Musk v. Altman Gets Fiery & Coca-Cola’s Cash Cow is…Milk?

0:00Tuesday on NBC, Jimmy Fallon and Bozma 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.

0:33Good morning, Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. Today, Sam Altman called Elon Musk not a happy person. Let's go inside the billionaire battle over the future of AI. Then the publishing world is locked in a heated debate over those little blurbs you see on the back of books. It's Wednesday, February 12th. Let's ride.

0:57The Super Bowl wasn't the only contest that everyone you know is talking about this week. The Westminster Dog Show was held last night, and Best in Show went to a giant schnauzer named Monty. It's the most prestigious prize in the U.S. dog show world, where dogs are judged according to how closely they match the ideal for their breed. Monty's owner and handler could barely hold back tears on the podium. Puppy did the damn thing, and I'm so proud of him, she said. Having been named the top dog, Monty will now be retiring from competition. Toby, what did you accomplish when you were five years old?

1:32Absolutely nothing compared to Monty. This was Monty's third time in a row representing the working group classification of dogs. So screw the Chiefs dynasty. I'm all in on the Monty dynasty. Hopefully it kicks off a new era for the working group, though. This was its first win since 2004. You also got a feel for Bourbon the Whippet, who is a runner-up for the third time at the competition. And get this, the nine-and-a-half-year-old came out of retirement just days before the competition. So what a performance out of Bourbon. Other finalists did include the crowd favorite, Neil, the Bichon Frise, representing the non-sporting group.

2:10Neil, never heard of a dog called Neil. That is also the first time I've heard of a dog named Neil, and I feel bad for that dog, to be honest. But get this, Neil, heel does kind of roll off the tongue. But congrats to Monte. Its owner says it's retiring from the competition on top. What a performance. Raise the rudders. Raise the sails. Raise the sails. Captain, an unidentified ship is approaching. Over. Roger. Wait, is that an enterprise sails solution? Reach sails 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.

2:46Spend$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. Now a word from our sponsor, Wise Business. Neil, I notice you've been getting into jigsaw puzzles lately. I love it. Very meditative. But you also do them without looking at the picture on the box. That is wild to me. I like the challenge. You're puzzling with one hand behind your back. It's like trying to send and receive international payments without using Wise. You are choosing to ignore a tool that could make things faster and easier. Well, I'm not an international business owner.

3:23I'm just a humble puzzler. Thank goodness you aren't because growing businesses know that Wise Business is the move, just like a real puzzler knows that looking at the picture can speed up your process. I'll admit, Wise Business is the move, but you can never make me look at the picture. Don't be like Neil. Visit wise.com slash business to speed up your payment processes abroad. That's wise.com slash business. Well, Mom, the billionaires are fighting again. And Sam Altman and Elon Musk escalated their beef yesterday with the two trading barbs on X and in interviews over Elon's last-ditch attempt to hijack a deal to make OpenAI a for-profit company.

4:01Earlier this week, Elon shocked the tech bro world by making an unsolicited bid to purchase the nonprofit arm that controls OpenAI for$97.4 billion. Elon co-founded the multi-billion dollar startup with Sam Altman as a non-profit back in 2015, but has spent much of the past few years railing against Altman's plan to convert the company into a for-profit entity. Through submitting a bid, Elon has thrown a wrench into those carefully laid plans. Open AI's board doesn't have a fiduciary responsibility to maximize returns since it's technically a charity, but by submitting a bid, Elon is setting a public floor price for anything Altman ends up offering.

4:41likely forcing him to paying a higher price to take control. Altman spent much of yesterday morning discrediting Elon's Hail Mary as an attempt to slow down a competitor, reminding everyone that Elon has his own AI company, XAI. But Altman also took the time to offer up some personal jabs, adding that Elon's whole life is from a position of insecurity and that he, quote, feels for the guy. Neil, it is real housewives of AI out there with billions of dollars and the future of artificial general intelligence at stake. Yeah, OpenAI right now is trying to pull off a routine of Simone Biles-level difficulty.

5:18What they're trying to do right now is one of the most complex maneuvers in American commercial history. It's got this$500 billion data center project called Stargate with Oracle and SoftBank. At the same time, it's raising$40 billion at a$300 billion valuation. That would be the largest venture capital round by orders of magnitude in American history. For those to happen, it needs to be able to convert from this nonprofit for-profit structure that it's in right now to streamline that into one cohesive for-profit company that allows it to raise money. Right now, it is handcuffed to raise money because of this weird structure that it's in.

6:01So it needs to be able to execute this deal. And Elon Musk, as Sam Altman is probably correctly saying, is trying to throw a wrench in it and slow it down, even if he's not able to stop it. OpenAI has a lot on their agenda, a lot of mouths to feed this very complex maneuver. And Elon Musk is certainly making that more difficult. Yeah. And what needs to happen is the board needs to pick a side, essentially. OpenAI did completely overhaul its board members. Remember the blowup that happened between Altman and the old board of directors last year. So in theory right now, the board is, you know, on Altman's side and oversees a nonprofit arm, which in turn controls the for-profit business.

6:43Also, who is on that board? None other than the former chairman of Twitter, Brett Taylor. He was the chairman of Twitter when Musk made his other unsolicited bid to buy that business and then tried to back out before, you know, he was eventually forced to buy the business. So he has a very fraught history with Elon Musk, to say the least. It is just like this, Brett Taylor cannot escape Elon Musk trying to buy every single business he's on the board of. So the same time though, the board could hypothetically say, wait a second, this is a legitimate offer. Let's see what you have to cook up Altman.

7:17They can't just dismiss it completely out of hand. So hypothetically, the board should side with Altman, but you never know in instances when you have billions of dollars on the line. And there's also a chance this is a complete smokescreen because OpenAI board director Larry Summers, who's the former Treasury secretary, said he had not received any formal outreach from Elon Musk and that consortium of investors who put forward this nearly$100 billion bid. Sam Altman also told employees that he hasn't received anything official from the Musk team. So we'll see whether this is bluster or actually a real bid in the first place.

7:52And then the final point to make here, I mentioned that the board doesn't have a fiduciary responsibility like most for-profit boards do. But they do have an obligation to fulfill OpenAI's kind of legal purpose. And that legal purpose is safely advancing artificial intelligence to benefit humanity. So the question of price is secondary to the question of whether this sales fulfills the mission that the nonprofit arm set out to achieve. So it gets a little nebulous there. But that is one other aspect of this that you have to pay attention to. And this is very all soap opera-y, obviously, but there is so much at stake, billions of dollars, but also the future of AI.

8:31OpenAI is one of the leading AI companies in the world. Every corporate exec and technology leader says this is the next industrial revolution. So who controls what happens going forward with this technology is of crucial importance to everyone around the world. And right now, these two guys are duking it out to be that person. Is milk the future of Coke? And by that, I don't mean milk-flavored Coke, which would try, but Coca-Cola, the drinks conglomerate, which is leaning into the white stuff to become a, quote, total beverage company amid declining soda sales. In its earnings call yesterday, Coca-Cola touted the milk brand Fairlife for continuing to perform well throughout the year.

9:12That is an understatement. It's Coke's fastest growing brand in the United States and the centerpiece of its plan to diversify away from soda into beverages that people, you know, drink. On the surface, milk might seem like a bad choice. U.S. per capita milk consumption has plunged nearly 30 percent since 2010 as Americans have turned to plant based alternatives. But Fairlife is not ordinary milk. It's milk, but fancy. It filters milk to create higher levels of protein while cutting sugar by half and getting rid of lactose altogether for happier stomachs. Fans worship its creaminess, propelling sales to grow 1 ,000 % from 90 million in 2015 to seven years later when it became a billion-dollar brand for the first time.

9:56Toby, food and drink companies are under a lot of pressure from changing consumer trends, high inflation, and the Ozempic craze. So here's the big question. Is it milk or milk? It is a milk, Neil. Also, I have tried Fairlife, and it is very deliciously creamy. A lot of fans do just like it because it's got a je ne sais quoi to it. It's got that creaminess. I didn't even know that, in fact, that it got rid of lactose when I first tried it. You just think it's really good milk. But I think it shows that Coke is on this path towards evolving away from, you know, its bread and butter, which is soda.

10:32They're reading the consumer wins right now that are saying that we want healthier things. We don't want these sugary beverages to be our main thing that props the company up. So we have been seeing them pour money into coffee, into sports drinks. They bought Body Armor a few years ago. They've bought these coffee brands. And now they have this milk brand that I don't think they had high hopes for when they first bought it. You don't think about milk as a tentpole product. But when you kind of innovate and you add these extra layers that consumers really start flocking to, you see how milk can be Coke's fastest growing U.S.

11:06brand. Yeah, I don't think they knew what they were getting into. This deal has a very interesting history. Back in 2012, they entered a joint venture with a milk co-op, a dairy co-op, which created the Fairlife brand in response to declining milk sales. And their initial outlays were about$320 million. dollars. But this deal had some performance based payments that continued through this year. And the performance was really good for Fairlife. So they kept having to pay over these performance based payments. So now at this point, they forked, which started as a three hundred twenty million dollar deal, has now morphed into a seven point four billion dollar deal over five years.

11:45And that's now the largest acquisition in Coke's one hundred and thirty three year history. So it's cost them a lot, but it seems like it is. They're getting their return. Right. It's kind of a good problem to have. What's ironic about this whole thing, too, is the U.S. milk industry isn't doing very well. The sector's been facing the same sort of headwinds that, you know, the soda industry has been facing, where a lot of kids and a lot of people just aren't drinking milk anymore. Also, you look at plant-based alternatives, oat milk, you know, soy milk. They have surged. So U.S. per capita milk consumption is down nearly 30 percent since 2010.

12:19And it does closely mirror the soft drinks industry's fall as well. Since 2000, the total amount of soft drinks consumed in the U.S. each year has sunk by 37%. So somehow we're combining a soft drink company with a milk company, and yet 1 plus 1 is equaling 3 in this instance because of just the approach that Fairlife has taken. Shopify finally booted the artist formerly known as Kanye West from their platform after the rapper used a Super Bowl ad to direct traffic to a site that only sold swastika shirts. Towards the end of Sunday's game, Ye's ad appeared on screen in markets including LA, Atlanta, and Philadelphia.

12:55In the 32nd spot, he told people to go to Yeezy.com, but within an hour of the commercial airing, Ye's website got rid of its normal inventory and instead only had one product for sale, a$20 t-shirt with a swastika on the front. Shopify drew widespread condemnation for keeping Ye's store open for orders throughout Monday before it took the site offline yesterday morning, citing a violation of its terms. This isn't Shopify's first scandal either. Despite months-long public outrage, another Shopify-powered store that sells Holocaust denial merch is still active. Neil, last year, Shopify removed a ban on, quote, hateful content from its user policies.

13:35So those recently loosened acceptable use policies are in the spotlight again after this incident. Yeah, my first question for this was also, So how did this commercial pass mustard to air? I mean, we didn't see it because we were watching in the New York market, but apparently he bought 30 second spot on three Fox owned channels. And the ad, which many people in America did not see, but many people did see, was him in a seemingly dentist chair filming on an iPhone. And, you know, this has to go through legal approval. So these station directors looked at this and said, OK, well, I guess there's nothing apparently wrong or illegal here.

14:14And when he did direct people to this website during the Super Bowl itself, but during the Super Bowl, this this store sold very generic, non-branded merchandise, nothing like the swastika shirts. And then hours after is when he flipped it, leaving these studio execs being like, what did we just do? But it speaks to the fact that Super Bowl commercials are also not always national and these very slick productions. Sometimes they're local car businesses and lawyers and often more controversial advertisers will buy, you know, spots in local markets for hundreds of thousands of dollars. It's still very expensive, but kind of skirt the national spotlight.

14:52It seems like this is kind of what Kanye did. It's also, you know, created some uncomfortable moderation questions at Shopify particularly. But it also it goes beyond, you know, Shopify in recent months right now, because remember, they loosened its acceptable use policies last year. But also they're not the only ones doing that. Meta announced it was ending its fact checking system in favor of this community note system that you see on a platform like X. Google also has recently told the EU that it's not adding fact checkers to search results and YouTube videos. So it is part of the climate that we're in right now that it does seem like we're in this loosening of content moderation, which is why sometimes you're going to see these instances like what just happened with Shopify start popping up more and more.

15:36And then also, just to zoom out here, this kind of ends the ability of Kanye West, or he's known as Ye now, to be a force for any sort of selling of anything. Because remember, he had this big collaboration with Adidas. That ended in 2022 over anti-Semitic remarks back then. Remember, he had another big deal with Gap where he was going to partner with them to release a line of clothing. That fell through as well. So you have seen Ye had a sports industry that signed athletes like Jalen Brown, Aaron Donald. They all left back in 2022 as well. So you are seeing just kind of this collapse of the Kanye West economy.

16:17Whatever last vestiges there were, it is now completely gone. Up next, what's up with this blurb drama going down on the back of books? 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.

16:53The spirit of innovation is deeply ingrained in America, and Google is helping Americans innovate in ways both big and small, From improving emergency response times to protecting against cyber attacks, local, state, and federal governments are innovating with Google AI. This is a new era of American innovation. Find out more at g.co slash American Innovation. Now to a page-turner of a story that you won't be able to put down. It truly is a tour de force that redefines how we think about the genre. I, of course, am talking about the controversy sweeping the publishing world around book blurbs.

17:30You know, those short, cliche-heavy sentences you see plastered on books from other authors goading you into buying it. Well, maybe they're not as permanent a fixture as we thought. Earlier this month, Simon & Schuster generated a storm when publisher Sean Manning wrote an essay, a gripping read if you ask me, railing against the book blurb industrial complex and stated that the company would no longer require authors to solicit blurbs for their books. I believe the insistence on blurbs has become incredibly damaging to what should be our industry's ultimate goal, producing books of the highest possible quality, he wrote.

18:05That tremor followed another literary earthquake in December when bestselling author Rebecca Mackay said she'd stop blurbing books for at least the next two years, calling it a drain on her time and energy. Toby, blurbs are an incredibly touchy topic among authors. No one actually likes to ask for them or receive requests to write them, but you seemingly should do it because this is what the industry has demanded. Can the blurb economy be reformed? At stake in all this worrying about blurbs is also this underlying fear about the state of publishing and, you know, the book industry in general. Remember in 2022, there was this lawsuit blocking a merger between Simon & Schuster and Penguin Random House.

18:44And that lawsuit revealed that just how much publishing relies on the top 0.1 % of authors that they expect to sell very, very well. They put most of their resources and most of their marketing behind the big names of the industry. And what that does is leave very little just scraps over for kind of the rest of the 99 % of the book industry. So a lot of authors have come out and say, we still need blurbs because we have no marketing spend. This is our one chance to get some, you know, advertising for free by hitting up our peers, hitting up our author friends that we know. And a lot of authors say, listen, it's not for people like you and me, Neil.

19:26It's not for people just cruising the bookshelves of your random bookstore. We don't care that much about blurbs, but what, you know, who does care are people who read professionally, book reviewers who, when they're sorting through a mountain of books, they will glance at the blurbs and say, all right, who did recommend this to maybe move a book from the bottom of the pile to the top of the pile? So it's not as cut and dry as it's just this cronyism and it's just you scratch my back, I scratch yours. It does still have a place in the publishing industry. It's for the gatekeepers, right? But it was interesting to me to learn how this process comes together because I guess I didn't really think about it that much.

20:03When you see a blurb on a book, you don't really think about how it got there. But apparently before a book is published, the authors of books who don't have massive marketing behind them, which is most of them, just literally cold email thousands of other authors asking them to read their book and blurb it. And oftentimes it is their teachers from their MFA programs. But anyway, so they send these, they do this like grind, you know, hit the pavement for three weeks trying to get these blurbs. And then so that does not sound fun, but you have to do it. At the other end, if you're an author, you are getting all of these requests going into you at the same time you're sending them out.

20:44So this is very painful for everyone involved. A huge time suck. So that's sort of why everyone hates doing it, even though they feel they must. At the same time, it's unclear whether these blurbs actually move the needle in terms of sales. I mean, we said it ourselves. You probably do not look at it because they all kind of start to blend together, like a dazzling display of this and that. It's just the name attached to it. Right. Even King. Yeah, Neil Freiman. All of this said, Neil, if you do write a book eventually, I would definitely blurb your book because a lot of it is actually just your friends will do it for you.

21:22So if you do have friends in the author community and people joke that oftentimes when you see blurbs, all it does is show which MFA program the author attended to because it is most of your teachers. So all that being said, asking for praise is oftentimes a very undignified business. So it is tough for the authors out there, but we'll see if we start seeing less blurbs going forward. I think the ultimate flex is publishing a book. No blurbs necessary. Just let it speak for itself. Catch 22. Catch 22. Had zero blurbs when it came out. Okay, let's sprint to the finish with some final headlines.

21:52The DEI rollback continues apace across corporate America with more major companies reversing pledges on diversity, equity, and inclusion under the directives of the new Trump administration. The U.S. arm of consulting behemoth Deloitte told its employees working on government contracts to remove gender pronouns from their email signatures and they scrapped broader DEI programs, citing the need to, quote, align with emerging government client practices and requirements. Also yesterday, Goldman Sachs abandoned SHIP on its pledge to refuse to work on IPOs for companies that had all-white male boards.

22:25It made a rule back in 2020 that it would only take a company public in the U.S. if it had at least two diverse board members, including one woman. A spokesperson said, as a result of legal developments related to board diversity requirements, we ended our formal board diversity policy. You are seeing just this about face at so many companies because I remember back in 2020, David Solomon made this really big deal at the World Economic Forum. He's the CEO of Goldman Sachs. CEO of Goldman Sachs said that, hey, we realized that the last 60 US and European companies in the preceding two years went public without a woman or a person of color on the board.

23:01So made this very big deal about instituting these diversity requirements. But now you see the wind blowing the other direction and they're kind of quietly sunsetting that big pledge that they made back in 2020. Same thing with Deloitte as well. Deloitte is trying to toe the line on both sides where they are trying to, you know, listen to the practices that they're hearing come down from the federal government. But they're also like their UK arm said, we're still committed to its diversity policy. So they're trying to play both sides of it here. For our next headline, CEOs are starting to sound off on Trump's tariffs.

23:34First up, Ford CEO Jim Farley raised the alarm against President Trump's proposed 25 % duties on Mexico and Canada, warning that their effect on the industry would be devastating. Speaking at an automotive conference yesterday, Farley said, let's be real honest. Long term, a 25 % tariff across the Mexico and Canadian border will blow a hole in the U.S. industry that we have never seen. Though Trump paused those tariffs for 30 days early last week, the auto industry is continuing to scramble as it tries to prepare for levies that could add up to$60 billion in additional costs to the industry. Then Citadel CEO Ken Griffin offered up his displeasure at a financial services conference in Florida, saying, quote, It's a huge mistake to resort to this form of rhetoric when you're trying to drive a bargain because it tears into the minds of CEOs, policymakers, that we can't depend upon America as our trading partner.

24:27His comments came after Trump signed an order that would impose 25 percent tariffs on steel and aluminum imports. So, Neil, in the case of Griffin, those comments are coming from an ardent Trump voter and supporter. So they mean a lot. Yeah, you've heard this from a bunch of CEOs that these tariff threats and reversals are creating a lot of uncertainty. and Griffin cited multinationals and in particular that you need to plan 5, 10, 15, 20 years in the future because you're about to sink tens of billions of dollars into a factory or another kind of investment. Requires a lot of planning, requires a lot of money and you just simply can't make those kind of investments when you're uncertain of the trade policy that the U.S.