Private equity’s appetite for restaurants

Summary

Marketplace Podcast Summary: "Private Equity’s Appetite for Restaurants" Hosted by Kai Ryssdal, Marketplace
Release Date: November 20, 2024

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Introduction

In this episode of Marketplace, host Kai Ryssdal navigates through a diverse range of topics, from the complexities of the housing market and the surge of private equity in the restaurant industry to insights on energy policy, autonomous vehicles in China, global inflation concerns, the resurgence of physical buttons in technology design, and the latest retail earnings influenced by impending tariffs.

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1. Housing Market Overview

[01:20 – 04:32]

Kai Ryssdal opens the discussion with an update on the U.S. housing market, highlighting mixed signals. The Census Bureau reported a 3% decline in housing starts in October, primarily due to hurricanes in the Southeast, and an 8% year-over-year drop in permits. Despite these setbacks, the National Association of Home Builders (NAHB) reported a three-month streak of rising confidence.

Matt Levin provides deeper insights:

• Interest Rates Impact: "The Federal Reserve's recent rate cuts have helped Portland Oregon home builder Justin Wood. The construction loans he takes out from banks to build townhomes and cottages are cheaper." ([02:52])
• Mortgage Market Challenges: "A lot of us were really hoping... they've gone the opposite direction." ([03:56])

Rob Dietz, NAHB economist, projects optimism for 2025, expecting mortgage rates to stabilize and new construction to increase. However, rising costs for key materials like lumber—up from $380 to $440 per thousand board feet—as well as increased construction wages, pose challenges. Dan Dunmoyer from the California Building Industry Association expresses concerns over potential immigration policy changes escalating labor costs.

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2. Private Equity Investments in Restaurants

[04:40 – 07:19]

Marketplace's Kristen Schwab explores the burgeoning interest of private equity firms in the restaurant sector, exemplified by Blackstone's acquisition of a majority stake in Jersey Mike's. This trend continues despite the industry's historically thin profit margins and high failure rates.

• Tim Powell, Food Service IP consultant, emphasizes the appeal of established brands with unique characteristics: "It had such a loyal customer base and had old wood paneling and just sort of the lighting that reminded you of like a 60s steakhouse." ([05:45])

• Sean Dunlop from Morningstar notes that struggling restaurant brands are lucrative for acquisitions due to valuable hard assets like property.

Andrew Charles, TD Cowan analyst, counters the high failure rates by stating, "there's no Amazon of food," highlighting the constant demand for dining despite market fluctuations. The shift towards fast-casual brands like Panera and Chipotle further attracts investor interest.

Kristen Schwab concludes that while private equity sees potential in both small, beloved establishments and larger chains requiring operational efficiencies, the overarching goal remains to scale and eventually take these investments public.

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3. Interview on Energy Policy with Gene Gobolis

[07:44 – 12:18]

In an in-depth interview, Gene Gobolis, founder and CEO of World Energy—a biofuels company—discusses the implications of the incoming Trump administration on clean energy initiatives.

• Kai Ryssdal questions the potential repeal of the Inflation Reduction Act and other clean energy provisions. Gobolis responds optimistically: "I fully expect [public and private investment in clean energy] will continue." ([09:39])

• Addressing concerns about political shifts, Gobolis asserts that clean energy growth transcends partisan lines: "The work we end up doing has actually more growth in red states than in blue states." ([10:34])

• When asked about interactions with the newly appointed Chris Wright, Trump’s pick for Secretary of Energy, Gobolis acknowledges the need to adapt: "We’re going to have to just find our way around him." ([11:52])

Gobolis remains hopeful that despite political uncertainties, both public and private sectors will sustain momentum in the clean energy landscape, pivotal for his company's sustainable aviation fuel (SAF) initiatives.

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4. Tech Sector News

[12:41 – 19:12]

Kai Ryssdal provides a brief overview of the day's tech news, focusing on major movements in the stock market and significant corporate developments.

• The Department of Justice has filed a lawsuit against Google's parent company, Alphabet, seeking to force the sale of its Chrome browser to address monopoly concerns in the search and browser markets. Despite this, Alphabet's stock rose by 1⅙% ([12:48]).

• Other tech giants saw varied performances: Apple increased by about 0.1%, and Meta climbed by 1.2%.

Ryssdal notes the resilience of companies despite regulatory pressures, underscoring the dynamic interplay between tech innovation and antitrust regulations.

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5. Autonomous Robot Taxis in China

[19:12 – 24:20]

Jennifer Pack reports on the advancements and challenges of autonomous robot taxis in China, particularly focusing on Baidu's fleet in Wuhan.

• Driver Skepticism: A human taxi driver expressed reluctance to switch to autonomous vehicles, citing safety concerns: "He said that he would never get in an autonomous vehicle." ([20:25])

• Operational Realities: While Baidu operates around 400 robot taxis in Wuhan, they are currently confined to suburban areas with human drivers onboard for safety. Xiao Weiguo, a taxi driver, experiences mixed feelings—recognizing cost benefits but apprehensive about job security and vehicle handling.

• Technological Integration: The Chinese government's investment in infrastructure, equipping roads and traffic signals with sensors to aid autonomous navigation, presents both safety enhancements and logistical hurdles.

• User Experience: Passengers enjoy lower fares ($5 compared to $14) but face longer wait times and less smooth navigation. Xiao Weiguo remarks on the robot taxi's abrupt stopping: "The car just stopped. If this was during morning rush hour and it stopped like this, that would cause a traffic jam." ([23:17])

Despite current limitations, the technology is evolving, and drivers like Lin Zhijun remain optimistic about coexistence, especially given the intricate urban layouts that challenge autonomous vehicle efficiency.

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6. Global Inflation and Central Bank Perspectives

[16:00 – 19:12]

Henry Epp delves into the global inflation landscape, outlining the cautious stance of central bankers despite progress in reducing inflation rates.

• Current State: Canada’s Consumer Price Index (CPI) hits exactly 2%, slightly above expectations ([16:00]). Upcoming reports from the UK are anticipated to reflect similar trends.

• Inflation Drivers: Supply-side factors, including energy pressures and ongoing conflicts in Ukraine and the Middle East, pose risks of price hikes. Jonathan Welborne, a senior researcher at RAND, highlights, "Take the wars going on in Ukraine and in the Middle east, which could flare up in ways that disrupt energy supplies and agricultural commodities." ([17:19])

• Trade Dynamics: Potential tariffs under the Trump administration could trigger trade wars, affecting import costs and currency valuations. Bill Emmons from Washington University emphasizes the cascading effects: "They could [...] make some items more expensive in the US."

• Climate Impacts: Increased frequency of climate-related disasters exacerbates supply chain disruptions and rebuilding costs, as noted by Christian Thiu from the University at Buffalo.

• Central Bank Caution: Central bankers are wary of repeating past mistakes where early optimism led to underestimating inflation. Anne Owen from Hamilton College warns against prematurely declaring victory over inflation, which could undermine their credibility.

Overall, while inflation has receded to manageable levels, external factors keep central banks vigilant to prevent a resurgence.

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7. The Return of Physical Buttons in Tech Design

[24:20 – 28:09]

Rachel Plotnik, an associate professor at Indiana University Bloomington, explores the cyclical resurgence of physical buttons in modern technology design.

• Historical Shift: The transition from physical buttons to touchscreens and digital controls marked a significant design evolution, epitomized by devices like the iPhone. Plotnik observed: "There was a moment when I thought we might be doing away with the concept of the button... but I do see this kind of cyclical effect." ([25:04])

• Design Motivations: Companies initially aimed to minimize physical buttons for a sleek aesthetic but found that buttons offer tactile feedback and a sense of control. Plotnik notes, "buttons are often that kind of go to interface, that give us that feeling of agency and control."

• Complexity Behind Simplicity: While buttons appear simple, their functionality can be complex, especially in critical applications like aviation or DJ setups. Plotnik asserts, "behind every button there are all of these social choices."

• Social Implications: The decision to include or exclude buttons reflects broader societal and organizational decisions, influencing how users interact with technology and exercise control. Plotnik emphasizes the importance of understanding these connections to grasp the full impact of design choices.

In conclusion, despite the trend towards digital interfaces, physical buttons retain their relevance due to their intuitive use and the agency they afford users.

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8. Retail Earnings and Tariff Implications

[28:09 – 29:21]

In the final segment, Kai Ryssdal touches upon the latest retail earnings reports and the potential impact of tariffs.

• Retail Performance: Most retailers reported strong earnings, indicating robust consumer spending. However, Lowe's CFO highlighted concerns over Trump's proposed tariffs, stating they would "add to product costs." ([28:09])

• Tariff Pass-Through: Ryssdal underscores the economic principle that tariffs are ultimately borne by consumers, emphasizing the irony in corporate financial strategizing: "Remember who pays the tariffs peeps."

This segment underscores the delicate balance retailers must maintain between leveraging consumer spending and navigating increasing operational costs due to external economic policies.

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Conclusion

This episode of Marketplace provides a comprehensive examination of current economic and business trends, ranging from housing and private equity to energy policy, autonomous technology, inflation, design evolution, and retail dynamics. Through insightful interviews and expert analysis, host Kai Ryssdal equips listeners with a nuanced understanding of the forces shaping today's marketplace.

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Notable Quotes:

• Matt Levin: "A lot of us were really hoping for that, the light of the end of the tunnel for starting to see rates come down for mortgages and if anything, they've gone the opposite direction." ([03:56])

• Gene Gobolis: "I fully expect [public and private investment in clean energy] will continue." ([09:39])
  "There's no Republican or Democratic climate. The work we end up doing has actually more growth in red states than in blue states." ([10:34])

• Rachel Plotnik: "Behind every button there are all of these social choices." ([25:04])

• Lowe's CFO: "Tariffs [...] would add to product costs." ([28:09])

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This summary encapsulates the key discussions, insights, and conclusions from the Marketplace episode, providing a detailed overview for those who haven't listened to the full broadcast.

Transcript

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[Kai Rysdal]

On the program today, housing Robo Taxis and hey, what does this button do? From American Public Media, this is Marketplace in Los Angeles. I'm Ky Rysdal. It is Tuesday today. This one is the 19th of November. Good as always to have you along everybody. There is amid all the hubbub over who's in and who's out of which cabinet appointment, there is some actual economic news with which to familiarize you. And for us today we have chosen housing and it's a mixed bag. Tbh. The Census Bureau informed us today that housing starts slid about 3% in October from a month earlier, mostly due to those hurricanes in the Southeast. Before you can start a house, of course you gotta have a permit to start a house and those permits were down nearly 8% over a year. On the glass half full side of things though, homebuilders are apparently feeling a bit more, you know, glass half full. Ish. The national association of Home Builders says its confidence index has been up three months in a row now. Add all that to the well reported realities of not enough houses, many of which are really expensive, and mortgage rates going back up again. And what you get is Marketplace's Matt Levin reporting that there is still a whole lot of uncertainty in the new home market for both builders and buyers.

[Matt Levin]

The Federal Reserve's recent rate cuts have helped Portland Oregon home builder Justin Wood. The construction loans he takes out from banks to build townhomes and cottages are cheaper. We are directly tied to the fed funds rate. So when we, when they come down three quarters of a point, we come down three quarters of a point. You know, it's difference of a few thousand dollars of interest over the course of a year. The problem for Wood and the entire home building industry is that the mortgage market is tied to interest rates on longer term government debt. And as those rates have gone up the past two months, he's had to keep spending thousands of dollars offering interest rate buydowns and other incentives for new home buyers. A lot of us were really hoping for that, the light of the end of the tunnel for starting to see rates come down for mortgages and if anything, they've gone the opposite direction. Economist Rob Dietz at the national association of Home Builders says the industry broadly expects mortgage rates to settle down in 2025 and for the pace of new construction to pick up. Ironically though, that means demand for some key housing materials is rising right now.

[Shopify Advertiser]

Just a few months ago, the typical.

[Kai Rysdal]

Price of lumber was around 380, $390 per thousand board feet. Right now it's up to 440.

[Shopify Advertiser]

So that's a notable uptick.

[Matt Levin]

Construction worker wages have also gone up this year. Dan Dunmoyer at the California Building Industry association says he's concerned about how the new administration's immigration polic may push labor costs even higher.

[Shopify Advertiser]

People saying, well, I have my green.

[Kai Rysdal]

Card, I'm able to be here.

[Shopify Advertiser]

I just don't want to deal with the hassle. Maybe part of my family doesn't have it. So I'm just going to go back to where I come from.

[Matt Levin]

About one in every four construction workers in the US Is an immigrant. I'm Matt Levin for Marketplace Wall Street.

[Kai Rysdal]

On this Tuesday, tech did fine. Otherwise unremarkable. We'll have the details when we do the numbers. The corporate news of the day comes to us from the land of cold cuts and condiments. The private equity firm Blackstone says it's bought a majority stake in the sandwich chain Jersey Mike's, the latest in a string of private equity deals in the food service industry since the beginning of the pandemic. Marketplace's Kristen Schwab has more on what's behind those investments. In a sector really known for fickle trends and small profit margins.

[Kristen Schwab]

When private equity firms are looking for restaurants to put their money into, they come to people like Tim Powell, a consultant at Food Service ip. He says he looks for familiar restaurant concepts with a unique touch, like a pizza place he scouted in Chicago.

[Kai Rysdal]

It had such a loyal customer base and had old wood paneling and just sort of the lighting that reminded you of like a 60s steakhouse.

[Kristen Schwab]

These mom and pop places can be good bets for investors, but so can bigger businesses with thousands of locations.

[Kai Rysdal]

Say a chain that has good brand equity, but it may not be operating at full efficiency.

[Kristen Schwab]

Investors are looking for room to grow. Maybe the restaurant could expand abroad or bottle its sauces and sell them at big box stores, all with the goal of becoming profitable enough to go public. Now that is the story of private equity investing in success.

[Kai Rysdal]

On the other hand, you see some of these deals with really battered full service brands.

[Kristen Schwab]

Sean Dunlop, an analyst at Morningstar, says struggling businesses, they can be lucrative acquisitions too.

[Kai Rysdal]

And in that case, you're typically looking for hard assets that you can sell like property.

[Kristen Schwab]

This has become a bigger piece of private equity investments as more restaurants file for bankruptcy. Now, you'd think this, the failure rate of restaurants would be enough to scare private equity away. But Andrew Charles, an analyst at TD Cowan, says the industry hasn't actually seen a lot of disruption. In other words, there's no Amazon of food.

[Matt Levin]

I mean, the good news is that people have to eat and they have to eat three times a day.

[Kristen Schwab]

And when they eat out, they increasingly choose fast casual restaurants like Panera or Chipotle, which sparks more investment in fast casual.

[Matt Levin]

The restaurant industry is increasingly going towards a model of food as fuel, which.

[Kristen Schwab]

Is maybe why we eat everything out of bowls these days. I'm Kristin Schwab for Marketplace.

[Kai Rysdal]

Oil and gas executive Chris Wright is President Elect Trump's pick to lead the Department of Energy. The announcement comes as the Biden administration is racing to finalize last minute grants and loans for its clean energy project. Gene Gobolis is the founder and CEO of a biofuels company called World Energy, and he is hoping to be on the receiving end of some of those loans to help his company produce more sustainable aviation fuel. SAF is the shorthand there. He and I first spoke about the business of SAF earlier this year as part of our series breaking ground. Mr. Gobulos, welcome back to the program, sir. Good to have you on.

[Gene Gobolis]

It's good to be here.

[Kai Rysdal]

So as you think about the next four years in the space in which your company operates, how are you feeling?

[Gene Gobolis]

Well, how am I feeling? I am feeling ready to be surprised by things going differently than everyone says.

[Kai Rysdal]

Go on.

[Gene Gobolis]

Well, you know, I'm thinking back to 2016. And it was a very similar situation. Republicans controlled House, Senate and the presidency. And a lot of folks in my world were pretty concerned. And it turns out that in the subsequent four years, things went very differently than we would have imagined. And there was a lot of growth in clean energy during Trump won. And I expect a lot of growth in clean energy and Trump, too.

[Kai Rysdal]

You know, when we talked however many months ago, it was one of the things that we talked about was how government investment in sort of kickstarting sustainable aviation fuel and large parts of what your business does. Government intervention was critical. I don't know whether the president elect will repeal the Inflation Reduction act and all of the other clean energy provisions or whether he'll claw some money back. What's your level of concern about?

[Gene Gobolis]

Well, look, there's a lot of speculation about what will happen, and I don't know more than anyone else knows. But I do know that once you really peel back the layers on a lot of this public investment in clean energy, what you end up having is economic growth. It's got to be seen in the context of global economic competition. And so both public and private investment in clean energy, I fully expect will continue. Now, will we have some big headlines about things that change? Of course we will. But on balance, I think we're going to continue to see ongoing investment.

[Kai Rysdal]

You will, I'm sure, be spending substantially more time in Washington. And with your with your lobbyist associate.

[Gene Gobolis]

Jazz, I am heading there tomorrow morning.

[Kai Rysdal]

All right. Well, so what are you going to do tomorrow? I mean, you know, without naming names, what are you going to do? Who are you going to talk to?

[Gene Gobolis]

Well, look, it's early days. We're just getting nominees, have a lot of people to meet for the first time. And what we do is not a partisan issue. There's no Republican or Democratic climate. The work we end up doing has actually more growth in red states than in blue states. So this is not as this is not as much a red state, blue state thing as many people make it out to be.

[Kai Rysdal]

Well, you're right to point out that Republican and conservative states have gotten a healthy chunk of the infrastructure and clean energy investment that President Biden and the Congress put into place. But are you really saying that it's not a political issue?

[Gene Gobolis]

Well, I think it's very much a political issue during election cycles. But, you know, the way people govern is often somewhat different than the way they're running for office. So, yeah, of course, there are tons of politics wrapped up in this. And what one day is presented as a clean energy technology the next day. It might be an agricultural economic support technology, but it's the same technology with different slants depending on where the national priorities are.

[Kai Rysdal]

Last thing and then I'll let you go. Mr. Wallace, you've I'm sure seen the news that the president elect is named Chris Wright, who's a straight up fossil fuels guy, to be his secretary of Energy. Is he on your call list somewhere?

[Gene Gobolis]

Well, he certainly will be. He's just finding his way around and we're going to have to just find our way around him. But yeah, certainly will be.

[Kai Rysdal]

World Energy is company. Gene Gabolis is the CEO. Mr. Gabolis, thanks for your time, sir. I do appreciate it.

[Gene Gobolis]

It's great to be here. Thanks.

[Rachel Plotnik]

Coming up, we go through these moments where companies want to take all the buttons away and then put all the buttons back.

[Kai Rysdal]

Make up your minds people. But first, let's do the numbers. Dow industrials off 120 points today. 3, 10% closed at 43,268. The NASDAQ increased about 195 points. 1%. 18987s and P 500 gained 23 4/10%. 59 16. There the Department of Justice asked the judge to force Google to sell off its Chrome Internet browser. And that's according to Bloomberg. The DOJ sued parent company Alphabet to curb what it claims is a monopoly on the search engine and browser market. Alphabet. Alphabet nonetheless elevated 1 1/6/10% today. Elsewhere in big tech, Apple ticked up about a 10th percent. Meta climbed 1 and 2 10%. We heard from Kristen Schwab about the rise of private equity in fast casual restaurants. Chipotle slimmed 1/10 of 1%. Red Ramen Gourmet Burgers slid 6, 10%. You're listening to Marketplace.

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[Kai Rysdal]

Money Money Money. Kids always have questions about it. And maybe you do too. That's why Million Bazillion, the Webby winning podcast from Marketplace, is here to answer the awkward and sometimes surprising questions your kids have about money. We explain concepts like savings accounts, retirement, and the differences between brand names and non brand names. Million Bazillion is the place for you and your kids to learn about money. Together, we help dollars make more sense. Get it Listen to Million Bazillion wherever you get your podcasts. This is Marketplace. I'm Kai Rysdal. Inflation is now globally, almost where central bankers want it to be. Almost, but not entirely. Central bankers in Australia and Russia and India have all said that they're worried about it ticking back up. Canada reported its consumer price index this morning, 2% on the nose, just a tad hotter than people had been expecting. The UK reports October inflation tomorrow. They, by the way, call it the Consumer Prices Index over there because there's more than one price. It is supposed to come in somewhere north of the 2.6% September reading that they had, Marketplace's Henry Epp explains why, despite the progress, central bankers are feeling a bit cautious about the inflation path ahead.

[Henry Epp]

While the world's inflation picture is not terrible, there are problems that could push prices up. Some are on the supply side, says Jonathan Welborne, a senior researcher at rand.

[Kai Rysdal]

Either that's coming through energy pressures, pressures from potential conflict scenarios.

[Henry Epp]

Take the wars going on in Ukraine and in the Middle east, which could flare up in ways that disrupt energy supplies and agricultural commodities.

[Matt Levin]

There's a global price for energy, you.

[Rachel Plotnik]

Know, a lot of food commodities also.

[Matt Levin]

Globally traded wheat, rice, corn, soybeans.

[Henry Epp]

Bill Emmons is a lecturer at Washington University in St. Louis. There's also the potential for the incoming Trump administration to impose tariffs which could set off trade wars that would make some items more expensive in the US And Emmons says it could also boost the value of the dollar and weaken other countries currencies.

[Matt Levin]

And so as their currencies depreciate versus.

[Kai Rysdal]

The dollar, then items that they import.

[Gene Gobolis]

That are dollar denominated, like oil, other.

[Kai Rysdal]

Foodstuffs, would become more expensive.

[Henry Epp]

So potential trade wars, actual wars, and oh yeah, the increasing frequency of weather disasters linked to climate change, says Christian Thiu at the University at Buffalo.

[Rachel Plotnik]

The efforts actually to rebuild after these.

[Gene Gobolis]

Disasters happen actually will increase and then that will increase costs.

[Henry Epp]

So while central bankers have good reasons to be wary, Anne Owen at Hamilton College says they're also concerned about their reputations.

[I]

They're particularly cautious right now because of.

[Kai Rysdal]

The recent history where they underestimated inflation.

[I]

And they don't want to make that.

[Henry Epp]

Same mistake again, declaring victory over inflation only to have it rear its head again, she says. It's not a great look. I'm Henry Epp for Marketplace.

[Kai Rysdal]

Tesla has been much in the news here the past month or two, thanks in very large part to the politics of its CEO. But but it's still a car company that's got to sell cars. And one key differentiator that Tesla is trying to capitalize on is its full self driving technology, FSD in the vernacular over in China, the world's biggest car market. For what it's worth, Tesla says it aims to offer that FSD early next year. The company has floated the idea, in fact of deploying full self driving first in taxis in China. But as Marketplace's Jennifer Pack reports, after having road tested, as it were, some robo taxis made by Chinese firms, there could be some fierce competition.

[I]

There are 16 cities in China testing robot taxis. The self driving vehicles are mainly confined to a small suburban area in each city and they usually come with a human driver for safety. Wuhan is the first to allow mostly unmanned robot taxis to operate in a bigger area, including a part of its downtown. To get there, news assistant Charles Jeong and I had to take a taxi driven by a human. What did the taxi driver say? He said that he would never get in an autonomous vehicle. Why?

[Kai Rysdal]

He didn't want to risk his life.

[I]

China's government actively promotes the autonomous vehicle industry, but it hasn't publish data on safety incidents involving self driving cars. Eventually we find a human driver who is willing to test a robot taxi with us. Xiao Weiguo has been driving regular cabs for 14 years. He got into a robot taxi with me and Zhang. It's run by tech giant Baidu.

[Kristen Schwab]

Safety is our top priority.

[I]

Baidu has the biggest fleet of robot taxis in Wuhan, about 400 cars. That's a tiny number compared to the tens of thousands of taxis and rideshare cars with drivers in the city. Still, Xiao Weiguo says driverless cabs could threaten his livelihood one day.

[Shopify Advertiser]

Once lots of robotaxis go on the market, people like me will lose our jobs.

[I]

But Lin Zhijun, a rideshare driver from Beijing, is more optimistic about his future. He thinks the layout of Beijing, with lots of narrow streets filled with bikes and people zigzagging, could limit the role of robot taxis. Ling Zhijun says the driverless cars seem to stop every time a pedestrian comes in front.

[Matt Levin]

Robot taxis would not be able to.

[Shopify Advertiser]

Drive in the center of Beijing. They would get stuck in the alleys.

[I]

But Beijing runs in advance pilot on the city's outskirts to help driverless cars navigate better by equipping roads and traffic lights with cameras and sensors too, so they can talk to the autonomous vehicles. And this has some safety benefits, says Andrew Stoeckles, an MIT lecturer on urban planning. Like say there's an 18 wheeler truck blocking a robot taxi's view of an intersection.

[Rachel Plotnik]

If the cameras on the intersection see.

[Kai Rysdal]

The traffic's oncoming, say around that obstruction.

[Rachel Plotnik]

They'D be able to alert the car earlier as it's approaching the intersection, and.

[Kai Rysdal]

It would be able to slow down.

[Rachel Plotnik]

Or brake more smoothly.

[I]

What isn't smooth the ordering process for a robot taxi in China, it can take 30 minutes and a number of platforms to get one. Plus, there are designated pickup points that are sometimes few and far between. But once we're inside the driverless robot taxi, it's kind of exciting. And when cabbie Xiaoweiguo got into a robot taxi with us back in Wuhan, he was excited too, and called his friend on the phone. Look, he said, the robot taxi is going pretty fast, even a bit above the speed limit. But then we slowed down once we hit more traffic. And Xiao Weiguo wasn't too impressed with the robot taxi's road skills.

[Kai Rysdal]

See, the car just stopped. If this was during morning rush hour and it stopped like this, that would cause a traffic jam.

[I]

We arrived at our destination 37 minutes later and paid $5. But without Baidu's deep discounts, the trip would have cost $14. That's a lot more than what Xiao Weiguo's taxi would charge. Plus.

[Kai Rysdal]

The robo taxi doesn't change lanes very smoothly, so it can make passengers feel sick.

[I]

But he says self driving technology keeps improving. He just hopes he can get to keep driving his regular cab until he retires in a few more years. In Wuhan, I'm Jennifer Pak for Marketplace.

[Kai Rysdal]

Once upon a time, your phone probably had buttons on it, right? Actual physical buttons, like 10 of them or more. Your oven had a physical dial. Your car think about the radio and the air conditioning and the heating buttons for days. And then along came touchscreens and digital controls, and a lot of those buttons went out the proverbial window. Now, though, they might be making a comeback, physical controls are reappearing on washing machines and steering wheels. Even Apple, a brand built on a minimalist Design Ethic, added two new buttons to the iPhone 16. So what is driving that change and what can buttons an interface that honestly sails under the radar for most of us. What can they tell us about how we interact with the world?

[Rachel Plotnik]

My name is Rachel Plotnik. I'm an associate professor of cinema and Media studies at Indiana University, Bloomington, and I'm the author of Power A History of Pleasure, Panic and the Politics of Pushing. I never expected to become an expert on buttons. Initially, I started looking at television remotes, and I thought a lot of power dynamics happen around that. Who gets to hold the remote, who gets to decide what to watch? But that led me to this bigger topic of how buttons are connected to so many issues in our society in terms of communication. Pick up your phone and push a button to call someone or to text them. In terms of commerce, you know, think about what you do on Amazon. And I actually think there's a tremendous learning curve that comes along with pushing buttons. They seem, on the one hand, very obvious, but I think the learning comes from kind of, if I push this thing, do I know what to expect when I push it? I mean, imagine if you were sitting in a DJ's booth or you were in the cockpit of an airplane or something. Sure, they're just buttons, but if you don't know which one to push at which particular moment, you could get yourself in a lot of trouble. And so while it does seem like a very simplistic interface, I think we could make the argument that buttons can be incredibly complex depending on the situation. There was a moment when I thought we might be doing away with the concept of the button, and that was one of the earliest impulses I had to research this topic. It was around 2009, shortly after Apple iPhones were becoming really popular. I saw a lot of headlines in the news about the quote unquote death of the button. But I do see this kind of cyclical effect, I think in terms of design where we go through these moments where companies want to take all the buttons away and then put all the buttons back. Certainly we've seen that with smartphones, with the move toward touchscreens and away from many physical buttons on our devices. But then buttons are often that kind of go to interface, that give us that feeling of agency and control that have a lot of tactile feedback. And so I would be hard pressed to use a button pun to really imagine this kind of total disappearance of push buttons. And I think we've seen that with a lot of these technologies where they thought this is the end of buttons as we know it. You know, the Microsoft Kinect is going to replace the controller. We're going to see VR headsets replace our phones. But personally, I'm not really convinced that that shift is ever going to take place in a totalizing kind of way. Behind every button there are all of these social choices. And it's not just about the technology itself. It's also about who made the decision for the button to work in that particular way and what can that tell us about society? Because usually a button is just a stand in for somebody's labor or certain kinds of organizational processes or certain social decisions. And I think it's really, really important to kind of probe those connections.

[Kai Rysdal]

Rachel Plotnick, an assistant professor at Indiana University Bloomington and an expert obviously on all things buttons. This final note on the way out today, in which one hates to say I told you so, but, well, you know, there was a slew of retail earnings reports today generally making plenty of money. Those retailers are because consumers are still in a spending mood. But on its earnings call this morning, the chief financial officer at Lowe's said that the tariffs President Elect Trump has promised and this is a quote, certainly would add to product costs. Remember who pays the tariffs peeps. Our digital and on demand team includes Kerry Barber, Jordan Manji, Dylan Mietanen, Janet Wynne, Olga Oxman, Ellen Rolfes, Virginia K. Smith and Tony Wagner. Francesca Levy is the executive director of digital and on Demand. And I'm Kai Rysdal. We will see you tomorrow, Everybody.

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