Morning Brew Daily - May 22, 2025

Hosts: Neal Freyman & Toby Howell
Episode Title: OpenAI Drops $6.5B To Kill the iPhone? & Tariffs and Boycotts Hurt Target

1. Reflecting on Bitcoin Pizza Day

[00:59] Neal Freyman:
Neal opens the episode by reminiscing about Bitcoin Pizza Day, commemorating the infamous 2010 transaction where Laszlo Hanyecz spent 10,000 Bitcoins on two Papa John's pizzas. At today's valuation, those Bitcoins are worth over $1.1 billion, marking the pizzas as the most expensive ever sold. This day is celebrated annually in the crypto community as a pivotal moment in cryptocurrency history.

[01:35] Toby Howell:
Toby underscores the significance of this event, noting that despite the hefty price tag, the recipient, Jeremy Stu Devant, used the Bitcoins to fund a cross-country road trip with his girlfriend. This anecdote highlights the unpredictable nature of cryptocurrency investments and their real-world implications.

2. OpenAI's Bold Move: Acquiring Jony Ive's IO for $6.5 Billion

[03:08] Toby Howell:
The discussion shifts to OpenAI's monumental acquisition of IO, the AI device-focused startup co-founded by legendary Apple designer Jony Ive. Valued at approximately $6.5 billion, this deal marks OpenAI's largest acquisition to date and integrates IO's 55 employees into a new hardware division within OpenAI.

[04:36] Neal Freyman:
Neal provides context on Jony Ive's illustrious career at Apple, where he was instrumental in designing iconic products like the iPod, iPhone, and iPad. After leaving Apple in 2019, Ive explored various ventures, and this acquisition represents a significant opportunity for him to shape the next generation of computing devices alongside OpenAI's Sam Altman.

[05:29] Toby Howell:
Toby delves into the strategic implications of this acquisition. He highlights that OpenAI isn't aiming to replicate the iPhone but rather to innovate entirely new form factors for AI interaction. Sam Altman emphasized the ambition to "completely reimagine what it means to use a computer," suggesting possibilities ranging from augmented reality glasses to entirely novel devices.

[06:34] Neal Freyman:
Neal draws parallels between Jony Ive's partnership with Steve Jobs and his current collaboration with Sam Altman. However, he also points out the risks involved, noting that OpenAI is still unprofitable and the success of this hardware venture remains uncertain.

Notable Quote:

"We've been waiting for the next big thing for 20 years," – Sam Altman on OpenAI's vision for hardware. [05:00]

3. Target's Struggles Amidst DEI Backlash and Tariffs

[07:40] Toby Howell:
Toby transitions to discussing Target's recent performance woes. The retailer reported another quarter of declining sales, attributing the downturn to backlash against its Diversity, Equity, and Inclusion (DEI) policies and the impact of tariffs. Target's CEO, Brian Cornell, cited "five consecutive months of declining consumer confidence and uncertainty regarding potential tariffs" as primary challenges.

[09:26] Neal Freyman:
Neal elaborates on Target's underperformance, noting that the company has lost market share in 20 out of 35 categories in the last quarter. Over the past year, Target's stock has plunged by 40%, and the company forecasts low single-digit sales growth for the upcoming year, marking its third consecutive year of declining sales.

[10:26] Toby Howell:
Toby adds that Target's struggles are compounded by customer boycotts stemming from the rollback of DEI initiatives during the Trump administration. This move alienated long-standing customers who felt betrayed by the shift in the company's values, leading to decreased foot traffic and sales.

[11:41] Toby Howell:
During Target's earnings call, the CEO was pressed for specifics on pricing strategies amidst rising tariffs. However, Brian Cornell remained non-committal, stating, "we're going to pull levers here and there," avoiding any direct acknowledgment of price increases.

Notable Quote:

"We're not putting out items that people want to buy." – Neal Freyman on Target's product strategy. [09:30]

4. Universal's Epic Universe: Challenging Disney's Dominance in Florida

[12:00] Neal Freyman:
Neal introduces Universal's latest venture, Epic Universe, Florida's first major theme park in over 25 years. This $7 billion investment aims to rival Disney World's long-standing dominance in the region. Epic Universe features five mini-parks, including dedicated zones for Harry Potter, Nintendo, How to Train Your Dragon, and classic monsters in Dark Universe.

[13:20] Toby Howell:
Toby discusses the initial positive reception of Epic Universe, citing glowing reviews from influencers and travel agents who praise its modern theming and attractions. However, he questions whether Universal can significantly impact Disney's market share.

[14:23] Neal Freyman:
Neal draws a comparison to other industries, suggesting that Universal and Disney can coexist and even benefit from a "one plus one equals three" dynamic, where the presence of both parks attracts more tourists to the region. However, he acknowledges that Disney's current lead is substantial, with Walt Disney World attracting nearly 49 million visitors in 2023 compared to Universal's 20 million.

[15:32] Toby Howell:
Toby reflects on the sustained success of Universal's Harry Potter World since its 2010 launch, which has been a consistent revenue driver. He remains optimistic about Epic Universe's potential to draw new visitors without cannibalizing Disney's audience.

Notable Quote:

"In a world where every brand is fighting over your attention, this is what themed parks should be." – Influencer's take on Epic Universe. [13:25]

5. Neal's Numbers: Intriguing Statistics and Insights

a. The Rise of the Stealthy Wealthy

[17:43] Neal Freyman:
Neal introduces the concept of the "stealthy wealthy," business owners who accumulate significant wealth through essential but unglamorous enterprises. He cites Derek Olson, owner of National Flooring Equipment in Minnesota, whose company is projected to generate $50 million in revenue. Olson's business, which manufactures machines for removing carpet from elementary schools, exemplifies how niche markets can sustain high earnings.

[19:11] Toby Howell:
Toby attributes the rise of the stealthy wealthy to favorable tax policies and low-interest rates, which have bolstered the valuations of such businesses. He highlights that these entrepreneurs often run "boring but essential" companies, contributing increasingly to the wealth held by America's top 1%.

Notable Quote:

"National Flooring Equipment ... makes machines that remove flooring from places like elementary schools." – Neal Freyman on Derek Olson’s business. [17:50]

b. Employment Prospects: Humanities vs. STEM

[20:02] Toby Howell:
Toby discusses a Federal Reserve Bank of New York study revealing that majors in nutrition, art history, and philosophy have better employment prospects for recent graduates compared to STEM fields like computer science and engineering. This counters the common perception that STEM degrees always offer the best job security.

[21:09] Toby Howell:
He suggests a disconnect between students' perceptions of "employable" majors and the actual job market demands. The changing hiring strategies of firms like BlackRock, which now seek graduates from humanities backgrounds, indicate a shift in the skills valued in the workforce.

Notable Quote:

"Majors in nutrition, art history and philosophy outperform STEM fields when it comes to employment prospects." – Federal Reserve Bank of New York study. [20:05]

c. The Decline of the Semicolon

[22:19] Neal Freyman:
Neal presents a cultural analysis of punctuation, highlighting a significant decline in semicolon usage in British text. Studies show a 47% drop in semicolon usage over the past two decades, with only 11% of respondents admitting to frequent use.

[23:40] Toby Howell:
Toby connects this trend to changes in digital communication, where emojis have replaced semicolons in emoticons, further reducing their usage. He reflects on the evolving nature of language and punctuation in the age of instant messaging.

Notable Quote:

"The semicolon remains a bulwark against civilizational decline." – The Spectator's take on the semicolon. [23:30]

6. Final Headlines: Market Movements and Record-Breaking Feats

[24:45] Neal Freyman:
Neal wraps up with a roundup of major headlines:

• GOP's Tax and Spending Package: The Republican tax bill is causing market turbulence, leading to the worst stock performance in a month and surging bond yields. The bill is expected to add trillions to the deficit over the next decade by extending tax cuts. This has shaken investor confidence, especially following Moody's credit rating downgrade.

• Everest Climbing Innovation: Four British explorers, all former special forces soldiers, set a controversial record by ascending Mount Everest in under five days using xenon gas to pre-acclimatize. This breakthrough could revolutionize mountaineering and impact Nepal's tourism industry by reducing the time and resources needed for acclimatization.

[25:23] Toby Howell:
Toby provides additional insights:

• Market Reaction: Traders are reacting negatively to the GOP bill and other factors like weak retailer earnings (e.g., Target), which combined with higher bond yields, are pulling investors away from stocks.

• Everest's Future: The successful use of xenon gas by the climbers may lead to more expeditions utilizing this method, posing challenges and opportunities for Nepal's existing tourism framework.

Notable Quote:

"Nepal's tourism industry will have to grapple with this." – Neal Freyman on the implications of the new Everest climbing method. [26:00]

Conclusion

Neal and Toby provide a comprehensive overview of the day's significant events, ranging from groundbreaking moves in the tech and theme park industries to insightful statistics on wealth accumulation and employment trends. Their analysis offers listeners a deep understanding of the current economic and cultural landscape, enriched with engaging anecdotes and expert commentary.

Key Takeaways:

• OpenAI's Acquisition: A bold bet on hardware innovation with the potential to redefine human-computer interactions.

• Target's Decline: Multifaceted challenges from DEI policy changes, tariffs, and shifting consumer behavior highlight the volatility in the retail sector.

• Universal vs. Disney: The entry of Epic Universe into Florida's theme park scene introduces healthy competition, though Disney retains a dominant market position.

• Stealthy Wealth and Employment Trends: Insights into unconventional pathways to wealth and the evolving value of humanities degrees in the modern job market.

• Cultural Shifts: The diminishing role of traditional punctuation like the semicolon reflects broader changes in communication practices.

Stay informed and start your day with the latest insights from Morning Brew Daily.

Notable Quotes Compilation:

• Sam Altman on OpenAI's vision: "We've been waiting for the next big thing for 20 years." [05:00]
• Neal on Target's product strategy: "We're not putting out items that people want to buy." [09:30]
• The Spectator on the semicolon: "The semicolon remains a bulwark against civilizational decline." [23:30]

End of Summary