Regulating AI Hiring & Auto Sales Make A Comeback

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0:38Good morning, Brew Daily Show. I am Neil Freiman. And I'm Toby Howell. On today's pod, AI hiring processes come under scrutiny in New York City. And if you're traveling to Japan in the next year, why you might only need to pack underwear and a toothbrush. Then we'll tell you all about how the auto industry has made a surprise comeback after being down 3-1 to the pandemic. before bringing you some big news from the footlong world where Subway sandwich artists finally have a new toy to play with. It's Thursday, July 6th. Let's ride.

1:15All right, happy Threads Day, Toby. Meta launched its conversation app Threads last night in the biggest threat yet to Elon Musk's Twitter. Zuck said it got more than 10 million signups in its first seven hours. Toby, you've been playing around with threads. What are your first impressions? I'm in my threads era. My first impression is it feels kind of like Twitter in the suburbs almost, where it's a lot more wholesome. Everyone's kind of excited. They're seeing their friends there. There's a lot of celebrities that are kind of posting on it. And my biggest takeaway or what I'm looking for is, is it going to shift more towards the Twitter voice, which is a little bit more unhinged, a little bit meaner, honestly?

1:56or is it going to stay in kind of like this wholesome era where people are just excited to mix it up with their friends again? So is it going to be like a Twitter voice or an Instagram voice? Yeah. That's what I'm looking for. Though I will note when our videos get posted to Instagram, Instagram is by far the meanest platform in terms of comments. So I don't know how wholesome Instagram actually is. That is true. When I say wholesome, I mean just a little more meme-y and just big meme accounts kind of dominated. But you're right. We still love you, Instagram audience, by the way. But your bitches.

2:25Yeah, you hold us accountable. We love it. All right, let's start with big news in the HR and AI worlds. A New York City law went into effect yesterday that requires firms using software to make hiring and promotion decisions to get their algorithms audited and post them publicly online. It's a first-of-its-kind law in the country. Using AI to sift through resumes has skyrocketed in popularity in the past decade. Nearly one in four organizations use AI to support hiring processes, according to a 2022 survey. And that share grows to 42 % when you're talking large businesses with 5 ,000 or more employees.

3:06So not sure if anyone was aware, but if you apply for a job at a big corporation, your application initially probably will not be seen by a human. Instead, it's going to be scanned by software looking for keywords on your cover letter, and then it maybe passes you through to the next round. But AI recruitment comes with the same problem as human recruitment. I'm talking about bias, specifically gender and racial bias. This New York City law, which could be copied by other cities and states, aims to hold companies more accountable for bias in their AI hiring algorithms by making them air their dirty laundry for all to see.

3:40Yeah, I feel like this is in direct response to how easy it became to apply to jobs online in the first of all, because you can machine gun fire out your resume to with like one click on LinkedIn, you can apply to 500 places. So then there was this rise of AI screening in order to just sift through that massive amount of applicants. But this law doesn't, might not have the teeth that the lawmakers are expecting it to have because the language in it says that this technology will come into play when the algorithm is making a substantial, is substantially assisting or replacing a human decision.

4:19And that word substantially is something where companies are seeing a loophole because as long as the AI isn't deciding to hire someone, then they don't have to get it audited is what like legal experts are saying. So who knows how the spirit of the law is such that they want these algorithms to be less biased and to not factor that into their decision making. But the leather of the law, people are saying, well, that word substantially is going to give a lot of companies an out on this. Yeah. But maybe if it, you know, if they do show something, it's not going to prevent it. It's like an indirect mechanism, right?

4:54It's saying you have to post your algorithm publicly online. And by doing so, you know, you're you're going to feel shame or embarrassment if you have to if you have to show how you use hiring decisions. And it is showing that you are degrading, you know, black people and women from from hiring because of your your AI systems. Yeah, it is interesting, too, that this law was first passed in 2021. So it was kind of predated the whole AI craze that we're in. So this has been a problem. Oh, this is a thing that's been going on for a long time. For a long time. This isn't like ChatGPT doing stuff. This is actual, not that ChatGPT is not actual AI, but this is, you know, previous era AI sifting through resumes.

5:37And it was interesting to look at. It's not just sifting through resumes and cover letters for certain keywords. You know, they you can have an interview with a chat bot and they're going to analyze your they use machine learning to look at your like facial cues and the way you talk. And the AI is analyzing that. So you can see how that would have a lot of bias because humans are training these AI systems. The AI was seen as this way to be super objective in the hiring process. Right. Because I'm a hiring manager and I'm looking at you and you're like kind of good looking or something. And I'm like, oh, and then I say, what do you do in your free time?

6:12And you're like, oh, I love watching sports. And then I'm like, oh, this guy is a great candidate. I'm going to hire him. Like we can be best buds. And then AI might not have that bias. And that's the idea. But in effect, I'm coding the AI to look for certain traits. And historically, men, European, white people have been the top candidates or they've certainly like dominated industries like tech. And so they might filter out women and minorities. Yeah, and we mentioned ChatGPT in this conversation. We do just want to hit on, do a little check-in with ChatGPT since we haven't talked about it in a while.

6:47And it turns out that worldwide traffic for ChatGPT actually dropped in June. So it was 9.7 % lower than in May. And it's the first time traffic has fallen to ChatGPT since its launch. So I don't know if it's panic time, like hit the panic button on AI. But it was interesting because a lot of people thought this was on a trajectory to just become the most visited site in the world. And now it's leveled off a little bit. We're seeing people spend a little less time on there as well. Some of the hypotheses were interesting why this went down. Number one was summer break because a lot of experts are saying the number one use case for large language models like ChatGVT is do my homework.

7:32So when kids are out of school, there's no homework to be done. and so they're just not using ChatGPT as much. That is so interesting. That's definitely true. And honestly, OpenAI might not be that mad about it because it costs so much to... Sam Altman, OpenAI CEO, says it's an eye-watering amount to run ChatGPT on a daily basis. And so experts have estimated it costs$700 ,000 a day just to keep it up and running. So maybe they're not panicking because one, you mentioned some of the external factors And then two, they're saving a little bit of money because there's just less pressure put on the website.

8:10All right, Neil, let's move on. We've declared this the summer of lots of things. The summer of Barbie, the summer of lost submersibles, the summer of blonde Toby. But what if it's really the summer of a different thing? The summer of cars. Okay. Yes, that's right. Good old fashioned automobiles are having themselves an unexpectedly fabulous first half of the year. New vehicle sales in the U.S. are estimated to have risen about 13 % in the first half of the year, which totally caught off guard a lot of industry forecasters, giving the rising interest rate environment plus the inflationary pressure a lot of people are facing.

8:48So the star of the legacy auto show so far has been GM, who represents the biggest market share of the U.S. auto industry. And yesterday reported a 19 % increase in sales in the second quarter. Plus, yesterday we talked about Tesla, whose deliveries jumped a whopping 83 % from a year ago in the second quarter. These are some pretty eye-popping numbers, and it seems like it's coming down to automakers finally figuring out their production and supply chain issues. Yeah, because during the pandemic, they couldn't get their chips, and people wanted to buy cars because they were flush with cash and their cars were getting old.

9:23But automakers could just not make enough cars to deliver to people. And there were not as many models out there. So you would go to the dealer and they'd be like, yeah, this is literally all we got. We can't make anything more. So they're finally being able to make enough cars of a wide variety to meet the demand. And we're seeing it's pretty cool. Yeah, there's been auto industry experts are saying there's just been this huge flood of pent up demand. People can finally buy the car that they wanted with the cash that they might have saved up. Earlier this year, the average age of a passenger vehicle on the road hit a record age, a record high of 12.5 years.

10:00So everyone's like, I got a real clunker here. There's a lot of mature lemons out there. Yes. Like, I mean, my parents, my dad's car has almost 200 ,000 miles and my mom's has also a lot of miles. Like these are, they're not old cars, but they are seasoned. They're veterans and they're starting to look for a new car. And what's interesting is we just went car shopping over the weekend, and my mom was looking for a hybrid SUV, which is like literally the intersection of the two growth trends, which is everyone's buying trucks and SUVs, and there's been a huge increase in demand for EVs. Yeah. Yeah.

10:37On that note, well, first of all, just running through some of the automakers' numbers, Honda sales are up 25%. Huge. Hyundai sales. Hyundai? Hyundai? God, I say that wrong. I cannot. I was waiting for you to try to say Hyundai. Hyundai sales are up 14 % in the second quarter. And then even Rivian, who is the electric truck maker, who can't seem to deliver any vehicles, is figuring things out. It reported a 59 % increase from the previous quarter. That still only comes out to 12 ,640 vehicles. So it's not a huge number. But you're totally right that EVs are continuing to power the rise of the auto industry.

11:13They accounted for 7.2 % of all new vehicle sales, and they're already at over 500 ,000 vehicle sales for the year. And just to put that in perspective, last year, consumers bought only 800, just over 800 ,000 vehicles in the year. So we're already trending upwards. They're definitely the main growth driver. I think the fact that Tesla, a lot of these automakers have started to use Tesla's standard charging infrastructure, that was one of the biggest barriers to entry for EVs. Like, where am I going to charge this thing? Tesla is the only one that has actually built out meaningful charging infrastructure.

11:49And now that pretty much every big automaker and a bunch of the other EVs are saying, we're going to adapt our cars to be able to plug into Tesla's charging infrastructure. that's been a big relief to consumers who are who that is the main hang-up for buying an ev right and then finally i know we always say we are not financial advisors on this show but if you're looking for maybe a deal two outliers of this trend of autos uh industry doing really well were the jeep jeep makers to land stilantis and toyota who both posted a one percent drop in u.s sales for the first half of the year so if you're looking for a deal they'll probably be looking to move some excess inventory because inventories have caught up.

12:31But if they're not selling, then they're going to start, you'll see those Toyota-thon events and the big deals coming. Not financial advisors, but maybe look at Jeeps and Toyotas. All right, Neil, before we jump into the next story, we're going to take a quick break.

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13:39Prices are based on rating plans that vary by state. Coverage options are selected by the customer. Availability, amount of discounts and savings, and eligibility vary by state. Okay, Toby, we are back with our Thursday segment, which I can't believe it's Thursday. I am so discombobulated this week. But Neil's numbers grounds me. And I know it's Thursday when I have to pick three different numbers or stats or facts from the week's news that I've read and I want to share with you and share with our entire audience. So to start, older Americans are aping into stocks like their bored degenerate sports gamblers in the summer of 2020.

14:17Check out these stats compiled by the Wall Street Journal. Almost half of Vanguard 401k investors over age 55 who actively manage their money have more than 70 percent of their portfolio in stocks. Back in 2011, it was just 38 percent. And then over at Fidelity, about 40 percent of investors age 65 to 69 had at least two thirds of their portfolios in stocks. And the pattern holds even as you go up the age bracket, 20 percent of Vanguard investors, 85 or older, have almost all of their money in stocks compared to 16 % in 2012. It's a bold strategy, Cotton. The conventional wisdom is as you get closer to retirement, you park your money in bonds or cash where you may not earn as big of a yield, but your money is at least safe from the inevitable market crashes.

15:05But stocks have outperformed bonds for the past couple of decades. Then the Fed showed it's going to step in during crises to prevent the market from totally bottoming out. So boomers are just saying YOLO. It makes sense because, yeah, as you mentioned, the stock market has historically, since records were being kept, returned 7.2%. But in the last kind of, since boomers have been alive, it's returned right around 10%. So, I mean, if you can get a bigger return, and yeah, as you said, like the Fed plays a huge role in that like - The backstop. The backstopping it. Yeah, like bonds are just not sexy anymore.

15:39Let's get into the stock. I think the big thing is inflation, right? So if you are thinking about putting your money in, you know, a T-bill or treasury, right? You're like, well, I'm going to return three or 4%. And then I look at, you know, I listened to this podcast and I hear us talking about the fact that inflation is four or 5%. You know, I'm like, well, I'm not going to make any money anyway. I'm losing money, actually. So might as well just kind of go into stocks. But it is kind of risky. I don't think I would employ this strategy as I'm getting up. Like I would just getting up there in age.

16:08I would be a little safer because you just don't know what's going to happen in the stock market. Obviously, it goes up and to the right over the course of history and over the long term. But if I'm just trying to yank my money as soon as I get out of work. So you're like maybe the next generation is going to return back to the bonds. This is scary. I am. I don't know. Maybe I'm again, I'm not a financial advisor, but like looking at these numbers kind of spooks me a little bit. I hope I hope they're OK. All right. Moving on to our second one. We've talked a lot on the show about the surging popularity of women's college basketball and women's soccer.

16:44But today, women's golf could get its own coming out moment with the start of the U.S. Open, which is being held for the first time at California's iconic Pebble Beach course. The sport is loaded with young talent. And I guess this is my number here. Women in their 20s hold 19 out of the top 20 spots in the world rankings. So this is just like a lot of up and comers, youth movement. The name to know, though, and you're going to hear this name a lot in the coming years. Make sure you write this down. Rose Zhang. She's a 20-year-old phenom out of Southern California who recently turned pro and could be the Victor Wembanyama of women's golf.

17:21Just a little shorter. And she went to Stanford, just like Tiger Woods. So a bright spotlight will be on women's golf this weekend. The U.S. Open purse of 11 million is the biggest ever in the sport. And NBC is devoting primetime coverage to it on both Saturday and Sunday. So there's a pretty big investment going on here. Rose is electric and we're not financial advisors. We're also not gambling advisors. But if you had to put money on someone, I think she's great value because she's plus 1100, right? Plus 1100. She just wins. She won. She won over half of her college tournament. She won her first ever start on the LPGA.

17:56So like Rose, Rose is the truth. She is the Tiger Woods. And she set the course record for women at Pebble Beach with a 63. Feels like great value. I'm hammering Rose. Are you a hammer and roast? Yeah. But it's interesting because women's golf has not kind of taken off like a bunch of the other women's sports that we've talked about, like soccer, softball. What else? Women's college basketball was huge in March Madness. And they're saying that, you know, women's golf is this massive opportunity with so many young stars, a lot of Americans coming through. And they're just like not doing a good job of promoting their stars and capitalizing on it.

18:34I mean, the Women's PGA Championship a couple weeks ago had fewer viewers this year than last year, even though it had like a star-studded field. So this is, I hope they can capitalize on this moment. Yeah, I think this is a coming out party moment for sure, just because Pebble Beach also. Pebble Beach is iconic. It's going to be on in prime time, so we will be watching. For sure. And you might lose a lot of money if you listen to Toby, that's for sure. All right, our final number, Toby. It felt like I sweated out half my entire body weight on July 4th. And it turns out I was not alone. Tuesday was the hottest day around the globe recorded by humans since at least 1979.

19:10And some scientists say it was probably the hottest day in 125 ,000 years. The global average temperature reached 62.92 degrees Fahrenheit. Why so hot? Well, climate change for one, the start of summer for two, and then tack on El Nino's warming patterns. And it's a triple whammy for scorching temps. By the way, Monday was the hottest day on record before Tuesday broke it. And by the time we get out of the studio this morning, they could announce that yesterday was the hottest of all. Yeah, we're looking at a chart right now in front of us where it's showing global temperatures year by year. And this little like uptick is definitely noticeable.

19:47You can see it. It's not good. Like, it's not good. No, it's really not good. Because I was thinking over this past weekend, I was dripping sweat while being outside. And I was thinking, you know, I'm in Massachusetts, right? Like it's not even that hot. It's 80 degrees. What if I'm in Texas where this heat dome has been baking it for two, three weeks now? You can't go outside. And AC is humming like crazy. Our grid is strained. Yeah. It's kind of a little freaky. I know. And I'm a summer guy. I'm from Florida. It's bad. But even this is, it's a little too hot for me. And in China, there was a massive heat wave.

20:20Beijing has seen temps of over 95 for nine straight days. Yeah. It's like a global phenomenon. The Antarctic is warming. I'm not like a climate doomer, but something about the heat makes your brain go places. All right, Neil. Thank you for those numbers. As always, it is a pleasure. But let's move on. You know I'm a subway guy, right? The sandwich place, not the transportation system. Well, subway has been going through some rough times recently. So the peak subway years were back in like the mid-2010s. 2013 is when the sales at U.S. locations hit$12.3 billion at a peak. But fast forward to 2021 and sales are down almost$4 billion from that peak.

21:03So Subway has started to reinvent themselves. They overhauled their menu, started hickory smoking their bacon, and doubled down on just more quality ingredients. But as of yesterday, it made its biggest change yet. Franchisees are going to start freshly slicing their deli meats in store instead of having them arrive pre-cut. And so, Neil, as a proud and unwavering Subway supporter, I, for one, am extremely excited about this. But would it make you go to Subway more? I think - That's the question. It's more just getting in line with kind of the industry standard because Jimmy John's, Jersey Mike's, even Firehouse is slicing their deli meat.

21:42And it just - See, I had no idea. And it doesn't matter to me. You're not as much of a sandwich connoisseur. What do you mean? I am the biggest sandwich connoisseur. I'm just saying I don't know that Jimmy John's and Jersey Mike's slice their meat in-house. It is not a deciding factor for me when figuring out what sandwich place I'm going to go to. It's a huge deciding factor for me because when you go to Jersey Mike's, it is paper thin. It layers nicely. It feels like you're actually eating a deli sandwich versus Subway. It's kind of thicker. It's wetter. It's not arriving and feeling in that fresh way, which is so weird because Subway's whole thing is eat fresh.

22:18They wanted fresh ingredients. And yet they're bringing this like old gray looking like turkey meat. So it does not. Yeah, their turkey meat does not look good. But it's a big investment. Right. These things are so expensive. Each slicer costs$6 ,000. And Subway spent more than$80 million to provide these deli meat slicers. So this is not a small financial thing by any means. And$6 ,000 for a meat slicer. Yeah. That's a lot. I did a little focus group yesterday. I was asking people I saw saying I was like, Subway is going to introduce, you know, freshly cut meat in their in their stores. Like, will that change your perception of Subway?

22:55Will it make you go more? And they were like, the number one thing was like, will it be slower? Oh, interesting. Well, because they because people think of Subway as convenience fast. Right. And so I didn't hear like, oh, I could use less mealy turkey. Yeah, that's true. I think that their plan is to slice it throughout the day. So it's not like you order a sandwich and then it's sliced. Yeah. So people hate Subway too. Like I've asked people about this too. And they're just like, absolutely not. Like I haven't even thought about Subway. I like Subway. I have good memories. Yeah. And it's also looking for a buyer.

23:29Oh, yeah, yeah, yeah. It's being sold. They're looking for a price of$10 billion, which would be the largest, you know, leveraged buyout of a food restaurant company in a long time. I mean, the last one, last biggest one was in 2010 when Burger King sold for less than four, or the parent of Burger King sold for less than$4 billion. And then Dunkin' was bought by the Arby's owner Inspire Brands a few years ago for$8.8 billion. So Subway is looking for a really high price, and maybe it's kind of boosting its price here with a little slicer. It's the biggest U.S. restaurant chain in the country. There's so many Subways.

24:08If you're driving in a rural area and you go to a town, there won't be a McDonald's or a Burger King there. You will see a Dollar General, and you will see a Subway. They are everywhere. I think there's 37 ,000 stores globally. I love it. People don't know that. Maybe I should have used that for one of my numbers, but we got to it. Okay, our final story. I have a question. Would you rent airline? Would you rent clothes from an airline if it meant you had to pack basically nothing for your flight? Japan Airlines wants to find out. The carrier began a 14 month test yesterday that will allow passengers to rent clothes that will be delivered to their Airbnb or hotel when they arrive for a price starting at about 28 bucks.