Americans LOVE to Spend & Why Broker's Fees Are Going On Trial

0:00Tonight on NBC, Jimmy Fallon and Bozma St John host 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 idea win! On Brand with Jimmy Fallon. Series premiere tonight on NBC. Good morning, Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. On today's pod, the 6 % commission you have to pay residential real estate brokers is under anti-trust scrutiny, and it could threaten to upend the powerful industry.

0:44Then, Neil, say it with me, never bet against the American consumer, because retail sales from last month just dropped, and they were way stronger than expected. It's Wednesday, October 18th. Let's ride.

1:00Neil, the Phillies won last night, which is a good thing for you and a lot of Philadelphia natives, but it could end up being a bad thing for the American economy. Over the past 100 years, the surest sign of an oncoming financial crisis has been a Philadelphia baseball team winning the World Series. So in 1929, the Athletics won. Great Depression hit. 1980, Phillies won. Recession hit. 2008, Great Recession hit. But 2023, the Phillies are currently two games away from the World Series. Recession? Question mark? Question mark? Question mark? Neil, I know you're a Philly fan, but for the greater good of the economy, I'm pulling for their opponents.

1:37No, no, no, no. A Philadelphia parade will in itself stave off a recession. So I'm 100 % behind this team. They're having so much fun. The crowd is going wild. Philadelphia is just loving this right now. And I know that even if a recession comes, it will be short-lived because Philadelphia is just going to spend so much on merch and other things celebrating that. We'll jump right back. It's going to be a V-shaped recovery. You heard it here first. Before we jump into the show, today's episode is brought to you by Yahoo Finance. Neil, so many finance platforms out there are confusing and give you information overload.

2:14But Yahoo Finance strikes a great balance of giving real-time market data without going overboard. There is a reason 150 million people visit that site every month. But honestly, the mobile app is a game changer as well. Oh, you're a mobile guy. Totally. It's convenient. I got to tailor my push notifications however I like. Plus, it runs really well on my Pixel. Oh, my gosh. You just had to slide that in there. I mean, enjoy your green text, I guess. You know, I will. Head to finance.yahoo.com to learn more or download the Yahoo Finance mobile app, my favorite, to get it directly on your phone.

2:49Race the rudders. Raise the sails. Raise the sails. Captain, an unidentified ship is approaching. Over. Roger. Wait, is that an enterprise sails solution? Reach sails professionals, not professional sailors. With LinkedIn ads, you can target the right people by industry, job title, and more. Start converting your B2B audience today. Spend$250 on your first campaign and get a free$250 credit for the next one. Get started today at linkedin.com slash campaign. Terms and conditions apply. We'll get to the business news in a bit. But first, these are tense times in the world, and we want to update you on what's going on in the Middle East.

3:26President Biden landed in Tel Aviv this morning for an unusual and dramatic wartime visit to Israel. His goals were to reiterate support for Israel, discuss how to free the nearly 200 hostages that were kidnapped by Hamas, including Americans, solidify a plan to get humanitarian aid to desperate civilians in Gaza, and prevent the Israel-Hamas war from spiraling into a wider conflict. If that weren't high stakes enough, the region was thrown into further chaos after a blast at a hospital in Gaza killed hundreds of people, according to the Hamas-run health ministry. The question quickly turned to what caused the blast.

4:01Palestinian health officials claimed an Israeli airstrike was responsible, but Israel's military categorically denied they were behind it and published several pieces of evidence that attempted to show it was a failed rocket launch from the Palestinian Islamic Jihad Group. Investigations by multiple governments and media outlets are ongoing to figure out what exactly happened here. But this morning, Biden said based on what he's seen, it was done by, quote, the other team. In terms of Biden's visit, the fallout of the blast immediately squandered his push to avoid escalation. Anti-Israel and anti-U.S.

4:34protests erupted across the Arab world, and Biden's planned trip to Jordan to meet with Arab leaders was canceled. So the scope of this trip was significantly narrowed. Yeah, I just want to emphasize the historic nature of Biden's visit. With his trip to Israel, he became just the second president to travel internationally to an active war zone that wasn't controlled by the U.S. military. The other president, also Joe Biden, when he went to Ukraine last February. Despite the risks, Biden hates Zoom calls and feels like he can make more of a diplomatic impact by speaking face to face with Israeli Prime Minister Netanyahu.

5:08The visit also comes as Biden reportedly plans to ask Congress for a mammoth$100 billion funding package that includes support to Ukraine, Israel, and Taiwan to beef up its security interests around the world. And speaking of Congress, the House remained without a leader for another day after Jim Jordan failed to get enough votes to win the speakership yesterday. Another vote is planned for today. Lots going on. We'll make sure to keep tabs on it for you. But, Neil, let's move on. and I have a question for you. What do the 2016 Cavaliers, our audio quality, and the American consumer all have in common?

5:45They are resilient. They may get beaten down, but boy, do they keep fighting. I want to talk specifically about American consumers though. The retail sales report dropped yesterday and showed that spending online, at stores, and at restaurants rose a stronger than expected 0.7 % in September. Sounds good, right? Well, and another sign that we are in the weirdest economy ever. This was a kind of good news is bad news moment. Treasury yields jumped towards yearly highs again yesterday as the spending report showed evidence of a still hot economy that could result in higher interest rates for longer.

6:20And remember, those elevated rates affect everything from mortgage rates to car loans to credit card borrowing rates. So those ripple effects do be rippling. Neil, I thought it was especially interesting to see where that spending is coming from. Consumers are still splashing out on big ticket items like cars, as well as at places like restaurant and bars, which has been part of a larger post-pandemic shift towards spending on experiences. Neil, bottom line here, I said at the top of the show, don't bet against the American consumer. You sound like Warren Buffett. I know. But I just want to take us back to October 2022.

6:53Bloomberg comes out with this article saying its economists predict a 100 % chance of a recession within the next year, which was understandable because the Phillies were in, you know, they were about to go to the World Series and everyone was worried about a recession. But one year later, we couldn't be further from a recession. After this report, you had banks like JP Morgan and Goldman Sachs raising their GDP forecast for Q3 to above 4%. That's not, you know, that's not even close to a recession. That is a booming economy. And this retail sales report only bolstered the idea that the U.S. economy has been chugging along.

7:29The recession that had been worn for so long that had been predicted with a 100 % chance of happening is not even close to here. It feels like we've been having these two contrasting narratives constantly, though, because on the one hand, you have economists forecasting a 100 % chance for recession. But on the other hand, you have these really strong spending reports. But then also you kind of have the consumer feeling pretty glum. The Consumer Confidence Index of Expectations fell below 80 in September, a level that has historically signaled a recession within the next year. So even though people are literally spending money, they still don't feel confident in the economy.

8:04Even though the labor market is still incredibly strong and is powering the spending, people just have this disconnect. And a lot of it could be because more higher income spenders are driving most of the spending while lower income are pulling back. And companies like Dollar General have called this out. companies that serve a more lower income bracket are saying, listen, we're in a diverging economy right now. So that could be part of the reason why we're seeing these great spending numbers, but people are feeling gloomy. And another reason why is, you know, Americans had built up such intense pandemic savings during COVID.

8:37And everyone thought, economists had thought that these savings had been depleted. Recent reports found that there were actually hundreds of billions more dollars in saving accounts than we realized, that could also be driving the increased spending levels that we're seeing. I think my bottom line is these GDP numbers that are about to come out are going to blow by expectations, and it's going to show in the U.S. economy that is booming. Okay, moving on. Anyone who sold a home in the U.S. is all too familiar with the roughly 6 % commission you have to split between your broker and the buyer's broker.

9:12But that That system could be dismantled and the brokerage industry thrown into chaos as multiple serious legal challenges take aim at what opponents call a blatant violation of antitrust laws that artificially inflate home prices. To understand what their criticisms are, you need to know about the National Association of Realtors, which is one of, if not the most powerful lobby on Capitol Hill. The National Association of Realtors requires its 1.5 million members to offer compensation to a potential buyer's broker if they want to be listed on a database of homes for sale known as multiple listing services, many of which are controlled by, you guessed it, the National Association of Realtors.

9:51So you've got this situation where a 6 % commission split by two different brokers has persisted for decades, allegedly thanks to the realtor lobby's monopolistic grip. Even while in peer countries like the UK and Australia, the total commission for on a home sale amounts to just 2%. Two class action lawsuits are targeting this buyer broker commission model and a trial in Missouri kicked off on Monday. But perhaps the biggest threat comes from the DOJ, which is deciding on whether to pursue its own case. If it does and destroys the system, half of the nation's real estate agents would go unemployed, Redfin CEO said.

10:25Did I set the stakes high enough here? The stakes are high. And again, I just want to call it how powerful the NAR is. Last year, it surpassed the U.S. Chamber of Congress to be the biggest spender on lobbying in the U.S. It laid out more than$80 million in 2022. So this is a very powerful group that has an interest in maintaining the status quo of these super high commission fees. And then just to kind of give a sense of how much these eat into when you're trying to buy a home, a$407 ,000 house, which is the median existing home sales price right now, a 5.5 commission, which splits the difference between 5 % and 6%, comes out to$22 ,390.

11:04So that's just another added fee for sometimes your broker doesn't even really do that much for you. So you can see why this is such an annoying part of the home buying process for a lot of people. Yeah, and their opponents of this model point out a blatant conflict of interest where a buyer, you know, a buyer is supposed to get the best – a buyer broker is supposed to get the best deal for you. But you know that they're also incentivized to get a higher price because, you know, their commission kind of depends on it. So there have been studies that show that recently, just last week, that home listings that have lower commissions are actually less visited and stay on the market for longer than ones with higher commissions.

11:47And that kind of exemplifies this conflict of interest that buyer brokers steer their clients away from those particular listings. Yeah, it is just a completely backward system when you really dig into thinking about it. And yeah, it is kind of, you know, the worst case scenario for the industry is that the government steps in and just bans all of these sharing of commissions, which prohibits both the seller side and the buyer side. So this is a rabbit hole that the NAR does not want the Department of Justice to or the Justice Department to go further down. And I could see it just kind of upending the entire, as a Redfin CEO said, it literally would get rid of half of existing realtors out there.

12:25We should mention that the NAR obviously has a response to this, and they say that demolishing the system would send the brokerage industry and the whole home buying and selling process back to the Wild West. You'd have outdated and inaccurate listing information. A buyer would have to go to every single broker in town to see all of the listings because they would be decentralized from these multiple listing services. So they push back that this system works to the buyer's advantage. It actually helps consumers. The critics of it say that it inflates home prices. I feel like just make the commission 2%.

12:59Just bring it in line with the rest of the world. Why are we in the 5 % to 6 % range? Just bring it down to the 1 % to 2 % range. That's what I would do. All right, Neil, before we go on talking realtors forever, we're going to take a quick break.

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14:09apply. Offer ends October 29th, 2025. Neil, one of the coolest and weirdest parts of this job is that we get to consume a ton of news. So then when we decided to talk about Mark Andreessen's latest manifesto, I was a little nervous because I wasn't sure I had room for 5 ,000 words from the most famous VC of the modern area to stuff into my brain. But stuff I did, I read every word and And now I want to tell you all about it. To set the stage, Mark Andreessen is the founding partner of Andreessen Horowitz, aka A16Z, the venture capital firm best known for investments in Airbnb, Slack, Instacart, Robinhood, Stripe, OpenAI, SpaceX.

14:50I could go on. And Mark himself is famous for his broad sweeping essays. He wrote about how software would eat the world back in 2011. That proved to be pretty dang correct. He wrote a now famous essay called It's Time to Build at the outset of the pandemic. as well. And on Monday, he published the Techno Optimist Manifesto, a 5 ,000 word piece on why tech is, in his words, the engine of perpetual material creation, growth, and abundance. Neil, this thing reads like a fever dream. The big themes were anti-regulation and the case for accelerationism in its place to mark everything can and will be solved by technology as long as the enemies, which he lists as everything from ESG and tech ethics to stagnation and authoritarianism.

15:37Don't get in the way and ruin everything. I could go on and on about Andreessen's various points, but I'll pause there. Neil, what stood out to you? Well, I think the boldest claim here was he was trying to prevent the slowdown of AI development, which has been called for by numerous tech critics and also people in the tech industry. He said that if we slow down AI development, it would lead to excess deaths than would be because AI could save lives. And he said that deaths that were preventable by the AI that was prevented from existing is a form of murder. So I think saying slow down in tech progress or putting regulations on tech is a form of murder, that stood out to me.

16:19Yeah, it definitely stood out. And I mean, I think that gives you a sense for just the way he writes. It's very easy to get caught up in his vision. He writes in broad strokes. He writes as if he's giving a speech to a crowd of thousands. But he's kind of very short on specifics and does not give much thought to an alternative vision at all. But I'll admit, I was getting a little caught up with it by the end of it because he does make a good case for the enemy being stagnation. And as soon as we stop innovating, it does feel like kind of like the end of human progress as we know it. So we do have a ton of problems to deal with from climate change to wealth inequality.

16:54And it feels really hard to solve those problems if we don't strive and if we don't innovate. The perfect example that came to me was the Vesuvius challenge that we just talked about. Remember, that was when people were trying to dig into an old Roman scroll to see the words within. And so many different people from so many walks of life were combining their collective intellect to accomplish a really incredible thing. So if stagnation were to hit, they would say, oh, these schools are too bitter or too brittle. We don't even want to open them at all versus let's use tech to solve the problem.

17:26So that's what came to mind. Yeah, I think Andreessen suffers from a little bit of lack of nuance. You know, he bashed government. But if you just back up two years, you had Operation Warp Speed, which was from the government. And that accelerated the development of vaccines, which ended up saving tens of millions of lives for COVID. There's also other really important R &D projects that are spurred by the government. So him hammering the government, you could argue whether the government should have its hands off of industry a little bit more or more hands on. But I think he would present a little more of a convincing argument and win over more people if he acknowledged a little bit of nuance.

18:02But that's not the point of this, I realize. The point is to make waves and generate conversation, which he absolutely has. It's so ironic, too, because Mark, he created one of the first web browsers out there, and he did it while researching at a government-funded research institution. So, again, yeah, he's kind of speaking out of both sides of his mouth sometimes. But the end result was this rallying cry for tech and this rallying cry for innovation to kind of power humanity forward for the next decades. I would say that a bunch of other tech leaders are kind of at odds with Mark Andreessen.

18:35Just last month, we talked about that AI summit at the White House where 2AT from Sundar Pichai to Elon Musk to Sam Altman, OpenAI CEO, said that they welcomed regulation of AI because they viewed it as more of a threat than Marc Andreessen thinks. Then again, Marc Andreessen, through his A16Z fund, has invested billions of dollars into a bunch of AI companies. So we should also mention he has a financial incentive to stave off regulation. Moving on to our second to last story. Tell me if you've been in this situation. You board the plane, settle into your aisle seat, and two minutes later, someone lets you know that they have the window seat.

19:13So you stand up in the aisle, blocking everyone else from going through the plane so that the person can settle into the window. Finally, someone is trying to fix this. Starting October 26th, United Airlines will implement a boarding process that prioritizes economy class passengers that have a window seat, followed by passengers with middle and aisle seats. The window seaters won't be the first to board the plane. That'll be your typical active duty military, unaccompanied minors and people with disabilities. And then first class and business class will follow. But when the rest of us plebs are allowed to board, it'll be window seat first in an attempt to speed up the boarding process.

19:49It won't be a major change. It's expected to shave off two minutes of boarding time. but an airline at the gate or an air aircraft at the gate is an aircraft not making money so united thinks this is a tangible way to reduce delays improve service and get its airplanes back in the air at a time when demand for air travel is soaring are you on board with this kobe oh my gosh i'm so sorry i'm still recovering from getting called a plea right now but i do think that this is a win-win for a lot of people it's great for airlines it gets the planes in the air it's great for uh people boarding the planes because it goes a little quicker although i was a little disappointed they said that this would save the airline up to two minutes of boarding time that didn't feel like a ton of time for me two minutes that's just one person with uh oversized carry-on kind of uh doing the thing but think about think about how many flights airline united flies a day and it definitely adds up i'm thinking about it from my perspective i was like two minutes like that's nothing but yes it is good for united i do think this is a pandemic effect as well because more people than ever are traveling, but business travel has taken a sharp decline.

20:53So airlines have kind of been prioritizing economy passengers for the first time. So this to me is United saying, how can we make the experience a little bit better for the less higher paying customers because we're having more of them and we're having less of these business customers. The best thing you can do with your time is going down the rabbit hole of science, scientific solutions to the fastest boarding thing possible because there have been numerous scientific studies done about it. What seems to me to be the best way from what I can gather was devised by astrophysicist Jason Steffen.

21:26And what happens is it's an alternating pattern back to front, window to aisle, if that makes sense. You get everyone on the right side of the plane, all of the window seaters from back to front. You send them in and they go alternate row. So that allows people to sit down at the same time. That is the key. You need multiple people sitting down at the same time. So once those people, all the alternating window seats are in, you have the, you go to the left side of the plane and do the alternating window seats over there. And then you do the aisle seats. You do the, or you do the middle seats on the right side, middle seats on the left side, and then aisle seats, right?

22:01Aisle seats left. And that is the optimized way to board a plane. That will be the fastest. That's the optimized way in a fantasy land though, because that is not everyone boards at the same speed. So I did a little research, and I found that through studies from researchers in Norway, Israel, and Latvia, they used a four-dimensional model of space-time to run thousands of simulations. Yeah, Neil, I went deep. And basically, they divided passengers into slow boarders and fast boarders, and they ran four simulations, which was having the slow passengers board first, the fast passengers board first, a randomized boarding, and the back-to-front.

22:34Which do you think won? I read the study, too. It was the slow. It was the slow. You got to put the slow passengers first. Slow passengers go first. Even though if you have fast passengers go first, that was ahead for 98 % of the simulation. But in the last 2%, that's when the slow passengers really kind of start to clog things up. So what you could take away from this is maybe send the elderly passengers or people with some families to start boarding first. Because the fast passengers will come in and fill the space more efficiently. So space time continue. Think about it like sand, filling a jar with sand and rocks.

23:07You have to put the rocks in first so the sand can fill in the gaps later. I think that's exactly what you were trying to do. Yeah, this is a great rabbit hole. I love reasoning to this. The bottom line is anything is better than what we're doing now. Even Southwest, which does a random, doesn't even assign seats, is faster than the way that airlines currently do it. Southwest, the goat. All right, our final story today is one that I'm sure everyone can relate to as well. An employee at Citibank, Sabalix Fekty, I apologize if I pronounced that wrong, went on a work trip and expensed his lunch as one does.

23:41He claimed to have consumed two sandwiches, two coffees, and two pasta dishes. Notice I say claims. When the company asked about his expenses, he said he had eaten everything himself. He had saved one of the sandwiches for dinner and drank both coffees as they were very small. But later the truth came out. He had, as you might have guessed, shared the meal with his partner, then lied about it to his company, who then promptly fired him. He sued for wrongful termination, but on Monday this week, a British judge ruled that the bank was entitled to sack him for gross misconduct because he had lied.