OceanGate Disaster Was ‘Preventable’ & SF is So Back

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0:27Good morning, Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. Today, how San Francisco got its mojo back thanks to AI. Then a Coast Guard report gives new details about what went wrong with the Ocean Gate submersible disaster. It's Wednesday, August 6th. Let's ride.

0:48Good morning and happy Wednesday. If you're looking for a nature-loving partner but frustrated with all the indoor cats on dating apps, I might have just the thing for you. Mountain Tinder. In Switzerland, single hikers are leaving details about themselves in visitor notebooks found on mountaintops in the hopes they'll pique the interest of fellow outdoors lovers. Mountain Tinder was the brainchild of a 29-year-old Swiss hiker who on a whim in 2023 wrote a personal message in a visitor's book lamenting that he didn't have anyone to share the sunset view with. Apparently, a number of couples have been formed through these notebook logs and the concept has spread as far as the summit of Argentina.

1:27No, Toby, I think this Mountain Tinder idea has legs and I already have a slogan for them. Mountain Tinder, where height doesn't matter, but altitude does. I mean, we've been seeing more and more hobby apps become fertile fields for dating. Letterboxd, Strava, Goodreads, even Duolingo. These are all, you know, online mountain peaks where people are starting to ask each other out because what Mountain Tinder and these apps do is ensure you already have shared interests or mutual tastes. What lets you know more about a person? A canned answer to a hinge prompt or the fact that you can summit a 14 or so?

2:03I'd invest in Mountain Tinder. Great idea. Might be tough to scale, though. And now a word from our sponsor, LinkedIn Ads. We've talked a lot about things we've wasted this week, Neil. Please say this isn't about the Medieval Times invite again. Nope. I'm making sure to waste less this year, which is why only my closest friends and I are going to Mongolia for my birthday this year. Wait, that's like my dream vacation. I know, and I can't wait to tell you all about it when I get back. In the same spirit of wasting less, LinkedIn ads can help you stop wasting time, money, resources, and effort, like 71 % of B2B ads, and find the right audience for your brand.

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3:20The banks discriminated against me very badly, Trump said in an interview when asked about the industry. The line of questioning was tied to an executive order Trump is preparing to issue. According to the Wall Street Journal report, the White House is set to put more pressure on big banks over perceived discrimination against conservatives. The directive, which could come as soon as this week, would subject banks to a 120-day review process threatening to fine lenders who were found to have dropped customers for political reasons. For Trump, this is a personal crusade. He went on in the interview to explain that JP Morgan and Bank of America had asked him to close his accounts or declined more than$1 billion of his money in the wake of his first term.

4:01But this has also been a talking point for multiple segments of Trump's base, from the tech right-wing elite who claim that the crypto industry has long been a victim of so-called debanking, to a Christian organization in Uganda who said it was punished by banks for its religious beliefs. Banks, for their part, say they welcome changes and any alleged discrimination was driven by normal legal, regulatory or financial risks. They also say they are aligned with Trump when it comes to doing away with using, quote, reputational risk as a means to turn away customers. Still, Neil, we'll see how aligned banks actually are with Trump's stance after this executive order drops at some point later this week.

4:39This reached a crescendo back in January when Trump was sharing the stage with Bank of America CEO Brian Moynihan. They were doing a Q &A sesh at the World Economic Forum in Davos. And Trump was asked something not related to debanking or banks at all. And he confronted Moynihan on stage in an extremely awkward encounter saying, I hope you start opening your bank to conservatives because many conservatives complain that banks are not allowing them to do business with the bank. He also singled out Jamie Dimon, the CEO of JP Morgan, who was in the audience there too. So an extremely awkward moment that raised this issue to the fore of public consciousness.

5:17Now it looks like they're going to escalate this attack against banks, as they perhaps have done against colleges and other industries and law firms with this executive order coming through the pipe. Yeah, this has long been a talking point because a lot of conservatives and then a lot of just tech investors in general have said that the U.S. banks have been discriminating against them for a long time. They don't necessarily or often debank gun makers or fossil fuel companies or religious groups or cryptocurrency firms. So it's kind of a wide variety of people who say that they are not being treated fairly.

5:51But on the bank side of things, they claim that they do not actually do this for political reasons. They actually say that compliance and this burden of regulation that's put on them makes them more politically exposed to these groups. And so anytime you add regulatory oversight, that's when you end up with people being debanged. So they are saying their decisions are driven by legal or financial risk, not actually any political affiliation. Yeah, they say they have regulators looking over their shoulder at everything they do so they can't take on high risk clients. They don't deny that they haven't that they haven't denied people the right to a bank account.

6:28But they just say that we don't. This was J.P. Morgan's response to Trump yesterday. They said we don't close accounts for political reasons and we agree with President Trump that regulatory change is desperately needed We commend the White House for addressing this issue and look forward to working with them to get this right So this is the tune that the banking industry has sounded for a long time now that they can't They can't have customers with whatever they consider a high risk because of anti-money laundering rules And you can understand why TD Bank was just fined three billion dollars for having lax anti-money laundering controls So they don't want to go anywhere near that.

7:02And they say, well, we're going to deny you a bank account. They don't explain why. And that's why it's wrangling some feathers from President Trump and other people in the tech and crypto communities. Moving on, Rivian did what anyone who's driving on a road trip through Ohio wants to do. It sued Ohio. But not for being boring. On Monday, the EV startup filed a lawsuit against the Ohio Bureau of Motor Vehicles to allow it to sell its cars directly to consumers in the state, escalating a fight electric vehicle upstarts have been waging for years. Ohio is one of more than a dozen states that banned direct-to-consumer vehicle sales, instead requiring automakers to funnel their retail distribution through franchise dealerships.

7:42In its lawsuit, Rivian says this makes no sense. It wrote that Ohio, quote, allows manufacturers like Rivian to perform warranty service and other repairs on vehicles in Ohio, to rent vehicles to consumers in Ohio, and even to sell new vehicles to Ohioans from out-of-state dealerships that can be delivered to Rivian service centers in Ohio. Nonsensically, the thing that Rivian cannot do is actually complete the sale of Rivian vehicles in Ohio. It called the ban unconstitutional, irrational and infringing on consumer choice, a bedrock principle of America's economy. On top of those complaints, Rivian said Ohio's law is simply unfair because here's the twist.

8:19Tesla, a Rivian rival, is able to sell directly to consumers in Ohio based on a deal it reached with the state's dealership association back in 2014. Toby, these direct to consumer bans are a huge pain in the butt for these EV companies and their intent on breaking up the dealership monopoly. Yeah, let's go back and figure out where that dealership monopoly actually came from. It dates back to the early 1900s. Back then, companies like Ford and GM actually used to sell directly to consumers, but then a lot of prohibitions started to arise because there were fears that these big car companies would become too vertically integrated.

8:53They would become too monopolistic if they controlled both the production and sale of their vehicles. So the state franchise laws began to arise. But let's be honest, it benefits car companies too because you know what? a franchising model allows you to do. It allows you to rapidly expand across the country. It allows you to focus your attention and money on other places. Instead of managing dealerships, you can put more money into production lines and factories rather than coming up with this nationwide distribution system. So as that progress, this mesh work and framework of laws and lobbying have basically made it so it's very difficult to skirt around these dealerships dealerships do say that they are useful and their argument is like hey don't you want to come to a single place and have a variety of cars to test drive to have your car service we are this location where you can do all that but a lot of people push back and say they actually stifle choice in drive up prices yeah i mean there was this dealer there's this dealership network uh that's very entrenched in states and then all of a sudden elon musk comes along with tesla and says actually i want to sell my cars directly to consumers i don't want to go through dealerships.

10:04What's going on here? So Tesla launched a big legal challenge against a bunch of states starting in 2016 and Michigan, and the two sides have been going at it for the past few years. Tesla has got a few more allies now. They're allies and rivals, but in Lucid and Rivian and all these other EV upstarts that want to do this same direct-to-consumer sales model that Tesla pioneered. And so they are going back and forth with all of these states. Now, I was wondering, how do you actually buy a Rivian in Ohio? And what you do is you actually buy it from out of state and then they ship it to a service location.

10:41There's three service locations in Ohio outside of Cleveland, Cincinnati, and Columbus. And that's where you pick it up. So it's this extremely weird workaround that allows you to get a Rivian in Ohio by buying it out of state. Rivian said, this is cramping our sales. And the fact that Tesla is able to sell it through a sweetheart deal in Ohio is unfair to us. So that's why they're suing Ohio. It's the first time they've ever sued a state over these bans. Yeah, it does look like in general, these car companies just don't want state by state level rules. And they certainly don't want carve outs for specific car makers like Tesla.

11:15The Rivian CEO said that they are as close as you can get to corruption, actually. So clearly a very hot button issue that they just want a more consistent regulatory environment when it comes to state to state decisions. It's been over two years since the Ocean Gate submersible imploded, killing all five people on board, including the company's CEO, Stockton Rush. And in that time, the U.S. Coast Guard has been putting together an extensive report to get to the bottom of what exactly went wrong. After 335 pages, the headline takeaway was that the tragedy was preventable and that a combination of a toxic work environment, a culture that put profits ahead of safety, and above all, a domineering CEO in Stockton Rush all contributed to the failure of the Titan submersible.

11:59In summary, the report read, Oceangate repeatedly prioritized operational goals and financial considerations over safety, ignoring warnings from both industry experts and internal staff. One such safety instance described in a hearing last year came from engineering director Tony Nissen, who testified that he refused to sign off on an expedition after he found the submersible was struck by lightning, compromising the hole in the process, and was subsequently fired for it. The Coast Guard also admitted that a lack of domestic and international standards for submersibles contributed to the craft's implosion.

12:31Without well-known safety standards, it was Stockton Rush's show to run as he pleased, leading to a culture where it was very difficult to stand up to the man in charge. Neil, Oceangate has since shut down operations, but this event will live on both in people's minds as one of the craziest news cycles of recent years and also one that potentially catalyzes some change in an industry that is clearly in need of some more regulatory standards. This was absolutely damning for Stockton Rush, who flouted every basic safety protocol when it came to submersibles. I mean, the whole, after reading this report, you'd think it was effectively held together by duct tape with all the beatings it took leading up to the mission.

13:09This report also paints a picture of a very economically stressed company, which led to shortcuts taken by Rush to cut costs at all and compromise safety. safety. They apparently left the Ocean Gate, the Titan Submersible, outdoors over the Canadian winter because they didn't have enough money to store it indoors, which led to further beatings taken on the hole. They also asked employees to forego their salaries for back pay. So this was a company that just wasn't doing well financially for whatever reason. Maybe a lot of people just didn't want to go down to the Titanic. But for that reason, Stockton Rush made all of these shortcuts and it led it led to a very very weak hole that combusted one day two years ago and also there were a ton of other red flags from this report one was the fact that rush refused to put the sub through a voluntary certification process again when it comes to regulations of submersibles there isn't a body that ensures that everyone is held to the same safety standards there are volunteer processes that stockton rush actually skirted because he said they wouldn't understand our innovative hull design, basically.

14:14And then also there is this idea that they were trying to push sub pilots through training in a single day at some point. They had a very inadequate safety manual as well. And then there's another little sleight of hand that they do is that passengers who went on these subs were classified as mission specialists to avoid small passenger vessel regulation. So everywhere that they could cut a corner, it did look like they were trying to either skirt oversight or skirt regulation, try to save a little money in the process, and it all added up to, yeah, this one fateful day two years ago. The U.S.

14:51Coast Guard said that had Stockton Rush lived through this, they would recommend manslaughter charges to the DOJ. We also learned what killed these five people, and that was when the carbon fiber hole imploded instantly under the weight of approximately 44 ,930 pounds per square inch of water pressure, killing them instantaneously. Up next, let's talk about San Francisco's AI revitalization. This message is a paid partnership with Apple Card. I'm a person who really appreciates simplicity. And when it comes to credit card rewards, the simpler, the better. That's one of the many reasons I have an Apple Card.

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16:43Plus, you can use GEM's ROI calculator to estimate potential savings and productivity gains. To get started, check out gem.com slash ROI. That's G-E-M dot com slash R-O-I. the tech world as you knew it is gone done and dusted put it in a museum that's the conclusion of a major series from the new york times which explored the transformation of the tech industry in the bay area as artificial intelligence has become the ultimate obsession the first change is being felt by employees that cushy job security endless perks and napods you associate with working at Google and Facebook have evaporated.

17:23So is the ethos of rest and vest, as the HBO satire Silicon Valley put it. In its place are the threat of layoffs, more strenuous work for those who remain, and a serious mood described as shut up and grind. The industry has entered its hard tech era, the Times says, whereas in the 2010s, companies like Netflix, Meta, Google, and Apple were all focused on building social networks and consumer apps known as Web 2.0. the launch of ChatGPT in 2022 was a paradigm shifting event that changed, well, everything. Those companies are now the old guard and startups like OpenAI and Anthropic are aiming to become the next internet giants by winning the race to create super intelligence.

18:02And that brings me to the next major shift. San Francisco, which was left for dead during COVID, is so back. Whereas the Web 2.0 Titans set up their headquarters 40 miles south of the city in suburban Palo Alto, Menlo Park, Mountain View and San Jose, the AI pioneers are located downtown. The booming fortunes of these companies has fostered a thriving AI ecosystem that is San Francisco feeling more optimistic than ever. Toby, it certainly feels like one chapter is closed and a new one has started. Yeah, San Francisco consistently reinvents itself as new tech waves come and go. And now the epicenter is directly in San Francisco.

18:39You want to know how you move a epicenter away from somewhere like traditional Silicon Valley is you just hire people. And right now, tech giants are no longer hiring like they once did over the past decade. Google is not hiring a ton of people. Meta is not hiring a ton of people. In fact, they are cutting people. But you know who is hiring and attracting people are OpenAI, Anthropic. these AI startups. So that is how you move the traditional cradle of Silicon Valley down to San Francisco because people who are coming in are living there and more hard tech people are getting hired in, less tech futurists are getting hired.

19:17So that's definitely a loser is just traditional Silicon Valley. But then also losers are Miami and Austin who had all these entrepreneurs abscond to go try to rebuild Silicon Valley in Miami or Austin. They're returning to the Bay Area as well. Just follow the money. In 2012, that was when Facebook went public. San Francisco companies raised about$5 billion of venture capital funding. Last year, San Francisco-based companies raised nearly$35 billion in funding. And that's from Anthropic and OpenAI. But also, all of these young kids are following in Zuckerberg's footsteps and dropping out of school.

19:53They're dropping out of Stanford, dropping out of MIT, 22, 23-year-olds, and they're going to San Francisco to be a part of what they consider the next revolution in tech. In terms of real estate numbers, a number of AI startups are gobbling up real estate, really helping this struggling commercial real estate sector. AI firms now occupy about 5.7 million square feet in the city, up from 2 million in 2020. It's making things a little more expensive if you want to live there. Perhaps it was dirt cheap five years ago as everyone was leaving. But in the past year, apartment rents in San Francisco are up 5.1%, which is the largest increase in the country.

20:30I mean, I will say that they're calling AI this hard tech era, which, you know, is a little maybe eye roll inducing, but we are coming off a horrible last crop of startups for tech. I mean, Metaverse, big flop. Remember, Clubhouse, also a flop. Web3, NFTs, all big flops and then maybe the best poster child of this you know very low interest rate free money era was zoomie which was this automated pizza making robot that raised 500 million dollars mostly from a soft bank so there is a sense of renewed optimism here that maybe the last crop of innovation wasn't quite as innovative as we think and now we're on to something with ai Now let's sprint to the finish with some final headlines.

21:14Well, it's official. The NFL and ESPN have reached a deal that ties up the biggest league in the world with the biggest sports broadcaster in the world. Though the pact announced yesterday is still non-biting according to the two sides, the general framework would see ESPN own and operate NFL Network going forward. It also gives ESPN, quote, broad rights to the all-important Red Zone brand, meaning that ESPN would distribute the touchdown frenzy every Sunday. But ultimately, the NFL would retain ownership of the actual brand. In return, the NFL is taking a 10 % equity stake in ESPN as part of the deal, something The Athletic first reported.

21:49But Neil, most of this mirrors what we spoke about on the show earlier this week. But it seems like Red Zone was the golden goose here. The NFL didn't want to fully let it go. This is an earthquake of a media deal. should it happen, should it close, because it marks a new era where leagues are taking actual equity stakes in their media partners, of which ESPN is the biggest media partner for the NFL. And I say if this deal closes, because these are two behemoths, ESPN and the NFL, and this will face regulatory scrutiny by lawmakers. And especially, you have to look at Trump because Trump has waded into a ton of matters, whether regarding Disney, which owns ESPN, as well as the NFL.

22:32He has threatened to held up this big$3.8 billion stadium project in D.C. for the commanders if they don't change their name. So we'll see what Trump has to say about this deal, but one that we will probably talk about on the show tomorrow because Disney reports its earnings in just a few hours this morning. The list of candidates to replace Jerome Powell is down to four, Trump said yesterday. That includes the two Kevins, former Fed Governor Kevin Warsh and top White House economic advisor Kevin Hassett. Notably, it does not include Treasury Secretary Scott Pesant, who was expected to be considered, but said he was happy where he was at the Treasury, according to Trump.

23:10The president also said that tariffs on pharmaceuticals and semiconductors will be unveiled within the next week or so. Both of those massive industries, which have been spared from the broad-based tariffs Trump's imposed so far are bracing for chaos. Yeah, Trump weighed in and started talking about which candidates he thinks are good. He said he's very good, referring to Warsh. Sometimes they're all very good until you put them in there and then they don't do so good. But I think he's a very good guy. I'd say Kevin and Kevin, both Kevins, are very good. And of course, yeah, those are referring to Kevin Hassett, who's the current National Economic Council Director, and Kevin Warsh, a former Fed governor.

23:45Right now, the prediction markets are giving both of those Kevins around 35 % odds after, you know, Trump kind of laid praise on them in a CNBC interview. But prediction markets are a little bit interesting because Trump himself has a 1 % vote right now. So they're saying he's got a chance. But yeah, with Scott percent out of the way, it looks like it's the two Kevins who are in the lead for now. So it looks like the next Fed share will go from someone named Jerome to someone potentially named Kevin. All right, a social media post by a zoo in Denmark has caused quite a stir. Last week on Facebook, the Alborg Zoo invited pet owners to donate their small companions so they could feed them to its predators.

24:28The zoo said it welcomed guinea pigs, rabbits, chickens, and small horses that would be, quote, gently euthanized by trained employees and then given to meat-eating animals to mimic the natural food chain and ensure nothing goes to waste. This initiative was divisive. Some commenters blasted the zoo for its seemingly cold indifference to a pet's death, but others praised it, saying they would definitely bring their old pet who has to be put down so that its death serves a purpose. Toby, this is a story where the headline of zoo wants to feed your pet to its predators doesn't quite tell the whole picture.

25:00Yeah, I think it's all in the framing. Do you want your valuable food to go to waste? Do you want predators to have the most natural nutrition possible? Do they want to have them exhibit the most natural behavior too where eating whole prey is often beneficial? So if you put it in terms of the benefits of the zoo animals, I do think some people would rally behind it. But I also couldn't stop thinking about a story that happened to my poor mother growing up. She had mice as pets. Her older brother had a snake. And I'll let you put two together. So it could be extremely scarring to see your pet.