Andrew Ross Sorkin (2:06)

Doesn't everybody think their own kids are the smartest?

Katie Kramer (2:10)

It's Wednesday, August 13, 2025. Squawkpod begins right now.

Andrew Ross Sorkin (2:16)

Stand Andreby in 3, 2, 1. Q Andrew good morning and welcome to Squawkbox right here on CNBC. We're live @ the NASDAQ market site in Times Square. I'm Andrew Ross Sorkin, along with Joe Kernan. Becky is off on this summer, August.

Joe Kernen (2:32)

13Th, 13th, just good to that's what.

Andrew Ross Sorkin (2:36)

Today is, the 13th on the back of some of that inflationary news. We can talk about what that means, but it sounds like the prevailing view is the Fed is going to continue to potentially lower it, continue, maybe start lowering rates this fall, in September. We'll see.

Joe Kernen (2:51)

I would just say true or false for the Fed, and this is a Nick Timorous. It's just, well, it just sums it up. It's good trying to say yes for the Journal, for, for the Fed. For the Fed, the lack of more alarming acceleration in price pressures likely removes an obstacle to lowering rates in response to growing worries about the labor market. In other words, that 3.1 core, you know, that's not great. What we saw yesterday, it was hotter than forecast for a 3% rate. But 3, 1, 3 8, it just the question is whether not as alarming as what people were.

Andrew Ross Sorkin (3:29)

Not as alarming. The question is, is it the beginning of something Right.

Joe Kernen (3:33)

With labor, you mean?

Andrew Ross Sorkin (3:35)

No.

Joe Kernen (3:35)

You mean with a rate cycle moving lower?

Andrew Ross Sorkin (3:39)

Well, no, no. I think what we're saying, oh, is.

Joe Kernen (3:42)

The inflation, the inflation piece, right.

Andrew Ross Sorkin (3:44)

Are we starting to see a little bit of that? How much of it is it should.

Joe Kernen (3:49)

Be here three months ago, then two months, then one.

Andrew Ross Sorkin (3:52)

And we, and that's the question people.

Joe Kernen (3:55)

And I'm not mentioning any names, but people that keep saying that the market is reacting incorrectly to what I think it should be doing and that the inflation is still there. And I haven't been wrong about inflation. It's just the markets have been wrong about the way it reacts to it. That doesn't help anyone. That doesn't help viewers. It doesn't help anyone. The market. Now the market could be wrong. The market could be mispriced. The market could be ready for a correction. But when it, let's say it happens like yesterday, you saw the numbers, right. The market immediately took off. Would you. Is that a day where you would argue that actually it was worse inflation than expected and that the market should be down?

Andrew Ross Sorkin (4:38)

No, no, no, it wasn't worse.

Joe Kernen (4:39)

I think you're missing my point, though, that the market, when the market tells you something, then it doesn't matter what you think or what anyone thinks at this.

Andrew Ross Sorkin (4:47)

Well, sure. I'm just suggesting to you that I wonder whether come this fall you actually will start to see bigger signs of inflation and whether what we saw yesterday.

Joe Kernen (4:58)

Was the first sort of crack in that last month. I think Right.

Andrew Ross Sorkin (5:02)

Because. And by the way, it's not that it's shooting up, it's just here we were going down, down, down, down, down, down, down, down. And now we're turning around, it's going up.

Joe Kernen (5:10)

The last mile, as Rick always points out, has always been from 3 to 2 is always going to be the hardest to get. It wasn't, you know, we got down here pretty quick from where were we? Nine at one point. So that's going to be the hardest.

Andrew Ross Sorkin (5:21)

But I do think just to want your point, one of the reasons that people thought, you know, their hair was on fire three months ago.

Joe Kernen (5:28)

Yes.

Andrew Ross Sorkin (5:28)

Right. Including my own. Let's just make you didn't know Trump.

Joe Kernen (5:31)

Was going to pull back.

Andrew Ross Sorkin (5:32)

And that's the distinction. So when John Hatzius, who's, you know, now getting a hard time from, from President Trump put out those reports back in, I don't know what it was April or May, saying that he thought that there was going to be a potential recession as a result of the tariffs. And he, I believe when you go read those things was saying, yes, if we have 145% tariffs against China, we'll have a recession. That's not a crazy idea.

Joe Kernen (5:55)

Maybe it's an economist should just be able to interpret numbers. And no one is saying he should be a psychiatrist to know what Donald Trump is thinking. But there are some people that probably were able to gauge the likelihood of whether that was going to be the case. And I'm not saying that they're Trump fans, but people that think there's a method to the madness or that he's a negotiator or the art of the deal or what, or it was just negotiations all along. Maybe you could have been savvy enough to say the worst case scenario is never going to come to pass. But here's what worries me is that we have gone from everyone predicting inflation from tariffs to now, nobody predicts.

Andrew Ross Sorkin (6:36)

And so I'm.

Joe Kernen (6:37)

You might be right about like to.

Andrew Ross Sorkin (6:39)

Be a little bit, you might be a little in the middle.

Joe Kernen (6:41)

You might be right that at this point the consensus has totally switched. And now it's like yesterday, I think, you know, when we hear Waller, I think Jim Bullard yesterday basically said I don't think tariffs cause inflation. Said it outright. I think it's, you know, monetary money spy or whatever it is. And there are people, by the way.

Andrew Ross Sorkin (7:03)

He'S also auditioning for a job. So let's just. But he's all take no but before he was get your salt Shaker out.

Joe Kernen (7:09)

Yeah, but you remember I said to him, I think two months ago you were saying that the labor, that the, the dual mandate, that the labor problem or the growth slowdown was more of a concern than inflation. And he said, yes, that was two months ago. So it was long before he was in fact. No, that'll be in a second. You're going to read that one. You're going to talk about Scott Besson yesterday. He wasn't on this show. Disappointing. But somehow the word got out from another show. And you're going to talk about that.

Andrew Ross Sorkin (7:42)

We will.

Joe Kernen (7:43)

The Trump administration, though, is reportedly considering changing how the government collects and reports those jobs data. So Wall Street Journal report saying officials are looking at different technologies now to make the process more efficient. That probably be a good idea. With aides saying that they want to improve the response rate to surveys, which, as we noted, are down, have been plunging since the, the pandemic to below 60%. People just don't answer. President Trump fired the head of the BLS after a worse than expected July jobs report. That wasn't really it. It was the revisions. It was the largest revisions to the prior two jobs reports in the last 50 years was really what it was, not just because the numbers were bad. Meantime, the economists picked by the president to take over the BLS recently flowed. The idea of doing it quarterly because you can't, you know, by, by the third month, you finally know because you finally get. Right.

Andrew Ross Sorkin (8:40)

No. So he wants to get rid of the monthly numbers.

Joe Kernen (8:42)

Right. And do it quarterly.

Andrew Ross Sorkin (8:43)

My understanding is he wants to suspend the monthly numbers while they figure out new technology and other kinds of methods to get better, more frequent numbers.

Joe Kernen (8:51)

This is one of our guys, E.J. anthony.

Andrew Ross Sorkin (8:53)

But it is interesting that they're. But this is interesting. So if you're accepting of the quarterly numbers, you're saying to yourself that they're.

Joe Kernen (9:01)

Not the last month. Could be.

Andrew Ross Sorkin (9:03)

But if you're saying that the quarterly numbers are not rigged.

Joe Kernen (9:06)

Oh, I don't just. The president says rigged. He uses. He throws out word.

Andrew Ross Sorkin (9:10)

Or we said it, but we asked him and we said is it political?

Joe Kernen (9:13)

No one thinks it's rigged.

Andrew Ross Sorkin (9:15)

He said it was rigged.

Joe Kernen (9:16)

I know he did, but he says a lot of things. Don't take him literally. Take him seriously. That's what we said all along. No one thinks they're rigged. You can't rig them. Elaine Chao says you can't rig them. But they.

Andrew Ross Sorkin (9:26)

I'm not suggesting they're rigged.

Joe Kernen (9:27)

I'm just suggesting the standard of deviation is so large that you can't trust.

Andrew Ross Sorkin (9:32)

Okay.

Joe Kernen (9:32)

So.

Andrew Ross Sorkin (9:32)

But let's just then accept that they're not rigged.

Steve Liesman (9:34)

You're, you're.

Joe Kernen (9:35)

I've always accepted. That's why when we had him on, I was grilling him on that.

Andrew Ross Sorkin (9:39)

Okay. But he's continued to say he thought they were rigged.

Joe Kernen (9:42)

Yeah, he says, he says that about the 2020 election too. So he's, you know. Okay, you don't, you, I know you understand how it works with him by now. After one whole. I do four year term and then another 200 days. I know you understand.

Andrew Ross Sorkin (9:57)

I do. Here's the hard part for me, the hard part is sometimes you say, don't take him literally, take him figuratively, or don't. And then people say, no, no, no. Actually he does what he says. So. And that's why, by the way, in the Yan Hotzius universe, when he's putting out a report saying he thinks there's going to be recession because of tariffs, when he says 145% tariffs on China, there are some people who say, well, he said that's what he was going to do.

Joe Kernen (10:23)

When you go to a doctor, do you think that it's art or science?

Andrew Ross Sorkin (10:30)

Probably a little bit of both.

Joe Kernen (10:31)

Exactly. With him, this is not a science. Every single situation you've got to sort of use some intuition to try to really figure out what's going on. A lot of things he does follow through on. Other things he's saying he's not even going to come close to following through on because he's doing something else. Right. Look, I know him well, but I still don't know. He's a riddle wrapped in an enigma.

Andrew Ross Sorkin (10:57)

Have you heard that expression, I have.

Joe Kernen (10:59)

Wrapped in a conundrum, surrounded by confusion?

Andrew Ross Sorkin (11:03)

I'm wrapped in all of those things right now. Meantime, Treasury Secretary Scott Bessant broaching the possibility of a 50 basis point rate cut as at next month's Federal Reserve meeting. In an interview yesterday, Bessen highlighted downward revised jobs growth data for May and June. That came in two days after the Fed opted to keep rates steady at the last meeting. He also said he hoped that the Senate would confirm Council of Economic Advisers chair Stephen Mirren to fill that temporary Fed vacancy before the central bank's next meeting in September. So he could ultimately actually have an impact on that decision.

Joe Kernen (11:42)

Where did. I already lost it, but I read somewhere exactly what might have been on Twitter. You never know when you.

Andrew Ross Sorkin (11:48)

Well, that you never know.

Joe Kernen (11:49)

Yes, I could have read it anywhere. But reading Descent said this is what I'm looking for in the next Fed chair. And when I read it I got to say I thought James Bullard, you know this, there were like five things and each one of them I just checked. We'll see whether that finally happens.

Andrew Ross Sorkin (12:10)

But I like Bullard and I think he's an experienced hand. People know him, people trust him, calm, calm, he's got some credibility, fearless and does not seem political to me. He does have probably more.

Joe Kernen (12:23)

Even though you said earlier he's trying to get.

Andrew Ross Sorkin (12:25)

No, he has a more of a right leaning bent than a left leaning bent. But I think on the whole people on both sides of the aisle wouldn't look at him as a, as some kind of political puppet or prop.

Joe Kernen (12:37)

Right, Right. But the way that and I like Bessant too and the way the param I'm going to find but the parameters.

Andrew Ross Sorkin (12:46)

Say by the way, even though I just did say that about what he said yesterday, he also made other comments that weren't completely upset and these are, these weren't new.

Joe Kernen (12:54)

These weren't. Since I don't think he two months ago, I don't think he thought he was. Of course they're all, they could always be auditioning, you know. Right. Okay, now to one unforeseen consequence of the rapid advancements in a pushed by some people to have smarter babies. That's the subject of a new Wall Street Journal article which begins by telling the story of a Silicon Valley mathematician who's hoping more intelligent children will save humanity from the perils of AI. It details testing that purportedly is effective at screening embryos for high IQ and high end matchmaking that aims at least in part to generate smarter babies. Boosters of the so called pro natalist movement to have more children in response to declining birth rates. That's different though includes Elon Musk. And the idea has been embraced by others in Silicon Valley. But questions about efficacy and bioethics remain. The Journal article quotes one professor who said testing embryos for IQ and selecting the top one could result in and an extra three to four IQ points on average versus choosing randomly.

Andrew Ross Sorkin (14:11)

Doesn't everybody think their own kids are the smartest?

Joe Kernen (14:13)

They do. And it's, you know, what are we going to start like breeding for like we do with livestock or corn?

Andrew Ross Sorkin (14:23)

Apparently we are already happening. It's already happening. Teas will be next.

Katie Kramer (14:30)

Coming up next on Squawk Pod, the latest inflation reading showed core consumer prices did surge just over 3% in July, which investors took as a sign that the Federal Reserve may have to Begin cutting interest rates to combat slightly higher inflation. Our chief economics reporter, Steve Liesman crunches the numbers.

Steve Liesman (14:50)

There's been two criteria, Joe. How much is coming through? And is it bleeding into other areas?

Katie Kramer (14:56)

And speaking of prices, what's for lunch? Brett Shulman, CEO of fast casual chain Kava, says he's still serving up for hungry customers. Despite inflation and despite tariffs, we haven't.

Brett Shulman (15:08)

Seen inflationary pressures today. I've got to give a shout out to our supply chain team. They've been incredibly agile, really mitigating any cost pressures to pass through to our guests. Remains to be seen what's going to happen at the end of the year. But no pressure on the labor front either.

Andrew Ross Sorkin (15:22)

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Katie Kramer (16:56)

Welcome back to Squawk Pot from CNBC Today with Joe Kernan and Andrew Ross Sorkin. Here's Joe.

Joe Kernen (17:04)

Yesterday's headlines, just modestly higher inflation from tariffs. Steve's going to dig deeper into it, but I just want to have a conversation with you before you. You wrote something out. We've been crunching some numbers. You can do that in a second. Can I read something to you? Yeah.

Steve Liesman (17:18)

You got something? What do you got?

Joe Kernen (17:18)

So this is what we were trying to say yesterday, and I think this is good. And then I want to ask you what it would really take for the Fed. The lack of a more alarming acceleration in price pressures likely removes an obstacle to lowering rates in response to worries about the labor market. And it kind of sums up what I think we saw yesterday. 3.1 was hotter for core.

Jonathan Kanter (17:41)

Right.

Steve Liesman (17:41)

Q7 was lower.

Joe Kernen (17:42)

Q7 was lower. 3.1 is not 2. What would. What would be. Woo, woo, woo. What would be the size for Core three. Five.

Steve Liesman (17:54)

I think it's kind of like there's been two criteria, Joe. How much is coming through and is it bleeding into other areas? And those have been.

Joe Kernen (18:03)

You expecting three, five.

Steve Liesman (18:05)

It's not out of the question. Guys, let's just skip the first part of this and go right to the first graph.

Joe Kernen (18:10)

Oh, this is going to. All right. Because these are so PPI is coming today, isn't it?

Steve Liesman (18:15)

PPI is tomorrow.

Joe Kernen (18:16)

Oh, tomorrow.

Steve Liesman (18:17)

Okay.

Andrew Ross Sorkin (18:17)

So that's right.

Steve Liesman (18:19)

You look inside the report. These are things. Joe, what we did is we calculated prices changes from January to July. Women's dresses up 10.4%. Tools and hardware, 5%. Major appliances, 4.8. You can see toys and games. These are things that normally would be going down or flat or were offsets to it. And that's really a key. Guys, if you move on here, we're doing this live here. Another way to see the change, though, is from the prior declining trend. Mike Konso from the Roosevelt Institute found some stark reversals. Take a look here. Tools in appliance categories was heading down. That's the trend line, the dotted line there before the reversal that likely is linked to tariffs. Similar pattern in home furnishings and dozens of other products that are mostly imported. The trend line was down, and you can see the current line is up. Kuznet found that 52% of 82 items in the core basket are up more than 3%. That was a sign of persistent inflation in the pandemic. Scott Lince from the Cato Institute tells me, quote, the big question is whether we're starting to see it move into the service inflation. And auto repair could be a sign of that. How long margins could hold before they pass on the tariff. At the same time, sort of talking about what Joe is talking about. Those who see benign tariff outcomes have been proven correct in several respects. Some prices are falling, perhaps in reaction to other things being more expensive. That's that relative price that we've been talking about acting as an offset to the Tariffs. And tariffs may not be sufficient in and of themselves to overcome these other offsets. Take a look at yesterday's CPI. Energy was down 1.1, so that's a big offset. Food at home down 0.1. Core commodities, though, were up. That's where it really was modest. But the surprise was that core services up.04. So the stock market trades like it's game over in this debate between saying it ain't going to ever happen and those warning, just, you wait, that's a bad sign. But the latter see overtime to this game in August and the inflation reports. I think that answers your question.

Joe Kernen (20:15)

We talked about it earlier. You know that, that, that the consensus has gone from oh, it's going to be terrible inflation to now people think that we know that it's not. Can I ask you one question? I'm going to just. This is the perfect world that I wish, I wish there was some chance that it was true.

Andrew Ross Sorkin (20:30)

What's that?

Joe Kernen (20:32)

You know how Trump always says that we're collecting money from foreign countries and we all know that it's people that import it? Here I have an answer. No, no. But my question is, let's say that there are countries that it's so important that they continue to export to us that they really have eaten the lion's share of the tariffs in their prices. So you actually could say that they're the ones that are losing out and actually paying for the tariff.

Steve Liesman (21:04)

Right.

Joe Kernen (21:04)

Money that we're getting here, at least a part of that could be true. It could be 10%, could be 50.

Andrew Ross Sorkin (21:10)

Goldman Sachs says it's 60%.

Steve Liesman (21:12)

Think about that was also including the, the, the wholesalers and the, and corporations. Let me give you two answers to that question, which is, wouldn't it be great? It would be great.

Joe Kernen (21:23)

What a wonderful world it would be.

Steve Liesman (21:25)

I want to give you two answers to that question. The first one is why I like my job so much. Because you know what? Tomorrow is not only ppi. I think it's tomorrow going to get import prices.

Joe Kernen (21:34)

Okay.

Steve Liesman (21:34)

When did you ever get excited about import prices? I'm excited about it because the import prices will answer that question if import.

Joe Kernen (21:42)

Prices are not flat down.

Steve Liesman (21:43)

Last time they were kind of, they've been kind of flat, which is crazy. It shows that they're not absorbing it overseas if it was.

Joe Kernen (21:51)

But the dollar has been weak too.

Steve Liesman (21:53)

You have a currency thing. The other thing is, you know, we have our CFO council, which is really a great group of people. One CFO said to me, I don't Think we're that stupid and bad negotiators that our suppliers have 15% extra margin.

Joe Kernen (22:11)

To absorb, according to.

Steve Liesman (22:13)

Isn't that interesting?

Joe Kernen (22:14)

Not really. Elizabeth Warren thinks that every single, every.

Steve Liesman (22:18)

Single producer's not making extra money.

Joe Kernen (22:20)

He thinks every single person's gouging every chance they get.

Steve Liesman (22:23)

But if you said, well, you got an extra, you're already making money and you have an extra 15% I could have negotiated out and that the world depends on the business is so uncompetitive that there's an extra 15% hanging around.

Joe Kernen (22:34)

What's in videos margins.

Steve Liesman (22:36)

Well, that's the margin. But that's true. That's true. And we'll see. We'll kick it from margin. My friend Rob is begging me to not talk anymore, as are some viewers, I'm sure. So. But that's the two things we'll watch. Import prices tomorrow and margins is the other key.

Andrew Ross Sorkin (22:53)

Steve. Thank you, sir.

Steve Liesman (22:54)

My pleasure.

Andrew Ross Sorkin (22:58)

Kava Shares down lower this morning after the fast casual chain reported second quarter revenue and same store sales that missed estimates. Company also trimming its sales outlook for the year as it tries to top last year's very strong numbers when it added grilled steak to the menu. And joining us right now is Brett Shellman. He is the company's CEO and a bit of a brave soul. I give you lots of credit to come on TV on a morning like this and not to overplay it or downplay it, but the stock is off nearly a quarter this morning. About 25%. 24. A little over 24% right now. So before we can get. How you feeling?

Brett Shulman (23:32)

I feel good.

Andrew Ross Sorkin (23:33)

I feel this is not throwing you for a loop.

Brett Shulman (23:35)

Listen, even before our ipo, I told the team, you know, stocks will go up, stocks will go down. But what really will define us is how we build this over the long term. We're not doing this for the next 10 weeks. We're doing this for the next 10 years and beyond. And so we're focused on that. And when you look at some of the metrics in the quarter, we beat our EBITDA, we beat our EPS. And our new restaurants in 2025 are trending at record level openings at $3 million plus run rates. So we're more confident than ever in the large scale white space opportunity defining the magic.

Andrew Ross Sorkin (24:04)

And so what do you think's happening? I mean, I think the investor class is saying, we expected you to continue to beat, beat, beat, beat, beat. We thought the forecast was going to be up and to the right and it is not that way.

Brett Shulman (24:15)

Well, markets can be short term focused and very focused on same restaurant sales, which we did come in under expectations.

Andrew Ross Sorkin (24:21)

And so when did you start to see that happening?

Brett Shulman (24:24)

So we did enter the quarter on our run rates as we expected. And then in June we saw a pretty pronounced deceleration. But that also coincided with our year over year lap of our steak launch last year, which was our most significant protein launch in a number of years. And, and as we started to work through the quarter, we started to regain momentum and reaccelerated comps at the end of the quarter.

Andrew Ross Sorkin (24:45)

Okay, so what are you seeing though? What do you think? What is the issue in your mind right now?

Brett Shulman (24:49)

I think for us specifically, we are comping significant hurdles. If you think about on a three year basis, we grew traffic in the quarter 20%. Our EVs have gone from 2.3 to 3 million during that period. So certainly high hurdles. And then I think there is macroeconomic uncertainty, I like to use the metaphor. It's like consumer trying to navigate through the fog. The fog has gotten denser at moments it's gotten lighter when they pass the budget. I think that gave consumers certainty whether you liked what was in the bill or not at least gave you clarity. And then now we've got some shifting tariff policy that creates fog again. So we're just trying to focus on delivering a great value to our guests when they're feeling that fog.

Andrew Ross Sorkin (25:28)

Tell me what you're feeling on the labor front and what you're feeling on the product front, meaning the food and other wholesale stuff that's coming in that you need to actually buy to make the food.

Brett Shulman (25:39)

We haven't seen inflationary pressures today. Got to give a shout out to our supply chain team. They've been incredibly agile. Really mitigating any cost pressures to pass through to our guests. Remains to be seen what's going to happen at the end of the year. But no pressure on the labor front either.

Andrew Ross Sorkin (25:52)

Okay, but hold on. So on supplies you're saying no, there's no pressure now when you put the.

Brett Shulman (25:56)

Puts and takes together. And again, that's, that's our, that's our job, that's our responsibility to try and work on behalf of our guests to mitigate the, any of those inflationary pressures we may be seeing by offsetting it with other efficiencies in the business.

Andrew Ross Sorkin (26:07)

Okay, so what, tell me, but tell me how you're doing that. Because by the way, that is the central issue for so many businesses that are bringing in goods from outside the country. So first of all, what goods are you bringing in?

Brett Shulman (26:16)

Yeah, so our olive oil from Greece. We do get some hormone antibiotic free beef from Australia and then some basmati rice from overseas. So the rice crop was great this year. So that helped offset any tariff pressure on that front. And then when you think about how we've architected our supply chain over the years, we do source a lot domestically. We are a domestic manufacturer. We have our two production facilities where we're vertically integrated to make our dips and spreads, which also helps pass that cost effectiveness and efficiency to our guests.

Andrew Ross Sorkin (26:44)

When you think about the rice, when you think about the olive oil, is it possible over the next year or two that you think you could be sourcing that domestically with this, the specificity.

Brett Shulman (26:56)

Of the, of the ingredients?

Andrew Ross Sorkin (26:57)

That's the problem.

Brett Shulman (26:58)

Yeah, there's some of it. I mean, there's certainly things we can shift domestically. There's others that we're going to source overseas. And then we're going to work to make sure that we don't have to pass those costs along to our guests.

Andrew Ross Sorkin (27:07)

What are you seeing? Okay, and that's the other question. Are you eating the costs?

Joe Kernen (27:11)

No.

Brett Shulman (27:12)

If you look, we beat on restaurant level margin, we had 26.3% restaurant level margin while absorbing any of those pressures around us.

Andrew Ross Sorkin (27:19)

Okay. What are you seeing in terms of the strength of the consumer to the extent that you think you're a barometer of what's going on? Are they trading down, are they trading up happening? Yes.

Brett Shulman (27:27)

I think relative to our peers, we put up a positive comp. When you've seen a lot of people put up negative comp. So clearly when people are choosing to eat out, they're choosing to eat out at kava. So we're very excited about what we've seen. And again, the long term trajectory of the business and the structural strength we see underneath.

Andrew Ross Sorkin (27:42)

Can I ask you almost like a philosophical psychological question? So you introduced stake a year ago. Yeah. You know that that's working in a big way.

Joe Kernen (27:51)

Yeah.

Andrew Ross Sorkin (27:51)

I imagine you say to yourself, this is working, but this is actually a problem for me insofar as you say to yourself, talk about the hurdle, like this is going to be a tough comp.

Brett Shulman (28:01)

Yeah.

Andrew Ross Sorkin (28:01)

When did you say to yourself in the past 12 months we're going to get to a point where maybe this is going to be tough. And do you. And when you're thinking that to yourself, are you also looking at the stock and saying, you know, I wish it wasn't actually so high?

Brett Shulman (28:15)

Yeah, that's the perverse nature sometimes of the public markets where, you know, you have to comp the comp, so to speak. And, you know, we could have done that. And we're going to launch chicken shawarma here in the first week of September, which is going to be another new protein launch. We could have accelerated that and launched it in June to match up with our steak launch of last year. But we didn't think that was the right thing to do for our operations team or for the business. And again, we've tried to position this business for the long term, very strong balance sheet, free cash flow, positive self funding, 18% plus unit growth so that we don't get unduly influenced by short term decisions that the market puts pressure on and we can stay steadfast on that long term strategy and build the next large scale cultural cuisine category.

Andrew Ross Sorkin (28:55)

Okay, thank you for coming in and thank you again for coming in on what is a tough morning. But we do hope you come on back and we love to follow your progress.

Brett Shulman (29:04)

Thanks for having me.

Joe Kernen (29:05)

Very tough. He brought food last time when I wasn't here, he brought food.

Andrew Ross Sorkin (29:10)

He was trying to buy you all last time. This time he decided he didn't even need to buy anybody off. He's like, he's like, the numbers are.

Joe Kernen (29:16)

No, I know. That is a tough. Yeah. All right. Next time.

Katie Kramer (29:23)

Next on Squawk Pod. Jonathan Kanter served in the Biden administration as assistant Attorney General, working on antitrust cases like one against Google. Today he is weighing in on AI company Perplexity's $34 billion bid for the tech giants Chromebook browser.

Jonathan Kanter (29:40)

One of the things that Google is arguing in court is that one, Chrome has no value outside of Google, and two, it would be difficult, if not impossible, to divest the asset. Now here you have perplexity with 34 billion reasons why it has value outside of Google.

Katie Kramer (29:57)

We'll be right back.

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Katie Kramer (31:04)

This is Squawk.

Andrew Ross Sorkin (31:05)

Pod up and Andrew Q. We're coming in hot. You're watching Squawk Box on cnbc. I'm Andrew Sorkin along with Joe Kern and Becky is off today here in the middle of August. August 13th is the day AI startup perplexity is now making an unsolicited bid. Joe, I don't. You saw this? $30.5 billion. You like perplexity, Use it.

Joe Kernen (31:25)

Yeah, well, I don't try to buy.

Andrew Ross Sorkin (31:27)

I don't like Google's Chrome Internet browser. Now, that figure higher, by the way. Almost like double. Yep, Perplexity's current valuation.

Joe Kernen (31:35)

But they got to sell it.

Andrew Ross Sorkin (31:36)

But the company said that several investors have agreed to back the deal. Now, this is all happening against the backdrop that the Justice Department has proposed that Google divest Chrome as part of that antitrust suit that the tech company lost last year. Now, neither Google nor Perplexity has responded to CNBC's request for comment. Of course, Google would like to keep the browser Perplexity. By the way, whoever gets this browser, if somebody else were to, has tremendous value because once you're in it, people are just going to search and that's how it's going to be.

Joe Kernen (32:05)

Go about that. Yeah. Who do you think is backing Perplexity? You have any idea? I mean, some I don't.

Andrew Ross Sorkin (32:11)

But by the way, that would be a. It's an easy win if Perplexity were to get this right. It would be a huge win.

Joe Kernen (32:16)

Total long shot, though, isn't it?

Andrew Ross Sorkin (32:18)

Totally. And by the way, what they have done, Perplexity has made a couple of what I call sort of moonshot bids. So this is one. They get a lot of publicity here we are talking about it. They, by the way, want to buy TikTok. Yeah, same kind of situation. I don't know what's really driving all of this, but it's interesting stuff.

Joe Kernen (32:38)

You said. I like it. I still have. My main problem with AI is Gigo in my app. I don't know if you finished.

Andrew Ross Sorkin (32:46)

It might happen because it's been that.

Joe Kernen (32:47)

Difficult because what they collate from Reddit and everything else is just the same drivel that you see Everywhere in what I call mainstream media, which my app is. So they don't have any insight, they don't use any thinking. All they do is collate the same tired garbage in, garbage out, stuff that they're finding in Reddit and other places. So it just comes out. It's just more the same problem that. So we.

Andrew Ross Sorkin (33:13)

When are you going to finish mine?

Joe Kernen (33:14)

When are you going to finish mine?

Andrew Ross Sorkin (33:15)

Well, I have to tell you, ChatGPT5 and I know we talked to Sam about it before, it was looking good for me for a while. It's slower, which is slower than the four, than four was.

Joe Kernen (33:25)

No question with the coating.

Andrew Ross Sorkin (33:27)

Well, coding may be better, the vibe coding may be better, but it's still running into lots of problems. I've been trying to build something that's pretty cool that I'm hoping you're going to like when it's done. But it's not. It's not just like doing it for me. Trust me, you got to know what you're doing.

Joe Kernen (33:40)

I think our app could improve all of AI. Let's bring in Joining us now with more on the legal landscape for Big Tech, he's probably a laughing former Assistant Attorney General Jonathan Kanter. He is a distinguished law professor for the Washington University in St. Louis. Great school, great town, and a CNBC contributor. Welcome again, Jonathan. We usually see you on set.

Jonathan Kanter (34:04)

It's great to be here. I'm here in beautiful Stowe, Vermont today.

Andrew Ross Sorkin (34:07)

Lovely.

Joe Kernen (34:09)

What do you think of this? Number one, is there any possibility that Perplexity could, could succeed here?

Jonathan Kanter (34:17)

Yeah, there's a possibility. So the Department of Justice, as you mentioned, has requested the court require Google to divest Chrome. Is that a clever move by Perplexity? Because one of the things that Google is arguing in court is that one, Chrome has no value outside of Google, and two, it would be difficult, if not impossible, to divest the asset. Now here you have perplexity with 34 billion reasons why it has value outside of Google. And if they're willing to buy for $34 billion, then clearly it's an asset that they can achieve or an acquisition that they could complete. The other piece that also is important here is browsers are going to be the front lines for the AI wars. And I think that's becoming clear. And right now Google and Apple own most of the distribution points. And the focus of the antitrust case was locking up distribution points. And so the same day you have Perplexity bidding to buy Google's browser, you have Elon Musk talking about Apple locking up distribution points for OpenAI. So I think what we're seeing here is the next stage of the platform wars where Google and Apple are competing or at least seen as bullies to some degree by the rest of the industry who want access to distribution.

Joe Kernen (35:39)

Did you understand we went back and forth yesterday with exactly what Elon Musk was accusing Apple of doing. Is he got a point or is Apple, I mean Apple's allowed to, to control rank?

Jonathan Kanter (35:53)

Yeah, yeah, it was a clunky email. I mean it's always hard to get in the mind of Elon Musk. I think what, what I read between the lines is that he's saying that Apple, because it owns a distribution points, is cutting a deal with open AI to distribute Open Air, exclude others. And maybe there's some funkiness going on in the App Store as a result, but I think it's really just a relative of the, the DOJ one under our watch against Google, which was locking up distribution points on Apple, Chrome, Android and these other platforms that are really critical to these technologies, whether it's search or an entry point for AI.

Andrew Ross Sorkin (36:31)

Well, let me ask you a different question, Jonathan, which is, you know, you were fighting, I hate to say yesterday, yesterday's war, but we are now moving into a place where we're talking about Open Air constantly anthropic perplexity, etc. Gemini, it seems to me that you're right. The sort of the entry point in is still a huge value proposition. But all of the other component parts that you went after historically, the advertising side of it, how they interacted with, with different platforms and things, doesn't that seem to be something that, you know, if we're talking about the world of technology, a couple of years from now is going to look very different?

Jonathan Kanter (37:11)

Well, it depends how what happens. I mean when we asked for divestiture of the Chrome browser, people said we were fighting yesterday's war and that browsers were no longer relevant. And now we have perplexity bidding $34 billion because browsers are the front lines of the AI wars. I think what, what we see here is do we want next generation of technologies to thrive and compete or are we going to have the previous generation of technologies going more slowly and locking up markets? And I think that's really what this is about. But let's be clear, I mean advertising, online advertising is still a massive business. It's still most of Google's profits. IOS is still a massive business. It's most of Apple's profits and valuation. So these Businesses are huge and really important, not just for today's technologies, but for tomorrow's technologies as well.

Joe Kernen (38:00)

What do you think when, when you saw this? Just on a completely different subject, what do you think of 15% of the revenues of Nvidia and AMD going to the U.S. government? I mean, it'd be nice that. It's always nice to bring in some money with the deficits. We're running this the way to do it.

Jonathan Kanter (38:19)

No, it's not. I mean, we're not China.

Joe Kernen (38:22)

Right.

Jonathan Kanter (38:22)

When you start blurring the lines between the state and the state's enterprises or the free market, we start to look a lot more like China. And so whether it's taking 15% of everyone's profits, I mean, that's just a tax basically, but it's also nationalizing the business. Similar. I think there was like a report that Anthropic was going to offer to give Claude to the government for $1. Again, it starts to blur those lines and frankly raised lots of national security and other kinds of questions as well.

Andrew Ross Sorkin (38:58)

Yeah, I got a. I got one for.

Joe Kernen (39:00)

Well, I won't do the what about ism. I always get yelled after that.

Andrew Ross Sorkin (39:03)

I want to go totally political. I want to go totally, totally political with Jonathan. Yep. Ready? Because here we are. Here, here we are making the argument that this president has gone into this sort of socialistic. You're going to be me on this Marxist world. I get it. And people have made that argument. So my question is. And you've just said that I don't think you like that. What do you think of Mandani?

Jonathan Kanter (39:23)

I'd like you to create an app for me that is less political. Andrew, listen, I think Mamdani is talking about issues that people care about, which is cost of living. And so setting aside whether you're for him or against him. I'm not a politician. All I'm just saying. No, my God. I mean, the fact of the matter is he's succeeding because he's talking about issues that people care about.

Andrew Ross Sorkin (39:49)

By the way, Jonathan, Score, you're right. And that's why he. No, I agree that that's why he's succeeding, but that's a total cop out.

Joe Kernen (39:57)

That's a total cop out. And it's exactly what Elizabeth Warren said. And you really ought to be able to be more. You're a capitalist, Jonathan. I hope I am an already.

Jonathan Kanter (40:06)

Listen, so that's. Let me be very clear.

Andrew Ross Sorkin (40:09)

The reason I asked you the question is not a capitalist. Mamdani is a. I agree with you he is turning out to be thus far at least, a good politician. The question is whether you believe in some of the things that he is articulating as part of his policy positions, namely the idea of socialism, namely the idea of, you know, freezing rent, giving out products and other things like food for free, things like that. So do you, as somebody who's talked about capitalism and such, look at somebody like him versus maybe somebody like Cuomo. And Cuomo has his own problems. Let's be very clear about that. How do you look at that? I know you're not living in New York right now, but nonetheless I'm also.

Jonathan Kanter (40:54)

Yes, I'm also not a politician, but I'm a capitalist. And so I don't agree with everything he says and everything he stands for. But I think he's talking about issues that resonate. And I think to the extent that any politician, whether it's Donald Trump who has done this effectively as well, or Mamdani, to the extent they're talking about issues that affect people's cost of living, they're more likely to get traction. That's really what's happening here. And how you solve these problems is a question, is a good debate that we should be having. But I think a lot of the typical cop out from Democrats in the past was to try to find safe issues without really talking about the economy. And I think we have to do that now.

Joe Kernen (41:30)

Yeah, I guess the only. The point I was making about, you know, the state sponsored capitalism in the CHIPS act when you mandate, you know, child care coverage, union wages, ESG dei, both sides do it. And it's what about ism? But it's. There's whataboutism and there's hypocrisy and that was a mess. A lot of the stuff that was in the Biden administration's. Yeah, but that's legislation too. I'd almost rather get the 15% from Nvidia than do all this feel good stuff that it just ends up hurting the people that.

Jonathan Kanter (42:08)

So you're in favor, Joe, it sounds like you're in favor of a 15% chip tax.

Joe Kernen (42:14)

15% tip tax. You mean we shouldn't have gotten rid of the tax on tips? I mean, I'm not.

Jonathan Kanter (42:22)

Chip tax.

Steve Liesman (42:23)

Chip tax.

Joe Kernen (42:23)

No, I'm not saying I am. I'm just saying that, you know, a lot of finger pointing from people about, you know, in, you know, state sponsored or industrial policy and the masters of that was the Biden administration. And now suddenly, you know, everybody's found religion.

Jonathan Kanter (42:39)

Yeah, listen, I think we can get into the whataboutism. But I will say there's a little bit of a difference when the government is giving incentives for somebody to do something vers simply saying if you're going to do business with somebody else, I need my taste. And there's a difference there, I think fairly well.

Joe Kernen (42:54)

I'm sure I can find some examples of things that were other than incentives during that time. But Jonathan, thank you.

Katie Kramer (43:03)

All right, that's the pod for today. Thanks for listening. Squawk Box is hosted by Joe Kernan, Becky Quick and Andrew Ross Sorkin. Tune in weekday mornings on CNBC at 6 Eastern. Followers squawk Pod, wherever you like to get your podcasts and get the very best of our show every day. And you can listen to it anytime you want. We'll meet you right back here tomorrow.

Andrew Ross Sorkin (43:24)

We are clear. Thanks, guys.

Steve Liesman (43:36)

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Katie Kramer (43:42)

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