Toby Howell (2:20)

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Neal Freyman (2:30)

To learn more, head to Bland AI slash mbd. That's Bland AI slash mbd. The global economy is in a precarious moment after the United States and Israel launched a war against Iran this weekend, which has spiraled into a major regional conflict. On Saturday, the two countries attacked Iran with sweeping airstrikes and killed the Supreme Leader of 37 years in the hopes that the Iranian people will rise up and overthrow the autocratic government. Iran's military responded with strikes around the Middle east against the US and allies, and three US Service members were killed, the Pentagon said yesterday. With the war spilling into its third day this morning, the consequences for the global economy are huge. Spanning energy markets, global capital flows, and travel. The first thing everyone is watching is oil prices, which shot up 8% last night, the most in four years over concerns of disrupted supplies. Iran is not only an oil producer, but it sits next to the most important maritime choke point in the world, the Strait of Hormuz. One out of every five barrels of oil in the world flows through the strait, and a prolonged closure of tankers accessing the waterway could keep oil prices elevated and in turn cause a spike in inflation around the world, something we saw after Russia invaded Ukraine. Another potential economic casualty from the war is the Gulf. Nations like the United Arab Emirates, home to Abu Dhabi and Dubai, Qatar and Bahrain have emerged as global economic hubs in the past decade, pitching themselves as a business friendly, peaceful oasis in a region otherwise prone to conflict. That image was shattered this weekend when Iranian drones pierced glitzy Gulf hotels and tourist hotspots, as well as airports. Etihad Airways, Qatar Airways, and Emirates, the world's largest international airline, all suspended flights in an unprecedented move that stranded tens of thousands of passengers. Last night, President Trump said that combat operations will continue until, quote, all our objectives are achieved. Toby, one thing's for certain. There are no certainties.

Toby Howell (4:18)

Yeah, let's start with the Strait of Hormuz, because that's the name that you're going to be hearing a lot when it comes to this regional conflict. How can the Strait of Hormuz be closed? That is a question that I saw floating around online yesterday in the Kabisi letter, which is a stock account, kind of explained how this actually happens because no country owns the Strait of Hormuz, so no one can effectively close it. But what happens is that when the ships travel through this region, they purchase war risk insurance, which protects their companies from the cost of being attacked. But insurers are looking at the risk of the region right now and saying we are either not going to offer that anymore or we're going to charge you astronomical rates. And if that happens, then basically no ship is going to sail through that region because they know that they're going to be on the hook if they end up getting attacked. So insurers actually are playing a much larger role here than you would expect when it comes to so called closing the Strait of Hormuz.

Neal Freyman (5:15)

And the Strait of Hormuz is effectively closed. I was just tracking this morning on my maritime shipping app and there's just no ship. They're all kind of parked either on either end of of this waterway because Maersk msc, Hatbag Lloyd, these are these big shipping container companies that if you drive by a port that of the companies that run all of these tankers and container ships, they're not traversing it. And it's so critical because on one side of the strait you have Dubai uae, these are the big oil producing nations. And then on the other side of the strait you have the rest of the world. So if no ships can traverse this strait, then there's going to be no supply coming on to the market. And we are already seeing a major reaction in oil prices. They're up 8% this morning. That's going to have an immediate effect on your gas bill when you filling up your tank. Because James DeHaan, who runs gas Buddies is very, very noted gas predictor, said we're already going to see gas prices climb above $3 per gallon for the first time in more than three months. He's predicting another 15% or 15 cent increase in gas prices. Meanwhile, just overall we might see a spike in inflation. Remember when Russia invaded Ukraine, there was oil prices went sky, went skyward and everywhere around the world, including the United States saw a huge spike in inflation. The question is how high will oil go? Right now Brent crude is at $78 a barrel. If it hits $100, that is when you'll see a lot of spookiness.

Toby Howell (6:40)

But I do just want to put into context this move because Javier Blass, who's a Bloomberg reporter, posted yesterday that if Brent market closed at current levels, which was up around seven and a half percent, that one day percent increase would rank as the 53rd largest. So it's not, you know, even a top 10 move. Even though all this craziness happened in the region. And part of the reason why is that it might have been a little bit priced in because this attack was telegraphed a little bit. But also the US Makes a lot more oil now than it has in the past. Only 17% of U.S. energy is imported. That is the lowest level in 40 years. So, yes, it's still exposed to global oil benchmarks, but a lot less exposed than it has been in the past.

Neal Freyman (7:24)

All right, let's talk about Dubai, uae. I mean, this is the nightmare scenario. They had pitched themselves over the past decade as this safe haven for global capital. They've emerged as this huge player in investing, AI entertainment, just tried to fashion themselves into the center of the world and brought in a lot of foreigners. Nearly 90% of everyone living there are foreigners. Now. The, the images coming out over the weekend were, were unbelievable. You saw the Burj Khalifa, which is the, the biggest skyscraper in the entire world. Getting, seeing drone strikes around it. There were five star hotels in Bahrain that were. And then people were leaving reviews on the Fairmont Palm Hotel in Dubai saying one star, no air defense systems. One person on next kind of summed up the vibe in, in the UAE in Dubai right now saying, move to Dubai for tax shelter. And now I'm in a bomb shelter. And the biggest, one of the biggest consequences here is air travel. These are the busiest international hubs in the world. They connect east and west, they connect north and south. And the fact is, right now, Qatar Airways, Etihad and Emirates are not flying.

Toby Howell (8:30)

No. Dubai is literally the busiest international hub in the world. Two million international travelers flew through it last year. That is 13 more than Heathrow Airport in London. And it's not only the fact that, you know, commercial traffic has been disrupted, it's also the fact that logistics are disrupted because, you know, airports don't just fly people, they fly food. They fly other things. And according to Ryan Peterson, CEO of Flexport, which is a shipping logistics company, he said 18% of global air freight capacity has been taken out of the market by the conflict in the Middle east right now. So if we were talking about the region of Strait of Hormuz disrupting maritime travel, same thing is happening on air travel as well.

Neal Freyman (9:10)

Yeah, this is, this is a huge deal for, for the Middle east, for those Gulf countries trying to project safety at a time when it's not really safe there at all. Finally, the C plot here is, is polymarket, as it always is for any major world event. These prediction markets where you can bet on literally anything. While people were betting on a strike in Iran, a lot of people were betting on this particular market. These, for when the United States would strike, had amassed $530 million, making it one of polymarket's largest ever. And once again, there were accusations and skepticism around possible insider trading here.

Toby Howell (9:46)

Yeah, absolutely, because you just looked at accounts posted online. One account turned $87,000 into 515,006 wallets made $1.2 million betting on a February 28th strike. So whenever you see these very outlier calls, yes, hypothetically, someone could have a lot of conviction and make that bet and place those bets. But also, they probably had access to someone with access to information around this, which is why you're seeing, you know, again, a lot of people pointing out prediction markets and saying this is just a hallmark of what they do. Now, anytime a big event happens, it looks like insiders knew before or ahead of time. All right, let's move on. Anthropic in the Pentagon broke up over the weekend and open air slid into the government's DMs faster than your ex's ex did when you broke up the Pentagon and Anthropic had been on thin ice all week. Cloud had been the chatbot of choice for the military, including aiding the US in its Maduro operation. But the Defense Department wanted full access to use the tech in any way they pleased. Anthropic wanted some guardrails in place, namely that Claude could not be used for mass domestic surveillance or fully autonomous weapons. Defense Secretary Pete Hegseth issued an ultimatum to the company promising to cancel its $200 million contract by 5:01pm on Friday unless it met its demands. After that deadline passed, the government took the very intense step of blocking Anthropic on Instagram and also designating it a supply chain risk which bars any company with US Government contracts from doing business with them. Enter Sam Altman, who had been leaving fire emojis on the government stories for months, waiting for the perfect moment to shoot his shot. By 10pm on Friday, he announced that OpenAI had, quote, reached an agreement with the Department of War to deploy our models in their classified network, Though Altman maintained that their agreement had similar red lines to Anthropics. Which brings us to today. Anthropic is a supply chain risk, but is promising to take the issue to court. OpenAI is an opportunist who landed a deal, but may have damaged its reputation in the process. And no one even really considered using Grok.

Neal Freyman (11:50)

No, they didn't. You can get really deep with this, and many folks say that this story basically disregard anything else that's going on in the world. This story is the most important thing that's going to be happening now for decades in the future. Because it really is a sign of how the government and the Pentagon and militaries are adopting AI and using it at scale for the first time. But going back to the narrow impact, I mean, the first thing you saw is a big brand boost for cloud. Cloud overtook Chachi Beat as number one app on the App Store. There seemed to be this upswelling of support for Anthropic and Cloud for sticking to their guns and staying true to their principles and going at it with the Pentagon. Even Katy Perry posted that she upgraded to a higher tier of cloudy. So many folks posting that they canceled their chat GPT subscription. So they did get a lot of goodwill, especially from just the rank and file tech employees. Many folks at Google and OpenAI penned a letter saying we stand with Anthropic. And even Sam Altman of OpenAI said that anthropic took a principled stand even though he, he disagreed with them. Very similar to what we saw back in 20 when Apple took on the FBI. They refused to unlock an iPhone belonging to a terrorist suspect. And they also earned a lot of goodwill. So a lot of, lot of big picture questions you can ask here and talk about, but the most immediate effect is that a lot of people are supporting clot over over OpenAI.

Toby Howell (13:16)

I was seeing some people say that technically everyone did come out of this deal a winner in a weird way because the government now hypothetically gets more control, even if it now has to use what's probably the second best product on the market. OpenAI and Altman pulled off the power play that they love to pull off. It's a very cutthroat and a very bottom line focus power play. And we'll see how that actually translates into brand equity down the line. And then Anthropic set up for itself gets to entrance itself as like the very ethical AI lab in the AI playing field right now. And Nate Silver noted that this adds a political characterization of two of the top AI labs he wrote, among the general population, Anthropic, now it gets more lib coded and OpenAI gets more conservative coded. But then he went on to point out that, hey, Tesla went down this rabbit hole as well. Look at what it did to its brand equity. A lot of consumers of these tech products probably are more left leaning than right leaning. So again, when we're talking about big picture, yes, OpenAI now has a big contract with the government. What is that going to do down the line to its reputation?

Neal Freyman (14:22)

Yeah, some say certainly you could take that view. Some Some would arg. This sets a bad precedent for the Pentagon to be bullying its own AI champion that way. I mean, there are very few companies that have been blacklisted, blacklisted like this by the Pentagon. And they all come from either China or Russia, which are two huge geopolitical adversaries. Dean Ball, who is a former Trump administration AI adviser, called it a dark day in the history of American AI. The message sent to the business community and to countries around the world could not be worse for the Pentagon to essentially go to war with an amazing piece of American innovation and a company that is, you know, now worth, I don't know, hundreds of billions of dollars. It is another chapter in the battle between OpenAI and Anthropic. It cannot get any juice here. We were in India a couple of weeks ago with Dario and Sam. They were, everyone was holding hands except those two guys. And they're all barreling toward an IPO later this year, both raising tons of money. It's just quite a heavy heavyweight fight.

Toby Howell (15:21)

All right, we're going to take a quick break and come back with our Winners of the Weekend.

Neal Freyman (15:28)

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Toby Howell (15:39)

Now, with NetSuite AI connector, you can use the AI of your choice to connect your actual business data and ask just about every question you ever had.

Neal Freyman (15:48)

If your revenues are at least in the seven figures, get our free business guide demystifying AI at netsuite.com brew that's netsuite.com/brew.

Toby Howell (15:59)

Neil, I want to tell you about something I personally love very much.

Neal Freyman (16:03)

Is it me, your good friend and co host?

Toby Howell (16:05)

No, it's not my work friend and co host. It's Spectrum Business, which keeps businesses of all sizes connected seamlessly with fast, reliable Internet, advanced Wi, Fi, phone, TV and mobile services, all backed by 100% US based support.

Neal Freyman (16:18)

Spectrum Business offers tailored connectivity solutions with packages built for your business budget. In fact, millions of business owners rely on Spectrum Business to keep them connected.

Toby Howell (16:27)

So whether your business is big or small, visit spectrum.com/business to learn more that Spectrum dotcom slash business restrictions apply. Services not available in all areas.

Neal Freyman (16:38)

Welcome to Winners of the Weekend, the segment where Toby and I pick two things that are so happy. It's March. My winner is Pokemon, which, much like your boy Neal, turned 30 and really hit its stride. The Japanese media juggernaut celebrated its 30th birthday on Friday at the peak of its power, announcing a slew of projects that aim to extend the franchise's domination well into middle age. The Pokemon company said it would launch two new games for Nintendo Switch 2 next year, which will add new storylines, regions and characters to its already immersive world. There is no way Tajiri Satoshi could have anticipated what was about to be unleashed when he created Pokemon back in February 1996. A designer living in the suburbs of Tokyo, Satoshi was an insect collector and lamented the urban sprawl that tarnished their habitats. And so he was inspired to invent a digital world where people could collect cute pocket monsters. Yep, that's where the word Pokemon comes from. And have them spar against each other. Three decades later, Pokemon is the highest grossing media franchise in the world, topping even Star wars and Marvel, with total revenues of $150 billion. It's an empire that transcends age or gender spanning trading cards, TV shows, video games, theme parks, and merchandise. And it has never been stronger. Pokemon cards have been at the forefront of the collectibles boom of recent years, while Pokemon Go led the critters into the mobile age. Toby when it comes to brand building, Pokemon is the very best, the best there ever was.

Toby Howell (17:59)

The scale of Pokemon is insane. They've sold nearly 500 million video games. They've sold over 75 billion trading cards. That is so many trading cars. And I do just want to shout out Pokemon Go here, because for a while it was like the biggest thing in the world. 2015, 2016, 500 million downloads immediately upon release. 30 million people are still playing it every single month. It has obviously fallen from its peak a little bit, but that is a very successful video game. You do just associate Pokemon with the trading card game more. And that has been a fantastic investment if you were a nerd in high school or middle school, because the card ladder index, which tracks the value of a collection of the most popular trading cars, was up about 6,208% since May of 2004. The S&P 500 was up a measly 521% during that time frame. So you should go dig through your attic and see if you have only old boxes left over.

Neal Freyman (18:58)

And also, Pokemon was important not just for Pokemon, but for unleashing Japanese culture on the rest of the world's. Pop culture expert in Tokyo, Roland Keltz, put it this way, and I think it's so apt he called it the Rosetta Stone that unlocked Japanese storytelling. And the Economist writes that Pokemon channels two Japanese sensibilities. One is kawaii or cuteness, which the Pokemon show through their wide eyed innocence. And the other is otaku, which is Greek culture. That's when fans love collecting things and catalog clogging things. So those are two essential elements of Japanese culture that most folks didn't really know about around the world. And then Pokemon sort of unleashed that. Then we had Digimon and all. The anime is one of the biggest booming, you know, media properties globally now.

Toby Howell (19:44)

And it appeals across many different generations. It appeals against many, many different demographics. Not just for kids, although kids obviously find great joy in it. Adults are doing most of the collecting at this point. And then also there is. If you want to be cute, there's Jigglypuff. If you want to be like hardcore and fierce, there's Charmander and Charmeleon. So there's something for everyone, which is why it just explains its enduring and lasting appeal. I never collected them. Neil never got into it.

Neal Freyman (20:13)

But maybe we're a little late. Maybe it was night.

Toby Howell (20:16)

90s babies.

Neal Freyman (20:16)

Yeah, because I was early 90s and Pokemon was the biggest thing around. And I was just thinking about, I was born in 1991. We had it best Pokemon 1996. Harry Potter first comes out in 97. 98. Mark McGuire, Sammy Sosa race. I mean, those three things were just the peak. I was six, seven and eight when those were happening. It was an amazing childhood.

Toby Howell (20:37)

Six, seven. All right. Sorry about that. My winner of the weekend is Australia because it's. It's stealing Kiwis. Not from the grocery store, but from similarly accented New Zealand. 63,000 New Zealand citizens left the country last year, with 61% heading to Australia. But perhaps none as high profile as Jacinda Ardern. The former Prime Minister of New Zealand became a poster child for the issue when she made the decision to relocate her family to Sydney last week. The move across the Ditch, as it is known in the region, has always been a popular migration route. Citizens of both countries can live and work indefinitely under a reciprocal visa arrangement which has attracted 670,000 New Zealanders to Australia. But it's becoming an existential issue for the smaller nation. Brain drain is a real concern, especially since most Kiwis leave for economic opportunity. Skilled blue collar workers fetch much higher wages in Australia, while the white collar pay gap is estimated at 5 to 10% in favor of Australia. Plus New Zealand's economy. Economy is already in a precarious position. Having contracted the last four consecutive quarters, so it can't afford to lose much more talent to the Aussies. Neal. There's sort of this friendly big brother, little brother relationship between the two countries, but the sibling rivalry is tipping a little bit too much in one direction at the moment.

Neal Freyman (21:57)

Yeah, it's just like if Justin Trudeau moved from Canada to the United States. It's just a real blow to your pride. But you can understand why the New Zealand economy is just not doing well at all right now. It had the largest contraction in gross domestic product of any developed country in 2024. The unemployment rate, 5.3%, the highest in nearly a decade. And when you read and listen to interviews of people who moved from New Zealand to Australia, they describe a general vibe of optimism and that things can get better for them in Australia. Whereas in New Zealand, things just seem to be on this downward spiral. There's not a lot of career opportunities, not a lot of advancement opportunities. The unemployment rate is high. People just can't find the jobs that they want and they're getting paid less. There's one social worker moved from Christchurch on the south island to Perth, which is on Australia's west coast. He's earning about $20,000 more as a social worker than he did in New Zealand. That's why more than 1% of the new Zealand population has left the country in the 12 months ending last October.

Toby Howell (22:56)

Right. Australia just offers a lot more in terms of economic opportunity. They have more generous pension contributions as well. They think there's better and stronger family allowances as well. So there's just this perception of a much stronger labor market market over there. There is this joke in New Zealand for a long time that it used to be a good. A good recession to clear out the cowboys on New Zealand. Now it's nurses, police, and soldiers. So that does speak to a broader issue here, is that you don't want your young people leaving to another nation, because if mid-20s and mid-30s professionals are leaving, that is a permanent migration pattern, because that is the backbone of your economy. That's the backbone of your poor labor market. So, yes, there is kind of like this friendly relationship between the two countries, but now it's becoming existential in a way. For New Zealand.

Neal Freyman (23:44)

It's so far. I really do. I don't think I fully understand the relationship between New Zealand and Australia. It's far away. I don't think it's a U.S. canada thing.

Toby Howell (23:51)

I kept wanting to call them neighbors, and then I'm like, they're not even close to neighbors. But you're right because like they're closer

Neal Freyman (23:57)

to each other than anything else right in the world. So very interesting that that particular trend, people leaving New Zealand to Australia. Meanwhile, New Zealand's trying to court a lot of Americans with these visa program and the number of Americans living in New Zealand has surged. I don't think it's enough to make up for the, for the exodus, but it's been interesting to see New Zealand try to court wealthy, wealthy Americans. Ever since Peter Thiel started coming over 2018, there was this big surge in American and wealthy Americans buying property in New Zealand thanks to friendly tax situations. I don't think they can, it can't make up for the exodus. Okay, it's Monday, so here's what you need to know to stay ahead in the week ahead. Apple is holding its first product launch of the year and it's not just one day, but three starting today and running through Wednesday. If Apple wants us to pay attention all that time, they better deliver the goods. And reportedly at least five gadgets will be introduced, including a new low cost MacBook, the iPhone 17, and an updated iPad Air and entry level iPad. Toby, in the early days of the show you got a reputation as an Apple fanboy. You still get hyped for these product launches.

Toby Howell (24:56)

I'm a fanboy of Apples, honeycrisp and Granny Smith. I am an objective analyst of tech companies, Neil and objectively, no, I'm not that excited for this. I actually have my eyes set on a future fall event which is expected to be Apple's foray into touchscreen laptops. This one is a little bit more, you know, similar devices coming out at different price points. So it doesn't really get me going. I will also be eating a Cosmic Crisp when I go home.

Neal Freyman (25:25)

On Wall street, besides war developments, all eyes are on the February jobs report that comes out on Friday. January showed surprisingly strong employment gains, but fears of an AI induced white collar wipeout are still palpable, especially after Jack Dorsey cut nearly half of workforce from his fintech company Block, citing artificial intelligence. Elsewhere, it's another busy week for earnings, including the chipmaking giant Broadcom and retailers Costco, Target and Best Buy.

Toby Howell (25:49)

The Block layoffs are absolutely going to be top of mind when this report comes out. In a week, Wall street economists expect the US economy to add 60,000 new jobs, which would be a slowdown from the 130,000 jobs that were created in January. As for the earnings front, not sure what the market wants to see right now because because Nvidia blew it out of the water last week, but that didn't settle any fears about AI disruption. So good luck to Broadcom. Target has a new CEO as well, so interesting to see the tone he strikes as they look to kick off their turnaround.

Neal Freyman (26:20)

And finally, if you're having Olympics withdrawal, international sporting events are back with the World Baseball Classic beginning on Thursday. The stacked U.S. team is looking for revenge after losing a thrilling championship game to Japan in 2023. But plenty of MLB stars will be repping other countries too, with contenders such as Mexico, Puerto Rico and the Dominican Republic. And I know we're all ready for baseball season, but don't sleep on more winter sports. The Paralympics begin on Friday from Italy.

Toby Howell (26:45)

More luge, baby. Also, you being so excited for the World Baseball Classic reminds me of a challenge we recently did where we each tried to name as many athletes as we could in a one hour across any sport. And I think you ripped off 170 baseball players. I did 12, including shoeless and Joe Jackson and Horace Wagner. So you're definitely a little bit more excited than for this than I am. And I love that there are a

Neal Freyman (27:09)

lot of people who are excited about this. I saw videos of Shohei Ohtani taking batting practice in Japan and it was bedlam. And you know, he won it for Japan a few years ago. He's the biggest baseball star in the world. So me and everyone in Japan is super excited for the World Baseball Classic. No, Toby, I'm going to as soon as this thing gets going and there's some amazing games, you're going to be totally locked in.

Toby Howell (27:31)

I just want I got to look Learn more baseball players names. It was sobering to see that list. I'm like, how do I only know 12 baseball players? I was under pressure.

Neal Freyman (27:38)

Shoeless Joe Jackson didn't make the roster this year. Okay, that is all the time we have. Thanks for starting your morning with us and have a wonderful start to the week. If you'd like to reach us, send an email to Morning Brew Daily at Morning Broadcom or DM us on Instagram @MB Daily show let's roll the credits. Emily Milian is our executive producer. Raymond Lu is our producer. Our associate producers are Olivia Graham and Olivia Lake. Hair Makeup is moving to Australia. Devin Emery is our president and our show is a production of Morning Brew.

Toby Howell (28:03)

Great show today, Neil. Let's run it back tomorrow.