Bipartisan legislation has been proposed in the House of Representatives that would impose significant regulation on large technology companies. The multiple bills, if passed, would change the rules for companies including Alphabet, Facebook, and Apple. This could result in some of these companies being broken up or having to sell some parts of their businesses. Steve Symington joins Dan Kline on “7investing Now” to break down what this means for investors.

Transcript

Dan Kline

Welcome to 7investing Now, a show that teaches you how to take a long term view on investing by better understanding what’s happening in the market now.

Good afternoon 7investors and welcome to the Monday edition of 7investing Now. My name, of course is Daniel Brooks Kline. And if I look flustered, it’s because I am flustered. I usually don’t do anything in the half hour before the show, I spend time reading my notes going over last minute changes. Today I was supposed to pick my son up at the dentist. It’s about a six, seven minute ride. But apparently I didn’t know where I was going. There was some sort of major police action. And then there was a road closed. So I literally just turned around and didn’t pick my son up at the dentist. So my wife will be out doing that now. And I will be doing this show here with all of you and of course with Steve Symington. Steve, welcome to the program. How you doing this morning?

Steve Symington

I’m well, it is it’s a Happy Monday. It’s like 80 degrees here, which is tropical for us, and golden. I’m good.

Dan Kline

Are your kids out of school yet? Are they still in school?

Steve Symington

They’re out of school. So yeah, they’re there. I don’t know, they might just be waking up right now. With with how late they’ve been staying up. We were watching a movie last night. So that was good time.

Dan Kline

We have the opposite issue. My son has to get up for school at 6am. So he is perpetually like, he’s 17, he’s about an 8:45 at night, you know, going to sleep. He has four more days of school. And basically for the last three weeks, it’s been like just watching Pixar movies, like, he’s probably seen Moana like 40 times that, that I am not a big fan of, I feel like we should have just ended the school year on time, even though we started late. Like it’s been a tough year.

Anyway, we’re gonna move on we are going to talk today, we, of course would love your questions and comments, we’re going to talk about the possibility that big tech is going to get broken up. Now, that has been a theoretical possibility for a long time. But let’s just say things got a little bit more real. There are multiple bills in the House of Representatives that aim to do this, that aim to put some restrictions, we’ll go into some of the things they could do in a second. I’ll let Steve take that part from the show notes. But why do I think this is more serious than usual? Because there are reasons on both sides of the aisle. And we don’t talk politics here. But we’re just going to talk the overlying issue.

There are reasons on both sides of the aisle where they want to regulate big tech. There is a a right wing theory that they’re persecuted, or not properly featured on some big technology platforms, there is a left wing idea that these are monopolies. Well, there’s some happy middle ground in regulating these companies that make it much more likely impossible. So we’re gonna get into talking about what this means for investors. But Steve, if you want to share just a few examples of what this again, proposed legislation, this hasn’t happened yet. But what this proposed legislation might do.

Steve Symington

So yeah, there’s several bills kind of on the table right now, but five bills, and among them, you know, for example, we could force Google (NASDAQ: GOOGL) to stop promoting YouTube, in its search results. Which would be you know, of course, Google acquired YouTube for something like $1.3 billion, you know, decade and a half ago. So they’re one company for anyone who didn’t know, Apple (NASDAQ: AAPL) could be required to relax restrictions on  iOS app developers, Facebook (NASDAQ: FB) could be banned from acquiring nascent and companies for the purpose of stifling future rivals.

And, you know, really, when you talk about the most aggressive of these bills, we could be talking about tech giants using their control over multiple businesses, it would prevent them and potentially break them up and prevent acquisitions, lots of different things that could happen from from these five bills. But whether there they come to fruition is another story, we’ll probably talk about that in a minute.

Dan Kline

We’re gonna get into the investing angles, and we would certainly love to hear what you have to think about this. But this is a mixed bag. So let’s go back to that Google example. Let’s say I search. I’m trying to think of a an accessible band, let’s say let’s say I search Coldplay videos, you know what I want it to show up, YouTube results. So if I search, how to fix a broken dishwasher, chances are the best answer for that is going to be on YouTube, it’s probably not going to be on Vimeo or some other video platform. So I actually think there’s a challenge here because obviously, you know, if somebody searches what investing service should I buy? Boy, I would love for it to come up with 7investing’s About Us page or whatever it is.

But the reality is, Google’s actually trying to serve you the best result possible. Does that result tilt to them a lot of the time. Absolutely it does. But Google’s also done some really smart things. Like, for example, it used to be if there was something trending on Twitter, and I wrote a news article about that tweet, my news article would be the first result. Now they show you the tweet, because you probably want the tweet and the underlying conversation there. So I think this is a very, very mixed bag.

Steve, I’m gonna throw a bunch of questions at you about this. But But before I do, in general, I don’t think I favor this, like, I tend to believe that the market will correct this. And I understand that all of these companies are doing things that that are bad. On the other hand, I worry about the unintended consequences of say the damage to small business, if you weaken Facebook as a platform or making search just not that useful, which I I don’t really have a lot of complaints about Google search, they generally get me the answer I’m looking for. And if they happen to make money, I’m not so sure I care. And, and the people impacted by this. Well, they’re competitors. Like I think that’s all right. But Steve, your your overview thoughts here before we get to the nitty gritty of it.

Steve Symington

I think, I think one thing that’s important to note, there’s a big difference between looking tough in a legislative hearing and sounding like you’re you’re hardline and actually getting 60 votes for one of these bills on the Senate floor. That’s that’s a there’s there’s a very, there’s a big gap to close before that happens. So I’m not entirely convinced these are going to cross in their their current forms. We also have, you know, we could be looking at bipartisan support for these bills. But on one side, you know, you have a party concerned about the political, the the the ability of these companies, these big tech monopolies or duopolies, in some cases to stifle speech. And then on the other hand, you have people concerned about just the fact that they are arguably monopolies.

But I think one of the one of the bigger things that we also need to keep in mind is that there seems to be a fundamental misunderstanding about how a lot of these businesses work in Congress, like we saw that in the hearings. And it was, it was like. You have the CEO of Alphabet (NASDAQ: GOOGL), like explaining to his 97 year old Grandpa, how the interweb works.

Dan Kline

This was a very big problem. And look, I think the industry could have headed this off. By having its own regulation. Look, I mean, there’s obviously some fishy stuff going on. Yeah, it would be much better to have an OSHA style industry led regulation that passes some meaningful reform look, yeah, I just downloaded the new iOS on my iPhone. And when I logged into every app, it asked me privacy questions. And I actually granted the social media sites permission to to track my data. You know why? as annoying as it can be, if you know, you bought a couch last month and Twitter’s serving you couch ads, a lot of the times it’s actually very useful, you’re actually getting results based on what you were looking for.

And I find it you know, certainly with small business discovery, or restaurants, if I’m at, you know, our Davenport, Florida house, and I search best Chinese, I want Facebook to be giving me targeted advertising content that becomes almost content. So I thought long and hard about it. And I’m sure there are some apps, I’m going to say no, like, like, I’m not sure that say like the gaming app I use, I play Solitaire on Skillz (NYSE: SKLZ). I’m not sure they need to have my advertising information. But a lot of things, I’m actually okay with that.

But let’s get into the nitty gritty for investors and 7investors, you were being awfully quiet. Let’s see some questions and comments. So let me ask the big question for consumers, and then we’ll get up into shareholders. Is this type of regulation and I’ll call it uninformed regulation. This isn’t gonna be good for consumers, right? Like, it seems to me that this will have unintended consequences.

Steve Symington

And that might be a leading question. But I happen to agree. It’s, it’s not good for consumers. And I think that’s one of those things that they will argue heavily is you will be harming consumers in the process. And all of these big tech companies have publicly said, we are all for regulation, but it needs to be the right type of regulation. And of course, that’s going to be met with skepticism. Like you say, what, what’s the right type of regulation, that type regulation that allows you can continue dominating, sure. In a lot of cases, but this is it’s been great for consumers. You know, who doesn’t complain about all of the revelations and positive technological changes, these companies have brought. And a lot of them, the majority of their revenue is driven by small business when you talk about Google ads and, and you know, Facebook’s commerce pages and stuff, small business is thriving as a result using these platforms. So that’s something that we can’t ignore.

Dan Kline

Yeah, and there are consumer friendly things. So a lot of people have objections to the fact that Microsoft (NASDAQ: MSFT) has bought Bethesda Game Studios, along with owning Minecraft and owning other things. Well, as a consumer, I pay for an Xbox on a subscription model. And with that, I get Game Pass, which gives me access to all sorts of games I used to spend $60 for. So does Microsoft lock me in as a customer? Absolutely. Would I have spent more had they not offered that deal? Yeah, absolutely. I am a huge believer in the, you know, mix of hardware and software as a service.

You know, Steve, that, that I bought my robot vacuum that way, I needed a new Roomba. And they offered a really good deal over at iRobot. You shared that with the team and I went wait for $24 a month, I don’t remember the exact number I get. I get a new robot every three years and they sent me replacement parts. And wait a minute, it’s a way better one that I have. It’s self emptying, which is awesome, by the way. So again, I am wary here.

But let’s go to question two. Would a breakup of any of these companies actually be bad for shareholders. Because I kind of don’t think it would be like if Facebook had to spin off Instagram, as long as they weren’t forbidden from having, you know, some sort of inter, you know, partnership agreements, which certainly say like a PayPal (NASDAQ: PYPL), eBay (NASDAQ: EBAY) did for years after they broke up, though they don’t anymore. I actually think you might be unlocking value in some cases. But you know, a lot more about this than I do. So go ahead

Steve Symington

Yeah, I agree. I would say not necessarily. There’s potential that as one business as a single consolidated business, that these tech giants are more powerful and valuable and able to extend their reach. But there is also an argument that we are looking at businesses where the, the the sum of the parts is actually greater than the current valuation of the businesses, right. So when you look at Alphabet breaking out, you know, they’re moonshots businesses, which are largely pre-revenue from their cloud computing business, to their, you know, any gaming efforts and hardware efforts and search and YouTube and all these different businesses.

I mean, yeah, there’s, there’s an argument that if you decided to break them up into all their disparate pieces, that the sum of those parts could be greater and current shareholders would not be shortchanged in the process, right? You’d be like, well, now you own shares of these five businesses, instead of just a single share of this one business. So no, I don’t think it would hurt shareholders, you’d have a lot of annoyed people worried that it would, but I’m not convinced that it would.

Dan Kline

And it depends what the breakouts are. If you make Facebook sell Messenger, that’s a problem. If you make them sell Instagram, those are standalone businesses that probably benefit from from the advertising structure. But there’s not, I recognize you can use one to populate the other, but there’s not a ton of interplay between them. Whereas if I’m in Facebook, I can see my Messenger messages. And And, look, I know these are, are not really the prime concerns of most people. But I think as an investor in many of these companies, there are things you want them to sell off, I’m not so sure I want Alphabet, if I was a shareholder sinking billions of dollars into, you know, automated driving and other sort of pie in the sky ideas, I’d really prefer that to be side projects funded by the owners, you know, like we’re seeing with like SpaceX. And, you know, in Tesla, that’s not a Tesla (NASDAQ: TSLA) company that is a, that is an Elon Musk company, it is important to think of it that way.

Let’s go with another one. Is there any actual problem being solved by this legislation? Does it help or hurt anyone that that these companies, I mean, it hurts their competitors. But we’ve seen through the launch of, of all these big tech companies, other players emerge in those spaces, they now it’s also important to note that clearly, the meaning of the word monopoly is not the way we define it. It doesn’t mean has no competition. Yeah. But again, is the government. Is anything being helped by this?

Steve Symington

I’m not, yes and no, I mean, I think that the worry is that these businesses are too powerful and they want to stifle the power and reach is if it doesn’t come at the expense of these up and comers. But I would say yes, they’re solving it, but it’s being politicized more than I would like in the process, the problems that they want to solve.

Dan Kline

We’ve got a great comment from our very own Maxx Chatsko, Steve, why don’t you read that one for us?

Steve Symington

Yeah, Maxx says most of the Rockefeller fortune was made “after” (emphasis) Standard Oil is forced to split up as the family became shareholders in many businesses instead of one. So that, that speaks to the argument that wouldn’t break up these companies hurt shareholders, and this, you know, some of the parts and, and, you know, that’s part of the reason that we’ve seen a lot of businesses divest portions of, of their own companies, or spin off things because they believe that they can focus better on their specific niche as a standalone business, and a lot of times that that fosters success. So yeah, great point, Maxx.

Dan Kline

So, power equals monopoly in the government’s mind here, the old version of a monopoly was you own something, and thereby didn’t let anyone else have the similar product. So I go back to say the ISP’s had a lot of power over say a Netflix (NASDAQ: NFLX) by being able to say, Hey, we’re going to choke you off. And we did have some FCC involvement there and deals get made. None of these are typical monopolies, you can compete with any one of them. You just look, look, you and I, Steve cannot launch a Facebook sized company. But could we launch an online community for people with disabilities who like golf, like, okay, is that unbelievably specific? Yes, build off of that branch and build something. And just because you’re not the dominant player…

I’ll point out I grew up in a family that, that that made ladders and scaffolding, my family still makes scaffolding. And our competitor was Werner Ladder, which is a multi-billion dollar gigantic company, that that’s nationwide, and how did we compete? Well, you can’t compete by making a cheaper ladder, you can compete by being better at customer service, and heavily serving the niches they don’t go after. So they’d be out there selling the the skyscraper. And I was selling the guy building a CVS (NYSE: CVS) or building a small apartment building, and you can do it different. And we’re seeing that in all of these areas, there are competitors, for all of these companies on a major level. And on a small level,

We’re gonna finish this one up soon. We appreciate so many of you watching out there. But of course, you are being very, very quiet, we have to think there would be more questions and comments on this one. So Steve, I want to know, you know, cable companies, ISP’s, they are a they are a pet peeve of mine. But why did the government not protect consumers from from internet service provider monopolies? In fact, local governments generally signed exclusive contracts that forbid competition, I don’t really understand why one type of monopoly is good and the other is bad. And to me, it actually feels like it’s all politics.

Steve Symington

Right? And those are those were the most frustrating for people because they really felt like they had. And still, you know, in many cases feel like…

Dan Kline

It’s about 40% of the country still only has one ISP or cable company.

Steve Symington

Yeah. And I guess, you know, there, there are companies on my scorecard actually, that are trying to take advantage of some of those opportunities to offer more choice to regional internet providers. So yeah, that’s, that’s something that that’s an opportunity, I think, to change, but it is frustrating. And that’s one of those sort of narrow monopolies where, you know, maybe they’re not as concerned because it’s not, you know, I guess, with, with some exceptions, you know, your Comcast’s (NASDAQ: CMCSA) of the world that that serve a significant chunk of the country, right. But local cable providers are, you know, they can be maddening when you talk about their their lack of customer service, because in a lot of cases, either they’re overwhelmed, or they just don’t feel like they have to pour as many resources into that aspect of their businesses, because consumers have no reasonable choice, you know, unless they want to go with some subpar little side, you know, satellite internet game or something.

Dan Kline

And in a lot of cases, that’s not even an option. And like, back to the word monopoly here, I don’t have to use Facebook, I actually have the opportunity if I wanted to not even use social media, to call my friends to go to my high school reunion to do all sorts of things I could, I could print out… in fact, we do my mother in law doesn’t have a computer. So we print out photos and send them to her. My my son writes her letters, like you know, we, there obviously are options to not use it. But with the exception of my mother in law, almost every American needs internet the way you need electricity or water. Yet in many places, it’s still a legally, a legal monopoly or your alternatives aren’t good.

Now did this force innovation Yes. 30 years later, you have your SpaceX’s sending up satellites, and you have your T-Mobile (NASDAQ: TMUS) building out 5G and making that a viable internet option in rural areas. But literally those monopolies go back to the early 80’s when cable was first laid, and I understand that was a monopoly in exchange for the expense of laying cable. But is that still an excuse, literally 30 something maybe 40 something years later? Steve, if you had to guess, and we’ll we’ll close out with this. Do you think there will be significant regulation over big tech in the next let’s call it 18 months?

Steve Symington

If I had to guess I’d say no. I wouldn’t say I would say that the government fails to reach a consensus on what that regulation will be in the next 18 months. I could be proven wrong, but I if I had to guess I, you know, I’d say no, no, probably not.

Dan Kline

I’m actually going to say yes, I think they’re the piece of this that will pass is there will be something limiting purchases, there’s going to be significantly heavier scrutiny on the big end, where if you’re buying, you know, if you’re over “X” market cap, and you’re buying something that’s over “Y” market cap, it gets an added layer, I think there’s also going to be a little bit of what you talked about in the beginning on Facebook, where like, you know, what, if somebody comes up with that new, put it in your ear, and you can have a social network, you know, play out on your glasses, and it’s not Facebook, but it’s a three person company that will sell for $30 million, I actually think there’s going to be more scrutiny for that too. That actually could hurt Apple, which you don’t hear a ton about Apple in this discussion.

But Apple is actually pretty famous for buying people who make some sort of app because they don’t even want the app, they just want some piece of functionality and to own that team. And I’d argue that that’s largely been good for consumers, you’re seeing a lot of leaps and bounds. The story came out today, that Apple is likely going to be able to monitor your blood sugar in the next iPhone. Now, I don’t know if that will be enough for two diabetics to be able to use it. But it’s certainly a positive. It’s it’s certainly you know, so I think a lot of innovation has come from, well, my little company can do this thing. Wait, we’re part of Apple now. And it’s in everybody’s phone. I think that’s really, really important.

We’re gonna pivot and do what we’re watching in a second. And we’re gonna talk about space. There’s not a lot of notes on here, it basically just says “Space”, but Steve is going to lead us in that direction.

Before we do that, let’s talk a little bit about something important that’s happening here at 7investing. Steve today is now June 14th, I’m not great at math. But that’s roughly the middle of June, June, June has 30 days, unlike those months that have 45 or 50. Now they all have 30 or 31, except February, which is 28 or 29. So we’re at about the middle. And that gives you about three weeks left to lock in 7investing at its current pricing, that’s $49 a month or $399 a year if you subscribe before the end of the day on July 7, you get that pricing as long as you remain a member.

So, it’s 2432, you’re a head in a jar, our successors are doing this show that, you know the Steve Symington robot’s on, you’re still paying that if you don’t lock in, as of July 8th, our pricing goes to $49 a month, or $399 per year. Now look, it’s a value at that price at the new price, we do all sorts of things we didn’t do when we started. First of all, there’s seven experts instead of just the three and four that there were in the early days. And it is an incredibly diverse team. We do members-only events this Friday coming up we’ve got our new members call at 10:00am the existing members call from 11:00am to 12:30pm. That’s where members can ask us questions about anything they want. Yeah, all sorts of questions about the picks, questions about what is going on. And those are lively, lively phone calls.

So we won’t belabor it but if you want to become a member and why wouldn’t you want to become a member? It is www.7investing.com/subscribe. Sam Bailey if you want to share the address that would be great www.7investing.com/subscribe three weeks left get in now why would you pay more? If you’re watching the free show, you are gonna love the paid content

With that, Steve there is a lot going on in space and it is a little bit confusing. Because Richard Branson or Sir Richard Branson as we’re supposed to call him I guess we don’t have to as American as he goes by because he is he is knighted, which seems incredibly archaic. But But he is. He has a second space company with a similar name to his first space company. Looks like they’re going to go public in a SPAC you want to explain what’s going on here?

Steve Symington

Ya, so there’s several things going on with the space economy right now. So first and foremost, just a few days ago, Sir Richard Branson is apparently in late stage discussions to take Virgin Orbit public via SPAC. And this is likely going to be a two and a half to $3 billion deal is what they’re searching for. So similar to the size of Virgin Galactic (NYSE: SPCE), and make no mistake, these are two separate companies, right. So Virgin Orbit actually spun off from Virgin Galactic in 2017. And that was essentially in order to allow both companies to hone their focus on their respective niches and, and yes to pave the way for Virgin Galactic to go public in the first place. That happened in late 2019. But now that we’re seeing some progress with Virgin Orbit, and I believe it’s going to go public, I forget the ticker already. It’s like New Vector Acquisition Corp. (Correction: NextGen Acquisition Corp.) or something like that is

Dan Kline

It is Vector Acquisition, it will trade under the ticker RKLB (Correction Below).

Steve Symington

That’s no, that’s Rocket Lab. So Vector Acquisition, sorry, Vector Acquisition is the Rocket Lab. So actually, this is going to provide some, on that note, some competition for Rocket Lab, which is going public under its own spec deal sometime in the second quarter. So you know, anytime in the next several weeks, we should see Rocket Lab go public as well, but Virgin Orbit as opposed to Virgin Galactic, which actually takes you know, it’s it’s space tourism and long haul travel disruption and a couple different markets like that the Virgin Galactic is looking at bringing people to space.

Virgin Orbit is all about small satellite launches. So 500 pounds to 1100 pounds, they actually take a 747 attach basically a big rocket to the bottom, looks like a missile, drops off similarly to the way the Virgin Galactic space plane drops off of its mothership, and launches it from air. So you don’t need a platform, you know, a rocket from the ground to do this. And it will allow small, basically small payloads to be launched into orbit. And I believe they have another another test coming up later this month or early next month. So in they’re going to livestream that test as well. So there’s going to be Virgin Orbit, it’s going to be all over everybody’s radar, pun intended, in the next couple of months here, because it’s it’s got tests that it will be live streaming, and it’ll be going public, and it’ll be confused with Virgin Galactic over and over again. But they are two separate companies.

Dan Kline

And it’s very important when considering investing in this type of SPAC to really understand the business, though, yes, this is a long game, Virgin Orbit can do their tests, they can get a satellite or two up, this is not going to be a meaningful business. For years, we’ve seen it with Virgin Galactic, like they hit some relatively minor milestone, like announcing a test and the stock will move in dramatic form. You’re not gonna see what these companies are actually worth for maybe five or 10 years, maybe even longer than that for to fully play out. Long haul travel, maybe a great business for Virgin Galactic, but that is transformative to the way the world operates now, and it’s not going to happen overnight. And figuring out what the market is, is that a $25,000 ticket is an $8,000 ticket that’s really, really different. So these are fun to talk about. And, and you know, I have to admit, I own a very small amount of Virgin Galactic, largely because I have so many friends that bet on it I don’t want to be I don’t want to be left out five years from now, if it scores. But be really careful here.

And then Steve, what I call, the race to kill a billionaire. You, You have Blue Origin founder, Jeff Bezos, who is trying to be to get the space before Richard Branson. I actually think this is kind of a terrible idea that we should not be sending our best and brightest and I understand the logic with Virgin Galactic Branson basically saying, hey, it’s it’s safe. You know, and that gets other people but they have a huge waiting list. I’d rather random-rich-guy blows up that Richard Branson, who is an innovator and one of the more important humans, but explain what’s going on between Bezos and Branson.

Steve Symington

Right. So the other thing that we saw is over the weekend, Blue Origin successfully auctioned off its first ever human spaceflight ticket. The person who won this auction they’ll reveal in the next couple of weeks. And they’ll be flying with Jeff Bezos and his brother Mark on July 20th. They auctioned that took it out for $28 million. Now, this is crazy because the bidding started, they’ve had this bid up, to and available to the public for anyone who wanted to go through a verification process and actually place a bid. The bid going into the live auction portion this weekend was $4.8 million. And it was it was crazy to watch because they live streamed the auction as well, you can go back and watch. It’s really weird to watch people just casually, you know, on the phone with their bidders. And he’s like, hey, Jeff, you know, what’s your bidder say 28…26-27… 27-28. And, and, but it went all the way up to $28 million for someone to take a spaceflight with Jeff Bezos.

And what was really interesting though, was that the, the, the interest was substantial, they had 7600 registered bidders from 159 countries. And the proceeds are going to charity, right for this first flight with Bezos factor. So it’s not really a direct comparison to the pricing power, or perhaps demand for the actual commercial space flights once they start kind of ramping that both Virgin Galactic and for Blue Origin, right, they’re going to both start ramping space flights of their own. But it’s still encouraging nonetheless, that someone’s willing to pay $28 million.

For perspective, Virgin Galactic already has 600 people who paid an average of about $250,000 to reserve their spots on their first flights. But this is also interesting, because you know, those 7600 registered bidders for the Blue Origin flight was kind of in line with some figures that Virgin Galactic had released before. So Virgin Galactic, they have the 600 future astronauts you’ve already put down in $250,000 deposit. But they also have 1000 members of what they call their One Small Step program who have basically put down smaller deposits to be next in line. And then they’ve said they had 8000 online reservations, expressing interest following their flight in 2018, within a year, and they’re going to reopen once once they announced Branson’s flight and actually do that successfully, Virgin Galactic, they’re going to reopen ticket sales to the public. And we’re going to get a good picture of what the actual demand for these flights are.

And I think people honestly, you’re going to be surprised, in a good way, if you’re a shareholder and interest in full disclosure, I have a fairly substantial position in Virgin Galactic. And I think, you know, when we’re talking about businesses now, with market caps of $6 billion, I do think we’re looking at multibagger potential as the the the long term potential of these businesses begins to become more clear. So it’s going to be an interesting next couple of months.

Dan Kline

We’re going to be keeping an eye on space and remember, not affiliated with Orbit gum, Virgin Orbit, not affiliated with the gum.

That being said, Steve, we are going to hit the homestretch here. We appreciate you watching our very, very quiet audience today. But that’s it. We enjoy that so many of you are following us along for the ride here. Let’s hit the homestretch with, “Are we at an inflection point for automation, driven by the current labor shortage?” So what does this mean? So you look at say your your rich, fast food chain, your McDonald’s McDonald’s (NYSE: MCD), which has routinely gone to its franchisees and said, Hey, you have to spend half a million dollars to update will finance it, we’ll give you some portion of it, whatever it is, right now, if I own a McDonald’s, and I can’t find enough people to work there, which is a legitimate problem in parts of the country, even with higher wages being paid in most cases, is that the point that I say, Geez, I wonder what it costs to automate making a Big Mac? I, I don’t think we’re quite there yet. But it feels to me like we’re gonna have to start really asking these questions. Um, am I reading it wrong? You’re sort of in the AI and robots space more than I am?

Steve Symington

Right? Um, you know, I think that that requires very specialized mechanics and specialized robotic solutions. And the technology exists, whether it is viable on a commercial scale for a company like McDonald’s, you know, to be able to have a robotic solution to make hamburgers. Sure, there’s robotic chefs out there. Are they going to be in, you know, 7000 McDonald’s locations in the next couple of years? Probably not. But I, you know, fast forward a decade, and maybe the answer changes. But I do think there are markets that are already kind of being disrupted, disrupted in the name of automation. And that could be something that’s accelerated by the current labor shortage.

And we were talking about this on our Slack channel earlier this morning. There are people quitting their jobs in droves right now. And some people sort of rage quitting amid the labor shortage. And so it’s a really interesting thing to the to watch these dynamics that not a lot of people expected to play out, right? Because we have, you know, 7.6 million jobs or something lost during the pandemic that they wanted to get back. But now people are sort of retiring early, or quitting and the numbers, the math is kind of changing on what we need to be to get back to sort of pre pandemic levels of employment if people are literally just quitting to retire.

Dan Kline

Well, there are some outlying factors here. And part of that is that childcare has not come back to the level and we’re heading into the summer and summer camps are not necessarily operating the same way they normally would, or they’re, they’re not obviously as viable as they were. So we’re hitting that. There’s also, if $15 is the minimum wage at a Taco Bell (NYSE: YUM) or Chipotle (NYSE: CMG), well, that’s forcing wages up everywhere and I have a teenager, a 17 year old is hoping to enter the job market this summer. You know what he’s not worth, $15 an hour. He doesn’t have any skills or practice yet. So, you know, I think we’re gonna hit that problem.

But I will tell you that right now, I 100% guarantee that your McDonald’s and your Domino’s (NYSE: DPZ) of the world. And certainly your Walmart’s (NYSE: WMT) are heavily researching automation. That if you’re in a field, like okay, is Starbucks (NASDAQ: SBUX) ever going to fully automate or any coffee chain gonna fully automate? Probably not because there’s an artistry into what they’re doing? Yeah, but if you’re ordering a medium pizza from Domino’s, you actually want the sameness. You want it to be the exact same way every time. So you know, if I buy from Walmart, and I want my order packed, I don’t care if a person did it or a robot did it? So is it going to be that quickly? No, I don’t think it’s going to happen that quickly. But I do think it is going to happen. You know, and we’re gonna see it. Look, we’ve seen tests in this all of this technology exists. It just becomes what is the delta for actually bringing it on line?

Stock Investor has a comment, Steve, why don’t you? Why don’t you share that one

Steve Symington

Are you telling me I could be eating robot made Big Macs soon? Yes, no.

Dan Kline

Yeah, I’d say the Big Mac is perfect for robot made, because McDonald’s is using kiosk based ordering. They have a robust app. And you could go in and heavily customize. That’s been one of the benefits at any of the coffee chains where you could go to you go to Dunkin (NASDAQ: DNKN) and say like, yeah, I want to half-calf, I want one pump of cherry and one of vanilla. And could you throw a doughnut on the top like, you can really get to very specific. I think that’s gonna be a benefit. And I’ve talked about this a lot when it comes to delivery, there was actually a Saturday Night Live joke about it this year about having fake people in your hotel room to justify how big your room service order is. I actually think that when you order for delivery, or pickup via app, the size of your order goes up and it has for McDonald’s. It’s like something like 15 or 18% higher. And I think because there’s less shame in getting a shake, or adding an apple pie or a Grimace cookie, I don’t even know if they still sell Grimace cookies, but you know that type of thing it definitely seems like there is more of that.

We’re gonna hit our finisher, in a second here. But again, our own Maxx Chatsko, who Maxx never ceases to surprise me. I worked the grill at Wendy’s in high school. I wish the robot would have taken my job. Yeah, those seemed like difficult jobs. Steve, did you ever work in the fast food space?

Steve Symington

I never did. But Maxx actually brings up a great point there. Actually robots taking our jobs. That’s one sort of recurring fear I’ve seen from a lot of people is that, “Oh, robots are going to take our jobs, automation is going to take our jobs”. Yes and no right job, I think the jobs market changes and jobs will evolve. And those jobs that can be automated will be automated. But that doesn’t mean they’ll come at the expense of jobs for humans, we’ll simply find more effective, efficient jobs for people to do as a result. And that’s something that I think we really need to keep in mind is we’re not going to have a bunch of unemployed people because of robots, we’re going to have different jobs for those people.

Dan Kline

Like, like robot polisher? (laughter)

Steve Symington

But But I mean, yeah, that I mean, the market for blacksmiths obviously isn’t what it was in the 1800’s. You know, because these are technologies that were sort of automated, largely. And we can do a lot of that with robots, but the jobs changed and, and we’re gonna have, you know, more cerebral jobs and, and not necessarily all thinkers, but there, there are trades and everything that people can go into, that won’t be disrupted for a long time. But robots aren’t out to steal everybody’s job. But some jobs will go away as a result and be replaced with others.

Dan Kline

I will say there’s a bit of a robot pitfall. So I’ve talked about, I live very, very close to a target about four tenths of a mile from a Target (NYSE: TGT). And I, I went to Target yesterday with my son, and we were buying three or four things we didn’t particularly need. And the line was significant. Now they have a very large automated checkout area. And the automated checkout is so bulky, that you need a person half the time anyway, you’re buying alcohol, something didn’t scan right, so there’s almost as many people serving that area, which is gummed up, and then there’s only two or three registers open. And the problem is they did at some point in the 35 minutes I spent in line, which is preposterous, they did call people over it to open new registers. But instead of saying, hey, you’re third in line, come over here, just the people at the back of the line got to go and go ahead and get out in front of you. It’s a significant problem and look.

Some places we’re seeing it that there’s actual labor shortage in the Orlando area, I have had the problem of walking into restaurants that aren’t that crowded. And they say it’s a 20 minute, 30 minute wait. And that’s simply because they have not gotten waiters and waitresses either to come back, or they have new ones, but they’re not trained yet. So it’s gonna be a bit of a period, because we went from essentially minimal tourism to oh-my-god, it’s crowded in like two weeks in that in that area, and then that call it the greater Disney area. So there are going to be temptations to and I think this is what we’re seeing at Target, to have less personnel to offset the extra expense of the pandemic. And that, to me is a very slippery slope. I heard more than one person in line say, boy, if I wanted to wait in a line like this, I just would have gone to Walmart. And if you have Target customers thinking that Walmart might be a better option, that’s not great, because that was absolutely a customer service driven brand.

Thank you for watching the show, we are going to move into the end here and hit our finisher. Sam Bailey, if you want to share the graphic. “Do you think 25% or more of all retail sales will be conducted online by 2025?”  88.6% of you said yes. Steve, I want your thoughts here, then I’m going to show another graphic.

Steve Symington

So I think part of the reason that so many people voted yes on this is is the fact that a lot of people probably assumed that it was higher than that already. And that’s one of the things that I think people are like, Yeah, everybody, you know, I’m gonna it’s got to be more than half right? No, it’s it’s nowhere close to that. But yeah, go ahead and run with that. I think that’s part of the reason.

Dan Kline

So let’s show this other graphic here. Because this is a pet peeve of mine. In the second quarter of 2020, which would be the height of the pandemic, e-commerce was 15.7% of total sales. Now, why is that? It’s because a lot of things we purchased, we still purchase in person, we’re at 13.6% now. Do I think that number will climb? Yes. But I did a survey of my own sort of purchasing habits. And I order from online retailers two or three times a day, very, very regularly. But my wife goes to the grocery store, and she spends a couple hundred dollars a week. Well, I don’t spend a couple hundred dollars a week in my online purchases. And I still usually go to say a physical liquor store or I go shopping to buy pants. Now I did just buy some shorts online and thankfully they fit so that that worked out.

But for the most part, you think you’re buying more online than you actually are. Now I personally am above that 13.6% because I bought my car online. And they’re basically it’s an online sale. If you agree to the deal online, you don’t actually have to conclude the transaction. So if you made a reservation to buy something, but could pay in the store that would still be considered an online sale. So this is actually tipped in favor of online sales in an omni-channel world. And I have a hard time believing if during the pandemic when it was hard to leave our house when we all needed things that you couldn’t necessarily get at the stores that were open. If we didn’t hit 20% then why over the next three and a half to four years would we get to 25% I don’t think that’s likely. And I hear all the arguments. Oh, it’s so easy to be on your couch.

But Steve, you have kids do you go to the mall because you need something? Or do you go to the mall because like there’s pretzels there and like it’s a mall and maybe there’s a you have young kids there’s a carousel maybe or other things to do.

I don’t go to the mall at all, But no, that’s yeah it’s sometimes it’s nice to just get out

Do you even, do have a mall, like I didn’t even think about this (laughter)

Steve Symington

We do have a mall it’s actually pretty nice and they’re they’re significantly expanding it so got the AMC dine-in which I can’t wait to go back to once there’s some decent movies and yeah, so it’s Yeah, we have a mall.

Dan Kline

Yeah, I am, I am bullish on online retail. But I do think there are limits to it. I think there’s things we want to buy and in person and I admit I once every couple of weeks will order groceries online because I’m just simply backed up and don’t have a chance to get to the store. But I still prefer to go to the grocery store and look at the fish on buying and you know and see what they might have on the shelves like I don’t know I think this is a lot of noise about nothing.

With that said thank you for watching today’s show. We’ll be back on Wednesday. Friday, please remember that we do the show at 12:30pm and we will likely have most of the team, we probably won’t have Anirban, but we will have most of the team because it follows our members only events so if you are not a member, what are you waiting for? That is www.7investing.com/subscribe if you’d like to get in touch with us. That is info@7investing.com. And of course, if you want to follow us on social media, which I suggest you do, we’re a lot where a lot of fun you can get access through the @7investing account, to all of our personal accounts and and watch us interact, watch us talk to members, watch us talk to our friends. It is an awful lot of fun. I had a really good weekend on social media, with people thanking me for some stock advice that that is something I’ve actually made an official recommendation on. But they didn’t know it from that they knew it from me talking about it years ago in another forum.

The other thing that gets a little scary though, is when someone thanks you for something that you didn’t recommend. And someone thanked me online for recommending Crocs. I did not recommend Crocs in any fashion. I did a show we talked about Crocs that is very, very different. And I did private message that person though they did make money on the deal. So So that being said, Be very, very careful with how you take any advice on Twitter. With that. Thank you Sam Bailey. Thank you Steve Symington. I am Dan Kline. We’ll see you Wednesday.