Inside Boeing's Turbulent Culture & Why US Gov is Suing Adobe

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0:27Good Morning Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. Today, Boeing's CEO faced the music at a tense Senate hearing over the company's safety lapses. Ben Fisker fisked around and found out the electric vehicle maker has filed for bankruptcy. It's Wednesday, June 19th. Let's ride.

0:51Surprise! You are actually listening to our voices from yesterday. We're recording this on Tuesday afternoon because today is Juneteenth and the Brew's offices are closed. But we still wanted to bring you a piping cup of fresh business news. Juneteenth commemorates the end of slavery in the U.S. following the Civil War and has been celebrated by black Americans since the late 1800s. In 2021, it was designated a federal holiday by President Biden, making it the newest of the 11 federal holidays on the calendar. As such, if you live in the U.S., you are probably also not working today and the stock market is closed.

1:26Speaking of, let's talk Yahoo Finance. It's hard to believe, but NVIDIA is now the largest company in the world. It's actually not that hard to believe. Anyone who's been perusing the purple streets of Yahoo Finance saw this coming from a mile away. All right, I didn't know I was talking to the Oracle of Morning Brew Daily here, but you're right. If you're a frequent user of Yahoo Finance, this news does not come as a surprise. Watching headline after headline pop up on Yahoo's news tab about just how strong demand for its chips are, digging into the market data to see how excited investors are, the pieces of the puzzle were there if you were just looking in the right place.

2:01Guess it doesn't take an oracle. All you need is clear data you can turn into actionable insights. All you need is Yahoo Finance. If you want to try and spot the next NVIDIA, head to finance.yahoo.com or download the Yahoo Finance mobile app to get it directly on your phone. Raise the rudders. Raise the sails. Raise the sails. Captain, an unidentified ship is approaching. Over. Roger. Wait, is that an enterprise sales 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.

2:37Spend$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. A heat wave is roasting the United States right now, but the most scorching place on Tuesday was a room on Capitol Hill, where Boeing CEO Dave Calhoun was on the hot seat over the company's numerous safety mishaps and production failures this year. Calhoun was testifying, actually he's testifying right now as we record this, in response to the ongoing investigations related to the door plug blowout on an Alaska Airlines 737 MAX in January and the ensuing revelations that showed shoddy work at Boeing factories.

3:18That wasn't enough heat on Calhoun. His testimony was thrown a major curveball when another Boeing whistleblower, a quality inspector, Sam Mohawk, came forward just hours before the hearing with more shocking allegations. Mohawk alleged that Boeing mishandled and lost track of hundreds of faulty parts, knowingly hid them from regulators who came to inspect the factory by stashing them outside. And these faulty parts may have even ended up on 737 planes in operation right now. Mohawk also said that he was retaliated against by his superiors for raising these concerns. So it's into this cascading scandal that Calhoun entered to make amends before skeptical lawmakers and victims' families.

4:00In opening remarks, he said, our culture isn't perfect, but we are taking action and making progress. Not everyone is convinced. Yeah, not everyone's convinced. This is an intense hearing for sure. It is covering everything because this is the first time that Calhoun is testifying and is more than four years running the company. It's certainly the first time he's testified since that door incident that kind of set off this whole chain of events. And, yeah, they're really looking at everything. His name is Mohawk, but the Mohawk whistleblower did throw another thing into another wrench into his preparation for these plans as well.

4:34So, yeah, we're going to look at glitches in the production process, the fallout from that January 5th blowout of its door, and then also some of those claims around the culture of Boeing and the culture of retaliating against employees that were raising some of these red flags. Right. As even before Calhoun said his opening remarks, there were victims of families of people who were killed in the 737 Max 9 crashes in 2018 and 2019. And just like we saw Mark Zuckerberg earlier this year, a turn around from the lawmakers and apologize to the victims face to face. He did that here. And he said, I would like to apologize on behalf of all of our Boeing associates spread throughout the world for their losses.

5:13And he looked these people in the face and did that. And one attendee responded, you should be in jail. there's still so much animosity towards this company over its safety operations over the past few years. The 2018-2019 737 MAX incidents were supposed to spark a culture change there, but based on what we've learned this year, it hasn't happened. And then the other undercurrent to this hearing too is that Calhoun has already planned to step down at the end of the year. So there's been this ongoing search for a new Boeing CEO, and it has not been going well because a lot of people are turning the job down.

5:47One of the biggest one is GE Aerospace's CEO, Larry Culp. He was kind of the number one guy that you wanted because he's done very well turning around GE. He's rehabilitated their image. He's very respected by investors but also on the supplier side of things. And he's kind of known as his guru in the world of manufacturing. And Boeing came to him and said, we would love for you to run Boeing. And he essentially said, nah, I'm not the guy. I'm comfortable where I'm at. And so they're going to have to figure out who is going to step in and lead the company, which is not a very desirable role right now.

6:19It is not a desirable role. I mean, look what Calhoun is going through. I mean, maybe by his, you know, likely by his own doing. Final point on this. I said another whistleblower came forward because it's kind of insane just how many whistleblowers have come forward this year compared to last. It feels like the gates have been blown open. So over the first five months of this year, the FAA received more than 11 times as many whistleblower reports from Boeing than compared to all of 2023. 126 tips compared to 11. And when you're in a very intense manufacturing industry like Boeing, regulators rely on whistleblower reports to talk about any sort of shoddy manufacturing things that are going on.

7:01And Boeing has just seen an absolute explosion in whistleblowers. One of them died by suicide after he said or after his family alleges that he was retaliated against and had so much pressure against him. So these whistleblower reports will only keep ramping up from here, it seems. So we'll see what happens. But yes, I don't know who wants this job right now. Another electric vehicle maker has bit the dust after seven-year-old EV startup Fisker has officially declared for bankruptcy. despite raising over$1 billion from outside investors and actually getting a vehicle to market. A combination of poor execution and slightly unlucky timing eventually sank Fisker.

7:39It started delivering its first model, the Ocean SUV, last summer, which was right around the same time that previously hot red EV market has begun to cool, and it didn't help that the car just wasn't very good either. Marquez Brownlee, the influential tech YouTuber, called it the worst car he'd ever reviewed. Others agreed, citing a litany of software issues and generally perplexing design decisions. Fisker also struggled with the basic process of being a public company, blowing through two chief accounting officers in less than a month. Neil, this was CEO Henrik Fisker's second attempt at launching a car company named after himself.

8:15The first one also failed back in 2013. This guy needs to stop launching car companies, or at least stop launching car companies named after Fisker. I would start launching companies named after maybe 19th century technologists, like maybe, I don't know, a Tesla might work better than naming it Fisker. No, this guy is very well known in the automotive industry, is a famous designer of BMW and Aston Martin sports cars. The 2013 venture didn't go well. You could blame that one on external factors. They had a problem with their battery supplier and some natural disasters as well. This one seemed to be completely on Fisker and the company itself.

8:53Its car was basically a debacle. It only sold less than 5 ,000 of them and produced just 10 ,000, which was a quarter of their delivery targets. There were so many things that went wrong here. Of course, they ran into a bit of a buzzsaw as the EV market declined. But that's not to say that legacy automakers aren't doing OK in this new paradigm. But this company just made a lot of made a lot of own goals. Yeah. Fisker said they tried and he said he tried to learn from his mistakes from his first foray. He raised more money this time around, and he tried to work with more reputable suppliers, but a lot of things didn't go well.

9:28Fisker pitched itself to investors as almost, they called themselves the automotive equivalent of Apple. And what that means was they were partnering with a lot of outside companies to actually build the product, and then they were going to layer on this software that would really differentiate them in the crowded space of EVs. But none of it really went well. Actually, the car looked good and performed relatively well driving. But if you just watch this Marquez Brownlee review of the vehicle, they're like there's unlabeled buttons. There's just very perplexing software decisions in general. And it was just not a pleasurable experience to drive this vehicle.

10:01When this Ocean SUV went into production, it did not have cruise control. And we're in the year of our Lord 2022 when it was being produced. So this did seem like a bit of an amateur effort. But Fisker is not the only EV upstart startup that has kind of gone belly up. I mean, it's not going full belly up. They're trying to sell assets and restructure a debt and remain a company. But there's this whole class of EV startups that wanted to take on Tesla, wanted to take on the legacy automakers that were all pivoting to EVs around 2020 and 2021. They SPAC'd into the public markets, and they're just really hurting right now.

10:38Now Rivian, which makes trucks, and you sometimes even see these on the roads. It seems to be doing better than most. Its stock is down 92 % all time since it IPO'd. And then Lucid, which is another EV maker, sort of in the same class, was at one point worth more than$100 billion. Now, I just checked its market cap,$6 billion. That is a huge plunge. These companies are just finding it really hard to make EVs. And at least those companies are still alive. You remember Lordstown Motors. That was this buzzy pickup startup maker that filed for bankruptcy. There was another company called Arrival that made buses.

11:13They wound down the last few years. So it's just tough. It's really tough out there. Supply chains are complex. Consumer demand's a little fickle. It's just hard to get everything to align. And Fisker's another one that bit the dust. Adobe wishes it could Photoshop itself out of this pickle. The FTC sued the software giant on Monday, accusing the company of making it extremely difficult to cancel subscriptions to Photoshop and its other programs, therefore violating consumer protection laws. Here's the specific complaint from the government. When you go to sign up for Adobe's design software, whether that's Photoshop or Illustrator, you see the most popular paid monthly plan in bold letters.

11:53Only if you look closely do you realize that this is an annual subscription you just pay monthly, and there is a cancellation fee displayed in a lighter text. You have to click a separate link to see the details of the cancellation fee, which costs half of any remaining payments if you cancel in the first year. Adobe's general counsel responded that they are transparent with the terms of their subscriptions. The cancellation process is simple, and it plans on taking on the FTC in court. Still, this is further evidence that Adobe and other big tech companies have a massive target on their back as Biden administration regulators crack down on what they see as consumer abuses.

12:29Yeah, not only was it very difficult to find the option to cancel on Adobe's website, but there was also reports that when you called customer service, those calls would drop and then they would bounce between different representatives. So they're really taking customers for the ringer here. The FTC has been on one recently. Let's just zoom out to say that because this follows on the heels of a very similar suit abroad against Amazon last year where they were basically saying Amazon was putting you through the rigmarole when you were trying to cancel your Prime membership. And then they've also been trying to push forward these new click to cancel rules, which just make it a lot easier, make it so you don't have to go through four different pages.

13:08You can just very clearly cancel your subscription. And this is something that a lot of consumers know very well. We've all tried to cancel a subscription in the past, and it is just truly insane the links that you have to go to. Yeah, I mean, this is a big—you're right. I mean, as you were talking, I was just like, wow, I really hate trying to cancel a subscription, and I can't. So I guess we have to thank the FTC for looking out for the consumer there. But subscriptions have become a huge business for Adobe. We were talking before the show, and you said you remember the times when you got a disk and you had a lifetime license for Adobe products.

13:40They've switched that to a very lucrative subscription business. Their revenue in 2023 from subscriptions was$14.2 billion, which is nearly double the$7.7 billion that they got in 2019. So Adobe, you can be sure they don't want you to cancel. They're doing everything they can to gamify the fact that you have a Photoshop subscription and then you renew it for the next year. Yeah, it has been a very successful business model pivot for them. It's great for investors, not so great for consumers, obviously. This is not the only PR battle that Adobe has been fighting either. They spent the first half of just this month kind of addressing this user fury around changes to their terms of use.

14:23They asked users to sign this new terms of use agreement in some language, made it implied or made it look like that their content, users' content, could be used, reproduced, displayed, or modified by Adobe. and a lot of people took that to mean that they were going to use your content to train their generative AI models because they are making a big generative AI push. Adobe had to clarify in a few blog posts saying like, listen, your content is yours. It will never be used to train any generative AI tool, but it did a lot of damage to them in the court of public opinion. So even though Adobe stock is doing well, its revenue is up, it suffered a little bit in the court of public opinion.

14:59Up next, the one year anniversary of OceanGate's submersible disaster. Eczema isn't always obvious, but it's real. And so is the relief from Evglyss. After an initial dosing phase, about 4 in 10 people taking Evglyss achieved itch relief and clear or almost clear skin at 16 weeks. And most of those people maintain skin that's still more clear at one year with monthly dosing. Evglyss, LibriKizumab, LBKZ, a 250 milligram per 2 milliliter injection, is a prescription medicine used to treat adults and children 12 years of age and older who weigh at least 88 pounds or 40 kilograms with moderate to severe eczema.

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16:06Tuesday on NBC, Jimmy Fallon and Bozema 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 Tuesday on NBC. June 18th marked one year since the Ocean Gate Submersible imploded on its ill-fated journey to visit the wreck of the Titanic.

16:45This story captivated the world for a few days as it seemed like the lives of five members on board, including Ocean Gate CEO Stockton Rush, hung in the balance after losing contact, descending to the wreck. It turned out that the frantic search and rescue mission that followed was for naught when sonar recordings revealed the craft imploded as it neared the bottom of the seafloor the same day it set out on its journey. But the legacy of the mission and the questions around how the catastrophic failure of the vessel still swirl to this day. We're sitting here one year later, but still no official report has been issued explaining what happened to the sub or who should be held responsible.

17:22Wired conducted its own investigation, looking through thousands of OceanGate's documents and emails to paint a picture of a company where cautious employees were dismissed for speaking up against their boss's risky high speed approaches. OceanGate has since ceased operations, but other individuals are already planning new missions to return to the wreck. What stands out to you about this disaster? What do you remember from it one year later? Well, I think what we've learned in the past few months about OceanGate is that it makes Boeing look like the most buttoned up company in terms of safety practices.

17:55They basically did everything they could to do what the industry writ large was not doing, which was safety checks, which was building these subs in a certain way. Stockton Rush, the CEO, really rebuffed any sort of regulatory review about whether his subs, his vehicles were safe for use. And I think the industry writ large is looking at this and wants to say he is a complete rogue agent. It also reminds me of what happened with FTX, Sam Bankman Freed, and the rest of the Cripo industry, where they were like, yeah, send him behind bars, make an example of him, because the rest of us are actually doing this the right way.

18:32He is not, and I want to distance myself from him. I see a lot of parallels with what's going on in this ocean expedition industry. Right. There are two types of subbed in the exploration community. There's class and unclass. Class obviously has a lot more regulatory scrutiny. It has to go through a rigorous amount of testing. Unclass are the experimental subs that Ocean Gate sub did fall into. And so you're right that the industry is saying class subs are considered exceptionally safe vehicles. This makes us look even better because OceanGate didn't make the industry look bad. It made OceanGate look bad.

19:04But as a whole, it made the industry look pretty good because of how safe the general community takes or how serious the general community takes safety. One of the issues, if you go back to what OceanGate did wrong, is just the very material they chose to make their submersible out of. They chose to make it out of carbon fiber, layered carbon fiber compound. And while that was a lot lighter and technically it could withstand extreme pressure and extreme depths just through the way the material is constructed, where stress points begin to develop, they think that after a few amount of dives, it got more stress than they anticipated and ended up imploding.

19:42So looking back at it all now, it is crazy that that submarine ever went down with people in it. Yeah, and you're probably like, well, what happens next for deep sea explorers, for people doing crazy things? Are they going to be hesitant going after this absolute tragedy? But it seems no. I mean, all you have to do is look back to 1996 when 12 people died on Everest in a very publicized tragedy. The years after that saw a huge spike in people climbing Everest. Businesses increased their revenue by 100 % taking people up that mountain. These days, you can barely get a permit. It is so popular. so popular.

20:18I don't think that itch to see the unexplored, to go where no one else has gone, is always going to be with humans no matter what happens. Obviously, you'd never want anything like this to happen, but I don't think people are ever going to stop venturing to the great beyond. Exactly. And Ohio billionaire Larry Conner is actually already planning a journey back to the wreck in a new sub. Conner's goal is to prove that diving to the Titanic is safe as long as you use the proper engineering. And that mission hopes to launch around 2026. So you're right, this urge to explore has not gone away and will not go away.

20:49If you've thought, you know what? I'm over this desk job. It's time to pursue my dream of becoming an influencer. Well, that's great in theory, but in reality, you're not going to be the next Mr. Beast. These days, the typical social media influencer doesn't bring in a lot of money and earnings are going down across the board. The Wall Street Journal writes, running down the numbers of the billions of people who post photos and videos on social media. 50 million people earn money from it. Roughly half of creators make$15 ,000 or less, and just 13 % made more than$100 ,000, according to influencer marketing agency, NeoReach.

21:25And the golden age of influencing appears to be on the wane. During the pandemic, when social media usage spiked, previously unknown creators, just regular people doing regular things, racked up huge followings. But now social media companies have shrank their payouts to creators, brands are becoming more discerning about who they sponsor, and algorithm changes make it harder to be discovered. Toby, it seems tough to make a middle-class living as a full-time influencer. I would file this under the not-so-surprising category, to be honest, because the internet is probably the most pure example of power laws that we have, where to the victor go the spoils.

22:01Just like if you are LeBron James, you're going to earn$50 million a year, but if you're the 1 ,000th best basketball player on earth, you're not going to even be on an NBA roster. Same goes for the internet. Yes, you have the Mr. Beast, the Kim Kardashians of the world, making millions of dollars, getting millions of eyeballs. But the income and the distribution that falls off from that just falls off precipitously. There's not really a great middle class of creators. And I think these numbers support that. But I think there may have been at one point during the pandemic in 2021, because all of these platforms were launching creator funds where they wanted to bring you on their platform.

22:38I'm thinking TikTok had a billion dollar creator fund where they would pay you if you were popular enough just to make videos and entertain your followers. You could add in sponsorships on top of that. And that, of course, is the bulk of where creators make their money. But it seemed like advertisers were sprinkling a lot of money around to various creators that the platforms are playing out because they wanted to get you on their platform. Seemed like there was a more robust economy that produced a more middle class influencer class. And now that may have been evaporated based on the things I mentioned.

23:08I think one of the things that supercharged your influencer journey was when you joined the platform, Stu. Because if you joined during kind of peak TikTok, which was during the pandemic when a lot of people were stuck at home on their phones, you benefited immensely from increased reach. You benefited immensely from those creator payouts that were flowing during that time. Also, the niche that you chose was very important as well. Yeah, I say niche. Whoever's counting it, whoever's playing bingo at home. I say niche every show. But yes, if you went into the investing world or maybe the lifestyle hack world, those are very profitable places to operate.