TikTok Wants to Be Amazon & Elon Denied $56 Billion Pay Package

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0:26Good morning, Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. Today, TikTok wants to turn Los Angeles into one giant QVC studio, but will its big bet on shopping turn off users? Then should you be allowed to drive more than 10 miles an hour over the speed limit? California lawmakers? They don't think so. It's Wednesday, January 31st. Let's ride.

0:53So after the show yesterday, Toby and I were walking by a Starbucks and they were handing out their new olive oil infused coffee called Oleato. The company had been testing these drinks in a few locations since last year, and apparently those tests went okay because as of yesterday, the chain is rolling out olive oil coffee nationwide. Toby, what'd you think? Yeah, we tried it. I mean, our initial reaction was it kind of tastes like a normal omic latte. It does have some depth and complexity of flavor. But all I can think about, unfortunately, is that there's fats in olive oil that helps smooth the insides of your bowel, making it easier for a stool to pass, while coffee can also have a laxative effect on people.

1:34So this is like a super beverage for making you have to go to the bathroom. I think Starbucks is betting that people will start customizing these drinks with various concoctions and adding olive oil into random things, and it'll go viral on TikTok, and it'll send the lines out the door and turn into a viral sensation. It does make you feel a little fancy just knowing that there's olive oil in there. It also makes you feel something else apparently. Exactly, exactly. Before we jump into the show today, we have a quick word from our sponsor, Veeam. Okay, I haven't asked for you guys listening. Go to Veeam's website after the show today and scroll down until you see a header that says, We Protect Everything.

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2:51They 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 tonight on NBC. TikTok is not content with just being a short form video app anymore. It also wants to be one big virtual department store. TikTok shop is everywhere these days. It's hard to even open the app without getting force-fed someone promoting something, and TikTok is doubling down even further.

3:29It's testing out a new feature that will automatically identify products within videos, then prompt a user to click into a page that displays similar items for sale. So imagine seeing your favorite running influencer sporting a new pair of kicks, then getting a nudge to go shop those shoes or similar ones in the shop tab. It's a big part of TikTok's new goal to create a juggernaut e-commerce business in the U.S. and reduce its reliance on advertising dollars. That feature alone shows TikTok is doubling down on shopping, but it's also tripling down by building out studios in Los Angeles where influencers can live stream and sell products.

4:05The eventual goal is for TikTok to capture some of the magic that has created a$350 billion live stream shopping industry in China. But is it going to alienate its user base in the process? We will find out. I mean, this is TikTok's big second act. It wants to essentially copy paste what's been working for ByteDance's other company, Douyin, in China. So we'll see if the American user base responds to, you know, the similar shopping experience. What it's doing in Los Angeles is crazy. It wants to build out essentially QVC studios all across the city because right now creators, when they sell products, they're kind of in their makeshift studios in their living rooms or in their bedrooms selling things.

4:45what's worked in China is there's this huge infrastructure that is built with studios, amazing lighting, you know, what you would see on QVC on TV. And they want to kind of replicate that in the United States. We'll see if that's kind of the key to unlock the market, because so far, I think American users have not been as receptive to this live shopping, live stream phenomenon that's been so successful in China. Yeah. Again, this is not new by any stretch. What's old is new again. QVC has done it since the dawn of TV. And yeah, TikTok wants to grow its size of its shop business in the US to$17.5 billion this year.

5:21You mentioned Doyin, the TikTok for China. It has a$200 billion a year shopping business. So it's definitely looking at and saying, why the heck can't we do this in America? People enjoy our app here. People enjoy shopping here. Why can't we replicate the success? I think the big is if you overload people with shopping content, you stop going on the app altogether, which is an experience that just as a user, you can't make it through three videos without seeing someone shilling some sort of candies, shilling some sort of gadget to you. And it's just not as fun these days. And it didn't work for Instagram.

5:54Remember, Instagram had its own shop tab and it tried live shopping and eventually shut those down in the past few years because users weren't responding well. There's also been a slowdown in TikTok growth in the United States that kind of happen at the same time that it started pushing all this shopping. And while obviously correlation doesn't equal causation there, there are a lot of complaints, just like you said, that when you open the app, it's become one giant mall. It's become one giant e-commerce platform. It's like people are going on Amazon when they want to see fun videos. So TikTok has, you know, is risking alienating its users here, but I think it's going all in.

6:31It is spending so much money. It's hiring executives from eBay and Amazon to try to move away from ads. So this is their big second act, and we'll see whether it pays off for them, Cotton. Don't be surprised to see Elon Musk flying commercial next to you because his gargantuan pay package worth$56 billion was struck down by a judge yesterday, a major setback for the world's richest person, and perhaps the first time in history that a compensation agreement has been blocked by a Delaware court. But this was no ordinary compensation agreement. In 2018, Tesla approved a pay package for Musk that consisted of 12 tranches of stock options that would vest as the automaker hit certain revenue and profit targets.

7:12In total, it was worth$56 billion, the largest executive pay package ever in the U.S., and Musk was set to see all of it because Tesla hit those targets. Unfortunately for Musk, his pay package had its critics, and a shareholder named Richard Tornetta challenged it in court, saying the Tesla board was not acting independently when it approved it and bent the knee to Musk, who got exactly what he wanted, without any pushback. And yesterday, the judge agreed with the shareholder, ruling that the process leading up to the approval of Musk's pay package was deeply flawed, and it should therefore be voided.

7:46Toby, this story, I think, is a lot more, it's about a lot more than Musk's fortune taking a hit. It raises questions about Tesla's corporate governance, Musk's commitment to Tesla when he's got all these side projects going on and courts intervening and how companies pay their executives. Yeah, I think the two big issues here is one, the unfathomable sum part, which is the judge's words that it is just truly an astronomical number. But then also the fact that there was just this there was no process. There was no adversarial negotiations, in her words, for the board approving this pay package.

8:19Those are the two big things that eventually led to this decision. And I mean, if we want to say that it was an exorbitant pay package, how about this first stat? An executive pay research firm estimated in 2022, Musk's package was six times larger than the combined pay of 200 highest paid executives in 2021. So again, like just putting it into scale,$56 billion is an absurd amount of money. It is an absurd amount of money, but the pushback from Musk's defense team was saying, yes, this is an absurd amount of money, but Elon Musk is kind of an absurd CEO and he can drive value for shareholders the way no one else can.

8:57I mean, Tesla at the start of this was worth 53 billion dollars. And then four years later, it was worth 690 billion dollars. And a lot of that is based on Elon Musk vision, not only beyond not only making cars, but this self-driving future, incorporating AI. So that was Musk's defense saying, look, I drive value like no one else can. And therefore, I am worth all of this packages. Plus, they were all hit. Plus, all of this money was tied to targets that I hit. So I think, you know, that was the defense. But the judge said, all that notwithstanding, you did not. This process was flawed because you had a bunch of your cronies on the board, including your brother.

9:35And so this negotiation was basically you handing over what you wanted and them saying, OK, looks good. It does seem a little messed up, though. If you want someone, the tranches that Elon had to hit, he had to 10x Tesla's value. Wouldn't you want your CEO to be incentivized to do that? So again, some of the argument was that maybe these tranches weren't as hard to hit as it appeared to shareholders. But 10xing a car company's value is not exactly easy by any stretch of the imagination. It was also, I do think that it's interesting that one of the big arguments against it from Elon was saying that he's going to use his pay package to also advance his mission of bringing humans to Mars, which probably didn't factor that much into the judge's decision.

10:24That was one of their big defenses is like, hey, I'm going to reinvest this money in getting humanity to Mars. But they're like, hey, listen, we're in a Delaware court right now. Let's keep it on Earth. Yeah, so what happens next here is that either Musk can appeal the court ruling or they'll have to go back to the drawing board and drop a new pay package for Musk. But either way, it seems like his fortune is going to be hit and he's no longer going to be the world's richest person. He'll be demoted to number three. OK, like all of us who realized we were driving in the wrong direction, General Motors is making a U-turn.

10:56Yesterday, the automaker made the surprise announcement that it will reintroduce hybrid models in the U.S., reversing its commitment of focusing exclusively on battery-only vehicles. It is a major strategic reversal for GM, which had phased out its hybrid lineup in the U.S., including killing off the beloved Chevy Volt Hybrid in 2019. Then again, this shouldn't come as a total shock. Hybrids have become hotter than a Stanley Cup as Americans have tamped down their enthusiasm for full electric cars and set their sights on the middle ground between gas and battery powered vehicles. Last year, U.S.

11:30hybrid sales jumped 65%, easily topping EV sales growth of 46%. Perhaps influencing GM's decision to bring back hybrids were auto dealers, which reportedly urged executives to send them hybrids since electric vehicles were not selling and piling up at their lots. Toby, this is a little like Comedy Central calling up Jon Stewart and being like, hey, we need you. It's what the people want. I mean, you can roll your eyes at the use of the word U-turn to describe this strategy, but it is a huge strategy shift for GM. I mean, Mary Vera was all in on EVs. She was lauded by President Biden for leading the charge.

12:05And there's all these quotes from executives in the years past saying hybrids are this unnecessary interim step. We all know we're heading, so let's just go there before anyone else does. But it turns out consumers wanted that unnecessary step. Car shoppers were 58 % more likely to ditch gas-powered vehicle for a hybrid versus an EV. That was the survey from August from S &P Global. So consumers, again, we were talking before the show and saying that consumers still kind of think in gas mileage. They still like having that just security blanket that they know they can always fill up. And seeing a hybrid with great gas mileage is to them almost more appealing than seeing an EV with some sort of nebulous range example.

12:50Right. It reminds me of that great Robert Frost line. Two roads to electrification diverged in a wood and GM took the wrong road. I mean, a bunch of South Korean and Japanese car makers were kind of lambasted by the industry for going into hybrids. Kia, Hyundai, Honda, Toyota. They were investing in hybrids. Obviously, Toyota has the Prius, while GM said, why are you taking this unnecessary step of continuing to invest in hybrids? People want to go straight to electrification. And now, you know, you can't find a Hyundai midsize SUV hybrid on any lot while EVs are piling up. And that's because people are very much into hybrids these days.

13:30Yeah, it seemed like GM kind of mistimed every single move. A decade ago, they introduced hybrid versions of their SUVs like Cadillac, Escalade, Chevy Tahoe. but those sales flops were discontinued. Then they went all in on EVs and kind of mistimed the market as well. They spent$8 billion investing in Cruise, which is the driverless startup, which also seems like they've mistimed it. So we've beat up on GM, we've beat up on GM, but also GM is still doing okay. Profit jumped 12 % in 2023, despite the autoworker strike as well. So again, like we can say all we want, but they are still heading down a path of profitability.

14:05They have a fat internal combustion engine lineup still that they're leaning on for profits. I mean, more than 90 % of their unit sales still are accounted for by traditional cars. So they're doing OK, and they can use that to subsidize whatever sort of hybrid electric vehicle hybrid they want to build. So, yeah, their stock jumped yesterday. Investors thought it was a really bullish report. All right, before we jump into the next half of our show, we're going to take a quick break.

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16:06Layoffs are back in the news again. This time it's PayPal and UPS headlining a recent wave revealing cracks in an otherwise strong labor market. PayPal is cutting about 9 % of its workforce or 2 ,500 workers as it seeks to right the ship under new CEO Alex Chris. It's part of an effort for new management to inject a little life into the stagnant payments company that has lost ground to competitors like Apple, Zelle, and Cash App in recent years. On the other side of the technology spectrum, UPS is also cutting jobs, laying off 12 ,000 workers. That number is especially a shock considering they had just reached a much-celebrated union deal just a few months ago in September.

16:48UPS said it's lost business when customers shifted to other carriers to avoid a potential worker strike and has struggled to win that business back. Neil, two companies in two different industries, but both facing layoffs. What's kind of the common thread here? Okay, so I think this reflects a vortex of three trends. One is seasonal layoffs, which are just typically high in January. And then there's companies increased focused on AI. They're not directly attributing these layoffs to AI, but in its statement, UPS said, we want to focus on generative artificial intelligence and defocus on some other areas.

17:26And the other final thing is that it's affecting white-collar workers the most. 12 ,000 of these UPS jobs that were cut were not drivers or anything. These were the managerial set. These were people who worked in UPS corporate. And I think when white collar workers are looking at all these layoffs that have happened this month and last month, they're kind of looking at it and being like, you know, this seems this sure seems like AI has a lot to do with it. And I know companies aren't saying we're laying you off because AI is replacing your job. But they think that they can drive a lot of efficiencies and reduce labor costs because of AI.

18:04And they've noted it every single time they lay off workers says we have to we have to focus on generative AI. So if I'm a white collar worker, I am a little nervous at sort of the broader trends that are going on. Yeah. And those trends provide almost a sort of protection for justifying layoffs. Like you can kind of get away with laying off people, cutting down your costs and attributing it to AI, whether that's true or not, if AI is directly stealing or taking these jobs from people. But, yeah, I want to talk about managers a little bit. when companies try to streamline middle managers kind of get squeezed from both side on the one hand they're usually the ones asked to conduct the layoffs like they're usually the people laying off the people underneath them but then they also are the ones getting the act so it's this really interesting and difficult time if you are kind of a middle manager in corporate america right now if we want to zoom out zuck started the year by saying this is the year of efficiency that kind of filtered all the way down through big tech with google conducting these rolling layoffs.

19:03And now it just seems like a lot of industries are kind of retaking stock of we're no longer in a zero interest rate environment. Let's pare down. Let's get rid of some of like the managerial middle class and try to regain efficiency, no matter if you're in UPS's industry or PayPal. And there's another theme that is kind of the undercurrent for all these layoffs, too, because when these companies have announced layoffs, UPS, I'm thinking especially, they said at the same time there was a return to work, return to the office mandate. So you're seeing that a lot of companies are sort of ending this fully remote work experiment.

19:38And there's data that show when you lay off people, remote workers are much more likely to be laid off. A recent study by Live Data Technologies looked at 2 million workers across last year. And they found that workers who work from home five days a week were 35 percent more likely to be laid off than anyone who popped into the office full time. So maybe these layoffs are also a way of sort of paring down the remote work workforce and bringing people back to the office. IBM also recently said that its workers had to come back to an office or just quit. So another current under, you know, another current running through all these layoffs is definitely we want people back in the office.

20:20Yeah, absolutely. We're going to see some LinkedIn think pieces about being present, being in the office, and we're already seeing it play out. Okay, moving on. Tom Brady's post-football life is beginning to come into focus, and it's clear the GOAT's competitive juices are running as thick as ever. Yesterday, Brady announced that his health and nutrition company, TB12, and his apparel company, Brady Brand, will merge with the fitness company, Noble. If you haven't heard of Noble, it's a$250 million workout gear brand with billion-dollar aspirations. It was started by the same guy, Mike Repole, who sold body armor to Coke for$5.6 billion in 2021 and also sold vitamin water and smart water to Coke in 2007.

21:01Not a bad resume. And with the merger, Brady will become the company's second largest shareholder after Repole. And in addition to selling you electrolytes, Brady is gearing up to call NFL games on Fox beginning in the fall. Remember, back in 2022, he signed a monster 10-year,$375 million contract with Fox Sports to become the network's number one color commentator, but raised some eyebrows about his commitment when he delayed his TV debut for two years. Brady's plunge into TV has also been the subject of intense debate over the past few weeks because he's set to replace commentator Greg Olson, who's become probably the best analyst in the industry during these playoffs.

21:40Toby, are you betting on Brady? And if so, where do you think he has a better chance to be successful, with Noble or on TV? Yeah, I want to start with Noble first. I remember when this brand first started, it was essentially this very niche CrossFit band. They made these very minimalist shoes. But they've done a good job kind of reinventing themselves and slowly expanding the brand. And they are running the same playbook. Mark Riepel is running the exact same playbook that they did with Body Armor. If you remember back, Body Armor had this very close relationship with Kobe Bryant and kind of used his star power to legitimize itself in an industry dominated by Gatorade.

22:17Look what they're doing all over again. They're using the star power of Tom Brady to legitimize themselves in an industry dominated by Nike and Adidas. So I love the playbook that Mark Repole is running. If we want to talk about the broadcast side of things, I'm going to be bullish on it because Brady did delay. He said, I want to become good at my craft. And I do think he's an obsessive perfectionist. And so I do think he will be a little better than people are giving him credit for. But it is a tough look when you're replacing one of the best, one of the fan favorites in Greg Olson. He definitely is a fan favorite.

22:50But can we just talk about how much money he's making? He's making$37.5 million a year to be a NFL broadcaster. And you might think, hey, that's like an insane amount of money. What's going on? But when you look at the TV landscape for these networks, the only thing they've got going right now is football. I mean, it accounted for more than 80 of the top TV broadcasts last year, and that market share is only growing. So when you're saying, what am I going to invest in as a network, it has to be football because that's the only game in town. And that's why you're seeing Brady getting$37.5 million a year because these are the Tom Brokaw's, the Dan Rathers of the world now from 20 years ago.

23:33They're commanding the same amount of salaries. Tony Romo kind of started this arms race back in 2020 when he was paid$17.5 million a year to stay at CBS. And so these broadcasters are making more money than God. But sort of what the market demands now as football is the only game in town for people not to cut the court. I do think, though, that if you want to use the grandma test in this situation, which is something where you ask your grandma, like, hey, who do you know on TV? and Tom Brady is one of those people. And so kind of the network strategy here is cast the most famous person you can think of, put them in front of the camera.

24:10If they stink, they stink. You move on. This happened with Joe Montana back in the day. He kind of stunk at broadcasting. So he retired after nine games. And so if Brady stinks, then you just slowly cut the cord. But if he doesn't, you got the grandmas knowing who, oh, I know who Tom Brady is. So that's kind of the litmus test. I do think you have to. You have to try Brady. Right, you gotta try. Like you have to try them. And you have our number if it doesn't work out, Fox. All right, let's move on. All you speed demons out there, listen up. California has figured out a new way to get you to hold on to your horses.

24:43A state senator earlier this week proposed a bill that seeks to prevent new cars from going more than 10 miles an hour over the speed limit. So in California, where speed limits top out at 70 miles per hour, anything above 80 miles an hour would be a no-go. The proposed bill would see intelligent speed limiter systems added to 2027 model cars to electronically prevent drivers from exceeding the stated limits. Neil, traffic fatalities have been on the rise in California, up 22 percent from 2019 to 2022. I honestly don't hate this idea. No, I mean, it's definitely one way to combat speeding deaths, which are terrible.