Why Companies Are Buying Bitcoin & Consulting Crashing Out?

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0:28Good morning, Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. Today, the hottest strategy to turn around your struggling business, just hoard Bitcoin. Then how is the unstoppable force NVIDIA contending with the immovable object of a U.S. trade war? It's Thursday, May 29th. Let's ride.

0:51Someone is finally doing something about people standing up and crowding the aisle right when the plane reaches the gate. That someone is Turkey, who in a Larry David approved rule said it would slap a fine on passengers who get out of their seats before the plane has stopped taxing or clog the aisle when it's not their turn to leave the aircraft. Aviation officials say it's a safety hazard when passengers unbuckle their seatbelts or stand up while the plane is still moving. And it can also delay the disembarking process. Toby, what's next? Finding people who clap when the plane lands? Obviously could not be more in support of this rule.

1:26nothing grinds my gears like people getting hot under the collar and jumping up to try to make up three rows where are you going there is nowhere to go it just drives me crazy but you combine this with american airlines's tech that triggers a sound if someone scans their boarding pass before their boarding group is called and we are finally getting to the point where we are bringing back shame in proper amounts in the airport in the travel sector and i love it bring shame back it's a very potent and powerful societal force. So shame the people who get up too early. Shame the early borders. Shame and financial repercussions.

2:03And financial, but mostly the shame. And now a word from our sponsor, LinkedIn. All right, Neil, trivia time. How many professionals are on LinkedIn? Price is right rules? Nope. Feel free to go as high as you want. Well, if that's the case, I'm going big, let's say 300 million. Wow. You nailed it. Really? No. Multiply that by three and you'd be close. LinkedIn has 1 billion members. And among that group, there are 130 million decision makers and 10 million C-level executives. And all those billions and millions of professionals are an advertising goldmine for B2B marketers. With LinkedIn, you can target the professionals who matter most to your business to start generating results.

2:44In the tech space, LinkedIn generated two to five times higher return on ad spend than any other social media platform. And 79 % of B2B content marketers said LinkedIn produces the best results for paid media. Get in on the gold and start converting your B2B audience into high quality leads. LinkedIn will even give you a$100 credit on your next campaign. So go to linkedin.com slash MBD to claim your credit. That's linkedin.com slash MBD. Terms and conditions apply. Eczema isn't always obvious, but it's real. And so is the relief from EBCLIS. After an initial dosing phase, about 4 in 10 people taking EBCLIS achieved itch relief and clear or almost clear skin at 16 weeks.

3:26And most of those people maintained skin that's still more clear at one year with monthly dosing. EBCLIS, LibriKizumab, LBKZ, a 250 milligram per 2 milliliter injection, is a prescription medicine used to treat adults and children 12 years of age and older who weigh at least 88 pounds or 40 kilograms with moderate to severe eczema. Also called atopic dermatitis that is not well controlled with prescription therapies used on the skin or topicals or who cannot use topical therapies. EPCLIS can be used with or without topical corticosteroids. Don't use if you're allergic to EPCLIS. Allergic reactions can occur that can be severe.

3:55Eye problems can occur. Tell your doctor if you have new or worsening eye problems. You should not receive a live vaccine when treated with EPCLIS. Before starting EPCLIS, tell your doctor if you have a parasitic infection. Searching for real relief? Ask your doctor about EPCLIS and visit ePCLIS.lily.com or call 1-800-LILY-RX or 1-800-545-5979. NVIDIA reported earnings yesterday, and while the days of 200 % revenue growth are over, things are still pretty hunky-dory for the company selling shovels during the AI gold rush. Demand for AI infrastructure shows no signs of cooling down, powering NVIDIA to better-than-expected earnings and revenue, as its data center business recorded year-over-year growth of 73%.

4:33Not quite triple digits, but hey, C's get degrees. The other main focus ahead of its earnings was whether recent U.S. chip export controls were going to affect NVIDIA's international chip business in future revenue guidance, And the answer was yes. Yes, they are. NVIDIA forecasted$45 billion in sales for Q2, saying its guidance would have been$8 billion higher if not for the export restrictions on China-bound 820 chips. The restrictions also led to$4.5 billion in extra inventory charges, $2.5 billion in lost sales, and a 10-point hit to its gross margin. Obviously, export restrictions are a hot topic in the chip industry as successive administrations have tried to stop NVIDIA's most advanced tech from falling into Chinese hands.

5:20But Jensen Huang himself called those attempts a failure, arguing they've only accelerated China's domestic industry by galvanizing local talent and government support. Neil, despite all of this political tension, NVIDIA is still chugging along, saying that global demand for their products is alive and well. But actually, Neil, I don't really care what you have to say here, because we have our Morning Brew coworker, Phil, who runs the Maconomics YouTube channel in the studio this morning to chime in on NVIDIA. Phil, first of all, thanks for being here this morning. And secondly, give me your thoughts on how NVIDIA is navigating this China situation.

5:58Thanks for having me on, gentlemen. The effect of export controls were in tight focus. NVIDIA has had to shift things around to comply with the new administration's trade policy. Notably, as Toby said, And NVIDIA took a$4.5 billion hit for having too many H20s on hand after the April 9th deadline for shipping them to China. The H20s were an intentionally downgraded GPU model designed specifically to meet export controls set by the U.S. government for China. NVIDIA ended up making too many, took too many orders, and weren't able to ship them out in time. And that gets even worse next quarter. NVIDIA is saying they expect around$8 billion in losses on the H20.

6:33you would think that perhaps you could just sell these to other companies. And perhaps in some cases that might be true. But these things were nerfed pretty hard to comply with the U.S. government's desire to not ship cutting edge ships to China. So it's certainly been a hectic six months for NVIDIA's compliance department, who, along with the CEO, have been fairly loud in making the case that perhaps limiting China to low powered ships will provide the incentive for the country to finally push through and develop its own chips that can rival the highest performing ones that are coming out of the U.S.

7:06As they say, necessity is the mother of all invention. And there have been some chirps that perhaps Huawei, the Chinese company that would be most likely to challenge NVIDIA, has made more ground in this area than people assume. I mean, I have been there. I just bought the wrong Uncrustables for my girlfriend, and she said, no, no, no, we don't want these old 820 Uncrustables. I want these ones. And she You started making your own peanut butter and jelly sandwiches. So I've been there where you just overload on the wrong inventory. And it does look like investors, though, are kind of shrugging this off because looking at early morning trading right now, NVIDIA is up 6 % already.

7:43And then since the announcement of kind of these export controls, NVIDIA stock has actually risen 20%. So mainly just been this shrug off maneuver from a lot of global investors. But, Phil, you also read through the most recent earnings transcript and found another interesting tidbit about demand for tokens, which is the industry speak for data being processed by AI models. What did you notice there? On the call, Jensen Wong, the CEO, said Microsoft processed about 100 trillion tokens over the last year, which is a 500 percent increase year over year. A token is the base unit of LLM processing.

8:22It's slightly more nuanced than this, but for the sake of brevity, one word equals one token. Anytime a word is taken in from a query or output as a response, that's one process token. So that means Microsoft is processing about 200 billion pages of single-spaced text per year. But as NVIDIA noted on its blog, the exponential increase in token processing has come from generating tokens, output, essentially generating words. So while we're inputting more and more data to these things, they're spitting out from what NVIDIA is saying, a far larger asymmetric amount. This jives with what David Solomon, the CEO of Goldman Sachs, said a few months ago, that an LLM can accurately generate 95 percent of an S1 statement.

9:06An S1 statement is about a three to four hundred page document, a super dense financial legal document that companies file when they when they're about to IPO. He said it used to take a six-person team two weeks to do that. So a bit speculative here, but that exponential increase in token processing might signal that these things have actually started to see more adoption in business use cases, even if those cases aren't made formal within the company. Yeah, it does seem like the demand is healthy, if that's kind of like the underlying point to the point you were making there. Because if you look at the list of domestic companies and their spend for this AI infrastructure, it is quite healthy.

9:48Big Tech still says that they plan to spend$345 billion on AI infrastructure this year. So homegrown demand is healthy as an OSC. Also, you looked at the recent trip over to the Middle East that Trump just took, and it looks like there's a new Stargate project as there. So there's some international demand. So a lot of what we heard yesterday from Jensen Huang was kind of flexing on people saying like, hey, we are shut out of this$50 billion Chinese market. But look at the amount of demand we have from other places around the world and just here in the U.S. So I think a lot of companies are having these hiccups dealing with these export controls or dealing with the trade war.

10:26but NVIDIA probably has the biggest moat of any of them. So they have the most resilience to any of this. So it did look like yesterday, Jensen Huang was basically saying like, hey, we are doing just fine. We're doing just hunky-dory here, despite getting shut out of this pretty lucrative market. And on that note, it's time to move on. Phil, thanks so much for joining us. Where can our listeners find your stuff? You can find me on all of the socials, primarily on YouTube at Maxonomics or on Instagram at MaxonomicsMB. B, it has been a privilege. Thank you, gentlemen. Wow, just loved shutting my pie hole during that discussion and learning a lot about NVIDIA.

11:02Let's move on. If you're worried about job security, just know that the people with far more diplomas on their wall are also feeling the squeeze. McKinsey has shed more than 10 % of its workforce over the past 18 months as the consulting giant hunkers down for lean times in the industry. The cuts began with 1 ,400 back office staff in 2023 and continued with letting 400 specialists in data and software engineering go last year, the Financial Times reported. These are among the biggest layoffs in McKinsey's almost 100-year history. And it's a sharp U-turn from the glory days of COVID when every CEO was looking for help navigating the pandemic, and McKinsey beefed up its workforce by almost two-thirds.

11:43This past year has been a much different story. The company was hit by$1.6 billion in legal settlements for its work with opioid manufacturers. Demand for consulting is down across the board, and something odd is happening. McKinsey employees are staying at their jobs a lot longer than usual. Turnover is typically high at firms like McKinsey, especially during the great resignation of 2021. But the number of people leaving voluntarily has dropped to a record low, and this lack of attrition has led to tougher mid-year performance reviews in an effort to coax the weakest performing consultants to quit on their own.

12:19Toby, McKinsey has hit a rough patch, but I guess it can take some comfort in that it's not alone. It's not alone, but also McKinsey consultants getting fired for operational efficiency into drive profitability. Where have I heard this before? But yeah, I mean, it is just insane. All the things that completely U-turned since the pandemic when they thought that this was just going to be the new normal, that governments were going to just need their services more and more. And talking about government consulting a little bit, Booz Allen Hamilton, who is a massive provider of government consulting, is also cutting roughly 2 ,500 jobs after they said that they are feeling the effects of Trump administration's crackdown on federal contracting.

13:04Its stock price fell nearly 17 % after the announcement because they are so exposed to their 98 % of their$12 billion in revenue comes from government-related work. So the hits just keep coming for a lot of consulting firms. It is interesting, though, to see McKinsey, who is the creme de la creme, they usually have a pretty good sense of what demand will be like and how much workforce they need to satisfy that demand. So to hear them cutting jobs, that is something that you don't normally see. I think a big thing is this lack of attrition. Usually they cycle through people pretty quickly. But in this perhaps labor market that is souring on white collar professionals, they these workers are just staying there a lot longer.

13:45So they've kind of shamed and, you know, made try to make people feel really bad about how they're doing their jobs at these midyear performance reviews in the hopes that they'll just leave voluntarily as they have been in recent years. So overall, the consulting industry has taken a dip in these past couple of years. But there is one firm that's doing pretty good, and that's McKinsey's small rival, BCG, Boston Consulting Group. Last month, it reported a 10 % increase in global revenue. And it's grown its workforce by about 1 ,000 people to 33 ,000. It's almost as big as McKinsey now, which has about 40 ,000 workers.

14:20but there is also another cloud hanging over this entire industry, and that is potentially ChatGPT and AI taking all their work. Yeah, they're trying to frame it that it's going to augment work, not replace consultants, which I know is probably true at some point. But yeah, that's definitely something that junior consultants are looking at saying, wait a second, this can maybe do my job better than I can. Senior consultants are probably still safe because they have to go out and win a business. But yeah, that's just another thing to add to the list of all these headwinds facing McKinsey and others.

14:51GameStop did a very GameStop thing yesterday and bought 4 ,710 Bitcoins worth more than half a billion dollars. It was the company's first investment in Bitcoin and comes as the digital currency has been on an absolute tear this year, flirting with an all-time high last week. While GameStop made the purchase partly because it's GameStop and it's allowed to do stuff for the memes, buying Bitcoin has become a popular strategy for an increasing number of public companies. Obviously, Uber Bitcoin bull Michael Saylor, the CEO of the company's strategy, is the pioneer of this concept, turning his company, once a lowly business intelligence platform, into a leveraged bet on crypto, fueled by selling stock and bonds in exchange for more Bitcoin.

15:33Others have followed in his footsteps, namely Trump's family-run media company, which said this week that it plans to raise$2.5 billion to buy cryptocurrencies as well. In total, the number of listed companies holding Bitcoin surged from 89 to 114 since April and have amassed a horde of around 800 ,000 worth$88 billion. So, Neil, this is a thing now. Companies holding a boatload of Bitcoin because Bitcoin is scarce and it tends to go up. And as it's gone up, more companies have been getting in on the game. And that's because this pioneer of this maneuver strategy has found what is essentially an infinite money glitch.

16:15Well, maybe not quite, but it is close because for every one Bitcoin that they buy, they're rewarded with a 1.6x increase in valuation on the stock market. They own$64 billion worth of Bitcoin, but their stock market capitalization is$101 billion. So if they keep selling stock and using those proceeds to buy Bitcoin, their valuation will keep going up. And that is exactly what they're doing. And that is what all these other companies are trying to do in their footsteps. To be clear, though, this is not a natural fit for a lot of public companies because most businesses are in the business of selling whatever product they sell.

16:53Why would you go and just do this other side quest of putting Bitcoin on your balance sheet? But Matt Levine from Bloomberg actually talked about how it's actually a strategy that crypto investment funds have been pursuing, which is they go and acquire a U.S. public company and essentially just turn them into a pool of a Bitcoin. He talked about one company, Upexi Inc., tiny public company, got acquired by a crypto investment firm and turned into this pot of Solana. Immediately it started selling on a public exchange 4x the value of the actual Solana it holded. And so it is like this interesting arbitrage opportunity where for some reason the public markets are valuing these companies at a premium to the actual underlying assets that they're holding.

17:36Not necessarily something that is financially sound, but you are seeing a lot more companies doing it. And GameStop said that, hey, the reason we're doing it is because we see macro uncertainty and that this is a hedge against a financial system. So they are justifying it by kind of just talking about what the bull case of Bitcoin actually is. But mostly they're just trying to follow this strategy and trying to trade out a multiple to their underlying Bitcoin assets. Up next, that was a lot of numbers. But Neil, it's got even more coming your way. Does it ever feel like you're a marketing professional just speaking into the void?

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18:51Get ready to go from make it happen to made it happen and keep striving. Visit Strayer.edu slash Jack Welch MBA to learn more. Strayer University is certified to operate in Virginia by Shev and as many campuses, including at 2121 15th Street North in Arlington, Virginia. Welcome to Neil's Numbers, the segment where I share three stats from the week's news that will send you down more rabbit holes than Alice. My first number is$216 million, which is how much New York City's congestion pricing toll has raised in the program's first four months. That's right in line with estimates and a sign that the hot button scheme is accomplishing its twin goals to A, raise money for transit projects and B, reduce traffic in the core of Manhattan.

19:36And that's not the only good news congestion pricing fans receive this week. The program has survived for now a legal challenge by the Trump administration, which has echoed many other critics in saying that congestion pricing hurts small businesses inside the zone and lower-income commuters. The Transportation Department threatened to withhold federal funding from New York City projects unless it scrapped congestion pricing, but on Tuesday, a judge said that the government couldn't do that until at least June 8th. Quick refresher on how congestion pricing works. It went into effect in January, charging most drivers$9 to enter south of 60th Street in Manhattan during peak hours.

20:12The policy aims to bring down traffic and pollution, while at the same time raise money for long overdue improvements for New York City's antique transit system. Similar programs have been implemented in cities like London, Stockholm, Milan, but New York's is the first attempt in the United States, and its supporters have to be thrilled so far. Yeah, you do have to be thrilled, but also it is trying to help put money towards funding these massive repair projects that the MTA is undergoing. They've budgeted$68 billion towards this, specifically$12 billion towards subway repairs and station improvements.

20:47Most of those are going towards adding elevators for accessibility and to become ADA compliant. So, yes,$200 million is great to start. But also people have been looking at the budget and saying, wait, we're averaging$110 million to add one elevator to one station. So that's two elevators if you're reading a little bit obliquely and a little bit higher level here. So they still have a lot of money, but this is crucial towards allowing them to continue to sell these bonds to help fund these improvement projects. So it is a very good start for a program that was very controversial when it went into place.

21:23And there's just a lot less traffic because of it. The daily average decline for cars entering the zone is 11%, and the average traffic speeds inside the zone have increased by 15 % in the first two months of congestion pricing. So, so far, so good for supporters of this policy. My next number is a bad sign for the New York Knicks, who try to stave off elimination at home tonight against the Pacers in the Eastern Conference Finals. So far this playoffs, the Knicks are just 3-5 at Madison Square Garden. While they're 6-2 on the road, a perplexing stat given just how rowdy their home arena is, what is the reason for the Knicks' lack of home court advantage?

22:02Some say it's because of all the A-listers sitting courtside at MSG, which distracts the players. New York radio host Boomer Asiason said on Tuesday, I think the Knicks are sick and tired of all the damn celebrities at home. They'd rather get away from all that. On Monday, former Nick Julius Randle also said of his experience at Madison Square Garden, It ain't fun. You can't really focus on the game. You're focused on everything else other than the game itself. Look, I'd get distracted too. A ton of Hollywood stars show up to Knicks games and perch themselves on so-called celebrity row where they're shown on the jumbotron during timeouts and become memes on social media.

22:39The most prominent Knicks fan this playoff run is Lisan Al-Ghaib himself, Timothy Chalamet, who often sits next to his mega celebrity girlfriend, Kylie Jenner, also seen at MSG, Jerry Seinfeld, Bill Murray, Michael J. Fox, Suni Lee, Jelly Roll, and of course, longtime Knicks fan, Spikes Lee. Apparently, they're all contributing to the Knicks' putrid home performance. Toby, you think there's anything to this celebrity distraction hypothesis? Absolutely. I would do my job a lot worse if Timothy Shalmagu was dressed up as Guy Fieri yelling in my face. Do I think I would podcast better if I knew Ben Stiller was going to tweet more about my show than his own show severance no I do not think I would do my job better so it is just the bright lights in the big apple it's part of why maybe players either can can play for the Knicks or they can't play for the Knicks like Julius Randall said wasn't cut out for it necessarily he went to Minnesota maybe he's doing a little bit better there so yeah I do think there is something to it because people look at the front rows I mean it's front row you see them face to face.

23:40You're very close to them. So this is just speculation, but you look at the record and it is playing out in the numbers that you've given us so far. And these celebrity sightings have just become almost as big of a story in and of themselves as the actual basketball game as we head into game five tonight. My final number is the birthday effect. Have you heard of this? It was new to me. Apparently you are more likely to die on your birthday than any other day of the year. A number of studies run across different populations have shown the birthday effect is indeed a thing. One study of 25 million Americans from 1998 to 2011 found 6.7 % excess deaths on people's birthdays, while another study of Swiss people from 1969 to 2008 found 13.8 % excess deaths.

24:27The number crunchers at the website Pudding decided to run an experiment of their own to confirm these findings. Looking at every person who died in Massachusetts from 1990 to 2024, they concluded that the birthday effect was real with 7 % excess deaths happening on people's birthdays, even controlling for seasonal variations. Toby, what is going on here? I don't know, but I'm a little nervous. My birthday's in February, so I got some time before, you know, death is knocking at my door. But why is there a birthday effect at all? There's a lot of explanations. My favorite is actually clerical. It is possible when processing death certificates to confuse the birth and death date, which would explain the apparent increase.

25:09Also, when the exact date of death is not known, oftentimes they just put the first or the 15th of the month as placeholder. So maybe there's an excess of births and deaths recorded on those dates that specifically overlap. Another one is this psychological idea of death postponement, where people have these looming birthdays and they hold on to reach death until they've had their special day. That has been mostly disproved by these studies, though, because you would probably see slight spikes in the birthday effect in the days preceding, in the days after your birthday, but we don't see those in any of the studies.