šŸŒŠ DJT to the Moon? šŸš€

Plus: Visa and Mastercard to cut credit card fees

We donā€™t talk about Beethoven enough.

Beethoven wrote this when he was completely deaf. The Ninth Symphonyā€¦completely deaf. If that doesnā€™t blow your mind, then youā€™re probably just better at music than us. I can barely play chopsticks after eight years of piano lessons. And despite listening to Green Day very loudly on an iPod Shuffle for all of middle school, my hearing is just fine.

In today's edition:

ā›“ Bridge collapse in Baltimore

šŸˆ NFL votes in another major change

šŸ’°Blackrock Part 2

And so much more!

ā€“Max, Max, Jen, and Alex

KEY STORY

Visa and Mastercard Settle

In a landmark settlement, Visa and Mastercard agreed to cut and cap credit card swipe fees

  • Visa and Mastercard own and operate the infrastructure that processes credit card payments. They charge merchants swipe fees per transaction

  • On Tuesday, Visa and Mastercard settled a class-action antitrust lawsuit brought by merchants. Per the terms of the settlement, both companies will cut and cap swipe fees over the coming years, which merchants estimate will save them $29.8B over the next five years

  • For the first time, merchants will also be able to charge customers different amounts based on their cardā€™s swipe fee

Dig Deeper

  • Lawyers for the merchants claimed that merchantsā€™ ability to charge different amounts based on credit card swipe fees will pressure Visa and Mastercard to offer increasingly competitive swipe fees, thereby further lowering fees on merchants in the long term

KEY STORY

RFK Jr. Picks Running Mate

Robert F. Kennedy Jr. (RFK) chose Nicole Shanahan as his running mate

  • A California lawyer and entrepreneur, Shanahan was formerly married to Google co-founder Sergey Brin. The WSJ reported that she had an affair with Elon Musk, although Shanahan and Musk deny that

  • Shanahan, a longtime Democratic donor, recently became a major RFK donor, donating $4M to fund a Super Bowl ad supporting him. Analysts speculate she could boost RFKā€™s appeal among women and allow him to access financing from her and others in Silicon Valley

  • In a speech on Tuesday announcing her vice presidential candidacy, Shanahan endorsed RFKā€™s views on the environment, the two-party system, and the ā€œcaptureā€ of government agencies by big corporations

Dig Deeper

  • A representative from a pro-RFK fundraising group told Roca that RFK is campaigning to qualify for all 50 statesā€™ ballots. He couldnā€™t qualify for the ballot in at least 23 states without declaring a vice presidential running mate, which forced him to choose one early

SPONSORED

This AI company is disrupting the $4.1T hospitality industry

Frustrated by the inefficiencies within a fragmented hospitality industry, Luca Zambello and his team transitioned from managing 300+ units in five major US cities to revolutionizing the hospitality sector with Jurny

  • Partnered with Airbnb, Vrbo, & Expedia, Jurnyā€™s award-winning tech automates operations for thousands of hotel and short-term rental properties worldwide.

  • In 2023, Luca and his team grew their customer base 5x and processed $35M+ in bookings

  • They raised $12M from top VCs + 1,100 investors, and Bloomberg, McKinsey & Co, Skift and others recognize Jurny as an AI leader

Dig Deeper

KEY STORY

TMTG Skyrockets

The stock price of Truth Socialā€™s parent company jumped 16% during its first day of trading, valuing the company at $7.8B

  • On Monday, TMTG, Truth Socialā€™s parent company, went public by merging with a shell company. It began trading Tuesday under the ticker ā€œDJTā€ ā€“ Trumpā€™s initials ā€“ at a valuation of $6.8B

  • TMTGā€™s stock price jumped 50%+ during the first few minutes of trading, but then cooled. It closed Tuesday up 16%, valuing it at $7.8B

  • Trump owns 59% of TMTGā€™s stock, adding billions of dollars to his net worth, although he canā€™t sell his stock for at least 6 months

Dig Deeper

  • Truth Social ā€“ Trumpā€™s social media platform ā€“ made just $3.4M in revenue through September of last year, while losing $49M. Its active users also fell 51% over the year to February

  • TMTGā€™s stock surge came a day after a judge gave Trump 10 days to pay a $175M bond to prevent enforcement of a civil fraud penalty against him

KEY STORY

Diddy on the Run?

Speculation was rife about the whereabouts of Sean ā€œDiddyā€ Combs a day after federal agents raided two of his properties

  • On Monday, federal investigators from the Department of Homeland Security raided Sean ā€œDiddyā€ Combsā€™ Los Angeles and Miami properties, reportedly in connection with a potential sex trafficking probe

  • The raids came after a series of recent lawsuits accusing Combs of sexual assault and sex trafficking. Authorities previously interviewed four unidentified individuals about sex trafficking, sexual assault, and the illegal solicitation and distribution of narcotics and firearms linked to Combs

  • Flight tracking apps showed a jet owned by Combs landing in the Caribbean nation of Antigua and Barbuda shortly after the raids

Dig Deeper

  • Itā€™s not clear if Combs was on the jet, which has since been taken off tracking sites

  • The news has sparked unverified reports that Diddy is on the run

RUNDOWN
Some Quick Stories for the Office

āš–ļø A majority of SCOTUS justices appeared skeptical about a lawsuit challenging access to mifepristone, an abortion pill. Analysts widely interpreted the skepticism to mean SCOTUS will strike down the lawsuit

šŸ˜ Following a backlash from top MSNBC hosts, NBC News reportedly plans to cut ties with former Republican chairwoman Ronna McDaniel

šŸ“󠁧󠁢󠁄󠁮󠁧ó æ A UK court ruled that WikiLeaks founder Julian Assange canā€™t immediately be extradited to the US. It gave the US three weeks to guarantee Assangeā€™s fair treatment and that he wonā€™t receive the death penalty

šŸ„ Milk from cows in Texas and Kansas tested positive for bird flu, US officials said. Despite the breakout, there is ā€œno concernā€ of bird flu in the milk supply, they added

šŸ‡ØšŸ‡³ A Chinese court sentenced the former head of Chinaā€™s soccer association to life in prison for corruption. Chinese authorities have cracked down on corruption in soccer despite setting a goal to become a global soccer power by 2050

COMMUNITY

Weekly Debate

Most news companies repress ideas they donā€™t agree with. We are different. To prove it, weā€™re making this a place where people can have a free and open debate. Each week we lay out a debate on Monday and feature responses below, replies to those the following day, and so on.

This weekā€™s Roca Votes Wrap asks:  Can Artificial Intelligence create art? If yes, who is the author of AI-generated art: The algorithm itself or the team behind it?

I think the question of whether AI can create art needs to start with a discussion about what is art? It is not about whether AI can make a picture, music, etc. that is indistinguishable from what a human makes but whether art is merely the picture. I would say that art as a medium is meant to convey a message, whether that be as simple as beauty or a more complex social commentary. So can AI generate art independent of a message, I would say no. Could someone use AI to create art with a message, yet. 

Jeffrey from Elmira, Canada

I do agree with Jeffrey, art is a medium meant to convey a message, and the author has to give the AI program the right instructions so he can "bring to life" his idea.

AndrĆ©s from TorreĆ³n, Mexico agrees with Jeffrey

No! These AI generated images are not art. They are mish-mashes of actual art pieces, usually stolen, and other images/photos they scrap off the internet at large. If anyone is responsible for these images, I guess it would be the algorithms, but I wouldnt consider it art. No creative procress is involved whatsoever.

Charlie from North Carolina, USA

As an artist/designer, I think yes; AI art can create cheap imitations of art. True art has originality, quality, emotion, and expression, which AI in its current state cannot produce. It creates to check a box, not to fulfill a purpose. AI art falls perfectly into the category of low art, or art without intention/purpose, art that is made just to sell, and that is meant to simply look nice.

Jacob

Today's Poll:

How interested are you in having AI technology improve your hotel or vacation rental stay?

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POPCORN
Some Quick Stories for Happy Hour

šŸ‡¦šŸ‡ŗ Do you come from a drain down under? Aussie police arrested a man in Brisbane who claimed he spent 36 hours in a sewer after trying to retrieve his phone. Police claimed he had fled into the sewer from a crime scene

šŸ’ø 7-Dollar Tree: Dollar Tree will reportedly raise the price cap in its stores to $7 as it plans target customers with higher incomes

šŸš“ ā€œNow boarding all fugitivesā€: Authorities arrested billionaire rapper Sean ā€œDiddyā€ Combsā€™ alleged ā€œdrug muleā€ at a Miami airport, following federal raids on Combsā€™ properties

šŸŒ‹ The ground is lava: A thief in Washington state led police on an hours-long chase before getting stuck on a telephone wire (see above). He stayed there for about 45 minutes 

šŸ˜– One-day contract: A Nevada probationary officer got arrested for a DUI one day after he celebrated his graduation from Hendersonā€™s police academy

šŸˆ New rules kicking off: NFL owners voted 29-3 to approve a major overhaul of the kickoff play for the 2024 season. The changes aim to reduce injuries

ROCA WRAP
BlackRock: The Power

This is part 2 of a 2-part Roca Wrap series on BlackRock. Part 1 was in yesterdayā€™s newsletter.

Public companies are required to hold annual meetings where shareholders vote on major decisions, such as who to elect to the companyā€™s board or substantial operational changes. At any of the largest companiesā€™ meetings, youā€™ll find BlackRock.

BlackRock owns at least 3% of the USā€™ 500 most valuable companies. Its holdings are divided between ~500 equity funds, which are placed into one of two baskets based on management style: Active or passive. Active funds are managed by a portfolio manager, or PM.

A PMā€™s job is to maximize the value of their portfolio by buying and selling stocks. If the portfolio does well, so do a PMā€™s clients; their incentives are aligned.

Most ā€“ about two-thirds ā€“ of BlackRockā€™s equity holdings are passively managed.

Passive investors aim to mimic the returns of indices, such as the S&P 500. Matching an index is less risky than betting on a few companies and a good way for investors to get consistent returns. The simplest way to passively invest is to buy a share of an exchange-traded fund, or ETF.

ETFs, which are provided by companies like BlackRock, pool money from investors to purchase shares of companies within that index, allowing investors to match the indexā€™s performance without having to buy shares from every single company themselves.

BlackRock acts as a middleman and buys company shares on behalf of ETF holders. In doing so, it earns voting rights at these companies

But because ETFs aim to mimic indices ā€“ rather than outperform them, like actively-managed funds ā€“ their managers (in this case BlackRock) have no incentive to maximize the value of their investment. They only need to match the market. This mismatch of investor and asset manager interests is known as ā€œdecoupling.ā€ 

Whether the S&P 500 and corresponding BlackRock ETF skyrocket or plummet, BlackRock will earn the same ETF maintenance fee. That means BlackRock has massive voting power ā€“ but isnā€™t incentivized to make as much money as possible.

So how does BlackRock vote? What motivates that? 

For BlackRockā€™s multi-trillion dollar holdings, the responsibility falls on 65 people.

Those 65 people make up the BlackRock Investment Stewardship (BIS) team, the division of the company to which BlackRock gives its passive investment voting power. With offices around the world, the team has significant voting power on decisions made by the worldā€™s largest companies.

According to BlackRock, the ā€œBIS voted at 18,200+ shareholder meetings during the 2022-23 proxy year,ā€ doing so with 2,640 companies across 49 markets.

The BIS says five principles guide its voting decisions: Board and company performance to date; forward-looking strategy; executive compensation plan; approach to climate change; and ā€œimpact on peopleā€. The BIS determines how each of those are measured.

Companies want to win investments from BlackRock, because its deep pockets can push up a stock price and attract other investors. Companies across the economy are therefore incentivized to align with BlackRockā€™s values, either to hold a BlackRock investment or incentivize one. In recent years, that relationship helped create the ESG industry.

BlackRock, and other financial institutions, have become proponents of factoring in environmental, social, and governance (ESG) factors into investment decisions. In 2020, Larry Fink wrote a letter to CEOs in which he cites climate change or risk 29 times: ā€œClimate risk is investment risk,ā€ he said. That led new ESG rating agencies to begin assigning companies ā€œESG risk scores,ā€ the way a rating agency does so for a companyā€™s financial risk.

A high ESG risk rating meant a company had environmental, social, or governance ā€œrisksā€ and made investments unattractive; a low one helped secure investments from BlackRock and other giants.

That relationship created financial incentives for companies to better their scores, including by reducing emissions or increasing ā€œdiversity, equity, and inclusion.ā€ But as companies have tried to tout their ESG credentials by emphasizing diversity and holding company Pride events, Blackrock has become divisive: Is it a force for good, or is one of the worldā€™s most powerful corporations forcing its values on everyone else?

Republican states have since set their sights on BlackRock, with the Texas school fund announcing this week that it would pull $8.5B from the company over its ESG emphasis.

BlackRock has the power, but can it use it without consequence?

Reply to this email to let us know what you think!

EDITORā€™S NOTE
Final Thoughts

Happy Hump Day Roca! We appreciate all the positive feedback on the BlackRock Wrap series. Have ideas about places or people we should write about next? Let us know by replying to this email!

ā€” Max, Max, Alex and Jen