US Gov't Comes for AI & $18 For A Big Mac?

0:01Lowe's knows how to get you ready for holiday hosting with up to 35 % off select home decor and get up to 35 % off select major appliances plus members get free delivery delivery delivery delivery basic installation, parts, and a two-year Lowe's protection plan when you spend$2 ,500 or more on select LG major appliances. Valid through 10-1. Member offer excludes Massachusetts, Maryland, Wisconsin, New Jersey, and Florida. Installed by independent contractors. Exclusions apply. See Lowe's.com for more details. Good Morning Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. On today's pod, why McDonald's is charging$18 for a Big Mac meal and loving every minute of it.

0:39Then would you buy a haunted house if given the chance? We'll dig into how Americans answer that question in just a bit. It's Tuesday, October 31st. Let's ride.

0:56Neil, this is a podcast, but I feel obligated to let the people know that we are in fact dressed up for Halloween. I am wearing a bull costume from head to toe. It's a onesie actually, and you are? I'm a very sweaty bear. Which makes us. Bullish and bearish. I think we crushed it. Very finance focused. Yes, thanks to our team for securing these costumes. Mine's very comfortable. And it's very hot in here. So let's see if we make it through the end of the show. Also, remember, we're still doing the Brew Costume Contest. So tag us in your Instagram story or on Twitter at MBDailyShow. Or send us an email of your costume for a chance to win a Morning Brew Daily mug.

1:32We've also seen a couple of you dress up as Neil and Toby, which is the most epic thing ever. So keep that up. Remember, if you dress up as us, you get a mug automatically. So if you're still looking for a fit, try us on for size. Before we jump into the show, we have a quick word from our sponsor, Yahoo Finance. Neil, it's finally here, our last Yahoo Finance ad. We've had lots of good memories from calling it Yahoo Finance to telling people to dress up as it for Halloween, but all good things must come to an end. I can't believe it. The only thing more important than telling people about the number one finance destination on the internet, trusted by over 150 million visitors globally, is the friends we made along the way.

2:13So we bid you adieu, Yahoo Finance, but know that your breaking news updates and real-time market data will always hold a special place in our hearts. Neil, take us home. All right, one final time, at least for this year, check out finance.yahoo.com today or download the Yahoo Finance mobile app to get it directly on your phone. I know I said it so sadly, but I am enthusiastic about it. 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?

2:53See 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 it for the next one. Get started at linkedin.com slash campaign. Terms and conditions apply. Okay, let's head to our first story. As expected, President Biden signed a sweeping executive order about AI yesterday in what the White House called the biggest effort yet around the globe to establish guardrails on this technology that has taken the world by storm in just the last year. The executive order shows that Biden is taking AI very seriously. He called it the most consequential technology of our time and emphasizes that AI can be used for incredible good or incredible evil.

3:35But to make sure it doesn't veer into the evil side, we need to create some rules around it. So what are those rules? At a high level, the order directs a bunch of government agencies to write up guidelines, create reports and begin research on AI. So not that sexy, but as anyone who's worked at a big organization knows, you've got to have some documentation down so everyone's on the same page. An executive order like this one is limited in its scope. It can be revoked by a future president, challenged in court, and generally lacks the enforcement teeth of a law put in place by Congress. Many of the demands made on companies here are voluntary.

4:08But as Congress is still working through its own regulations, Biden wants to send a bat signal to the world that the U.S. government is paying attention to AI very closely and is fully aware of the promise and perils of a technology that could be as disruptive as the internet. What's it out to you, Toby? Well, first of all, the order invokes the Defense Production Act, which is this 1950s law that was leveraged a bunch of times in the last few years, including 18 times during the COVID pandemic by the Trump administration. And it requires that companies share safety testing results with the government and also speeds up development of certain technologies and regulations.

4:42And in terms of those regulations, there are multiple different parts of the government getting involved here. The National Institute of Standards and Technology will set benchmarks for safety testing, which then the Department of Homeland Security and the Energy Department will then use to evaluate risks to national security and infrastructure. Department of Commerce will issue directions for watermarking AI-made content, which is going to be huge for knowing what's a deepfake and what's not. Then also the Department of Labor will get involved to mitigate the effects of AI on jobs. And finally, Department of Justice will get extra training and tech assistance to investigate cases of AI algorithmic bias.

5:18So you can see how widespread this is. Very much a hot podge. And it talks to about the wide variety of stakeholders here for AI. It's not just these AI, huge AI companies like Microsoft, OpenAI, Alphabet, you know, all those other ones. It's about getting stakeholders from labor, from the Justice Department, from the housing market. One of the big thrusts of this plan is to limit algorithmic bias in terms of fair lending practices for the housing market. So you just see, it seems like a lot of different people wrote this thing. And I think that is actually the case. Yeah. And remember the government is using its role as this huge technology customer to kind of influence the private sector by saying like, Hey, here's how we're going to judge new AI tools that we're considering using because the AI, I mean, the government buys a lot of technology so they can kind of influence how people are regulating it and whatnot.

6:13So I think that's the big thing. They're exerting their influence as as a buyer there. At a high level here, it seems like the government wants to make up for past mistakes in terms of how it regulated social media. And by that, I mean how it didn't regulate social media. It feels like it let these social networks kind of run, run right by it and are, are now being accused of all of these harms of perpetuating mental health, of perpetuating disinformation. And they want to get ahead of the AI wave. So they don't make the same mistakes as they did with social media. Yeah. One of the final things that stood out to me on this was that they're definitely trying to beef up its own AI workforce.

6:48And so beginning on Monday, you can go to AI.gov to see which openings are there. AI.gov, of course. All I thought about was like, that is one of the most valuable domain names out there. They got the AI.gov. I guess when they're U.S. government, you can get whatever domain you please. But yeah, that one stood out. And there is a global race to regulate AI. China has AI regulations. And then later in the week, the UK is hosting the first ever global summit on AI. Kamala Harris, the VP, is going to be there. And the UK Prime Minister, Rishi Sunak, is hosting a X-Audio, I don't know what they call it now that's not Twitter anymore, with Elon Musk that he hyped up in a major hype video.

7:28So I think governments and countries want to be the first to regulate AI because they want to foster this industry that is going to create trillions of dollars. And by establishing the first rules of the road, companies know how they They have to operate. And the U.S. wants to do that first because we, you know, I'm not even bragging, but we do have the biggest technology companies in the world on the West Coast. And so if we can create regulations and rules of the road around it, then companies will invest here, create jobs and build AI. Absolutely. OK, now for some other headlines we want to get into.

7:58Up first, McDonald's reported earnings yesterday. And boy, were they delicious. Revenue was up 14 percent in the latest quarter due to a surge that the chain said was driven by strategic menu price increases. Remember, inflation has been taking a bite out of restaurant chain's profits, which have subsequently been passed on to the consumer. So while we don't know exactly how much or in which regions McDonald's has jacked up prices, we do have some anecdotal evidence that things are getting ridiculous. One branch in Connecticut charged$18 for a medium Big Mac combo meal. Truly outrageous and even more expensive than the McDonald's in Times Square, which will only set you back$13.69 for the same combo.

8:38So, in total, the CFO of McDonald's expects the company to increase the cost of its menu items by just over 10 % for the full year, which is the second consecutive annual 10 % price hike. Neil, it's tough out here for someone who just wants a Big Mac without dropping stats. Shout out Darien, Connecticut. People know what I'm talking about for that$18 Big Mac deal. McDonald's did reveal some interesting data on who was increasing their visits and who was decreasing their visits. People who made less than$45 ,000 annually decreased their visits to McDonald's as inflation and other things took a bite.

9:14Meanwhile, the people who were making over$100 ,000 increased their visits to McDonald's as you see a lot of trading down going on, which is economic speak for saying, OK, I'm going to eat a meal out. But instead of going to Capitol Grill, I'm going to McDonald's for those kind of people. So it all leads to this fact that McDonald's is very poised to do well when times are getting tough and people start trading down their meals. The funniest part to me of this price hike over the recent months is the McDonald's app in New York City, where the$1,$2, and$3 menu doesn't actually have anything worth$1,$2, or$1, or$2 on it.

9:53So it is just ironic that the cheapest thing you can get at McDonald's right now is a small fries for$2.39 or something. And I think there's going to be there's starting to be a backlash to this. There was a Reddit thread where someone posted what is no longer worth it because of how expensive it's become. And the top rated response was most fast food. And so 1849 for a Big Mac. I know that's a singular location or Big Mac meal. But you can go out to a Chili's or an Applebee's or another chain restaurant and get, you know, a bigger meal. That's probably a little more healthy for the same exact price.

10:26So the value perception that McDonald's touts it has is kind of going by the wayside at this point as it continues to hike prices. So it definitely is going to be wary of that. They know that, you know, they're looking at all the data. OK, we have to move on. It lasted six weeks. There was a lot of name calling. Billions of dollars were lost. But the historic auto strike appears to be completely over. The last holdout GM agreed to a tentative deal with the United Auto Workers yesterday. That mirrors the 25 percent wage bump recently agreed to by the other two Detroit automakers. Ford and Stellantis.

10:58So now that this is over, pending ratification by the union members themselves, what have we learned? Well, it's definitely a big win for the union. They secured more wage increases in four years than workers got in the past 22. By the end of the contract, unionized workers will make in the mid$80 ,000 annually before overtime. For automakers, they're going to have to open up Excel and figure out how to deal with much higher labor costs than they just locked themselves into. Ford CFO John Lawler said, we have work to do. We have to identify efficiencies we have to increase productivity and just to zoom out the end of the auto workers strike caps off a frenzied summer of labor organizing that saw workers snag huge gains from hollywood writers to ups drivers to commercial airline pilots yeah it's been a big wind summer honestly we talked about the big strike summer but it's turned out very well for for the the unions this new contract will end up costing gm seven billion dollars over four and a half years in higher labor costs.

11:54And that's just GM. So you mentioned Ford saying we got to find new efficiencies because right now those costs are just going to be passed on to the consumer until these automakers can figure out how to cut costs and figure out how to become more efficient. So again, it is a win for the union, but now the automakers have to take a step back and say, how are we going to deal with this? And they paused a bunch of billion dollar EV projects because of higher labor costs and things that were coming down the pipeline. Their stocks are kind of in the dump. So after they do it, they did have a string of record profits.

12:26But now there might be some cost cutting going on. Meanwhile, the UAW is hunting for more. You know, there's three Detroit automakers that are unionized now. And Sean Fain says, when we return to the bargaining table in 2028, it won't just be the big three, but the big five or the big six. And he's talking about Tesla, Mercedes and other automakers that are operating in the U.S. but aren't unionized. Moving on, Apple hosted an uncharacteristically late event last night, kicking off at 8 p.m. Eastern. And while it was bad for my sleep schedule, it was great for the people who like faster MacBooks.

12:59The star of the show were the new M3 chips that Apple makes in house. Apple says they are the first personal computer chips made using the more efficient three nanometer process, which helps boost transistor density and therefore performance. The M3 chips makes the new iMac revealed two times faster than its M1 predecessor, as well as gives a boost to the new MacBook Pros, which also came in matte black for the first time. They are also ditching the touch bar for good on all entry-level MacBooks, which thank goodness for that, because that thing stinks. No offense, Neil, I'm looking over. I'm looking at my touch bar now.

13:34It doesn't have a lot of use. It's gone forever. Overall, it was an event that turned up the spooky vibes in terms of presentation, but nothing truly otherworldly on the product side of things. No, it just seems that Apple wants to really capitalize on this resurgence in the computer market because in 2021 and 2022, there was a huge boom as people worked from home and upgraded their computers. That one completely bust in 2023 as shipments completely dried up. And now it looks like there's going to be another upswing. Mac sales are forecast to climb about 5 % in the holiday quarter and overall PC shipments are expected to climb nearly 4 % in 2024.

14:12And Apple wants as much of a market share in that as it can. Yeah, one of the other things that stood out to me was right at the end of the presentation, they had a slide that popped up that said shot on iPhone. So, you know, that's Apple's big thing. They apparently filmed the entire event on iPhone, which a lot of people were asking questions because there was some pretty fancy kind of CGI and stuff. So like how much was actually filmed? The most souped up iPhone you could possibly find. Right, but yeah, that was a flex at the end. All right, finally, this news is for all our European listeners.

14:40Good afternoon. And anyone who's interested in social media business models, Meta will allow users in the EU to opt out of seeing ads and instead pay for an ad-free subscription to Facebook and Instagram. The plan costs 10 euros on the web and 13 euros on mobile. This isn't exactly Zuck taking a page out of Elon's book at Twitter. It's intended to comply with European rules over ad targeting and data collection. Meta thinks it will better meet regulatory requirements if it gives European users the choice of paying for the service to remove ad targeting or knowingly opting in and consenting to its data collection practices.

15:16Meta says this isn't changing its overall business philosophy, which is to use its reams of user data to sell tens of billions worth of ads. It's just to give it some cover with EU regulators, something we've seen a bunch of other U.S. tech companies do before. Yeah, the EU is after tech right now for sure. And so, yeah, Meta thinks that choice option helps it satisfy those regulations. But remember, Meta decided not to launch the Threads, which is its Twitter rival, in the EU because they didn't know if they could adhere to the new Digital Markets Act. So, again, it's like this big thorn in the side as the EU keeps coming after these big tech companies.

15:49And that's why the new iPhone is going to have a USB-C. Sometimes it ends up good for us. All right, Neil, before we jump into the next half of our show, we're going to take a quick break.

16:01On NBC, Jimmy Fallon and Bozema St. John host a highly anticipated new competition show. I hired 10 creatives from all walks of life. They will be battling it out to see who can impress the world's biggest brands. This is a huge opportunity. This is the battle for the next big idea. This is not play play. We're spending millions of dollars. I'm so excited to embark on this adventure with all of you. Make the best idea win! On Brand with Jimmy Fallon. Series premiere tonight on NBC.

16:33When did making plans get this complicated? It's time to streamline with WhatsApp. The secure messaging app that brings the whole group together. Use polls to settle dinner plans. Send event invites and pin messages so no one forgets mom's 60th. And never miss a meme or milestone. All protected with end-to-end encryption. It's time for WhatsApp. Message privately with everyone. Learn more at whatsapp.com. It's Tuesday, which means we're back with another edition of Toby's Trends, where I, a Gen Zer dressed in a bull onesie, educate you, a grizzled millennial dressed in a bear suit on a recent trend I've had my eye on.

17:14And today's trend is the rise of upscale indoor golf clubs. A lot of people describe golf as a good walk spoiled, but recently there's been a plethora of high-end indoor facilities that take the walking part right out of it. These places combine all the traditional fixings of an actual golf club, like a locker room, fine dining, a head pro, and even steam rooms. But instead of a course, there's indoor golf simulators. Now, why are these golf clubs having a moment? For one, the at-home golf simulator market exploded during the pandemic, with some sellers reporting a 500 % sales spike in 2020 and 2021.

17:50So people are becoming a lot more familiar with the technology. but also there's an element of social mobility some to some of these just like real clubs in town golf club is a private golf and social club that compares itself to soho house that combines golf with a hot that highly exclusive feel and gives members the chance to rub elbows with other socially upward-minded people neil more and more of these are popping popping up and i am all here of course you are because you're the i mean frankly both of us are kind of the target demographic for an indoor golf thing. But this seems like the sports bar of the future, to be honest, where you go to an upscale place that has a bunch of TVs.

18:28You can watch sports. There's golf simulators. And there's not just golf simulators. There's bowling. There's shuffleboard. There's a ton of recreation stuff to do, because I think people our age don't just want to go to a bar and sit down and hang out and talk forever. They want to have activities options. And you've seen that, you know, in other cities other than New York that have a lot more space where you can go play ping pong and i think that this is capitalizing on that trend as well in addition to the ups upswing in indoor golf yeah there's definitely a few paths these clubs can fall into like the one you mentioned t squared social is this new 22 000 square foot facility in midtown manhattan that was opened by tiger woods and justin timberlake and they have a golf emphasis but not a golf focus because like you said they got a bowling alley they got a dartboard in addition to its golf simulators but then you have places like five iron golf which are a lot more golf focused it's for the more hardcore golfers we used to play in a league at one of these golf focused uh places in hoboken called uh hudson golf so shout out hudson golf and then you got places like inwood which are more like traditional golf clubs in terms of there are this uh exclusive member feel to it so it does seem like we're seeing like a bifurcation in how the the market is targeting this this uh this gap in the market.

19:41A lot of people are listening to this and probably thinking, wow, this is the most bro-y thing ever. It's fun in there. Yeah, but also I want to say that some of these clubs are really stressing gender parity. In town, like you talked about, said we want to appeal to as many people as possible. And they said that 10 % of their members are women and it's something that they want to increase. So, I mean, I don't know if it'll ever get there, but it does make golf more accessible to people because in New York City, you really have to drive an hour and spend eight hours out there. It sucks. So maybe just this trend will create more accessibility to people and also just increase the number of sports bar options so you don't just sit there and watch TV and you can actually do activities, which is super fun.

20:23Okay, Toby, I want to talk about a trend as well, and that is behaviors we took up during the pandemic reverting back to pre-COVID norms. One of those is cooking meals at home. When restaurants were closed during peak COVID, many people began to chef it up in their house. Personally speaking, I became a whiz at Gordon Ramsay's scrambled eggs and even bought a La Crusette. In 2020, people in the U.S. ate 9.4 meals at home per week, up from 8.4 in 2019. But a new Gallup cookpad survey showed that the eating at home rate last year plunged to 8.2, a historic low. So it seems like the gradual return to office, the greater comfort with eating out, and inflation in the grocery aisle had Americans returning to their Thursday night at Chili's ritual.

21:06Thursday night at Chili's. I actually was reading, digging into this trend a little bit. I remember reading an article from June of last year saying that the new trend was actually people ordering takeout, but then dressing it up with some of the ingredients they had around the house laying around. So you might order some pasta from Olive Garden, but then dress it up with an$8 jar of sauce. What I do is order just a turkey sandwich with the bread and the turkey, and then put all the fixings on that I have at home because they charge you so much for a slice of cheese or tomato or an onion. So that's my little hack.

21:36That is a good monetary hack. But it was interesting to see how the trend kind of evolved over time to everyone was cooking at home. But then we're like, all right, I don't want to actually make the turkey sandwich. I'll order that, then put the fixings on. But now people are back to just ordering out, probably because they feel a lot more comfortable to going out to eat than in the pandemic era. So, yeah. Last year, people spent 21 percent more at restaurants than they spent on groceries in 2022. That is a huge gap, and that's a complete reversal of the way things have been going in the 2010s.

22:07So you just see a lot more. I mean, the restaurant industry is booming, and they're constantly searching for workers. Okay, our next trend is that second home sales have fallen dramatically since the pandemic. U.S. vacation home sales are down three quarters from the crazy pace set three years ago, as an inventory shortage makes it impossible to find one. Sales have all but dried up in places in popular vacation spots, even though demand remains sky high. Hilton Head Island and Lake Havasu City in Arizona have experienced the greatest fall in the volume of available homes, down 83 % and 87 % respectively.

22:43And overall, the current share of secondary homes within the market is sitting at 16 % as of August, down from a peak of 22 % in January of last year. So break out the world's tiniest violin for the 1 % because the years of frenzied vacation home buying in the pursuit of more space during the pandemic are over. I was looking at the set and I was about to read something about higher mortgage rates biting and people not being able to afford a second home. That is not the case. There's plenty of demand. Just all the second homes have been bought already. So I thought that was kind of funny because if you're buying a second home, you look at something like a 7.5 % mortgage versus a 6 % mortgage.

23:23And you'll be like, all right, well, maybe I can handle this. Right. So demand for those homes remains more constant because, yeah, as you said, a percentage increase or decrease in a mortgage rate doesn't affect the second home market as much. It also hurts the remodeling market, too, though, because some of this larger ticket remodeling work on new vacation rentals has all but dried up. So there are some second order effects that ripple through the economy. But yeah, again, world's tiniest violin. The final the new normal is the old normal stat is the decline of the home office. According to a study by Zillow, real estate agents are advertising home office perks in their listings far less often than they used to.

23:58The report found that keywords like home office and Zoom room were mentioned significantly less in real estate listings during the first six months of 2023 compared to the same period last year. And the words Peloton room plunged nearly a quarter. Poor Peloton. It is a sign of shifting priorities as potential homebuyers put less focus on a fancy home office since they're probably on that commuting grind at least three times a week. Brokers say it is very unusual for the mention of previously popular features like a home office to not become an important selling point in the span of just a year.