What Biden Dropping Out Means for Markets & The IT Outage That Halted Almost Everything

0:26Race the rudders! Good morning, Brew Daily Show. I'm Neil Freiman. And I'm Toby Howe. Today, President Biden drops out of the presidential race. What comes next? Then, now that the blue screens of death have dissipated, what's been the fallout from the largest global IT outage ever? It's Monday, July 22nd. Let's ride.

0:54I gotta catch my breath. The last week has had enough news for an entire century. Just to recap, since last Saturday, former President Trump narrowly survived an assassination attempt. He then nominated a vice president who once said he might be America's Hitler. President Biden got COVID. Ken Griffin paid$45 million for a stegosaurus skeleton. A country singer performed one of the worst national anthems in history at the Home Run Derby. Friday brought the largest IT outage in history. Then on Sunday, Biden said he wouldn't run for president, adding even more mayhem to a presidential race that has seen plenty of it.

1:35July is supposed to be boring. Well, you forgot the biggest news from last week, actually, and that is the makers of Hello Kitty reveal that Hello Kitty is not a cat. Yes, despite the whiskers, her ears and her name, Jill Koch, the senior vice president of marketing at Sanrio, the creators of the cartoon, told the Today Show that she's actually a little girl. I feel like my entire world is turned upside down here. Truly. I mean, it looks like a cat. She looks like a cat. She looks like a cat, but she's not a cat. She's actually a human girl. But yes, what an insane week. Thank you guys for tuning in to the show every week to stay up on everything.

2:09Now a word from our new sponsor, Beehive. And Neil, this one hits particularly close to home for us. It does. Beehive is a newsletter platform built by one of the earliest Morning Brew employees, Tyler Dank. Ah, Tyler. I overlapped with him for a little bit, but you were there in the trenches with him for longer than I was. Did you see him founding a company like this? I mean, Tyler built the tech stack that powered Morning Brew into the company that it is today. So yeah, he knows newsletters inside and out. So what you're saying is we wouldn't be here chatting it up right now on the biggest business news podcast in the world if it wasn't for Tyler?

2:44Well, let's not give him a big head now, Toby. We'd have made it no matter what. But yes, if you're at all interested in writing or spinning up your own newsletter, Beehive makes it a breeze. We'll be telling you more about what Beehive has to offer in the next few weeks, but if you're interested in checking it out, head to beehive.com slash brew. That's B-E-E-H-I-I-V.com slash brew to get a 30-day free trial. Then you can use code brew to get 20 % off three months.

3:15When 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. How many times can we possibly say we live in unprecedented times? Well, at least one more, because yesterday Joe Biden said he was dropping out of the presidential race in November. The decision comes after intense pressure from fellow Democrats to pass the torch following a debate performance that heightened concerns the 81 year old couldn't be Donald Trump in the election.

4:02Biden isn't the first president to not seek a second term after serving four years in office. But the timing is historic. No sitting president has dropped out of a race so late in the election cycle in American history, meaning whoever replaces him will have just over 100 days to secure the nomination, convince the country they can be a credible leader and make their case against Donald Trump. And that person appears to be Vice President Kamala Harris. After bowing out of the race, Biden endorsed Harris to be president. And then one by one yesterday, influential Democrats lined up behind her. So while it's not a guarantee Harris will become the nominee, it's hers to lose.

4:40She's the first black person and Asian American to serve as vice president. And now she has the opportunity to become the first woman president. Toby, this wasn't exactly a surprise, but it was still shocking when you saw it happen. Absolutely shocking. Our Slack channels were popping off over the weekend, as expected. The issue here is that this is very unprecedented. We literally have no idea how this process really works because no sitting president has withdrawn their re-election campaign just four months before voters go to the polls. It's less than a month before the Democratic National Convention.

5:12You have to go for the closest parallel. You have to go all the way back to 1968. That's when Lyndon B. Johnson announced he would not seek re-election. But that was eight months before the election. So there's a lot more time for at that time the Democratic Party to regroup. So right now, like the word of the day right now is uncertainty. everywhere from in the political sphere, but also in the markets as well. There's a lot of uncertainty around what will happen when the markets open this morning. So we'll definitely be paying attention to that. Yeah, there had been a growing sense that Trump would sail through to the presidential, to the White House and Biden would just, you know, kind of limp along.

5:48And he was pretty adamant about not, about staying in the race. But it does seem like a lot of the money dried up. Wealthy supporters of his campaign really closed their wall. It's just in the past month in July. They were expecting$50 million from these large, wealthy backers. And when they counted the checks, it looked like just$25 million came in. Big, big donors like George Clooney. I know we laughed when he wrote that op-ed in The New York Times saying that Biden should step aside, but he is a huge donor. He puts on huge fundraising events. And without money flowing in, the Biden campaign was really running on fumes.

6:23And they spent 93 % of what everything they brought in in July. So it seemed like Biden was really backed into a corner and he made this decision. He did not really tell anybody before he did it. He told the White House staff at 1.45 p.m. and then at 1.46, that's when he posted on X that he was stepping aside. Speaking of X, it is a big win for the platform because Biden did not go on a news network and announce it there. He did not tell a journalist or a reporter that he was stepping aside. He just went straight to the source, posted a letter that he wrote directly on X. And obviously it's an awkward thing to do because Elon Musk, who owns X, has come forward and said, I'm contributing$45 million to a PAC dedicated - Each month.

7:05Each, every single month to Trump. So that must have hurt a little bit using that platform, but it does show that X has remained like the global center, the conversation. Obviously, that's where all the memes spawned as well. Let's go back to fundraising for a little bit though. So what happens to the$96 million that the Biden-Harris campaign had raised, that actually does go to they've converted it over to Harris. It's now, according to updated documents, said that she now has access to those funds. If you look at you've talked about big donors, if you look at small donations, they jumped after Biden exited.

7:42If you look at single day donations to the ActBlue PAC, there was a massive jump yesterday. On Sunday, they reached$59 million. dollars. That's up from just seven million dollars the day before. And if you go back to the day after the debate, small donations only totaled 20 million dollars. So clearly there's a ground swelling of support around Kamala Harris and this new campaign that they're running. Totally. And let's talk about the markets for a second of the past few weeks or the past week since that failed assassination attempt. We saw what investors called the Trump trade, which was a rising dollar, rising small caps, smaller companies and a retrenchment of big tech companies and higher Bitcoin prices because Trump has just fully embraced that sector.

8:23Now we'll see what happens as the polls maybe show a tightening of the race between Trump and Harris. They show Harris competing a little bit better than Biden in certain states. So we'll see what happens when the markets open this morning and seeing if that Trump trade starts to unwind just a bit. Also, real quick, just want to give a shout out to poor Wolf Blitzer. literally an hour before Biden announced he was dropping out. The CNN anchor posted this picture of him enjoying a Wolf Spritzer at a local restaurant in D.C. It was a drink named after him, only to be dragged back into the studio shortly after because of the news.

8:59I think the lesson here is to never check your work email on the weekend. It's only going to ruin your afternoon. But yeah, the Internet collectively was pouring out for Wolf Blitzer for having his weekend ruined. So before Biden dropped out, we totally thought that this was going to be the biggest story of the weekend. and that is the fallout from the massive CrowdStrike outage that took down millions of Microsoft devices worldwide. It was widely billed as the largest IT outage ever, and industries from travel to healthcare are still recovering from the mass technical blackout. Just to recap for all of our Mac-using listeners out there, the cybersecurity firm CrowdStrike put out what it thought was a routine software update to Microsoft Windows customers early on Friday morning, but the update ended up containing a defect that brought millions of Microsoft Windows users to a standstill inflicting their devices with the dreaded blue screen of death.

9:53For some industries and employees, that just meant a surprise long weekend on a summer Friday. But other industries are still picking up the pieces from the outage. 38 ,000 flights were affected worldwide as some airlines resulted to writing handwritten boarding passes. Traders at big banks couldn't execute orders, and many hospitals were forced to cancel some elective procedures or walk-ins. Neil, the fallout is falling out, bringing up questions about Microsoft's size and scale because this outage highlighted just how many businesses and how many governments rely on Microsoft products. Do you remember we recorded this podcast Friday morning at 6 a.m.

10:29when this was just starting to percolate and we were just sort of learning a little bit about it and we were laughing about the outage. We were like, oh, this is happening. We have no idea what's going on. And then over the course of the day, you realize the scope that this was literally the largest IT outage in history. The number that was released over the weekend that really has stood out to me is that Microsoft revealed in a blog post that just 8.5 million Windows machines were affected. And that might seem like a big number, but that's actually just less than 1 % of its global footprint. That's less than 1 % of all devices that run on Windows, 8.5 million.

11:08and it was enough to bring the global economy to a standstill. And I think that shows the reach of Microsoft. It also shows how critical some of these companies are to the functioning of our economy. And when they don't work, there's a massive cascading effect that can impact every single sector. You just got to go down the line. Yeah. If that was the fallout from 1%, I do not want to see what 2 % or 10 % looks like because you're right. And you know who instantly seized on this outage was FTC chair Lena Khan. She wrote on X that these incidents reveal how concentration can create fragile systems.

11:40Remember, she's been on this crusade against big tech saying it's too big and it infiltrates too many aspects of her life. But then Microsoft fired right back and said the impact of today's outages was defined by the reach of CrowdStrike, not the reach of Microsoft. A spokeswoman said that. So it is interesting because, of course, Lena Kahn is going to say, like, listen, this is what I've been saying. these companies are too ubiquitous across different sectors, across parts of our life. But then Microsoft's saying it really wasn't our fault. Like, it was CrowdStrike, the cybersecurity firm that did it.

12:12There is a little bit of a blame game going on. And it does seem like Google searches for Microsoft outage were bigger than CrowdStrike. But Microsoft Windows has been attacked repeatedly for years for having lax security practices. And therefore, it needs to contract out with companies like CrowdStrike, which is a massive company. It's almost worth$100 billion before its stock price fell 11 percent on Friday. But it has 8 ,000 employees. There's a huge industry of, you know, servicing enterprise clients with cybersecurity to protect against, you know, cybersecurity threats. You know, CrowdStrike is one.

12:47They're based in Texas. There's Palo Alto Networks. There's Sentinel One. So there's a huge industry here of these cybersecurity companies coming into corporate clients and being like, we can help you with your security unless we push an update with a corrupted file. And it brings down the global economy. Let's be clear here, though. This was not a cybersecurity incident. It really was just a faulty update. But it did open the door to a lot of cybersecurity issues. A lot of major cyber defense agencies around the world were issuing all these warnings over the weekend saying that you're probably going to see this increased phishing activity trying to exploit the incidents.

13:21because eventually people coming back online from the outage are definitely going to be especially vulnerable to hackers because if you're coming off the blue screen of death and maybe you get a link from someone posing as IT, you're going to be more likely to click it. So there is just a big push from cyber defense agencies going like, please be aware, be on guard. This is when hackers love to prey on people amongst these moments of vulnerability after a global IT outage. show. People, be smart. Be vigilant. If you see anything pop up in your inbox, it could be a scam. I think you've got to do a reprise of Toby's trends on these preppers because this is exactly, last week you did Toby's trends on the people prepping for doomsday and for outages exactly like this.

14:11There's a growing sense that our economy and our systems are just very fragile and that they're being held up by this one stool, one peg of a stool, which is a CrowdStrike content update. And so they're preparing for scenarios like this, and they might be on to something, because this seems like it could happen again. It wasn't necessarily a one-off incident. I mean, just AT &T's cellular service went all black, you know, earlier in February. So, you know, we're all worrying about AI and inhumanity and next-generation technologies, but it really just is a simple content update from a cybersecurity company was enough to send computers crashing all over the globe.

14:52Up next, it's time for our winners of the weekend segment. Tuesday on 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 Tuesday on NBC. I'm Christian McCaffrey, pro running back, and Abercrombie is an official fashion partner of the NFL.

15:33I'm not kidding when I say NFL by Abercrombie broke the internet last year, and I think this season's lineup is even cooler. And so does my wife, who keeps stealing all my hoodies. Stay fit for the season and Abercrombie's newest arrivals. Shop NFL by Abercrombie in the app, online, and in store.

15:58Now for our winners of the weekend, where Toby and I picked two things that sailed through the HOV lane while everyone else was stuck in traffic. You won the pre-show IKEA bookshelf building competition, so you get to go first. my winner of the weekend is cinema baby because it is back and it wasn't oppenheimer or dune 2 that brought it back no it was glenn powell in jeans chasing down mother nature that made the movies feel like the movies again twisters the disaster flick follow-up to the original 1996 twister movie opened to 80.5 million dollars this weekend good for the best ever start for a natural disaster film in North America.

16:37It's also the third biggest opening of the year behind Inside Out 2 and Dune Part 2. Unsurprisingly, the film that takes place in Oklahoma performed very well in the area of the country most affected by tornadoes. The highest grossing theater in the country on Friday was located in Oklahoma. It also shows the ascendancy of Glenn Powell as the movie star of the moment, but only in America. The Midwest-centric film is underperforming overseas. Still, this movie is fun. It's loud. And I'm still very much afraid of tornadoes. Me too. But my takeaway here is that sequels have been crushing it. Go back to last year and there was an Indiana Jones movie.

17:14There was another Ant-Man. There were all these exorcists coming out. There were all these sequels coming out. And Bob Iger, CEO of Disney, said, I think people have sequel fatigue. I think they have superhero fatigue. We can't just keep pushing out these same stories. People are craving something original that turned out to not be true at all. I mean, just look at the box office this year. What is carrying it? Well, Inside Out 2 has collected$1.4 billion worldwide. Despicable B 4 has taken in more than$500 million in just three weekends. The third Quiet Place film, the fourth Bad Boys movie, they were all successful.

17:47The second Twisters movie just continues the momentum that all we want is sequels, I guess. The Rotten Tomatoes score is 92 right now. Clearly, audiences are having a good time watching this. How about this, though? twisters matched Oppenheimer they came out exactly one year apart on the same day they both brought in exactly 80.5 million dollars when they opened on the same weekend I feel like we're hearing a lot less about twisters or I don't know it just feels a lot less big than Oppenheimer felt maybe because obviously Barbie and Oppenheimer Barbenheimer but still I have been seeing Glenn Powell everywhere you literally you cannot open social media without seeing him on some press tour seeing some like thirst trap edit of him so clearly glenn powell is doing people are saying he's like tom cruise 2.0 he's the movie star of the moment he really is my winner is bruce springsteen because the boss is now a billionaire yes bruce got the forbes stamp of approval over the weekend with the publication calculating he has a net worth of 1.1 billion dollars and i suppose when you release 21 studio albums and seven live albums sell 150 million albums total when 20 Grammys, write a best-selling memoir, sell out 236 Broadway shows, win an Oscar and two Golden Globes, and over 60 years of performing, you're going to make quite a bit of money.

19:04Most of Bruce's fortune, though, was accumulated a few years ago when he sold his music catalog to Sony for more than$500 million, the largest ever deal for a catalog. But Bruce Springsteen being a billionaire, it doesn't feel quite right. You know, growing up in a working-class family on the Jersey Shore, his music expertly spoke to the struggles of the average person and the aspiration to do something greater beyond the confines of your hometown which is why it resonated not just around the garden state or even the united states but around the world toby i really shouldn't even be using the past tense for bruce because the man is still going strong he is still going strong i was fully prepared to have multiple bruce springsting song references in there that i wouldn't understand but thank you for not putting me on the hot seat there but yeah forbes estimated that he's worth $1.1 billion, and they also did call it a very conservative estimate.

19:55This is definitely a part of a growing trend of musicians making that step to billionaire status. A lot of it does come from some of these massive catalog sales that we've been seeing, but also, I mean, you go down the list, it usually is from some other reason beyond just music that propels them to billionaire status, but Bruce Springsteen just has such a big body of work. He is such just an iconic figure in the industry that it is mostly on back of his musical talent that he did reach the, how many, four Comma Club. Yeah, I mean, and he's still touring. I mean, before the Ares Tour came along, Bruce Springsteen was the hot ticket.

20:28This show was, you know, the thing that everyone wanted to go to. And last year, he sold more than 1.6 million tickets on his world tour. That generated$380 million in revenue. He plays for three hours. It's just a total marathon. He has so much energy. Toby, I know you're into like distance running and cardio. You should study Bruce Springsteen because I went to a show a few years ago at Gillette Stadium in Boston, and you just keep checking your watch. The music is fine. I think he has some hits, but there's a lot of intermediary stuff. But he just goes forever, and he has so much stamina. You're like, how is this guy doing?

21:06I mean, he's in his 70s. So kudos to Bruce. I mean, keep doing what you're doing. What a career. He's the boss for a reason. There has been a lot of debate as to what exactly the best use case for artificial intelligence actually is. Yes, it can help you do your homework or generate surreal art, but in China, some companies are using it for a much more serious application, bringing your loved ones back from the dead. A company called Silicon Intelligence is creating AI chatbots that mimic a person's likeness and voice to digitally clone people who have died. This trend of resurrecting loved ones has become a pretty big industry in China specifically, especially around a major holiday to commemorate the dead in early April.

21:49Of course, the rise of so-called dead bots raises a whole host of ethical questions. Should we be simulating real-life humans dead or alive? But with Silicon Intelligence's basic tier of digital avatar costing just about$30 and requiring less than one minute of high-quality video and audio of the living person to train it, this niche of generative AI boom is only going to grow. With AI, I mean, death is not final. And this industry is booming. Like, it really is one of the biggest examples of people using generative AI in China specifically. And that's because the government is seen as controlling religion and spirituality, and you're not allowed to talk about death in public.

22:29It's very taboo. So this is seen as a way to grieve and mourn your loved ones in ways that you can't do in public life and the way the government doesn't allow you to do. And that's why it's just taken off there. You go onto any e-commerce website and you see dozens of companies hawking these products of creating a digital twin of someone who is deceased. And that way you can communicate with them. It's obviously a very slippery slope. And there are many, many ethical questions that I can't answer, but it does seem like this is a very popular thing in China. Yeah. And one of the key questions around these bots is how do you train it?

23:07What what data do you use to train a bot to interact with you as a loved one would? And part of it is the companies ask you to submit some of your memories of the person or some of the experiences that this person has lived through, but other companies just go straight to their social media profiles and just use the data of the stuff that they've put out online to train them. Obviously, to make a truly lifelike clone, you do need a very high volume of data, and some companies say that if you want this, start preparing well in advance like 10 years of data would be something that is able to give you the best maximally of your loved one.

23:44So if you are wanting to go down this path, like keep a daily diary of something that you'd of training data that you'd want to train these bots on. Yeah. Some Americans, American companies have gone down this path before, but said maybe we shouldn't. I mean, in 2017, Microsoft filed a patent application for stimulating virtual conversations with someone who had died, but an exec later said they didn't do anything because he called it disturbing. And then there was a company that was using ChatGPT's technology that allowed customers the ability to talk with their deceased loved ones. And then OpenAI terminated the platform's access to its technology, citing the possibility that it would be used for emotional harm.

24:26So it does seem like US companies have dabbled in this. And they just said, look, this is an ethical quandary that we don't necessarily want to enter. There's so many other ethical quandaries with AI. And this is just another one that maybe they're just like, we don't want to even deal with this. Right. One company said a user texted the chatbot for 18 hours straight. They eventually ended up pulling that person's access to prevent addiction. And experts have warned that any attempts to, quote, resurrect the dead could create confusion and stress and disrupt the grieving process. So there's definitely a long ethical road ahead for this to become a widespread technology.

25:03Yeah. I just think there's no doubt, though, we're already seeing it that AI will change our relationship with death and mourning and grieving and things like that. Finally, here's a rundown of the week ahead. The Secret Service Director Kimberly Cheadle is in the hot seat. She will testify today before a House committee on her agency's failure to prevent an assassination attempt on former President Trump during a rally in Pennsylvania on July 13th. Congressional Republicans have been calling on her to resign, and Speaker Mike Johnson pledged the hearing would be must-see TV. Yeah, this is the hottest of hot seats right now.

25:37Even amongst everything else going on right now, a lot of people will be tuning into this hearing. Yeah. And are you hungry for some earnings reports? Well, you're about to feast on them. This week, about one quarter of S &P 500 companies will release their Q2 financials, including Alphabet, Coca-Cola, Tesla, UPS, Visa, Chipotle, Comcast, GM, and Southwest. And if you have room for dessert, the government will release two big economic reports, second quarter GDP on Thursday, and then an important inflation gauge on Friday. I'm stuffed. Usually I have one or two companies I'm looking forward to, but it's a quarter of the entire S &P.