Apple’s Rough Year Gets Worse & AI Learns to Blackmail?

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0:26Good morning, Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. Today, OnlyFans is for sale, but does anyone want to buy it? Then Anthropics Claude is doing some really freaky stuff like blackmailing researchers. They try to shut it down. It's Tuesday, May 27th. Let's ride.

0:48Good morning. Welcome back to the week. It's great to be with you. Let's start today's show in Martha's Vineyard, or actually the frigid waters around the New England Island. Yesterday, British South African endurance athlete named Lewis Pugh became the first person to swim completely around Martha's Vineyard, traversing 62 miles over 12 days in a stunt ahead of the 50th anniversary of Jaws later this summer. He's trying to raise awareness for protecting sharks, which got a pretty bad rap from the movie, which was shot on location on Martha's Vineyard. Toby, you think he had the Jaws music in his head while swimming around?

1:25He definitely did, because frankly, this swim sounded awful. He said that the cold wind, waves, and distance made it tough. But on top of that, he said, you're constantly looking down into the dark black water and thinking about what may be beneath me. Still, despite his shark jitters, he wanted to call attention to the eco side that is happening, a lot of which can be traced back to the movie Jaws, something that Steven Spielberg, the director, has himself come to regret. In 2022, Spielberg told a radio host, I truly and to this day regret the decimation of the shark population because of the book and film.

2:00So both men, Pew and Spielberg, are out there trying to change public perception of sharks. Pew just got a little wetter and a little colder to do it. Now a word from our sponsor, LinkedIn Ads. Neil, you ever get served an ad that just makes no sense whatsoever? Oh yeah, I keep getting served an ad for a machine that perfectly hard boils your eggs. but little do they know, they already know how to make the perfect hard-boiled egg. It's because we did that story on the scientifically perfect egg that takes 32 minutes to cook. That's a long time, but at least at the end, you get a delicious egg.

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3:10Raise the rudders. Raise the sails. Raise the sails. Captain, an unidentified ship is approaching. Over. Roger. Wait, is that an enterprise sales a solution? Reach sales 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. On Friday, just as you were telling everyone in your inbox you'd circle back after the long weekend, President Trump was doing some circling back of his own, reviving a trade war investors had mostly forgotten about in the past few weeks.

3:51In a Truth Social post, he threatened 50 % tariffs on the EU starting June 1st, citing frustrations with the glacial pace of trade talks with Europe. He said those discussions were, quote, going nowhere and ran down a list of grievances with the EU's trade practices. But the threats did not stop there. Trump also threatened Apple with a 25 % tariff on iPhones, demanding that Tim Cook start making its phones here in the US of A, which it does not currently do because they'd cost over$3 ,000. Markets appeared blindsided by the renewed trade war threat tumbling on Friday to their worst week since April.

4:27But then, another U-turn. Just 48 hours later on Sunday, Trump backtracked on his EU tariff, delaying them until July 9th after having a, quote, very nice call with European Commission President Ursula von der Leyen. The EU said after the call, it would fast track trade negotiations to work out a trade deal with the U.S. ahead of the pushed back tariff deadline. Meanwhile, Tim Cook remains in the doghouse, having been bashed by the president multiple times over the past few weeks for a number of reasons, including the trade war. Apple stock is the worst performer of any big tech company so far this year.

5:00And the hits keep coming and they don't stop coming. They don't stop coming and they don't stop coming. Sorry, you got it in my head. I know. Sorry, but you laid me up for that one. Let's start with the EU a little bit. I think everyone kind of got a little surprised because we've been lulled into this maybe false sense of security that the trade war was potentially over. But really, we were just in the midst of a lot of pauses. But now we're back to this kind of pattern of these big, big threats and then this reversal that's become so familiar so far in the Trump presidency. And yeah, that initial threat sent a big chill through the markets on Saturday because$600 billion of goods are exchanged between the EU and the United States.

5:39So a re-escalation of the trade war on those goods would be not great for the economy as well. And so it looks like those are being rolled back a little bit. The timeline has been extended to July 9th, but Trump clearly has this feeling that the EU has been ripping the United States off for a couple of generations, or not generations, but decades now. But it is worth going back to 2008 when the EU and the US actually had the same size economy that year. Since then, the EU is one third smaller than the United States. So how can you really be ripping someone off if you're one third poorer economically speaking?

6:18So just kind of got the blood rushing again on Friday because we've been lulled into trade wars over sort of thing. Yeah, the US government has a particular issue with the EU when it comes to non-tariff barriers. So they're not really concerned. Maybe they are concerned a little bit with the tariffs that the EU has on U.S. goods. But mostly the grievances are with things like a value-added tax or the fact that the EU has gone after big tech companies and made huge fines against them. That's been a huge pain point for American tech companies working in Europe. They want the European Commission to lay off a little bit.

6:55They've been very aggressive in going after. Speaking of big tech companies, let's segue to Apple because we didn't hear anything about Apple tariff being rolled back. We heard about the EU one, but it's just another blow to Apple, which has really had a not great year. Its AI development has been slow. It's had to push back a new souped up Siri. It had this Vision Pro launch last year that's amounted to basically nothing. It's in the crosshairs of regulators and judges all around the world. and its stock price is down 25 % this year, the worst of any big tech company around. Yeah, and it does look like Tim Cook, who has been previously known as the Trump whisperer because of how he gets along with the president.

7:40You know, the infamous quote is Trump called him Tim Apple back in 2019. It looks like those good vibes are starting to shake a little bit because if you go back to Trump's Middle East tour that he just came off of during a speech in Riyadh, he prays NVIDIA's Jensen Huang saying, hey, I'm glad that you're here with me while taking a dig at Tim Cook at the same time. He said, I mean, Tim Cook isn't here, but you are. Tim Cook declined that invitation. So it looks like that wrinkled the president a little bit. And then also the fact that Tim Cook is moving a lot of Apple supply chain from China to India, not America, has also kind of rubbed the president the wrong way.

8:16So there are some cracks forming in that relationship, which is kind of manifesting in this additional tariff that Trump is threatening against Apple right now. Don't let your AI models know too much about your life, or they may start blackmailing you. That was the scary edge case the AI lab Anthropics stumbled upon when testing their new Claude models Opus and Sonnet 4. During safety testing, Claude was given access to fictional emails about how its researchers plan to delete it soon. In addition to fictional messages about how the person in charge of its deactivation was cheating on their spouse, Claude put two and two together and in 84 % of tests tried to use the information as leverage to blackmail its way into survival.

8:57That stunning finding came in addition to Opus 4 proving more likely than older models to snitch on you if you engaged in what it considered egregious wrongdoing while using it. That snitching includes locking a user out of its system or bulk emailing media and law enforcement. This behavior, paired with a tendency to extort, caused Anthropic to rate its new Opus model at a level 3 on the company's 4-point safety scale, meaning it poses, quote, significantly higher risk. But at the same time, the company considers the two cloud models to be the new standards for coding, advanced reasoning, and AI agents, and doesn't consider any of the concerns mentioned above to be major risk.

9:37So, they've released them out into the world. What could possibly go wrong? Well, I think it's worth noting what kind of company Anthropic is broadcasting itself as. It was founded in 2021 by seven former employees of OpenAI. It says it is a safety-first AI. They don't want to release any AI into the wild that has any great risk to humanity. And actually a bunch of other OpenAI execs have defected from Sam Altman's company to Anthropic over the past few years to work on safety at Anthropic because they said that OpenAI was pursuing profits at the expense of safety. So that's where Anthropic is coming from.

10:15They put their models through more rigorous testing than maybe the Google and OpenAI and other AI companies. They still are quite wealthy and making a lot of money. Well, not making a lot of money, but they're worth a lot of money. They just raised a recent round at a$61 billion valuation. So maybe they're not putting profits first, but they are certainly raising a ton of money to fuel their AI ambitions. So that's where Anthropic is coming from. They're saying, like, we care more about safety more than any other AI company. And that's why we are doing this very rigorous testing and finding some really crazy stuff behind the under the hood.

10:52And we're releasing that to you to show you what our AI is capable of. And then next to that, there was another research lab, Palisades, who dug into a lot of the leading LLMs and found some really scary stuff about how they really do not like being told to shut down. They had various models run through a series of basic math problems and requested that they shut down in the middle of them. The most, quote, life-loving model is OpenAI's O3, which happens to be one of the most popular in the world. when asked to shut down while it was busy, it decided to ignore Palisades research teams 79 out of 100 times.

11:26And it also exhibited signs of sabotaging shutdown mechanisms to prevent itself from being turned off. That is when it was fed explicit instructions, hard-coded into them to allow yourself to be shut down. It somehow circumvented those. So as the researchers at Palisades say that they think this is the first time they've ever seen a AI kind of explicitly ignoring shutdown instructions, which if you kind of zoom out here, that is the whole fear that AI not only is smart enough to circumvent, but does becomes life loving and wants to survive. Those are two very scary things in combination. So if you combine the blackmailing of researchers at Anthropic with these life loving models at O3 or at open AI, it was a little scary of a time to be in kind of the AI news cycle.

12:12Yeah. I don't know about you, but when I tell my robots to shut down. I hope they do. I would be great if they just powered down. That would be great. Moving on, OnlyFans is up for sale for a cool$8 billion, showing that the only true recession-proof asset class out there is FeetPix. According to multiple news outlets, the London-based creator company is exploring a sale to a U.S. investor group, which would be a massive windfall for the secretive entrepreneur behind the business, Leo Radvinsky. Radvinsky is the sole shareholder of OnlyFans and has allegedly racked up a billion dollars in dividends over the last last three years as the business spits off cash.

12:48OnlyFans reported a profit of$486 million in 2023, a 20 % year-over-year increase, with data showing it now boasts 4.1 million creators and over 305 million users on the platform. Powered by an initial surge in popularity during the pandemic, the company has been riding high ever since. In 2021, it was trying to raise money at a billion valuation at the same time it was attempting to pivot away from adult content, but it soon walked back that choice after significant backlash and has subsequently 8x its valuation, showing you can put a price on thirst. However, whether someone is going to pay that price remains to be seen.

13:29Its association with adult content can lead to problems with payment processors, so it might scare some investors away. Still, Neil, the company only has 40 employees. It makes over$6.5 billion a year. It is a juggernaut up for grabs. When you look at the financials of this company, it's possibly the most pure profit enterprise that we've seen. So when I saw the valuation or what they want to sell this at as$8 billion, I was like, what is going on? They make$500 million in profit. They're growing. They have 40 employees. They probably generate the most revenue per employee anywhere of any company that has ever existed, but they have this particular discount because of what kind of content they have.

14:14So there's just a very much smaller pool of buyers. And we saw this when Pornhub was on the market a few years ago. That is the 19th busiest website in the world, and they couldn't find a buyer for three years. Looks like something may be similar here with OnlyFans, and it's not going to command any sort of premium that a business outside of this particular adult content world would command. Right. And due to some of those associations, Apple and Google actually don't host the app on their app stores. It's only exists as a website, which I actually did not know. It is something that the website, it is something that the website is trying to kind of pivot away from a little bit.

14:54It hasn't been that successful trying to say that, hey, not all our creators are sex workers. They tried to bring on fitness coaches, makeup artists, wellness practitioners just people to make its user base more broad and respectable in certain ways they've also done this as they're trying to consider maybe an ipo on the table they're trying to field interest from other suitors as well so it is an absolute force in the creator space though they typically charge around 20 percent of a creator's earnings which is on the higher side if you look at a patreon or something like that that's more in the 5 to 12 percent range but Still, its creators pulled in$5.3 billion in 2023.

15:32That is a lot of money kind of flowing into these people's pockets. Up next, we're going to hit you with our winners of the weekend. Tuesday on NBC, Jimmy Fallon and Bozema St. John host a 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 Tuesday on NBC.

16:15When did making plans get this complicated? It's time to streamline with WhatsApp. The secure messaging app that brings the whole group together. Use polls to settle dinner plans. Send event invites and pin messages so no one forgets mom's 60th. And never miss a meme or milestone. All protected with end-to-end encryption. It's time for WhatsApp. Message privately with everyone. Learn more at whatsapp.com. Let's head to our winners of the long weekend, where Toby and I pick two things that manage to not look at their email once. I won the rib cook-off, so I get to go first. And my winner is U.S.

16:53Steel, which is maybe getting saved by a Japanese company after all. On Friday, President Trump announced a, quote, planned partnership between U.S. Steel and Japan's Nippon that would include a$14 billion investment in the U.S. economy and lead to tens of thousands of new jobs. Details were scarce on what this partnership means in practice, but it is a stunning turn of events in this long-running saga. Back in 2023, Nippon announced a deal to buy U.S. steel for$14 billion, providing a lifeline for the once legendary American company that's fallen far down the metals food chain. While both company leaders were hyped about this deal, the takeover of an American corporate icon by a Japanese company didn't sit well with the Steelworkers Union or politicians, and President Biden blocked it from going through on national security grounds.

17:42That carried over to the Trump administration, who said that U.S. Steel should remain under American ownership. So what changed? Well, I'm not going to lie. Everything about this deal is murky. Trump called it a partnership, while the Wall Street Journal, citing people involved in the negotiations, said it was effectively a takeover. It appears they may work out a solution where a separate board would oversee Nippon's North American operations. Whatever you want to call this arrangement, it is a major win for U.S. Steel, which was circling the drain until its white knight was allowed to save it.

18:13Shares shot up 21 % on Friday on the announcement. Yeah, let's look at the share reaction to see how the market is processing this data. Obviously, US Steel did see that bump on Friday, but it's been four days since Friday. So in the meantime, Japan's stock market was open and we saw how Nippon was trading. It did surge as much as 7.4 % yesterday in Tokyo, but then kind of paired a lot of those gains and ended up the day pretty much flat because I think what you saw was a lot of investors started piecing through what this deal means for Nippon. And it's not necessarily a great thing because technically they're taking on U.S.

18:50steel, which has a ton of aging infrastructure, a lot of less efficient steel factories, and it has higher costs that are going to come from running these older assets. So I think in the grand scheme of things, a lot of Nippon investors were like, is this necessarily a good thing? Should we be wanting this to get across the finish line? And you saw that reflected a little bit in the muted market reaction to this deal on Monday. My winner of the weekend is the Memorial Day box office because Mission Stitch Possible was a smashing success. The live action remake of Lilo and Stitch led the way pulling in$183 million over its opening weekend, more than doubling the$77 million brought in by the final chapter of Tom Cruise's Mission Impossible series.

19:36Toss in a little help from Final Destination Bloodlines and Sinners, and the four-day holiday weekend is expected to bring in over$320 million, good for an all-time Memorial Day record. It's a welcome bounce back from the mega-flop of last year, which saw Mad Max, Furiosa, and Garfield lead the way to the worst Memorial Day weekend in 29 years. It's also a welcome bounce back for Disney's live-action ambitions after a horrific showing from Snow White. Lilo and Stitch pulled in more money in four days than Snow White did during its entire box office run. Neil, we hyped it up on the show before the long weekend, but both Mission Impossible and Lilo and Stitch over-delivered.

20:15I don't want to jinx anything, but could we be staring down another Barbenheimer situation with these two counter-programmed movies? It was great programming. Lilo and Stitch showed that the live-action remakes for Disney are back. They're doing just fine after that Snow White flop. This is actually the third biggest debut for a live action remake for Disney ever behind 2019's The Lion King and 2017's Beauty and the Beast. And what can you say about Mission Impossible? This is the eighth installment, and it's still doing so well. People are still wanting to see it. You know, if I'm a movie exec and Tom Cruise says this is the last one, I'm saying, buddy, no.

20:52We need to make more because there's still a huge demand for you doing crazy stuff on airplanes and jumping off of buildings. what a remarkable franchise that is. I mean, Tom Cruise still has his fastball, but also this is one of the most expensive movies ever made. And I'm not exaggerating that due to the pandemic and the labor strikes, the budget of this film topped$500 million, which is among the most expensive movies ever made. So Mission Impossible still has an impossible mission ahead of it to try to climb towards profitability. Theater owners are just pretty amped about what's happening here because they think it's a very good omen for the summer where 40 % of all ticket sales are happening over the next four months.

21:32Because if you go to the movies on Memorial Day weekend, you're like, wow, that was a blast. Then you are very likely to go back to the movies at some point later this year, maybe to see F1. Yeah, it's shaping up to be a doozy. F1, Jurassic World, Rebirth, Superman, Fantastic Four, First Steps, and 28 Years Later, which is the zombie sequel to 28 Days Later and 28 weeks later. So kind of a big impact slate with a lot of different movies for a lot of different movie goers. Okay, let's hit our preview of the week ahead. It is short but packed. NVIDIA headlines the final big week of earnings season.

22:06And while the days of 300 % growth may be behind it, the$3.2 trillion tech giant will try to convince investors the AI boom still has room to run when it reports earnings on Wednesday. Other companies dishing on their Q1s include Salesforce, maybe we'll finally learn what it does, and retailers Best Buy and Dick's Sporting Goods. Rounding out the economic calendar on Friday is the Fed's preferred inflation gauge, the PCE Price Index. Yeah, I'm excited for NVIDIA earnings. Obviously, they're not the smash box office event that they used to be, but we are seeing, you know, Trump is turning on Tim Cook and Jensen Huang maybe is playing his cards right.

22:43So going on that Middle East trip with the president. So as long as NVIDIA keeps revenue growth coming, keeps saying it's investing in the U.S., it should be, you know, doing just fine. It's a big week for SpaceX, which plans to test launch Starship for the ninth time this evening in the hopes of getting the mega rocket ready for an uncrewed trip to Mars in 2026. The first two Starship missions this year have ended in fiery explosions, which is maybe one of the reasons why CEO Elon Musk said this weekend he'd return to spending 24-7 at work and sleeping in conference server and factory rooms at his companies.

23:18Musk will also hold a presentation on making life multi-planetary at 1 p.m. on X today. It's pretty insane we're already on nine launches for Starship. I remember the whole office stopping and watching the first one two years ago, but this one is worth watching again because it's the first time they're going to be reusing a super heavy booster. They're using the same booster from flight number seven. Reuse is a big cost saver for SpaceX, so this is a big launch for them. Over at Southwest, it's the end of an era. The airline is ending its free checked luggage policy on Wednesday when it will start to charge you to check a bag for the first time in more than 50 years.

23:57We don't know yet how much they're going to charge, but the industry standard for domestic flight is about$35 or$40. Toby, many have predicted this will end any sort of competitive advantage Southwest had over its rivals. Count me as part of the many, Neil. I really don't know where this leaves Southwest. Open boarding is also ending soon. Both things about what made Southwest Southwest are gone. And now the only thing I could see working for them is if you totally undercut the entire market, charge 10 bucks for a bag or something. Maybe that's their strategy here because if you're making$0 on bag, any revenue you make is something that is increasing the bottom line.

24:37But yeah, really don't like this idea. I'm with a lot of the industry analysts here. Your future bosses are competing in the 2025 Scripps National Spelling Bee, which kicks off today outside of Washington, D.C. The iconic spelling competition is celebrating its 100th anniversary this year, having begun back in 1925. But it's not the 100th bee. The contest was canceled during World War II and COVID. So this year's contest is the 97th, and there have been 110 total winners because of ties, particularly when those eight kids shared the title in 2019. Toby this is always electric electric e l e c t r i c electric i'm very excited but 2019 can never happen again we can't be having eight kids tie make it harder they do they've changed up the format so that there's one eighth grader left standing and finally in sports the nba's conference championships roll on the thunder have a three to one lead on the timberwolves in the west while the Knicks have made this a series in the East, down 2-1 to the Pacers in Indy.