This is an audio transcript of the FT News Briefing podcast episode: ‘Looming US port strikes threaten supply chain’
Kasia Broussalian
Good morning from the Financial Times. Today is Monday, September 23rd, and this is your FT News Briefing.
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Germany’s centre left squeaked out a win yesterday and businesses are bracing for a major strike across US ports next week. Plus, one of the fastest growing AI companies wants to bump Google up its advertising perch. I’m Kasia Broussalian, and here’s the news you need to start your day.
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Germany’s Social Democrats were breathing a huge sigh of relief on Sunday night. In Brandenburg state elections, the party won a very narrow lead over its biggest rival, the far-right Alternative for Deutschland. This win is a big deal because Brandenburg is a social democratic stronghold. The party has ruled the state for more than 30 years. It’s also where German Chancellor Olaf Scholz lives, and Scholz is having a tough time these days. His approval ratings are rock bottom. Some Social Democrats have even privately said that he should step aside rather than run for a second term as chancellor. That way, someone more popular could step in for elections next year. But yesterday’s results might just be enough to silence some of his critics — at least for now.
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Workers at dozens of ports on the east coast of the US could be going on strike next week. Negotiations between the ports and the union representing the longshoremen have completely stalled. And if workers walk off the job, the effect could be devastating for supply chains. I’m joined now by the FT’s Taylor Nicole Rogers to talk about what a strike might mean for the US economy. Hey, Taylor.
Taylor Nicole Rogers
Hi. It’s so great to be back.
Kasia Broussalian
Great to have you. So what are the main sticking points when it comes to negotiations?
Taylor Nicole Rogers
This is all coming down to two big things. One, of course, is pay. And the other big thing is automation. There are not a lot of automated tools on the east coast and gulf coast ports compared to the west coast ports. And the union really wants to keep it that way. Of course, the port operators would like to do something different. And that is where negotiations broke down over the summer. And that’s the big reason why they haven’t gone back to the table since.
Kasia Broussalian
So these workers, they essentially don’t want robots taking over their jobs?
Taylor Nicole Rogers
Basically, yes.
Kasia Broussalian
And how close are we to a strike?
Taylor Nicole Rogers
The port operators in the union last met in June, and there’s been some talk about coming back to the table. But pretty much things are at a complete standstill. And US President Joe Biden said last week that he would not intercede if the workers decide to strike. So that really brought the level of fear of the business community to a fever pitch this past week. So unless something major changes, the dockworkers will be walking out on October 1st. And that means that every US port from Maine to Texas would shut down. And together those ports account for the overwhelming majority of all of the cargo that comes into and out of the United States.
Kasia Broussalian
Wow. And now, obviously, a work stoppage at the level that you’re describing here, it can’t go unnoticed. So just how disruptive could these strikes get?
Taylor Nicole Rogers
Well, a lot of retailers and manufacturers actually saw this coming. So they worked really hard to bring in a lot of the things that we need for Christmas earlier in the year. So Christmas will not be ruined. But what could happen is that businesses will have to start paying more to ship their cargo. And that will push prices up. And, you know, I was talking to some economists earlier and they were saying that supply chain issues were one of the big, big causes of the inflation that we’ve been dealing with over the past couple of years. And the fact that the supply chain has really been freed up has really helped bring inflation down. And so they’re worried that if shipping prices keep going up because people are freaking out about a strike or because there actually is a strike, consumer prices will go back up.
Kasia Broussalian
Taylor Nicole Rogers is a labour correspondent for the FT. Thanks, Taylor.
Taylor Nicole Rogers
Thanks, Kasia.
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Kasia Broussalian
US chipmaker Qualcomm has reached out to its competitor, Intel, about a possible takeover. Now, no formal offer has actually been made, but it would be the biggest tech deal in history. Intel’s problems are no secret in Silicon Valley. In August, the company lost $30bn in market value after a disastrous earnings report. And it also announced painful job cuts — 15,000 workers. So the possibility of a buyout isn’t exactly out of the question, but there are a lot of hurdles. For starters, regulators would likely make a big fuss over antitrust concerns. Any deal would have to be pitched as a bid to strengthen the US in its chip race with China. And secondly, it’s not even clear how Qualcomm could pay for a full takeover. So a deal is definitely not a sure bet at this time.
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All right, Cristina. So I have the app Perplexity up right in front of me. What do you think I should ask it?
Cristina Criddle
Maybe you should ask if Perplexity is going to take over Google in the search ads business.
Kasia Broussalian
All right. Perplexity is an AI powered search engine that, let’s be honest, you’ve probably never heard of.
Perplexity audio clip
Perplexity AI is gaining traction as a potential alternative to Google due to its ad-free and precise search capabilities, but it is not currently positioned to overtake Google in the ad search business.
Kasia Broussalian
All right. It’s hedging a little bit. But the San Francisco Start-Up has big ambitions. So, Cristina, there’s actually something interesting going on here. I’m just looking at my answer. And then there’s this list of sort of related questions that follows just below. And that’s something that I’ve actually never seen before in a search engine.
Cristina Criddle
Yeah. These are called follow-up questions. Perplexity uses them as additional prompts. Things that you might want to find out that are related to your question. And this is where Perplexity wants to put ads in.
Kasia Broussalian
And Perplexity is attracting a lot of attention. Here to tell us about just how much of a threat it is to Google is the FT’s Cristina Criddle. Hey, Cristina.
Cristina Criddle
Hi.
Kasia Broussalian
So how is Perplexity trying to shake up the digital ad market?
Cristina Criddle
Well, Perplexity is trying to introduce advertising into its search AI product. We have a lot of AI products and search engines out there, but not many of them have ads in them yet. So I think Perplexity wants to redesign what the search ads business looks like. It’s a very different format. And they want to really challenge what Google has created on the traditional Google search. So the way that Perplexity wants to do it is to have these ads feature in the follow-up questions.
So, for example, if I wanted to promote a sparkling water brand, one of the questions I could ask is: Is sparkling water better than still water? And it would have a logo next to it of a suitable brand. It would generate just as the AI would normally respond. But the difference here is that the brand gets to sign off on the answer to make sure that it’s safe, that it doesn’t say anything that doesn’t align with its brand values. And they also pay for it, obviously.
Kasia Broussalian
Are brands showing any interest in partnering with Perplexity on this?
Cristina Criddle
Perplexity has been trying to target quite premium brands. Its user base is from quite high-GDP countries. And some of the brands that they’re in discussions with are people like Nike and Marriott. But as far as I know, no deals have been officially made yet.
Kasia Broussalian
And, you know, the goal here is for Perplexity to eventually take a pretty big bite out of Google. But Google kind of holds the keys to the kingdom when it comes to the digital ad space. So what sort of weaknesses does Perplexity see here?
Cristina Criddle
Since ChatGPT came out, there’s obviously been a huge amount of hype and excitement for generative AI, and that’s the type of AI that you see in perplexity and that you see in AI search engines. A few companies have launched AI search. Microsoft has done this with Bing, and they’ve started trying to monetise it a little bit. Google has launched AI search now, but they’ve not monetised it yet either, and they also won’t release figures on how widely it’s used. I think as the incumbent it has the most to lose here, and it’s trying to tread very carefully. A start-up like complexity can be more flexible, more nimble and make those business decisions a bit faster. But when Google does decide to jump, I think that’s really when we have to sit up and take notice.
Kasia Broussalian
Yeah. So then in the end, do you think that Perplexity can break through and challenge Google in the digital ad space?
Cristina Criddle
It’s still unclear. Perplexity does have quite a strong user base and it is growing very quickly, but so far we’ve yet to see it really take over. We’ve yet to see it really monetise either. By and large, Google is the biggest player in the search business. Its search business has grown 14 per cent in the last three months to June compared to the same period the year before. And the consumer behaviour of going to AI for search is still very nascent and we don’t know if that’s going to take off yet. But upstarts like Perplexity, they’ve still got a lot to prove.
Kasia Broussalian
Cristina Criddle writes about technology for the FT. Thanks, Cristina.
Cristina Criddle
Thank you.
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Kasia Broussalian
You can read more on all of these stories for free when you click the links in our shownotes. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.
