Big Tech's $180B Stock Buybacks & Bumble's AI Dating

0:00Does it ever feel like you're a marketing professional just speaking into the void? But with LinkedIn ads, you can know you're reaching the right decision makers, a network of 130 million of them, in fact. You can even target buyers by job title, industry, company, seniority, skills, and did I say job title? See how you can avoid the void and reach the right buyers with LinkedIn ads. Spend$250 on your first campaign and get a free$250 credit for the next one. Get started at linkedin.com slash campaign. Terms and conditions apply. Good morning, Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell.

0:35Today, Bumble wants to have AI go on dates for you. Great idea or the greatest idea? Then a giant solar storm is smashing your atmosphere right now, creating a great photo op for you. And a little bit of havoc for our comms and power grid. It's Monday, May 13th. Let's ride.

0:56The beginning of the Mount Everest climbing season kicked off this weekend with some record-breaking summits. Sherpa Kami Rita, known as Everest Man, broke his own mark with his 29th climb of the world's tallest mountain, while a British man named Kenton Kuhl scaled Everest for the 18th time, the most ever for a foreigner. Having the name Kenton Kuhl and being a world record Mount Everest summiter, objectively the coolest thing I've ever heard. What's it called when your name matches your occupation? It's like an aptonym, aptronym, something like that. Someone fact check me on that. But my thought is any desire, Neil?

1:33You want to do it? I'll take the cable car to the top. Mount Washington summit is plenty enough for me. But there are so many people who go each year during the spring to climb Everest. This year, Nepal has issued 414 permits, each costing$11 ,000. And they're accompanied by a guide. So in total, over 800 people could summit Everest this spring. Last year was a huge year for Everest. It's so crowded these days. More than 600 people made it to the peak, but it was also one of the deadliest in memory with 18 deaths recorded on the mountain. We've talked about overcrowding and this tourist problem, and it's affecting everywhere from, you know, the streets of Barcelona all the way up to the very peaks of Mount Everest.

2:14So that's definitely a conversation that we'll continue to have this year. Now let's hear a word from our sponsor, the Wendy's Cinnabon Pull Apart. Neal, I'm feeling like an influencer these days because over the past week, you all have been sending us pictures of you ordering the pull-apart. We are the Kylie Jenner of delectable breakfast treats, the Alex Earl of culinary delights, the Hailey Bieber of frosted baked goods. Jeez, who knew your influencer bag went so deep? But seriously, it's been very cool seeing you order the Cinnabon pull-aparts in the wild. They truly are a delightful way to start off your day or for a quick pick-me-up if you need something sweet.

2:48I'm still thinking of influencers over here, Toby. Wait, does Travis Kelsey count? I'll allow it. He's probably love a Cinnabon Polo part too, but he's in Paris right now for the Ares Tour. So I guess it's the Le Cinnabon Polo part. If you want to also be influenced by us, head to a Wendy's near you or go to wendys.com slash morningbrew. 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.

3:29Like a good neighbor, State Farm is there. The vibes are high at big tech companies right now, and so is cash flow. In a break from the past, companies like Apple, Google, and Meta are taking some of the cash they are raking in and paying it back to investors as a dividend, something straight out of the playbooks of old school, boring businesses. Meta and Google announced dividends for the first time earlier this year. And now among the magnificent seven, only Amazon and Tesla don't pay a dividend. It's a testament to just how financially stable these companies feel right now. In the old days, any excess cash generated would be used to chase growth at all costs, but companies clearly feel confident that they can grow and toss regular payouts to shareholders at the same time.

4:15Still, the favored way for these companies to return money to shareholders is through stock buybacks. If we look at the Magnificent Seven again, they've spent around$58 billion on buybacks this year. While zooming out, S &P 500 companies that have reported first quarter results have bought back$181 billion of their own shares, up 16 % from a year ago. The idea being when a company repurchases its own stock, they reduce the number of shares available, which should increase earnings per share. Neil, despite some fears that the economy might soften a little bit as interest rates remain higher for longer, these buybacks and dividends are signs that parts of corporate America are feeling pretty good right now.

4:54It is a sign of financial strength and companies are looking at their balance sheets. They're saying, we're investing so much here in AI. We've got our data centers investment plan, and we have all this excess cash left over. What do we do? Well, there's two ways you can possibly return it to shareholders. One is through dividends and one is through stock buybacks, and they are doing both at the moment. And when you do a stock buyback, the reason is because it helps your stock price, at least in the short term. We've absolutely seen that when these companies have announced these plans. Apple had its best day since 2022 after announcing a$110 billion buyback, which was the biggest one in history.

5:33Metastock had 23 % gain in a single day after it unveiled a$50 billion buyback plan. So these plans, these buybacks are really resonating with shareholders by showing that these companies are in a very strong financial position where they've allocated all of the cash that they think they could do in a smart way. And it's time to add a little sugar for some stockholders. Right, I think you hit the nail on the head there that you can't just rely on buybacks alone to drive your share price up. It needs to go hand in hand with investments in other areas of the business because it's not a magic bullet where you announce a share buyback and the stock just ramps up because, oh, wow, they're so confident.

6:12This is going to lead to long-term share price growth. But you need to be still putting money back into the business to grow the business and then pairing it with buybacks. It's a nice one-two punch. I will say that we talked about dividends and share buybacks. One of the reasons why companies prefer buybacks is it's a little bit more flexible than a dividend. A dividend you have to pay out on a quarterly basis, on a monthly basis. It's a very ill, not flexible way of returning money to shareholders. Buybacks, on the other hand, you can announce them, but there is no real fixed deadlines. You can kind of go at your own pace.

6:49It's not as regimented. So that's another reason why these companies prefer buybacks to the more rigid dividends. And buybacks are a bit controversial. They've been a political lightning rod, especially for progressive lawmakers who say, Why aren't you using this money to invest in factories, to invest in growth, to invest in jobs? And there's been pushback to the pushback from somebody named Warren Buffett. I don't know if you've heard of him. He's been doing share buybacks at Berkshire Hathaway for over a decade now. And this is his argument. He says the math isn't complicated. When the share count goes down, your interest in our many businesses go up.

7:25So it's basically like buying out a business partner where they go away. but everyone who remains all the partners in the company get a bigger share of the pie. And so he says this is great for every single shareholder in Berkshire Hathaway, which is a lot of people. And, you know, this is when companies have invested in everything they could possibly think of. That would be a smart allocation of capital. So I don't think share buyback, the conversation around it, is going away. A couple of years ago, President Biden enacted a one percent tax on share buybacks. I think they want that to go up to four percent.

7:56So this is going to be a political lightning rod for going into the future as long as companies continue to ramp this up. In an interview last week, Bumble founder Whitney Wolf Heard discussed a future where singles have AI concierges that make small talk with each other, streamlining the dating process and combating the fatigue many people feel when using dating apps. That sounds like a Black Mirror episode. It literally was one seven years ago. the clip of Hertz interview went mega viral, racking up more than 10 million views on X, showing how the incorporation of AI into dating elicits strong emotions.

8:30Our focus with AI is to help create more healthy and equitable relationships. And that also starts with yourself. You could in the near future be talking to your AI dating concierge and you could share your insecurities. I just came out of a breakup. I've commitment issues and it could help you train yourself into a better way of thinking about yourself. The majority view this as freaky and dystopian, hence the references to Black Mirror. Others though may resonate with her argument that there's a world where your dating concierge could go and date for you with other dating concierges and then you don't have to talk to 600 people.

9:11The conversation comes at a time when Bumble, rival dating apps, and social media companies more broadly are figuring out how to leverage chatbots on their platforms to increase engagement. And the rest of us are figuring out what it all means for human relationships. Toby, are you buying this AI dating vision? Well, there was two visions she kind of laid out in this clip. One is that you can go to your AI relationship coach for advice saying like, hey, I just got out of a long-term relationship. I'm not feeling very confident. What should I do to get back in the game? And that I'm relatively bullish at because AI probably has a decent perspective just based off everything it's been trained on.

9:48So I don't mind it as a sounding board. The concierge idea, I'm a little less bullish on, especially if you have AIs interacting with AIs. I think the issue here is that dating apps in general are probably not the best equipped way to meet people in the age of AI. I think that the dating apps that young people say that they are using to meet people, which are, they don't look like dating apps, they're actually TikTok, Snapchat, like Instagram. Those are actually the apps that I think are best equipped that they have AI in the sense that these algorithms are pushing you content that is reflective of your personalities.

10:27You send that content to someone in a DM, in a message. That in a way is an AI powered way to connect with a human that doesn't have like this facade of a concierge on it. It actually is just a way to connect with a human being. So I think that in the age of AI, Instagram and TikTok are going to be a better way to meet people than anything that Bumble will roll out, any AI concierge that these dating apps can roll out. Well, one use case of AI that Bumble has already been using is helping you create a profile to maximize the photos that you're using, scrolls through all your photos and selects the best one that may resonate with people the most after feeding it all of this data.

11:05And that may be a popular use of this because they did a survey. 66 % of Gen Z and millennial daters said they would use AI to assist them in creating or making them a better dating app profile. So there could be ways to include AI in these dating apps. And honestly, every single app is using this because they want to increase engagement. They're looking at AI as a way to get people staying on the apps at a time when a lot of their stock prices are faltering big time. Their user engagements are down. People are feeling fatigue with swiping. So they are definitely going to look into any possible ways that they can get chatbots and AI to get people staying on their platforms.

11:43One thing that I am not bullish on is that Bumble is rolling out an opening move function that will let users pre-select DMs to initiate conversations instead of coming up with a nice pickup line yourself. That reminds me of the way you interact with like your Uber driver where you, you know, when the Uber is about to roll up, you go, oh, be right there. And it's a preset DM. It feels so impersonal to me, and I think people will see right through these AI augmented attempts to reach out, and I'm not bullish on that, even though it might take away some of that creative burden. Would you feel very special?

12:13Yeah, I do that all the time for a lot of canned responses. I use AI. So I think saying that people aren't going to use this is probably just not true because we've seen that people are going to use this. There was this guy in Russia who boasted that he was dating over 5 ,000 women at a time using chat GPT. And I'm not—he's certainly an outlier, and you could question the ethics of that, absolutely. But people are going to gravitate at this because they love convenience more than anything else. And let me tell you, swiping is so frustrating and annoying and boring, and it sucks. So any way to get a leg up or create more efficiencies in this process, I think people will gravitate to.

12:54So maybe not all the way to the AI dating concierge that Wolf Hurt is talking about, but it's not crazy to me. Let's hit our winners of the weekend now where Neil and I find two stories that happened over Saturday and Sunday that we think you all should know about. Neil, I won the pre-show game of Name This 80s Tune because I have a better grasp of Madonna songs than you do. So I'm up first, and my winner of the weekend is Aurora Borealis, a.k.a. the Northern Lights. The reason why the Northern Lights were prominent this weekend is because we got hit with one of the biggest geomagnetic storms of the past two decades.

13:29The sun released a solar eruption so powerful the National Oceanic and Atmospheric Administration put us on severe geomagnetic storm watch for the first time in nearly 20 years. You didn't just have to be in the north to see the Northern Lights either. People from Maine to California and as far south as Alabama, Georgia, and Florida got a glimpse of them as pretty much the entire northern hemisphere was treated to a Technicolor light show. So a big solar storm. Is this dangerous? Not really. But solar storms like this can disrupt the power grid and throw off things like satellite and radio communications.

14:04Also, levels of FOMO rose to dangerous levels, especially for people who live in northern cities, like Neil and I, with too much light pollution to actually see the lights. Neil, the timeline was beautiful these past few days. Toby, I'm 0 for 3. No path of totality for the eclipse. I didn't feel the earthquake in New York City last month, and I didn't see the northern light. So in terms of natural celestial events, I've just completely struck out this year, and it's very frustrating to me. But diving into the science of geomagnetism and these plasma outbursts from the suns and how they can really affect infrastructure on Earth is very fascinating.

14:41Starlink, which operates 60 % of all commercial satellites in space, Elon Musk said that its systems were degraded, but it's holding up okay. And the problem is when these energy bursts interact with the atmosphere, it can really disrupt high-frequency communications. Anything that travels along that high-frequency band gets really messed up, like GPS systems, things that need to go from space to Earth along that particular wavelength. It can also send intense currents through power grids, which happened in 2003. It caused major blackouts for Quebec in 1989. So whatever's happening in space does affect us on Earth because of how much our satellites and things that we put in space do really impact our commercial activity here.

15:26Yeah, it absolutely does. I also just want to take a step back and just marvel at how amazing it is that we live in an era where the best devices for capturing a phenomenon like the Northern Lights live in our pockets. Your phone is better at seeing them than even your eyeballs are because it can let more light in. And so those pictures that you're seeing, those videos we were seeing was just truly amazing and made me just grateful that we live in a time where you can capture something like this because it wasn't always been that way. And this storm has just been something that has been populating my timeline.

15:57And I've just been looking at them and saying, wow, the earth is just incredible. And so is the fact that we have technology that can capture it. Up next, we're letting the suspense build for a bit before Neil reveals his winner of the weekend too.

16:32embark on this adventure with all of you. Make the best I do win! On brand with Jimmy Fallon. Series premiere tonight on NBC. I'm Christian McCaffrey, pro running back. And Abercrombie is an official fashion partner of the NFL. I'm not kidding when I say NFL by Abercrombie broke the internet last year. And I think this season's lineup is even cooler. And so does my wife, who keeps stealing all my hoodies. Stay fit for the season and Abercrombie's newest arrivals. Shop NFL by Abercrombie in the app, online, and in store.

17:10My winner of the weekend is Human Connection. Yeah, we're getting real sappy on a Monday morning. And the reason why Human Connection is on the up is because of two giant screens, one in Dublin, Ireland, and one right next to our office here in New York that serve as a portal for people to look at each other in distant cities. Think of it as a public Zoom call on mute that's always running. The portals were introduced last Wednesday, and they've been, in a word, a sensation. The boldest among us have been using them to get numbers from cuties on the other side of the pond. One American mom was reunited with her daughter who's studying abroad in Ireland.

17:47Dubliners are challenging New Yorkers to dance-offs. And while there are some exceptions, it's been really wholesome for the most part. So what's this all about? Why do these portals exist? Well, it's a collaborative project that stems from Dublin being named this year's European capital of smart tourism. The portals themselves were invented by a Lithuanian artist who is excited about the potential to connect people. He said portals are an invitation to meet people above borders and differences and to experience our world as it really is, united and one. These portals are a sight to behold. Just the actual physical piece of art is very impressive.

18:22They weigh three and a half tons. They're about 11 1⁄2 by 11 1⁄2 feet large, so very, very prominent. And the technology that enables it, actually, you said it was created by a Lithuanian artist, but there's actually a British company called Video Window that created the software originally as kind of back in the pandemic as a way to have always-on video communication. So it's kind of like a baby monitor for your coworkers where instead of having to log on to a Zoom call, you could just press a button and then be there, and it feels like a very native always-on video conversation. it's now been used for these portals themselves a big issue that you have to address is obviously security you don't want anyone zoom bombing the 24 7 video feed between two international countries so it's been an absolute flying success in something that i think you're right like you said it was sappy but it does facilitate human connection in a really beautiful way and it's not just going to stop here which is great the dublin portal is also going to connect with people in poland brazil in lithuania later this summer and if i'm a city i'm like give me a portal Like this could be the bean.

19:26This could be bean level in Chicago. It's just like a great way to, you know, for people to come to your city and have something to do and have this particular activity. So I can see this Lithuanian artist wants it to be a global network of portals connecting cities all over the globe. And he said this is just the start. And I could totally see it. The first thing I thought of when I saw the portal is this would be a great plot device in a mystery novel. Imagine you see a crime or a murder take place across the globe and only you saw it and you have to travel across the country. I don't know. That's where my brain went.

20:00So if any budding mystery writers out there want a 21st century mystery novel, maybe check out the portal. Jim Simons, a legendary name in finance, died on Friday at 86 years old. Simons is an almost Buffett-level figure in certain circles, famous for being the mathematician and investor that created the secretive firm Renaissance Technologies that may have been the greatest money-making machine ever. And I don't mean that figuratively. The fund he ran, called the Medallion Fund, averaged a 66 % yearly return for over 30 years. To put that in perspective, $100 invested in Medallion at the start of 1988 would have grown to$398 ,723 ,873 by 2018.

20:47Absolutely nuts. So how did Simons do it? He was a genius mathematician who hired other academics at his fund, ushering in the era of quantitative-based trading. Quant trading relies on pattern recognition and data analysis to develop algorithmic-based trading strategies rather than relying on any human intervention or discretionary trading. He also took a short-term approach, so he's looking for market inefficiencies rather than the next Apple or Google. His approach inspired other traders to adopt a more numbers-based approach and earned him the nickname the Quant King. Neil Simons probably shaped the modern way hedge funds and money managers approach the market more than any other figure ever.

21:28Truly one of the greats. Yeah. I mean, right now in 2020, quantitative trading, the use of algorithms accounted for a third of Wall Street trading operations. So he was a pioneer in this field. He was doing it way before anybody in Wall Street ever did. They relied on MBAs going into the lab, you know, thinking about research reports on particular companies, handing it to the traders. Traders would use their networks and their intuition to make trades. And he coming from an entirely different background, and maybe that's what made him so successful. He won the prize for the best geometry in the entire world in the 80s.

22:05So he came from this different background, looked at the way this was being done in a very non-scientific manner, and said, wait, why don't I just let a computer do all this work for me? I built a machine. I can do this in my sleep. It can make money for me. And it did. It made so much money for him and changed Wall Street forever. Yeah, he did create a money-making machine. Everyone always wanted to know what is his one secret, like what is the algorithm? them, but he was famous for saying, no, it was a bunch of little things that added up over time. He was very good at predicting how their own trades would affect the market, which is something not a lot of people had taken into account.

22:38He also capped the fund at$10 billion because for many years, as other hedge funds were swelling, they kept it very small so they wouldn't have to chase any trades. He also really did pioneer hedging his bets, which is you reduce your overall exposure to the market. Now it sounds obvious that like, of course you would hedge your bets, but Renaissance was one of the first firms to really do that. And he was also just an incredible people person and people manager. He had the, the, the firm was secreted away on Long Island. He hired math, mathematicians, not people tied to the finance world. So not a lot of people left to go start their own firms because they didn't know anyone in finance.

23:16So it was a bunch of little things that just all came together to create one of the, the great money-making institutions of, of the 80s, 90s and 2000s. Yeah, he was also a big philanthropist too. He gave away hundreds of millions of dollars. He actually gave away$6 billion over the course of his life. And the Simons Foundation was part of the portal that allowed that to happen. So the huge foundation. I'll just cap it off by one of his famous quotes that he mentioned in a lecture a couple of years ago. He says, I did a lot of math. I made a lot of money and I gave almost all of it away. That's the story of my life.

23:53so I can't recap it better than he did. Let's move to our week ahead preview, and it's more stuff than your carry-on when you choose basic economy. Really, an epic week is in store. First up, OpenAI CEO Sam Altman teased a big announcement later today. All he said was they're releasing some new stuff that feels like magic to me. According to Reuters, it's going to be a ChatGPT search feature that competes with Google, but I also wouldn't be surprised if it was a Crocs partnership. I wouldn't be surprised if it's an AI dating app, too. No, just kidding. I do think that is probably going to be a search engine.

24:27But I was going through what other mediums are left. They've done the text to image in Dali. They've done the text to video in Sora. Is it going to be like text to smell at this point? What other sensory things can AI attack next? So very much looking forward to seeing what. Yeah, that's going to be. Yeah, it's going to be 1 p.m. Eastern today. Tomorrow, Biden is going to ramp up the trade war with China in a big way. by quadrupling tariffs on Chinese EVs from 25 % to 100 % and raising tariffs on other Chinese climate tech. Remember, Chinese EVs are way cheaper than American-made ones, and there's broad concern that they present an existential threat to U.S.