A millionaire says the quiet bit out loud. September 15, 2023

32:32I can't even think of the other ones. Ansett went broke because Virgin turned up. I mean, there is something, there's some reality about competition, which is like, when it doesn't work, it doesn't work. And you can't just say, well, competition will solve this. Like, no, we've tried. We're still paying a fortune. Flights are being cancelled. Baggage handlers, customer service is terrible. What other events do you need? This is not working in this sector. Was it, again, brain's super foggy. It's been a wild and wacky week. But I feel as I read a tweet from you this week on Aussie broadband. I'm speaking of telcos, right?

33:03So I have only, from my sins, been with sort of the big telcos, Optus and Telstra. And they suck. Am I allowed to say that? They suck. They suck. The service is terrible. The costs are outrageous. And yet I have – Aussie listed on the stock exchange. Yep. And we had a bit of discussion on this on Strongman. But, again, you just see it all the time. It's like, oh, the customer service is great. The service is brilliant. And when you look at – I haven't looked this year, but the last time I looked at their customer growth, it was fantastic. And to me, this is a case in point because when you ring up someone, you actually – you get someone reasonably quickly.

33:48They're in Australia, so they more clearly communicate with the locals, et cetera, et cetera. They spend more money doing this kind of stuff. Yeah. And I wonder if that's not a good example of, I think, forget the, sorry, mate, the context in which you raised it, but I wonder if that is an example of. It was insurance in this context. Yeah. Ah, that's right. Yes. Right. Where, where people will go that little extra yard, not for the fuzzy warm feeling aspect, but because it actually delivers actual business results. And I think that's what knocks people out of these, these situations where they can go, well, stuff it, what are you going to do?

34:28So in my mind, that's the difference because the ISP market is a market that seems to be working. The internet reselling business, competition is changing. You can be an ISP reseller. It takes a lot of capital, but not as much as putting planes in the air. So there is, you know, and that's why I think, you know, markets, what I really despise is ideologues who can't see where their ideology doesn't work. Like for capitalism, I'm a full-throated capitalist. And I acknowledge that it doesn't work in a lot of areas, so we need to have regulation to fix it. That's the pragmatic middle ground, right?

35:04The idol of who says free markets are always the answer. It's like, well, let's talk about pricing externalities like pollution or crappy outcomes or whatever. Natural monopolies, prisons. Exactly. So there's times when it just doesn't work. And I think that's, to my mind, it works perfectly. And in broadband, it has worked. I think Aussie's up to 7 % or 8 % market share now. And they're just, every customer raves about them. it is just the simplest business model in the world right actually do decent customer service people will flock to you it's it's been it's worked in absolute charm now not everyone will join us you don't have to that's the point competition lets people choose what do you want you want the big the big orange tea okay well you'll pay up for that by the way do you want more this is not internet but you know mobile do you want more coverage yeah well you go with okay cool you'll pay for that cool um do you want you know simple local city-based coverage with really cheap prices no service yes okay choose that company and around and around it goes um i just think that that's that's the point it's that's a great example side by side of here is competition at work here is where competition simply isn't working at least to any any any untrained eye let alone trained eye um airlines are not a competitive market they need something to keep them honest because the duopoly will duopolize and again no with no with no collusion you don't have to collude if you know your competitors are going to be so super rational and you're going to be super rational.

36:23You can both coexist perfectly well, make a lot of money at unusually high margins because you don't compete. Now, there have been times in the past, by the way, where the airlines have absolutely cut each other's throats. And so I'm not saying it'll happen forever. Connors and Ansett and then Virgin, there've been times when they both went on a capacity war. They all wanted their share of the market, so they went hard at trying to get passengers, try and beat each other. I would say honestly, purely self-interesting, purely logically, that are doing exactly what they should do right now. It is exactly right to say, let's cancel flights if we can get away with it.

36:56Let's charge higher prices if we can get away with it. Let's provide the poor customer service if we can get away with it, because those things are all costs. So why would you if you didn't have to? And the answer is because competition isn't there, as you've rightly pointed out. Yeah, it's really important. Competition is what keeps this whole system honest, right? So you have to have it. You have to have it. And there are just some situations, and that really, for my, you said before, that like where we do need to tinker, I think we don't do it in the right way too often. What government's role should be is making sure that there is fair and equal.

37:34Let me start again. You want to reduce the barriers to entry. Yeah, totally. I'll have a little whinge here again, just on our own little industry. Yeah. I had a friend recently, he runs a fund, all kinds of onerous regulatory stuff thrown at him. And it's like you're going to go, what, so you're against regulation in funds management? Don't retail investors need to be protected? Obviously they do, obviously. But what you've done here is you've set it up in a way where it's sort of like for the big guys, for the AMPs and the perpetuals and the people that the Royal Commission have shown are just like bad actors, right?

38:13Allegedly. Allegedly. um uh but then it's a rounding error i just i've got a i've got a whole team a whole floor full of lawyers and compliance officers it'll just not a big deal yeah for the one two-man show it's existential if you increase the fees and it's sort of like i've i've seen it in terms of access to pricing data on the asx yes access to reporting asx announcements on your website i mean it is it is outrageous outrageous and i know i'm having a little whinge because it just it impacts me personally all about you andrew and it's all about me but it's kind of like we wonder why there is such aggregation at the top end of of town in finance it's because there's not that they they talk a good talk but the reality is is that i would say cynically conspiratorially a lot of these regulations are there dressed up as a means to protect the investor when really they're there to protect the oligopolies of the big bigger players and it's just sort of who suffers at the end the consumer suffers at the end and a lot of these a lot of these institutions I think would be in a lot more trouble if it was easier for the proverbial you know business-based garage to sort of come in and say hey we're going to offer a really good service here and we're not going to be bogged down in really expensive lengthy costly uh compliance checks no not again people misread that oh so you're saying there shouldn't be compliance and regular no no i'm gosh of any industry that needs regulation it's it's the finance industry um but but you don't need you don't need to make it so bureaucratic so much red tape so expensive so labyrinthine in trying to figure out where I need a team of high paid lawyers just to understand what the hell you're trying to get out of it here.

40:06And that is the way in which we protect the consumer by allowing businesses in the arena of capitalism to juke it out. And the consumer always wins when that happens. Do you know what, mate? I actually don't think it's a conspiracy. I'm a fan of that. When faced with the choice between stuff up, conspiracy always takes stuff up. I think it might have been a neville ran or it's no it's uh it's called um henlon's razor they never attribute to malice what can be adequately attributed to um oh god now i forgot it to stuff up idiocy or something like that yeah yeah i i know i only i say that because well i think i think it's i think there's malice involved i think there is absolutely if you're if you're so firstly if you're a regulator you're by the way multiple is a regulated business so please be nice to us assig uh well i'm not going to criticize you but i am going to i am going to say that i think I think bureaucrats are going to bureaucrat right I think you know we've seen it with the bloody and I don't want to get political or even necessarily I don't want to go on this topic in detail but the same job same pay stuff that's being proposed right there's apparently a 500 and something or 700 and something page piece of legislation and maybe it needs to be but it probably doesn't and and the more detail you add frankly the more loopholes you encourage people to find someone will find on page 648 where there's a colon missing which means they can do something or whatever like and you know we did and the only person who can figure that out is the person who has the resources to throw enough enough lawyers and you know whatnot at it yeah and so i think you know bureaucrats get a bureaucrat and if you ask some a bureaucrat what's the best solution they will find some more bureaucracy to help solve the problem and i think they are wonderful doing a great job probably underpaid massively under resourced in all likelihood but if you know if to a man with a hammer right that what do they have they have bureaucracy that that's their tool to solve a problem and so it tends to get solved that way the other thing i think is this is the this is the malice bit if you're a big guy and you can you can throw 15 lawyers and persuasive people at a bureaucrat and say let's talk a bit about this problem you guys have we think we have a solution for you and we see it in every you know why did facebook welcome regulation of social media because it's already the big dog right and if you're the big dog of course you want that because it stops little guys getting involved do you think the regulators are deliberately being conspiratorial saying i'm going to protect you facebook because you deserve it.

42:19I really don't. I honestly don't. I think you've got the big guys trying to get the regulations they want and you've got the bureaucrats saying, well, I've got bureaucracy as my tool and some really persuasive arguments. Every time and again, we see it, speaking about industry, in funds management, where I saw the bloody paper this week. Someone said there's a passive investing bubble. It just drives me nuts. So somehow, somehow passivists... Oh, we've got to talk about that too. We have to talk about that. How did I forget? Yes. Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener.

42:55Passive investing is not going to destroy the stock. I pick stocks for a living. Andrew runs a business where people give their views on stocks. Passive investing is bad for both of that. If we had more passive investors, he and I would be richer. I might get paid more if I'm lucky if I convince the boss. Andrew would have another second or third lead yet. But the reality is passive investing is not, you know, it reduces my customer numbers, reduces his customer numbers. It's also really, really great and not going to cause anybody any trouble ever. If it ends up being 99.8 % of the market, then let's have a chat.

43:25Until then, the self-interested bleating and carry on by people who have either convinced themselves or frankly, just probably lying to us is just maddening. But again, so why do they say it? Because it's self-interest. And at some point, I'm fearful, a regulator will say, yeah, good point. We should have too many index funds in managed funds because it might cause problems or super funds shouldn't use index funds because just in case there might be a bubble. They will try their absolute damnedest to get what's good for consumers ruled out if it means it costs them money. And yes, I'm a cynical so-and-so.

43:55I did have someone, by the way, sharing with me the Matthew McConaughey, Leonardo DiCaprio scene out of Wolf of Wall Street where Matthew McConaughey's, it's great and it's not suitable for work at all, but at least the end of it. But he basically says, we don't want people to take their profits and run. We want to give them a new best idea so they can reinvest that money and keep going until we make fee after fee after fee. And Matthew McConaughey is able to do it in a much more impressive way than I can. But suffice it to say, there is self-interest everywhere. And if the regulators are under-resourced, convinced, not alert enough, think they have their own solutions, it can be an unholy alliance for...

44:35I think businesses are absolutely trying to screw over the regulator. Don't get me wrong. But the regulators, I don't think there's a conspiracy there. I think they're genuinely trying to do the right thing. they just see every problem through their own lens and influenced by yeah you and i aren't going to get invited to asics offices but the big guys might be or might invite themselves like well let us help you let's make a let's make a proposal let us let us make a submission to your new plans and maybe you can take that under advisement someone thinks oh that seems like a good idea that those people are smart they have a lot of lawyers and that must make sense i don't think it's horrible i just think it's it's it's it's absolutely terrible as an outcome but i think the regulators in on it i think it's one of those things that is chronically under taught is um game theory um what was that russell crowe movie uh beautiful mind yeah which is on um oh gosh my brain is so foggy i want to say the mathematician oh gosh anyway um it's it's i know i can't remember everyone's yelling at the pod machine everyone's yelling at it yeah um nash nash nash the nash equilibrium yes and what's so it gets very it feel as though it can get very academic-y but there are lessons from game theory once you see it it's you see it every it's one of those disciplines yeah that's right isn't it you know you don't know about it then you learn a bit about it and it's like oh there's an example there oh there's an example there and where it is is that you don't this is like with the supermarkets right or the banks oh gosh two great examples right no one's ceo of cba is not ringing up the ceo of anz and saying hey listen what are you going to do they don't they don't need to because they've both got they both um will signal not not directionally oh sorry intentionally so but they both have their own incentives yeah they both can communicate in in indirect ways and you will reach these equilibrium points where it's actually, it's, it's, it's kind of a prisoner's dilemma kind of thing, where it's like, we, we are both better off by doing this.

46:31Yes, that's exactly what it is. And I don't need to communicate with you. That's exactly what it is. Yes, yes. So I think, I think that's exactly what you're talking about. You're right. It's not a conspiracy. At least let's hope it's not, but it is, it is still nevertheless an emergent phenomenon that comes out of the, the current incentives that are, that are at play there. And again, just to come back to, you know, let's Andrew and Scott fix the world, episode number 432. That's what government should be. I think when creating policy and these kinds of things, you need to understand the way the world works and look at it through those lenses and recognize that, you know, these dynamics are going to be at play.

47:10and any policy that you put in place has to be in recognize the potential for these sort of cooperations i mean non-specific cooperations to emerge and just an account for it and and and to prepare for it because they will they will emerge and they will circle around the incumbents and they will act to protect them and it will make all of us worse off if we're not careful yes love how to put it can we can we can we just go to so you i can't believe um i didn't suggest this when we were chatting beforehand so in the afr today uh yesterday uh yesterday yeah um johnny johnny shapiro really great journo at the afr big fan of johnny i'm sure he listens religiously every week wouldn't miss it hi johnny um he wrote a really good book co-author really great book on afterpay actually um uh and he had an article in the afr talking about fund managers and the title was more than half of local active equity funds fail to beat the market you go oh that's pretty damning so if you go with a uh active fund manager so just a on your point of active versus passive here yeah half of them didn't beat the market now that sounds bad enough It sounds bad enough, right?

48:27It's like flip a coin. And I think you made the point, well, on average, that's probably mathematically likely to be true. But when you look over five, 10, or 15-year timeframes, so these are meaningful timeframes where it's sort of like, the longer you go in investing, the more it's about skill and the less it's about luck. The luckiest fool is going to do great in short, And the smartest investor is going to look dumb over short periods of time. But what was interesting here is it wasn't that half underperformed. It wasn't 60%. It was 80 % of these active fund managers underperformed the market over 5, 10, and 15-year timeframes.

49:11Brutal. So just on your point, the point here is these studies come out all the time. Yeah, that's not new news, right? That's the other thing, exactly. Like every couple of years, another series of academics, look at the data. Again, it's not a conspiracy, it's just the data. And they go, okay, well, all these results are published, right? So let's see how they went. And you've got to ask why? And these fundies used to be much higher before passive came along and sort of undercut them. Funny how competition has that impact, doesn't it? Back to our earlier point. But it used to be about 2%, 2.5%.

49:52So for every$100, you're paying$2.50. Not based on performance, just for whatever money you've got there, each year you pay that. I think now it's closer to 1.6%. So why am I paying 1.6 % on average for someone to have a four out of five chance that you're going to underperform the market? I tweeted out jokingly. It's like, well, I can underperform the market by myself. Thank you very much. I don't need to pay anyone to do that, right? And it is, I guess, the so what is passive because you'll guarantee to get the average by definition and you'll have an 80 % chance that you're going to beat the quote unquote professionals over the long term.

50:35Yes. Or do it yourself, right? Like don't back yourself here because these experts, they're not that good. and and here's the other thing there was another um article i saw as well where perpetual had a um i'm going to forget the specific details here but they backed up a younger fund manager who really had actually actually outperformed the market slightly over like the smallest time frame is to not be meaningful a couple of two years or whatever but it was hyper volatile down 40 percent one year up 50 percent the next and you got the flick got the flick that's right so what do you do is anyone who's in the industry knows this.

51:12What do you do? What you do is you call, it's called hugging the index. I look at the index and BHP in the all odds might be, you know, 3.6%. So I slightly over or underweight that depending on my view. And so I have this portfolio that kind of looks pretty much exactly like the index, slightly different. So I might underperform, but if I do, it won't be by much. I might outperform, but it won't be by much if I do. But you know what? I don't lose my job. And you know what? What matters for a fund manager is scale more than anything else in the world. So you and I can be doing the exact same job and you've got$2 billion of assets under management and I've got$10 million.

51:58You're just going to make a – even with much lower fees, you're going to make so much more money than me. Because you just get paid – you get a pay – you get paid based purely on the amount of money that's there. So when you look on this, I want to give a shout out to one of our members. He's actually on Twitter, Arrow Invest. He did some really scathing comments the other day. I won't name them because, again, I don't want to get sued, but some of these listed investment companies who have bled their investors dry over the last five years. Again, meaningful timeframes. You can't put this down to volatility.

52:32It's like, well, even Warren Buffett underperforms occasionally. Of course he does. Yeah, but not over these long-term timeframes. But the egregious thing is, is that the fees that they, when you, because again, these are listed companies that they report all their numbers. You go down into the notes of the financial statement and you have these guys all paying themselves literally millions and millions and millions of dollars. So even if they eventually go out of business, like, it was a great ride, great ride, boys. And they'll be clinking their flutes of champagne on their yachts at the end of the day.

53:07And it's sort of, I guess the so what here is just be very, very careful before you give your money to, particularly I think any of the larger organizations with funds management, because they have not covered themselves in glory and the incentives are really not there to do much. Even if they do better than the market, they're not going to do much better. You could do a lot worse than trying yourself. And if you don't have the time or inclination, buy an ETF. Yeah. And I think that's – I've talked about the paradox of investing. There's only a couple of quotes or lines I've kind of coined or kind of grab onto.

53:42But the paradox of investing here is that as a group, we won't do better than average by definition. And yet there are some investors who should try and invest in buying individual stocks because they can beat the market. but not everybody can so on one level you're saying everybody should index but those who can beat the market should try and beat the market and you try and pull those things together how is it possible that that can show that that that's the paradox right as a group if we all just indexed we'd all get the result and we'd probably save ourselves frankly you wouldn't lose there's that you save yourself fees so there's that so as a group we should all index but individually a warren buffett should always pick stocks because warren buffett's warren buffett and so So there is that just inherent paradox.

54:20And so as investors, I think, you know, what you've talked about before about partly we do it trying to beat the market, partly because it's fun and partly because it's a hobby and keeps us off the streets and out of our wives here. But there is some, you know, for some people, if you can't beat the market over an extended period of time, you should just say, okay, I tried, it was fun. It's not for me. I'm going to index because that's just a better result. If you can beat the market, then go for it. And also, by the way, whether it's you or choosing a fund manager, just understand the role of luck because that's a really important one too.

54:48You know, the five years you talked about, maybe they're the unluckiest people in the world. Maybe they've just got the wrong style, the wrong stocks. They're actually really, you know, Buffett's had bad years and good years, as you rightly say. And by the way, if you look at the Berkshire share price as evidence of that, it's also a question of the market sentiment as much as his performance, right? So the market hates him. Shares go down. Is Buffett doing a bad job? Probably not. If the market loves him, I own shares in Berkshire for full disclosure. Shares are up phenomenally this year. Like they're really, we talked about the other day about them being high.

55:15They've gone even higher since. I'm just going to quickly pull it up because it's, and not that there's no, you know, up 19 % this year, up 33.5 % over the last 12 months. This is one of the biggest companies in the world. Now, is the company a third better than it was a year ago? No, of course it's not. Is it too expensive now? I don't know. Was it too cheap then? I don't know. Is it somewhere in between? Probably. But, you know, just that reality, the only thing you've got to be careful of is, is the stock picker wrong? Particularly a long-term stock picker. I mean, you know, I'm really lucky at ShareAdvisor, the Motley Fool, right?

55:45But I have never had anyone say, your last six, well, actually members do occasionally. No other company has ever said to me, your last six months of picks suck. You're losing to the market. You're out of here. And in a fund, that's, as you said, mate, that's exactly what they would do. They'd say, sorry, Phillips. And by the way, because investors would pull their money. So the only other thing I would say to you is, that's a little jaundice, but also not untrue. What I would say is there are some really good fund managers out there who say to their investors, if you invest with me know this is what i do know this is how i do it know this is what i'm planning to do it will mean some periods of underperformance and some periods of overperformance and in neither case should you assume those things are permanent i'm going to genuinely try and beat the market over the long term and because the market's fickle the market's fickle i'm not going to shadow index to your point just because that's not my style it's frankly not very arguably not very ethical allegedly um i i will i will take your money and i will try to beat the market over the long term with knowing that trying to do that, I'm going to be different to the market.

56:45So sometimes I'm a genius, sometimes look like an idiot. Neither is probably true, but over time, I'm going to try and beat the market for you. They are the fund managers worth paying attention to. Now they can still aim to that and still suck, by the way. So I'm not saying they're necessarily great investments. You can absolutely lose money doing it, but just keep that in mind as well. The argument that you hear, and let's take it seriously, is that the trouble with passive investing is that you have all of this money flowing into the market, say from super annuation or just as people save. And that money is being allocated to shares based purely on their current size and weighting within an index.

57:25So not whether they're, it's actually really antithetical to all of the good things of capital allocation. You would imagine that the capital should be attracted to businesses and enterprises that sort of deserve it and should flow away from those that don't. And again, we have this wonderful sort of self-correcting nature of true capitalism, which is a pretty good point, actually. I don't disagree with that. And then over time, if it's influential enough and there's enough money, you have this really big distortion where it's sort of like, well, CBA is one of the biggest companies there and there's another 200 billion being added to the investment markets this year.

58:04So it's just going to get there. It's going to get bigger and bigger and bigger. And that means that more money comes in, it's going to get through and so on and so forth. And it leads to these big distortions. I actually think, yeah, I've got sympathy for that. That actually mathematically, it's hard to argue against that. However, I would say for any capital, true investors out there, true capital allocators out there, this is good. This is good for you because you want distortions in the market, right? So I would argue that as that became, unless you get to a situation where every single dollar allocated is passive, you will actually find that you won't, I don't know, I can't do the math.

58:45I'm not smart enough, But I would imagine that so long as you even have 10 % of active capital allocation in there and that that 10 % isn't, you know, stupid, you actually find that that itself corrects for things. Because there'll be people who'll go short, those who go long. Yeah, exactly. You know, it just doesn't really make sense for Commonwealth Bank to be on a PE of 483. No, it just doesn't, right? And at some point, financial gravity will sort of take over. So anyway, the point, just to underscore it, is stay away from the big financial fund managers. Allegedly. Allegedly, allegedly, allegedly.

59:22And page PAG, exactly, yeah. Yes, I think that's largely true, Matt. I don't think – I think likely there are – law of averages, there are probably some good investors among the large fund managers. I'm a little less absolute than you if you can find a genuinely good fund manager who's doing the right thing. You know, Magellan would be in that bucket for me for a long time, whether it's still that or not with a change of investment team. Maybe I haven't checked recently. I do think there are some big guys at Care Nilsen at Platinum in Japan for a long time. I think it's the exception that proved the rule.

59:52I think it's your point. I just think it's, you know, we should tar most of them with the same brush, not necessarily all of them with the same brush. You're right. And the other thing that's worth underscoring here is not that they're idiots. They're not. Yes, yes, yes. But the institutional imperative is real. Yeah, exactly. That's right. So if you put either of us, let's assume that we know what we're doing. Okay, big assumption, but let's assume that that's true just for the sake of example. I guarantee you that within a few years, we're playing the same game. Yes, correct. Show me the incentive.

1:00:21I'll show you the outcome. It's just like, why would I make any long-term bets and try and do some sensible stock picking if I know that the sword of Damocles is just forever hanging over my head and I'm going to get, you know, or that all my investors are going to flee at the first sign of volatility. I'm going to manage for the things that actually impact me personally, which is why it's so pernicious. You know, again, it's just the nature of things. And it's why I think I often encourage people who will say, oh, my gosh, you know, I own shares in a company. I just saw the perpetual sold down.

1:00:58What do they know? You know, oh, well, they're probably just, there are factors at play there that probably have no bearing on what you or I would consider sensible investment criteria. Maybe they're reweighting their portfolio. Maybe they're having to cover some redemptions. Maybe they're trying to window dress for the end of a period. It's all factors that you kind of go, oh, but what difference does that make to the long term? Exactly. Yeah. Like, no, it doesn't make any difference. But then it feeds on itself and then others see it. And then, you know, a little bit of momentum kicks in and all this.

1:01:28And, you know, before you know it, you're playing a silly game that can't be won and has no bearing on any sound financial investment principles anyway. So, yeah, all of it's a lot. And again, not because they're dumb, but they're playing a different game and they are being influenced by a different set of incentives. And again, this is a good thing. This is a good thing for us as individual stockholders. Yeah, that's right. Exactly. Very, very awesome. By the way, it applies to fund managers and funds similarly for exactly the same reasons. That if you invest in one of the big funds and they underperform for a year, they know you'll take your money elsewhere because they're attracting.

1:02:01You know, it's a bit like shareholders, right? At some level, you frankly deserve the shelter you get. You get the shelter you deserve. So if you play that game, then you can't be surprised when they leave. But if you are playing that game and most people play that game, you say, well, hang on, the big money's over there. I could be the iconoclastic fund manager over here and raise a little bit of money and do okay. Or I could be one of the big guys, put two zeros on the amount of funds I've got in the management and play the game. You're like, well, again, is it chicken or egg? I don't know. If investors want that, you give it to them.

1:02:27Do you offer it so they come to you? It's probably both and it's probably neither, but it's that sort of story. Hey, mate, we've tried for a long time. Don't wind it up just yet. No, I'm not. Go on. Can we talk about Tim? That's why I'm trying to wind up this particular conversation because if I don't do it, you'll make me come back and record a special podcast about Tim. 100%. I'm deliberately trying to shut that conversation down to give you some Tim Gurner time. Andrew, who is Tim Gurner? Why do you want to talk about him? Well, surprise, surprise, he's in the property development game. And, you know, talk about in this industry that's covered itself in glory.

1:03:00Anyway, there was an AFI held a property summit and a video of him opining on the state of unemployment went a bit viral. So you even had like US politicians commenting on it as well. And good old Tim basically said the quiet part out loud, which was we need unemployment to go up 40 or 50 % because people are too lazy and that this will sort of slap them around and teach them who's boss. I'm paraphrasing here, but not really. I mean, you won't struggle to find it if you have a quick Google or look on Twitter. Basically, people are too complacent. People are too lazy. If unemployment went up, they would remember who his boss.

1:03:42Can I read some quotes just for fun? Oh, please. All right. So this is from the AFR. Quote. This is Tim Garner. Quote. Sorry. I'll read the full article, including the quotes. This is from the AFR. Exacerbating the labor problem, Mr. Garner said, quote, sorry, Mr. Garner said, were people who had, quote, decided they didn't really want to work so much anymore through COVID. Unemployment has to jump 40 to 50 percent, in my view. We need to see pain in the economy, end quote, Mr. Goehner said. Quote, we need to remind people they work for the employer, not the other way around. Tradies have definitely pulled back on productivity.

1:04:16They've been paid a lot to do not too much in the last few years, and we need to see that change, end quote. Alongside a drop off in productivity, Mr. Goehner slammed the planning system in New which he called genuinely a quote genuinely terrifying unquote didn't go well it didn't go well and because man tone deaf you know he's probably here's the thing though right and a lot of i'm not there's no original takes what i'm going to say there's some really good comments on on twitter and the rest of it but it it was he's actually not he's actually not that far at with like the new rba boss pretty much said the same a few weeks ago now she put it in her framing wasn't so much about punishing people and teaching them a lesson.

1:04:59And the framing matters, right? That was my issue because you're right. There is that same – we talked about it at the beginning of the podcast. At some level, the economy has a level of unemployment that is caused – the other thing was Michelle Bullock said that's what's going to happen because we're targeting inflation rather than Gurner saying we really need to punish those poor dirty workers because we need to go back to Charles Dickens' time and that would fix things. It's a very, very different cause and effect in a very different direction. Yeah. But I mean, we've had this conversation before, so I won't rehash it.

1:05:28But I do think that some of those cause-effect relationships are wrong. You know, making people unemployed to reduce the price of milk and bread is just nonsense, to my way of thinking. But I guess the other thing is you've always got to look through people. Oh, by the way, this is the gentleman that coined the avocado on toast. He was too. I love that someone found that a couple of hours later. I was like, oh, this is the guy. It's like, oh, of course it is. Two for two, my man. You're welcome. And, you know, there's another one too of him in his hyperbaric oxygen chamber getting a magnesium treatment.

1:06:07You know, it's like, oh, God's sake. Yeah. Like, you know, talk about detached from reality.

1:06:16There's also, I really struggle with people who love to tell us all about how it needs to be done. And look at me. I am a captain of industry. Look how hard I worked and the value I created and all this stuff. Obviously, if you go back and have a closer look at this guy, he started his business because granddad gave him a bunch of money. Yeah. Right? And his boss fronts him some cash too for a Renault. You know, it's sort of like there's this wonderful thing that I've – it's back in 2017. I'm going to read this out as well. Go on. I love it. It's from an unknown person on Reddit. It says, entrepreneurship is like one of those carnival games where you throw darts or something.

1:06:56Middle-class kids can afford one throw. Most miss. A few hit the target and get a small prize. A very few hit the center bullseye and get a bigger prize. Rags to riches, the American dream lives on. Rich kids can afford many throws. If they want to, they can try over and over and over again until they hit something and feel good about themselves. Some keep going until they hit the center bullseye and then give speeches or write blog posts about meritocracy and the salutary effects of hard works. Gosh, I didn't say that right. Poor kids aren't even visiting the carnival. They're the ones working at it.

1:07:29Yeah. And I love it. I love it because - It's a nice summary, isn't it? You know, it's sort of, again, I don't want to begrudge those that have taken big risks and have worked hard and have enriched society as a result of their efforts. They deserve rewards. But bear in mind that we are all a product of our circumstance and where we are lucky enough to be born with our abilities and talents and our background. And I reckon you could, if I took Scott Phillips as a young child and put you into the home of a billionaire, you probably have multiple huge big businesses now. Same person. You just got to try again and again.

1:08:08And I think to sit there and tell tradies that they're not working hard enough, you know, when it's just like, well, mate, we'd all love to be, you know, on the BRW rich list too. And probably would have been if we'd had the opportunities in life that you had. The other thing that's important here to understand is the context. As I understand it, a whole bunch of his projects are struggling. So they've been priced very poorly. So building material costs have gone up and all of these very significant number of these projects, allegedly, allegedly, are looking very dodgy. And so rather than have a good hard look at the - Just sorry, when you said dodgy, we don't mean illegally dodgy.

1:08:47You just mean possibly unprofitable. Oh, you just, you priced things. I just want to clarify dodgy. That's because dodgy could imply other things. Not illegal because property developers are the cleanest of the clean. You know, they're like real estate agents and mechanics, right? Every week we have fewer and fewer listeners. And sometimes I wonder why. Other times I remember that you're a liberal with your hatred. I am. I am. But my point is that like anyone who's run a business out there, poo happens, right, to keep your language clean. And it's tough, right? Yeah. And what do you do? Well, one, you never take risks where the various vicissitudes of life can just like knock you for six and represent an existential threat.

1:09:36But when they do, understand that there's decisions that you have made and sometimes chickens come home to roost. And that sucks. And that's just how it goes. That's why there are such good prizes for winning, right? Because of the risk that is involved. Yes, yes. But when it goes wrong, it is such poor form just to point around and go, it's not my fault. It's my worker's fault. they're not trying hard and i was like you know it's just like look when when we eventually eat the rich and the revolution happens like we're people are being lined up against walls this dude's going to be the first one that's there i i suspect and and maybe maybe not without good reason oh very funny i um no i think that's i think that's right mate i think so i actually want to because i because i feel like i should do the right thing here um to be to be clear Maybe he doesn't deserve it.

1:10:25Maybe he does. But I will just note he did sincerely regret. He regrets the reaction. Let's be honest. He doesn't regret saying it. He regrets that, oh, people didn't like what I said. That is probably true. But we should at least, out of fairness, acknowledge that he has actually apologized or regretted or something. He says, quote, the AFR Property Summit this week, I made some remarks about unemployment and productivity in Australia that I deeply regret and were wrong. They're a clearly important conversation to have in this environment of high inflation, pricing pressures on housing and rentals due to lack of supply and other cost of living issues.

1:10:57My comments were deeply insensitive to employees, tradies and families across Australia who are affected by these cost of living pressures and job losses. And he goes on from there. Great, great. His lawyers are earning their bread this week. Let's just say. You know what I loved in the back, by the way, the second paragraph is like, well, they're clearly important conversations about these things that I talked about. So I'm not really regretting it. I just regret that people, as you say, were, anyway. um i mate i think you're i think you're absolutely right i think um you know i think i i've stopped reading a lot of business books um because i should say biographies specifically yes because it's kind of the survival the survivorship bias that is one of those things in in economics and statistics that really matters and i liked your read an example i hadn't expressed that way but it's absolutely true and you're right if if you or i had been born to a family with with un you know unlimited means and we want to start a business we could have had as many goes as we wanted to and frankly we talked about last week the week before there's no entrepreneurs who do succeed on their second third and fourth businesses not always because they're they're they're kids are rich people by the way but just that idea of having enough time to keep going have enough space money opportunity frankly connections are really really important yeah but even but even that aside the just the sheer all even if even if there was not wealth and there was in this case so and i take your point about he's obviously coming from a privileged position but even even all that aside if you just start from luck happens you know i've said before steve jobs was born 10 years earlier he doesn't invent the iphone because gorilla glass and wi-fi and what was in 3g didn't exist in fact there wasn't a wi-fi at that point you had to transfer your your data by a cable from your computer right so you know there there are circumstances and and he would have had some is he genius of course he is and is he a fantastic yes he and would he have something else maybe but the role of luck you know the the the second guy to think about touch touch screen glass doesn't get there because the iphone you know again if jobs are in six months later maybe someone else invents the touchscreen phone and and on and on it goes and i guess i just say that because there's so much there's so much luck involved that looking at people's books saying oh i made it because i did this and this like well you had to do those things to make it yeah but the role of luck and circumstance and everything else that goes into it um that in a different circuit you know i've said a million times if tesla if there's a recession in musk's first couple years at tesla musk himself has said the company would have gone broke yeah so we owe tesla's existence better or worse depending on your view um to the fact my son is a fraction of a share as i said before for full disclosure because i do that um you know we we owe tesla's very existence the fact there happened not to be a recession at the wrong time for tesla that's literally sliding doors right so yeah i i completely agree quick clicks in australia right no one will remember this It was an ASX listed company called Quick Flix.

1:13:45QFX. And if that sounds like Netflix, it's because it was. And it failed miserably. And why did it fail? Were they terrible business? No. There wasn't the broadband infrastructure available at the time. They were too early. If Quick Flix had started in Silicon Valley at a time when there was enough supporting cable infrastructure, we would now be all talking about our Quick Flix subscriptions and not our Netflix subscriptions. Luck is phenomenally important. Yes, you've got to work hard. Yes, you've got to be smart. Yes, yes, yes. That just gets you to the starting line. And then there's a huge amount of, and that's just how it is.

1:14:23And yes, people make their own luck. I get that. That's also very true. You've got to work bloody hard, but everyone has to work bloody hard. The failures work just as hard as successes. I'm sure we all know someone who's the smartest person in the room, who's a bloody hard worker. And just unlucky in life. Like we all do, right? And it's just the way of the world. So I guess what I'm saying is don't begrudge anyone their success. Well done to you. But where it gets me is when they turn around and go, well, look, I did it. Therefore, anyone can. And if you're poor, it's because you choose to be poor.

1:15:01And that, I think, is just such a bad take. There but for the grace of God, you know? Exactly. Do you feel expunged? I do. I'm going to have a little lie down now, but I'm going to do so with a smile on my face. You were much more vibrant in the last 15 minutes of the podcast than the first 15. Not for any fault of yours, just because, well, you know, it worked pretty well. I'm glad you got that off your chest, man. I hope you're feeling better. Do you think you'll be up for a Sunday podcast? Give it a go. I feel, as I said to you before, look, let's be real. I'm not up on a roof, you know, tiling or I'm sitting in a chair with my Ugg boots on talking.

1:15:39so I don't want to pretend here that I'm like, you know, making a big sacrifice. So let's give it a go. No, you are still strong. Well, the only problem is it's hurting you. Your throat's crooked and you've got to talk. So there is, you know, you're right. We're not digging holes and we're not putting tiles on roofs, but we will see how we go. If we are back on Sunday, we'll have something for you, but I hope Andrew might be back with us at least for part of that time. Let's do it. Until Sunday morning, have a great weekend and fall on. Cheers. The Motley Fool and people appearing in this program may have positions in the companies mentioned.

1:16:08General advice only. Please speak to your financial professional to understand how it may pertain to your situation. Subscribe to the free newsletter at fool.com.au forward slash listener. The Motley Fool operates under Financial Services Licence 400691.