Will AI Crash the Economy?

Summary

Everybody's Business – "Will AI Crash the Economy?"

Podcast by: Bloomberg & iHeartPodcasts
Hosts: Max Chafkin & Stacey Vanek Smith
Episode Date: August 22, 2025

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Overview

This episode dives into the growing skepticism around artificial intelligence (AI) and its actual economic impact, questioning whether the AI boom is a bubble poised to crash the economy. The show also explores fast food trends amid economic stress, with a spotlight on Taco Bell’s resilience, and concludes with an analysis of the significance of the Federal Reserve meeting in Jackson Hole. The main event is a candid interview with Ed Zitron, tech PR expert and host of the “Better Offline” podcast, who details why he believes AI is overrated and potentially dangerous to the financial markets.

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Main Segments & Key Discussions

1. Is the AI Hype All Hat, No Cattle?

[01:12 – 06:19, 06:03 – 22:27]

Context & Skepticism

• Hosts discuss the week's market jitters stemming in part from doubts about AI's transformative power.
• Max shares his worry that AI's economic potential is grossly overrated: “This is the risk that the AI just, like, doesn’t do anything, and all these businesses that are spending tens of billions of dollars… will wind up being worth a lot less than we think.” (06:24)

The Bear Case: Interview with Ed Zitron

• Ed Zitron, self-proclaimed “AI hater”, lays out why he thinks AI is overhyped, risky for the economy, and why the media & markets should shoulder some blame.

Highlights:

• Lack of Meaningful Utility:
  • Zitron argues, “When you actually look at what these models can do and their actual outcomes, they don’t do that much. They’ve not been that useful. They never have been that useful.” (09:09)
  • “Large language models are inherently limited in what they can do. They are inconsistent. They hallucinate, which is when they authoritatively state something that isn’t true… A hallucination will mean it does something wrong.” (13:22)
• Corporate Adoption Myths:
  • Max cites an MIT study: “MIT just put out a study suggesting that 95% of the generative AI pilots that companies are pursuing are failing.” (12:12)
  • Zitron adds: “Enterprise adoption of AI is huge. It’s everywhere. The problem is it doesn’t learn. It isn’t good at complex tasks, it isn’t good at workflows.” (12:45)
• Misleading Market Narrative:
  • Zitron on AI-driven market gains: “This entire thing is vibes… All of these companies seeing growth from AI are not seeing growth from AI. They are riding a bump of already existent growth…” (14:49)
  • “Any narrative in markets is scary because they can make the markets go to these pornographic heights… then they can drop the moment someone makes a sour fart and everyone smell.” (15:31)
• Systemic Risks:
  • Zitron breaks down concerns about concentrated tech market value: “The Magnificent Seven makes up 42% of Nvidia’s revenue… If their whims change, Nvidia’s revenue drops.” (17:26)
  • Data center spending (“more of economic growth than all consumer spending combined”) is pegged to AI expansion, which he warns is unsustainable. (17:26)
• Potential Crash Scenario:
  • “Vibes based market means that once the vibes sour, money go down, market go down. At that point, the markets would turn to fundamentals.” (18:46)
  • Zitron’s bleak outlook: "I don't think there is any cushioning the fall anymore." (20:55)
• Media & Market Responsibility:
  • Zitron doesn’t mince words: "The media has failed here categorically, across the board. I'm not going to name names, but there are people that should be ashamed of themselves." (20:55)
  • “The markets are nonsensical growth drunk idiots. And as long as we obsess with growth, we will keep creating these cycles." (21:39)

Memorable Quotes:

• Ed Zitron: “Every description that I've heard of how people use [AI] is just what Google search should be.” (10:28)
• Stacey Vanek Smith: “I use AI as a research assistant, but there are some really exciting uses… AI deciphered the whale language. We were able to talk to whales for the first time.” (11:25)
• Max Chafkin: “If that story [AI] started to collapse, their [tech titan] values would collapse.” (16:34)

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2. Pop Culture and Markets: Labubu Craze

[02:37 – 06:03]

• Brief comedic exploration of the Labubu toy craze, a hit Chinese import that is outselling even Barbie.
• Hosts' children (and their friends) offer puzzled, funny takes on why these “demonic bunnies” have caught on, underlining the unpredictable nature of consumer fads and China’s growing cultural export power.
  • Child: “People just have bad tastes these days.” (04:31)
  • Max: "Honestly, cute monster. I guess that's the answer.” (04:46)

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3. Fast Food Winners & Losers: Taco Bell’s Secret Sauce

[25:03 – 37:48]

Guest: Dina Shanker, Bloomberg Businessweek food reporter

• Despite industry-wide slowing sales and low-income consumer pullback, Taco Bell is thriving.
  • Dina Shanker: “Taco Bell turns out is growing. And not only are they growing, they're actually not even seeing pullback from low income consumers, which McDonald's and Wendy's both reported that they were...” (27:19)
• Reasons for Taco Bell's resilience:
  • Remains consistently cheap (“How many other places can you order like six different things off the menu for less than ten dollars?” [28:30])
  • Constantly introduces new, limited-time menu items (Cheez-It Crunchwrap, Street Chalupas, Midnight Baja Blast, etc.).
  • Viral social media presence — “There's a whole genre… people just ordering things from Taco Bell and eating them on camera.” (28:30)
• Broader economic insight: Rising fast food prices are pushing lower-income customers out, but Taco Bell's cheap innovation bucks that trend. “If you are dependent on low income consumers, then those consumers are pulling back and… you’re like, I’ll just make dinner at home.” (32:37)
  • Higher-end “fast casual” chains (like Sweetgreen and Chipotle) are also reporting disappointing sales, suggesting broader spending pullbacks.
  • Potential takeaway: “If people are pulling back from Sweetgreen… then I think we have a pretty bad sign.” (37:04)

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4. Underrated of the Week: Jackson Hole and the Fate of the Fed

[39:04 – 42:24]

• The Federal Reserve’s big gathering in Jackson Hole is called an “underrated” story because of its market-moving potential.
• Stacey explains: “Donald Trump… they're really making a play to have much more control over the Fed, which has traditionally been quite independent. A lot of people see this as a big threat to the economy if that becomes politicized.” (40:20)
• Jerome Powell’s upcoming speech is seen as pivotal for central bank independence amid political pressure.
• Max jokes: “I cannot imagine a more boring thing than a conference full of central bankers. But why this speech is significant?” (39:52)

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5. Revisiting AI and Algorithmic Price Fixing

[42:24 – 44:05]

• Listener email points out how AI is being leveraged (controversially) for rental price fixing (DOJ settlement with major landlord Greystar).
• Stacey: “AI is effective. It has an excellent business use case. It can now force all of our price fixing. Yeah, it's amazing if you're a crooked landlord.” (43:07)
• Max clarifies there was no admission of wrongdoing by Greystar but notes the case illustrates the “shadow side” of AI business use.

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Memorable Quotes & Moments

• Ed Zitron [on AI’s real market value]:
  • “All of these companies seeing growth from AI are not seeing growth from AI… it's not coming from AI.” (14:49)
• Stacey [on AI’s practical uses]:
  • “It helps me in the same way like a very fast, semi competent intern would.” (09:55)
• Max [on the AI narrative]:
  • “...a significant part of our retirements [is invested here]… and then you have this additional problem... all this capital investment.” (16:13)
• Dina Shanker [on Taco Bell’s marketing]:
  • “A never ending menu means never ending online content.” (27:43)
• Stacey [on fast food economics]:
  • “If you are dependent on low income consumers, then those consumers are pulling back... making dinner at home is always less expensive and even more so when prices have gone up.” (32:37)

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Timestamps & Notable Segments

| Time | Topic | Speaker(s) | |-----------|-----------------------------------------------------------|---------------------| | 01:12 | Episode open, theme of AI skepticism | Max & Stacey | | 06:03 | Max expresses AI economic bubble concerns | Max | | 08:13 | Interview with Ed Zitron begins | Ed | | 09:09 | Zitron's core arguments on AI limitations | Ed, Stacey | | 14:49 | Impact of AI “vibes” on stock market | Max & Ed | | 16:32 | Discussion about the tech sector and Nvidia's dominance | Max & Ed | | 18:46 | Zitron’s “vibes-based market” collapse scenario | Ed | | 20:55 | Zitron: “no cushioning the fall anymore” | Ed | | 25:03 | Taco Bell’s economic success story | Stacey & Dina | | 27:43 | Social media’s role in Taco Bell’s success | Dina | | 32:37 | Broader fast food struggles and consumer cutbacks | Dina | | 36:01 | Are Taco Bell’s gains a warning sign? | Max, Dina | | 39:04 | The undervalued significance of the Fed’s Jackson Hole mtg| Stacey, Max | | 42:24 | Listener email about AI and price fixing | Max, Stacey |

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Conclusion

• Skepticism toward the AI-fueled market boom is growing, with Ed Zitron laying out a detailed, data-informed argument that AI’s usefulness—and value—is massively overstated, creating dangerous risks for the economy.
• Taco Bell serves as a rare bright spot in a struggling fast food sector, using low prices and menu creativity to weather economic hardship.
• The upcoming Federal Reserve meeting in Jackson Hole is presented as a crucial economic event, particularly amid political threats to central bank independence.
• Listener engagement brings in new concerns about AI’s real-world impact on markets, notably in rental pricing.

Final Question from Hosts: Are you an AI hater, or an AI lover? Tell us your take at [e-mail].

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Tone: Informal, energetic, skeptical (on AI), humorous, analytical

For more, follow Ed Zitron’s podcast “Better Offline” and check out his substack for in-depth critiques of AI and tech market dynamics.

Transcript

[A]

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[A]

Bloomberg Audio Studios podcasts Radio News.

[C]

This is everybody's business from Bloomberg Business Week. I'm Max Chaffkin.

[D]

And I'm Stacey Banik Smith. And this week, Max, I think the theme of the week is like all hat, no cattle.

[C]

That's like a cowboy reference or something, right? Stacy, that's something having to do from your upbring.

[D]

I am home visiting family in Idaho, but I really do think it fits because we have seen the markets take a real hit this week a lot because there have been some signals that maybe AI, which has been this big, you know, touted this big economic game changer, might not be everything we thought.

[C]

Yeah, we've got a really provocative conversation with Ed Zitron of the Better Offline Podcast. He is an AI hater and he is here to explain to us why we should be worried.

[D]

Also, Max, the fast food industry starting to show some signs of distress and some restaurants coming out and saying that this is going to be a really tough stretch for lower income consumers.

[C]

Wait, but there's one fast food restaurant that is doing well.

[D]

Stacy, that's true.

[B]

Welcome to Taco Bell.

[C]

Yeah, we've got Business Week's Dina Shanker on to talk about my favorite fast food restaurant, Taco Bell.

[D]

And for our underrated story, this one might be a little bit more all cattle, no hat. The Federal Reserve meeting in Jackson Hole. Big speech coming later today.

[C]

Everybody's business goes west.

[D]

Yes.

[C]

Stacey, I can't believe I'm saying this, but before we start the Show. I feel like we have to talk a little, just for a second about Labubu.

[D]

Oh my gosh. The like little stuffed demonic looking bunnies.

[C]

So these are like Beanie Babies, but for kids of today. They are sold by a Chinese company called Popmart. Popmart reported its earnings this week. Stock went up 20%. And it's all because basically people cannot stop buying these little dolls. And this has come, I got to, unfortunately, to my house as well.

[D]

Yeah, I mean, these, like, the little demon bunnies are outselling Barbie. They're outselling Hot Wheels. And I don't understand it because they just look. They don't do anything high tech or interesting. They also look very frightening. It looks like they're happy that the world is burning or something. I don't know.

[C]

Yeah. So I wanted to get to the bottom of this and talk to some customers who really understand this phenomenon. So of course, like, I asked my own children who are ages 10, 8 and 5, and we had a. A handful of other children who are related to the show in one way or another way in. Let's give a listen. What's so special about Labubu?

[D]

I actually don't know. All I know is that they're popular.

[C]

Cause they're cute.

[D]

They're supposed to be monsters and they sort of look like bunnies.

[A]

And when did you first hear about the Labubu?

[D]

At camp. And they like the really freaky faces, the fur, the shape and the colors.

[A]

Why do you think lobooboos are so popular? Their heads turn and they could be like, not just one boring color.

[D]

Because they're really new toys. The reason why people like them is cause they're freaky. Maybe because they're collectible. They're just cute. I completely disagree. They're not cute. They are just freaky, weird toys.

[A]

Also, I do not know why they are popular. People just have bad tastes these days.

[C]

Why do you think they're selling so well?

[A]

Probably just because, like some popular person, like bought it and now everybody thinks they need to get one.

[D]

Maybe.

[C]

Honestly, cute monster. I guess that's the answer.

[D]

I think people have bad taste these days. Nailed it. I think that was your son. These days people don't know what they're. How old is your son? Who's saying this?

[C]

He's eight. He's a hater.

[D]

When he was like, people have terrible. I was like, that is Max Chavkins. That is Max Chavkins son.

[C]

I know, I know.

[D]

So cute. They don't seem to know. That is so interesting to me that they seem as puzzled as we are. It's just like, they just are popular.

[C]

What seems interesting to me about this phenomenon, in part is that it's Chinese and that it's like a Chinese toy that has exported and gone global. And, like, there was a line in one of the stories I read saying that, you know, like, Beijing is. Is talking this up as, like, a proud moment. And I think that's. That's true. Like, we've been reading stories for, like, years and years about, like, the Chinese film industry and the. And the role that Chinese consumers are playing in global entertainment companies and so on. But this is, like, a true export. You could imagine that there will be other things like this, that as China grows, you know, globalization, yada, yada, maybe this is. We're going to look back on this as, like, a significant moment.

[D]

The demonic bunnies are just a harbinger for things to come, is what you're saying.

[C]

That's what I'm saying. All right. Stacey, I got to tell you, I'm getting worried about. I'm worried about AI as you.

[D]

You're not going to be surprised to hear that. I know you're. You're a huge skeptic of AI we disagree on this.

[C]

I am worried because we're seeing a bunch of economic signs over the past couple of weeks that suggest to me that maybe we're in a bubble. So obviously, there's the risk that you hear from the AI industry, which is that the AI is going to take over the world. This is kind of the other side of that coin. This is the risk that the AI just, like, doesn't do anything. And all these businesses that are spending tens of billions of dollars building data centers and buying Nvidia chips and buying stock, that all of that is going to wind up being worth a lot less than we think it is.

[D]

Well, yeah. I mean, a lot of companies have staked a lot of money on this technology, and certainly a lot of the stock, stock market, and even the economy is kind of banking on this. So I hear where you're coming from.

[C]

Yeah. And I thought it'd be useful at this moment, at a time we have sort of stock prices dropping. We have lots of bearish signs, including a bunch of the boosters saying that we're in a bubble. Sam Altman said this the other day. Eric Schmidt, the former CEO of Google, wrote it, wrote an op ed saying the tech industry had been too bullish on this technology. I thought it'd be good to talk to a hater, a Guy who could kind of make the. The bear case, who could explain why we're in an AI bubble and what the danger is. And so I called up Ed Zitron. Ed is kind of an interesting guy. He runs a PR firm. It's called Easy pr. Does PR essentially for tech firms. But he also has a sideline as a substacker, and he's been, for years been writing essays and blog posts about the ways in which AI is falling short. He wrote a piece a couple weeks back that I really enjoyed and found interesting called A Hater's Guide to the AI AI Bubble. He also hosts a podcast called Better Offline. And Ed is here now. Ed, how are you?

[B]

I'm doing great. I'm getting a lot of texts. I'm getting a lot of texts of people saying, hey, you know those hundreds of thousands of words you've been writing about that I've been somewhat doubting you on for years? Well, what if they were based on hours and hours of research and careful analysis?

[D]

So you're getting like the well, well, well emails.

[B]

It really, it really is. Well, well, well, look who darkens my text message. I'm not talking about you, Max.

[C]

No, it's because I just did this this morning.

[B]

But you did it. Respectfully. I have people who straight up said I was crazy, reaching out and being like, well, no response, zero interest.

[D]

Has been like, the story of the economy right now is that AI was going to transform everything. And it seems quite plausible in a lot of ways because even just using it in different ways, you can see how AI can do a lot of, a lot of jobs. It didn't seem crazy.

[B]

I gotta disagree with you on that one.

[D]

Okay, yeah, talk to me about this.

[B]

I've been saying this for a while. I wrote that OpenAI was a bad business at the end of last year, but I wrote, how does OpenAI survive in the middle of last year? And I've been making the point that, is it plausible? Because when you actually look at what these models can do and their actual outcomes, they don't do that much. They've not been that useful. They never have been that useful. Can't do my job. And my job, my PR firm, is heavily spreadsheet based. You'd think I would be the first guy to like, pick this up. I am naturally someone that loves new technology. I mean, it's been like this from the beginning. They've never had any kind of real use cases that they can point to. If you go and look at the coverage of GPT Four people were giving credit to that model for ordering a goddamn taskrabbit because it was in the system card from the very beginning. Everybody's got this wrong.

[D]

I will tell you briefly what I am always telling Max, which is that I do use AI quite a bit in like looking up research. And I always back it up, but it feels like it. It helps me in the same way, like a very fast, semi competent intern would. So I find it pretty helpful in terms of like, hey, can you look up, like, where was a country that put big tariffs in place that you. That saw impacts on its economy? So I do have to follow up with research, but I have found it enormously helpful as kind of a personal assistant role.

[B]

But you're even describing a personal assistant where you have to check all the work and do the work yourself.

[D]

I've never had a personal assistant, so it's still better.

[B]

So I don't disagree that there are people using it for research. This is describing what Google should have been. ChatGPT's growth has come as a result of Google's lack of innovation, of no one's real interest or curiosity in making search more than what search was and is today, other than the AI summaries that blow. And I think that every description that I've heard of how people use this is just what Google search should be. And I would be fine with that if these things did not take hundreds of billions of dollars of data centers, boiling lakes, gassing people of color in various communities. But also, I'm not that impressed by that. It's just like, okay, it's better search, sure. Oh, it's for brainstorming as well. Okay. Oh, it's for coding. Well, how good is it for coding? Well, not really clear how good it is for coding.

[D]

Well, like I said, I use AI as a research assistant, but there are all some really exciting uses of AI happening right now. We've got a reading medical images. AI deciphered the whale language. We were able to talk to whales for the first time. Also, you know, going over ancient texts, deciphering those. I mean, there's some really compelling use cases for AI that seem really exciting to me.

[B]

Well, the medical stuff, the thing is with that is that are we talking about large language models or are we talking about AI and machine learning? Because that was happening already. And one of the marketing tricks they do is to kind of conflate the two. Like they love to say AI and then autonomous cars, which are not large language model driven. Maybe there's one bit that There is. And I think that still even these combined use cases don't back up the market further around this.

[C]

Yeah, well, you know, the thing is, and just to put some kind of like some data. I alluded to this at the top, but like, MIT just put out a study suggesting that 95% of the generative AI pilots that companies are pursuing are failing. I think lots of people have kind of experience this in their own lives, right where they are. There are a lot of companies that are like, very enthusiastically embracing these technologies, but not quite yet sure what to do with them. That is where I think the problem, the economic problems start.

[B]

But that study was so much better because, of course, I'm a curious critter and I went and read it. So people have been misreporting that study. It's actually worse because that study has one line in it that says it's a gap, a learning gap. And people have said that's the reason. No, not at all. The actual reason is enterprise adoption of AI is huge. It's everywhere. The problem is it doesn't learn. It isn't good at complex tasks, it isn't good at workflows. Like, the actual reasons is it sucks.

[D]

Wait, what does that mean? It's not good at workflows. So companies are using it, they're adopting it, they're trying it out for different things. And how is AI not delivering?

[B]

I mean, it can't do the actual things that they want it to. The common thing within that study was this mention. If it feels good for a week, then stops being good. These companies, what happens is they adopt it because everyone's saying AI, AI, AI. Everyone's saying AI. The problem is large language models are inherently limited in what they can do. They're not good at automation, they are inconsistent. They hallucinate, which is when they authoritatively state something that isn't true. But hallucinations within massive workflows are cancerous for enterprises because a hallucination will mean it does something wrong. It enters data in the wrong place, or it can't enter data at all. Making a linguistic model try and do distinct replicable tasks. It's actually kind of nonsensical. It's insane we let it get this far.

[C]

Okay, let's start talking about the risks posed by all this AI exuberance. That was kind of the meat of the. The essay you wrote. We could argue all day is, is like ChatGPT useful or not. And Stacy and I have that argument, continue to have it on this podcast. But there is a Possibility, I think we can all agree that it's less useful than we believe or that, that many companies believe and that the business isn't as big. And that's where things I think start to get scary. Ed, start with the stock market. Why is the kind of dependence of the stock market, and in particular like the S&P 500 on this world, such a problem?

[B]

So there's a few things. One, this entire thing is vibes. Microsoft stopped volunteering their AI revenue in January. They said at that point they had 13 billion annualized revenue, so about a billion a month. Stopped sharing that stat for some reason, probably because it's flat or dropping. OpenAI's compute, which is served at cost or around cost. So not remote already a loss, but a bigger loss now is $10 billion or more this year, which is more than 10% of Azure's total revenue. All of these companies seeing growth from AI are not seeing growth from AI. They are riding a bump of already existent growth from expanding their services that already exist, but it's not coming from AI. Easiest way to tell that is because when you actually go and look at the revenues they're making on AI, which are hidden and analysts have, they're like 3 or 4 billion dollars on like 80 to 100 billion dollars worth of capex. On top of that, any narrative in markets is scary because they can make the markets go to these pornographic heights we've seen from the last few months and then they can drop the moment someone makes a sour fart and everyone smell. You don't have a story to fall back on here because the actual technology itself is not that useful. It's not integrated at scale, it's not providing the kind of business returns and it isn't making anyone any money. Salesforce themselves have already said earlier in the year that they expect no growth from AI this year.

[C]

There's one company, right, that is doing super well and it's, it's Nvidia. I mean, to me, like that is where you start to worry because. And you make this point in your, in your piece. Yeah, but like something like today, like 40% of the stock market's value, the S&P 500 value. So that, and that is where most.

[B]

People, 5% is the MAG7, right?

[C]

Yeah, yeah, maybe even up a little bit. So like the Mag 7, which is where you've seen most Magnificent 7. That's, that's like the big tech stocks, they're all going up right now because of this AI story. And if that story started to collapse, Their values would collapse. Tesla, well, Tesla's a mean stock, meme stock, so maybe not worth talking about, but these companies are all trading at huge multiples, huge historic multiples relative to their earnings. And so. So in other words, they're worth a lot more money than they're currently making. And maybe normally you wouldn't worry too much if a handful of companies are potentially overvalued, but this is like a significant part of, of our retirements. And then you have this additional problem, Ed, which is the data centers. All this money that's going in to all this capital investment.

[B]

There's actually another thing that makes things worse. So the Magnificent Seven makes up 42% of Nvidia's revenue. That is also bad. It's so bad, so very bad because it means that if their whims change, Nvidia's revenue drops. And also the data center thing is also bad because data center development and it's mostly from four companies, Amazon, Meta, Microsoft and Google made up more of economic growth than all consumer spending combined. And the data center growth by the way, involves buying those Nvidia chips. So we kind of have this systemic problem here. And the thing is, however you feel about AI, this is terrifying because oh my goodness, there's only so much space on earth. Even if they could afford to buy more GPUs every single day day, it would still they're going to run out of places. And on top of that, this is the thing. At some point Nvidia is going to have to not increase growth every quarter. Otherwise with what Nvidia is going to sell 60 billion, $70,100,000,000,000 of GPUs every quarter by 2027. Is that anyone think that that's reasonable? It isn't going to happen.

[D]

So walk us forward into like the risk that you see potentially going forward as maybe this starts to kind of come apart.

[B]

So vibes based market means that once the vibes sour, money go down, market go down. At that point the markets would turn to fundamentals. They would say, okay, what about the money from AI making money from AI at this point they will say, sorry, I have to take a phone call in another room, I will get back to you in three years. So they don't really have a story to tell them. So at this point they go, oh crap. Well at least Nvidia is doing well, right? Except the next earnings for these companies. The stock market might get a little bit angry if they see all these capital expenditures and where are those capital expenditures going? GPUs and data centers. So that slows, which brings down Nvidia's value. And by the way, the Magnificent Seven, 35% of the stock market's value, 19% of that is Nvidia. So things start tipping there and at that point, data center development slows down and we lose a massive part of our economic growth. At this point, thankfully, we have a commander in chief who is on top of making sure our economy isn't slowing by adding a bunch of tariffs that make things more expensive. So that will slow consumer and enterprise spending. At this point, our economy stagnates and declines and tech has no other story. There is no the reason that they did AI in my belief, and I said this last year in the Rock com bubble, the I believe that they did AI, despite this being nonsensical from the beginning because it is an insane idea, is because they don't have another cloud storage thing. They don't have another growth market. They don't even have the next LinkedIn. They don't have the next Facebook, they don't have the next smartphone. They barely even got the next smartwatch. So you've got no story. Economic development and growth based on pretty much one thing from four companies. Four companies that will eventually be at the wheels of the market who will not like the capital expenditures and push them to drop them. Once those drops, so does economic growth.

[C]

What is the best case scenario here, Ed? What you're saying is like we sort of are able to unwind some of this exuberance as soon as possible and limit economic fallout or something like that.

[B]

I don't think there is any cushioning the fall anymore. I said this a year ago. This would be bad, really bad, and it would only get worse based on the amount that we put into it. The media has failed here categorically, across the board. I'm not going to name names, but there are people that should be ashamed of themselves. And the media did allow this market to grow. Had the media turned around and been like, I don't know about this crap. Had the media not assumed that. I'm not talking about you, Stacey. Just to be clear, I appreciate that something that is Search plus could become the supercomputer had people stopped referring to this as the ultimate assistant. Had people stop quoting every single thing that Sam Altman did. It's the same thing, Max, that you noticed with Elon Musk.

[C]

Yeah, yeah.

[B]

That they just. When Elon Musk so much as farted, everyone's like, we must write it up. But because this was perpetuated. The markets also bought into it. But also the markets are to blame. The markets are nonsensical growth drunk idiots. And at this point they do not. It's very clear that the markets do not actually connect companies with value. They connect companies with growth. And as long as we obsess with growth, we will keep creating these cycles.

[C]

So Ed's podcast, Better Offline, which you should subscribe to, just dropped essentially part one of a two part. Am I right Ed? Is it only. Is it gonna be two or there's.

[B]

Two parts and then a third one explaining how GPT5 works. Because I did journalism.

[C]

So if you wanna, if you wanna learn more on this, check out Ed's substack and check out the podcast, which goes into this in a lot of detail as well. Thanks Ed.

[D]

Thank you, Ed.

[B]

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[D]

Listen to the latest from Bloomberg News now on Apple, Spotify or anywhere you listen. So, Max, as you know, I am home visiting family in Idaho this week and visiting all my old haunts from high school, which is very fun and nostalgic. And you know where I used to spend a lot of my time in high school was in the parking lot of the Taco Bell. Because, because you could buy a meal from Taco Bell with the change in your car. Was this like a thing in New York?

[C]

100%. Yeah. Agree with you. I spent a lot of my childhood in the suburbs and with cars and stuff. I remember a lot of fast food parking lots. But I totally relate to what you're saying. Taco Bell is where you get the really cheap. It's also, and I, I feel like if I don't say this, like everyone will be thinking it. It's where you go when you're stoned.

[D]

I have heard that too, but mostly it was just like so cheap. And, and there's a great article this week in BusinessWeek by the great Dina Shanker who writes about food for Bloomberg and businessweek. And she actually found that Taco Bell is having this amazing moment like they're really winning right now in the economy. And I think a mix of like being home and sort of nostalgically driving by Taco Bell. And this article made me really want to talk to her also. She's wonderful. She is joining us now. Hi, Dina.

[A]

Hi. Thank you so much.

[D]

So if you don't mind, talk a little bit just about the premise of your article, like why is Taco Bell winning right now at a time when so many companies are just really, really struggling.

[A]

Yeah. So if you listen to fast food earnings calls, for the most part, for a while, we've been hearing about low income consumers pulling back, they're raising prices and people are, you know, getting a little stingier with their Budgets. And nobody wants to spend $18 on a big Mac meal. And everything's getting too expensive.

[C]

Is that, is that what a Big Mac meal actually costs these days?

[A]

At certain locations? It can. So franchisees have some control and, you know, varies by location. But basically, what was supposed to be like really cheap food has been getting significantly more expensive. And so it really stood out when Taco Bell turns out is growing. And not only are they growing, they're actually, they're not even seeing pullback from low income consumers, which McDonald's and Wendy's both reported that they were like within the same week. So we were wondering, what is the secret to Taco Bell's sauce?

[D]

The secret sauce. Yeah.

[A]

And it turns out that it has to do a lot with being super cheap and also with just like constantly offering new limited time offers and just like putting new things on the menu, mixing things up. I mean, crispy chicken is big for everyone, including Taco Bell. And it really plays into social media because a never ending menu means never ending online content. I mean, I watched a TikTok video where the woman literally just opens up somebody else's preferred order for Taco Bell eats it, talks about it, and that's it. And the last I checked, it had more than 67,000 likes on it.

[D]

The Internet is an interesting place. It just really is.

[A]

There's a whole genre of that, of people just ordering things from Taco Bell and eating them on camera. And it's, you know, they've really struck a chord, I think, because how many other places can you order like six different things off the menu for less than $10?

[D]

Dina, do you mind like listing off some of the. The offerings that Taco Bell has sort of cycled through?

[A]

Sure. So there was the, of course, like the Cheez It Crunchwrap supreme, which I think was with the huge cheese.

[D]

It massive.

[A]

Cheez It. Yeah, just like with the whole Crunchwrap supreme apparatus around it. The cheesy chicken crispinatas. There's been recently a barbecue chicken on top of fries. There's the milk bar churro, which has like icing on the inside and confetti sprinkles on the outside. The. I forget what the real name was for this one, but this was an old one called the Beef Canoe, which was like this like crispy taco shell, just like filled with beef. So like imagine a beef canoe and that's exactly what it looked like. And I mean there were. They've just. What I love is they're just. You just get this feeling that they're like, you know what? Like, let's just try it. Let's just see if anybody will eat this weird thing.

[D]

Like, we're just, like, throw some things at the wall. Well, I. I actually went to my local Taco Bell, where I used to go growing up, and decided to see what Dina was talking about what kind of, like, new novelty items they had. And here is what they told me.

[B]

Welcome to Taco Bell.

[D]

Do you have anything that's new?

[C]

The streets loopers are brand new.

[B]

Yes.

[D]

Okay, maybe I'll try the street chalupas then.

[C]

You got it.

[D]

And then the Cinnabon twists. And do you have anything else that's new?

[C]

My midnight Baja is new.

[D]

Oh, is that the drink?

[B]

Yeah.

[D]

Ooh, I'll try that. What is it?

[A]

You got it.

[D]

Midnight Baja Blast. Yeah.

[B]

It's Mountain Dew.

[C]

Now, our medium is a dollar for half the hour.

[D]

There's a. Oh, it's happy hour.

[A]

Yeah.

[D]

From 2 to 5. Okay. Okay. Yeah. Why not?

[C]

Okay, so right now we're at 867 pennies, unless you like to make that.

[B]

Nine for the scholarship program.

[D]

Sure.

[B]

$9 at the window.

[C]

Thank you for being so amazing.

[D]

Thank you.

[C]

Okay. Wow. 800 and how many pennies?

[D]

867 pennies. Look at this thing.

[C]

I knew that's what you got.

[D]

I have not tried it. And I have the street chalupas, too, but the whole menu was. I mean, this was like. Have you guys tried this? Is it just normal Mountain Dew that's dyed people?

[C]

I want to see.

[D]

It's like the color Grimace. No. Have you tried it, Dina?

[A]

I can't say that I have.

[C]

Dina, I know you're Bloomberg's, you know, food columnist. How could you not?

[D]

Oh, my God. It's like.

[B]

That's why.

[D]

It's like Mountain Dew and Bubble Yum Grape got together, and it, like, had a sordid affair. It's. It's really sweet.

[C]

So when we talk about, like, Taco Bell doing well, I'm kind of curious, like, what we mean exactly. Like, their. Their sales are. Because, like, Taco Bell's part of a larger company. Like, what. What exactly do we know about. About Taco Bell's performance?

[A]

Their same store performance is positive.

[C]

Got it.

[A]

I think that it was up 4%.

[C]

Okay.

[D]

Same store is, like, same store sales, like, year over year.

[A]

So, like, it doesn't include, like, new stores. And meanwhile, if you look at, like, Wendy's or if you look at Yum's other brands like KFC and Pizza Hut, their sales are down for the year. So one of the things that is so vexing to me is like, yum, has figured it out with Taco Bell. Like why can't they sprinkle some of.

[D]

That magic on their other chains? Why are fast food companies having a hard time right now? This seems like a moment when they would really be thriving. People are on a tight budget, people are kind of nervous and cutting back. It seems like a moment for fast food. Why is, why is this struggling?

[A]

Because if you are dependent on low income consumers, then those consumers are pulling back and you know, an $18 Big Mac meal is not so cheap. And you're like, I'll just make dinner at home. Making dinner at home is always less expensive and even more so when the prices have gone up, which is why so many of them are running deals. There was news today that McDonald's has plans to cut some prices even further. But what's interesting to me about the deals that the other fast food companies run is that their limited time offers are often just come get the thing we already sell, but get it for cheaper. Which I'm sure brings people in. It does bring people in, but it's not the same as like come get this insane, oh, spicy chicken, crispy taco wrapped in beef that is only here for three weeks or until supplies last. Like that's a much more exciting opportunity for some people.

[C]

And we should say that McDonald's news announced Wednesday today as we're recording this is, which is Wednesday, August 20th. Do you think is. Is part of this like some kind of weird pandemic hangover? Like I sort of wonder if companies in an effort to deal with rising prices, raised prices and sort of tried to move up market and then left, maybe left behind lower income consumers in a way that, that is now catching up to them. And where, where Taco Bell as the kind of standard bearer of the cheap ass food is like well positioned to maintain?

[A]

Yeah, I mean we did see a lot of companies during COVID and the immediate aftermath as inflation was rising. A lot of companies just rose, raised their prices. Their costs were going up or they were expecting their costs to go up and they raised prices and consumers had a lot of money laying around because we weren't going anywhere. So we had all those pandemic savings. There were other forms of government assistance flying around so people had money to spend. So for a while, you know, we were hearing from a lot of the consumer companies that the American consumer is resilient, they can handle the higher prices. And then things just crossed some Line where people were like, wait, how much is that?

[D]

It does seem like I do understand why fast food companies have been raising their prices because the price of everything has been going up, especially food like since 2019, the start of the pandemic. I think food prices are up more than 50%. How is taco Bell stayed so cheap? Do we know?

[A]

So one of the ways that they have like kept up their, their LTO calendar is by.

[D]

What's lto?

[A]

Oh, limited time offer is basically one of the things that they do is they introduce new items that are really just new ingredients and you can mix them around and match them and it seems like a whole new thing, but it's not really a whole new thing. It's just a slightly different version of the last thing. It's more deep fried or has like three times as much beef in, in it or whatever. And so I think that's probably helped them on the cost as well because they're not trying to incorporate crazy new ingredients and reinvent the taco every week. Exactly.

[C]

Is this like a warning sign? I mean, Taco Bell's sort of being the exception to this larger trend of, of fast food company. Fast food companies really struggling and struggling in a way that seems even unusual in uncertain times. Are people in the chalupa, in the coal mine? Is this the Baja Bright or what? What is it called?

[D]

Yeah, the Baja Midnight.

[A]

You know, I think that the, the actually the bigger warning sign came from the sweet green earnings, which were really disappointing also because that's the fancy salad.

[C]

It's the 18 salad place.

[A]

That's right. And so there was a time when they were pretty well protected from the, from, you know, bad economy vibes because they weren't dependent on that low income consumer. They're a high income consumer.

[D]

Why do you stand in line in midtown Manhattan like a line of like dozens of people? It was like, it was like Beyonce tickets. We've all done a salad.

[C]

Yeah.

[A]

I mean, and it, if, if people are pulling back from sweetgreen, that means that the higher end of the economy, which the high end consumers often sort of like do a lot of work for the, for the rest of us in their spending. And if they're pulling back on spending, then I think we have a pretty bad sign. And actually Chipotle also had bad earnings recently. And Taco Bell said that part of their success was people trading in from fast casual into Taco Bell. So they didn't name Chipotle, but you can imagine somebody who normally goes to Chipotle being like, oh, well, I could spend $11 on a burrito or I could spend $7 on a box that includes a burrito, the taco, the chalupa, the da da da da da da.

[C]

All right, Dina, we should leave it there. Thank you for for joining us today.

[A]

Thank you so much for having us, Dina. Thanks, guys. Every business has an ambition. PayPal open is the platform designed to help you grow into yours with business loans so you can expand and access to hundreds of millions of PayPal customers worldwide. And your customers can pay all the ways they want with PayPal, Venmo, pay later and all major cards so you can focus on scaling up when it's time to get growing. There's one platform platform for all business PayPal open grow today at paypalopen.com loans subject to approval in available locations.

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[C]

All right, Stacy, it's that time again. It's the time when we talk about the underrated story of the week. And I guess you're going to try to tell me that the Fed is the underrated story of the week, even though we talk about it every single week.

[D]

Well, and rightly so. I think we talk about the Fed a lot and we don't talk about the Fed enough. So yes, I think the Federal Reserve is the underrated story of the week. So the central bankers of the world are meeting in Jackson Hole, Wyoming this week. They've been kind of discussing all things central bank. And later today, Jerome Powell is going to give a very anticipated speech. It'll be the last such speech that he gives. And this is a moment when central bankers are like a little looser than a normal press conference. I think it's all the western air and I think this could be a really important speech from Jerome Powell.

[C]

Okay, for the record, the Fed is not an underrated story. But I actually, now that as you're laying this out, I feel like I need to say that just to, you know, stay on brand or whatever. But, but I actually, like, what do you think? Can you just say like what, like what people are expecting here. Like why this like some speech at a conference? Like, I cannot imagine A more boring thing than a conference full of central bankers. But why this speech is significant.

[D]

Well, and it's true, too, that Federal Reserve speeches are boring, but they are boring by design. They are boring on purpose because the things that Federal Reserve chairs say move markets. This speech, though, could be a little different because right now Donald Trump is really. And the Trump administration, they're really making a play to have much more control over the Fed, which has traditionally been quite independent. A lot of people see this as a big threat to the economy if that becomes politicized, if interest rates get cut because the president thinks it'll give the economy a little sort of temporary, like a sugar shot. And so I'm really interested to hear what Jerome Powell says. This is sort of a moment.

[C]

But you think he is a suggestion. He's going to be like, screw this, like, I'm never raising interest rates f you, Donald Trump. Or like, is that the kind of, like, vibe where we're expecting?

[D]

I mean, I think the Jerome Powell version of that, Yeah. I mean, first of all, a week of Western air, which is going to do some good. I think also he is retiring later this year. Like, his term is up. But this is a moment. This is not an official speech. This is not, you know, like, this is what we're doing with interest rates, which the normal press conferences are. This is just a big global speech that he gives. So. And this is a moment when the independence of the central bank is under fire. I mean, this is must see tv, Max. This is like the super bowl of central banking. This moment in time. I think this is, you have to, like, this is a must see tv. I am getting like, you have to watch this thing. You have to watch this live.

[C]

I mean, I look forward to it. I look forward to, you know, having you here next week to unpack the nuances of what Jerome Powell says and we can talk all about what that means for the economy.

[D]

The instant replays for all of us. Yes, I appreciate you hearing me out on this. I really do think that this is an underrated story.

[C]

Stacy, before we go, and just to circle back to AI, you know, we talked about a couple weeks, this sort of question of price fixing. And Aaron, a listener wrote in to flag a another domain where this is happening. Apartment rentals. There was actually recently a settlement between the DOJ and a landlord which company called Graystar manages something like basically a million apartments, settled with the DOJ over alleged price fixing. And Aaron, Aaron just pointed this out, just super interesting. I feel like this is going to be a thing that we keep talking about over and over again. Just want to continue hearing.

[D]

I feel like I have been proven right by this email because look, AI is effective. It has an excellent business use case. It can now force all of our price fixing. Yeah, it's amazing if you're a crooked landlord. I guess the problem is they're people too.

[C]

One thing I need to say first of all is that Graystar did not admit wrongdoing in this settlement. So just to your okay, any, any suggestion that and it believes that it said in a statement it believes that it's use of this revenue management software complies with the laws. On the other hand, it has agreed not to use these algorithms. And also Stacey, I just want to say like really appreciate the email from Aaron listeners. Tell us what you think about this latest AI segment with Ed everybody'[e-mail] everybody's with an [e-mail] are you a hater or are you a lover? That's, that's what I want to know.

[D]

Yeah, I mean do you think like how do you use AI if you use AI? I want to definitely. If you use AI and love AI, write in. If you don't, you know, do something else.

[C]

This show is produced by Stacy Wong. Magnus Henriksen is our supervising producer and Amy Keane is our editor. We get engineering from Blake Maples and Dave Purcell. Fashion Checks Sage Bauman heads Bloomberg Podcast. Special thanks to Jeff Muskus, Julia Rubin and Maria Lynn. If you have a minute, please rate and review this show. It will mean a lot to us all people find it and if you have a story that should be our business, email us@everybody's bloomberg.net that's everybody with an slumberg.net thanks for listening and we will see you next week.

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