They're called AI slop. And I love it. That is my new favorite term, AI slop. I'm here for it. Exactly. Just load up that trough with AI slop and let the public feast. Yeah, so I guess we should define what AI slop is to kick this off. AI slop is just AI-generated content that is sort of designed with the sole purpose of gumming up the internet with a bunch of stuff that people can.

19:04And it's not exactly a scam, but it is kind of like a hustle. What you do is you set up basically a fake site. Let's say I set up Fred's recipe blog and I fill it with AI generated recipes and AI generated images of my recipes and a little AI generated profile. It's all fake, but I'll put a real ad on it. And the more people who come to the site, the more ad money I can generate. Now, a good way to get people to come to my fake AI slop site is to go on Pinterest and put up more AI slot, put up, you know, recipe teasers and things like that, that look right and satisfy, you know, the whims of Pinterest algorithm.

19:39So people click on my AI generated image. They come to my AI generated site. It's all fake. Nobody's happy. But I pocket a few cents on the dollar every time someone looks at that ad. So it's this whole weird, scammy ecosystem that's kind of a depressing place to be. Someone making money, sending you to a place you don't want to go where you're actually not going to learn about the subject matter that you said you wanted more information about. And then there are people that are creating instructional videos, which I'm afraid to say I actually watched, that teach you how to create these AI spammy slop sites.

20:20And it's just the worst in human nature once again coming out. and isn't it everything that people were afraid of with AI that this would just go wild and these images would just take over and of course they are out of control that slop is out of control no I agree and it's weird because I think like look like Pinterest obviously has every incentive I think at least to get rid of this stuff because I don't think users genuinely get anything out of it they're sending traffic away from the site to give ad dollars to scammy people who are setting up these fake sites so they don't like this. Ideally, they'll figure out tools to get rid of AI image or not get rid of it, but at least market or, you know, figure out some way to deal with it.

21:01But it is a sincerely complicated problem because I think it's tough to make an algorithm that can really tell the difference. And, you know, how do you distinguish between an image that's generated with AI that is cynical and scammy versus one that someone genuinely thinks is kind of cool and creative and is uploading to Pinterest because they like it? That's a very subjective judgment that it's hard to make that call. And I understand why, you know, sites like Pinterest are struggling to deal with that. Now, in terms of the impact on designers, I do think this is real. I think that Pinterest being gummed up with AI junk makes a difference for designers.

21:33And I think it's two things. One of them is a little bit more, you know, ephemeral, but I do think that, of course, you know, as we all know, Pinterest is the internet's mood board and designers use it to sort of, you know, figure out an aesthetic direction to go with clients. And if the thing you're using as your mood board to get a project started off is gummed up with a bunch of AI garbage. I think, you know, it makes it harder to find real, actually inspiring imagery. And it also makes taste, frankly, a little more generic. You know, if clients are looking at Pinterest and trying to find stuff they like, and a lot of what they like is generated by AI.

22:03And we all know AI is kind of by definition, a little bit generic. I do think that has kind of like a general drag and a somewhat depressing effect on aesthetics and taste and culture. But in some ways, the more real impact here is simply that like designers have found Pinterest to be helpful as a marketing channel. You know, it's a place to get clients. You have an, you know, an image that pops on Pinterest. People discover you that way. They hire you. You know, I know lots of designers who have gotten work that way. And if the site is getting less and less useful and getting overrun by, you know, AI slop, then I think it's less useful for designers to find new clients.

22:37So there's just, you know, a lot of negative effects here. Well, exactly. I mean, and that's just where I was going to go. I've spoken with so many designers who this is a big lead gen channel for them. And suddenly you see all of the AI images are suddenly ranking much higher and knocking them out of contention for leads. And so it really does change the dynamic. And Pinterest is not a place that I spend a lot of time, but I'm amazed when I talk to designers how much of a tool it is for them. As you say, both for clients mood boarding and showing them things, but even more importantly, people discovering designers work.

23:19And suddenly this throws quite a wrench into that whole system. Next up, we're going to talk about the client dictionary, Fred, because in this week's feature, you asked designers to help decode what clients really mean when they use words like timeless and minimalist, often meaning something else entirely. Yeah, this was a fun feature to work on, kind of a pet project for me, just to rewind and kind of explain it a little bit. So, you know, I am unfortunately a writer and I'm very interested in language and especially the language we use in the design media. You know, if I had my druthers every week for Business of Home, I'd be writing about, well, why do we call it warm modernism?

24:00What does that warm mean? And what does that term imply? And I love kind of picking apart language in that way. But of course, for me, it's just an academic sort of fun thing to think about. But when you get out into the industry, confusion over these terms is a real pain point for designers because their client walks into the meeting and says, you know, I hate traditional. But then everything they pick is totally traditional. And confusion over those terms is like a real, you know, is a real thing that designers have to overcome. So I thought it'd be fun to reach out to a bunch of designers and get like little translations, like examples of, you know, things from their own experience.