Zuckerberg to Testify in First Major Social Media Addiction Case

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0:33Sam Schechner:Mark Zuckerberg faces his day in court in a landmark trial testing claims that social media harms teens. Plus, India tries to model a frugal AI strategy for the developing world. And a strain in the U.S. commercial real estate market nears a breaking point.

0:50Luke Vargas:The problem with office is not a cyclical problem. People just are using office less because of hybrid work, because of remote work. That's not going to come back. And as a result, these loss in valuations that we're seeing won't change.

1:04Sam Schechner:It's Wednesday, February 18th. I'm Luke Vargas for The Wall Street Journal. And here is the AM edition of What's News, the top headlines and business stories moving your world today.

1:19Sam Schechner:Meta CEO Mark Zuckerberg is set to testify today in a landmark trial on social media addiction. It's the first of several bellwether trials planned in California and revolves around a young woman's claim that platforms like Metta's Instagram foster addiction in adolescents and caused her a host of mental health problems. The plaintiff's lawyer, Mark Lanier, told Fox Business' Varney & Co. what he plans to ask Zuckerberg. Well, we slapped a subpoena on Mark Zuckerberg on purpose because we've got documents with his name that he authored that we believe show he put profits over the safety of children.

1:56Sam Schechner:Meta says that it has consistently put teen safety ahead of growth. The company's lawyers say its products aren't addictive and aren't responsible for a plaintiff's mental health issues. Meanwhile, Europe is dialing up the pressure on big tech. The Spanish government this week asked prosecutors to investigate several social media platforms for potential crimes against minors relating to AI-generated images. And that's just the start of it. Ireland is now probing X. The U.K.'s prime minister is cracking down on chatbots. And the EU wants TikTok to ditch its infinite scroll. The companies have denied any wrongdoing.

2:34Sam Schechner:Journal tech reporter Sam Schechner said the concerted push against predominantly American companies isn't entirely a coincidence.

2:41Luke Vargas:In this political moment, after what's happened with Greenland, after threats from the Trump administration, European governments are eager to show that they aren't going to back down in enforcing EU tech laws. Those can relate either to digital competition or they can relate to content moderation. The Trump administration has made pretty clear that they want Europe to back off on enforcing some of these rules. At first, there was maybe a little bit of tentative enforcement, soft rolling some of these things to help secure trade deals. But the shine is off right now, and they're not holding back.

3:18Sam Schechner:And specifically around children, Sam said that while some governments are trying to regulate tech platforms, others are considering stricter measures.

3:26Luke Vargas:Yeah, it looks like banning social media for younger teens is the new viral trend for governments. What started as this sort of isolated legislative gamble from Australia has spread to over a dozen capitals where leaders are seizing on these issues related to childhood. France earlier this year, the lower house of parliament passed a bill that would do that for under 15s. The UK is launching a consultation. And then just this week, one of the two parties in Germany's ruling coalition threw its weight behind a proposal to do something similar in Germany. Now, they're not necessarily agreed on the age yet, but that puts Europe's largest economy in the bucket of these countries like France, Spain, the UK, Denmark, actively considering implementing some of these bans.

4:13Sam Schechner:Well, the effect of AI and chatbots are also front and center at India's AI Impact Summit this week. In just a few years, the event has turned into a key date on the calendar for private sector AI players, as well as government officials eager to regulate or tap into the technology's potential. Our South Asia Bureau Chief Tripti Lahiri is in New Delhi this morning for that summit. Tripti, I've seen that Indian Prime Minister Narendra Modi has been out there touting AI's potential prospects this week, but also emphasizing this morning that the technology needs to be inherently human, mutually beneficial.

4:48Sam Schechner:You know, I'll be honest, it sounds a little fluffy, but I'm curious if there's any real ideas coming to the fore about how to make it so.

4:55Mark Zuckerberg:I totally hear what you're saying. There's a lot about AI that can seem in the realm of hype and exaggeration. But I think India is a good place to talk about what does AI really mean for people? Because if AI can do basic coding and do lots of basic human jobs, that's a big challenge for India, which has built a big tech industry on doing those jobs cheaply for a lot of the world. So when India's leader says we need AI to be human centric, he's certainly thinking about those challenges and how do we make sure AI just doesn't put a lot of people out of work. At the same time, I think India does see real benefits.

5:31Mark Zuckerberg:For example, helping to translate things from one to another of India's many languages in real time, that was something which was really, really difficult until recently. And once you have something like that, a lot of other things can be built on it.

5:43Sam Schechner:Possibilities, you sort of package them up in your recent reporting as a frugal AI strategy that maybe India thinks could be a blueprint for the world. I mean, And take us into what that strategy looks like.

5:54Mark Zuckerberg:If you're going to build a huge model that has answers for everything and everyone, yes, it's going to be expensive. It's going to need tons of energy. It's going to need tons of computing power. And that is not going to be frugal. But what India is saying is, hey, we have a specific problem with delivering these health services to a village. Or we have an issue with we don't have enough clerks and stenographers and courts. So India is already experimenting with software tools that can speed up transcription and court recording and witness depositions and do it in lots of languages. And India, by the way, has 50 million pending cases.

6:26Mark Zuckerberg:But it inherited this legal system from Britain when it was a colony. And now that would enable India to offer a tool that it developed here to other countries with that same shared legal system.

6:36Sam Schechner:How's that gone over with the heads of big tech companies that I prefer those expensive solutions are the ones that are taken off the shelf and paid for by countries like India?

6:45Mark Zuckerberg:Well, so far, they're all championing and saying we're here to support India's AI strategy as they would. And frankly, they see a lot of opportunity as well. Just because India is going to develop some of these kinds of tools cheaply doesn't mean that India is not going to be a market as well. India is very keen for data centers to come in, is offering incentives for that, a tax break for that. So I think that they see a lot to be gained, even if alongside India is promoting the spiral LALPATH for how AI could develop.

7:12Sam Schechner:And because you mentioned trying to solicit the data center investment there, what are the prospects for that?

7:17Mark Zuckerberg:What is really going to be something India has to solve is the electricity needs and the water needs for cooling. So, you know, India is in any case a country where water is an issue a lot of the year. And similarly on the power front, actually, you know, the average person here consumes far less electricity than they should if all things being equal. As they get richer, they're going to need more power. But then these data centers are also going to need power. So India's going to have to figure out how does it deploy the power that it has in ways that are fair.

7:47Sam Schechner:All right. You've laid out the big opportunities, some profound fault lines coming down the road here as well. I've been speaking to Wall Street Journal South Asia Bureau Chief Tripti Lahiri in New Delhi. Tripti, thank you so much for the update. Thank you for having me. Coming up, we've got the rest of the day's news, including fresh warning signs from the commercial real estate sector after the break.

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8:38Sam Schechner:Japan plans to invest$36 billion in the U.S., the first of its$550 billion strategic trade and investment agreement with Washington. The investments include a$33 billion gas-fired power plant in Ohio,$2 billion in an LNG export facility in Texas, and$600 million for a diamond grit plant in Georgia. Meanwhile, Japan's finance minister is defending the country's economic plans after the IMF urged it not to cut taxes and to refrain from fiscal loosening. That warning follows Prime Minister Sanae Takeuchi's pledge to suspend sales tax on food and beverages to address affordability concerns. Well, here's a scary phrase.

9:22Sam Schechner:Zombie office buildings across the U.S. are becoming a real headache for commercial real estate, with lenders starting to call in tens of billions of dollars of troubled loans. Refinancing property debt has become difficult since interest rates started to soar in 2022. And in January, the delinquency rate for office loans in commercial mortgage-backed securities climbed to a record 12 percent. Here's the journal's Peter Grant.

9:47Luke Vargas:For a couple of years, lenders were practicing a strategy known in the business as extend and pretend. Basically, what that means is that when loans matured and borrowers couldn't repay them, lenders would extend them, hoping that conditions would improve. Now that hope is fading and a growing number of loans are moving into special servicing or default. So a good way to think about it is that the industry spent a few years basically buying time, and now that time is running out and everyone, owners, lenders, cities, they have to figure out what these buildings are

10:22Sam Schechner:really worth in this new post-pandemic world. Peter says that many lenders are now having to accept that the decline in property values and cash flow is part of a new reality where hybrid work has permanently reduced demand for most office space.

10:36Luke Vargas:The problem with office is not a cyclical problem. The performance is not going to improve down the road. And as a result, these loss in valuations that we're seeing won't change. And there's a reckoning that the lenders and the borrowers have to go through to realize that lower value, and they have to deal with it either through foreclosure or default or something else that's going to be very painful. And they've

11:04Sam Schechner:been trying to avoid the pain up until now. That said, there are bright spots in commercial real estate, with industrial buildings and retail centers continuing to perform well. And today's release of Minutes from the latest Fed meeting will kick off a busy few days for investors trying to parse the direction of the U.S. economy. Tomorrow, it's jobless claims, and on Friday, the Fed's preferred inflation gauge and an early estimate of GDP growth in the last quarter. Many economists are looking for signs of the so-called K-shaped economy, where the highest earners continue to thrive while lower income brackets struggle.

11:38Sam Schechner:On the latest episode of WSJ's Take on the Week, Royal Bank of Canada chief economist Francis Donald said that the K-shape is making predicting growth a lot harder.

11:47Mark Zuckerberg:You know, if you go into a room of 100 people and you ask everyone, how are you feeling about the economy? A consumer confidence indicator weights everybody the same. Everybody gets one vote in that. But when you go out in the real economy, that's not the case. Not everybody has an equal vote when it comes to total spending. We know there's plenty of data that will tell you the top 10 percent of Americans spend 50 percent of all of the money. So economists have had this struggle, which is, well, do we ignore that confidence data altogether? Do we say, well, that's the K-shape and it's irrelevant?

12:18Mark Zuckerberg:Or do you recognize it as just telling you something different? If I want to forecast retail sales or GDP, I can't spend as much time looking at something like confidence data. But if I actually want to think about the real economy, if I want to help companies understand who their customer base is, if I want to help policymakers make the right decisions, then ignoring things like confidence data and saying it's just the K-shape, that can be really dangerous.

12:41Sam Schechner:And for more of that interview with RBC's Francis Donald, check out the link we've left in our show notes. And that's it for What's News for this Wednesday morning. Today's show was produced by Daniel Bach and Hattie Moyer. Our supervising producer is Sondra Kilhoff, and I'm Luke Vargas for The Wall Street Journal. We will be back tonight with a new show. Until then, thanks for listening.

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