SpaceX's Historic Landing & Introducing HVAC Millionaires
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Good morning, Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. Today, why you shouldn't be surprised if the person who comes to fix your heating is a millionaire. Then, it's officially been over one month since Boeing workers went on strike, and the two sides are still further away from a deal than Neil is from dunking. It's Tuesday, October 15th. Let's ride. Let's ride.

Well, that was pretty cold, Toby. But good morning, everyone. Welcome back to the week. Here's something I learned over the long weekend. You know how you reflexively sign receipts or touchscreens after paying with a credit card? Yeah, you don't need to do that at all.

According to the Wall Street Journal, the major credit card companies Visa, MasterCard, Discover and American Express all ditched the requirement to sign for charges like restaurant checks back in 2018. They have other ways to look for fraud. So it's just a tradition that has randomly persisted. But Toby, why are we still asked to sign even if we don't have to?

they just really want your autograph because you might be famous one day. No, the answer is one, businesses just don't want to alarm customers who have become accustomed to having the signature line there and expect to sign. And then two, some businesses are just using older point of sale systems that print the signature line by default. So it really is just one of those things that have become ingrained habit at this point rather than...

having any meaningful fraud protection, which is great because my signature has degraded over time. I mostly just put a line at this point. So sorry, mom. I know you sat me down to practice as a young boy, but it is simply become a line at this point.

Now a word from our sponsor, Wendy's. Neil, we're in the circle of trust here. How often do you skip breakfast because you don't have the time? Well, between you and I, way too often. Well, I've got just the thing for you. Wendy's Breakfast Burrito. We're talking fresh cracked eggs, seasoned potatoes, cheese, bacon or sausage, you name it. No. Next time...

you're going to tell me it's quick and actually filling. Neil, it is quick and actually filling. Perfect for anyone who wants a delicious breakfast on the go. Well, then what the heck are we waiting for? Let's go get one. The pod, Neil. The pod. Yes, but after, let's ride. If you're looking for a delicious breakfast on the go, head to your nearest Wendy's to try the Wendy's Breakfast Burrito.

Over the weekend, you might have seen videos of a rocket getting caught by a giant pair of mechanical chopsticks on its way back from space. If it looked impressive, it was. This rocket catch was potentially one of the most significant feats of aerospace engineering since the 1960s and could make returning to the moon and landing on Mars a reality in not too long.

The rocket that got bear hugged by the chopsticks was the booster for SpaceX's Starship spacecraft. This thing is the most powerful rocket ever built, and it stands nearly 400 feet tall, higher than the Statue of Liberty. And the fact that you could build something to catch it is kind of a mind-boggling achievement. Science fiction without the fiction part is how CEO Elon Musk described the moment, which

which other SpaceX employees called magic and a day for the engineering history books. Here's why it's so important. Reusable rockets. Before SpaceX came along, most rocket operators used boosters you could use only once like a bridesmaid's dress. But Musk believes that reusable rockets are the future of space travel since they dramatically lower costs and can be sent up to space again quickly after completing a mission. So one giant leap for SpaceX and I'm

also a giant leap for NASA because it's depending on a reusable starship to send humans to the moon in 2026. Musk, of course, is thinking even bigger and he's planning on using Starship to colonize Mars. Yeah, I mean, you know the saying, if at first you don't succeed, try again, try again, try again. This was the fifth time

Test flight for Starship, and it has blown up a lot of times in the past. First launch blew up. Second launch blew up. Third launch made it into sub-orbit but then failed to land. Fourth launch, it actually did simulate a landing at a virtual tower, and that was seen as success. But the fifth time to nail this landing in the chopsticks,

the first time that they really tried it. If you listen to the videos or watch the videos on social media, you'll hear the engineers in the background watching it land, just going absolutely nuts because of how big of an achievement this was because it was anything but guaranteed that these chopsticks, this Mechazilla contraption, as Elon calls it, was actually going to catch a rocket. And it still is just mind-boggling that it did manage to catch this giant booster. So that is why this is seen as just such an achievement beyond just the...

implications of the fact that NASA needs Starship to get its ducks in a row. It truly is just an engineering marvel. - And you were sort of wanting to nerd out about why they use Chopstick and not maybe a fork. - Yeah, that was my first question is why do you need Chopsticks to catch this thing? And one, it does make it very easy and efficient to relaunch because you don't have to reposition it. It's already in the position it took off from so it can do a quick relaunch.

but also it reduces weight. There's this video of Elon talking actually three years ago about moving some of the weight from the landing gear of the rocket to the Mechazilla chopstick launching apparatus. And anytime you can do something like this, anytime you can reduce weight, it just opens up a whole...

a whole bunch of opportunities. You can fill it with a bigger payload. You can load it up with more fuel. You can just make it a more powerful rocket. If you can take some of that weight from the landing gear and put it through the landing apparatus. And at the time he kind of giggled to himself. Cause he's like, there might be no chance that this works. Like actually having the telemetry to be able to do this, but reducing that weight, simplifying everything, making it more reusable. That is why you saw these giant chopsticks in action. Yeah. And it's crazy that

reusability for rockets is now a thing because it lowers costs by so much. SpaceX already does some level of reusability with its smaller workhorse Falcon 9 rockets. They can't go back up in there as soon as they land, but you can do a little fixes to them and they can go back up. That's already brought down the price of a launch by a factor of 10. If you can do it with something as big as Starship, that'll lower costs even further.

Yeah.

So we're officially hunting for aliens. So using a SpaceX rocket, NASA sent a mission to one of Jupiter's moons, Europa, to look for signs favorable for extraterrestrial life. Scientists consider Europa the most likely place for life beyond Earth because it has this icy crust that they suspect is covering a massive saltwater ocean with twice as much water as all of Earth's oceans combined.

combined. So according to Elon Musk, if even simple bacterial life is discovered on Europa, this will be the most significant planetary mission ever. Right. And so SpaceX Falcon Heavy Rocket launched NASA's spacecraft, the Europa Clipper, as it's called. It's going to take five and a half years to actually reach Europa. But as it does, it's going to make all these passbys and use its radar to dive deep or try to delve deep into the surface, see if it has the organic properties necessary to sustain life.

They said it's not actually a life-finding mission. They won't be able to detect life forms, but they will see if some of the compounds you need to support life are there. So a lot of exciting stuff happening in space. We could go on and on, but big weekend for Elon Musk, especially coming off maybe that Wii robot event that had some people questioning Tesla's position and everything. SpaceX seems to be doing it just fine.

Well, as SpaceX took flight over the weekend, one of its peers, Boeing, is still stuck at low altitude. It has officially been just over one month since the 33,000 Boeing machinists walked off the job because, as the saying goes, time flies when a strike is costing you more than $1 billion a month.

Since a tentative contract was rejected over 30 days ago, the tension between the two sides remains sky high. The union and the company remain at an impasse, which means production has been idled, starving Boeing of much-needed cash, and putting pressure on new CEO Kelly Ortberg to reach a deal. Driving morale even lower, Ortberg blames

broke the news just before the weekend that the company is cutting 10% of its total workforce over the coming months, shaving off 17,000 jobs as it enters cost savings mode. And there's no real end in sight either. Talks between the two sides broke off last week after two days of federally mediated negotiating. Stephanie Pope, president and CEO of Boeing's Commercial Airplane Division, said, unfortunately, the union did not seriously consider our proposals.

So, Neil, Boeing is looking at losing $1 billion every month that this stretches on. They're laying off employees, and the strike looks no closer to a resolution than when it kicked off. It is a mess over at Boeing. This reminds me of some of the birthday parties that I was given over the years, and they would hand me a candle, or they'd hand me a cake with a bunch of candles, and I would blow them out.

the candles and they would just relight. And that's exactly what's happening with Boeing. They're trying to, they have so many problems. They're trying to blow out all these different problems. And as soon as they think that they have one solved, it relights again. And whether it's the strike or all of the shenanigans related to its safety culture and the door panel blowout from the Alaska Airlines jet back in January, it doesn't seem like they can ever put out all of the

fires that are going on at this company. And, you know, even some of its customers are throwing around the B word bankruptcy. So Emirates is the largest customer of Boeing's 777, which is its largest twin aisle jet. It's that thing that goes from New York to Dubai all around the world. And Emirates president over the weekend, Tim Clark said, look, if they don't raise money soon, then we could be talking about chapter 11 bankruptcy. He had a lot of

harsh words to say for Boeing because they also, among the raft of bad news, is they're delaying the launch of their newest 777 version, 777X, of which Emirates has ordered half of all of them. So he's like, we are going to have a long discussion, a long, hard discussion with Boeing. And if they don't raise money, like I don't,

I see a potential for Chapter 11 in the future. And adding to Boeing's list of woes is that S&P, the ratings agency, is thinking about considering downgrading its bonds because of how big the company's cash flow problems are right now. So S&P grades corporate bonds on the company's ability to repay that debt back. And they put them on possible review for a downgrade because it is just...

burning through cash left and right. They're not producing any income-generating planes right now. Their 737 MAX production has ground to a halt. And so if they are downgraded to junk bond status, which is below that triple B rating, it makes it more expensive for a company like Boeing to borrow money. It'd also be one of the biggest, the industry term for this is a

fallen angel, which is when a company with outstanding long-term debt is downgraded to junk bond status. It'd be the biggest base off that index eligible debt that we've ever seen. So truly just a lot of headaches piling up right now for it. That being said, though, some industry experts are saying if they can just get 737 production back on

all their problems will be solved. I mean, it sounds simple. They're like, just give the union what they want, ramp back up that production. I wish you actually hadn't laid off 17,000 workers because you're making the same mistake you did during the pandemic, which you're getting rid of all these trained workers and then you have to rehire and retrain workers in order to get production. If you adjust like,

made it return to stable production quicker, you could start solving some of these cash flow issues. But again, easier said than done when you have these two sides at such an impact. Right. And because this is a crazy stat, labor, touch labor accounts for just 5% of all commercial airplane operations. So it's not that big of a cost center. So yes, outside observers are like Boeing, just give them what they want and let's get this, let's get these assembly lines back going.

The Nobel Prize in Economics was awarded yesterday, and the winner was Toby Howell for his remarkable insights into Gen Z spending patterns on Toby's trends. Not next year, Toby. The actual winners were economists Darren Asimoglu, Simon Johnson, and James Robinson for their work explaining why some countries became rich and others remain highly impoverished.

To understand the gap these economists found, you have to go back to the time of colonialism when European powers carved up the rest of the world and imposed their governments and way of life on the local population. Not every European power practiced colonialism in the same way. In fact, it was quite varied. Some adopted more inclusive governments that protected property rights and shared prosperity with workers, while others formed extractive, appropriative,

oppressive regimes, pillaging an area for local resources to benefit the elites. If you're thinking the first way probably led to better outcomes, you are correct. The countries that started out with more inclusive institutions during colonial periods tended to become more prosperous over the long term. And according to Asimoglu, one of the prize winners, broadly speaking, the work that we have done favors democracy. Toby, the key thing everyone should take away from their work is this.

institutions matter. Yeah, institutions do matter because in these inclusive societies that they highlighted, you have these institutions that protect property rights, they enforce the rule of law, promote economic freedoms, and those three factors are very conducive to long-term prosperity, very long-term prosperity, because they are going back to European colonialism times. So

to see how these societies kind of played out in the long term. And so why, what is the motivation behind a study like this? Jacob Svensson, who's the chairman of the Economics Prize Committee said, "Reducing the huge differences in income between countries is one of our times greatest challenges.

Thanks to these economists, we have a much deeper understanding of the root causes of why countries fail or succeed. Because some of the instances that they highlight, there's this town that literally sits on the town on the border of the U.S.-Mexico border. It's called Nogales. In the northern part in Mexico,

the U.S., it has become a much richer and more prosperous town versus below the border. And they say, just look at this. It is pointing to the fact that the U.S. side is richer because of the country's institutions rather than the southern side in Mexico. So they pointed to specific examples of cities really benefiting from these inclusive institutions. And yeah, finding a

a border town that sits on a border where you can directly compare the two was big for their research. Right, because apparently in economics research, institutions, you know, the sort of governmental structures that you don't often think about was kind of sidelined. And people were looking at agriculture, climate, things like that to sort of understand prosperity and differences in equality between nations. But these guys came along and took this

took this topic that no one was really looking at, institutions, you know, it's not the sexiest thing. He said, actually, we should look at these because they're super important. And that Nogales example is actually from this New York Times bestselling book that Robinson and Asimoglu wrote back in 2012 called Why Nations Fail. And the cool thing about these Nobel Prize winners is that a lot of their best work or their most important work is

done through books that are very accessible to the public. So if you want to read about this, you can go buy these books. And instead of having it be buried in these academic papers that are very hard to get through, they actually publish very accessible, digestible books on their work. So it's pretty cool that you can

It's very rare, I think, for a Nobel Prize winner to be like, oh yeah, I can totally just read this and understand why this was such groundbreaking research. So pretty cool. Next year, I will win this, and the million-dollar prize is coming my way. Up next are winners of the long weekend.

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Welcome to the winners of the weekend, the segment where Toby and I pick two things that would have won a Nobel Prize if there had been a category for it. Because it was a long three day weekend, we're adding a third winner as a bonus. And I won the pre-show origami contest with a stunning paper frog. So I get to go first.

And my winners are the people who own home services companies like HVAC plumbers and electricians because private equity is turning many of you into millionaires. According to the Wall Street Journal, private equity investors have swooped into the skilled trades, buying up small businesses and handing their owners six and seven figure paydays. Nearly 800 of these businesses have been purchased by PE investors since 2022. And that is a severe undercount. It's a playbook we've seen in

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But others say, sure, I'll take the paycheck and even stay on board this rocket ship. About a third of small business owners in the skilled trades want to remain at the company after the buyout to see it grow. Toby, I don't think anyone gets into the sector expecting a tech startup like exit, but it's happening. Yeah, it is.

increasingly become a very popular sector for private equity companies. You go down why private equities are so interested in HVAC and plumbing companies. It makes sense. One, they're stable demand, like HVAC services, plumbing. They are essential, so they provide consistent demand regardless of what the economic climate is. It's also a very fragmented industry. Again, this is the classic PE playbook of rolling up these companies, achieving economy of scale.

So if you can find a fragmented industry like the HVAC sector, then it makes sense to try to roll them up. They also have recurring revenue. HVAC companies often have these maintenance contracts, these regular services needs. So it's not a flashy SaaS company, but it does have that all-important recurring revenue. Also got a nice growth potential because a lot of, especially the HVAC units or HVAC companies, they have these new energy efficiency requirements. So they're

have to go around and maybe the smart home technology, they have to upgrade their system. So a lot of good growth potential down the line. So you start to tick off the reasons why private equity loves this sector and it starts to make a lot more sense. My first winner of the weekend is the meat stick brand,

Chomps. Think of it as a cleaner, healthier version of those typical jerky sticks you see at gas stations like Slim Jims or Jack Link's. Chomps' zero-sugar approach has led the company to become the fastest-growing snack food brand in the U.S., according to data from Numerator.

Chomps has ridden this wave of better-for-you snack options by doubling down on its high-protein, low-sugar offerings from the very beginning. Rummaging around your office snack drawer or your kids' lunch boxes, you might encounter Chomps' offerings like venison, beef, turkey, or chicken meat sticks in flavors like Italian, taco, pepperoni, or smoky barbecue. They have 12 grams of protein, zero sugar, and...

They've boasted a 206 increase in sales over the past year with expectations to beat that number again this year. Neil, it is a meat stick with a growth chart that looks like a hockey stick. Better for you is the term that is taking over the food industry right now. If you just go through all the recent big acquisitions, it's

all about acquiring snacks that are quote-unquote healthier for you. I mean, Pepsi just bought Ciete Foods, which makes healthier tortilla chips, for $1.2 billion last month. And then the maker of Slim Jim, Canagra Foods, bought also another meat stick company called Fatty Smoked Meat Sticks, and Canagra also owns Slim Jim. So all of these companies are moving into the quote, better for you space, which is

with snacks that have high protein and low sugar. And I guess meat sticks is just like one subcategory of that. That's absolutely exploding. I think it's also a big for school lunchboxes because right now the company says their core demographic skews female because they say a lot of it is that, uh, people shopping for their families. And it is just kind of that perfect, you feel good throwing it in your kid's lunchbox. It's

It's very easily containable, like the packaging. It's a shrink-wrapped meat stick, and it also feels healthier. Chomp's has kind of doubled down on this sugar-free approach from the beginning, which we were kind of talking before the show, like do any high-protein snacks have a bunch of sugar in it? And unless they add...

unless it's like a protein bar that adds artificial flavoring into it. No, like meat doesn't have sugar in it, but that kind of story, the fact that they positioned themselves as this better for you snack brand has led it to just see this explosive sales growth. So go check your company's snacks or if you have one, I hope you do look for chomps or go check your kids' lunchboxes. They'll probably be in there as well.

My special bonus winner of the long weekend is one of the single greatest athletic performances of a generation. And that was Ruth Chepnigetich breaking the women's marathon world record as well as a mythical two hour and 10 minute barrier at the Chicago marathon this Sunday. To say this was a quantum leap forward in athletic performance is almost underselling it. It demolished the previous world record by nearly two minutes.

Cheptan Agenic's first 13.1 miles of the race was the fifth fastest half marathon ever run. Her first 10 kilometers of the race was so fast that only 11 women in the world ran faster on a track, let alone in the first six miles of the marathon. And the pace seemed suicidal until it wasn't. And Cheptan Agenic held on to break a barrier long thought to be out of reach. Neil, this was the same course that Kelvin Kipton almost broke the two hour on mark last year. And this run was on par and maybe even

even more impressive than that world record performance. Right. So she, uh, and the men's winner, uh, who was also Kenyan dedicated their races to Calvin Kipton, who died four months after setting that record last year. So just truly a very emotional day in Chicago for marathoners and runners in general. And to do, uh,

what she did breaking the two hour and 10 minute mark is truly astonishing. One of the NBC commentators who was a marathoner herself said it was almost like seeing someone land on the moon. So something that's like absolutely mind blowing. And I went back to women's marathon world records in the past few decades. I mean, as recently as 1971, the record was three hours and one minute. And now we're down to. I would have had it. I would have had it in 1970. I would have. What accounts for people getting so much

faster in just the span of a few decades. Well, it's definitely the super shoe era ushered in this era of incredibly low times, but we've been in the super shoe era for almost a decade at this point. So you can't just point to the shoes anymore. I think it's truly that they see that it's possible for a while. Everyone thought 210 was simply unbreakable. Like it truly was unfathomable. It is the equivalent of a two hour marathon since it's basically a Monday. Let's close with a

We'll be right back.

competing, joined by the Cleveland Guardians at $109 million. The Mets and Dodgers are currently knotted up at one game apiece, while the Yankees lead the Guardians one game to zero. It's funny because the Mets have taken on this role as like the plucky team of destiny, and then you look at their payroll and it's $332 million. So, I mean, let's go Mets, but they aren't exactly the underdogs that maybe the media is making them out to be. Maybe less exciting, but still very important. Earnings season kicks into gear with the corporate equivalent

We'll be right back.

is on an absolute roll with the S&P 500. No, I know you're so excited. You just want to interrupt me. S&P 500 and the Dow set more all-time highs yesterday. Earnings season might pose a test, though. Yeah, since the S&P 500 is up 20% so far this year, and when the S&P 500 gained at least 20% through the first nine months of the year, it posted a down October 200th.

70% of the time dating back to 1945. So I thought you're going to ask, like, which company are you most interested in? I'm interested in all of them because I'm rooting for all of them because we are fighting history at this point. 70% of the time, October is a down month, but so far it's not looking that way. No, not at all. I mean, it's just been up and to the right. It's been crazy. This is the first week on the job for Nike's new CEO, Elliot Hill, who have quite the onboarding experience trying to revive a struggling giant whose stock is

is down 23% this year, one of the few companies that hasn't gained. And then Thursday is National Pasta Day. Toby, what's your favorite pasta shape? Okay, I was hoping you'd ask me this because it is casciatelli, which is one of those newer pasta shapes that's been invented. It made Time Magazine's 100 Best Inventions of 2021. It's got great sauce ability, great forkability scores. You can get it at Trader George's. It's kind of a dark horse for pasta of the decade, I think.

It is a new pasta shape. What is the shape? It's hard to explain. It's like a turned over thing with ridges. So it's got good, I think it handles sauce very well, which is what I'm looking for in a pasta. Okay, say it again so people can look it up. Cascatelli, C-A-S-C-A-T-E-L-L-I, Cascatelli. I'll check it out. There you go.

That is all the time we have for today. Thanks for starting your morning with us and have a wonderful Tuesday. For any questions, comments, or feedback on the show, send an email to morningbrewdaily at morningbrew.com. And if you enjoy Morning Brew Daily, don't keep it to yourself. Send the pod to your friends, family, and coworkers. If you're having trouble thinking of someone to share it with, Toby is here with an idea. I want you to share today's show with someone who ran the Chicago Marathon this weekend. They are probably very sore. They are probably very,

very immobile so send their pod this way one as congratulations but two as some entertainment as they probably sit and if they ran a marathon they probably wouldn't be quiet about it they you've definitely heard about it so you know which friends ran it and they have posted on social media so send their this pod there okay let's roll the credits emily milliron is our executive producer raymond lu is our producer olivia graham is our associate producer uchenawa ogoo is our technical director

Billy Menino is on audio. Hair and makeup is inspired. They're signing up for next year's Chicago Marathon. Devin Emery is our chief content officer, and our show is a production of Morning Brew. Great show today, Neil. Let's run it back tomorrow.