FSD’s Big Week, Abel Makes a Mark on Berkshire, and 24/7 Trading

0:04Our RoboTaxi's finally here, Motley Fool Money starts now.

0:25Everybody needs money. That's why they call it money. The best things in life are free. But you can give them to the birds and bees. From Fool Global Headquarters, this is Motley Fool Money. Welcome to Motley Fool Money. I'm Travis Hoyam, joined today by Lou Whiteman and John Quast. Guys, the robo-taxis with no safety driver in the vehicle are finally operating in Austin, Texas. This has been something that has been coming for arguably a decade or so from Tesla. Lou, is this a watershed moment for Tesla or just ho-hum given that it's coming in 2026 and Waymo is operating with fully driverless vehicles.

1:09Zoox has vehicles that don't even have a front seat or a steering wheel. You know, is this huge news or is this just kind of the way that things are going for everybody? It's a step in the process. It's not a watershed moment, but it's not insignificant. I don't think it really matters who gets there first if you get there. Tesla has its own advantages, just the number of cars it has out there, etc., etc. They'll do just fine if they can get there. The thing is, they have to get there. And to do that, as an engineering mindset is, you test, you test again, you change the parameters, you continue to build.

1:43That's what they're doing. So this is a step along the process. How close they are, when will they get there? We'll see. Look, you know, I mean, I'm in Atlanta. I see Waymos buzzing around me all the time. So I know that Tesla isn't in the lead here. I don't think it matters who's in the lead. It's just, can they get there? And if this gets them a step closer, good for them. John, what do you think about this? Because the other detail, we don't know exactly how these operations are going. We don't get a ton of safety data either. I know that they have to report some of their safety data to the NHTSB, if I'm getting my acronyms correct, which I'm probably not.

2:20But I believe they've had eight or nine accidents with these vehicles, even with the safety driver, the person that's sitting in the passenger seat. Now it appears that there's actually a vehicle following them. There's obviously remote monitors as well. So is this is this actually something like a Waymo or is this sort of where Waymo was like four years ago? It's a good question. Here's the thing. Elon Musk has promised a lot more than what it just delivered this week. talking about this is going to be much bigger in many, many cities across the United States. And we think he's saying by the end of this year too.

2:58Sure. Well, maybe even by the end of last year, I don't remember what it was, but yeah, this is a step in that direction, but it's still just a step. And as you point out, it seems like we're still monitoring this car pretty closely without the safety driver. Here's the thing with Elon. Take what he says very seriously, but don't necessarily take the timetable seriously. Pay attention to when and go ahead and toss that out. But what he says is very serious. So for example, he just said, expect AI data centers in space in the next three years. Okay, when I hear that, I say, I need to take AI data centers in space pretty seriously, but probably not within three years.

3:38In the same way, these robotaxis without a safety driver, yeah, we are promised a lot more, a lot bigger, and a lot faster, but we are moving in that direction. And I do take it seriously. John, another thing that came out this week was they partnered a little bit with Lemonade. Lemonade is going to be offering with their insurance per mile product. You can insure your Tesla when it's operating in FSD. It's actually 50 % lower than the previous cost. Is that another one of these something or nothing things that's going on? Because insurance is going to be a question for a lot of these robo taxi businesses.

4:12And if even if we look at something like Uber or Lyft, insurance is a big cost for them. So if the actual cost is 50 % lower than traditional insurance, that seems like something. Yeah, this is a general trend out there making devices that weren't collecting data smarter by collecting data. Teslas are collecting tons of driving data and it just had a deal with insurance company Lemonade to tap into that. Lemonade does have a pay-per-mile product, as you point out. And so when full self-driving is activated in a Tesla, the idea is customers will pay 50 % less insurance for those miles when it's activated.

4:51Not overall, just when that is activated. You know, and Lemonade is saying that Tesla is just the first company that we intend to do this with. And it makes a lot of sense if you're Lemonade. Go ahead and tap into that huge Tesla audience. And okay, Tesla has its own insurance, but they're not necessarily all in the same states. There are regulatory reasons for that. So Lemonade is available in some places that Tesla isn't. So this makes sense. Yeah, I think this is gonna be a general trend. Cars are getting smarter and insurance needs to tap into that. Lou, let's stick on the supply side here because I think this is interesting.

5:26The thesis with Tesla for a long time has been, this was gonna be a winner-take-all market. You said that this was not gonna be a winner-take-all market. As you look out three, four, five years and maybe start eyeing opportunities, is autonomy in some of these things that we're seeing from Tesla, whether it's lower insurance costs, whether it's the autonomous features, is this going to be just standard operating procedure, just like airbags and seatbelts and things like that? Or is there going to be a real opportunity for automakers and technology companies in this space? Yes and yes. I think the long history for automotive is that things that are premium become standard over time, especially with safety.

6:06Look, there are a lot of companies right now that offer, insurance companies offer big discounts for cars with advanced driver assist systems. I know, like in some cases, it used to be you get your teenager the beat-up old car. Nowadays, it's better to get a teenager a new car because the safety systems are so good, your insurance is actually lower. So, part of, I think, what Lemonade and Tesla are doing here is marketing. I think it's a neat idea. 50 % off is better than Tesla was willing to do. I'm not sure exactly. It's so interesting. They weren't able to offer those kinds of deals. I don't know exactly what Lemonade is doing better.

6:42Tesla reportedly was losing a lot of money on their insurance offering, too, which I think is interesting. I mean, Teslas are expensive to insure, in part because of their supply chain model. Look, for now, full self-driving is engaged primarily in the most straightforward, easy parts of the drive, which would suggest the least likely to have accidents. You know, it's when things get hairy is when full self-driving has to hand it off to humans. So it's probably a pretty good bet to make, but I think it is a bet. I think that the longer term feature is that, yes, as cars get smarter, we should just see incidents go down and that should affect rates, whether or not there are discounts or not.

7:25This is aggressive. This is splashy. This is kind of neat. But I think it's more marketing. If and when these systems are ready for prime time, I don't think first mover advantage for Lemonade really matters here. I think State Farm, I think Geico, I think everyone else can sort of ramp up these systems pretty quick because they're all looking at this. This isn't going to catch anyone off guard. The final piece of Tesla news this week was that they are getting rid of autopilot, which did seem to kind of be confusing to some consumers. What was autopilot? What was FSD? So that's no longer an option.

7:59Actually, the standard options in a lot of ways are going to be less than what you can get from most other manufacturers. Some of the lane assist and smart follow features just aren't going to be standard with the Tesla, but they are going to offer the FSD for$100 a month. I'll start with you, Lou, but I want your thoughts too, John. is this subscription model something that is going to be successful, not just for Tesla, but for everyone in the industry? Because everyone is trying this. They want this to work. They like the high margins of a SaaS model. But is this the future of automobiles or is the consumer just going to reject it?

8:34Automakers have been thinking about this for a long time. And so far, it hasn't come through. I mean, what is it? Was it Mercedes to try to charge you a subscription for a heating seat? I think it was BMW. Or was it BMW? This is a hard thing to change consumer preference on. If anything, and this is why it's interesting, I think you point out, like Tesla's actually behind here. And they're charging for stuff that others kind of include. A lot of it, like with Honda, I know it's the premium models. Not every model has it, but, you know, so it's a different way. But it's very rare that a company stops taking$8 ,000 up front in return for$100 a month.

9:10I think that's a sign of weakness. I think that's an admission that it's harder to get$8 ,000 for stuff that others are getting from just getting, spending$1 ,000 more on the base model. I wouldn't be surprised if there's a continued push to get whatever is cutting edge off of the standard and you pay for something. But I think that bogey's constantly going to change and his cars will get safer just in the standard, just kind of the consumer will push that. And so it's kind of, if I was modeling Tesla, I would have a hard time modeling huge revenue growth in that subscription because I think you're always going to have a moving target of what you can charge for and how much you can charge.

9:52I don't personally like it. I personally struggle with paying for satellite radio when I can get FM radio for free. But one thing I was thinking about is it's so interesting,$100 a month, are you going to save$100 on your car insurance with 50 % off from lemonade on those miles? I don't know if there's enough there to do that. And so that's just kind of an interesting pricing dynamic. Yeah, it maybe depends on your age. As I've gotten older, insurance has gotten so much cheaper. But yeah, the subscription model will be really fascinating to watch. Obviously, every automaker is trying to figure out how it works.

10:24I know I got a notice that our free subscription to the Volkswagen service where I can get remote start and things like that is coming up and they want something like$100 a year to do that. I don't know if that's necessarily worth it for us, but definitely something we'll be monitoring here. When we come back, we are going to talk about big changes at Berkshire Hathaway. You're listening to Motley Fool Money.

10:47When Johan Rahl received the letter on Christmas Day, 1776, he put it away to read later. Maybe he thought it was a season's greeting and wanted to save it for the fireside. But what it actually was, was a warning, delivered to the Hessian colonel, letting him know that General George Washington was crossing the Delaware and would soon attack his forces. The next day, when Rawl lost the Battle of Trenton and died from two Colonial Boxing Day musket balls, the letter was found, unopened, in his vest pocket. As someone with 15 ,000 unread emails in his inbox, I feel like there's a lesson there. Oh well, this is The Constant, a history of getting things wrong.

11:27I'm Mark Chrysler. Every episode, we look at the bad ideas, mistakes, and accidents that misshaped our world. Find us at ConstantPodcast.com or wherever you get your podcasts.

11:51Welcome back to Motley Fool Money. Greg Abel has officially been CEO of Berkshire Hathaway for about 23 days, and he's already potentially unwinding one of Warren Buffett's biggest deals, that is Kraft Heinz. So John, is this an admission that this was a mistake? Is this Able making his mark? What are your thoughts on this? I think that Warren Buffett already admitted it was a mistake before he retired and was expressing that he did not like the direction that Kraft Heinz was going and splitting these companies back apart when he spent all that time and effort getting them together. I wouldn't necessarily say though, that this is Abel trying to establish himself and make a name for himself and go his own direction.

12:31If you look at the stake that Berkshire has in Kraft Heinz, yes, it is huge. And yet it's only 2.4 % of Berkshire's total stock portfolio. And so if he was going to make his mark, he'd do it in another company such as Coca-Cola or American Express, selling off these much more important positions. But I think he's just tidying up the portfolio from something that he recognizes maybe isn't going to deliver the returns they're looking for. And Buffett's already expressed that he's disappointed. Yeah, my first thought was, thank goodness, Berkshire is finally raising some cash, right, guys? They only have, what,$382 billion?

13:06I'm not sure that was enough. Kidding aside, look, yeah, Greg Abel, he's not just doing this. He shook up management, added a corporate council. He's doing a bunch of things. I don't know what to think of this, because it does seem like a no-brainer. Why didn't Warren do this? It makes me wonder, though, if all of our assumptions about just it'll be business as usual at Berkshire, or Warren picks someone that's continuing the philosophy, is that true? Or are we going to see a dramatically different portfolio here? Obviously, this is something Warren Buffett didn't want to do or didn't do. I don't know why he would leave it to his successor if he agreed with this.

13:47That doesn't seem like his sort of thing. It could be a signal that there's more selling? Are we creating an offset for some gains or something like that? But I have real questions about what you can do with this portfolio to really, really get investors interested again, to make it less business as usual. As I said, they do have almost half a trillion dollars in cash to play with. Maybe this is a sign that, you know, business as usual, the kind of steady as she goes, maybe that's not the plan here. I doubt it's going to be dramatic. I don't think they're going to be doing triple day options in tech stocks or anything like that.

14:24I don't think that. But maybe this just fortress Berkshire that we're so used to, it's just kind of plodding along. Maybe Greg Abel was picked because he didn't want to do that. Who knows? There'll be a lot to watch there. One of Berkshire's former big, big positions, I think it was about half their portfolio, was Apple. And actually, we got some interesting news from Apple, reports from Apple this week. We obviously know that Gemini is going to be powering Siri. We're getting some leaks about what that might look like. The generative AI bot that looks like it's going to be folding into Siri. So now you can talk to my AirPods, for example, something we were, I think, supposed to be able to do about a decade ago.

15:05But Lou, is this Apple now playing kind of a strong hand with Gemini? They've got the distribution, or is this them just being late to the game? Charles, I'm so confused by this because it was last year I was watching actress Bella Ramsey in an Apple TV ad and she was at a party and she couldn't remember who it was that was coming up to her and her phone quickly in a chatbot form just gave her information about who she was talking to and all of that. So what? That wasn't real? Apparently, it wasn't. So, look, I say that. I'm not a tech expert here. But, you know, I think what we're hearing that Siri is going to become is exactly what every Apple ad and everybody else has been saying consumer AI would look like for years.

15:49I think the lesson here is to say, let's see when they actually get here, how it works. This stuff really looks good on TV ads involving celebrities. It's a lot harder in real time. I mean, Travis, right now, I can I can conversationally ask questions of my Pixel Buds and sometimes I get good answer and sometimes I don't with that same Gemini technology. I think that, yeah, this is trying. I mean, this feels both tired to me and wired if they actually get it right because we've been just talking about this forever. And let's see you do it. Yeah, we've talked before on this show about personalized AI and how Alphabet really does have a good hand to play when you consider its distribution and all of its products that integrate together.

16:32To me, Apple is really just piggybacking on that. It does have the consumer reach and the distribution and the products as well. And so I think it can do personalized AI. The partnership with Gemini makes sense. What about the AI pin? That was the other news or rumor that we got this week. Like, it seems like everybody's trying to figure out what AI hardware looks like. And typically what happens is you have a new technology paradigm. You have the PC, you have the mobile phone, and there's a new piece of hardware that comes with that. AI, if it's going to be transformative and disruptive, theoretically, you would need to have a new piece of hardware.

17:10Is something like a pin going to be successful, John? Is it going to just be earbuds? Is it going to be glasses like we see with something from Meta? Is everybody just trying to throw stuff at the wall? I'm very confused about what's going on in this space. Late Apple founder Steve Jobs once said, people don't know what they want until you show it to them. Maybe Apple is going to show us that we really want this. I can kind of wrap my head around the use cases a little bit, but when it comes to what I'd actually use this for in the logistics of making it work, I just don't see any AI device company out there that can get it done.

17:46You look at the defunct startups out there that have tried and have failed. I think that the Apple Vision Pro is a good example here. We have talked about VR headsets forever. I really think that Apple delivered a just beautiful product when it came to the Apple Vision Pro. And people haven't really adopted it because still... $3 ,500 is a lot to spend for a VR headset, to be fair. That is a very good point. That's a very good point. But at the same time, were people who did buy it, were their lives really enriched in the way that they thought it was going to be? I don't know that it actually delivered on the promises.

18:23It's great that all the engineers watched Star Trek because that's where this arrives. You have that little pin you hit. But look. That's right. That's right. I've never made that connection. That's exactly what it is. But wait, hold on. So, this pin will have a microphone, two cameras, an onboard processor, a battery, and all that, and also be flat and light enough to effortlessly attach to your clothes. You got that? All of these startups that John mentioned, one of the real problems was the stupid thing would keep falling off or it would be so heavy, it would rip into clothes. We'll see. Here, though, let's get serious for a second.

18:54As an investor, if you're an Apple, this would be my worry. The speculation here is that they are trying to rush something out ahead of whatever Johnny Ivey, whatever his name is, and OpenAI are trying to get out later this year. That's just speculation. I don't know what that's going on here. But Apple has made its money on Observe and Iterate, kind of come out not with the first thing, but with the better version. If they are switched to, we got to be first because someone that we used to work with is going to release something. That, I mean, again, the question forever with Apple is like, what's the next big thing.

19:33I don't know if this is a positive development if, and I say if, this is the direction they're going to scramble and get something out and figure it out later. That's not really the Apple winning strategy over time. Yeah, the other thing that we learned is that it looks like Tim Cook is not going to be leaving that CEO role anytime soon. So, is he the right person to lead them into this AI hardware paradigm? We will see. When we come back, we're going to talk about potential acquisitions. You're listening to Matley Full Moon.

20:31and get your new new new deal on Sparsim.de.

21:01Brothers Discovery. There's been some other smaller acquisitions announced recently. So let's talk about Disney, a company that did a big acquisition a few years ago, buying a bunch of Fox assets. But if these acquisitions are now possible again, what do you think they could buy? Is Paramount on the table? I want to throw out Nintendo, Epic Games. John, what do you think about these potential deals? As far as potential IP goes, Nintendo is the cat's meow. It has just so much untapped potential and Disney could do a lot with that, but I don't necessarily think that Disney needs more content. It has so much already that it can make into so many different things.

21:40So I'd say that Epic games is pretty attractive from Disney's perspective. It's not really all that strong of a player Disney in the gaming department. And that's kind of interesting as a huge entertainment business. So I think it could grow that Epic games could help. Yeah. So, I mean, the obvious answer here, let's just wait a few years when the PE firms are ready to sell electronic arts. Isn't that the best fit? That, to me, is what I come out to. Definitely not Paramount. Maybe a Hasbro or a Mattel for merch reasons. I think something like that, maybe. But I really think, just wait a few years and see how electronic arts goes, and I'll probably just end up buying that.

22:21The interesting thing with both Nintendo So Epic Games and then Electronic Arts is it is that video game side that they have these IP assets. Disney did invest one point five billion dollars. This was in 2024 in Epic Games. So there's at least a little bit of a tie there. But that does seem like an untapped opportunity as you're creating IP and then you need to monetize it in as many ways as possible. They obviously have the theme park. So it's something they could bring to a company like Nintendo. But both Nintendo and Epic Games could bring more gaming assets. Is that kind of an area where they should maybe have a little bit more focus?

22:57What do you think, Lou? I mean, sure. I mean, if they can get it, I don't, I mean, I like the strategy. I don't know how desperate they feel to do another big deal, especially burned after the last one. So I think I doubt they're as aggressive as you are just kind of, you know, just kind of playing Monday morning quarterback. But it makes sense, sure. Well, the good thing about gaming is it can go both ways. You can monetize what you already have in gaming, but you can also take some gaming assets and turn them into other things. So it just makes too much sense. All right, let's talk about another company that made a big deal a few years ago in buying Activision Blizzard.

23:34That is Microsoft. They have plenty of cash on the balance sheet to make some acquisitions. And there may be some deals that could make sense. OpenAI is constantly looking for funding if that funding dries up elsewhere. Could that be an acquisition? Salesforce. Discord is still private. They've been talking about an IPO for a while. Lou, what could be interesting for Microsoft to acquire? I'd be very surprised to see them go after OpenAI. I think we're moving away from... Do you think that relationship is so fractured that... Well, it's not just fractured. It's just I can't imagine they would think it's valued what OpenAI would want or need to make it work.

24:11I think the partnership they have, the kind of arm's length and ability to look around, actually serves them a lot better. Okay. Discord, maybe, but I doubt it. I do think something like a Salesforce probably makes the most sense. I don't know if I'd say Salesforce, maybe a workday or something like that, just to kind of add to that office. But the real answer here is, could you just buy Zoom and DocuSign and put them out of their misery? What do you think, Jeff? In hindsight, Microsoft probably should have just acquired OpenAI from the get-go. I think it's far too late for that. I could see discourse making a little bit of sense, although it doesn't feel like a Microsoft asset to me.