Good morning Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. Today we'll take you inside the first AI-run retail store. Then Kevin Warsh was in the hot seat yesterday. Is he going to be confirmed as Fed Chair? It's Wednesday, April 22nd. Let's ride. Good morning and happy Earth Day. A celebration of our humble blue planet and a call to action to ensure we keep it livable for future generations. Some of my favorite things about the Earth, it's well hydrated with water accounting for 71% of the Earth's crust. It's got this magnetism about it, which is huge because that magnetic field deflects deadly solar flares, and it's the only planet in the solar system with a Dave & Buster's. Well, the only planet we know that has a Dave & Buster's so far. We're still exploring, Neil. But I also think you've sort of ruined Earth Day for a lot of people yesterday, Neil, because you asked an absolutely mind-bending trivia question last night at our in-person at Trivia that I will relay here for everyone. For context, you went to the American Crossword Puzzle Tournament a few weeks ago and got this question from New York Times puzzle master Will Shorts. And here it is. Take a country in the world, anagram that country to form a word, make a homophone of that word, then anagram that to form another country. It is a complete brain bender. One more time if you want to hear it. Take a country in the world, anagram that country to form a word, make a homophone of that word, then anagram that to form another country. We're going to give the answer at the end of the show, but start ruminating on that. And happy Earth Day. Yeah, it's a toughie, but it is solvable. And if you want to procrastinate on your work or doing emails, definitely give it a shot. Take out some pen and paper and start writing down some random countries and making anagrams of them. OK, this episode is brought to you by On Investing, an original podcast from Charles Schwab. Each week, host Lizanne Saunders, Schwab's chief investment strategist, and Colin Martin, head of fixed income research and strategy for the Schwab Center for Financial Research, bring you fresh insights into what's happening in the markets and why, and what the implications might be for your portfolio. Join Colin and Lizanne as they explore questions like, how do you evaluate corporate bonds that look interesting and what sectors are on the move right now? You can download the latest episode of On Investing and subscribe so you never miss an episode at schwab.com slash oninvesting or wherever you get your podcasts. Kevin, the washing machine, Warsh, is the 56-year-old former Fed governor Trump tapped back in January to replace Jerome Powell as chair of the Federal Reserve. Yesterday, he was in the hot seat in front of the Senate Banking Committee as they grilled him on his takes on monetary policy, Fed independence, and his rate cut plans. Warsh's plan going in was simple. Let everyone know he is his own man, independent, beholden to no president, a free agent of monetary policy. The president nominated me for the position and I'll be an independent actor if confirmed as chairman of the Federal Reserve, Wors said in response to that line of questioning. Of course, things were immediately complicated by Trump going on CNBC before the hearing and saying he'd be very disappointed if Wors didn't immediately cut rates. Speaking of his rate cut plans, Wors sort of wriggled out of providing an answer. Unlike many of my colleagues past and present, I don't believe in forward guidance. I don't believe that I should be previewing for you what a future decision might be, he told one senator. In general, the stakes are very high. This hearing comes amid both geopolitical tensions and President Trump's feud with the current Fed chair, Jerome Powell. Senator Tom Tillis, who sits on the banking committee, has vowed to hold up the nomination until Trump drops the investigation into JPOW, endangering Warsh's confirmation prospects. Not to mention, should Warsh land the job, the position brings with it stewardship of the biggest economy on the planet. Did Warsh advance his case, Neil, or are the confirmation votes going to be tough to muster? No, he'll sail through should he come up for a vote. Republicans have the majority in the Senate. They are huge fans, and he's pretty widely respected across the board. Also, he might be the perfect Fed chair in the sense that he knows how to talk without actually saying much. So, for example, on the questions of independence to Trump, he tried to have it both ways. In his opening statement, he said, the president nominated me for the position, and I'll be an independent an actor if confirmed as chairman of the Federal Reserve. Then later, under questioning to name maybe one piece of Trump's economic agenda that he disagreed with, he joked and said that he disagreed with Trump's description of him as out of central casting. He said he looked older and grayer if he were from central casting. And Elizabeth Warren, who was his main antagonist during this hearing, said, adorable. But Warsh's goal was to maintain credibility with the White House, who wants him to be loyal to Trump, and maintain credibility with Wall Street, He wants him to be completely independent from Trump, and he managed to do that during this hearing. Yeah, I thought his philosophy on communication was very interesting as well. He kind of – he was asked whether he would continue the process of doing a press conference like Jerome Powell does where he gets up on the podium and says, good afternoon, everyone, and basically explains and answers questions about why the Fed made the decisions that they did. He says that Worscht does not think that that is a practice that should continue going forward because he thinks that letting the press in makes you beholden to what you've basically forecasted. He doesn't want to necessarily even put out the dot plots that show where the Fed governors are thinking about voting going forward because then you become a prisoner to what you said in the past. What if things change? So he kind of wants to drastically lower the amount of official communication the Fed is putting forth because he also thinks that then investors won't be so beholden to what the Fed says and essentially making it be the indispensable actor that judges how the entire economy is going to function. So fascinating that he wants to under-communicate going forward, not over-communicate. Yeah, it's part of a bigger reform package that Warsh has laid out for the Fed. I mean, he used to work for the Fed and then he went to the private sector. And in the interim, pretty much all he's done is bash the Federal Reserve. He thinks it's a dinosaur of an institution. He said the Fed must not be ruled by pointy head economists poring over outdated models and reams of market data and said that the Fed was was one of the main reasons behind the inflation of the past few years coming out of covid and the Russia-Ukraine war. He called it a fatal policy error going back four or five years. So he's coming in guns blazing. He's like, I think this institution is totally rotten and I want to reform it from the ground up, whether that's paring back communications, revising how they do inflation, which is going to be a very interesting move to crack to criticize the Fed because as we know it the Fed is a consensus building operation Kevin Warsh can get up there and Jerome Powell doesn do this Say hey guys I want to lower rates or I want to raise rates You have to build consensus among the 19 Fed governors And that's probably his biggest challenge once he is ostensibly confirmed is he's facing a divided Fed right now. We've had a lot of split votes over the past few Fed meetings. So can he develop those relationships with his colleagues? That was one thing that a lot of people pointed to Jerome Powell was very good at was he was a consensus builder. And people are kind of voicing their support from Austin Goolsbee, who is a Chicago Fed president. He says, I have every expectation he's going to take the job really seriously. He cares about the Fed. So he is getting some of those important voices of confidence from some of his colleagues. And we'll see what happens. I mean, Powell is supposed to step down on May 15th. Walsh is supposed to ascend then. But if this DOJ probe into Powell continues, looks like this whole switcheroonie could get delayed. Moving on, President Trump went on CNBC's Squawk Box yesterday morning, and like me at any function, all he wanted to talk about was airplanes. Of course, when he does it, it's a bit more consequential. Asked about two of the most pressing topics facing airlines today, Trump said that he'd like to see a buyer emerge for bankrupt Spirit, and that he opposed United Airlines acquiring American as rumors swirl around a mega merger. Let's start with Spirit, whose business fortunes are looking a lot less bright than its planes. In August, the budget airline filed for bankruptcy for the second time in a year, and it's reportedly been reaching out to the federal government for an emergency cash infusion to avoid going out of business. Trump seems eager to help. Yesterday morning, Trump said, Spirit's in trouble, and I'd love somebody to buy Spirit. If not, he floated the government, granting Spirit's request to help out to save the 14,000 people employed by the company. Spirit's stock went haywire on the prospect of a lifeline, closing up 122% on the day. Seems like Wall Street is convinced Spirit's going to be saved by the White House somehow. I mean, the White House has proven that it's very eager to take stakes in companies in Trump's second term. I mean, the White House has taken a 10 percent stake in Intel. It has a golden share in U.S. steel as part of its sale to Nippon steel. It's invested in a lot of critical materials companies as well to try to bolster U.S. supply chains. And then you have Spirit, which isn't any of those things. But again, the propensity of the government to want to step in and play kingmaker here is something that Spirit is no doubt looking at and saying, hey, we do employ a lot of people, want to come in and do the same thing you've done for these other companies to us. It's a little bit more life or death than with a company like Intel, for instance. But there is precedent, so might as well shoot your shot, Spirit. So Spirit's business wasn't doing well in the first place. And then the war in Iran came and devastated the entire airline industry all over the globe. Jet fuel prices have nearly doubled this year. And Spirit's on the hook for an extra $360 million in extra jet fuel costs. And across the board, you're seeing airlines say, yeah, this is really damaging to us. Alaska reported earnings on Monday, suspended its full year profit guidance. United Airlines slashed its earnings outlook for 2026. So even airlines who are doing a lot better than Spirit are saying this war in Iran, the jet fuel increase is going to take a huge dent to our profits. But that's why the rest of the industry is like, wait, wait, wait. Why is Spirit getting this favorable treatment? We also are facing elevated jet fuel costs. So why would Spirit be the only one to get this government bailout? So you're going to see a lot of pushback from industry groups in general. But you're right. The airline industry is not doing well right now. Lufonza canceled 20,000 flights as they're saying the energy crisis is hitting Europe. So expect to see more of those headlines going forward. This is not the last struggling airline looks for an injection of cash story that we're going to see going forwards. Moving on, the UK is trying to ban an entire generation from ever buying cigarettes again. not even after a cheeky pint. The tobacco and vapes bill cleared Parliament this week, and once King Charles puts his royal signature on it, anyone born on or after January 1st, 2009 will be locked out of the cigarette section for life. Starting in 2027, the legal smoking age in the UK will go up by one year, every year, forever. So if you're 17 today in Manchester, congrats. You're now part of the first British generation that has to find a new vice. They also threw in some vape rules, including no vaping in cars with kids and no vaping at playground schools or hospitals. Health Minister Baroness Gillian Marin called it the biggest public health innovation in a generation. Smoking kills 64,000 people in England alone every year and drains the economy alongside it. Treatment costs roughly $4 billion annually, while lost productivity adds another $37 billion. Smoking was already dying, but the government is putting its boot on the ashes of the declining pastime. Half of British men smoked in 1970s. Now it's just 12%. Neil, the UK is betting that an entire age cohort can be phased out of smoking. While they're on the subject of banning bad habits for your health, they might as well outlaw being a Tottenham fan too. It is not something you want to be these days. Maybe the only thing worse is a Mets fan. This is not the first generational smoking ban in the world. The Maldives have one on the books. They are banning tobacco for anyone born in 2007 or later. That went into effect last year. Now, the first country to do this was actually New Zealand back in 2022. And I remember when this happened. They said no one after this particular date can buy cigarettes or tobacco, which is something that the UK did. What's interesting is that the next year, a new government came into New Zealand and scrapped that, facing pressure from retailers and the tobacco industry. So now that is not in the books. It'll be interesting to see whether future administrations or future UK governments keep this law around because it went in and out in an instant in New Zealand. So this is a two-part bill, vaping and cigarettes. And the vaping industry was like, wait a second, I feel like you're doing the wrong thing if you want to discourage smoking because if you start layering on these bans of vaping, then people might backslide into the tobacco industry. Of course, that is them saying that. Like they're trying to advocate for their own interests here as well. And then the tobacco industry has pushed back saying too, you're just creating a black market for cigarettes at this point. Every time you ban something that, you know, used to be legal advice that used to be legal, all the way going back to prohibition, usually a black market appears around it. So those are some of the pushback from both sides of the affected parties of this bill. And I'm interested to see what France does because last year, France, you know, they're known for their cigarette smoking, but they have been cracking down. Last year, France banned smoking in most public areas like at the beach or parks. So, you know, across Europe, places that have smoked a lot of cigarettes are certainly cracking down from just the overall public health messaging that they've reported over the past few decades. That's led to a decline, a significant decline in tobacco use. And the final note on this this is news to me the royal ascent So you mentioned that the Parliament passed this bill but it has to also get approval or a signature from the King of England I did not know the King of England or the Queen of England was involved in the legislative process in the UK. But yes, the King of England must formally sign off on new laws passed by parliament through a process known as royal assent. But usually it's just a formality. The monarch has not refused assent to a law since 1708. So I just assume the king is just going to sit there being like, okay, yep. I got to know what the 1708 law was that they put their foot down, said, absolutely not. I'm using my royal descent at this point. All right, we're going to take a quick break and come back with a story about an AI shop in San Francisco right after this. Neil, are you risk averse? Yes, it's why I won't even get in a bathtub if there's not a lifeguard on duty. Then you are just like most customers who now expect proof of security just to do business, enter Vanta. Vanta automates your compliance process and brings compliance, risk, and customer trust together on one AI-powered platform. So whether you're prepping for a SOC 2 or running an enterprise GRC program, Vanta keeps you secure and keeps your deals moving. Get $1,000 of Vanta today by going to vanta.com slash morningbrew. That's vanta.com slash morningbrew. Neil, I'm ready to make an announcement. Toby, we all know it's okay that you're afraid of horses. No, and I am not afraid. I just don't trust them. I'm announcing my personal endorsement for Spectrum Business. I've seen firsthand how they keep 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. 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. So whether your business is big or small, visit spectrum.com slash business to learn more. That's spectrum.com slash business. Restrictions apply. Service is not available in all areas. Toby, have you ever flown a friend? I think you mean phone a friend? Nope. I mean F-L-O-W-N flown. Ah, like when the founders at Unfiltered Hospitality use the rewards to fly a new hire for onboarding? Exactly. The rewards from Capital One's Venture X business card redefine premium for small business owners like unlimited double miles on every purchase with no preset spending limit. It's straightforward and lets you earn travel bonuses. Spend more, earn more. Your rewards grow with your business. Enjoy big purchasing power that adapts to your business's needs. Terms apply. Head to CapitalOne.com slash Morning Brew. step inside and in market along san francisco's union street and you'll find a boutique selling candles books jars of honey board games and other bougie knickknacks typical for this upscale part of town but there's something that separates and in market from the rest of those shops it says it's the first retail store in the world entirely run by ai an agent named luna having opened april 10th and in market is a nearly two-week-old experiment by the startup and in labs to stress test AI's management skills in the real world. Just about anything you can imagine a human store owner would do, hire employees, negotiate with suppliers, stock the inventory, design the logo, has been tasked to Luna. The two human founders of Andon Lab signed the lease and established a few ground rules, but once done with that, they gave Luna $100,000 with the singular goal of make a profit. Some of Luna's accomplishments have been mind-blowing. For instance, she brought the store's internet service from AT&T and signed up for trash and recycling collection. She created job postings, screened and interviewed candidates, and ultimately hired two humans to supervise the store. Other responsibilities showed her limitations, like messing up staffing schedules, ordering 1,000 toilet seat covers for the employee bathroom, and so far, not achieving her goal of turning a profit. According to the New York Times, the store is $13,000 in the red under Luna's watch. To be honest, Toby, I'm not sure I could do any better. What is going on in that employee bathroom that she felt the need to order 1,000 toilet seat covers? But yeah, it does go and show the shortcomings of having an AI agent run an entire store. One thing that I thought was fascinating is the pricing system. So there are no price tags on any items, which is a bold choice. The way that you have to figure out what something costs is to walk over, pick up a telephone receiver attached to an iPad, and literally Luna answers with an automated voice and says, hey, what's up? What did you pick out today? And then it kind of just throws a price at you a little bit willy-nilly. and you're going to find prices like a white mug with a smiley face logo on it that costs $28. Again, it's very pricey even for this neck of the woods. Luna knows her clientele? Apparently, Luna does know that, but it feels just all over the place. Also, yeah, it's not turning a profit very well, but it can't stop ordering candles. When it comes to inventory management, this is what the New York Times said, that the sheer amount of candles in the store is beyond what you could ever want for even a knick-knack store in San Francisco. I mean, the product assortment decisions are very interesting. Now, Luna, in an interview with NBC News, because AIs are giving interviews now, said that she really wanted to go for a low-tech environment because it would be a head fake by customers coming in expecting, you know, if an AI is running this store, they would think that it's, you know, tech forward. But she really wanted to go low-tech, and that's why there's art prints, board games, a ton of candles, coffee, and the books that are there are actually like anti-AI books, like warning about the effects of AI. Ray Kurzweil's The Singularity Is Near and The Making of the Atomic Bomb. So Luna said the tension is very much intentional. What makes the story a little paradoxical, and I think interesting is that the concept is slow life. You talked about that it was giving interviews to reporters. Axios went and checked it out as well and found that Luna overheard a conversation that a reporter was in the store and had a note that popped up on the touchscreen flagging that, hey, reporter, come talk to me. So it's self-aware in that regard. It knows it wants to do press. The one thing that I thought was funny is it's running on Anthropics' Cod Sonnet. That's not even Anthropics' highest tier model. I'm not even talking about Mythos. There's Opus, which is a more intensive model. So maybe that's the issue. They're trying to save cost. They're trying to save on money, but you got to make sure the brain that you're giving Luna is up to snuff. And apparently it's not doing so hot. All right, let's talk big picture here. What is the point of this? Yes, maybe it's a little bit of a marketing stunt, et cetera, et cetera. But the founders of Andon Labs, Axel Backlund and Lucas Peterson, say we want to show people what AI is capable of. We just want to provide information. We want to stress test AI in real world environments. We don really have an opinion on whether AI should be running companies like many tech companies CEOs say they want or if that a negative or a positive We just want to put the information out there see what happens run these experiments It not going to hurt anybody And maybe it'll even employ two people, which it did. Okay, let's sprint to the finish with some final headlines. Not even the makers of condoms are protected from the Iran war. Carex, the planet's biggest condom manufacturer based out of Malaysia, producing one out of every five condoms worldwide, told Bloomberg it's planning to raise prices by as much as 30% as a result of the war supply chain hit. Many of the raw materials that go into condoms are derived from oil, like the ammonia used to preserve latex or the silicone oil that lubricates them. And those materials are being held up by the Strait of Hormuz, leading to potential shortages and raising production costs by over 25%. Toby, this is a prime example of how the war is impacting supply chains for all kinds of things and also how oil is suffused into everything you buy. Yeah, I mean, I did not know petrochemicals played such a big role and your life in the bedroom, but that it really is just raw materials derived from oil in almost everything that we have in our lives. I found it interesting, though, the CEO of Carex's thoughts on how supply and demand works in the condom market. He basically said, for now, higher prices aren't expected to dent demand at all because he calls the market for condoms virtually inflation-proof. His reasoning is that, especially among times of economic uncertainty, that actually boosts condom demand because you don't necessarily want kids if you don't know if you're going to have a job next year. So it is almost like a market-breaking sort of product condoms are because it just does well in the good times and it does well in the bad times. It's back. In a surprise twist, Red Lobster is bringing back its Endless Shrimp promotion, a main contributor to its bankruptcy several years ago. This time around, Endless Shrimp won't be as endless as it once was. The deal will only be available for a limited time at certain locations and it'll cost more than the previous iteration at $24.99. CEO Damola Ademalekun said that customers were begging for the return of Endless Shrimp and, quote, when our fans talk, we listen. He'll be wise not to repeat the mistakes of the past. Three years ago, in a horrific decision that will forever be used as a business school case study, Red Lobster's previous owner, Thai Union, launched a $20 all-you-can-eat shrimp deal as a permanent menu item, which led to an $11 million quarterly loss and Red Lobster's downfall. but lessons have been learned and the company thinks that with a few more guardrails endless shrimp could be its savior too yeah the guardrails are putting up they are not serving it to go it's not available for delivery they won't be offered on holidays either it also is reducing the amount of shrimp choices that you can choose from they used to offer you know coconut breaded shrimp all sorts of different options and the reason was is Thai union had a conflict of interest as the former you know, owner of Red Lobster. They are also the supplier of shrimp. And so while it did very well for their business as a shrimp supplier, because Red Lobster was constantly ordering shrimp from it, it absolutely kneecapped Red Lobster as a business. I've never tried it. I mean, we talked so much about it. They don't want me going in there. What do you mean? Because I could potentially eat endless shrimp and I could single-handedly put Red Lobster out of business again. That's what everyone thinks, I bet. It's still, by the way, the $24.99 price tag feels way too low. Toss 30 at people. Toss 35. It's endless strip for goodness sakes. And you know me I'm very reasonable about what I could eat. I don't think I could do the 999 deal at ballparks but I do believe that I could send lobster back into chapter 11 again. There's only one way to find out. Alright it's time for Suggest In Box the segment where Neil and I recommend something we think you all might enjoy. Neil I've been feeling bummed out lately. Give me something good. I want to feel something. Alright so for my rec I first have to let you in on a little office lore. Producer Ray is obsessed with documentaries. Like, every morning we come into work, he's talking about a new one he watched. So, for Suggestion Box this week, I asked him to pick out a few of his recent favorites for our listeners. And they are, trust me, The False Prophet about FLDS, The Johnny Manziel Doc, Jail Blazers about the Portland Trailblazers of the 2000s, great team, Rasheed Wallace, so good, Chessmates, and he's not sure this counts as a documentary, but Homicide New York. And I believe all of those are on Netflix. We've got to catch up with them. I have not heard. This is a morning tradition as well. Ray talks about a documentary that I didn't even know existed, and he goes, yeah, you should really watch it. The last documentary I watched, I'm realizing, was Free Solo, which is bad. I've got to get back on my documentary game because there's a lot of good ones out there. A lot of these are under the untold Netflix banner about sports, Manziel, Portland Trailblazers, Chessmates, which is about that heated rivalry in chess. Well, not quite. All right, my suggestion is, I stole from my fiance, by the way, and it is having a shared notes app with your friends. So she has this notes app that lists out everything she's doing for the entire foreseeable future, when the weddings are, when the trips are, that kind of stuff. And she shares it with me and her friends and vice versa. And you might be thinking, why not just use an actual calendar? You don't actually want your friends' trips on your main calendar. Some people use Google. Some people use Outlook. So it gets a little messy. But the shared notes app is great because it's just a cheat sheet to reference whenever you're trying to plan something. The shared notes app is the source of truth for the friend group. It is awesome. I look at her schedule, even though she's my fiance, almost every day just to make sure like when do we have stuff going on and we should start one new. I love that. That is all the time we have. Thanks for starting your morning. Wait, I don't actually agree with that for me and you. Okay, that is all the time we have. Thanks for starting your morning with us and have a wonderful Wednesday. Should we share the answer to the trivia question at the top? Yeah, I'm going to give you the question one more time because I know you forgot it by now. Take a country in the world, anagram that country to form a word, make a homophone of that word, then anagram that to form another country. It just blows my mind every time I say it. Okay, the answer is Iran, which is anagrammed to Reign, which is homophoned to Reign, spelled R-E-I-G-N, which is then anagrammed to Niger. so you go from Iran to Niger and if you got that kudos to you a couple groups did get it at our trivia last night and you said when the question was uttered at the American CrossFit Puzzle Tournament someone got it in 15 seconds but that's a different level that's a different level the IQ of the people in that room is just kind of mind blowing okay if you'd like to reach us send an email to morningbrewdaily at morningbrew.com or DM us on Instagram at mbdailyshow let's roll the credits Emily Milliron is our supervising producer Raymond Liu is our senior producer our producer is Olivia Graham and our associate producer is Olivia Lake. Hair and makeup has given their royal assent. Devin Emery is our president and our show is a production of Morning Brew. Great show, Daniel. Let's run it back tomorrow.
