Are you sucking wind from trying to keep up with AI and its impact? Take a breather and tune in to The Intelligence Shift, Morning Brew's new podcast with PwC. It bridges the gap between big picture AI concepts and what it actually means in practice. Host Dan Priest is joined by expert guests to discuss AI's role in sports, music, HR, and more. Listen to The Intelligence Shift wherever you get your podcasts. Good Morning Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. Today, did private equity save Michael's? Then is America entering its post-literate age? It's Friday, July 10th. Let's ride. If you're like me and obsessed with memorizing airport codes, I've got an important update to share. Yesterday, Palm Beach Airport officially changed its name to President Donald J. Trump International. which makes it the first airport to be named after a sitting U.S. president. And therefore, the airport code will change from PBI to DJT. And this sent me down a rabbit hole of other airports named after presidents. There are at least eight, according to a Sporkle quiz I did this morning. You've got the big ones. Kennedy in New York, Bush in Houston, Reagan in D.C., but also Gerald Ford in Grand Rapids, Michigan, Clinton National Airport in Little Rock, Eisenhower in Wichita, Abraham Lincoln in Springfield, Illinois, and Theodore Roosevelt Regional Airport in Dickinson, North Dakota. I think I got five out of eight. That was the most Neil seen ever this morning. I walk in and you're knee deep in a sparkle naming airports after presidents. Yes. Speaking of airports, Neil and I are gonna be heading to one today after the show. From there, we're hopping across the pond to Scotland with some friends on a trip to visit St. Andrews. Some golf will be played, some haggis and cull and skink will be consumed. And the trip extends until Wednesday of next week, meeting both myself and Neil will be out at the same time. But fear not, the show will go on. You'll be in the capable hands of some of our colleagues, including sixth man of the year, Kyle Haggie, who will bring you your daily dose of news. Now a word from our sponsor, Ultra Running. Hey, Neil, do you own anything foot-shaped? I mean, nothing human foot-shaped. Wow, what a terrifying answer. That warns zero follow-up questions. If you'd like to add something human foot-shaped to your collection, Ultra Running makes shoes shaped like feet. Most running shoes are narrow at the toe, but Ultra has more room for your toes so they can spread out and your feet can stay in a natural position. The Ultra Fit is designed to give you room for your toes for comfort, balance, and strength. Use promo code MORNINGBREW10 for 10% off your first pair of Ultra Running shoes at ultrarunning.com slash morningbrew. That's A-L-T-R-A running.com slash morningbrew. Earlier this year, SpaceX went public in the biggest IPO of all time. Today, number two arrives. It's a lot less familiar to Americans, but it's at the center of the AI boom that's taking over the economy. Meet SK Hynix, a South Korean memory chip maker that's going public on the NASDAQ today. It raised $26.5 billion, beating out Alibaba as the largest foreign listing in US history. You've heard us talk about memory a lot recently, and for good reason. There's a massive shortage that's driving up prices for everything from Nintendo Switches to Apple laptops. AI giants have been gobbling up all the memory chips to run their models, driving memory costs to record highs and starving the rest of the industry of much needed hardware. It's been an absolute windfall for anyone who makes memory and there aren't that many. Just three companies produce the kind of high bandwidth memory that's so trendy in AI. SK Hynix, South Korean rival Samsung, and Idaho's Micron. Each of these companies has hit a $1 trillion valuation this year thanks to surging demand for their chips. SK Hynix's financials are certainly enviable. Annual revenue nearly tripled between 2023 and 2025. Then this year alone, it's expected to triple again to $235 billion. On the South Korean stock market, its shares have gone up 700% over the past year. After a breathtaking run, SK Hynix looks to continue the momentum under the bright lights of Wall Street. Why come to Wall Street? Because it sounds like it's doing pretty dang well over in the South Korean stock market, which by the way has become the world's seventh largest stock market. It just recently passed Canada on the backs of these two memory giants. We talk about the magnificent seven here. They have the terrible two or the terrific two because South Korea or Samsung and SK Hynix account for roughly half of its entire Cosby index. So that is a very concentrated market over there. But the reason why you would list inside the United States is because one, you're going to raise a lot of money and they need a lot of money to do these capital expenditure projects. But it also narrows the valuation gap that it has with US peers like Micron. Now, you mentioned that both of them have similar market caps around a trillion dollars. But historically, Micron has always carried a higher valuation multiple if you look at price to earnings due to some sort of nebulous US listing premium. It's not that nebulous. There's greater trading volume over here. There's more liquidity over here, but SK Hynix actually has much higher operating margins than Micron does. It's nearly 50% versus Micron's 26%. So why is it valued the same? It's probably because it's just not listed over here in the US. And then you factor in other things like how it can help with recruiting top engineering talent because suddenly you have US stock compensation to offer to top engineers. And those are some of the reasons why it would make the trek over here to the US to list on the NASDAQ. I want to talk about margins because if you pay attention to the stock market or memory companies over the past decade or so, I mean, the fact that we're even talking about memory companies being worth a trillion dollars or that they're sexy and exciting would blow your mind because this was typically a very sleepy corner of the tech industry. It was a boom and bust cycle. There would be a glut of memory chips, so all of the memory companies would stop making the chips. And then there would be a shortage, and then they would make more, and then there would be a glut again, so you'd go between glut and shortage. And this was just an endless cycle that led Micron and SK Hynix and Samsung to just kind of plod along. But then all of a sudden, AI happened, and we're seeing just a crazy boom in this particular industry. Go back to 2023. Margins for SK Hynix were negative. They were selling stuff at a price below what they were paying to make it. That was just three years ago. And now, danger to memory shortage looks like there's going to be demand for their products through 2030. We don't know if there's going to be a bust on the horizon, but at least this boom cycle looks longer than it has been in the past. And they are taking a big swing here, though, because you're right. It has been a very cyclical industry, but now they are putting so much money into building out capacity. I mean, the chip outlay investment plans in South Korea total up to $720 billion. That is a massive capital expenditure plan right there. And so if memory turns out to not be a super cycle, if it goes back into being very cyclical, then these companies are on the hook for once you start building a factory, that is money that is almost a sunk cost at that point It very hard to stop building a factory in Indiana So this is a big bet that the memory industry is not going to enter another crash It's a big bet that this is a mega cycle, a super cycle, whatever adjective you want to put in front of a cycle. The problem in the past is there's always been a crash. Maybe this time will be different. And just ahead of the IPO, Bloomberg reported that demand for this listing is about seven times more than the available shares. So at least initially demand looks very hot. Let's move on. There's a building in the middle of midtown Manhattan that is sagging under its own weight. And yet 10,000 tons of steel is not the only pressure it is feeling. Earlier this week, the former Pfizer headquarters in Manhattan suffered a major construction scare after structural columns buckled and floors drooped as workers toiled to convert the old office building into new apartments. The building is set to become the largest office to residential conversion in U.S. history, creating about 1,600 apartments complete with a rooftop pool. But the issues with the East 42nd Street project are threatening to cast doubt on how residential conversions are perceived going forward. While the building has since been stabilized and the engineering challenge appears fixable, the bigger challenge may be to public confidence. If this project goes sideways, it could make investors, lenders, and future tenants much more cautious about similar projects. which is not good for New York City, which has been aggressively promoting conversions via tax incentives and zoning reforms. The city changed zoning rules in 2024 to allow older office buildings to be transformed into residential properties in the hopes of alleviating one of the tightest housing markets in the world. Neil, what is scarier, a collapsing building in New York City or the prospect of trying to look for somewhere to live in New York City? They are both daunting. I'm never moving again. This was a very ambitious project. This is one of the more complex office to residential conversions anywhere. It's also the biggest because there was two buildings here. They were built in the 1970s and they were going to add 19 new stories atop one of them, which was 10 stories high. And then you had another tower that's 33 stories and they were basically going to gut that and reconfigure it. And on top of that, you want to add a rooftop pool, of course, a fitness center, ground level shops, and then of course, 1600 new apartments. Robert Fuller, who's a principal at Gensler who's working on this Pfizer building conversion, told Bloomberg that it's basically like surgery. There's just so many technical challenges, unique conditions from floor to floor. So as office to residential conversions go, this one was extremely complicated, a far cry from all the popsicle stick bridges you made in eighth grade. But just in general, I didn't know that office residential conversions were so difficult to pull off because from the outside, you're like, it's a building, just put up some walls, put it in a bed, and all of a sudden you have apartments. But no, each apartment needs a kitchen. You need to put bathrooms in. You need to reroute plumbing in the building. Most offices use central HVAC systems. If you go to apartment buildings, you probably want more individualized heating and cooling systems. Apartments need natural light. You can't just put people in a jail cell. So sometimes you have to add windows to office spaces. So it is a lot more complex than you might assume. I thought it was interesting too how Manhattan real estate, when it comes to the office market, is actually in a pretty healthy spot right now compared to other cities. Manhattan's office vacancy rates is around 12.4%. You compare that to other major cities, Los Angeles is 25, Chicago is 28. So it's not like these buildings are sitting around unused. It's more just that this is a massive priority for a lot of leaders in New York City that there's clearly a dearth of apartments. Let's try to move some of these buildings that do sit unoccupied for some period of time into apartments to alleviate that housing shortage. There's another quirk of Manhattan that makes this more economically feasible, and that is it's hard to remove waste and rubble from Manhattan because we're on an island here. So if you knock down a building, it's pretty expensive because you've got to get all that stuff out of the island, so it's maybe easier. and more economically sound to just convert it despite all the hurdles that you were mentioning. Still, this is a very hot sector of the real estate game right now. 90,000 apartment units from office conversions are currently underway in the US right now. That is up 28% from a year ago. And New York City is leading the charge with 16,000 units planned or under construction. So that is the big question mark here. Does this Pfizer building make everybody a little bit more shaky and a little more scared of completing these renovations, or is it still guns blazing? Let's keep making as many housing additions as we can to the constrained market. Welcome to Stock of the Week, Dog of the Week, where we pick one stock that's scoring more goals than Mbappe, another that got embarrassed like the US. I won the pre-show rap battle, which I'm glad no one caught on tape, so I get to go first. And my Stock of the Week is the crafts giant, Michaels, which is thriving thanks to an unlikely source, private equity. In the most recent quarter, Michael's sales and profits jumped by double digits, according to Bloomberg, and it raised its inventory by 20% ahead of what's expected to be a bonanza in the second half of the year. Investors are taking notice. Last year, Michael's bonds traded as low as 34 cents on the dollar, indicating a probable restructuring. Now, those bonds have rebounded to nearly 100 cents. Bloomberg writes that Michael's owed much of its success to the backing of its owner, Apollo, the private equity giant and one of the world's biggest alternative asset managers. Five years ago, Apollo scooped up Michaels and instead of gutting it like other PE shops might do, gave it the flexibility and funding to move into new areas like yarn and fabric and allowed it to make bolder and quicker decisions than its rivals in the public markets. The collapse of some of those rivals also gave Michaels a boost. Party City filed for bankruptcy twice and closed all of its stores in late 2024. And last year, craft retailer Joanne went into bankruptcy, also for its second time and said it would close all of its stores. Michael's with Apollo's backing didn't miss a beat, swooping in and acquiring Joanne's name and brands for under $10 million. Toby, it's a rare example of private equity fueling a retailer's revival instead of killing it. It also just might be that the timing is right because the CEO of Michael's says that it has a reputation for being your grandmother's store. And he actually said that. That's a good thing now. Yeah, as a negative. but it is 100% a good thing right now because nearly three quarters of US adults participated in at least one craft activity last year. A lot of Toby's friends has been talking about how people are joining knitting groups or watercoloring. They're showing they're doing DIY crafts because they want to do analog hobbies, aka grandma hobbies. So you can point to private equity and the fact that it remained more nimble than maybe a public company would, or you can point to the fact that everyone just wants to craft these days and that's why Michaels is doing well. And Michaels is leaning into that with new remodeled stores They are getting into experiences of course and that could be hey come into Michaels not just to buy something but hey we got a candle making class We got other classrooms for other crafting activities We host your birthday parties We have balloon services So they moving into the party city side of things They increasing their party supplies business by 60 this year So if you go into a Michaels and it has maybe a less product assortment on the shelves and more space to just kind of play around with things with your hands then this is what going on. The big risk still remains China because you spoke about that kind of roller coaster ride, its bonds were going on. When it was at the lowest, that was right around Liberation Day tariffs where a lot of the supplies that it sources do come from China. So if tariffs were slapped on those, then that made their business basically untenable. They've been trying to diversify away from China, but that's still a risk because a lot of their production still is coming from over there. So if any additional China tariffs come on, then suddenly this is a different story that we're talking about. No matter how many, you know, goodwill, grandma crafts, or balloons you put in the store, if your input costs go up because of tariffs, then you do not have a tenable business. It's an interesting narrative violation too that private equity is maybe helping a retailer by just having so much money in the bank to allow it to fuel a renaissance like this because, I mean, you go down the list. So, like, private equity has, quote-unquote, killed a lot of retailers by doing these huge leverage buyouts and landing them with so much debt. And you can just list Toys R Us, Sears, Payless Shoe Source, Jimboree, Sports Authority. Those are just some of the retailers that filed for bankruptcy after they were acquired by private equity. But Michael's is a success story. And the other success story is Barnes & Noble. In 2019, it was taken over by Elliott Advisors. And now it's surging in a way that Michael's is. They're opening an additional 60 stores in 2026. And we've talked previously about how Barnes & Noble is doing well under private equity management. So maybe it's not the death sentence that many think it is. It's actually a perfect transition into our next story, which is talking about reading. So we're going to take a quick break and come back with the story about how no one is reading right after this. Public speaking isn't everyone's forte. Really? I'm a natural. It'd be great to just have your own personal version of a teleprompter. And that's where EvenG2 comes in. Their productivity smart glass is designed to keep real-time support in view with teleprompting, conversation support, real-time translation, and more. They are so light on my face, I almost don't feel them. The voice-activated assistant helps me stay on top of my day. Learn more at evenrealities.com and use code MORNINGBREW for 10% off Even Ring 1 and or Even Clip when you add them to your Even G2 order. When it comes to figuring out dinner, there are typically three big questions. Will it taste good? Is it healthy? And how long will it take? Totally. I usually end up compromising on at least one of those. And if the only fork I own is already dirty, then I'm in real trouble. Gonna have to talk to you about cutlery later, but with Forkful, their menu was curated by chefs and made with clean premium ingredients, so you don't have to compromise on anything. Meals heat up within minutes and there's no prep or cleanup required. Get 50% off by going to forkfulmeals.com slash discount slash mb50. That's forkfulmeals.com slash discount slash mb50. My dog of the week is reading because Americans are not doing a lot of it. Rose Horowitz of The Atlantic published a big manifesto laying out all the signs that America is becoming post-literate. People still know how to read text, posts, emails, captions, but fewer people are doing the harder reading found in books and essays, and a lot more people are watching stuff instead. The stats are damning. Just 16% of Americans read for pleasure on any given day last year, down from 28% in 2004. Fewer than half of U.S. adults reported reading a book of any kind in 2022. Contrast that to the 57% of Americans who placed a bet last year, and you realize that gambling has become more popular than opening a book in this country. And it's not that books these days are all that cumbersome to get through. In 1958, a top-selling book of the year was Dr. Zhivago. Last year, it was Hunger Games' Sunrise of the Reaping, followed closely by the romance novel Onyx Storm. Signs of post-literacy are popping up at elite colleges too. One Harvard director described a student struggling to read a clockwork orange because it was written in quote old English and how they had to use chat to be to translate it into easier language. Students are coming in unprepared because a 2025 survey found that most middle and high school English teachers assign zero to four books per year. Short passages and tablets are in, books are out. Neil, there's so much more here from AI's threat to reading to how politics has moved into its post-literate age. Someone should write a book on this stuff that inevitably no one will read. Certainly won't read it. If you want to get all existential about it, this could fundamentally reorder society because literate societies and cultures think in a more complex way than illiterate societies. And what The Atlantic cites as an example is that this neuropsychologist, whose name is Alexander Luria, went to some remote villages in Uzbekistan and other parts of Eurasia in the 1930s. Peasants there were starting to learn how to read and write. And they asked questions to the people who were literate and people who were illiterate. And the question was, in the far north, all bears are white. And then this group of islands is in the far north. Then he asked these people, what is the color of bears in this group of islands? And the people who were beginning to be literate were able to put two and two together and say, okay, of course, the bears are white. But the illiterate ones, they just refused to try. They said, well, I've never been there. And they haven't refused. They just refused to answer. So the point there is obviously there are a lot of variables here. But that just reading things allows for more complex understanding and synthesis of arguments that can change the fabric of your society and culture. And it just changes the fabric of your brain. We actually are not, you know, predetermined to read because reading was not a part of early humanity. Like it only emerged about 6,000 years ago in Mesopotamia. But reading is great because it frees up memory. So thoughts can be stored outside the mind. If not, you're clogged with everything that you would ever have to remember. But there's a lot of kind of prognosticators that are saying maybe the literate age is just that, a unique moment in time. We were not literate. It was part of an oral tradition before. Now we are in the literate age. What if we are entering post-literacy where multimedia is the dominant form of consumption going forward? Because clearly that is what is happening right now. I mean, it started, you could point to the television that that was the start of the post-literate age in the West in 1962. Now smartphones have exacerbated the problem, made it even worse. Studies show that people comprehend less on digital devices than paper. Audiobooks as well are not the same as reading a book. So everything is pointing towards our comprehension, our reading abilities getting shallower. And maybe the logical end of this is that we just don't read at all anymore. And this was just a blip in humanity's timeline. We might be a part of the problem. Yeah. Because Morning Brew was a newsletter for seven years, which I wrote for its entire history. And then three years ago, we were like, hey, people maybe don't like to read the news. They want to listen to it or watch it. And then we said okay let start a podcast And so people are consuming news That not a bad or a good thing It just the way people operate now is instead of reading it more people like to listen to news as a way of consuming information It really is a muscle Reading books is just like working out. The more you read, the easier it gets. The less you read, the harder it becomes. So it's almost a self-fulfilling prophecy. The less that you pick up a book for fun, the more difficult it is to get even through a newsletter like Morning Brew. So if you stop working out that muscle, if you turn towards social media and instant gratification instead, then yes, it is going to be increasingly more difficult to open that book, read some physical words, and not just watch the YouTube video. And what's more interesting about this is that it feels like the book industry is thriving right now. I just mentioned Barnes & Noble is opening 60 new stores. BookTok is one of the most thriving parts of social media. 400 independent bookstores were opened in 2025. You have Dua Lipa and Reese Witherspoon with book clubs and audio. People are consuming audio books. It's now a billion dollar industry. But if you want to take the point that no one is reading anymore, you look at the stats, you dive a little further and you say, okay, actually it's just a really small part of the population that is reading books. 20% of adults accounted for more than 80% of all books read last year. If anyone can save literacy in America, it's Dua Lipa. All right, let's sprint to the finish with some final headlines. Hasbro released a Play-Doh for adults aiming to lure screen-weary millennials with tactical fun. This week, the toy company introduced a new line called Blooms, which lets you sculpt putty into floral arrangements that can be displayed in your home. It's part of Hasbro's aging up strategy to focus on teens and kiddults that are over the age of 13, the fastest growing segment of the toy industry. Hasbro's tried to make Play-Doh resonate with adults before. In 2020, it tried something called Grown-Up Sense, making Play-Doh smell like mom jeans, overpriced lattes, and 90s throwbacks like mall food court and VHS rental and chill. That didn't work out. So it went back to the drawing board and came up with something that might be perfect for a couple's wine and crafts night. Yeah, part of the issue why Grown Up Sense failed is that it still kind of looked like Play-Doh and adults don't actually want to play with Play-Doh if it's the same, you know, branding that their kids are opening up. So they've tried to rethink everything about this. They're trying to market it towards a more female skewing audience in particular, which kind of goes away from other cadult efforts that skews more towards Star Wars, Dungeons & Dragons, that sort of thing. So those are some of the reasons why they're pretty bullish on this. They've also just very openly pointed to LEGO's success because that has been the ultimate cadult winner is that LEGO has rebranded itself as a very therapeutic thing for adults to do and especially guys to do as well because you sell a lot of Star Wars LEGO. So they're looking at that playbook and saying, We can probably run it back for a little bit different of a demographic as long as we show, first and foremost, this is for adults. This is not for kids anymore. And it does look pretty fun. I haven't played with Play-Doh in a minute, so maybe I'll jump on the bandwagon as well. Moving on, Anthropic saw how much everyone loves Spotify Wrapped and made the same thing for your AI habits. The company just launched a new feature for Claude called Reflect, essentially a Claude Wrapped that analyzes how you've used the chatbot over the past year. You can find it in the settings menu on the web or desktop app where it'll show you your most common topics, the kinds of tasks you delegate to Claude, when you use it the most, and even offer prompts to help you think about how AI fits into your life. It's not all fun and games. Anthropic also gets something out of it. The more Claude becomes part of your daily routine, the more likely you are to keep using it instead of switch to another AI tool. Neil, I'm team every brand should have a wrapped, and I think Claude's version will be very popular. I just need a gimmick. like Spotify did with your listening age or your sound town. Maybe it's, you know, what your role will be when AI takes over humans based on how polite you were to Claude. Could be, you know, you get friend of the bots or member of the administrative bureaucracy overseeing human activities. Or if you weren't nice, mark for execution. You know, that would spice things up a little bit. I'm not sure Anthropic would go for that, but I think we need a little gimmick to make it a little more shareable. Mine would be death at the hands of robots. I am not polite. I don't even spell things correctly and go, make it better. So yes, I love the idea of a gimmick, but I do not want to see what mine would be in your world. Finally, Bonnie Tyler, the Welsh pop star best known for her ubiquitous power ballad, Total Eclipse of the Heart, died yesterday at 75 while being treated for an illness. Total Eclipse of the Heart topped the charts when it was released in 1983, but endured throughout the decades thanks to popular covers and it just being so dang epic. I think I heard the song for the first time in that opening wedding scene in old school. and it changed my life. Re-evaluating the song in 2020, Stereogum wrote, it's pop music as heart pounding, chest thumping, blood gargling, heaven's falling, passion explosion, it's sheer spectacle, it's fireworks and lasers and lightning and thunder, it's swords and swoops and barrel rolls. Tyler may be synonymous with Total Clips, but you should check out the rest of her discography because there's a lot of great stuff, including holding out for a hero from Footloose and more notably, Shrek 2. I mean, I was almost late to the show today because before while we were prepping, I was just watching every single movie scene that has something from Bonnie Tyler in it. I mean, the Streck 2 scene just brings back, that's not even a good movie, but that scene in particular, you gave me a weird look there. It's a decent movie. But that scene is just absolutely electric. And I do realize that that was how I encountered Bonnie Tyler's discography before. I don't even think I knew that it was a real song outside of Streck 2 because that's just what I grew up on. It is so fun watching the Footloose scene as well. There's a tractor chicken scene. So I literally just was in a YouTube rabbit hole. You were trying to focus a little bit, but I was like, hey, watch this new Bonnie Tyler one. Just electric. She's an absolute legend, especially when it comes to pairing her soundtracks with great scenes in movies. And also her song, Total Clips of the Heart, got a boost when there were actual eclipse. If you look at streaming spikes, it went straight up during 2017 and 2024 when they were eclipsed. So ultimately, that song is over 1 billion streams. And I do remember during those eclipses, people would just be playing it when the sun went in front of the moon or the moon went in front of the sun. I don't know exactly what kind of eclipse it was. But yeah, Bonnie Tyler listened to her stuff. There's also a really good Strong Songs episode. It's a podcast that I like where he breaks down different songs from a very tactical level. There's one on Total Eclipse of the Heart. He goes into the back of the song, how it was made, and all the things that make it just so freaking epic. Maybe we listened to it on the way to Scotland. Let's do it. That is all the time we have. Thanks so much for starting your morning with us. Have a wonderful Friday and an even better weekend. We will see you back here on Thursday, but do tune in earlier in the week to regular episodes of MBD. To share your thoughts on the episode or anything else, 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. Technical direction by Nina Miller. Hair and makeup is holding out for a hero. Devin Emery is our president and our show is a production of Morning Brew. Great show today, Neil. I wish you all well.
