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Oracle Scores $300B OpenAI Deal & Digital Creators Get Huge Tax Break
00:27:49
Oracle the next Nvidia? & good time to be a content creator
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- [00:00]
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Neal Freyman
Good morning, brew Daily Show. I'm Neal Freyman.
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Toby Howell
And I'm Toby Howell.
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Neal Freyman
Today, a new robo taxi company is rolling into Vegas. Will it go blackjack or bust?
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Toby Howell
Ben, on your left, Elon Oracle founder Larry Ellison is the new richest person in the world. It's Thursday, September 11th. Let's ride.
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Neal Freyman
It's a somber morning here in the United States, which is marking 24 years since the September 11 attacks. Many of you have that crystal clear day seared into your memory. I was in fifth grade when hijacked planes crashed into the twin towers in New York, the Pentagon, and Western Pennsylvania, killing nearly 3,000 people. Ceremonies and tributes to the victims will be held in cities across the country, including at Yankee Stadium, where President Trump will be in attend for tonight's game.
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Toby Howell
Meanwhile, Americans are still in shock after conservative influencer Charlie Kirk was killed yesterday. He was shot from an estimated 200 yards while speaking at an event at Utah Valley university. He was 31 years old. It's another instance of an attack on a political figure in the US following the assassination of a Minnesota state rep and her husband in June and last summer's assassination attempt on President Trump. Quick update on the hunt for the shooter. It's entering its second day. Authorities had taken two suspects into custody, but have since released them. The search remains ongoing. And now onto the show, starting with a word from our sponsor. Indeed. Neil, don't distract me. I'm trying to innovate.
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Neal Freyman
Innovate what?
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Toby Howell
I want to make hiring and job seeking easier for everyone involved.
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Neal Freyman
Hate to be the bearer of bad news here, buddy, but Indeed's been doing that with their AI powered solutions for both employers and job seekers.
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Toby Howell
What are they leveraging? Huge amounts of data to make hiring faster and easier.
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Neal Freyman
Yes, it's literally what they're talking about today at Indeed Future Works, our morning Brew coworkers are there right now.
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Toby Howell
Oh well, in that case, I guess you can learn more@ Indeed futureworks.com Brew that's Indeed futureworks.com/brew Larry Ellison is 81 years old, he's got a full head of hair, and now he's the richest person in the world. After Oracle, the company he founded and now chairs searched 35% yesterday, Ellison's personal fortune soared by 89 billion, pushing him to a nearly $400 billion net worth and into the top spot over his pal Elon Musk. Behind the surge was an earnings call that had analysts practically giddy with excitement. Guggenheim's John defuci said he was blown away. TD Cowan's Derrick Wood called it momentous quarter. Deutsche Bank's Brad Zelnick said, we're all kind of in shock. Ironically, Oracle actually missed earnings expectations in the past quarter, but no one cared. Investors were locked in on future guidance. Its cloud infrastructure business, which supports the computing requirements of AI companies, is set to grow 77% this year to $18 billion. But then the company projects $32 billion in revenue in 2026, 73 billion in 2027, 114 in 2028, and 144 billion by 2029. Added all up. And Oracle says it has $455 billion in in booked revenue, up three hundred and fifty nine percent from last year. A huge chunk of that comes from one company, though. Morning Brew. Just kidding. It's OpenAI who, according to reports, agreed to purchase $300 billion alone in computing power over the next five years. Neal the staggeringly high backlog of business that Oracle tees shows that AI companies are certainly planning to keep on spend, spend spending. Meanwhile, Oracle looks to be the biggest picks and shovel winner of the AI gold rush. Now all it has to do is live up to those lofty revenue expectations. A piece of cake.
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Neal Freyman
Shades of Nvidia here in terms of an old hat Silicon Valley company catching fire because of a I Oracle expects its revenue to double over the next three years, and this was already a massive company worth about $500 billion. But due to that stock gain yesterday, it overtook some of the other biggest companies in the world. J.P. morgan, Walmart, Eli Lilly, Visa. It all passes yesterday. Wave goodbye and Larry Ellison wave goodbye to Elon Musk becoming the richest person in the world. Just astonishing projections in terms of how much how much sales this company expects to grow over just the next few years thanks to AI.
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Toby Howell
But still, it's going to be tough to actually deliver on those expectations because it's going to have to build out a lot of infrastructure to support those contracts. That's going to require a, a ton of power, four and a half gigawatts of capacity. That's as much as the Hoover Dam creates actually to Hoover Dams worth of power right there. They're also going to have to get their hands on a whole bunch of Nvidia GPUs which have been in hot demand. Obviously they're going to have to get permits to build out all these data centers as well. So the one thing that Oracle thinks that it has an advantage on over fierce competition from the likes of AWS and Azure, from Microsoft, is that they are more focused on the process of inferencing. That is when AI models are kind of getting the answers that you read on your computers or phones. That is a little different from, you know, the training that a lot of other cloud providers are providing these AI companies. So they think that they can do it, but there's still a long road ahead to realizing all of that. Nearly half a trillion dollars in revenue.
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Neal Freyman
It's been an amazing pivot for Oracle, which I'm not sure that many people know exactly what they do, but for decades they were database provider, they sold software to these big companies and they did a pretty good job at that because they were a huge company. But growth was fine. It was, they were growing at an average of about 1.6% per year. And now that growth is going exponential because now they are selling or they're renting out computing on these servers, which is going to require a lot more capital expenditures. They were spending about $1.6 billion per year in capex. And now as you mentioned, they have to actually build a lot of physical stuff which is going to require billion in capex now. So they're going to spend more. But the potential is so much greater than this legacy database business.
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Toby Howell
People were kind of doing some back of the napkin math here yesterday once we realized that OpenAI was one of the biggest customers. Right now OpenAI makes about $10 billion in revenue of year. Pretty solid, but nowhere near profitability. Their commitment starting in 2027 is to spend $60 billion with Oracle going forward. So that is six times current revenue to just to secure compute that technically they are the only way to support spend like that is for chat CBT to become essentially Google over the next five years just become so ubiquitous and so moneymaking that they are allowed to do this. So everyone was kind of scratching their heads going huh? We're kind of relying on some pretty lofty revenue assumptions coming down the pipeline for a company that is nowhere near profitable right now. So maybe some cracks forming in that $300 billion pledge. Oracle right now is reaping the rewards, but we'll see again if this stock surge actually amounts to real revenue going forward.
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Neal Freyman
And Larry Ellison is just living his best Life as the 81 year old richest person in the world. He owns 98% of the Hawaiian island of Lanai, he revived the Indian Wells tennis tournament in California, and recently he's been going on a spending spree in Oxford. He just bought a pub that was the hangout of J.R.R. tolkien and C.S. lewis for $10.7 million. This pub was not for sale. And then he went and just kept writing bigger checks and finally the pub. So you know he's just doing the billionaire thing, right?
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Toby Howell
Moving on. When Trump's one big beautiful bill came with a no tax on tips provision, there was some head scratching as to what incentives it would create into who it would apply to. Well, thanks to a Treasury Department's preliminary list, we now know which occupations will be able to deduct up to $25,000 in tips per year going forward. And the list may surprise you. There's the typical service workers and bartenders. But the list also included digital content creators, so that means Twitch streamers, OnlyFans, and yes, your favorite podcasters are now allowed deductions on any virtual cash left on the proverbial table. That inclusion could shift the business model of creators, who typically earn their revenue through ads, subscriptions and brand sponsorships. But now the new rules make digital tips disproportionately attractive, since they can be written off in ways other revenue streams cannot. And while tipping someone on your screen might feel a little odd for some, it's becoming more commonplace. More than a quarter of large US influencers classified as over 100,000 followers reported earning tips last year, according to a study from the Creative Class Group. Now this tax provision is set to expire in 2028, but in the meantime, we might not be that far off from a future where audience reflexively tip their favorite podcast hosts the same way you leave 20% after a meal.
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Neal Freyman
This is absolutely going to change the economics of the creator economy. Right now, creators do work on various plat platforms like TikTok, YouTube, Twitch, Snapchat, OnlyFans, and there are a variety of ways they can monetize this through advertising revenue. Some of these platforms have creator funding programs as well, but you can bet that these platforms right now because they want to attract all of the creators as they can because that also brings eyeballs to their platforms, are going to roll out these incredibly lucrative and visible tip buttons everywhere. And when you ever going to watch a YouTube video or your favorite Twitch streamer, you can bet that going forward they're absolutely going to be asking you to tip them rather than buy a particular subscription or anything else because it is the most tax advantageous way in order that they get paid.
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Toby Howell
Yeah, and I do think that this is the coming of age of creators as almost a political bloc as well, because obviously both parties have been trying to get these influencers on their side. Actually since the election, the Trump administration has added a new media seat in the White House specifically for creators. So they are trying to get, you know, these influencers to these press events. So by giving them tangible tax relief, technically you are providing not just financial benefit. You're saying like, hey, we want you as our voting bloc right now. So it looks like we are seeing this young, influential, very online becoming offered material incentives in order to kind of align themselves with a certain political party because they've just become so powerful in today's modern age.
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Neal Freyman
It'll be interesting to see how this no taxes on tips, or at least, you know, specifically deducting $25,000 in tips from your income will impact the broader economy because it does impact digital creators, but also so many other occupations and is going to change incentives up and down the board. Here's just a list of some other professions that will be impacted. DJs, clowns, ushers, maids, gardeners, electricians, house cleaners, tow tuck drivers, yoga instructors, cobblers, skydiving pilots, ski instructors, parking garage attendants. These are all of the 68 professions that are included in this no taxes on tips. Now, it will have a big impact for these people, but it's not going to be a huge amount of people because more than 37% of tipped workers over one third earned income, low enough that they didn't even face any federal income tax. This goes back to 2022. So for the people who are going to be impacted by this, it will, it will have a huge effect on their finances. But there are a large group of of tipped workers for whom this does not apply. Zoox, the driverless car startup that would look real nice over a triple word square, has finally launched its service to the public in Las Vegas. Starting yesterday, you can take a Zoox Robotaxi among several popular venues near the Strip, including topgolf, the Luxor and Resorts World. And because there are no drivers. What happens in a Vegas Zoox stays in a Vegas Zoox with its Sin City launch, Zoox joins the increasingly frenzied race to roll out driverless taxis across the U.S. google's Waymo is the leader of the pack, operating in five cities and having surpassed 10 million paid rides to date. Tesla is far behind, but also in the hunt with robo taxis currently bopping around Austin and an invite only service ongoing in the Bay Area. So where does Zoox fit into the picture? Well, while it sounds like it belongs in a Dr. Seuss book, it actually belongs to Amazon, which acquired Zoox for $1.3 billion in 2020. Amazon's deep pockets means Zoox can offer its Vegas service for free, at least in the first few months, allowing it to build a strong user base before it expands its presence to other parts of Vegas and beyond. But Toby, the name isn't the only Susan thing about Zoox. These cars are something that the Cat in the Hat would roll up in.
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Toby Howell
They are freaky looking. Neil, they let's start on the interior. They have no steering wheel or pedals, so they are fully committed to being an autonomous vehicle. They're symmetrical front and back and they also have bi directional wheels so they can go forward and backwards without a turning. They have two rows of seats that are facing each other, so it's meant for conversation. This might be something that doesn't feel very Vegas. They have floor to ceiling windows that are technically for sightseeing, but that means also the public can see inside the car itself. They are of course electric vehicles as well. I'm just going to say a lot of people compare it to a toaster on wheels. Like that is the number one thing you'll see when describing a zoo. So they are freaky. But it was almost a reflection of a philosophical bet that they took that we do not even want to retrofit cars for autonomy, like Waymo has been doing with Jaguars and Chrysler or even Tesla, who's been using their normal cars and trying to turn them into self driving robo taxis. They wanted to start from scratch, they wanted to reimagine what a car even is. And apparently what they came up with was a toaster on wheels and they.
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Neal Freyman
Have to manufacture these themselves. It is like an all in one thing that Zoox is doing and saying we're not going to retrofit cars, we're making our own that are specifically designed for driverless vehicles. They have one site, one manufacturing site in California. Right now it's chugging out one Zoox, one Toaster on wheels per day. They want to get that up to 3 robotaxis per hour when it's at full scale. Right now Waymo has, has about 2,000 vehicles in its commercial fleet. So they want to pump out a lot of Zoox and they can do that because they are backed by Amazon. All of these driverless car companies need are being subsidized by their broader parent companies or Tesla is being subsidized by its, you know, divisions in its company because analysts don't expect any of these companies in terms of their Robotaxi businesses to be profitable until 2030. So right now it's a turf war. They're all going to all these different cities in order to grab market share as the, as the race heats up.
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Toby Howell
Now let's take a quick break and come back with Neil's numbers.
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Neal Freyman
What does the future hold for business?
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Toby Howell
Ask nine experts and you'll get 10 answers. It's a bull market. It's a bear market. Rates will rise or fall. Inflation's up, down. Can someone invent a crystal ball?
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Neal Freyman
Until someone does, over 42,000 businesses have future proof their business with NetSuite by Oracle. The number one AI Cloud ERP bringing accounting, financial management, inventory and HR into.
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Toby Howell
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Neal Freyman
Whether your company is earning millions or even hundreds of millions, NetSuite helps you respond to immediate challenges and seize your biggest opportunities.
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Toby Howell
Download the CFO's Guide to AI and Machine Learning for free at netsuite.com/brew. That's netsuite.com/brew.
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Neal Freyman
You know what today is, Toby?
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Toby Howell
Tuesday.
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Neal Freyman
No, it's indeed FutureWorks, which you can join virtually right now. Also, it's not Tuesday, buddy.
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Toby Howell
That last part is up for debate. But what's not up for debate is what a great opportunity this is and Morning Brew is on the ground covering it right now. Indeed has been reshaping the world of work with AI powered solutions for both job seekers and employers. Combining this with the scale of their data, Indeed is transforming the hiring landscape to simplify and accelerate the job search and hiring. This is why AI will be a pretty big topic, I think. Indeed. FutureWorks Today and Tomorrow it's not just.
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Neal Freyman
Inspiration, it's actionable strategies to future proof your workforce. Check it out at indeed futureworks.com/brew that's indeed futureworks.com/brew welcome to Neil's Numbers, the segment where I share three stats from the week's news that will feel like putting on a tweed coat for my first number. As if you needed any more reason to get mad about health insurance they're going to raise Prices by the most in 15 years yeah. According to a report by Mercer, the cost of companies health insurance plans for employees will increase by an average of 6.5% in 2026, the biggest jump since 2011. And for those of you who get your health insurance on government exchanges, the median increase will be 18%, more than double last year's rise, according to KFF, health care costs are already straining American households, even before the upcoming price hikes. The recent average for family coverage was about 25 or the price of a small car. Insurance companies blame higher costs for their need to raise prices. UnitedHealth, the country's largest insurer, said it was increasing prices in Maryland and Oregon because of tariff uncertainty and the cost of bringing pharma production to the U.S. others blame the fact that Americans are using health care services more and the proliferation of pricey drugs like GLP1s. And unlike companies in other sectors, health insurers aren't in a financial position to eat those higher costs. Centene, which is taking heat in Arkansas for raising premiums by up to 54%, is the third worst performer in the S&P 500 this year. UnitedHealth is also among the worst stocks in the S And P, plunging 38% so far this year.
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Toby Howell
Yeah, tariffs have this kind of hidden tax beyond consumer goods. You of course expect them to show up in stuff like electronics, but hitting an industry like health care is not something in health insurance, not something that you would normally associate with tariffs whatsoever. But I also do think that AI is weirdly playing a role here that is leading to an escalation in costs. Blue Cross execs say that providers are using AI more aggressively to figure out how to, you know, create faster and broader escalation in costs. And so just like AI is disrupting the white collar jobs, it's also quietly inflating health care bills alongside it. But yeah, just that number of $25,000, the price of a small car is kind of staggering to wrap your mind around, especially because it is set to increase at its fastest rate in 15 years.
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Neal Freyman
For my next number, there's been A curious surge in the number of 99 unit residential buildings being built in New York City. In fact, over the last four quarters, 28 permits for 99 unit buildings were filed, which is more than double the total from the previous 16 years combined, according to Bloomberg. It's not that developers are obsessed with Aaron Judge. It's an unintended effect of a new law. A rule passed last year allows New York developers to claim a tax break if they include a certain number of affordable housing units in their projects. But Once you reach 100 units or more, then you must pay workers $40 an hour, which developers say is financially unworkable. The result will be more mid sized buildings being built than towering skyscrapers. And that's not necessarily a bad thing. Any incentive to spur more housing is being welcomed in New York City, where rents have reached yet another record high. But the real estate industry says this 100 unit or more tax will ultimately limit the number of new units that are put on the market. So Toby, if someone looks at a construction site and asks you, I wonder how many units this will be? You can't go wrong with guessing. 99.
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Toby Howell
This reminds me of the window tax. This was introduced in Britain back in the 17th century. It was meant to be a progressive wealth tax where homes with over 10 windows would be taxed more because more windows means you're wealthier. But what happened was landlords said 10 windows. What if I just bricked up this window to bring it down to nine? Then I get to pay less of a tax. So you start to see this kind of threshold fall off. The exact same thing is happening with apartment buildings right now. It's also reminds me of something called the cobra effect, which was when the British government offered a bounty for dead cobras in India to reduce the population. But people started breeding cobras in order to, you know, earn the reward. So that's an example of perverse incentives. It is just fascinating how you make one policy and you just can't necessarily know how that's going to react down the line, how people are going to react to those incentives. So 99. It sounds like a song. 99 apartment units on the wall. But that's what we're about to see more of in New York City.
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Neal Freyman
If there is a theme for this episode is taxes shape behavior in many ways. And in this case they're shaping the skyline of New York City for my final number. This is extremely odd. There have been no no hitters in Major League Baseball this year. None. There have been a few close calls like the Dodgers Yoshinobu Yamamoto being one out away last weekend versus the Orioles. But each team has gotten at least one hit in every game since the season began back in the spring. No hitters are very rare. There have only been 326 of them in almost 250,000 MLB games. But maybe even rarer than no hitters are no no hitters. The last season without a single no hitter was 2005, and it's happened just five times since 1969. What makes this even more bizarre is that we are coming off a golden age of no hitters. According to the Wall Street Journal, there was an average of four no hitters a year from 2010 through last season. There were nine in 2021, a record going back to the 19th century. And even two in 2020 where there was a shortened season from COVID 19. That was a lot of double negatives. So hope you're still with me. Toby, is this no no hitter season just what statisticians call an outlier?
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Toby Howell
It is an outlier. But there are a few possible reasons contributing to the lack of no hitters. Batters batting averages are taking up a little bit. They were.243 in 2022. They're up to.246 this year. More balls in play means more chances for a mistake. Also shorter outings. This is probably one of the biggest factors behind it. A lot of pitchers are, you know, going five innings, going six innings and then getting pulled by their managers. There have been 10 instances this season when a starter went five hitless innings and then their manager comes out and yanks them. Which was not something that used to happen in the past. It used to be like, all right, my guys deal in here. Let's let them. Let's let them cook a little bit. Let's let them try to chase that no hitter. Now people are saying, like, hey, as long as the team wins, like, I'm fine with being pulled right now, so. But probably random chance has to play with it. I mean, Yamamoto being a single out away like that is a crazy thing we have to mention too. It's never happened before, but the Dodgers ended up losing that game. They have never been a team to have both a lead and a no hitter through eight and two thirds innings and end up losing that game. So that is just some random chance.
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Neal Freyman
That was the best game of the season. Incredible win by the Orioles.
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Toby Howell
Now let's sprint to the finish with some final headlines. The revival in the IPO market rolled on yesterday as Klarna finally made its long awaited public debut on the New York Stock Exchange. The Swedish Buy now, pay later giant didn't exactly take off like a rocket ship like recent IPOs of Figma and Circle, but still shares rose about 15% in its first day of trading, closing above its expected range and giving it a $17 billion valuation. Now that Klarna is a public company, it will look to expand its products beyond letting users pay for their burritos in installments into things like debit cards and loans for larger ticket items. Klarna is still very much a money losing business with a net loss of $153 million on total revenue of one and a half billion for the first half of the year. So it'll be interesting to see the market's appetite for a more reasonably priced, unprofitable fintech with dreams of becoming a larger digital bank.
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Neal Freyman
Depending on when you invested in Klarna, you either made a lot of money on this IPO or you lost a lot of money. Sequoia, which is a VC firm, started backing Klarna way back in 2010. It's invested $500 million so far and turned that into 2.6 billion. But if you are Masayoshi Son, the leader of SoftBank, then you invested in Klarna in 2021 when Klarna's valuation was at $30 billion, which is double what it is now on the public markets. So markets so you are red and paper. So it totally depends on when you invested in Klarna on its journey. And according to CEO Sebastian Semiatowski, where is it on his journey? Well, it just got mar the IPO a little bit like a wedding. You prepare so much and you plan for it and it's a big party. But in the end, marriage goes on. The first opportunity to secure World cup tickets opened up yesterday and you'll never believe this, but it was chaos and the site crashed. At 11:00am Eastern, Visa card holders were able to enter a lottery for access to tickets for the World cup, the first of four lottery phases ahead of the tournament here in North America next summer, it was a feeding frenzy reminiscent of the Aristor. And similar to that ticket debacle, FIFA's site broke. For many users who waited more than an hour to secure tickets, only to be hit with an error message. The funny thing is, there was no need to be first in line for this lottery. The window for Visa holders is open until September 19th and no preference will be given to those who got to the front of the line. An undisclosed number of applicants will be notified to begin purchasing tickets on October 1st. Toby, you tried to enter this. Did it work for you?
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Toby Howell
I had no less than five group chats start the morning saying, hey, World cup presale draw is open. So you kind of forget just how massive these events really are. I mean, it's the biggest event in the world. But yeah, I jumped in the queue yesterday along with what I would assume is a billion other people, and it told me I had 45 minutes to wait and I couldn't close my browser, which of course I couldn't do. I had to go home and take a nap. So I whiffed hard yesterday. But then you and I this morning logged back on. Went pretty smoothly. We got a submitted entry in a minute. So I guess happy end of the story. Especially because it doesn't really matter. You have until September 19th, so we all have a fair shot at those tickets. But yeah, I'm just kind of getting excited here. So which. Which cities do you want to see? And we just checked all of them. Like any game would be amazing. So interesting to see just how they're doing this rollout, especially with one of the biggest mega events in the world.
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Neal Freyman
I believe, believe that we will get tickets. That is all the time we have. Thanks so much for starting your morning with us and have a wonderful Thursday. If you have any thoughts or feedback on today's show, send a note to Morning Brew daily at Morning Broadcom. 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 has a no no heading into the ninth. Devin Emery is our president and our show is a production of Morning Brew.
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Toby Howell
Great show today, Neil. Now let's run it back tomorrow.
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