Elon Loses to Sam Altman & Are Smartphones to Blame for Falling Birth Rates?

0:01Consider this comparison. PwC data found the percentage of CEOs who report revenue gains or cost reductions from AI is almost equal to the percentage who say they're still stuck. What separates these two groups? PwC points to a clarity issue. Even for CEOs, it's hard to tell what's AI hype, what's reality, and where this tech can make a tangible difference. Learn where AI can actually make an impact and what successful adoption looks like at pwc.com slash us slash brew AI. That's pwc.com slash us slash brew AI. Good morning, Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. Today, what happened to dad books?

0:42Then are smartphones to blame for falling birth rates? It's Tuesday, May 19th. Let's ride.

0:53The party's over at Spotify. The audio streaming service said it would retire its new app icon celebrating its 20th birthday next week after intense backlash. Did you see this on your phone? Happened on mine. Last week, without any advance warning, Spotify changed its logo on Apple's iOS from the traditional 2D bright green blob to a disco ball. People had strong reactions with one representative X user writing, the person who designed this logo should be fired. In response, Spotify reiterated that the logo swap was temporary for its big birthday and that its regularly scheduled logo will return next week.

1:28Toby, what went wrong here? I will tell you the issue. They just made it too dark. If they bumped up the brightness a little bit, I swear people would like it. I think Dylan Abrusco on X made a good point. He said, when tapping an icon is second nature, even the slightest change in appearance can make you double take when searching for it. And that's annoying when trying to open the app. So I do think that people don't like change when it's something as habitual as Spotify. Another take I saw is that they made it too dark on purpose because then everyone would start to talk about it just like we are right now.

2:02And they wanted to set, you know, tech Twitter on fire and any publicity is good publicity. I like the whimsy of it. Everyone always complains that everything has gotten too bland, too flat. Someone finally takes a risk and then everyone gets mad at them. I'm just going to be disco-ifying every single app on my phone going forward. And now a word from our sponsor, LinkedIn Ads. Neil, are you tired of bowl spend? What do we say about making up swears? It's not made up or a swear. Bowl spend is a term LinkedIn coined for when marketers optimize for the numbers that look great, impressions, reads, and reactions, but they can't show revenue, which leads to a not-so-great conversation with the CFO.

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3:17In Oakland, California yesterday, a jury rejected Musk's claims that OpenAI execs Sam Altman and Greg Brockman, quote, stole a charity from him when they converted their nonprofit into a for-profit enterprise. But the jury didn't actually weigh in on the merits of that argument. Instead, they decided against Musk because of procrastination. He filed his lawsuit too late. Musk sued Altman for breach of charitable trust, but the statute of limitations for that claim is three years. The jury found that Musk was aware of the behavior mentioned in his complaint as far back as 2021, but he didn't file the suit until the summer of 2024.

3:52That timing gap was central to OpenAI's case. OpenAI's lawyers argued that if Musk was so concerned about OpenAI shifting to a for-profit, then why did he wait years to sue? Their answer? To stop a corporate rival in its tracks. Musk recently founded an AI company, XAI, that competes directly with OpenAI. And according to OpenAI attorneys, the reason he had this change of mind to sue was to stymie OpenAI from going public, which XAI is also doing. Musk, of course, disputes that, and his lawyers said they will appeal. For now, the jury's decision lifts a dark cloud over OpenAI as it marches to the public markets.

4:28If Musk had won, Sam Altman and Brockman could have been booted from their positions, and OpenAI might have been required to revert back to a nonprofit, both things that could have derailed the IPO. Now the path has been cleared. This whole trial could have been an email deal because the jury moved so quickly. It tried to remove any sort of doubts that this was even close or controversial. They spent such little time deliberating that they did leave really no other interpretation of that. At least we got some drama, though. There is so much history that is tied to the AI world that stems back to the formation of OpenAI.

5:04And I just want to go through some of the revelations that came out during the trial. Sam Altman has been accused of lying multiple times, and that surfaced again in the testimony. OpenAI co-founder Ilya Sutsukovar told the company's board that Altman, quote, exhibits a consistent pattern of lying. So that goes in the court record at this point. Brockman's diary, too, was just a star of the entire trial. He was writing down everything that was going through his mind at the time. And one of those things that went through his mind is that Altman gave him an equity stake in his family office behind Elon Musk's back.

5:35And Musk obviously pointed to that, saying that he was trying to buy loyalty there. He also wrote that when they were not honest with Musk about shifting to the for-profit structure, that would be, quote, morally brain drop. So make sure you have a locking key on your diary because you never know when it's gonna surface as evidence in a trial. Elon Musk obviously didn't come out clean either. Altman testified that Musk proposed folding OpenAI into Tesla. And then also floated passing that down to his children should anything happen to the board. So that was a big talking point overall. So a lot of juicy nugs when it comes to drama in the AI industry, even if the eventual ruling happened very quickly and was procedural at best.

6:19Yeah. And some investors in Musk weren't too happy that he brought the suit to begin with. Ross Gerber, who's a big investor in SpaceX, said that Musk's attempt to, quote, distract and harass Sam Altman was an expensive failure and that it embarrassed Musk in general. And then he concluded by saying the good news is that people hate both of them. I think that was the general vibe of this trial where we dug up all the receipts from Altman and Musk going back to 2015 when they started to form OpenAI. and nothing that came out was too flattering for each of these leaders as they prepare to go public in this huge rivalry that's coming this summer.

6:54And I think the jury did kind of understand that it moved from deciding between should AI be a nonprofit to actually litigating who gets to control the future of AI. And that was a main reason, again, why they didn't think Elon had a big case to stand on. Big picture though, this is definitely a massive win for OpenAI because the restructuring gets to survive. Their leadership team gets to survive. The Microsoft partnership gets to survive because Elon was going after Microsoft as well. And then obviously the IPO ambitions get to survive too. So that is check, check, check in the box. Even if it was a statute of limitations ruling, it paves the way for a lot of good things for OpenAI to have going forwards.

7:37Moving on, for decades, economists looked at declining birth rates around the world and laid the blame on issues like affordable housing and cost of living increases. But now there's a growing theory that the modern fertility collapse might actually be tied to the phone in your pocket. More than two-thirds of countries are currently below the replacement rate of 2.1 children per woman. In 66 countries, fertility is now closer to one child per family than two. So the question is why? Why are birth rates falling? John Byrne Murdoch from the Financial Times puts forth a theory. It's the smartphones.

8:12Byrne Murdoch cites a study from American researchers that found births fell first and fastest in areas of the US and the UK that got 4G mobile connectivity the earliest. He also points to a correlation between declines in birth rates and widespread smartphone adoption in specific countries. In the US, for example, birth rates started falling in 2007, right after the iPhone came out. France and Poland, slightly behind the curve, saw their decline start in 2009, while Nigeria and Senegal saw their birth rates dip later in the mid-2010s. The thesis from multiple researchers is that young people aren't coupling up like they used to because they're socializing less and their standards have been warped by having their faces buried in Instagram.

8:53Others push back, saying things like falling home ownership and financial pressures are a bigger factor. Also, if you just zoom out, rates were falling before smartphones were introduced. Neil, is everyone too busy texting to start a family? They certainly make a strong case, and they point to this major distinction, which is that in previous decades, the world's fertility rate went down because couples were having fewer kids. And what we're seeing now with the birth rate collapse is that there are just fewer couples to begin with. A study by Stephen Shaw, who's a demographer, says that in the U.S.

9:27and most high-income countries, actually the number of children that mothers give birth to is stable or even going up in some places. But the proportion of women who have children at all has fallen steeply in the past 15 years. And that owes itself to the lack of couple formation. And perhaps that goes back to just the lack of socializing because of smartphones. And you see this in South Korea, which is the face, one of the faces of demographic decline in South Korea. In the last 20 years, young adult in-person socializing has been cut in half. A lot of people, though, say that, hey, why are we ignoring the elephant in the room, which is housing?

10:02Housing is a massive barrier to starting a family. An FT analysis found that as much as half of the fertility decline since the 1990s can be explained by falling home ownership and more young adults living with their parents. But then John Byrne Murdoch kind of said, let's look at other regions of the world, like the Nordic regions, that has also seen falling fertility rates despite a lot of economic stability, despite more young adults living independently. So he was basically saying that undermines that argument. Zooming out, though, a lot of people said that zooming out was a thing that needed to happen to add context to this chart.

10:35They said it was a little bit of a chart crime because John Byrne Murdoch focused very specifically on this 2007 and on period, whereas if you just zoom out to the 1900s to 2000s in general, birth rate has been kind of falling steadily over that time period, so there's not really a big inflection point that you can actually point to. So some people in the chart crime camp were definitely pushing back against this analysis. Right. But overall, I think there were a lot of supporters of this thesis saying that perhaps it's not exactly the smartphone specifically, but they accelerated an already ongoing trend.

11:11And there is a lot of literature out there that shows the impact of new media and new technologies on relationships that does support this particular thesis. And I'm talking about television ownerships. Back in 2001, there was research that found a strong link between falling birth rates and TV ownerships. That was a more powerful effect than income or education. And then in 2018, these other researchers found that owning a TV led couples to have less sex. So whether it's TV or smartphones, it's clear the evidence shows that new media technologies, more stuff that you can watch, distracts you from just interacting with other people.

11:48And perhaps that is one reason why we're seeing such plummeting birth rates all over the world. And according to John Bernmurnich and a bunch of other people, this is the defining issue of our time. I wonder in, you know, 10, 20, 30 years what the new media technology is that people are going to be shaking their hands out again, saying that it's the reason why young people aren't coupling up anymore. I can't even deign to imagine. I hope it's not some weird AI thing that also, you know, invades the bedroom. There might not be any young people. Oh, no. Okay, moving on. TSA is removing the airport from airport security.

12:20Starting next month, some passengers flying out of Logan Airport in Boston will be able to go through security in Framingham, Massachusetts, a suburb 25 miles to the west. It will be the first ever remote airport screening facility in North America and a key test of whether these types of far-flung terminals could be the future of air travel. Here's how this works. If you've booked a flight on Delta or JetBlue from Logan beginning June 1st, you can opt to check in and drop off your bags at a building in a Framingham parking lot. You go through the typical security process run by TSA personnel, then board a bus to the airport that leaves every hour from 4 a.m.

12:55to 11 a.m. Once you arrive at the airport about 40 minutes later, hopefully the most stressful part of the ordeal is over and you can head straight to your gate to check if the airplane is there, if you're that kind of person. The CEO of Landline, the company that operates the buses, told the Wall Street Journal that as demand for air travel increases, airports will need to find creative ways to relieve the crush of humanity clogging terminals. You can only do so much to build a bigger front door at these airports, he said. At some point, you have to think about how you can make more front doors.

13:24And TSA is definitely thinking about it. In addition to Boston, seven other locations have been tapped for pilot programs, including private luxury terminals near L.A. and Atlanta. I love this idea. It's actually not trying to solve the TSA line itself because oftentimes those lines are pretty manageable. There's a lot of different ways to make it through security, but what they are trying to solve is the traffic leading into airports, curb congestion, trying to find a parking, just a rideshare chaos, all of these bottlenecks around airports that feed into the security line. That's what they're trying to disperse out to these suburbs a little bit.

13:58And I do think it's because airports just cannot physically expand forever. They are landlocked. I mean, LaGuardia has nowhere to go. JFK has nowhere to go. So how do you distribute that a little bit instead of expanding airports, expand access point to airports? So absolutely could see this catching on and kind of rethinking how we even conceptualize an airport going forward. Right, an airport is not just a single place. It's spread out across the suburbs. They really wanna bring the airport or at least some process of the airport check-in process just closer to where people live. I think people will travelers will embrace this if two things, two conditions are met.

14:36If it costs less and takes less time than just going to the airport. Let's talk about the cost first. So the landline bus service costs nine dollars for a one way ride from Framingham to Logan in downtown Boston. And parking will cost seven dollars a day, which is certainly cheaper than going into the actual airport and doing long term parking there. How long will it take? Well, Landline recommends arriving 45 minutes ahead of the scheduled bus departure time. That seems pretty much on par with what you would do at an airport. I know you like to get there within five minutes of your boarding process.

15:10But most people, I would say, get there, you know, 30 to 45 minutes. They expect that boarding process to take about that long. So if you don't want to drive to the airport, I know my family, we're coming from Western Massachusetts. This seems like it would be a service great for us because we would always park in Framingham anyway and then take the bus in. and now if you can go through airport security, seems like TSA for the first time in a long time is just thinking a little more innovatively about getting people to their plane. I just don't know if it really removes that much friction though, because you're still sitting in a vehicle in Boston traffic on the way to the airport and still probably stressing out a little bit, even if you make it to the Framingham station on time.

15:47What if the bus gets caught in traffic? So until we have actual vertical takeoff and landing vehicles that can bus you in the air to those airports. Maybe it's not the stressless journey that TSA is envisioning. All right, we're going to take a quick break and come back with Toby's Trends right after this. You know that saying, more money, more problems, Toby? Of course. Why do you think my life is so chaotic? Sure. Well, with startups, it's more like more money, more security. Big enterprise deals usually come with even bigger security and compliance requirements. Yeah, the right kind of security posture doesn't just protect you.

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17:03Okay, well, for those of you who are actually serious about investing and building wealth, there's Public.com. With their modern investing platform, you can build a multi-asset portfolio of stocks, bonds, options, crypto, and more while accessing industry-leading yields. Earn an uncapped 1 % match when you transfer your old investment portfolio over to public at public.com slash morningbrew. That's public.com slash morningbrew. Paid for by public investing, full disclosure, and podcast description. Neil, I've got something pretty big on the Verizon. You mean Horizon? Nope. Pretty sure that's not a real word.

17:39But the Verizon Visa card helps eligible Verizon customers get more from everyday spending. You can earn 4 % rewards on gas, groceries, and dining. Redeem rewards toward Verizon bills or devices with no annual fee and unlimited rewards with no expiration. For a limited time, new cardholders can get up to$150 cash back. Just head to verizon.com slash morningbrew to learn more. That's verizon.com slash morningbrew. Dad books are dying. You know the type, a doorstopper of a biography about Winston Churchill. a 400-page look into the Battle of the Bulge, books that capture the attention of a guy who grunts every time he gets up from a chair and also make for easy gifts on Father's Day.

18:23Sales of this specific sector of the print nonfiction world are crashing faster than a dad in his recliner after a day of yard work, a trend I want to talk about on today's edition of Toby's Trends. The Wall Street Journal's Pamela Paula and Jeff Trachtenberg documented the decline, noting sales of nonfiction books are down nearly 8 % this year, while politics and current affairs books have fallen by 19%. Their theory? Blame the podcasters. Podcast consumption among men has exploded. 62 % listened to one in the past month, up from 46 % in 2023. So instead of buying dad books on history, politics, military strategy, biographies, those same readers can get they're fixed by listening without committing to a 700-page hardcover.

19:08Politics has become less interesting to book buyers too, whereas the industry saw a Trump bump during his first administration. The opposite has been true in the second, as many seek to escape the news rather than dive deeper. Neil, Father's Day is coming up. Is a 768-page copy of All Hell Let Loose by Max Hastings a bad gift idea? No, it is a great gift idea. I think this genre is absolutely worth saving. I mean, little nostalgia trip here. I definitely grew up around these books. Civil War by Shelby Foote. D-Day by Stephen Ambrose. I actually read that one. Anything by David McCullough, 1776.

19:44But the numbers are stark. And let's look at two books by Ron Chernow, who you might know from writing Hamilton, which was adopted into Hamilton the Musical. In 2017, Ron Chernow wrote a biography of Ulysses S. Grant, pretty interesting guy, that sold 381 ,000 copies in hardcover. Last year for Father's Day, Chernow was at it again, wrote a biography of Mark Twain that sold 119 ,000 hardcover copies to date, about a third of what his 2017 book did. Maybe two guys, I'd say arguably Mark Twain might be more interesting than Grant. And then at the same time, so that's a timescale one, 2017 to 2025.

20:23You see this book sales get wiped off a cliff from this same author. And then nonfiction in general is getting wiped by fiction. Let's look at the New York Times bestseller list dated April 26th. The Rites of Starling, which is the sequel to a romantic novel by Daphne Perry, sold was number one. That sold 105 ,000 copies in its first week on the list. Now let's go to nonfiction. The number one counterpart there was London Falling by Patrick Radden Keefe, which was a very much hype book from a very popular author. That sold 13 ,000 copies. So the trends are not going in the right direction. The irony, too, is when we come back to the podcast thing is that a lot of podcasts do sell books because Barnes & Noble went on record and say, hey, we look at what the rest is history is talking about.

21:12We look at what Lex Friedman is talking about and try to curate our book selection to match what those topics are. Simultaneously, though, they are a replacement for a lot of books. And the visual that I'll paint for you is there used to be, you know, the dad with the packed bookshelf full of history books. Now it's a guy with AirPods listening to 12 hours of history podcasts a week that they can do while commuting, that they can do while doing yard work around the house. Podcasts are both cannibalizing but also helping the industry at the same time. So it's a very interesting symbiotic relationship.

21:45One might call it more of a parasitic relationship actually. Yeah, mostly cannibalizing right now. I think people are just listening to the rest in history or reading sub stacks instead of sitting down with a massive 600, 700 page book about what happened on D-Day or in World War I. And when you look at James Daunt, who's the CEO of Barnes & Noble, has probably the best insight into what's going on. He said he mentioned podcasts, but also he just said that the news is cannibalizing these history books. everyone, people who would typically read nonfiction, these dads are all, are really just consuming the news.

22:16And it's very fascinating what happens in the news. As we know, as we're going through it every day, we're part of the problem because we're podcasters about the news right now. So we're kind of ruining the dad book industry as well. Yeah. So here's my solution. I mentioned this earlier. Lin-Manuel Miranda just needs to make another musical about one of these books. I don't know whether it's John Adams by David McCullough, but he absolutely spiked sales of Ron Chernow's biography of Alexander Hamilton when he made this bonanza of a musical about Hamilton. So he needs to go through the dad book library, the dad book canon, and pick another maybe Civil War novel to make a musical about, and he can single-handedly save this industry.

22:57I know you can, Lynn. I don't know if the world is ready for another Hamilton-esque media cycle, but I like your optimism, Neil. Okay, let's sprint to the finish with some final headlines. President Trump made some legal moves yesterday that had his allies hooting and hollering, but left critics fuming. First, Trump dropped his$10 billion lawsuit against the IRS over the past leak of his tax records. It's unclear how this would have shaken out ultimately considering he was suing an agency he presided over, and a judge seemed skeptical that the two parties in this case were adverse enough for it to even exist.

23:31But it was this next move that got everyone's attention. Trump's DOJ created a so-called anti-weaponization fund with nearly$1.8 billion of taxpayer money to compensate people his administration deems have been unfairly targeted by the federal government. Acting Attorney General Todd Blanche said, The machinery of government should never be weaponized against any American, and it is this department's intention to make right the wrongs that were previously done while ensuring this never happens again. On the other side, Democrats and advocacy groups blasted the fund as corruption and a handout to Trump supporters like those who took part in the January 6th attack on the Capitol.