September Stinks for Stocks & Why Tech is All About "Founder Mode"

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 I do win! On Brand with Jimmy Fallon. Series premiere Tuesday on NBC. Good Morning Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. Today, why was the stock market a giant dumpster fire yesterday?

0:39Blame the month of September. Then Silicon Valley found a new buzzword to obsess over, founder mode. It's Wednesday, September 4th. Let's ride.

0:54Welcome, welcome. This is for anyone who listens to Morning Brew Daily while scarfing down a bowl of cereal. The publication Complex published a list of the 50 best breakfast cereals of all time, and we want you to get irrationally angry about it and debate it with your friends. I'll read off the first five, and Toby, you can tell me what they got right and what they got wrong. Number one, Cinnamon Toast Crunch. Number two, Honey Nut Cheerios. Number three, Cap 'n Crunch's Crunch Berries. Number four, Oreo O's. And number five, Fruit Loops. Now, my initial observation is that three of the top five have individual units that are O's.

1:35So the closer your cereal resembles to its nutritional value, the higher up in the ranking it is. I mean, where do we even begin, Neil? Let's start with what they got right. CT Crunch at number one is a very solid pick. But then a massive fall off to number two in Honey Nut Cheerios, which is getting by on longevity and name recognition at this point. But really, my bone to pick is with number four Oreos. Did a kindergartner write this list? Because you are right. That is a nutritionally bereft cereal. It is a cookie, not a cereal. And then finally, get out of here with Froot Loops at number five.

2:12Give me honey bunches of oats. Give me frosted mini-wheats. Give me Special K with strawberries, but miss me with that toucan. Okay, rant finished. I'm a big cereal guy. Now, let's take a moment to hear from our sponsor, Mass Mutual. So the New York Marathon is coming up and I've been training, but I've never actually had a coach just been winging it. And that explains why you're always limping around the office. I don't want to hear you moan and complain all the time. You need a coach. You're not wrong. Just like marathon training, financial planning is a lot smoother with some guidance. How about this stat?

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3:49neighbor, State Farm is there. September is the best month for so many things. The sweatshirt and shorts combo, tossing around the football, the potato harvest. But one thing it is absolutely not good for is the stock market. Going back more than 100 years, September has been the worst month of any for stocks, and they certainly stuck to the script yesterday, the first trading day of the month. The tech-focused Nasdaq tumbled 3.3%, and the S &P 500 fell more than 2%, good for the worst day on Wall Street since the early August meltdown nearly a month ago. Investors are jumpy right now, and they're hitting that sell button on any sign of weakness in the economy.

4:34They didn't have to wait long because in the morning, two readings of manufacturing production came in lower than expected. Those economic warning signs sparked a major sell-off that sent the VIX fear gauge soaring and tech stocks tumbling. Semiconductor companies got bruised up the most. The biggest one, Nvidia, plunged nearly 10%, wiping off almost$300 billion in value, the largest one-day market cap loss for any U.S. company on record. Toby, for whatever reason, September is always a nightmare for the market. And so far, it's not looking like that narrative is going to change. September just plain stinks.

5:09The S &P 500 has suffered an average monthly decline of about 1.2 % in the month. It has only finished higher less than 50 % of the time, dating all the way back to 1928. It gets even worse in election years as well. The S &P 500's performance from August 31st to October 31st in election years averages a decline of 4%. So why is September historically bad month for stocks? Just think about how information travels. Good news filters through markets very, very quickly because anyone can buy a stock, but bad news filters a little bit more slowly because only people who own the stock can sell it. So factor in the fact that a lot of the finance world ends up on summer vacation in August.

5:52So the ability to filter that bad news is even more kind of repressed because a lot of people are at their beach house in the Hamptons. So when everyone gets back to work in September, all that lingering bad news kind of really starts to set in. And that's what maybe causes those stocks to go down. That is a theory. Do you actually think that that's true? Well, it's become a little less so in just the age of cell phones and algorithmic trading. But it definitely was. I mean, if we're looking back 100 years, this is part of the reason why. So the September effect should be diminishing as we are remain more connected.

6:27But yeah, I'm going to blame the people at their Hamptons houses for not, you know, processing bad news as quickly as they should have. There's also a theory that when you come to work in September. You review your portfolio, you prepare your annual profit and loss statements, and you shed some of the stocks that have been performing well for you and reallocate. So that is another theory. You said that the September effect should be diminishing now that everyone has smartphones and can react to bad news even over the summer. But it's only grown more powerful over the last four Septembers. Each of them have been negative in major ways.

7:022020, we were down 4%. 2021, we were down 5%. In 2022, the market crashed 9 % in September. And then last year, it was down 5%. And already, we're off to a horrible start. Investors, like I said, are just awaiting. They're very anxious about the economy right now. And we had that big meltdown back in August. And stocks have climbed back to near record highs. But yesterday was a total wipe out any sign of economic weakness. Investors are selling hard. The big event coming up is this jobs report on Friday, and investors are just really worried that that number is going to come in really weak and add to concerns that the economy is slowing down in a big way.

7:46Paradoxically, though, just to fully confuse you guys, Americans have never been more bullish on stocks right now. As of the second quarter, the number of 401k accounts that are at a million reached an all-time high. They're up 31 % from a year ago. Stocks recently accounted for about 42 % of Americans' total financial assets. That's the most on record going back to the 1950s. And stock allocation has just steadily inched up over the last year. The S &P 500 has hit more than three dozen highs in the last year or so. So right now, Americans do on the whole seem bullish at stocks. Let's see, though.

8:22We just have to get through September. We just got to get through September. you've heard of goblin mode, sicko mode, and even monk mode, but may we introduce a new mode to the lineup, founder mode. It's a term recently coined by the legendary investor and founder Paul Graham in his latest essay that has all of Silicon Valley abuzz. The easiest way to define what founder mode is, is to start with what it's not. It is not manager mode, the mode that most founders are encouraged to adopt when their companies grow to a certain size. The phrase, hire good people and get out of the way, is parroted across organizations but is antithetical to the ethos of founder mode.

9:03Instead, Graham argues, founders should look to the likes of Steve Jobs and more recently Airbnb's Brian Chesky as examples of founders who remain very hands-on even as their companies grow. Neil, this got the internet all riled up. Is delegating responsibility actually hurting companies more than helping them? Or do founders just need to hire better? Founder mode. I mean, no one knows what it means, but it's provocative. This started when Brian Chesky, the CEO of Airbnb, gave a talk and he said he regretted a lot of the decisions he made. He said he was encouraged to, when Airbnb got out of that startup mode, that hustle and grind mode, and was in a more mature company, he was encouraged to hire executives, lieutenants, and let them do their job and just be their manager and not be active in the day-to-day, not be the micromanager that he was when he was founding the company.

9:57And he said he absolutely regretted that. The company went backward when that happened. And as soon as he said that, and Paul Graham published this essay, so many other founders and people in the startup world came out of the woodwork and said, you know what? I've been told this exact same thing to take a step back from those day-to-day operations and just hire good people and let them go to work, let them cook. and they said one by one, that did not work out. People came from other companies with preconceived notions of how things work and they didn't really innovate. They didn't push the company in a positive direction.

10:30And so they've had to course correct and go back and get their hands dirty again. They said, this was just a bad decision. I've heard this so many times from so-called experts to delegate. And this is some pushback to delegation saying, actually, the most successful founders maybe are micromanagers. Right, and if you go down the list of founders that exemplify founder mode. You got Steve Jobs, who obviously everyone has studied. Brian Chesky pointed to him as the person that he studied the most. Jensen Huang of NVIDIA. He's got 60 direct reports, which is a lot. He still eats lunch in the company cafeteria, so he's very embedded in the day-to-day of NVIDIA.

11:07Elon Musk is another big example of someone who is very immersed in the minutia of a company. Mark Zuckerberg at Meta. Sam Altman of OpenAI. You can go down the list. But on the other hand, you can also go down the list of people who exemplified founder mode and it led to disastrous results. Sam Bankman-Fried, Elizabeth Holmes, even you can look at Travis Kalanick, Adam Newman. For every example of a positive founder mode, you can probably find a negative as well. So a lot of people were pointing that out as well. And for every founder that did well, you could look at particular managers who weren't founders of their company, came in from another company with this ethos of I'm going to have a more classic management style.

11:52Take a step back. Let other people do the work. And so you had these memes going around of Microsoft stock where founder mode, quote unquote, was this pretty much straight line while Bill Gates and Steve Ballmer were at the helm. And then Sadia Nadella came in, the manager, not the founder, and the stock looks like a hockey stick. And I think that's why this founder mode, manager mode dichotomy caught fire so much and sparked so much discussion because there are two sides to every coin. For every good founder that's a micromanager, there's another one that's a really good just overall manager.

12:30So it's food for thought for founders. I think it was interesting to see a lot of founders come out and say, I've heard this exact same thing to delegate and it didn't work out for me, to which I might think maybe you're just bad at hiring. What's red, white and rapidly losing popularity? Wine. The latest sign of the unprecedented slump in wine drinking came yesterday when beverage giant Constellation Brands said it would book a loss of up to$2.5 billion related to its struggling wine and spirits business. In the latest quarter, wine and spirits sales declined 7 % compared to 8 % growth in beer sales.

13:11Constellation is hardly the first company to warn of drinkers drawing a Sauvignon blank. In June, Duckhorn Portfolio cut its guidance due to the weak wine market, and then Absolute Vodka owner Pernod Ricard sold most of its wine brands in order to focus on businesses that are actually, you know, growing. Globally, wine consumption fell nearly 9 % last year to a 27-year low, and the industry is searching for answers. Toby, we know that younger people aren't drinking as much alcohol, but they seem to be developing a special distaste for wine in particular. too many tannins? Too many tannins. I was digging into some of the industry reports around the wine industry.

13:53There was one that came from NIQ that said that in the first quarter of this year, wines under$12 performed the worst. So you're right. It is younger people, those entry-level consumers who are not buying the$1 ,000 bottles of wine that are just saying, listen, wine maybe doesn't satisfy the taste buds like it once did. A big reason too is coming out of the pandemic, people curtailed their wine purchasing. We have not seen it bounce back to pre-pandemic numbers either. So these distributors and retailers are looking at their portfolio. They're looking at their inventory and saying, we got too much wine on our hands right there.

14:28I mean, remember, we talked about on this show, the French government literally paid wine producers over$200 million to destroy 80 million gallons of surplus wine they were unable to sell. If that is an emblematic of just the broader state of the wine industry. I don't know what is. Yeah, wine production costs are going up while demand is lower. Wine producing has outstripped wine consuming every single year for the past decade. Yeah, so many factors. Millennials and Gen Z just aren't drinking as much alcohol. There's more competition for a smaller share of the alcohol market with hard seltzer and canned cocktails.

15:06People seem to be drawn to those more so than that classic bottle of Pinot Grigio. And then I think there's a general awareness that drinking is bad for you. And there's so many studies that come out about like, is a glass of red wine good for you every single night? Is it bad for you? And I think there's a growing recognition that sort of any type of alcohol is bad for you. So that's sad because I do like wine, but I think this industry will have to grapple with whether this is a long-term secular decline to zero or something a lot smaller, or it's merely a blip where actually people bought so much wine in 2020, the industry potentially thinks that people call them pantry stuffers or pantry holders, and they have so many wines that they bought in 2020, they still haven't worked through them, and that once they work through all of those wines that they have in their cellar, they'll unleash a new round of buying.

16:00But yes, this industry is in major contraction mode right now. So up next, why are so many people going out to eat by themselves? Does it ever feel like you're a marketing professional just speaking into the void? But with LinkedIn ads, you can know you're reaching the right decision makers, a network of 130 million of them. In fact, you can even target buyers by job title, industry, company, seniority, skills. And did I say job title? See how you can avoid the void and reach the right buyers with LinkedIn ads. Spend$250 on your first campaign and get a free$250 credit for the next one. Get started at linkedin.com slash campaign.

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17:16EBCLIS can be used with or without topical corticosteroids. Don't use if you're allergic to EBCLIS. Allergic reactions can occur that can be severe. Eye problems can occur. Tell your doctor if you have new or worsening eye problems. You should not receive a live vaccine when treated with EpGliss. Before starting EpGliss, tell your doctor if you have a parasitic infection. Searching for real relief? Ask your doctor about EpGliss and visit epgliss.lily.com or call 1-800-LILY-RX or 1-800-545-5979. If you have eaten alone at some point in the last year, you are actually not alone. In the US, solo dining reservations are up nearly 30 % over the last two years, according to OpenTable, while a survey of 2 ,000 diners found that 60 % of Gen Z and millennial respondents have dined solo at least once in the past year.

18:01And it's this rise in chowing down alone that I want to talk about on today's belated edition of Toby's Trends, where I take a deep dive into the internet and emerge with a trend you should keep your eye on. So why so many parties for one? It could be that our dining habits are mirroring larger social trends. Record 30 % of Americans live alone, while the U.S. Surgeon General has warned of a loneliness epidemic affecting the country. But on the flip side, some diners just like being alone. It's a time to unplug for half an hour or so and just take a breather from your fast-paced lives. Neil, for so long, dining alone has almost been scoffed at.

18:40It's been the subject of punchlines in movies, but now it's far more accepted. It really is, and the growth is pretty staggering. What's interesting to me is how restaurants are responding to this because they're getting a lot more people who are singles coming in and wanting to try out their restaurant. So there are some ways they are responding, which is redesigning their dining rooms, adding more counter seats, or some are even going so far as to create little mini booths for single diners in order to cater to their experience. They're having more tasting menus. So one reason that people don't go eat by themselves is that they want to try a lot of the menu and you can't because you only have one stomach.

19:21We're not a cow. So there's, yeah, so they're trying these, you know, more tasting menus where you get a little tidbit of everything. Balthazar, which is this very fancy restaurant in New York City, actually gives you a free champagne glass if you come eat by yourself. So restaurants are sort of grappling with this new era of smaller parties where they have to redesign their menus and their interior design in order to cater to this really rapidly growing population of people who are eating at these restaurants. Part of it too, I think is the rise of fast casual chain, sweet green Chipotle, where a lot of lunch goers grab their bowl.

19:56They sit down. It's not socially, uh, unacceptable to go eat lunch by yourself. You see it all the time in cities and a lot of people to just enjoy the experience of eating alone because there was this 2023 survey where 60 % of people said that they were okay eating by themselves because and the top reason cited was much needed alone time think about how much of your life is just spent scrolling or how much of it is spent just around people some people just want that chance to unplug savor a nice meal maybe talk with the waiter about the menu or something like that it's a different experience and it's definitely a changing cultural phenomenon um even though some people you've done it one time or two have you enjoyed your experience No, I don't know.

20:45I don't like it. I mean, the concept is appealing. Me time. I get to be by myself in this interesting space. But no, I did it two weeks ago on Long Island. And I mean, it was fine. I didn't get to eat whatever I wanted because I wanted to try all these things on the menu, but I could only stomach one dish. And I ended up, yes, you say we're scrolling all the time when I'm sitting by myself. What do you think I'm doing? I just literally pull out my phone and I'm sitting there doing the crossword the whole time while just like looking around. So it was interesting. But I realized that I personally would much rather be with people when eating.

21:20And I know other people feel differently than that, obviously. Well, here's some advice. Don't take financial advice from TikTok. People who did this weekend are finding that out the hard way, seeing massive negative balances in their banking accounts and probably Googling, what is the punishment for check fraud? Here's what happened. A few days ago, a viral trend took over TikTok and X that allegedly exposed a glitch in Chase Bank's ATMs. All you had to do was write a check for a bazillion dollars, deposit it, and withdraw a lot of money before the check cleared. Boom, the infinite money loophole.

21:54People actually did this. Videos showed long lines forming around Chase ATMs in the New York area, with some who took out thousands of dollars boasting about their clever ploy on the Internet. And then reality hit. Chase said whatever that glitch was, it had been addressed and pointed out that these people were actually committing a crime. Regardless of what you see online, a spokesperson said, depositing a fraudulent check and withdrawing the funds from your account is fraud, plain and simple. Not only was this fraud, it was the easiest kind of fraud to catch because these people were seemingly committing check fraud against themselves.

22:29So the bank knows exactly who did it. Toby, if it's too good to be true and it involves the largest bank in the United States giving out free money, it probably is. Right. This is a process known as check kiting. It's where you take advantage of the float, which is the time it takes for a check to be processed, to use these non-existent funds. Check guiding is illegal because it's essentially an interest-free loan without the bank's consent. So that poses this huge risk to financial institutions, which is why it's looked at as a form of check fraud. But really, this is just another example of how TikTok can play into spreading some not-so-sound financial advice.

23:07I mean, last year around tax season, we talked about these tax influencers giving advice about how you can write off your$70 ,000 truck if you're using it for commercial uses. And the problem is that they package this advice for virality, not necessarily for accuracy. And whenever you go on TikTok and you see people like throwing money into the air and saying like, hey, you got to try this hack out. Of course, you're going to be curious or maybe susceptible to that. So a very interesting example of another trend spreading through the Internet and leading to real life consequences for people. It did seem like wiser heads prevailed here because for every one person that was trying the hack and there were a lot of people.

23:51I mean, I saw these videos. There are literally lines to get into the Chase ATMs. There were there were 10 people saying you're committing a crime. This is this is check fraud. Congrats on discovering a fraud that's been around for 100 years on the internet a few days ago. If you are single and dating apps aren't working for you, maybe you should be focused on pine app holes instead. That's because over in Spain, a new fruit-based code has emerged helping single people find partners in supermarkets. Yes, single Spaniards have been flocking to the grocery store chain Mercadona between the hours of 7 and 8 p.m.

24:27and then using fruit to broadcast their intentions. Here's the code. If you put a pineapple upside down in your shopping cart, that means you are down for a date, but a legume or lettuce means you are more DTF and looking for a short-term fling. Dating app fatigue is a real thing, Neil, but looking for love in aisle nine might be a step too far. I don't know. Why send an eggplant emoji when you can go pick up a real eggplant? I think this was a matter of time before something like this happened. All of the trends are pointing out that younger people are so fed up with dating apps they want to seek out in real life experiences this was sparked by a viral tiktok of course i mean that's like half of our shows here's a viral tiktok uh but uh by a tv personality saying like here's this code i've discovered that's going on at the supermarket and you pick up some fruit you go into a particular wine idol and then the way you match this is the funniest part is you bump your cart into the other person and that indicates that you have this particular interest or connection.

25:27So you can make fun of it all you want, and it is probably the goofiest thing we've ever talked about on this show, but it does seem like it's better than a dating app. We have seen the same sort of signaling in other aspects of lives. I mean, the thing that comes to mind is run clubs. If you show up to some New York City run clubs wearing black, it means you're single. There's been single parties for generations where there's some way of indicating that you are, in fact, looking for love. So this is just another iteration of that. What was interesting, though, is that some supermarkets weren't really on board with this because you just got all these kind of single people loitering and bumping into each other and not actually buying stuff.