Meta’s $1.4T Trial Over Child Safety Begins & Is AI Buying and Destroying Used Books?

0:01Are you sucking wind from trying to keep up with AI and its impact? Take a breather and tune in to the Intelligence Shift, Morning Brew's new podcast with PwC. It bridges the gap between big picture AI concepts and what it actually means in practice. Host Dan Priest is joined by expert guests to discuss AI's role in sports, music, HR, and more. Listen to the Intelligence Shift wherever you get your podcasts. Good Morning Brew Daily Show. I'm Neil Freiman. And I'm Kayla Lopez. Today, Meta stares down its biggest legal challenge yet. And a mystery source is buying up all the used books. It's Tuesday, August 18th.

0:38Let's ride.

0:43Good morning. I am once again joined by Kayla Lopez for a few more days. Kayla, did you know that your dinky first car is now a hot collector's item? The Wall Street Journal reported that seemingly mundane cars from the 90s and 2000s like Honda Civics, Toyota Corollas, and Buick Roadmaster wagons are a fast-growing segment of the car collector community. At one insurance company that specializes in classic cars, 40 % of insured vehicles were built since 1980. And another said they've seen the number of 2000 Civics and Corollas they insured double in just the past three years. For the collectors themselves, many of them younger, it ties back to nostalgia and capturing that feeling when you were 17 driving around your hometown with your buddies getting up to shenanigans.

1:28Yeah. Some of my favorite memories from high school are in my best friend's Honda Civic with the blown out subwoofers, just driving very slowly around like suburban Cleveland. But if you think about it, this generation is, you know, fixing up classic cars. Yes, sure, maybe a Honda Civic is slightly different than a Cadillac from the 50s. But the generation before us was fixing up cars from the 50s and 60s. It's kind of the same as us fixing up cars from the 80s and 90s. Some people would say that the 90s and 2000s cars don't have the same aura as the other ones. the boxy sedan look. But yeah, shout out Chandler and his Ford Taurus.

2:04I will never forget that car. I mean, I spent so much, so many hours driving around our hometown in that Ford Taurus. I wonder where it is. Maybe it's getting scooped up by some hot young Gen Z collector. Okay. Now a word from our sponsor, Rubrik. Kayla, do you feel like you're up to date on cybersecurity? Well, my laptop doesn't turn on anymore, and I don't know why, so no. Yeah, the old model of cybersecurity was built on protection, safety nets, recovery plans, systems designed to withstand the last era, and maintain the status quo can't hold up to the present day. The AI era demands confidence that you can secure and accelerate your business operations so nothing stops your momentum.

2:46Rubrik can give you that confidence. Their platform helps you keep going by securing your data, controlling your AI, and protecting your identity built as one architecture, not stitched together after the fact. To learn more about how Rubrik rewrote the industry rulebook, head to rubrik.com slash mb. That's r-u-b-r-i-k dot com slash mb. Today, Meta finds itself in a familiar place, a courthouse with unfamiliar consequences, $1.4 trillion in potential damages, and the risk of being forced to make key changes to its apps, Facebook, and Instagram. Four states, California, Colorado, Kentucky, and New Jersey, brought a case against Meta, whose trial begins this morning in Oakland.

3:27These states accused the company of getting kids hooked on its social media platforms using addictive design features, then misleading the public about the possible harms of kids being on those platforms. They're seeking up to$1.4 trillion, with a T, in damages, which is almost as much as Meta's entire market valuation and a makeover of its products to be more safe for kids. It's the biggest trial yet in what many have called Big Tech's Big Tobacco moment, when a wave of lawsuits brought the cigarette industry to its knees decades ago. So far, so not good for Mehta. Earlier this summer in New Mexico, a judge ordered the company to pay nearly a billion dollars in damages and restitution in a case over child sexual exploitation.

4:08Mehta was also ordered to make changes to its products like blocking push notifications to children late at night and during school time. But while New Mexico was the opener, this case in California, the most populous state in the country, is the headlining act with the verdict determining the future course of its apps that reach 3.6 billion people around the world. Yeah, so although the$1.4 trillion is super lofty and seems very large, the expected range also hits about$200 billion, which still was Meta's entire annual revenue in 2025. So even at the low end of the spectrum, this is going to be impacting Meta substantially if this actually goes through.

4:47Now, there is some pushback of the suit, right? Critics are saying that it might not actually force any change by big tech companies, even if this goes through, or that forcing one app to make user experience modifications will just push these young kids to other apps that maybe aren't required to make these changes. Some other critics also say that this could create ID verification requirements where you have to prove that you are above age in order to access the app's features, which could expose users to data breach risks if you are putting your ID online and potentially prevent individuals without ID from accessing these platforms.

5:25And it could also end digital anonymity per the Electronic Frontier Foundation. But it's not just Meta that could feel this impact. The appeals court that allowed the suits against Meta also allowed suits against Alphabet, TikTok, and Snap to go through over similar claims. And Meta has had a pretty intense response to this. They said that the state AGs may call this a landmark case, but their limited claims are unsubstantiated and their financial demands are vastly disproportionate. They say they've been adding a bunch of safety features to protect kids from people like predators online. and they detailed this in their statement like, we have these features that remind teens to take a break if you've been scrolling for long periods.

6:07We have other features that impose daily time limits on their usage. They say, we've listened to parents, worked with exports and law enforcement, and conducted in-depth research to understand the issues that matter most. But for me, this case in California is really the culmination of blowback against social media that has been bubbling for so long. I feel like we've been talking about child safety and social media for a long time. Congress has tried to pass these laws to get these platforms to be more safe for kids, and it's been bubbling. Nothing has happened at the federal level in Washington, D.C.

6:41Now I think it's fair to say that the blowback has reached its climax this year with all of these trials against social media companies, and the poster child of this backlash against big tech and social media really has been meta. They had this big loss in New Mexico, forced to pay nearly a billion dollars. They lost another case earlier this year as well. And this one will set the tone for future ones because it is the biggest one right now because it's California. And whatever happens in California spreads not only throughout the country, but potentially throughout the world because of just its influence in massive population.

7:13And there are a bunch of future ones to come. So this will set the tone for what's to come. Absolutely. And I know that they're saying, you know, they've made changes to the products designed to encourage people to spend less time on the platform. I don't know if you've ever received a you've been scrolling for a long time message. I have. And let me tell you, I blow right through it. And I'm in my 30s. Kayla, I got some discipline. I do not. But what's interesting is that these suits are actually focusing on the product's design and not necessarily the content within it because the content within these platforms are protected by Section 230 of the Communications Act of 1934.

7:48So this is a law that protects platforms from being held responsible for the content created on their platforms. and these suits are different in that they're focusing on the features of the app, not necessarily the content within it. That's what worked in New Mexico, and we're going to see if that works in California as well. All right, so the details of this trial, pretty interesting that the judge in Oakland is Yvonne Gonzalez Rogers. If you remember that name, which maybe you don't, is the same judge that handled Elon Musk's lawsuit against OpenAI earlier this year, which Musk lost. So what's going to happen is it's a jury trial, which actually has been really bad for social media companies.

8:25That's been one of the reasons that they've been having this losing streak over the past few years is the proliferation of jury trials against them. So the jury is going to recommend a verdict to the judge that who will have to accept it in the Elon Musk case. She accepted it right away. We're going to probably hear testimony from some of the biggest names at this company, Mark Zuckerberg, the CEO, and Adam Masseri, the head of Instagram. So stay tuned, this kicks off today and could determine the future of this massive company. Moving on, it's a good day to be a used book salesman and a bad day to be a used book.

8:58That's because secondhand book sales are soaring, but the purchases are large bulk orders made by mystery buyers. And it's recently come to light that some of these anonymous nerds are actually AI companies, which are reportedly using the physical books to train their models. So why is this happening? In 2024, a group of authors sued generative AI company Anthropic for copyright infringement, claiming that their works were used illegally to train its AI models. While the AI giant did have to pay$1.5 billion in settlement to more than 300 ,000 authors who filed the claim, the judge in the case determined that if the company paid for the books, then it is not illegal to train AI models using the texts.

9:39This has created a market for cheaper books, sending companies to buy as many used books as they can get their hands on. Once these AI companies get access to the physical books, they may engage in a process called destructive scanning. These books' spines get removed so individual pages can scan more quickly and fed into LLM's training data. After the pages have been scanned, they are tossed. Neil, it seems like the tech that brought us Fruit Love Island is now looking for obscure texts to ingest. This has been pretty crazy. There have been a ton of reports come out of news outlets talking to used bookstore owners, and these owners are saying, I've never seen anything like this in decades working in this industry.

10:25I'm getting massive orders for these really obscure books that no one seems to want to buy in general. This one guy, Stuart Manley from Barter Books in England, told the BBC that typically he sells 2 ,000 to 3 ,000 books in a week, and he's recently been getting orders from one buyer for that many books in a single day. And another bookstore owner in the United States told The Atlantic that these people have been buying a lot of nonfiction books, mostly published from the 1970s to the 1990s, things like the Insider's Guide to Metro Denver from 1995 and how to use Coral WordPerfect 1991. So there's something very bizarre going on in the used book industry.

11:12And a lot of outlets have identified that perhaps it is AI companies through intermediaries to be opaque about it, buying up these books in order to kind of, yeah, destroy them and use them to train their large language models. Yeah, and it's true. Anthropic confirmed in legal filings that they've been buying up books in what they're calling Project Panama in an effort to, quote, destructively scan all the books in the world, which is quite ambitious if you ask me. But a lot of the outrage online from this came from individuals protesting the destruction of rare or obscure books. The question here that The Atlantic investigated is, are they actually destroying rare books or is it just old books that nobody really wants?

11:54And you mentioned the Insider's Guide to Metro Denver from 1995. I don't really think that's super relevant to me today. And so, you know, if it's getting recycled, maybe there's not a huge sadness around that. And the books that these companies are buying may be rare in the sense that there are only a few copies, but not necessarily that it's a first edition, you know, great expectations or anything like that. Even so, it is presenting a bit of an ethical dilemma for booksellers. If you know that you're selling these used books to, you know, potentially AI companies to be destroyed, it might feel like it's a good thing for your sales to go up.

12:30But destroying these books brings up complicated feelings. One bookseller told the BBC that, quote, some may have ethical concerns about where the books end up and if they're destroyed. But the world no longer needs five million copies of the Da Vinci Code. Well, that's true. I mean, I do love the Da Vinci Code, but we don't need that many copies. Yeah, it's a very interesting question. There's been a lot of pushback online. I think people are just generally uncomfortable with the concept of destroying books because there's been a long history of that being used by authoritarian regimes and the fact that AI companies are using them to create bot-induced content rather than books, which are made by humans.

13:09And human brain just makes a lot of people uncomfortable. And a lot of even the biggest names in tech have spoken out about this, like Elon Musk And Michael Burry is another investor who's called this particularly evil. What I thought was interesting is yesterday, 404 Media, which really broke this story in the first place, tried to catch a company red-handed. So what they did was they talked to a used bookseller. They said, hey, we think this book is going to be bought in one of these mass purchasing schemes. So they put an air tag in it and said, OK, let's follow this to see wherever it goes.

13:42Because remember, this is all very opaque. We don't actually know which companies are buying what books. So they put an air tag in this book and it was bought and then they followed it around the country and the final destination was an Amazon warehouse in Las Vegas, Nevada. So 404 Media found that actually, yes, they caught Amazon red-handed, which you can say is, you know, it's perfectly legal for them to do this. Or you can say this is the evilest thing that they could do on Earth. But yes, this, they found that Amazon had been buying this particular book in bulk and was taking it to a warehouse in Nevada to destroy and train their AI.

14:18So this is not the last we'll hear of this story. Very, very interesting. Okay, up next, Reddit, the home to shower thoughts and mildly infuriating stories, is getting the call up to the stock market big leagues. Today, the online forum is joining the S &P 500 Index, cementing its rise from the chaotic front page of the internet to a mature, even giant digital business. When news of the S &P inclusion broke last week, the stock surged as much as 17 % since all the funds that track the index will now have to scoop up some Reddit. And in doing so, they'll be investing in a company that epitomizes the threat and potential rewards of AI.

14:52On the threat side of things, Reddit has long relied on Google's search for the bulk of its traffic. However, Google has recently blown up its search model to prioritize AI overviews, which gives answers to users without them having to click that blue link. Reddit stock has been volatile this year as investors question whether Reddit's traffic lifeblood has dried up. On the other hand, Reddit's 26 billion posts by humans have opened up an entirely new business line, licensing that data to AI companies for training large language models. Two years ago, Reddit struck a landmark$60 million deal with Google to sell that material, followed by another deal with OpenAI.

15:29And so you've got this bizarre bite the hand that feeds you dance going on between Reddit and Google that remains unresolved. But ultimately, Reddit's being included in the S &P 500 because it's been a financially strong company since going public two years ago. Since its 2024 IPO, shares are up 424%. It's not a bad percentage increase. But Reddit has also made some changes over the years to attract more advertisers, not just selling to Google. This includes rewarding more small posters and discouraging recycled content. And Reddit CEO Steve Huffman told Yahoo Finance, quote, Reddit is naturally commercial.

16:1040 % of the conversations people are having organically on Reddit are more or less about what to buy. And brands are definitely looking to break into the Reddit communities in order to build their own credibility and encourage more sales and get in on those organic conversations about what to buy. But they are seeing some strong pushback from the very posters they're looking to court. Social media consultant Rachel Carton told Wall Street Journal, quote, we don't want to hear from you when we're gossiping about you. And this comes after jewelry company Brilliant Earth listed a job opening for a Reddit strategy manager, which definitely saw some pushback as Redditors felt that the brand was infringing upon the last place on the internet for genuine company reviews and feedback.

16:50So it may be a good place for brands as long as they can interact with these users authentically, and we'll see how that impacts the stock. Either way, they're buying ads. I mean, yes, you can have an organic Reddit strategy as a brand, and I know we've thought about that at Morning Brew about how we get involved in Reddit. But we're not buying ads on Reddit, but a lot are. And that's led to just massive sales growth, consistently strong sales growth for Reddit. And that's why we're seeing the stock price go up so much since its IPO. So the most recent quarter, Reddit reported 61 % year-over-year revenue increase.

17:25That is the eighth straight quarter of annual revenue growth of more than 60%. In the past 13 quarters, sales have increased by more than 10%. This is like NVIDIA level growth by Reddit. So they're doing such a good job of courting advertisers, growing that ad business. And then investors got even more hype when they said, okay, we've got all this licensable data and maybe the AI companies are looking for that. They've already bought all the used books. Maybe they want to go buy all the Reddit posts as well. And so they did the$60 million deal with Google and this other deal with OpenAI, but this stock is actually down 22 % this year because there was a Wall Street Journal reporter a few months ago that said that Google is reconsidering that arrangement with Google because, as I said, Google is also hiving off all of its traffic by putting all of Reddit posts just in AI overviews.

18:15And if you look at what actually constitute AI overviews, it feels like most of it is just them taking from Reddit and putting it in front of you. So Reddit's saying, Why are we giving content to even selling content to Google, which has been really hamstring, hamstring so much of our traffic? So that's what that's why the stock has been down a little bit this year. But overall, it's been a great run for Reddit as a public company and now joins the big leagues. Yeah. So it's called the S &P 500, which means there are 500 stocks in there, which made me wonder which stock got the boot because Reddit joined.

18:48Luckily, it was not an episode of Game of Thrones and there was no red wedding here. Avalon Bay Communities is getting acquired by another S &P 500 company called Equity Residential, which turned the S &P 500 into the S &P 499. So they needed to come up with a different company to join the S &P 500. And because of all the things that you've mentioned already, Reddit was chosen to join. Up next, why one job is no longer enough for Gen Z. Every day, shareholders meet to discuss important matters about the companies you invest in. Now you can easily make your voice heard too. Vanguard Investor Choice makes it easy to set your proxy voting preference for your eligible Vanguard index funds.

19:29In just a few clicks, you can have a say on important shareholder topics like executive pay and director elections. Visit Vanguard.com slash Investor Choice to learn more. It's your shares. It's your voice. It's easy. Vanguard investors own shares of their index funds, and those funds own shares of the companies they invest in. Vanguard Marketing Corporation Distributor. Neil, when you need new running sneakers, is an AI agent placing an order for you? You're the Gen Z one here, Liv. Wouldn't you be more likely to do that? Fair point. But it is becoming increasingly common. Agents are comparing products, evaluating inventory, and completing purchases for customers.

20:05An IDC study sponsored by WooCommerce found that open-source platforms give e-commerce brands more freedom than SaaS to optimize for agentic commerce. That can mean more sales whether the buyer is a person or a bot. Check out the study at WooCommerce.com slash trends. That's WooCommerce.com slash trends.

20:50How can you climb the corporate ladder when even the first rung is out of reach? For many Gen Z workers, the answer is to disavow traditional 9-to-5 careers altogether. On today's edition of Toby's Trends, the portfolio career, or income stacking, is the hot new thing for early career professionals. The portfolio career is where someone pursues a series of smaller income streams instead of a traditional job. While, yes, this could look like a full-time job and a side hustle, it can get more complicated than that. For example, take Mahuya Khan, who was interviewed by Yahoo Finance. She made$130 ,000 last year across nine income streams, including, but not limited to, content creation, commissioned artwork, a clothing brand, and drop shipping.

21:32So how did we get here? A few generations ago, starting in the 1950s, the normal career path was called a cradle-to-grave job, where you worked at one job from the beginning of your career until retirement. This is where you hear stories of the guy that started in the mailroom and worked his way up to the C-suite. Then you have job hopping, popularized by the millennial generation, where employees were spending just a few months to a few years at a company before leaving to go to another place, usually in search of greener pastures and more money. But that reality has largely disappeared. Among recent college grads aged 22 to 27, the underemployment rate is 42%.

22:09Entry-level jobs have fallen 35 % since late 2024, plus the looming threat of AI-related layoffs means that Gen Z employees entering the workforce are rethinking a traditional career entirely. Neil, would you rather income stock like Gen Z or stay in one job forever like the boomers? Well, I'm feeling a bit boomer because I've been at this job for nine years now. And so apparently that's not the way the kids are doing it anymore. And it's just fascinating to me that this is just the reverse of what has typically been a career progression or what you think of as stability. Kids growing up now, they're leaving college and they're saying, well, actually, what's more stable?

22:49You know, me starting my own business, being my own boss, managing multiple income streams, or going into traditional corporate world. And the answer is they don't think that the corporate world is as stable because of the things you mentioned. Because of underemployment, my degree is not getting the job that it should. There is a lot of AI uncertainty going around. So why don't I just be the master of my own domain, be my own boss? And that is the way I will achieve career stability. It's just a complete flip of people listening to this growing up in the 80s and 90s, where getting a job at a blue chip company, whatever, maybe not the mailroom that you're starting in, but as an intern and working your way up.

23:27And that was seen as career stability. Now it's the complete opposite. Yeah. And called a portfolio career, it also almost feels like you're holding a portfolio of stocks. You're investing in diversified revenue streams in order to prevent, you know, when one maybe falters, missing out on revenue entirely. And so it does feel perhaps for some of these individuals that are embarking on a portfolio career that it's a little more stable and more diversified. But of course, there's also risk and anxiety associated with trying to income stack and do your own thing without the comfort of a stable job.

24:01This can also take up a ton of time and effort to get off the ground and of course can cause burnout and exhaustion. So it's not all roses on this path either. Let's sprint to the finish with some final headlines. Movie and television fans reacted with shock after the death of 36-year-old actress Hayden Panettiere was announced Monday morning. A preliminary investigation found that she was in cardiac arrest before her death in Greenville, South Carolina, but no foul play was suspected. Audiences first became acquainted with Panettiere as the coach's daughter in Remember the Titans, but her popularity surged after roles in Heroes and Nashville, for which she earned two Golden Globe nominations.

24:37A child star, Panettiere was open about her struggles with postpartum depression and alcohol addiction, detailed in her memoir, This Is Me, A Reckoning. As recently as May, though, she told the New York Times that she had a laundry list of aspirations moving forward, like trying directing or creating a lifestyle brand. Yeah, you don't have to look too hard online to see how beloved she was in many communities. She started acting in TV commercials at just 11 months old, so she has been in the spotlight for her whole life, and she had a very illustrious career. I personally never watched Nashville or Heroes, but I absolutely loved Ice Princess and Bring It On as a kid.