$10B Wall Street Collapse on Trial & AI Creating Wonder Drugs?

0:26Race the rudders! Good morning Brew Daily Show. I'm Neil Freiman. And I'm Toby Howe. Today, the FTX saga has something no one thought possible, a happy ending. Then why are kebabs suddenly such a hot topic in the German government? It's Thursday, May 9th. Let's ride.

0:52Apple is experiencing its worst PR debacle since it forced AU2 album onto everyone To hype up the release of its new iPads, the company released a minute-long ad that showed artistic treasures like a trumpet, piano, camera lenses, and turntable getting smashed to bits by a hydraulic press, with the end result being a new iPad Pro. A generous interpretation would be that the ad shows how the iPad can be this high-tech tool for creating art of many different forms. But people online were not generous, and they blasted the ad for highlighting the destructive forces of technology. Toby, I would not like to be in the post-mortem meeting for this campaign.

1:31No, I would not. The marketing world was up in arms about this. I would say 90 % of people said this was the most anti-Apple ad you could ever make. You're showing these beautiful tools, these symbols of human creativity being crushed by this soulless industrial press replaced by this thin piece of technology. It feels antithetical to everything Apple stands for. Yeah, Paul Graham, big VC, was like, Steve Jobs would be turning over in his grave right now. He would never have shipped this ad. Others were saying, bring back Ridley Scott, who directed the 1984 famed commercial that really brought Apple into the public ethos.

2:08So, yeah, this was a rare miss for Apple's marketing department. The best response I saw was a guy who reversed the ad on iMovie and showed the press giving space and kind of recreating the things that it was crushing before. Same ad, just in reverse, worked so much better. You never want an ad to be put in reverse and have it show your message better, but that's what happens. So a lot of discourse. Definitely recommend going to check that ad out. Now let's take a moment so I can tell you about the goodness that is the Wendy's Cinnabon pull apart. Today I want to talk about the structural marvel that it is.

2:41It's the Goldilocks of food engineering. There is enough tensile strength in the bonds that hold the dough together so the whole thing doesn't fall apart. But you can still pull the individual pieces off no problem. It really is an incredible feat of confectionery construction. You know how Apple, speaking of Apple, designs its packages so it has that extra little bit of friction as you pull the lid off? I get the same vibes from the pull apart. If it was too easy, it wouldn't be fun. And too hard is also a no-go. Gotta thread the needle. Gotta get that perfect amount of stickiness. They definitely nailed it.

3:11You were probably always told not to play with your food, but with the pull apart, you basically have to. Need to put Wendy's and Cinnabon's food engineers to work on other parts of the economy. Who knows what wonders they might create? If you want to taste what we're talking about, head to wendys.com slash morning brew to try the Wendy's Cinnabon pull apart. This episode is brought to you by State Farm. Checking off the boxes on your to-do list is a great feeling. And when it comes to checking off coverage, a State Farm agent can help you choose an option that's right for you. Whether you prefer talking in person, on the phone, or using the award-winning app, It's nice knowing you have help finding coverage that best fits your needs.

3:50Like a good neighbor, State Farm is there.

3:56AI has been predicted to revolutionize everything, from software development to advertising to Hollywood movies. But one less discussed area where AI can make its biggest mark is in drug discovery. Soon, it might not be far-fetched if the items in your medicine cabinet were all dreamed up by artificial intelligence much faster and much cheaper than humans in a lab can currently achieve. The AI revolution in drug design took a big step forward yesterday when Google DeepMind released the latest model of AlphaFold, its landmark tool for predicting protein structures. With AlphaFold discovering drugs no human could conceive of, Google thinks it can build a business that would top$100 billion.

4:37How does this work? Well, this is a very crude analogy, but think of AlphaFold as chat GPT for biology. Instead of training the model on strings of letters and asking it to come up with new sentences, you train the model on strings of chemicals and ask it to come up with new molecular compounds, the stuff that goes into a drug. And the possibilities are mind-blowing. Right now, all of big pharma taken together uses an ingredient list of 10 million molecules to build drugs from. By tagging in AI, you could expand that list to 10 to the 160th power, opening up endless new avenues to treat diseases.

5:13The word gets thrown around a lot, but this would indeed be a revolution. It would be a game changer. Today, on average, it takes more than 10 years and literally billions of dollars to develop a new drug. So the vision is to make AI drug discovery a lot faster and a lot cheaper. AlphaFold's actually been around since 2021. It has been cited in thousands of times in other people's work. And that's the key unlock here, I think, is that having this easily accessible database that you can access without having a ton of knowledge about computers, that's the big unlock here because these are biologists.

5:46These are not computer engineers. They do not want a system that is very hard to navigate. So Google came in, made this accessible database that you can literally just go on a webpage and start playing around with. And that is what has led to this big unlock and why people are so excited for this specific development in the pharma industry. Yeah, developing a drug, you said it costs 10 years on average. It costs billions of dollars. And the main problem is that would be great. That'll be fine, but if it worked, the problem is it has a 90 % failure rate, and you have to go back to the drawing board each time.

6:18So they're hoping that AI could better identify targets and molecules that would work better when you have to put it in a clinical trial. And we said this takes 10 years and billions of dollars because this is what happens when you're developing a new drug from scratch. You have to pick a target in the body for this drug to interact with. Maybe that's a protein. Then you have to design the molecule that will manipulate the target, do something to it. And then you have to make that molecule and then test it. And then your final step is you have to go through human clinical trials to make sure that the molecule design does what it was intended to do in a human body.

6:51So this is such a long process that costs so much money. And then at the end of it, nine out of 10 times, it's going to fail. So AI can really help with every step of that process from identifying the protein in the body that needs to be manipulated, making the molecule. and all the way through the steps through the process, AI seems to be able to help, except for that clinical trial step at the end. There's no substitute for just putting it in humans, seeing what happens. Test tubes are not human bodies. So the one idea that came to my mind when I heard this is that what about hallucinations?

7:22Because remember, these are the things that Chachamity spits out where sometimes it just kind of makes up stuff. They call it the name of the, in the business, it is a hallucination. So what happens when you're hallucinating new drug or protein molecules? It's actually a good thing in some cases because, again, it can help humans think outside the box. If AI spits out a folded protein that they've never seen before, sometimes it causes connections in biologists' minds and say, wait a second, we haven't thought about it like this. Even though it might be nonsensical, there is something we can take away from it.

7:58So hallucinations, as long as they don't make it too far down the steps of the process you mentioned, can be a good thing in this sense. All signs point to this being just a massive market. VCs have poured$18 billion into AI biotech startups in the last decade. And there are currently about two dozen drugs currently in clinical trials that were created with the help of AI. So that will take a few years to see, you know, whether those actually work and whether they will come to market or not. But all signs indicate that this is going to be in a massive revolution in drug development. Yesterday marked the start of a criminal racketeering trial featuring Bill Huang and the collapse of Archegos Capital Management.

8:39Archegos Capital is a family office slash hedge fund founded by Bill Huang that went through one of the fastest creations, then destructions of wealth in modern financial history. The quick one-sentence synopsis of the events that landed Bill Huang in court. He took advantage of light regulatory scrutiny on family offices to amass gigantic levered positions in certain stocks, thanks to generous lines of credit extended by banks who didn't do their due diligence. Eventually, it was a surprise stock sale announced by ViacomCBS that caused the unraveling of Archegos and Huang. He couldn't meet margin calls from his lenders, forcing a$20 billion fire sale of the rest of his positions that caused the whole thing to come crumbling down.

9:19There are lots more layers to this, but let's get back to the trial real quick. Huang has been charged with 11 counts of security fraud, wire fraud, conspiracy racketeering, and market manipulation, and could spend life in prison if he's convicted on all counts, though that seems unlikely. You know, this all went down in 2021. Do you remember just how crazy this saga was? It was crazy because we all learned what margin calls were, who this guy was, because he was kind of a no-name. I mean, he did come out of Tiger Global Management, which is this big hedge fund. And one reason why this case drew a lot of attention is that he's what's known as a tiger cub.

9:54And people who work in Tiger Global Management, they were disciples of this founder, Julian Robertson, and they all went on to found their own hedge funds and investment firms. And so he was one of those tiger cubs. And the fact that he was doing these ludicrous trades, like literally ludicrous trades, borrowing so much money from all kinds of banks, putting them into very select stocks, artificially pushing the stock price up with no real exit strategy about how he was going to get out of them. I mean, at one point, this guy was the largest shareholder in Viacom CBS, which is now Paramount Global, a massive company.

10:30He was individually the largest shareholder, and no one knew about it because he was doing it by going to these banks and getting this and levering up. So, I mean, this was kind of an investment debacle that blew everyone's minds and destroyed a lot of value,$100 billion in a matter of days. And it really sent Credit Suisse. I mean, that got absorbed by UBS after it collapsed. Credit Suisse lost$5.5 billion because of this guy. And that set it on the course to its collapse. Maybe it wasn't the ultimate reason, but it did lose$5.5 billion because of this one trade. So now that this is going to trial, the question is, why the heck did he do this?

11:07he'd already done well managing his own money. Why did he feel the need to lever himself to the absolute maximum and try to? At one point, the assets under management topped$100 billion. His net worth was$35 billion. And so this is something that the jury is going to consider. It's not actually as a matter of law. You don't technically need to know why someone committed fraud on the scale that they did. But that is something that's going to play a major role here because a lot of lawyers are looking at this case and saying that does pop into jurors' minds of like, what is the motivation behind this?

11:39And that's still something that we may never know because he didn't need to do this. He just did it because he wanted to fly close to the sun, I guess. And he wasn't handling other people's money. This also increased scrutiny of what a family office is, is when you just manage your own wealth, he didn't have outside investors. So he destroyed a lot of value for these big banks, but not for any investors that gave him money to invest in the market. So, you know, this case has led to calls of increased transparency and filings for these this kind of murky world of the financial world, which is these family offices.

12:14Off the top of your head, I want you to think about how much global power comes from renewable energy. Neil quizzed me on this yesterday and I lowballed it. The answer is renewable sources accounted for a record breaking 30 percent of global electricity in 2023. That's the big takeaway from the annual report from energy think tank Ember published this week. Ember called 2023 a crucial turning point toward clean energy that sets us on a path towards a future much less reliant on fossil fuels. In fact, 2023 might go down in history as the highest carbon-based emissions will ever be again in the power sector.

12:50What made this possible? You can probably guess. Wind and solar have absolutely taken off in recent years. Hydropower typically has been the MVP when it comes to renewable electricity, counting for about a sixth of the world's electricity in the past two decades. But now the newcomers solar and wind account for 13 percent of global electricity, double what they were producing in 2017. Like I said, I lowballed this. That's a lot of power coming from renewables. Yeah. And really the main driver of growth is solar. I mean, it's amazing how much solar has been adopted and is powering a lot of countries now.

13:24Now, it accounts for more than 10 % of annual electricity generation in 33 countries, led by Chile at 30%. And then six countries generate at least a sixth of their electricity from solar, including the fifth largest economy in the world, which is California. 28 % of its electricity comes from solar. The Netherlands, which you wouldn't even expect to have a lot of solar generation because it's not exactly the sunniest place and it's in a very northerly climate, is number four. So there's a lot of room to grow here because you have countries like Egypt, Pakistan, Saudi Arabia that get less than 3 % of their energy from solar.

14:01So the main focus point that I was reading in this report is that solar is just enjoying a crazy boom led by China. Yeah, the growth in solar capacity installed in 2023 was actually insane. Insulations broke 200 gigawatts for the first time in 2022. Last year, 444 gigawatts, which was topping virtually every single forecast you saw out there. Just to put a gigawatt in perspective, remember Zuck went on a pod recently, not our pod, a different pod. He said he wants to build a gigawatt single training center to train his AI models. And the interviewer was like, what is a gigawatt? He said, that's about one nuclear power plant, like a good size nuclear power plant.

14:41So 444 gigawatts of solar were installed last year. It just is truly crazy. Wind, on the other hand, had a little bit of a down year when it comes to growth. And what's really funny is one of the reasons why wind had a bad year was bad winds in the Midwest, which is where the wind farms are. So that is funny that it is something that affects wind production like that. But overall, wind generation still reached a new record high in 2023. All signs are pointing towards, you know, typical carbon-based emissions. are we've seen the winds, not to say the winds again, but the winds blowing the industry in a different direction here.

15:18And now Ember is calling it, they're saying this is the peak of carbon emissions that we'll ever see again in our lifetime. Up next, oh wait, do you hear that? That's the sound of Neil's numbers coming right up. Eczema isn't always obvious, but it's real. And so is the relief from Evglyss. After an initial dosing phase, about 4 in 10 people taking EBCLIS achieved itch relief and clear or almost clear skin at 16 weeks. And most of those people maintain skin that's still more clear at one year with monthly dosing. EBCLIS, LibriKizumab, LBKZ, a 250 milligram per two milliliter injection, is a prescription medicine used to treat adults and children 12 years of age and older who weigh at least 88 pounds or 40 kilograms with moderate to severe eczema.

16:02Also called atopic dermatitis that is not well controlled with prescription therapies used on the skin or topicals or who cannot use topical therapies. EPCLIS can be used with or without topical corticosteroids. Don't use if you're allergic to EPCLIS. Allergic reactions can occur that can be severe. Eye problems can occur. Tell your doctor if you have new or worsening eye problems. You should not receive a live vaccine when treated with EPCLIS. Before starting EPCLIS, tell your doctor if you have a parasitic infection. Searching for real relief? Ask your doctor about EPCLIS and visit ePCLIS.lily.com or call 1-800-LILY-RX or 1-800-545-5979.

16:33Tonight on NBC, Jimmy Fallon and Bozema St. John hosts the highly anticipated new competition show. I hired 10 creatives from all walks of life. They will be battling it out to see who can impress the world's biggest brands. This is a huge opportunity. This is the battle for the next big idea. This is not play play. We're spending millions of dollars. I'm so excited to embark on this adventure with all of you. Make the best I do win! On brand with Jimmy Fallon. Series premiere tonight on NBC. Welcome back to Neil's Numbers, the segment where I share three stats from the week's news that will give you full body goosebumps.

17:12You may not believe my first number, but this is real. Customers of the failed crypto exchange FTX will get all of their money back and then some bankruptcy lawyers said yesterday. That seemed downright impossible 17 months ago when$8 billion in customer funds were wiped out during the collapse of FTX. But in the time since, the miracle workers who took over the exchange went on a treasure hunt for FDX's assets, sold them off, and say they'll deliver 118 % of what customers lost when FDX went belly up. New FDX CEO John Ray, who oversaw the unwinding of Enron, said in any bankruptcy, this is just an unbelievable result because lower-ranking creditors typically just receive pennies on the dollar.

17:55So if you want to make bank on your garage sale, give John a call. Bad news for Tom Brady, though. He just can't stop getting roasted. Equity holders like TB12 and Giselle are still getting wiped out. So he's still out$30 million. The joke here was that if Sam Bankman-Fried could have just lasted another few months, crypto would have ripped. Solana would have ripped one of his biggest crypto holdings. And he probably could have covered up the freewheeling he was doing with customer funds. It is a little bittersweet for customers, though. Yes, you are getting your money back. Yes, in some cases, you're getting a little bit of interest on top of that.

18:29But I mean, if you just look at Slon, it's up almost 600 % in the last year and their money was stuck in FTX. They weren't accruing those gains that the broader crypto world was getting. So, yes, it's a good and bad thing. You want your money back, but you could have gotten a lot more bang for your buck. Yeah, it's pretty interesting to see what SPF actually invested in and where these assets came from because they recovered$16 billion. One of these investments was in Anthropic in 2021. 2021, FDX put$500 million into this AI company. And this was before ChatGPT was released to the world. And Anthropix is now worth billions and billions and billions of dollars because it has a ChatGPT competitor.

19:09So honestly, SBF, pretty good investment there, I got to say. But this is just so rare. John Ray was like, this rarely happens. And it does rarely happen. There's very few times you can count it on a single hand when creditors emerged from bankruptcy made whole. The last time I can remember was in 2021 with this Hertz bankruptcy. It became a little bit of a meme stock when it went to bankruptcy because people suspected that maybe people would get their money back when it went bankrupt. So they sent the stock way up and everyone was paid out. And it was also a similar thing happened. Crypto ran up and helped make these creditors whole.

19:46Used car prices ran up and helped make creditors full for Hertz so they could sell off their used car fleet a little bit. So I guess your Toyota Camry is the same as Solana in this case. My second number might help explain why you aren't totally dreading going to work this morning. When asked how they feel overall about their jobs, 62.7 % of U.S. workers say they're satisfied. The highest share in a conference board survey going back to 1987. This isn't a huge shock. The labor market is humming right now. Unemployment has hovered below 4 % for two years. Many white collar workers are able to work from home at least part of the week.

20:22Wages have been growing faster than inflation. And ChatGPT writes your emails for you. Times are pretty good. And when you dig deeper into the numbers, you find some more interesting results, like how much a company's culture matters. Of the workers who said they intend to stay at their jobs, more than 75 % said they were satisfied with the culture of their employer. Of those who plan to move on, just 22 % approved of the culture. That gap of more than 55 percentage points was one of the highest ever reported in this survey. Toby, as someone who seems pretty satisfied with your job, what were your takeaways?

20:53My takeaways here is that there is a lot below the surface of that headline 62 % number. There's this widening gap in job satisfaction between men and women. 65 % of men say they're happy compared with just 60 % of women. There was also almost a paradox in the results. They poll people in 26 specific categories. Across those 26 specific categories, there was drops in almost all of them. So if you dig deeper and ask about specific things, people aren't as satisfied as maybe like their overall satisfaction. That may be just more about human psychology when you're asked about a specific thing versus overall.

21:28So it is interesting that maybe we are feeling more satisfied as a whole, but if you really ask some people, they wouldn't be as satisfied as they're saying they are. For my final number, Taylor Swift's Eros Tour returns tonight in Paris after a two-month hiatus. and odds are someone you know is flying to France for the show. Swift's four-night stand in Paris is expected to draw five times as many Americans as the Paris Olympics later this summer. And according to the concert venue, 20 % of the tickets were sold to Americans. When you look at the ticket prices, the math starts to make sense. Europe has tighter curbs on fees and resales than in North America, leading to much lower prices for concertgoers.

22:07One American who's going said she paid$650 for seats very close to the stage. Meanwhile, for the upcoming Eras Tour stop in Toronto, nosebleeds are going for$2 ,200. So if you've committed to laying down a couple grand to see Taylor Swift, you might as well get a round-trip flight and three nights with an Eiffel Tower view with it. And the tens of thousands of Americans who are about to drink every last bottle of wine in Paris have made that calculation. Toby, are you ready for the flood of Eras Tour videos to hit social media again? Yeah, I've been missing them. What can I say? So these concerts are drawing five times as many Americans as the Olympics.

22:43They should do a torch lighting ceremony for the Ares Tour. And I was thinking, what would a Swifty torch be? I think it'd maybe be the scarf from All Too Well. You light that on fire. You pass it from stadium to stadium. You're deep in the lore. I'm very deep in the lore right now. And I also was just thinking, seeing these prices that these Parisians are paying and these Americans going abroad are paying, and just thinking about what you and I paid to go see it here at MetLife. Let's not think about that. No comment. No comment on that. But this Paris shows, honestly, are going to pale in comparison to Stockholm.

23:15Stockholm, where she's going to after Paris, they're expecting 120 ,000 out-of-towners from 130 countries. They've jacked up the amount of flights coming in from Denmark, Finland, and Norway. It's going to be insane there. I think every Scandinavian person alive is going to be in Stockholm when she's there. So it's going to be an absolute huge boon to everyone there. It's going to be such a party. They're going to add$46 million to the economy. So I'm looking beyond Paris to Stockholm to see actual craziness. I think it's going to drive inflation again in that. Absolutely. Like Beyonce did. Right.