Why Uber and Lyft are Leaving Minneapolis

Good Morning Brew Daily Show. I'm Neal Freyman. And I'm Toby Howell. Today, a major American city could be without Uber and Lyft after passing a minimum wage law. Then things just got really real for real estate agents. After a new settlement related to commission fees turned the industry on its head. It's Monday, March 18th. Let's ride. All right, Toby, quick round of a rose and thorn from the weekend. But skip the thaw and just stick with the road. I like the good vibes. My rose was. I ran the

New York City half marathon over the weekend. Incredible event. I've never done a big city race before. The sheer amount of humanity that turns out for this race blows my mind to over 27,000 people ran this incredible amount of runners. And this is just one city in America. Can't believe it. All right. Not to blow up your spot, Tovia, other 27,000 people. Where did you finish? I got. I looked it up because, of course I did. I got 2,065th place. So fast. Almost half a thousand. I was like a 620

pace, six 3630 pace. My rose. I had a way more sedentary weekend that you did, but I saw a play Enemy of the People with two of my favorite actors slash TV characters of all time, Michael Imperioli, who is Christopher from The Sopranos, and Jeremy Strong, who is Kendall from succession, even got to chat a little bit with Michael afterwards. It's just a super nice guy, a great player. Definitely encourage everyone to go. Did they translate well from screen to to play? Jeremy Strong is incredible.

Oh, he was incredible. Incredible. He's he's a fantastic actor. You always love to see that. Now, let's hear a quick word from our friends over at Factor. One of factors, big taglines is that they make restaurant quality meals, and I totally agree with that. It's not just the taste or the quality of the ingredients. Fresh, never frozen, by the way, that make them restaurant quality, though it's the whole experience. Part of the experience of going to a restaurant is the fact that you don't have

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et 50% off. That's factor meals dot com class morning brew 50 with code morning brew 52 snag that a restaurant quality 50% discount. Just before we get out for the weekend last Friday the national Association of Realtors agreed to settle settle multiple lawsuits around how they charge commission, which flips the industry on its head. Real estate agents have long compelled home sellers to agree to a commission sharing arrangement in which the seller pays a commission fee, usually in the 6% range

for both their agent and the buyer's agent. The neighbor were able to get away with this because in order to sell your home, it really helps to get on a listing service which shows buyers which homes are out there and sets A seller, pays the commission fee of both the buyer and the seller. The fear was if you don't agree to that commission, then buyer's side agents will just ignore your property in favor of ones that offer them a better deal. The settlement agreed to on Friday moves the industry

towards a decoupling system in which buyers and sellers pay their agents separately. In addition to slapping the NRA with a $418 million fine to be paid out over the next four years. Neal, The decoupling part is the big deal here, especially when you multiply this new compensation structure across the millions of homes sold every year. Yeah, experts say this could lead to dramatic cost savings for Americans. Americans pay some of the highest commission rates in the world when they buy or sell a

home. One expert said that this could lead to a 30% reduction in the $100 billion that Americans pay annually in real estate commissions. It also could have disastrous effects for brokers themselves. Some may leave the industry because of this. One estimate puts it at half of the 1.5 million realtors that are part of this association, and they are will leave the profession because of this decoupling. Absolutely. It's going to lead to a real estate agent bloodbath no matter which way you scrape

it, because a lot of these agents were kind of scraping by. They weren't in that top tier. They weren't providing services that maybe were in commiserate. The fact that they're charging 6% fees doesn't add up to the services they were providing. And so you could see a big exodus from this industry where some estimates put that 60 to 80% reduction in the number of real estate agents. So it is totally going to be one of the things that's going to reshape the industry and I mean, it's not an easy j

ob being real estate agent by any means. And we might see kind of that bottom third, bottom half of people who sell homes kind of drop out of the profession. So what this is going to be a major shake up, but no one really knows how it's going to play out. One of the areas I think is most interesting is that a buyer is now going to have to directly negotiate with their buyer's agent and the services that they provide might be more a la carte than we're used to. You know, maybe I'll just charge an

hourly fee to show you some listings. Maybe I'll just do the contract negotiations at the end. So you're going to start to see more of this, you know, segmented market of what an agent does and you'll start to see more market force. I think that's what a lot of economists and people are so interested in to see here, because we're seeing a market emerge in real time that didn't exist. So you'll see like what the actual services rendered are and how much compensation agent makes because of what s

ervices they're they're providing to a to a buyer. One company that I'm very intrigued at how this is going to affect is Zillow. When this kind of was passed on Friday, Zillow shares fell 13%. The company gets a big share of its revenue by connecting sellers to buyers agents. That is one of their big revenue sources. So lower commissions could mean those representatives have less money to spend on marketing. So Zillow might come out of this on on the negative, but also they do have a rather robu

st business in general. So Zillow is one company to keep an eye on how this affects them. Meanwhile, the settlement money is huge. It's $418 million. And if you're one of 50 million, it could be up to 50 million people who recently sold their home. You could be you could be part of part of the settlement. So I would definitely keep your eye on that. Okay. Moving on. If you live in Minneapolis, it could soon feel like 2007 again, because Uber and Lyft warn they will leave the area after the city

council passed a law that would require them to pay drivers the equivalent of the local minimum wage. Advocates of the law called it a David and Goliath story of regular working class people taking on corporate giants to prevent worker exploitation. Currently, drivers in Minneapolis make a median of $13.63 per hour, and this law would bump that up to a floor of $50.57 an hour. Uber and Lyft, of course, have a different view. Lyft said the pay hike would make its operations unsustainable in Minne

apolis, and it has support from the mayor and the governor. They're worried about what Uber and Lyft leaving means for vulnerable people who rely on ride hailing services for their daily lives. But is this all a bluff by Uber and Lyft to try and get Minneapolis to compromise? Definitely. Could be. The law doesn't take effect until May 1st, so you can bet negotiations will be ongoing. Yeah, this is definitely a hot button topic. Kind of boils down to this. Everyone wants to see these drivers get

a raise, make a livable wage. But that raise or livable wage doesn't do a whole lot if it means you lose your job in the process. So Uber and Lyft are definitely applying maximum pressure here, saying like, all right, you thought you did something good for these workers, increasing the amount that they're paid. Well, now they have no jobs all together. So it's definitely a tight line from both at the city council's walking, as well as Uber and Lyft, shows how much leverage they have in these par

ticular cities. One statistic that they pointed to in in saying we're leaving this this pay hike is completely unreasonable, is that the state did a study and it said that to to get to this minimum wage that the city wants to get to, you only need to pay $1 and not only, but you need to pay a dollar and $0.21 per mile and $0.49 per minute. Meanwhile, the law that was passed is much higher than that. It is $1.40 per mile and $0.51 per minute. So the ride hailing services are saying you're not eve

n looking at their own data that you that you commissioned the study that the state did. It requires us to pay less than what the law just passed. It compels us. And I definitely feel bad for Minneapolis because there is a report from Axios that found that Minneapolis only has 39 licensed cab drivers, which back in 2014 they had 2000. So again, if Uber and Lyft leave this city, it just won't exist like ridesharing. I can't imagine a life where you just can't call Uber home from the bar in the ev

ening or something like that. So again, we've talked about leverage and Uber and Lyft certainly have it in this scenario, and particularly for disabled people, there are I mean, they needed to get to their jobs. There are a lot of nonprofits working in the area that connect these people to that have partnerships with Lyft and Uber, and they're warning that Uber and Lyft leaving will lead to basically bad, massive job displacement. They're going to be like, these people can't get to their jobs. O

n the other side, though, there are those who say Uber, you are profitable now you're making $1,000,000,000 in your advertising business. You can afford to pay drivers more, and cities and states across the country, New York, Seattle, Washington State have all put in place minimum wages, and Uber and Lyft haven't left. They threatened to leave, but they haven't. We got to bring in Kyle, our resident Minneapolis mayor, to get the word on this story. Word on the street here, buyer's remorse is the

word. Sometimes that dress that looks so good on the model just doesn't quite fit the same. Or the hot new running shoe that you paid $300 for doesn't automatically turn you into Elliott Khashoggi. I know that from experience, but HP has perhaps one of the longest lasting bouts of buyer's remorse on record after acquiring the software company Autonomy for $11 billion back in 2011. It's so big and so long lasting that they are still wrapped up in litigation against Autonomy founder Mike Lynch. T

o this very day in 2024. Mike Lynch is from the UK and was once hailed as Britain's Bill Gates for raising the profile of the Cambridge Tech scene after completing this gigantic sale. But soon after the acquisition, HP CEO who orchestrated the takeover was ousted and things got nasty. Just one year later, in 2012, HP announced an $8.8 billion write down of autonomy and blamed it on, quote, serious accounting impropriety. HP and Lynch have been locked in a decades long legal battle ever since, cu

lminating in a trial that begins today in San Francisco. Neal, what do you make of this Mike Lynch saga? Well, they call it the largest fraud in the history of Silicon Valley. They say that Lynch artificially inflated autonomy revenues by backdating sales and other sort of accounting tricks. They also say that they misrepresented hardware sales as software deals, giving the false impression that autonomy software was growing much faster than it was. And it's a really interesting snapshot of wher

e silicon Valley was back in 2011. HP was this kind of dying dinosaur that it was the first wave of Silicon Valley, right? HP was the giant. It was the alphabet. It was the apple of its time. It was facing slower hardware sales. It wanted to pit monster pivot to high profit, higher profit or higher margin software sales. And it thought autonomy was the answer. And it was a complete debacle. Absolutely a big debacle. The fact that this company I just want to read you how The New York Times descri

bed what autonomy actually did. The company helped clients analyze unstructured information in order to unearth hidden insights about their business. That is a word salad, if I've ever seen one. Weirdly enough, though, that's kind of what Snowflake does today. They add in the storage aspect as well. That's a $51 billion company. So maybe your timing was just ahead of it. I think that's that's I think that is just like data analysis. That's what a lot of companies do, is they they help you make s

ense of your data. I think they those companies are very popular in 2020 for as much as it was in 2011. They just use generative AI to help you find insights from messy data. Yeah, maybe a time you just needed some AI. It is interesting too because from what I've read, his odds do not look good in any any sense or any way you cut it. In 2022, a London judge found Lynch and then a Tommy's former CFO liable for defrauding HP. And then the San Francisco judge has already dismissed some of the evide

nce that Lynch tried to bring to the table. The one light I see at the end of the tunnel, though, is that Ernst and Young, who is the accounting firm that looked over the deal for HP back in 2011, did not find any accounting discrepancies at that time. So that's something you can always point to and said, Hey, look at EY. We looked at this thing. They didn't find anything. So why you're having buyer's remorse right now? That's right. So I do think there is some some ask and we should say Lynch's

side is he's accusing HP of mismanaging autonomy once they bought it and there was no accounting fraud in that HP and Meg Whitman, who who came in to be the CEO, Meg Whitman is a big Silicon Valley figure. She was the CEO of eBay. Now she's the US ambassador to Kenya. She's completely mis mismanaged autonomy after after the merger. But HP is not the only major corporation to have problems with mergers or accused founders of inflating their numbers. I mean, just recently, Jp morgan bought this c

ollege financial aid company Frank for 175 million. And now they're suing the founder of Frank, whose name is Charlie Jarvis, for making up a bunch of numbers. So this is this is going to happen throughout the entire course of corporate history. Yeah, it's a tell us all this time. Up next, pour yourself another cup of coffee because we have our winners of the weekend segment coming up right now. Welcome back to Winners of the Week and the segment where Toby and I picked two things that couldn't

find any thorns this weekend. Toby, you won the pre show half marathon, literally. So you get to go first. My winner of the weekend is the Kansas City Current NWSL team. This weekend was the grand opening of its brand new stadium, the first soccer specific stadium for an NWSL team ever built. KC hosted the Portland Thorns in its new digs on Saturday, looking to get things started on the right foot in their new digs. But the Thorns were not a very good houseguest, scoring four goals in their oppo

nents new home. But luckily, the current scored five and an absolute barnburner of a game that tied the league record for most total goals in a game. Neil a54 victory to break ground at your historic stadium in front of a sold out crowd. Not a bad housewarming. I don't think this is just the first NWSL women's focused team. This is the only arena a stadium that is focused on a women's sports team anywhere in the world. At least that's what the owners of this team say. So it's a truly historic th

ing. A bunch of women's teams that have always just been the third or fourth tier tenant at men's stadiums and haven't had their own facilities. So the fact that they built a stadium which cost $117 million was almost a fully privately financed is a remarkable, historic moment that shows how far women's sports has gone. And just another moment that was also historic about this game. A 16 year old scored her first goal for Kansas City. Youngest goal scored NWSL history. So I think the entire mome

nt was just emblematic of the growth of women's sports in America, but also around the world. I also want to shout out Arsenal's women's team. They sold out the Emirates Stadium, which is again where the guys played. They the women's arsenal. The team has a higher average attendance than ten Premier League team men's teams. So it just goes to show you that there is a massive demand for this. I also went to a Gotham AFC game over the weekend as well. There was 14,000 people there. It was a great

environment. Alex Morgan unfortunately broke Gotham's hearts in the 87th minute, but it is truly just like it's having a moment. And I'm glad that these teams and these women are capitalizing on it and getting these stadiums that they deserve. It's pretty amazing. So this this Kansas City Stadium has a capacity of 11,500 season tickets have been sold out for months. And there's just a question of when, not if they're going to expand capacity in that stadium. We're going to stick with sports for

my winter, which is Long Beach State men's basketball coach Dan Munson. One week ago, Munson was fired after leading the team for 17 seasons, but he agreed with the school to stay on board until the end of this season. Well, the end of the season is going on longer than anyone expected because Long Beach State caught fire during its conference tournament, improbably won the title and is now dancing in March Madness. Munson is still fired, though, which means he could become the only coach in his

tory to schedule a zoom first round interview during halftime of a game. I think lame duck coaches are dangerous. You got nothing to lose. The players are playing their hearts out, so I would not want to see Long Beach across from me at the dance or playing Arizona. So good luck, Wildcats. I was wondering, what do you think the business equivalent of this is? Like a lame duck CEO? What I came up with is a CEO gets fired, but also has to stay on to take a company public in their IPO Goes really w

ell. That feels like the equivalent here. But it's hard like this doesn't happen in any other. It doesn't happen. No, it doesn't. In the CEO corporate world, it does happen where you stay on a few months and sort of hand the baton over, but you're not technically fired. Maybe it's more of a amicable parting. And then this is but this I mean, he has been super gracious about he said this has been the rite of a lifetime. I don't think I'm done coaching yet. Think I'm going to try to coach elsewher

e. So he's been super gracious about it. And, you know, if you if you need a team to root for in March Madness, I mean, you can't beat Long Beach State. Another great fact about Long Beach State, they used to be called the 40 Niners. And in 2019, for some reason this I don't know that this school is great at marketing but they changed their nickname to just beach so their Long Beach state beach that their job is to take a play out of can in Barbie's playbook right there my job is beach Stanley c

ups are so out many tote bags they're so in the latest social media fueled consumer craze comes from the aisles of everyone's favorite grocery store, Trader Joe's. They sell these many Trader Joe's branded tote bags that only cost 299 in store and are only big enough to fit maybe one box of cauliflower gnocchi. But that hasn't stopped shoppers for going nuts. For them, the demand has brought out resellers in mass, with some tote bags being listed on eBay for as high as $999 for a four pack. If c

ute merch from TJ's was the kindling, TikTok was the flame thrower with multiple videos showing people customizing their bags as well as crowds fighting over them. That all went viral. Neil It's crazy how these hyper accelerated consumer trends can propel some pretty innocuous items into a must have, even if no one really must have a tiny tote bag. No, we are definitely in the age of the micro trend. I mean, we're not going to be talking about Trader Joe's totes in April, if only to the point of

saying that we're going to talk about the next trend and say, remember what happened to Trader Joe's in April? Remember what happened to Stanley Cup in December? These trends are going as fast as you can because of social media, because of tick tock, the whole product life cycle of introduction, discovery, maturation, and then following off is just it takes place in weeks, whereas it used to take place in months or years. I think all the ingredients were there for this Trader Joe's to go viral.

I mean, it's got the exclusivity aspect, the limited supply plus the virality built in. I also think that colors play an underrated role in a lot of these things because remember, that was one of the things that made Stanley Cup so popular is that you could collect them. There is different colors. There's only four colors of the Trader Joe's tote bag, but it's something like, Oh, you have the blue one, I want the yellow one. So there's all these different ingredients that propel these massive h

ighs and then also people moving on from them. And I think color is part of it. To what extent do you think signaling is a part of it? So you have the Trader Joe's bag and now you post on social media that you have the Trader Joe's bag. Like how how big of a deal is that? I think part of it is signaling, but Trader Joe's is just another beast entirely, like people have built in love for them. That I think goes beyond just like a status symbol people. It is like a cult like following. So in most

cases I would agree with you, but I think in Trader Joe's, people like truly just want their hands on it because they love Trader Joe's so much. It's just so funny that these products are not anything special. They're just normal. It's a water bottle, it's a top back. It's things that you use in your daily life that are very useful and they're becoming the must have, you know, quote unquote, luxury fashion items of our particular age. I do think tote bags are having a moment, though. Like Emily

Rico, big creator, is selling a $120 ones. They are cute like I live you hanging out in Williamsburg. So you see them around a lot. And so I think tote bags are having a moment. All right. Here is your preview of the busy week ahead. First up, it is once again the season for people who don't watch college basketball to suddenly find themselves screaming at their TV's because an unpaid 19 year old missed a free throw. That's right. March Madness has arrived. The NCAA college basketball tournament

brackets were announced yesterday on Selection Sunday. The men's tournament starts Tuesday and the women's field gets going on Wednesday. I'm all in on the Golden Eagles. I'm a I'm a marquette. Well, I went to my Gap for two years. Men's team made it as a two seed women's team also made it in. So those are both my picks for the men's and women's side of things. I'm all in on the Golden Eagles. Just for people who haven't been following college basketball closely like me, to be honest, the numbe

r one seeds for the men are the defending champs UConn, Houston, Purdue and North Carolina. And the number one seeds for the women are undefeated. South Carolina, Iowa and Caitlin Clark, USC, which is a lovely private school. And Texas. Are you picking. Give us your picks. I like Houston. Okay. I know it's not surprising because there. Kind of a juggernaut, but I think this is Houston's year. On Thursday, Reddit will become the first social media platform since Pinterest in 2019 to go public. Th

e company, which will be under ticker, are DDT, is going to list shares at a valuation of up to $6.4 billion. And in a unique twist, some IPO stock will be set aside for its most loyal users. Unfortunately for Reddit, though, many of those loyal users are bearish about the IPO and have expressed interest in shorting the stock when it goes public. We're not financial advisors, but I am all out on this IPO. I think it's going to be an all time disaster just because we've seen the power that Reddit

's kind of stock trading community has with GameStop. And if they turn on Reddit itself, it could get ugly. And they have signaled that they are going to in on Reddit itself. Okay. It's a central bank extravaganza. This week, central banks representing half of the global economy are meeting, including our very own Federal Reserve. There is virtually no chance Chair Jerome Powell will lower rates at the meeting this week, but he is expected to discuss whether two or three rate hikes are in store

for the rest of the year. Meanwhile, the Bank of Japan, this is very interesting, could hike rates for the first time since 2007, which would bring an end to the world's last remaining negative interest rate. That Japan's that is absolutely blow my mind. They've been trying to rev up growth for two decades now at this point. So remember that next time we say like they are, economy's overheating. I mean, Japan has been trying to put their factor meal in the microwave for four years now, trying to

get it hot so they're finally at a good spot. I was wondering what metaphor you are reaching for there. I think that was good. All right. I think that's happening today, actually. So maybe we'll talk about on tomorrow's show and dig in to that negative interest rate and what that means. It is the first day of spring. Tomorrow, Toby, pop quiz. Is it a solstice or an economics? Oh, on. Are you kidding me with that? I have no idea. I want to go salsa this. It is. Oh, no. It's an equinox day. The s

ummer solstice and the winter solstice are June 21st and December 21st. Those are the longest and the shortest days of the year during the equinoxes, which are spring and fall. The days and nights are the same exact length. I guess I could have known that because I knew the summer solstice. I. Come on. What were you going to say before I pop quiz you? Absolutely. I was going to say, I'll believe it when I see it. When you say it's spring, but I will believe it when I actually when I feel it outs

ide. All right. Finally, game of Thrones creators David Benioff and D.B. Weiss are back with their latest TV show, The Sea. The Three-body Problem, which is based on a bestselling Chinese sci fi series. It arrives on Netflix on Thursday with a lot of hype but considerable skepticism over whether it'll be any good. Yeah, I don't trust these two and more. And also, I got to read the Three-body problem. I have it in it my way. I hear it's very good. All right. That is our show for this Monday. Have

a wonderful start to the week and remember to cherish these final few days of official winter. As always, our inbox is open 24 seven 366 this year. So please send your thoughts on the show to Morning Brew Daily at morning root.com. Let's roll the credits. Emily Milian is our executive producer. Raymond Lu is our producer. Olivia Graham is our associate producer. You Taniwha Ogbu is our technical director. Billy Menino is on audio. Hair and makeup is waiting in line for the TJ's tote. Devin Emer

y is our chief content officer and our show is a production of Morning Brew. Great show right now. Let's run it back tomorrow.