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'Friction' Author: Today’s Consumers Are ‘Walking Billboards’ for the Brands They Love

Companies need to focus on becoming “passion brands” instead of just flooding consumers with advertisements, co-author Jeff Rosenblum told Glenn Thursday on radio. The latest generation of consumers is comfortable with social media and loves to interact, so they are the best advocates for the brands they like.

In his book Friction: Passion Brands in the Age of Disruption, Rosenblum explored this phenomenon of “passion brands,” or companies and products that people love enough to share with everyone by tweeting, wearing a T-shirt and telling friends through word of mouth.

“They’re like walking billboards, and they’re actively proselytizing for brands,” Rosenblum said, describing this key type of consumer.

One of his favorite examples is the brand Yeti Coolers, which sells a particularly rugged type of cooler intended for camping, fishing and other outdoor trips. Instead of traditional ads, Yeti focuses on creating short videos about people going on incredible adventures. It’s more about image than anything else. Even if people don’t really need a cooler that can weather the elements, they’ll be drawn to the vision of adventure.

“They tell these stories about people who are going on bigger and bolder adventures than most people ever will,” Rosenblum said.

GLENN: The whole world is changing. And really in an exciting and dynamic way, if you understand that the bull crap of yesterday, which Washington hasn't figured out yet. The bull crap of yesterday, the lies of yesterday, and the systems that create friction and make your life complicated just don't work anymore. Nobody wants them. Don't prop them up. Get out of that and find passion. Passion brands and friction. We're going to talk about that with a guy who knows it quite well. Beginning right now.

Name of the book that I've been telling you about for weeks, and I'm thrilled to have Jeff Rosenbloom. He's one of the co-authors of the book "Friction" passion brands in the age of disruption. It is one of those books that you read, and you're, like, jeez. How could I not know that? How did I not think that? How is this all of a sudden -- it's one of those things that somebody invents something, and you're, like, of course. How come I didn't invent that?

I want you to know that Jeff is not here to sell books. I highly recommend you buy his book, but he's not taking any of the money from it. It's actually going to something called special spectators, which we hope to talk about a little bit later. He will also be with us on The Blaze TV for a special episode tonight at 5:00, so he's not here to make any money. He's here to change some lives, and you have dramatically impacted my thinking since I picked up your book, so it's great to have you here, Jeff.

JEFF: Thank you for having me. I appreciate it.

GLENN: So tell me. I guess we just need to start at, you know, the brands of the past and the brands now. Passion brands. What is it?

JEFF: , well, passion brands are the brands that absolutely dominate the competition; right? They don't have just customers. They have an army of evangelists. These are the folks that are at the bars, at the restaurants, at the dinner table, they sit around the campfire, grew up on their social media channels, they've got the T-shirts, they've got the hats, they're like walking billboards, and they're actively proselytizing for brands.

GLENN: So you talk about one passion brand that has really boggled my mind until I read your book, but I want to ask you some questions about it. And that is Yeti. Coolers. Great coolers.

JEFF: The best.

GLENN: But -- what is it? Four times the price of a good cooler?

JEFF: yeah.

GLENN: And I've often wondered. People who buy this, they become evangelists, and it's a cooler. And I wonder how much of that is because it truly is absolutely great and how much of that is to soothe the cognitive dissidents in their head of I just paid fours times as much and everybody who doesn't have one says "What the hell is wrong with you."

Does that play a role in that at all?

JEFF: Absolutely. To dial it back, and then we'll talk about Yeti. Passion brands are built by fighting friction. Friction is anything that gets in the way of what you want to accomplish in life. It's anything that gets in the way of your hopes, dreams, aspirations, on even your mundane day to day goals.

So when you think about Yeti, it's a cooler for outdoors. So by definition, if you're using it, you're going on some sort of outdoor adventure. So they fight friction in two ways. The first is this cooler is fundamentally better than any other cooler out there. It's literally certified Grizzly bear proof. Now, the chances of anyone actually needed that type of technology --- fairly negligable.

GLENN: Right. I would like a cooler that I can pick up and throw at the grizzly bear.

JEFF: That's the next product.

But it's nice to know if you're going on that adventure, that product that you're buying can go further and deeper and bigger on an adventure. But to your point, it's not just about the cooler, it's about the totality of the experience. And what they've done that I love is rather than relying on a bunch of interruptive ads, they've created these incredible videos. Each of these videos are about eight minutes long, and there are dozens of them. And they've been watched millions of times over. And what they do is they tell these stories about people who are going on bigger and bolder adventures than most people ever will. The world's greatest fly fisherman, the world's greatest ski guide, the world's greatest barbecue pit master who happens to be an 89-year-old woman named Tutsi. It's not, like, we're Yeti, and we make coolers. Yeti doesn't even appear in these videos. But what happens is they give us a vision. A bigger and bolder vision of ourselves. We all wake up in the morning wanting to be better we were than the day before. It's at the heart of the human experience. It's what drives capital I am. So these great videos help us envision that.

And, by the way, I've watched hours of them. Most people will watch a few of them. The typical interactive ad experience is 1.6 seconds. Compare that to an eight-minute video.

GLENN: I watched the fly fishing one. It's 22 minutes.

JEFF: Yeah.

GLENN: I watched it. Every second of it. And here's what I do. I hear from the guys because I'm not a sports guy. But I hear from the guys on sports every -- every Monday, I hear ugh, and I know they're on ESPN just trying to get the six-second clip, and they have to sit through the commercial. That's not 22 minutes. And it's just in the way of getting to their six seconds.

JEFF: Yeah. Prerolls. You know, the advertising industry, we keep making ads and the audience keeps running away.

Now, to be clear, this is not about the death of advertising. That false eulogy has been written before. We're just asking advertising to do too much. We can still do incredible things with advertising, but increasingly those traditional interruptive ads are being ignored and avoided.

GLENN: In fact, just removing the friction from your product will do more than any ad. If you make a truly great product, and you make it frictionless and not only -- I mean, let's go into the passion brands a little bit. Of finding that group of people -- and let me ask you. Do you need -- to really have an authentic brand, does that need to come from the founders that are, like, what you know? I wanted this. I know this is great, and I don't care if anybody buys it. Or does it come from a group of people who are just scanning the horizon and saying, yeah, these people over there. Let's come up with something for their -- does it matter?

JEFF: Well, I think it comes from both. But most passion brands that we see, and they can be big brands like Under Armour or big brands like Amazon or some of them are smaller startups, they tend to be run by the founders because they have a strong vision, and they don't want to waver from that vision. But it can be from large, established corporations.

One of the interesting things that we found is that really the key is to take all of your efforts and instead of first focusing it outward at messaging, focus it inward at your own behaviors. And a piece of research we found is what's called the power score. And they looked at 9 million different data points. They interviewed 20 self-made billionaires and CEOs and army generals. What they found is only 1 percent. Only 1 percent of leaders are great at what they call the power score, which is establishing your priorities, staffing effectively, and building internal communication cadence. So if you can have great leadership, then you can build a great passion brand. And ironically, you can create great ads. But you have to focus inward before outward.

GLENN: Some amazing things that I just didn't know, for instance, some stats in your book. Let me just run through a few of them. 90 percent of all of the data in the world has been collected in the last two years. That's astounding. 40 minutes in nature every week will lower AD/HD by 50 percent. Don't put your smartphone or your iPad next to your bed. Take that on.

JEFF: That is interesting because so many people loved it, and we weren't sure if that actually fits in the book. But what we tried to do with the book is look at industrial friction, organizational friction, and personal friction. And in that example, we found this great story about Keith Richards. The world's greatest guitar player or one of them. And one night, he's out doing the one thing in this world better than play guitar. He's partying like a Rockstar, and he passes out cold, and he wakes up the next day, and he has a song in his head. And his guitar is literally lying in bed lovingly with him. He grabs his guitar, rolls over, presses record on his tape recorder, lays down a few notes, passes out cold again. Wakes up a couple hours later, presses play, and he finds the guitar riff for satisfaction is waiting for him. Of course, then it's followed by the sound of him snoring. He's not even conscious enough to press stop on the recorder.

Paul McCartney had a similar experience. He woke one day, and he has a song scrambled eggs in his head. Can't stop. He's turning to all of his band mates and friends and be, like, what song have I ripped off here? And they're, like, dude, you didn't. It's your song, it's your original. And he went to John Lennon and turned it from scrambled eggs to yesterday.

Not quite as catchy when talking about breakfast; right? And it knowledge only happens to rock stars. The guy who figured out the periodic table of elements, the guy who figured out the double helix of DNA. All of this happened first thing in the morning when people woke up. And what happens in your brain, you've got something called alpha waves. It's the most powerful form of cognitive creativity that you have. This is where you can think of some big, bold, break through ideas. It's the same thing you get if you're in a hot shower, hot bath, you're in traffic for a while, your alpha waves start kicking in, and you ignore all of that crap in your head.

Now, the issue is 72 percent of us go to bed with their cell phone lying next to us. 50 percent of us, the very first thing that we do is we check it. One third of women before they even go to the bathroom, they check social media. The problem is when you do that, you completely shut off those alpha waves. You lose that opportunity to have that cognitive creativity.

GLENN: And why is that.

JEFF: Because it kicks in your fight or flight system, which is something we learned about in high school; right? It's when the blood flow changes. It used to be something that kept us from getting eaten by woolly mammoths, now it keeps us from getting run over by a car; right? Your subconscious takes over, you have different chemicals like adrenaline and cortisol in there. Your buddy on Facebook who just went on a better vacation than you'll ever go on. That's stressful; right? The server that's on fire, the contract that didn't get signed. Whatever it is on e-mail, that's all stress. So you're turning off that creativity, and you're creating stress.

Now, here's the interesting point. They used to think that your brain was your brain, and that's all you got. It turns out that there's a high degree of plasticity in your brain, which means it can change just like that cheap analogy that says your brain is like a muffle, you have to work it. It turns out it's true. You can actually change the size and shape of certain areas of your brain, and it happens very quickly. So when you go to your mobile device first thing in the morning, you turn off the creativity, you turn on the fight or flight. For the rest of the day, you're not going to be as creative.

So with a 90 million bits of information, 90 percent of the data that's been collected the past two years, everybody has unprecedented access to data and technology. Creativity is the ultimate competitive advantage, and you have to feed your creativity just like you have to work out your body at the gym.

GLENN: When we come back, I want you to talk about --

STU: All about the gym. You're talking to a good crew.

JEFF: That's why I went there.

GLENN: So you're speaking our language. When we come back, I want you to talk about monkeys and how this relates to monkeys and then back to us. In just a second.

GLENN: A game-changing book in your thinking is "Friction: Passion Brands in the Age of Disruption." There is so much friction in our lives from chaos, from just -- just from the news trying to understand the political -- it's all friction. And being able to reduce that and navigate through that is really hard. And I think people are getting really frustrated in some ways with life, and they're just tuning out. They're just stopping. And that's really because the media or politicians or party or whatever you're dealing with just are not changing. They're holding onto the old system.

JEFF: Yeah.

GLENN: And it doesn't work. I was blown away -- where did you get the monkey thing, and then explain the monkey thing.

JEFF: Yeah, it was interesting. When I was writing the book, we set up a research team, thousands of pages of research. I'm a numb nut. I barely graduated college; right? But I'm hanging out with my really smart friend, he's a Ph.D. at Stanford, a neuroscientist, and he's telling me about this study that they conduct all the time. And what happens is when you go to get your Ph.D., they often give you this experiment where they take an electric probe, and they put it into a monkey's brain to read what's going on inside that brain. And then what they do is play this loud, blaring, obnoxious sound in the monkey's ear. And what you see on the readout is not surprising. When you play that awful sound, you get a very strong and very negative reaction from the monkey's brain. So then they repeat the experiment. They play that loud, blaring, obnoxious sound. And what you find, again, is not surprising. They have a very strong and very negative reaction.

But what it was absolutely shocking to me is that if you repeat the experiment a few times over, and then you look at the readout, the reaction looks like the side of a cliff. The monkey's brain literally stops reacting to this awful sound because the monkey at a structural level knows that it needs to focus on other things in life. Food, water, shelter, fornication; right? If it continues to respond so strongly to that stimulus, it literally can't survive. It's called repetition suppression.

GLENN: So are we in -- before we go into this on the decisions that we make and every day. But are we seeing this -- is this one of the reasons why we are just tuning so many things out in Washington? We're tuning principles out. We're tuning all kinds of stuff out because we just can't do anything about it, and we keep hearing it shouted over and over and over again, and we focus on other things? Am I reading that right?

JEFF: That's exactly right. The human brain is exposed to 400 billion bits of information every second. We make 35,000 conscious decisions per day. We ran an experiment --

GLENN: That's 35,000 yes or no decisions.

JEFF: It could be more complicated than yes or no. These are outright conscious decisions per day. So brands, politicians, we're all trying to enter this stream. We expose people to 5,000 branded messages per day. The previous generation was only 2,000. Already, that was too much. So what we have to do is focus less on interruptions, and more on empowerment. Another way of looking at it is magnets over megaphones. We have to create content and experiences that are so powerful, people go out of their way to participate in them. And then, share them with others. And that's the secret ingredient to brands like Yeti.

GLENN: Patagonia you think is the pinnacle of a passion brand?

JEFF: Patagonia is one of them.

GLENN: Why?

JEFF: Well, I fell in love with this guys because, first of all, they recognize that there's friction in the category. And what they to is they focus all their efforts on fighting that friction. So the friction is this:

If you want to enjoy their outdoor gear and apparel, you need a healthy outdoors. And ironically when they create their products, it actually damages the outdoors; right? Create manufacturing by-products, your old jackets make garbage; right? So everything they do, they fight friction by empowering people.

GLENN: Okay. So when we come back, listen to the ad campaign that they came up with, and it's brilliant. Brilliant. Patagonia "Friction" is the name of the book. Jeff Rosenbloom joins us again in a few minutes. "Friction: Passion Brands in the Age of Disruption". Back in a minute.

[Break 10:31]

GLENN: I will tell you. If you really want to see the world in a different way, especially if you're an entrepreneur or a leader of any sort, you really want to see the future and whether what you're doing will survive or not. You need to read the book "Friction: Passion Brands in the Age of Disruption".

Jeff Rosenbloom is with us, and you were giving us the example of Patagonia. Patagonia making outdoor clothing, and they really are dedicated to, you know, save the planet and everything else, and so that's where their people are. And the friction that they had internally was, you know, all of the stuff that we make the chemicals and everything, the garbage, that's actually hurting. So how are we helping, exactly?

So talk about the campaign that they ran with a coat.

JEFF: Yeah, so you hit on a really important point. For their target audience, making the environment healthier is absolutely paramount.

GLENN: Paramount.

JEFF: Right. So the campaign that I love, I came across not when I was doing research, but we actually created this documentary called the naked brand. And we looked at one of their campaigns called the footprint chronicles where you know if you got the surfer board shorts, and you go surfing, and you come back on the beach, and they dry, like, 45 seconds later? Well, guess what? Mother nature didn't make those shorts. We made them. We manufactured them. They're manufacturing by-products, so you can actually follow the manufacturer of their products around the globe, see the supply chain, they're not saying look how great we are. They're literally talking about the damage they do. It's really counterintuitive. I find it fascinating, and I fell in love with the brand. And I wanted to buy this blue Patagonia jacket. I had a perfect vision of it in my mind's eye.

And I'm literally shopping on Black Friday. The number one shopping day of the year. Brands sell more on Black Friday, the day after Thanksgiving than in months combined. And I went to Patagonia.com and on the home page, like, they read my mind, I can't exaggerate this. There's the blue jacket that I wanted to buy. And then right next to it on the home page in a giant font, don't buy this jacket. What the heck is going on here? And then there's a button, like, direct response principles click on it. Learn more. So I click. And their point is this. Reduce, reuse, recycle. Reduce is number one. So if you want to buy that jacket, we're happy to sell it to you. But we're going to damage the environment from the manufacturing, from the garbage of your old jacket. Maybe, you don't need that jacket. Maybe you should buy less.

So I'm Jewish, I'm from New York, I felt guilty, I didn't buy the jacket. They lost the sale. But here's what they gained. They gained my unwavering loyalty. And they gained my evangelism. So here we are on your show talking about Patagonia. But more influential than me are the people who are truly influential. The guys; right? These are the guides leading hiking and biking and fly fishing and surfing adventures all around the world. And in definition, guides are influential, and they're covered head to tow in Patagonia gear because Patagonia is empathetic and empowers people about the one thing that is most important to those guides. And when you talk about evangelists, they are 12 times or more trusted than paid advertising ever will be.

PAT: Wow. And also, their competition is similar in that way; right? They try to reduce -- north face, they reduce friction for their customers as well.

JEFF: Yeah, it's a great point. Thanks for bringing it up because we can't just all jump on the environmental bandwagon. We can't jump on what other brands are doing.

PAT: That would look really disingenuous.

JEFF: Totally. People don't wake up in the morning and want to hug the trees and save the manatees; right? It works for some brands. North face took a different tact, which is if you want to enjoy outdoor sports and apparel, we're going to help you become a better athlete. So they created what they call the mountain series; right? And it's a bunch of instructional videos and information and articles and events that help people become better athletes. So I fell in love with this video series. It was from some of the best rock climbers and skiers, and they were shown very specific exercises to help me become a better skier. What's interesting is I don't think it worked all that well for them because they made less of those videos and became less prominent. But they stick to this platform. They're always empowering and always educating with different events and different information to help people become better athletes. You don't see the edge or you do see the ads and say, hey, we're north face, these are great products. But more importantly, they create content and experiences. So the ads are only part of that brand-building system. It's not the totality of it.

STU: You go through a lot of this stuff, obviously, in the book "Friction." And I have a friend who goes to Soul Cycle, which is a cycling spin class place.

JEFF: Bordering on a cult.

STU: The number one people say to her is shut up about Soul Sycle.

GLENN: It's like orange theory.

JEFFY: Yes.

GLENN: Orange theory is, like, okay. Stop with the bumper stickers. It's a gym, man. Let go.

STU: So the question I want to ask you is how do I get her to shut up about Soul Cycle? But separately -- because I look at their business model, and I see a huge friction point, which is they're charging people $31 to come in and ride a bike in their establishment for an hour.

JEFF: Yes.

STU: And, to me, that sounds completely insane. Yeti, they have more evangelists percentage-wise probably than any company I've ever seen. How do you cross over a huge friction point like that and bring your point along?

JEFF: Great point. Great brand. I should have included them in my book. I was scared to death to go in there. You guys selling salad? We'll do that.

GLENN: Salad? I like the part on Cadbury, for the love of god.

JEFF: Here's the interesting point that you just amongst is these passion brands, they don't get there by talking about discounts and promotions. And once brands go there, it becomes really addictive. They actually charge a premium price. Patagonia, Yeti, Soul Cycle, sweet green, all of this stuff is quite a bit more expensive than the competition.

GLENN: And it has to be worth it first. It has to be worth -- if you're buying a dozen eggs, you better get 14 and great farm fresh eggs if you're charging --

PAT: Or at least you're better than whatever else.

GLENN: Yeah, you've got to be. You have to be that first. There's none of this, you know, hey, Fred Flynn stone is saying, you know, that doctors say smoking is healthy. It has got to actually be accurate; right?

JEFF: There's a great poster I saw. No amount of advertising can get me to buy your crappy pizza; right? And the truth and the matter is it actually can. It can get you to buy that crappy pizza once. But it's not going to get loyalty and evangelism. So you're hitting on a key point with Yeti is that the product has to be better than the competition. It doesn't have to be two or three times better. But it has to be 10, 20, 30, 40 percent better.

But to your point, that relationship that people have with Soul Cycle is irrational; right?

STU: Yes. Yeah, I can confirm that. Yes.

JEFF: The reason it's irrational is that it's emotional. Most brands have a transactional relationship; right? They make a good product, they charge a fair price, they have some pretty good advertising, people comparison shop, and then they buy.

Soul Cycle and other brands have an emotional relationship where people pay more for the product. They ignore the competition. They buy all of that Soul Cycle and gear, and they turn themselves into walking billboards. And they do that, they create that irrational relationship through irrational behavior.

Think about that Patagonia example. Running a campaign that says don't buy this jacket, that's irrational.

GLENN: So Starbucks, really, was kind of a pioneer in this kind of area, weren't they? Where everybody was going to Dunkin' Donuts and getting your coffee at a normal price. And then all of a sudden here comes Starbucks charging money out the nose. But it became more than a coffee place.

JEFF: Yeah, well, it went from transactional. I like Dunkin' Donuts. I'm from the northeast. But it's transactional. You're in, you're out, you move on. Howard Schultz was, like, wait a second. Let's make this experiential. Let's look at what's going on in Europe. Let's sell them the cup of coffee and then give them a place to hang out. And then all of a sudden almost like Soul Cycle, it's almost coltish in the language that they're using, and they're becoming part of a tribe and tribes are extraordinarily powerful. We don't just want customers. If you want to be a passion brand, you have to build a tribe.

GLENN: So is that do you know where Y they use things like venti? They change the language to make it even more of a badge to be a part of this tribe. Is that what's going on?

JEFF: That's exactly right; right? And I don't know, like, I'm not that gifted creatively to figure those types of things out. But, yeah, Howard or somebody on his team figured out long ago let's create that badge. Let's create those shortcuts.

GLENN: The name of the book is friction. I can't recommend it highly enough. I've never done this with any book before. I insisted everybody on the staff read this book, so we're responsible for about 249 companies being sold.

JEFF: Thank you very much.

GLENN: And everybody has read it. I also for the first time I've never done this. We're asking all of our Dallas employees to come down to the studio floor today. There's about 90 here just in this building. They're coming to listen to you at 5:00 for the show at 5:00 today TheBlaze.com, and I just want you to talk about how to find the customer, how to reduce friction, how to -- I mean, I'm convinced -- everything in your book, I've known instinctively. And if I boil it down, I always thought that capitalism was the greatest charity brand ever, if it's done right. And meaning if I love a group of people, I'll say how can I serve them? How can I make their life better, easier? And by serving them, what they need in a really easy way, I could become rich. It is capitalism. It's not charity. It's capitalism. And that's really kind of the thing. If you know who your target is, you know who you're serving, and you actually love them, listen to them, and help make their life easier, that's it, isn't it?

JEFF: It's interesting you bring it up because I'm leaving this very blue region of New York City, and I'm entering this red region of Texas. And I'm looking out the window of this wonderful, amazing, beautiful country of ours. And I was thinking about the fact that we just can't seem to agree very much lately. And then I realize, wait a second. There is one thing that we can all agree upon. Which is corporations have incredible power. And they should use that power to improve people's lives one small step at a time. And this is not for altruistic reasons, this is not for idealistic reasons because that is not sustainable. It's because when brands improve people's lives, they get rewarded. Not just by shifting customers or, say, prospects to customers, but by shifting customers into evangelists, and that's what fighting friction is all about.

GLENN: Unless you go to the Harvard school of business, and you are assigned both wealth of nations and moral sentiments, which is imperative that you read both Adam Smith books, you're not going to get this. This is a new really kind of Adam Smith look at how capitalism should work, "Friction" passion brands. We will you on The Blaze TV today at 5:00.

JEFF: Thank you.

GLENN: I want to talk really quick before you go. The proceeds as we're telling people to buy your book. The proceeds are not going to you. Where are the proceeds going?

JEFF: From July 15th to August 15th, all of the proceeds, not Amazon, not the publisher. I can't control those guys. Goes to special spectators.

GLENN: Which is what?

JEFF: Takes kids with life-threatening illnesses, and takes them to exclusive college sports experiences. So they'll get on the field at, like, Alabama, and they'll get into the locker room, they'll meet the coaches, and there's all different games going around the country. And what they found with these, because I'm on the board of make a wish, and we saw it there also. It's not just about giving these guys a moment of happiness, but it's also part of a healing process; right? It literally heals kids when they're fighting these diseases to actually have a moment of happiness in their life.

GLENN: Thank you very much, Jeff. We'll talk to you later this afternoon.

JEFF: Thank you.

GLENN: By the way, if you have any questions, go ahead and tweet them, and I'll have the staff look at them this afternoon before we go on the air. You can just tweet them @glennbeck, and we'll try to get your questions in as well.

RADIO

WARNING: Will the "AI Bubble" CRASH the Stock Market?

The AI revolution promises to change everything, but what if it’s leading us straight into another financial collapse? Glenn Beck and economist Peter Atwater break down the eerie parallels between today’s AI boom and the 2008 housing crash, revealing how speculative hype, overvalued tech giants, and circular corporate investments are inflating a dangerous bubble. Could this “AI gold rush” be the next market disaster waiting to happen?

Transcript

Below is a rush transcript that may contain errors

GLENN: Is it not a bubble?

I don't know. Are we close to AGI or not close to AGI.

Again, I don't know.

Is it to change things? Yes. I saw a story in our show prep today. I'm not going to get a chance to get it. It's about other countries that are building these giant server farms. Their electricity and their water is being shut off because all of it being diverted to these big server farms. And if we're not careful, that's exactly what's going to happen to us.

Peter Atwater is a guy that Stu and I have been talking about for a while because he's comparing this AI bubble. He's like, "Look, I wanted to show you a chart. I'm not smart enough to figure out the chart. But let me show you a chart, and I want to show you a chart that I did in, like, 2007 or 2008 with the housing bubble! Wow, they kind of look exactly the same. And it's a little frightening."

Peter is with us now. Peter Atwater from the College of William & Mary. He's an adjunct lecturer there. He's the guy who coined the term K-shaped recovery.

Welcome to the program, how are you, sir?

PETER: I'm great, Glenn. Thanks very much for having me.

GLENN: You bet. Okay. So can you explain the housing -- or, not the housing bubble.

The AI bubble. Do you believe it is? And if so, why? And what does that mean?

PETER: I do believe it is.

And I study confidence and its impact on what we do.

And so what I see in the AI bubble is a lot of similarities to what we saw during the housing bubble. Where everybody wants to be involved.

There's a social frenzy to it. There's a want to, you know, make a lot of money, to see the opportunity in it.

There's a lot of speculation.

And what matters so much, to me as a researcher, is that this network that existed in the -- in the housing bubble. Where mortgages were sliced and diced.

And you had these conveyor belts that moved everything from, you know, mom and pop's house to folks all over the world.

GLENN: Right.

PETER: Now, it's within the AI system. Where you have enormous amounts of capital moving, but also equipment.

So it looks a lot like the Just In Time Network that we saw stumble during COVID.

GLENN: Okay. That doesn't make me happy. But there's a difference between the housing bubble, where it was all being inflated and resold and repackaged. And this, which does seem to be a game-changer on productivity. Where housing was not.

This seems to be like it could be a real game changer for economies. Agree or disagree?

PETER: Oh. There's no question, it will be a game changer. But we can think about it the same way we said dot-com was going to be a game changer. Like railroads. And all of these other things that we have in terms of speculative mania.

There's real productivity. Real improvement that comes from it. But what happens is that investors anticipate it happening far sooner, in far larger scale.

And much more profitably than it ever does.

GLENN: So what are you predicting? How is this going to -- how is this going to happen?

What's a bad case scenario, not necessarily worst?

I don't know if I can handle worst. Bad case scenario, and realistic scenarios.

PETER: Yeah. So to me, the realistic scenario is that valuations come down dramatically. At the same time, the build-out continues at a much lower pace.

And eventually, maybe a decade from now, it all settles out.

But in the meantime, there's a lot of financial pain that's going to go along with it. Particularly because today, more than 40 percent of an S&P 500 ties to AI.

GLENN: Like seven companies. Right?

PETER: Seven companies, and -- and the ones that are closest to them. So that, you know, retirees, pension plans, you know, folks that invest in index funds, have a super sized allocation to AI whether they realize it or not.

GLENN: Can you give me an example of this happening in history, that's not housing, but more industry?

PETER: Sure. You can go back to radio. In the -- in the 20s. I mean, RCA was a mammoth weight in the markets. Because people were incredibly excited about it.

You saw it even -- go back even further to canals. We -- we love new technology. Particularly where we can identify the efficiencies that we see coming from it.

STU: One of the things that's really interesting about the trends you've highlighted, Peter, is this sort of circuitous relationship with these companies. It's too complicated to go through all of it.

Just to give you one quick relationship here. And tell me if I'm understanding this right.

OpenAI, of course, buys a bunch of chips from NVIDIA. They're spending a ton of money with NVIDIA. NVIDIA is investing $100 million into OpenAI. OpenAI is -- has a 300 billion-dollar cloud deal with Oracle.

Oracle is spending tens of billions of dollars in chips with NVIDIA. And then NVIDIA is investing into OpenAI. There's a bunch of these arrows, that are pointing in this circular directions. And it seems like companies are flowing money back and forth to each other, and all these arrangements. And you wonder if there's any disruption here.

Are we looking at some sort of short-term collapse of all this stuff.

PETER: The -- the dog eating its tail phenomenon is extraordinary here. And what's so unusual about this one is, in prior bubbles, the -- the conveyor belts were among smaller participants.

But in this one, we had the largest technology companies in the world, to spinning money around, among themselves.

It looked like one of those Esther drawings, where the waterfall just keeps moving in perpetuity. And the challenge, particularly given that OpenAI is at the center of it, is that this is a company that is barely profitable. That is committing to hundreds of billions of dollars in commitments.

STU: Hmm.

GLENN: So what does it look like if it starts to fall apart? And what are the signs we should be watching for?

PETER: So what we know right now, is that everybody wants to be affiliated with AI in some way.

And so you end up with these late arrivals to the party.

And typically when a bubble bursts, the last guy to the party, is the first to leave. When you think of this in the context of a mortgage bubble.

Where it was the subprime lenders who showed up right at the tail end.

And then collapsed first. So I'm -- I'm watching to see these companies that are barely AI-related, that have tried to position themselves as being AI industry leaders. Who are likely to fail in the not too distant future.

They just need rarefied air to exist.

GLENN: Like what companies?

PETER: I don't have specific names to throw out there.

GLENN: Sure. Okay.

PETER: But they're typically smaller highly leveraged offerings. To very, very compelling, but untested technologies.

GLENN: Now, this would be -- I mean, if it collapses, I mean, that would be horrific for our economy.

But also, what -- what happens with the race with China? I mean, China is deeper into this than we are, at like crazy.

How -- how does this affect China, what happens to the race, how does -- I mean, how does this not move forward?

PETER: So I am by no means a China expert, but I would expect that if our confidence in AI begins to fall, confidence in AI more broadly will come under question.

STU: Hmm.

PETER: So they then face questions in terms of policy maker credibility. In terms of, why did you commit so much to this?

No difference than a CEO faces that test, when a bubble bursts.

GLENN: So what does success look like to you?

Because I'm not sure -- I had a really fascinating conversation a couple of weeks ago.

And he's going to come on the show in a couple of weeks with Max Tegmark, who is a brilliant AI ethicist. And we were talking about AI, AGI. And he believes that that may not be happening. And he makes a great case on this.

But is that the goal, or, I mean. Because what -- what is the goal that we're not going to hit, that would fall short?

That would cause this kind of stuff?

PETER: So I think you -- we tend to fall short in terms of immediate usage. So volume short.

But also profitability.

You know, if you go back through dot-com bubble. They all imagined this huge, you know, pot of gold at the end of the rainbow. And you're seeing the same wild fascination with the potential profitability for AI.

And, again, that may come, but it's unlikely too come at the speed and magnitude that people now expect. I mean, we're -- we're fans of science.

GLENN: Boy, I mean, in a way, that would be really, really good.

Because that -- what I worry about is AI advancing as quickly as everybody says it is. And then what happens to all the jobs so quickly. I mean, you just can't absorb that kind of an impact. If it happens that fast. So I don't know which is better.

PETER: So typically, we'll see a backlash against new technology. I mean, if you go back to the 1920 bubble burst. And you saw this backlash to, you know, innovate technologies like the vacuum. And the ironing board. And all these things that people said, took jobs away. Well, we'll have that same thing in all likelihood. And this time, too, to a point you made earlier, likely compounded by a greater awareness of the environmental consequences of this, and also, the cost that it creates in the average consumer, in terms of the utility bills.

GLENN: Hmm.

Can you explain one more thing? Because you're the guy who invented the K-shaped recovery. And as Stu and I talked about the K-shaped recovery -- can you explain that? K-shaped recovery.

PETER: Sure. So when COVID hit, I immediately saw that if you were a white-collar worker who could work from home, your confidence improved immediately. Whereas, if you were a, you know, somebody who worked if a warehouse. Or stocked shelves in the supermarket. Or hospital worker.

Your confidence didn't start to improve for a long time.

And from that, what I have seen is that the economy that results from these two different tracks of confidence, are vastly different.

And today, those are the top, whether it's because of the markets, or because of corporate earnings, growth. Those at the top feel invulnerable.

And they're spending like it. They're investing like it. They're living like it. They're living like there's no tomorrow.

Well, on the other hand, those at the bottom today, aren't sure how they will make it through the take. They're delinquent on their car loans. They're now worried about health care costs. And so to me, this K that -- this divide has created two classes of Americans.

You have the increasingly desperate, and those who feel invulnerable.

GLENN: That does not sound stable long-term.

PETER: It doesn't feel stable to me too.

And I worry that those who are in a position to do something about it, we're spending so much of our time in this country, fighting between the left and the right, and we're not seeing that our biggest divide is up and down.

That those at the bottom, there's a bipartisan hopelessness that exists.

GLENN: Hmm.

PETER: That I feel like Washington is not paying enough attention to.

THE GLENN BECK PODCAST

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RADIO

Trump told me why he's "DESTROYING" the White House...

Construction for President Trump's ballroom has begun on the East Wing of the White House, and every Democrat in America has lost their mind. Does the President have the authority to alter a historic structure like the White House? Glenn and Stu discuss, as Glenn shares the story where he reveals even Trump was shocked at how easy it was to get the alterations approved.

Transcript

Below is a rush transcript that may contain errors

STU: Well, you still haven't really addressed why Donald Trump for is knocking down the White House for his own --

GLENN: Well, he just hates America.

STU: That's -- what I've been reading. Yeah.

GLENN: Right. And how crazy excited the left should be that he's knocking down something built by slaves. They're like, we've got to preserve that.

Slaves made that!

It's weird.

STU: I actually do have questions about this though.

GLENN: What? What question do you have?

STU: Well, and they come from, you know, everybody's source of thinking these days. Which are group texts.

GLENN: Uh-huh.

STU: I'm on with some friends. I have some really basic questions of like, I feel like, there would be a conversation and a bill passed if we're going to put a giant new building at the White House.

GLENN: No.

STU: That's not how it works at all.

Is it? How's it work? How does this work?

GLENN: You ready? So the president says, I want to change the White House.

STU: Okay.

GLENN: And the White House architect says, how would you like to change it?

And he says, this way. And they say, okay.

Well, you need to approve all the permits. Okay. I approve all the permits.

Okay. We change it. That's literally how it happens.

STU: Really? They can do anything they want.

GLENN: Well, I mean, within reason.

When I say within reason.

I think with restraint from public outcry.

Like, I want to paint the White House black.

Well, you know, as president, you can do whatever you want.

But I don't think that will fly with the American people.

STU: Hmm.

GLENN: So there some standards in there. I will tell you about a conversation I had with Trump next.
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(OUT AT 10:29 AM)

GLENN: Welcome to the Glenn Beck Program. We're glad you're here.

Thank you so much for listening. You know, Stu has been freaking out about the White House.

STU: I'm not -- I'm not freaking out. I just think it's an interesting. I thought there would be more of a process to something like this.

GLENN: No.

STU: Because I certainly was not think at this point, the American people understand what is about to happen. Which is like, the White House is about to double in size.

GLENN: Uh-huh.

STU: My -- just by my eyeball look at it.

It looks like it will maybe be more than two times the size.

GLENN: It's going to be large! But it's not the actual White House. It's part of the east wing.

STU: That's -- that's a totally misleading commentary.

GLENN: No. It's not.

GLENN: Because the White House is the original piece from the 1700s. Okay?

That's the center house. The east wing and the West Wing was not done until FDR. They were added later.

STU: It was a big deal.

GLENN: The biggest change in the White House since FDR. And happened in our lifetime. Right after 9/11.

The White House became enormous. But it was all underground.

STU: Okay.

GLENN: They completely changed everything underground.

STU: Yes.

GLENN: And we didn't have a conversation about that at all.

STU: Because it's underground!

I assume all sorts of things are happening underground. Our well-known monuments and buildings.

GLENN: Right. Sure.

STU: But this is -- this is -- it's not a -- they keep saying this.

They're going to be changed the West Wing.

GLENN: No. The East Wing.

STU: They're going to be changing the East Wing. That's not what they're doing. This is like doubling the size of the White House.

Now, I'm not opposed to that idea.

I'm just sort of surprised that it wasn't like a big conversation and a bill.

GLENN: All right. Okay. Okay. You ready?

So was Donald Trump.

STU: What do you mean?

GLENN: So I'm in the White House with him. And I'm up in the private quarters with him.

And he is showing me some things that he is doing. And talking to me about some other things that I can't talk about. Because he doesn't want.

I don't know.

STU: He doesn't want to discuss it.

GLENN: I didn't want to discuss it. And I don't know why.

Because it's all really good stuff.

So, anyway, we're taking about it. And then he brings up the ballroom.

And we're walking down the stairs, from the residents, and we're going into the ballroom.

And he says, you know, this is the ballroom that Abraham Lincoln had dinners here.

I said, you know, it's that window over there, that Fredrick Douglass had to open up the window and had to crawl in because they wouldn't let him in because he was black. And Abraham Lincoln was like, let him in. He's my friend. Why is coming through the window?

And we were talking about all the history of the ballroom. And that it's very, very small.

Because it was built in the 1700s. And we keep using that ballroom. And he's like, we have to have a bigger ballroom.

We have it out in the wet, and the cold and the rain. Yada, yada, yada.

And so he said, we come over to a window. And he's like, right there, I will build a big, beautiful ballroom.

And it's going to better than anybody thinks. It's going to be the biggest, most beautiful ballroom. And I'm just trying not to laugh. Because that's the way he describes it.

And he said, you know, surprised that I could do that.

And I said, I bet. How long is that going to take? What's that process like?

And he's like, right. That's what I asked.

He said, I went to the -- I went to the -- I don't know, chief usher or somebody. Whoever is in charge of the White House. I think it's the chief usher. He said, I think we should have a ballroom. He's like, what do I do?

And he said, well, you just have to talk to the architect.

So he went to the White House architect. Now, this is a guy who makes sure the integrity of the White House stays. Okay?

You can't make it into a modern house. Okay? You're not going to redesign the inside. You can add some gold I guess.

You can add a lot of gold, I guess. You can't make it into. You can't wreck the integrity of the White House.

And he said, you know, I just put these flagpoles in. And he's like, all I had to say was, I want to put some flagpoles in.

He said, yes, sir. Where?

He's like, what?

One in the front. One in the back. They were like, okay. Tell us where.

We went out into the yard. Right here. Right there.

And they put them up. And so he's talking to the White House architect. And he said, we've got to have a ballroom. And I think we should have it over here in the East Wing. A big, beautiful -- and he said, but what is this going to take?

And he's like, well, it's going to be very expensive. Are you expecting the people to pay?

And he's like, no, I'll raise the money for it. I'll pay for it, and I'll raise the money, extra, so American people are not going to pay for it.

And the architect said, well, then all you have to do is sign the permits.

And he's like, what?

And he said, well, you have to go through the permitting process.

He's like, how long will that take?

He said, well, the President is the one who controls the process and signs the permits. So as on short as you would like it to be, Mr. President.

And he's like, are you kidding me? And he looked at me, he's like, I'll have this done by spring of next year.

So he can change it. The -- what you have to understand is, the -- the east wing and the West Wing, those -- those are FDR.

So FDR went into a works project. And he added those wings.

The east wing is where the first lady's offices are.

Just the east wing is like, you know, it's -- it's just the east wing.

And it's --

STU: Okay. Shade of the east wing?

GLENN: Yeah. Yeah. But anyway, and so what he's doing is he's taking some of it town, and he's going to link it to the ballroom. And the bail room is going to be the biggest, beautiful ballroom in Washington DC.

It's going to link from there. So you will walk -- if you're in the White House, you will walk from the front door, through the -- the dining room.
Or, the east dining room. You'll go into the East Wing, and you'll go to the ballroom.

STU: I'm looking -- I'm at the renderings as we speak. And that's exactly --

GLENN: I've not even seen the renderings. Just describe it to me. Can I see it?

STU: No. They're mine. This is my computer.

GLENN: Okay.

STU: This is the -- I can't obviously show it to the people here. You can see it over here.

GLENN: Okay. It's big, beautiful. What a surprise, the tables are golden.

STU: By the way, it's different --

GLENN: That's amazing. Holy cow.

STU: My conversation about whether this is the -- the -- you can't. It's already zoomed in. They're not the best images.

Here.

GLENN: There's nothing wrong with that. What is wrong with that? It looks just like the White House.

It fits. It's appropriate.

STU: I was in the middle of saying. It's -- my conversation on this is not whether it is -- looks good or is appropriate or anything like.

I actually think his point on the ballroom is so obvious, every president should have been making it.

The fact that we don't have a big room to have state dinners in.

GLENN: Right.

STU: Unless you wanted to do them off campus everywhere else.

You have to have that, and why not have it at the White House. It makes a lot of sense.

GLENN: Except, I don't want to pay for it, as a citizen. I don't want a dime going for it.

You know what? Hey, all you Frenchies, you can eat on the lawn. Literally, on the lawn.

Just throw the food out on the lawn.

Yeah, I mean, I'm fine with that.

But if he wants to pay for it. If he wants to get rich people to pay for it, go for it.

I don't want any of my tax dollars going for it.

STU: Right. So my criticism is not how it looks. And that we need it.

We actually showed the inside of it. It seems like the facility we should have for these type of events.

We're going to have them somewhere. Why not have them there?

GLENN: Right. And who better to build it than one of the best builders of all time.

STU: Donald Trump. We've had this conversation about how you project American power.

GLENN: Yes.

STU: And I think Trump's approach to -- particularly in the Middle East. I think it's been effective around the world. Of these trappings actually are effective in diplomatic relations with other nations. Donald Trump has a lot of places that are lined in gold. That can have meetings. It's not like that's what he wants it for. The left tries to portray. Of course, he does.

No. It means something to him. And he knows how these people think.

GLENN: No. No.

Because I asked. I -- I won't tell the whole story.

But I really want to, really desperately.

STU: Hmm.

GLENN: But, you know, he's gilding everything.

And that's not necessarily my favorite look.

STU: Right.

GLENN: And -- and he -- he came in, Tania and I were alone in the Oval for a while. And we were talking about it.

And he comes in. He says, you know, I'm doing all of this.

You see all the gold? Yes. You can't miss it. You can't miss the gold.

And he's like, you know, it's so important. These foreign leers, they all come from palaces. And they don't understand. And I know, you know, the White House is different. America is different. But they understand power in a different way.

And he said, they are coming from these old countries. And these big buildings.

And these palaces.

And he said, it is important for us to project power.

STU: Yes!

GLENN: And that's -- and that is why he's doing this. Not because he likes gold. He's doing it to project power and wealth.

Notice how many prime ministers.

They're all flying in all the time, from all over the world. You know, I've never seen a president meet with so many foreign dignitaries in the White House all the time!

STU: Yeah. And the media likes to say, well, that's because he's self-important.

And he's --

GLENN: No. He's projecting American power.

STU: Yes. I think so too.

When I say it's important to him.

That's why it's important to him.

He believes it's an important tool in that world.

GLENN: Correct. It's not him.

He knows the language they speak. And not just body language or, you know, spoken language.

All of the entire -- that's what protocol is all about. It all means something.

STU: And so my criticism -- and it's not even criticism.

My observation is not whether it fits. Or whether we need it, or whether it's appropriate.

My -- I don't think my observation here in the group text, that we started this with, which is that, holy crap.

I don't think the American people have any idea what's about to happen. Like every time I bring this up to Glenn.

And we have to understand how these conversations work.

I say, people will look at the White House. And it will be totally different.

He's like, oh, president Tyler did on more than that. In 1940 -- shut up!

That's what I get from Glenn.

Oh, well, there was more changes underground. You don't understand the piping -- that he totally changed the -- the -- the piping back in 1807. You moron!

Okay. I'm sorry.

I didn't know that. What I think of. And, you know, FDR made these changes.

My whole life, it's been the same, pretty much from the outside.

I know what the White House looks like. You go up there, I look at the White House.

It looks like the White House.

It is not going to look like the White House when this is over. It is going to look like the White House plus another White House next to it.

And it's going to be, I think, massively impressive. But I'm surprised there's not more conversation about this.

GLENN: When was the last time you were in Washington, DC?

STU: The inauguration.

GLENN: So you would not believe the difference in the White House grounds.

STU: Hmm.

GLENN: The difference from, you know, when I went with George Bush.

You could stand right at the front gate.

STU: Right.

GLENN: You can't do that anymore.

They've taken the park. The park in the back is all gone.

The security --

STU: Just for security.

GLENN: Everything. All of the trees. Everything that has been done to not see the White House.

Except, for that iconic front.

STU: Yeah.

GLENN: You know what I mean?

Everything is -- is not really -- you don't see it like you used to anymore. You don't walk up to it.

STU: The last -- I was in town for the inauguration. Last time I actually walked by the White House.

It's been a long time.

GLENN: Oh, you would not.

You will not recognize it.

I mean, just driving by and seeing it.

You will get pictures and everything else. But walking by it.

Today, you wouldn't recognize it.

It's -- it's -- what has -- what has happened with security is so sad. When I have the bell from the White House front desk, they're will it used to be a little desk right in the front, right as you walk in. There was a desk, and a bell. And I -- I have it. I think it is from Tyler's, you know, administration.

STU: Of course.

GLENN: And you would walk in. And you would hit the bell. And you would say, I want to see the president.

And somebody would say, okay. All right. Sit over there.

And you would wait. And you might wait all day, but you got -- you can walk in without an appointment and see the president of the United States.

You're not getting within two blocks of the White House right now.

It's sad. It's sad what's happening.

STU: Yeah. And for good. I wouldn't disagree with that either.

It's for good reason, security-wise.

I think back, the classic. I think what everybody thinks of when they think of the White House.

Is the scene from Superman two.

GLENN: Try to remember.

STU: When they showed the White House. And it's supposed to be -- it's a motion picture.

But they were too lazy to actually get video footage of the White House.

So it's just a still.

And you can tell, because there's like things that should be moving. That aren't moving. Right.

GLENN: Is that because --

STU: I think that's Superman.

GLENN: On Independence Day, they blew it up.

STU: But that's another example.

You had that picture of what the White House looked like. And, you know, I guess from certain angles, it looks pretty much the same. From the front. You won't notice it. Because it's kind of wrapped around the back. The back is pretty iconic too.

It's not going to look like that anymore.

In some ways, it will look a lot better or impressive.

It is a major change. That when you say, hey, they're redoing the West Wing, putting a ball room in there. That's not what they're doing.

GLENN: East.

STU: Sorry, East. I hate Glenn.


GLENN: I'm only saying it because I know how much he hates it.