Meta Offers $100M to Poach OpenAI Talent? & Nippon Closes $14B US Steel Deal

0:00The Jack Welch Management Institute at Strayer University helps you go from I know the way to I've arrived with our top 10 ranked online MBA. Gain skills you can learn today and apply tomorrow. Get ready to go from make it happen to made it happen. And keep striving. Visit Strayer.edu slash Jack Welch MBA to learn more. Strayer University is certified to operate in Virginia by Shev and as many campuses, including at 2121 15th Street North in Arlington, Virginia. Good Morning Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. Today, you'll never believe how much Zuck is offering OpenAI employees to change sides.

0:40And the Fed held interest rates steady as she goes, much to the president's chagrin. It's Thursday, June 19th. Let's ride.

0:52Good morning. Today is Juneteenth, the newest federal holiday that commemorates the end of slavery following the Civil War, specifically the day enslaved African-Americans in Galveston, Texas, finally learned they were free. two years after the Emancipation Proclamation. The stock market is closed and maybe your office is too, so we hope you enjoyed the day off if you have one. Morning Brew told us not to work today, so we actually taped this yesterday afternoon right after the Fed meeting about 3 p.m. Eastern time, which we'll get to in just a second. And since we are off on Thursday, that means you get a special Friday episode as well where we interviewed a marketing expert who talked to us about some recent branding snafus like HBO Max changing its name a billion times and whatever the heck Apple was doing with liquid glass.

1:38So if you've ever seen a rebrand or a new logo from a company and thought, what in the world were they thinking? Tune into our show on Friday. But back to Thursday and back to a word from our sponsor, Amazon Ads. Neil, you ever try to cook something without tasting it along the way? Toby, who do you think I am? Of course I taste it throughout. That's how to avoid serving surprise soup, which is never a good surprise. Same deal with small and medium businesses marketing. You can throw money at ads, but if you're not sure what's working, you're just guessing and certainly not tasting along the way.

2:10That's where Amazon streaming TV ads come in. With the help of trillions of shopping, browsing, and streaming signals, businesses of all sizes can reach the right audiences. And you don't need to sell on Amazon to use it. You get campaign measurement and a real shot at making your dollars work as hard as you do. Less guessing, tastier results. Gain the edge with Amazon ads by going to advertising.amazon.com slash start now. That's advertising.amazon.com slash start now. Change is always happening. But no matter what changes in five years, there's one thing that will stay the same. The price of your internet.

2:46With the Xfinity five-year price guarantee, you get five years of the most reliable Wi-Fi. With our best equipment included for a price that stays exactly the same. Restrictions apply. new residential customers only. Taxes and fees extra and subject to change. Most reliable Wi-Fi based on OpenSignal Awards USA. Fixed Broadband Experience Report, August 2024. The Fed is acting a lot like your deadbeat boyfriend when it comes to doing the dishes and not really doing much of anything at all. Jerome Powell and co. left interest rates unchanged as the Fed continues to weigh the impact of President Trump's tariffs, much to the chagrin of President Trump, who has called Powell a numbskull and a stupid person in recent days due to his reluctance to lower rates.

3:28Trump's ire is supported by recent data drops. May's CPI report showed price increases are leveling off, with inflation now hovering around its lowest level since 2021, though it's still above the Fed's 2 % target. The job market is also showing signs of weakness, with hiring in May slowing from the month prior, and unemployment filings creeping up, though, again, still near historic lows. Another data point that is shaking the Fed's wait-and-see approach is the retail spending data we got on Wednesday, which showed that people are reigning in their spending. But most analysts agree it's simply too soon to lower rates because you still have to wait for tariffs to filter through the economy, given that most businesses were able to front-load purchases and dodge some import duties.

4:10Neil, the Fed said in a statement on Wednesday that uncertainty about the economic outlook had diminished but remains elevated, which is another way of saying we ain't doing anything. First of all, how many metaphors do you have left for how to explain how the Fed is not doing anything. I mean, you're scraping the bottom of the barrel now. You're killing me, Jerome Powell. Do something. But you're still doing well. Yeah, Powell, once again, is not doing anything. He's in that wait and see pattern. And that is because I listened to his press conference just now. He said that tariffs were not showing up yet in the recent inflation reports, which were much cooler, but they could show up going forward.

4:46There was an elevated degree of uncertainty. He said someone's got to pay for the tariffs, and there are pretty very high tariffs on imports right now, the highest level we've seen in a century. Someone is going to pay for those. He mentioned that companies had stockpiled goods before the tariffs went into effect. But ultimately, inflation will rise. They don't know how much it's going to rise or whether it will be permanent or temporary. And that's why they're just standing pat, even though Powell did stress that inflation was cooling, which was great. And the labor market, despite maybe showing some cracks, is still going strong.

5:17So overall, he said, we're in a healthy economy, and that justifies our sit-back-and-wait approach. Overall, though, a lot has changed since the Fed last met. I mean, there obviously is the tariff announcement and pauses, but also there's been this introduction of this huge tax and spending bill in Congress that is currently still making its way through the houses. And most recently, there's been this outbreak of fighting between Israel and Iran. So there is a lot going on that the policymakers have to weigh, and so standing pat seems to make sense. But you kind of hit the nail on the head in a lot of ways.

5:48The situation is relatively similar to what it was three months ago. Unemployment is still low. The jobs market is still pretty stable. Inflation is still cooling, but there still is that injection of uncertainty, which is why rates aren't going anywhere, despite Trump's wishes. The Fed did update their economic forecast and their inflation forecast, which we should mention. They raised their median estimate for inflation at the end of 2025 to 3 percent from 2.7 percent. So they forecast inflation will be a little bit higher. And then when it comes to economic growth, they lowered their forecast for economic growth for the rest of the year from 1.7 percent to 1.4 percent.

6:29You pull on different levers in order to lower inflation and boost growth. One leads to suggest that you should cut rates. The other suggests that you should raise rates, which, again, leads to this particular stuck in the mud situation that we have here. But what like the takeaway from the Fed meeting, I think, is that the labor that Jerome Powell sees the labor market as healthier than maybe most analysts are looking at right now. And he just doesn't any pushback on Trump criticism saying, hey, look, we're all in this for the same thing. is to keep the U.S. economy chugging along. And that's what me and all my central bank buddies are doing.

7:04And so he can criticize us all we want. And that is our goal. And we're just going to stick to that. After a year and a half in limbo, Nippon closed its$4.9 billion takeover of U.S. steel on Wednesday, forming the second biggest steel maker in the world. And it was a journey that would make even Frodo tired. Months ago, former President Biden blocked the deal, saying that a Japanese company shouldn't be able to control an American industrial icon that makes a product crucial to national security. Trump came into office and was also against the deal until he wasn't and gave it the green light. So what changed?

7:37As a precondition of the takeover, the U.S. government was handed a so-called golden share in the new company, an unusual arrangement that gives Trump a say in major decisions, such as employee salaries, board composition, plan closures, name changes, headquarters locations, and a lot more. While other countries have employed golden shares before, like the UK and France, it hasn't been used in the United States. And some libertarian critics say this level of government control could set a worrying precedent for foreign companies investing in the United States. Whatever you think of a golden share, the deal is a big win for U.S.

8:09Steel, which was treading water and needed a buyer to stay afloat. As part of the deal, Nippon will invest an additional$11 billion in its U.S. operations by 2028, a much-needed cash infusion. Yeah, this perpetual golden share is the real story here because it's not just the Trump administration. It's all in administrations going forward who will now have a share over U.S. steel. And U.S. steel is a very hot button company in American industry. One, because steel is a very important industry. But two, it's a swing state. It's located in Pennsylvania. So you can imagine that future administrations might want to play around with that golden share.

8:47By the way, how do you even grant a golden share? You get granted a class of preferred stock called Class G, G as in gold. There's only one of them out there. It doesn't actually give you equity in the company. It's not about monetary gain. It's about control. And that is what the U.S. now has. And you mentioned Ford investors. They're looking at this saying, is this just a one-time thing? Is this just a U.S. deal thing? Or are we going to have to kind of play ball with the government every time we come in and try to take over a U.S. company? So that injects a lot of uncertainty. Right now, the word we're getting out of the White House is this is just a one time thing.

9:21But it injects that layer of, oh, no, I don't know if I want to do business with the United States anymore if their government's going to get involved like this. And the U.S. government has criticized other countries that took a golden share in their own national champions in the past. Countries like Brazil, which owns a stake in the plane maker Embraer, which is their national champion. China has an indirect stake in ByteDance, which is TikTok's parent company. The UK has done this. It has a golden share in the defense company BAE Systems. And the United States has said, guys, what are we doing here?

9:52Like we're trying to invest in your government is coming in, taking control of the company and making all these decisions that we think are better left to corporate decision makers. And now Howard Lutnick, the Commerce Secretary, has really been the architect behind this golden share. And he's sort of staked a path for himself in this administration by thinking a little outside the box and looking to other countries, what they're doing and saying, hey, why don't we do this here in the United States? So he implemented this golden share idea. He has also introduced the concept of a sovereign wealth fund, which for the United States, which I guess is being worked through.

10:22That has been typically the domain of other countries. So Lutnik has certainly shaken things up. I guess the positive spin on the golden share idea is that it could facilitate more foreign investment in the U.S. if it is a sector like something of national interest. One is maybe critical minerals. So if you want to shore up your critical supply chains, it might make sense to have the government involved. And that may make you feel better as an investor because they're like, oh, they will want this to succeed because it aligns with their national interests. So potentially that is where you could see people advocating for this.

10:55But most people say that America does not typically operate like this. Corporate decision makers should have more interest over these deals and not the U.S. government. And we can't leave this story without mentioning one casualty of the takeover, which is that U.S. Steel shares stopped trading on the New York Stock Exchange as of Wednesday. And why is that a big deal? Because U.S. Steel has probably one of the best tickers on the entire stock exchange. It is just the letter X. No one doubt Elon Musk. He's going to find out a way to get that and trade his company's public under that ticker. All right, moving on.

11:29Mark Zuckerberg has been calling up OpenAI employees and offering them signing bonuses of up to$100 million if they switch teams. And they're saying no. That's according to OpenAI CEO Sam Altman, who on his brother's podcast this week, dropped Jaws by revealing that Meadow was trying to poach his employees with nine figure offers and even bigger annual compensation packages. However, Altman said so far, none of our best people have decided to take them up on that, which simply doesn't check out. because what person ever would turn down$100 million? Altman spilling the tea seemed to confirm recent reports that a frustrated Zuck was taking it upon himself to assemble a new AI super intelligence team meant to help Meta catch up to rivals in the high-stakes AI arms race.

12:13This spring, Meta has lost high-profile talent and delayed launches of new models, spurring Zuck to launch a personal recruitment effort to get the ship back on track. To all this, Altman said game respects game. He told his brother, I've heard that Meta thinks of us as their biggest competitor. Their current AI efforts have not worked out as well as they have hoped. And I respect being aggressive and continuing to try new things. I think Altman's word choice here was very specific because he said that none of his best people had taken up Zuckerberg on his offer. So I think we're seeing pretty high level people management here because by saying none of your best people are leaving, he's implying that anyone who does go is in fact not one of his best people.

12:53And the people who do go are almost like mercenaries motivated by money. So there's like this meta game going on as meta is trying to recruit their people. It is fascinating, though. I wonder if the truth is somewhere in the middle that maybe not everyone has said no, or maybe people aren't getting these, you know, nine figure packages because it does seem hard to comprehend someone saying no to a hundred million dollar signing bonus with additional pay package on top of that after you signed. Yeah, I mean, we've only seen this in the world of like baseball or Elon Musk pay packages. It's kind of insane.

13:25Altman did have some choice words for Meta, though. Maybe what I mentioned a part of the podcast that he was being a little nice to Meta, but he also knocked them. He said that he disagreed with this concept of a ton of upfront guaranteed comp. And he also criticized Meta. He said, I don't think they're a company that's great at innovation. He accused them of copying OpenAI and said, you know, I think Zuckerberg and Meta, which has been a criticism that's been lobbed at them for years as not being a particularly innovative company, but just being really good copycats. We've seen that time and time again as they've just kind of copied every single update that Snap has rolled out or TikTok.

14:00So he said this is sort of a loser strategy here. OpenAI, we're in the driver's seat. Up next, we got Neil's Numbers. 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. Like a good neighbor, State Farm is there. Does it ever feel like you're a marketing professional just speaking into the void?

14:43But 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. Welcome to Neil's Numbers, the segment where I share three stats from the week's news that will give you plenty of material for that awkward first five minutes of your Zoom meeting.

15:17For my first number, shares of a Hong Kong-based biotech startup have shot up 46 ,000 % this year, like a meme stock on steroids, a bewildering rally made even crazier by the fact that it has zero revenue. ReginCell Bioscience says it uses traditional herb-centric Chinese medicine techniques to treat neurological disorders like ADHD and autism, yet its treatments are still in the R &D stage, and according to a filing released last year, it's not particularly commercial ready. The company wrote, we have not generated revenue from any TCM formula candidates or applied for any regulatory approvals, nor have distribution capabilities or experience or any granted patents or pending patent applications and may never be profitable.

16:01That doesn't stop investors from sending its stock skyward from a market cap of$53 million a year ago to over$30 billion now. That makes it worth more than Lululemon, eBay, and Kraft Heinz. Reginsell's stock surge is reminiscent of another Hong Kong-based fintech company, AMTD Digital, that got the meme stock treatment during summer 2022 when it climbed 126 % to give it a bigger market value than Coke and Bank of America, But Toby, this is on a completely other level, 46 ,000%, and no one can really explain it. Yeah, part of the reason why is that there's not a lot of shares outstanding to be traded.

16:39Of its 500 million outstanding shares, only 30 million are available to be traded. So that's about 6%. If you look at big public companies like an Apple, 98 % are available to trade. Tesla, 87 % are available to trade. Regenacel, 6%. So any move just massively ripples through the entire stock as a whole. And then also there's probably some sort of short squeeze going on here. Remember when GameStop was going upward? That's because a lot of big hedge funds had taken short positions against them. That might be happening here because a short interest as a percentage of float is almost 100 % in this company.

17:12So when it starts going up, a lot of people have to buy back shares to cover their positions, which just sends it up even further. So short squeeze, low float. There's all these things going on. But yeah, not a lot to actually understand why it started going nuts in the first place. There was one thing that they did earlier this week, which is a 38 to one stock split, which doesn't really raise the it's not doesn't change the market value at all. It decreases the individual share price. That was like the only piece of news that happened to this company in the past few years. There hasn't been a breakthrough in their treatments or any anything like that.

17:48So it is just a bewildering thing in, you know, that we've just become accustomed to in the stock market since COVID started. For my second number, the office market is healing. For the first time in at least 25 years, more office space is being removed from the United States than added, according to CBRE Group, meaning that office conversions and demolitions will exceed new construction. Across the largest 58 U.S. markets, CBRE found 23.3 million square feet of space will be demolished or transformed to other uses by the end of this year, compared to 12.7 million square feet of new construction.

18:21It is a positive sign for an office real estate market that's been hammered by remote work and plummeting property values for empty buildings. Supply being removed from the market should boost rental prices and give a lifeline to landlords that had been panicking over office vacancy rates that shot up to a record high and still remain elevated at 19%. Meanwhile, the office to apartment shift is trudging along just OK. Since 2016, about 33 ,000 apartments and condos have been created out of pre-existing office space, and another 43 ,500 units are in the pipeline. That rate is picking up, too, thanks to government incentives for conversions, loosening of local zoning laws that enable more construction, and plunging prices for zombie office buildings.

19:03Toby, this is great news if you own an office building. Yeah, this was really a perfect storm of the last decade for creating an office space glut because obviously federal tax breaks lured developers in to say like, hey, come build a lot of office space. There was low interest rates, so barring was very cheap. Those low interest rates also created maybe an inflated demand for unprofitable startups to move into those buildings. So there was just a lot of free money spinning around where developers were saying, come in, come in, where you have all this office space. and then you toss in the rise of remote work and everyone left the offices.

19:38So it really was just all these offices were created and now are sitting empty. So the appeal of converting those into apartments is very high right now. And analysts are a little bit shocked at how quickly it's happening. They thought that this glut would be staying on the market for years, maybe even decades, but it does look like the pace is accelerating because it just makes so much economic sense to make these conversions. And they have been, they are very expensive to do and not every office can be converted into an apartment. I mean, I don't want to live here where we are in this office, but it really is thanks to those policy interventions that local governments and city governments have stepped in and said, here, we're throwing money at you in order to do this because we're not making any money in property taxes if a building is completely empty and its value is decreasing.

20:23So everyone kind of has an incentive to make these conversions happening, and it really is happening at a faster pace than anyone expected. My final number is$4 ,800, which is how much it costs to be a Red Sox fan in 2025, including tickets, TV access and merchandise, a 262 % increase from 20 years ago. In a New York Times op-ed that sparked a lot of discussion, sports journalist June Lee calculated the number to highlight how following your sports team has become so expensive that it's out of reach for the regular American. Lee writes that for most of his life, sports is one of the American cultural institutions that was accessible to everyone, which was a huge public good because it fostered community and belonging.

21:04Now, he says fandom isn't being nurtured. It's being mined, casting blame on everyone from the leagues to owners and lawmakers for allowing sports to be turned into a wealth extraction tool for financiers and paywalled for folks like Fireman Ed. He takes particular issue with streaming services, saying their land grab for content has resulted in a fragmented viewing landscape that makes it impossible to watch your team without shelling out ridiculous sums of money. Lee found that if you subscribe to every service that carries live sports, and it's a growing list that encompasses Apple TV Plus, Macs, Amazon Prime, YouTube TV, NBA League Pass, lots more, it would set you back over$2 ,600 a year.

21:41Toby, does he have a point? Absolutely, he has a point. Even the most ardent of sports fans turn on the TV and can't even find where their teams are playing because one game has been sold off to one network. It's no longer being aired on your local network because of blackout deals. So there really has just been this absolute, you know, slicing and dicing of the sports landscape. And, you know, the point of this op-ed was saying that also fractures community because it used to be something that everyone could come together and watch on TV or go see and it was affordable. But now it's this pay to play game and it's just fracturing the very culture of sports in America.

22:17Private equity probably is playing a role in that as well, because maybe they don't have a great long term profit outlook. They want to extract profits from their investment, maybe not nurture the community as much. So it just really is an inconvenient time to be a sports fan, which we've all experienced when you just want to watch, you know, the Yankees play the Red Sox and you can't find it unless you pay$20 a month for an app. And you mentioned private equity. The author does point his ire at private equity, which increasingly leagues are allowing these firms to buy stakes in their sports teams for a long time, for decades.

22:51This was when you owned a sports team, you were just kind of a local business owner who was really rich and you wanted to buy the team for your legacy or it was kind of this trophy purchase. Now it's, you know, these these leagues and these teams are so lucrative that they're getting, you know, high finance to buy in private equity backed entities currently own stakes in 74 major North American sports teams valued at a combined two hundred and thirty billion dollars. So he says that that is one of the reasons why we're seeing just prices go up at a much higher rate than inflation. And it's not just streaming or TV.

23:27He also says that going to a game, just buying tickets to attend a game is growing much, much faster than inflation. From 1999 to 2020, the average price of a seat across all sports rose roughly twice as fast as overall consumer prices. And then between May 2023 and May 2025, those ticket prices increased 20%, which is one of the biggest jumps of any category in the inflation basket. I thought one solution to this is a great idea. And he said Congress should take inspiration from Britain's, quote, crown jewel rule, which designates certain events as nationally significant and therefore have to air on TV for free.