A tipping point for retail in Australia?. June 19, 2026

24:16But the existence of billionaires is not the cause of it. That's the outcome of it. Like you're missing cause and effect here. We see an outcome and we go, well, if we get rid of the outcome, then we get rid of the cause. And it's like, no, dude, it's more complicated than that. Let's not drive it out too much longer, but he says, I'll jump back in, but I think it's really important to separate out the how Musk becomes a trillionaire, right? Because he hasn't taken anything from society to have that money. The government hasn't paid him a trillion dollars for a thing. He hasn't garnished people's wages by a trillion dollars to have a thing.

24:56He has said, I will create largely three separate – I'm talking about SpaceX particularly here – three separate product lines. I will offer those products to customers. Customers got to pay for them or not. No gunner when you're in his head. Do you want satellite internet or do you want to use the NBN? Me, I've chosen satellite internet. Do you want me to send your payload into space for you? I don't have a payload, but someone does. And they said, yes, please do that. That'd be lovely. He's got an AI. Again, do you want to use my AI system? Yeah, I do. I think that might be useful for me. It might create some value.

25:24I'm happy to pay the asking price because I suspect that's worth something. And so he's got$18 billion worth of revenue last year for that purpose. And then someone else has said, hey, I really like what you built. I'm prepared to pay, in aggregate, a trillion dollars when you add the value of all the shares and the traded price. I'm prepared to consider that's worth a trillion dollars. There's nothing in the process – again, I don't like the guy. There's nothing in the process of doing that that has been any – look, every businessman's probably cut some corners. I'm not going to say Musk is pure as the driven snow either.

25:54But unless and until we know he's broken a law, as far as we know, nothing untoward has happened. He's not strong-arm anyone to using Starlink rather than the NBN. He hasn't made anyone use his rockets rather than someone else's glasses or did their own thing. He's literally said, I've got an option. You can use it if you want. And someone else said, I think that's worth a trillion dollars. There is no disaster in that outcome, right? Where's the coercion? Right, right. But even then, where's the value transfer? There is no value transfer. Yeah. There's value creation. To your point about the trillion dollars, no one's given him a trillion dollars.

26:30If the government had said, okay, I'll buy your business for a trillion dollars, and this thing's losing$5 billion, you're probably going to go, guys, I'm not sure I would have made that trade necessarily. Now, it might still be the right trade, but you can have an argument at that point. This trillion dollars is not - And then you are taking my money and then allocating it against my wishes. That's a very different moral quandary. Correct, correct. Same. Have your last say if you want. But I think it's important when we say he's worth a trillion dollars or somebody's mad trillion dollars, that's bad.

26:55It's like, well, there's no gun to anyone's head here. his added value, his creative value, people willingly paid the price for his shares. I think they're silly, but they're entitled to. It's an outcome. It's an outcome of no bad things, right? There's nothing untoward. He hasn't diverted trains and held up banks and, you know, this is just a bloke going, I made a thing, would you like it? And we say, yes, please. And someone else says, I think the fact that they want it means that's worth this price. It's pretty simple. It's pretty simple. Well, I'll finish up on this part of it just by answering your original question at the very start of the pod, which is how much is too much?

27:31And I think it's, I think it's, A, it's up to the individual, but B, if we had decided in 1983 that$100 million was too much, right? And you hear that, right? And again, just on the first level reaction is, yeah, who needs more than$100 million? It's like, well, if we had done that, think about, go back in time and just go completely different building. There are no billionaires at this point in time. That money is, and this was the case with Musk, with PayPal, and it's actually the case with almost all of these mega rich people. They have, let's call it skill and luck mixed together. They have some success, and then they reinvest that capital.

28:17That capital is optionality. That capital is the potential to do something new. And that new thing might create even more value. And if that creates more capital that then can be redeployed to create more value and you get this beautiful, virtuous, self-reinforcing cycle where it's like, hey, it turns out that people who are really good at allocating capital accrue more capital. It's like, who do you want the capital to accrue to? The people who can allocate it in the service of society or those that can hoard it for themselves? Now, what if I've just assumed in that example that everything that they touch turns to gold?

28:52What if it doesn't? What if it's just absolute disaster of an investment? Well, that's just another fancy way of saying we just redistributed all the money. I started a business because I thought that I was going to do the thing and no one did it. But obviously in trying to do the thing, I paid a lot of people a lot of money. A lot of suppliers got paid a lot of money. A lot of tax was paid along the way. And it's like the business didn't ultimately work out, but that money didn't disappear. That money went to other people and it probably went to some of those people who were actually themselves pretty good at capital allocation, had some good ideas who could then take that.

29:29I would actually say no amount of money is too much. Again, putting aside the ill-gotten gains of it, if it was just fairly accrued in service of other people. And it's just like, I honestly think I would always want more under some self-deluded idea that I could put that money to good use in whatever capacity I think a good use would be. And is that a bad thing? Again, is$100 million too much for one person? Maybe, but then what if I had an ambition that I was going to had some zero carbon, zero pollution way to turn salt water into fresh drinking water and make the deserts bloom around the world?

30:13You know, I'm not going to do that with a hundred million dollars, right? That was an example off the top of my head. But there are ideas and opportunities out there that would, again, it's the unseen, would never, ever, ever have been realized if some arbitrary person puts a cap on wealth like that. And as I said, even if it's complete failure, that money just goes elsewhere. And even if, and my final point is, even if I just want to sit in my gold mansion and eat caviar all day, that is a form of redistribution, right? So it's sort of like I just don't think that we should ever limit that. We should just limit theft.

30:51We should definitely limit theft. But in terms of like creating value, why would we limit that? I don't want to keep the conversation going, but I will clarify. My point wasn't that they should be stopped or limited at any point from achieving it. It was more just a reflection on the psychology of someone who says, I've got a lot. I'm going to do everything I can to get more for its own sake. Like, I think I find another way to say that should be stopped. Just, I just think it's fascinating. I think it's just a really, I would stop well before that. I guess I'm comparing myself to others, right?

31:18We've talked on the podcast before. It's like, I could do a very small fraction of that number. Right, right. I'm going to go keep bees and grow tomatoes. I'm just going to be a monk at that point. That's me, but I just, I don't begrudge others who might want to necessarily. And I actually think maybe after like three or four years of like being a monk, I might get a little antsy. and then go, I don't know, maybe I could solve poverty. I don't know. Some stupid, but you need that stupid dream. That dream big is why I want people to dream big and I want them to have the capacity to do it. And I want them to succeed when they do that, right?

31:55And it's like, and if they do succeed and the consequence of that success is wealth for them, it's like, fill your boots, man. That's fantastic, right? Like what, again, who's the victim here? That's what you've always got to ask. I did have someone say to me, yes, but he got all these government contracts talking about Musk again or whatever. It's like, yeah, but they were in tenders in competition with other people. Because the government wanted the things done. Can you please send a rocket to space? Oh, yeah, but it's all because of this and that. It's like, so you're against political cronyism.

32:26Yeah, me too, man. Me too. Sign me up. I hate that. That is like, I hate it with a passion. But that's a different thing. So we've got to be careful about what we're talking about here. I think people just have a strong emotional view of another individual human being. And from that basis, I will twist myself in all kinds of shapes to make an argument that I should be able to, well, someone should go and take from them. And it's like, yeah, think that through, man. Just think that through for five seconds longer. Not like it. So let's pivot a little bit to some of the current events. SpaceX, of course, probably the biggest one.

33:06We recorded this on Thursday morning, the 18th of June. SpaceX had its first share price fall overnight. So that was remarkable. The company bigger than, it might not still be, but as of Wednesday, it was bigger than Amazon. It was the fifth largest company on the US stock market, which is just, from scratch, just incredible. Mate, the other big thing this week was - Can I just put a number on that? Please, yeah. So you and I always know that the real measure of success in this game is the internal rate of return or return on invested capital. How much money went in versus how much money came out?

33:40That's all that matters, right, here? And$12 billion is what went in. And a trillion dollars plus came out. Let's just let that hang for a moment there. It might be worth$2 trillion or half a trillion at some point. Yeah, yeah, totally. But either way, it's a remarkable... Yeah, I can only go with point in time. But yeah, at this point in time, that's the calculus. It's a remarkable story. Mate, the other big news this week was the end asterisk of the Iran war. I say asterisk because, frankly, by the time this goes out, anything could have changed. And I think this is the seventh or eighth time Donald Trump's claimed the war is over.

34:14So we have to hope for it. And I say this all the time, Matt, but I'll say it one more time. For humanitarian reasons more than financial, right? Like, just stop killing people is a good start. I don't mean just one. I'm anti-murder as a general president. I don't know if that puts me out on an island somewhere, but generally. Yeah, premature death is bad. I think we can agree with that. And so we hope for those reasons, frankly, more than any others, that this is finally the end, at least at scale, and hopefully altogether, of hostilities in the Middle East for now. I say in the Middle East. Well, you say we're going to bring it to the Middle East in general.

34:49Yeah, let's say this particular conflict hopefully is at an end. And it has been fascinating, mate. For my sins, I do a daily cross with a few radio stations. And one is 2GB. And they're the only one that asks me every day what the oil price has been because it's obviously relevant for people and it's indicative. And that's kind of interesting. And I've kind of been – so I've been doing that. I've been keeping a reasonably close eye on it. And it's – one of the other questions I had for people, by the way, is a listener actually texted in and said, oh, what should people do differently? Will they act differently in the future?

35:21You know, how do we protect our assets next time from this sort of thing? And I don't want to get too much into the lesson yet, but as others would expect me to say, ignore it because it goes away because they always do. And that seems negligent and it seems, you know, somehow not active enough, but that kind of is the story. And I say that because the oil price doubled a little bit by the time we go to air. But$67 a barrel it was before the war. It got up at$1.127 a barrel. And at the moment, literally as we record this, Brent at$79.55, West Texas at$76. We're talking about 15-odd percent above the pre-war price.

36:01And right in the middle of the line of best fit over the last five years. Right. And so you kind of think, well, now a couple of things, I suppose. On one hand, it's not as low as it was. So is the market still expecting a degree of risk? I think that would be a very reasonable thing to assume. I think that's a good idea. On the other hand, miles below, miles below where it was. It must be in the bottom 15 % of the price range over the time the war was there. So the market's betting it's over or at least almost over, but allowing a little bit of room for maybe it's not. And as you say, maybe we were at 15 months low before the war started.

36:38So it kind of feels like, I'm going to say newish normal. and I hesitate to say that because I hate that phrase, but it kind of feels like the market is assuming things are okay. And as I've said before, mate, I love being in an optimist in a room full of pessimists. It's great because, I mean, until and unless I'm wrong, the future is generally brighter than the past and if everyone's freaking out about the short term, I'm like, oh, this is great. I get to keep a long-term perspective where you guys are freaking out. That's great. When I'm in a room of equal optimists or more optimistic people than I am, I'm like, this doesn't feel very comfortable.

37:12I mean, I'm not a contrarian for the sake of it, but I'm like, ah, you guys all feel – so I don't know how to feel about it. The oil price right now doesn't matter so much other than hopefully it's meaningful for, well, for inflation, frankly. Unless I go too far down that rabbit hole. But hopefully it's also good for the economy. I mean, the reality was always going to be that 20 % of the world's oil blocked for an extended period of time was just going to have to result in a recession. Even put the term aside. you can't run the economy at its going rate and take without 20 % of the things that literally, quite literally and metaphorically fuel economic activity.

37:46So, you know, if this is over, if the price is down around, as you say, mate, roughly in the line of best fit over the past half decade and not miles away from where it was before the war, it kind of, we're all hoping we can, I don't want to jinx anything, hoping we can put this behind us and things seem like we, again, still issues right across the economy for all the reasons, But this feels like it's not a bullet dodge, at least something that is less likely to create more problems than it already has. Yeah, I mean, the one observation I have is it's just, I just have to bang this drum every single time because people put out, people with fancy titles and impressive suits put out forecasts and we take it as not a forecast, but as a absolute this will happen.

38:39And it was almost across the board. I mean, people calling for$200 oil a barrel. And I was like, as you say, 75, and it never got above 126. Yes, exactly. And only for a very short period of time. Right. Now, this isn't me dunking on them because, like, it's predicting the future is hard. What did Yogi Berra say? You know, forecasts are hard, particularly about the future. Yeah, exactly. And it's just sort of like we've always got to be very mindful when we hear these things. And, again, I'm not saying we dismiss them. I mean, I really, I'm not against experts in any way, shape or form, but it's just like no one can tell the future.

39:16And it's just the thing that you've always got to think of with markets is their reflexive nature. You know, there is a multitude of factors going into that. And in and of itself, you often say that, you know, all else being equal is like a kind of useless kind of thing because like when is ever that the case? Now, if all else is equal, then yes, all of these things come true. but it's like, yeah, but they're not equal. And when that happens, this other thing over here happened and that happened and that, that, that, that. It's like, I'm 12 degrees separated from the initial premise, but it's this multifactorial butterfly effect, three-body problem, you know, Rube Goldberg machine that's just so diabolically complex as to just at the very least caution us with these things.

40:00So I say all of that because now it's the folk, the soothsayers are, oh, this means this for the world. Of course, of course. That's right. Okay, so I'm going to go and everyone's, oh, that's what they're saying. I was like, how many for me once, you know? But anyway, so there is all of that.

40:20Markets are doing what markets do. And I think too often we put these moral judgments on it. Again, it's like, oh, the market should do this or the market should make this. or it's some extracorporeal entity that exists out there with some kind of malevolence that's all about greed and extraction and it's just like, no, no, no, no, no, no, no. It's just people. Someone has something and someone wants something and there's a lot of them in one particular commodity or price and they're all just making decisions based on their own guess of the future and their own current predicament. That's it. When we say the market, that's what it is, right?

41:08What's the market for prawns at Christmas time? I don't know. Whatever the trawlers decide they can sell it for and whatever the people who want to buy it can do it. And are they right or are they wrong? They just did. And it's going through this process right now and it always has and it will continue to do so. What does that mean? I don't know. Other than it's actually going to be, rather than me saying what I think it should be or where it should, you're not saying this at all, by the way. I'm off on a completely different tangent. But this just seems to be the commentary. It's like, it should be this and that has to happen and rah, rah, rah.

41:46It's like, no, this is an emergent process. This is what we are seeing here are the actual participants of the people that extract the oil and buy the oil in constant negotiation, making best judgment of, as I say, of themselves and the future. That's all it is. It's not something to be controlled. It's something to see as a signal, to see as information, pure information of what is going on. And I think it tells us, I think that it's a very different framing, but it's a very valuable one to think of as an investor, whether you're talking about stocks or property prices or oil prices or whatever, that's what it is, right?

42:30And you can shake it. And look, how long have I been shaking my fist at the sky for property prices or things like that? But you've got to, at a point, make your peace with it. It's just sort of like, look, people are just going to do what they do. So what does that mean in terms of the oil price, where it goes? It depends. Is there a lasting piece? Do people get more confident? Do we see economic activity pick up and more people demand it? Well, that's all going to be reflected in the price as appropriate to that kind of situation. It is what it is. Now, what can I do about that? How should I think about it?

43:09Well, if you're an investor, you've now got to intuit what other people are going to think in beauty contest conundrum again, and good luck to you if that's what you want to do. But in terms of what they're asking you on 2GB, it's like, well, understand, A, that you're dealing with a volatile commodity. Probably factor that into your calculus. I would. If I was a farmer, I make this point all the time. Some years are going to be drought. Some years are going to be flooding rain. Maybe factor that into your business model. If you're running a country and you're seeing that this is a very critical commodity that helps, you know, look after the prosperity of your people and you know that you can't control it or predict it, maybe you could put some buffers in place.

43:53It's more about trying to recognize the reality of the situation and position yourself accordingly within it other than us tutting as to where it should be or why it should be this or that. It's a different point to what you were making, but it's just like, that's my take on the oil price because it's just like so many things, it always seems, at least in the media, it's discussed without, I think, a recognition of what we're actually talking about here. I think that's fair. I think there is still a, the actual price still has a physical impact on the economy, but you're right when it comes to the forecast and the what comes next.

44:33And it should have an impact on the economy, right? Higher oil prices should mean that people buy less of it and vice versa. As I say, it's information. That's what it's telling us. So it's, yeah. Sorry to hijack you, but it's like, yeah, exactly. I'm agreeing with you. That's the point. That's the point.

44:54Sorry, I cut you off. No, no, no. I'm trying to get what we've done. I think we've probably done oil. I think we'll move on. I was more, I was just trying to think through, without wanting to, we don't want to go into prediction land, but, so whenever I'm asked to radio, it annoys the hell out of people. I said, don't do predictions. I said, I can discuss probabilistically with you kind of what's going on and we can talk about the range of outcomes, but, you know, and some of them go, they laugh and start, okay, Scott, I needed to give predictions, but it's like, I was not going to. So I am hopeful that the end of the war makes it far less likely that we have serious economic downturn in the next 12 or 18 months.

45:36And when that does have a real-world impact, as opposed to forecasts and guesses and all that kind of rubbish, it hopefully means fewer business failures and fewer people lose jobs. And so that's kind of, I guess, we can celebrate the fact that when raw material costs don't increase, the price, as you say, is a signal. And I think that's important, actually, mate, because we'll think about the price of the pump, and that's absolutely true. What we will miss, because it's really hard to see the counterfactual, is what – well, hopefully I say wouldn't, because hopefully it will now – what wouldn't have been done.

46:07So there's one thing to say, okay, petrol is going to cost me 25 cents a litre more to put in the tank. Okay, cool. That sucks. But what won't get done because of a higher oil price? And that's the stuff you can't see. And you'll never know exactly what would have changed and not changed. But there would have been less economic activity because, yes, some people paid more for the oil they got. Others would have got no oil because they weren't prepared to pay a higher price or couldn't afford to. I don't mean afford to in terms of literally no money in the bank, although I do in that a little bit.

46:32But I mean couldn't afford to as in I make a product or I provide a service, and that service only gets provided if I can do it profitably, and I can't do it profitably when I'm paying$2.50 a litre. And so that kind of – they just don't do it. And so that doesn't happen. frankly we saw some farmers in WA in particular were kind of talking about maybe not even fertilising their crops or not sowing their crops sorry because they couldn't be sure that the fertiliser would be cheap enough to make that crop profitable so what do you do you know as you say farmers know this stuff about the climate but at some point it's like well hang on it's going to cost me this much put it in the ground and keep it growing and I get this much when I sell it if I can't get more when I sell it for what it's going to cost me I'm not going to bother because why the hell would you and that's the stuff we wouldn't have happened again at the time you'd never know because the counterfactual is the counterfactual, but hopefully what it means is less disruption to the economy.

47:19Not everyone survives and everyone does well. We'll talk about a business failure in a minute. But just that idea of hopefully it means that there is less. It's not an artificial disruption. It's just markets being markets, but the artificialness is the interruption by the war, which otherwise needn't have happened, and I won't get into the pros and cons of that stuff. But hopefully we just don't have that economic disruption. Hopefully that does mean there is, to use some of your words, more prosperity, more activity, more value created. That's kind of what we want. And so all these equal. It's a win-win, less murder.

47:49There's going to be less murder and people dying. That's a win. Take that. And life is cheaper. Yep, that's a win too. I'm failing to see the problem. Or we can go back to murdering children and having much more expensive oil prices. I don't know. It's like, I'm going to go with not that version. Let's go with Columbo. I think I'm sure I said, let's go with that. Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener.

48:19I mentioned business failures. Let's talk about that a little bit. I wrote about this during the week and I think this is fascinating and partly this is confirmation bias, mate, and I'm not going to do a victory lap at all, but I've been talking for a long time about the rise of e-commerce and I've been talking a long time about the impact of what we call unit economics. So we're getting a bit of investing here, a bit of economics and business analysis. Unit economics are the economics that apply to a single unit of a business's production or sales, right? So you take a single part of the business, go, right, this thing stands alone as its own division, entity, operation, physical location, and we'll get to that in a second.

48:57And whether the business itself makes money or not is kind of a roll-up of those individual units. In other words, the economics of each individual unit, you roll that up and say, can the company make money? And if you're running a retail operation, you might have 60 stores. I'll pick that number deliberately. I'll get back to that in a second. And those 60 stores, while they're growing and while you're making money, the profit for each of those 60 gets added together and it looks like you're making a lot of money. And sales are whatever they are and profits, whatever it is, and things are okay.

49:25At a store level, and let's talk about retail stores. This is really where unit economics really, you know, this is where the rubber hits the road. At a store level, you have a certain level of fixed costs, and they're normally really high as a proportion of sales. You have a certain level of variable costs, and they fluctuate. They vary with sales. And then you have a level of sales. And I'll unpick this. I'm not going to be too esoteric about it, too theoretical. Let's say you run a homewares and fabric shop, and you've got to pay for the rent, and you've got to pay for the electricity. And yeah, you can turn the lights off earlier, but that's kind of fixed.

49:59And you've got to pay insurance, and that's kind of fixed. You've got to pay wages and you can kind of reduce, part of your wages are variable. You have more stuff on a Saturday afternoon if it's busy, but on a Tuesday morning at 10 o 'clock, you've got to have at least one person in the shop keeping the lights on and opening the door and taking the money. And you've got a certain amount of inventory and fixtures and fittings and insurances and all the things that go with running a physical retail location. And for many, many, many retailers, that can be, I'm going to pick some arbitrary numbers, 70, 80, 85 % of sales.

50:29Then you've got Variable costs. And the variable, I mean, every cost variable in a long enough period of time where you stop paying the rent. But the variable costs are there's extra stuff you might put on. It might be the extra inventory you order in. It might be, I don't know, a pamphlet you produce for a sale, whatever those things are, but they're a bit variable. And then you've got a total level of sales. Now, people will look at sales at a retail store and say, well, if sales were by 5 % or 10%, it doesn't feel like much because it's still got 90 % of the sales they previously had. And yeah, that's true.

50:56So the problem is that most retail outlets couldn't, and again, I'm making this up, mate, but tell me if you think my assumptions are wrong. I would wager that most retail outlets couldn't have a sales fall of more than 10 % without actually losing money at a store level because of all those fixed costs and how incredibly stupidly difficult they are to reduce over anything other than a period of years. You can cancel the lease, you can turn off the electricity, but you can't really use half and you can't pay half of the rent. You either pay it or you don't. And so if you're in that sort of situation, while it might feel like, if you're only doing 90 % of the previous sales level, that's still pretty good.

51:30You're still pretty prosperous. People still like you. Most of your customers still want what you've got to offer. That's a pretty good business. But the way unit economics kind of works is once you fall below a certain threshold, even with the vast, vast, vast bulk of people that already shop with you, like you, keep shopping with you, pay the price you're asking, you can be unprofitable and go broke really, really quickly. And I raised that as a picture. I probably should share the actual story first before I went into the theory, but that's what happened to Lincraft this week. So Lincraft, for those who...

52:00I've been to Lincraft, I think, maybe once in my life around, maybe twice. I'm not an aficionado of homewares and haberdashery, but let's just go with it for a second. I've been into more than a few. Have you? There you go. My better half loves that kind of stuff. So I've sat there impatiently on my phone in many Lincrafts or Spotlight. They really should have chairs for blokes at the door of those things. Exactly, exactly. So, Linkcraft this week announced they were going to shut down very quickly all 62 physical locations and become only an online business. And I've called this a tipping point, and I don't want to overstate it because it may be years and it may take a while, and it may be puts and takes and whatever else.

52:40We saw Barbecue's Galore Go broke a couple of weeks ago. I think we might have talked about that. But they weren't broke entirely. I don't know if we did, actually. Maybe that one's selling me by. It went broke. So, it went in administration in February. and in early June, the administrator shut down this. We have to liquidate this thing. We can't. There's no buyer for it. We can't make it profitable. And so you see retail failures all the time. And I don't mean to say that flippantly, by the way, but then they're common-ish just because things happen. But I just thought the Linkcroft thing was fascinating.

53:08This isn't a business that went broke. This is a business who said, you know what? Our online business is really good. Our physical business sucks. We are now going to become a purely online retailer. And I just, I really honestly, mate, I've talked a lot about e-commerce and the rise. I think we're absolutely missing it. Woolies & Coals online sales are going up three and four times the rate of their physical sales. David Jones' online sales were up 10 % last year, even though their total sales were down 8%. And none of these are necessarily surprising numbers. But why I want to fast forward is Lincraft is the first time I've seen a significant business go, we have a great business.

53:44We just can't justify physical stores anymore. And I really think, I think it is an inflection point. I think it's a tipping point. Not for everybody, not all of a sudden, not overnight and whatever else. But I'm not going to be a retail landlord for quids. I'm not buying chairs in Westfield anytime soon. I really think this is a business that – sorry, I'll take a step back for that. The retail businesses that are realizing that you can make a lot of money online or a decent amount of money online, but not necessarily cover your costs at a physical store level because consumers are choosing to shop online.

54:16They want to do that. So you're actually pulling your own customers out of your store. I talked about JB Hi-Fi before, mate. I suspected, and I'll make a stupid outlandish statement, in 20 years' time, I reckon JB Hi-Fi's got fewer stores than they've got today. Because at some point, they go, you know what? Our online sales were 5 % of sales. Then they were 10. Now they're 85 % of sales. And we'll have some showroom-style stores around the country. But most of our customers want to shop online. We can't support the footprint of those loss-making stores based on that unit economics I started by talking about because all of a sudden, we've got everyone.

54:47People are store shoppers. We're eager than we've ever been. We sell more stuff than we've ever sold. We're more profitable than we've ever been. The problem is the stores themselves don't make any money for us anymore. And I really think, that's it. I'm not saying this is the tipping point. I'm not saying everything's going to fall over tomorrow, but I think this is the carrying the coal mine. Let me call it that. That's probably a less aggressive way to describe it. It just feels like, and by the way, the other quick thing I'll let you talk in a sec. Lincraft is a private business. And Lincraft has shut down its stores.

55:16Premier Investments run by Solomon Liu. They used to own Just Jones, JJ's. They still own Peter Alexander and Smigel. He used to close stores all the time and they weren't profitable. But 99 % of other retailers, when was the last time you saw a retailer close a store voluntarily? Not only like we've got a crisis, we've got to cut stores, but one of those, that one's not profitable, close that store, we'll open another one over there. This isn't working, that's not working. It's always been grow the network, grow the network, grow the network, show we're bigger, show we're bigger. I don't know, mate.

55:41I think we're in a brave new world. I think things have changed fundamentally. It had been changing for ages. I just think we'll look back and go, So, Lincraft, June 2026, was the first of many who made that decision. Hmm. Well... I don't know. I don't know. I've got to think about that. Disagree if you want. I don't know if I think it's as pivotal, if that's the right word. Yeah. I think this is just a trend that's been in place for a long time. I agree. But I think you don't come to me as it falls over. I guess that's my point. It's like it's a little bit like, what is it? Gradually and suddenly, your favourite?

56:20I think you don't economics at some point, you kind of go, the stores are making 10 % margins. Now it's 5 % margins. There's 1 % margin. and now it's minus one, oh, crap, our physical network can't pay for itself anymore. I could be wrong, but my suspicion is it may be one of those situations where it's the overnight success that's 10 years in the making, but in reverse. Yeah. I mean, to me it's actually, again, we're listening to the coverage on this, it's just like it's just so dripping with feelings and emotions and vibes and morals. Yeah. And it's like. Shouldn't, shouldn't. Yeah. Yeah. Yeah, and it's just like they are doing what any business has ever done since the dawn of time.

57:01They are reacting to consumer preferences. They're not doing it because they want to do it. They're doing it because no one's shopping there, not at the prices they want. Retailers, as a general rule, don't make great margins. This is the other thing that people get upset about with inflation, like these greedy businesses screwing. They obviously are charging as much as they think that they can get away with, but they're kept in check by others who will undercut them. And, you know, in the same way that I always point out to my socialist-leaning friends, it's like you're always advocating for the highest pay that you can get with your job.

57:31We're always doing that, right? And the fact that they've got two choices here. It's like, to your point, the unit economics are such that if you want this stuff in this location at this price, we can't do it. Not because we're a-holes, but because it just becomes a charity at that point. And if you're a charity, you're going to have to rely on donations, right? It's like, and no one's going to be donating to Linkraft when the Smith family and Lifeline exist, right? It's a silly kind of notion. So they could turn around and go, well, I guess we're going to put up our prices. And maybe they could.

58:04I don't know. This is business. This is the nature of the beast. This is entrepreneurism. It's like trying to intuit a demand from the market, believing that you can sort of provide something at a certain price and that people will accept it. And there is only precisely one way to know if you're right, and that is to try it. And Linkraft has presumably been trying to sort of get that right for a while. And the people at the front line have gone, you know what, we just, we can't make it work. So we're closing it down. Simple as that. Simple as that. And then I guess we'll do online because that's going well.

58:37And maybe they'll find that they suck at online retailing or someone else does. This is all just the cut and thrust of it all. And it may well be to your point that this is more that part of the S curve where it really starts to sort of take off. Could well be, right? I don't think this story is anywhere near over. But I guess my point is, is just like, yep, this is the nature of the beast. like i i i it's also the other thing i find funny is like in in reporting when business is going well it's there's a very negative connotation when they're going bad there's also like oh you know oh people lost their jobs and it's like well you need profitability and success to support jobs and growth and all of that kind of thing you know it's just like and that's bad and then when it's not not they're incapable of supporting those and then then that's bad you you can't have one without the other, I guess is what you're saying.

59:39So anyway, it's another separate point. But the other angle, of course, is, and they noted this was the very cheap manufacturing from overseas. And again, that tends to roll people up as well. And it's the same people who are benefiting from very cheap products, right? Like who is the, who's got the most agency here. And it's the consumer. The consumer has the most agency. If there is a market for someone to pay 30 % more than what you might be able to get from Timu, and you can do it in a physical store, then you should do that. And if there is demand for that, then you will be successful. And if there isn't, you won't be.

1:00:30These guys are just responding to what other people are are demanding so i just as a separate point those that bemoan the the closure of all of these stores i think like a lot of things we need to look our collective selves in the mirror you know it's like they didn't do it to be evil they didn't do it because they wanted to do it they did it because they had no choice and they had no choice because people weren't rocking up and buying stuff at the physical store. Full stop. So, yes.

1:01:03I also think that while online retailing is obviously – well, actually, here's the thing. You and I will remember that in the early days, we actually had to have arguments about people who thought that it was going to be a thing. There was an argument at a point like, oh, no one's ever going to shop online. Are you kidding me? Yeah, yeah, yeah. You know, it's sort of like some things are just – I don't know. I don't know. You know what's funny? Just quickly, the way that changes I think is fascinating. Our ability to conceptualise some of that. I mean, there are some who – futurists get too much credit when they're right and too much blame when they're wrong.

1:01:36Oh, they obviously saw it. No, no, they made lots of projections. Some were wrong, some were right. Some were right. They got lucky, right? But I remember personally, just – sorry to interrupt you, but just kind of go through it. It was obvious that books would sell online. And it was obvious that music CDs would sell online. It was less obvious until it got to the point where it was obvious. and we kind of remember, humans remember kind of points in time at those points in time, right? So we kind of remember the point which obviously Spotify was a thing. But for years before, Spotify wasn't obviously a thing.

1:02:05Think about, the thing it gets me is homewares. Beds and couches. I'm still, I wouldn't buy a couch online. I don't think I'd even buy a bed online. I didn't know this. Yeah, I bought a couch online. And a bed. Right? And so that will, at some point I will and I'll look back and go, well, of course I was always going to do that. As Samuel said, saying of course i'm gonna download music and of course i'm gonna buy music online of course i'm gonna use my credit card and i i only say that mate not to not to make too much of a tangent other than the inevitability we see is often us remembering the points in time which we realize are inevitable and forgetting the points in time where we didn't think it was and not not you and just just i think that's human nature of like you know yeah will people use their credit cards line oh maybe i don't know probably maybe no i don't and now it's like 100 of course and then all those It's kind of flowing from there.

1:02:49You keep going. No, you're 100 % right. The only difference there is that there is a point where they're plausible. The very early day, in 1999, is everyone going to do it? I don't know. You could actually have a very sensible debate and see merit on both sides of the argument in 1999. In 2019, you're an idiot. You're just a moron. There's no way to sugarcoat it. People will never do that. So it was like, they are doing it and they're doing it in ever greater numbers and it's exploding in terms of adoption. So that to me is, I think that the core investment lesson for me here, and I know I say it a lot on the pod, but I just so fundamentally believe it with every fiber of my being is that to be successful with some of these things, it's not about trying to see something before everyone else does.

1:03:37And of course, if you can, then good luck to you. it's just a matter of just quote just unquote isn't that a word yeah such a such a lot of heavy lifting there but it's it's more about recognizing when you're on a curve right more than anything else it's like i don't know if smartphones will be a thing are people really going to use a phone if it doesn't have a qrdi keyboard on it i don't know and then you look around at one point it's like right yeah actually 80 % of new phones sold or all that. And then, you know, it's saturated in the market. And now I'm not, I'm still making a forecast of sorts, but it's just like, it's a very different caliber.

1:04:17So I just make that. Yeah, it's updated. That's a good point. Update your thinking, right? In terms of the online thing now, this is what I find interesting, is that now the debate has flipped. Now it's like, everything's going online. It's like, whoa, whoa, whoa. I don't know about that. And it's not like, I'm not being contrarian for the sake of being contrarian, but people love the experience of going out and trying stuff on and touching. We're very tactile as a species. I absolutely think online retail will continue to grow, but I very much think it gets to a steady state where there's a healthy balance.

1:04:58Healthy, not as determined by me or what I think is appropriate, just by what it turns out that people like. There would come a point if everything was available online and I was to create a nice little boutique store in my main street that you could come and buy some things. I bet you, even though they were more expensive, I bet I could make a go of or someone could make a go of it because there is a point of difference there and people will demand it. Do you remember when, remember everyone was saying that cinemas were going to die? Yeah, that's right. Now, you know, they're not necessarily doing as great as they were in the heyday.

1:05:34But they're still a thing. I mean, my teenage kids go out to the movies all the time. And, you know, just for fun. So now I will go, we've got Netflix. And they look at me like I'm an idiot, which is the appropriate response because I'm just, I'm totally trolling. I'm totally trolling. But you will remember. You will remember the conversations where it was like, oh, no, they're all dead and they're all going. It's like, no, people are changing in terms of their preferences and their desires. And the entrepreneur, the business people are reacting to that. And the ones that best cater to that demand will prosper.

1:06:14And those that go, no, no, la, la, la, head in the sand. This is how it should be. And no one turns up. Well, they fall by the wayside. And we have this wonderful creative destruction. And the consumer is king here. That's the thing I always want to come back to, that these are all what Linkraft is doing, what cinemas are doing, what any of these things are doing is just in response to it turns out what people actually want, right? And that is the proper framing of all of this stuff. So I hope Linkraft make a really strong go of it with their online store. I think it's a shame that those stores are closed because I feel for the 400-odd people who lost their job as a consequence of it.

1:07:01But, you know, you always have to ask yourself, well, what's the alternative as soon as we... We've talked many times in this pod about governmental efforts to sustain uneconomic operations in the name of jobs and the perverse, counterintuitive sort of nature of all of that and how it actually makes us all less better off. In the name of doing some little bit of good here, we have a much greater, we have much more injury sort of over this other thing. So I would, I guess what I was surprised about, and maybe there's a, I'm not sure that, I'm absolutely convinced actually there's a very good reason, but of all of those stores, what did you say, 60?

1:07:3962, I think, was actually on the media. So I would have imagined that there is a few there that are actually doing just great. Maybe without the other store networks, they still can't make it. I see the logistics problem, but I agree with you, actually. You could even treat the store as an online customer effectively and just deliver stock. I mean, I'm actually with you because they're a privately owned company. There's no – I can't imagine. You don't have to sell it to the market, right? Right, right. And I can't imagine a story where they're like, that store makes money, let's close it anyway.

1:08:06It seems counterintuitive. Why are you doing that? Right, right, right. Yeah. Well, maybe none of them are. Yeah, I think I was thinking, I had the exact same thought. I'm glad you mentioned it, actually. I wondered whether the model itself, whether it's the pricing or the distribution or the range, I don't know if there's too much dissonance between the two offerings at some point, is all I might guess outright. I don't know. It's hard to know. By the way, I should say, things like a company at Adore Beauty, I still loaned some shares, and that's been an absolute debacle of a recommendation and a share ownership.

1:08:36They've actually gone from online to open physical stores for all the tactile reasons you mentioned, mate. So I will say really clear, I'm not saying the end of physical retail entirely, but I do think at a – even if people want to – again, my point about the kind of economics is if they want to touch and feel, but that's only 85 % of them, even though they want to, there's not enough, right? Now, I suspect we end up in more showroom-style stores. I've said before, your day out thing is really important. I suspect the Westfields – I said about owning shows in Westfield before. I suspect the Westfields are probably the last ones to go because that is the destination, right?

1:09:06You go to meet the friends, go to the shop, spend the day out. You don't go and just grab a pair of pants and go home. You're there for the day, right? Your suburban ones, well, if there's a Woolies and a Michelle's Patisserie and a Brumby's Bakery, you're probably going to go there and do your shopping and grab a coffee, and that's probably okay for a period of time. The stuff in the middle, the kind of semi-regional department store, is there a reason to go further than the local shops? I can't believe the department store is still a thing, obviously. So that's the other thing. The way retail gets changed, not every retail business goes broke, but unit economics, if David, David is not a public company anymore, but it's owned by a public company.

1:09:45I've said a lot of times, just again, for the sake of, I say don't make predictions. I make Atlanta stupid predictions for fun just sometimes. In 20 years' time, if there's more than a dozen DJs and myers, I'll be shocked. I think you'll find there'll be one of each in the major capitals down the eastern seaboard. You might get one in Perth. If you're lucky, you certainly won't get one. Adelaide, Darwin, Canberra maybe probably gets one. because you just don't have the foot traffic and the critical mass, right? If you want to go to a DJ's or a Meijer, a bit like the Westfield, you'll make it a point of going to those places.

1:10:12My local shopping centre, you know, no. The one closer to me, no. Why would I bother? I can get everything out there online or from somewhere else. So I just think that, again, my point about economic economics, man, I might be overplaying it, but I suspect my point is the stores fold long before the consumers go away en masse because they simply can't afford to keep the stores open for the reduction in... If 80 % of people still want to go to Meijer, Meijer closes. It doesn't exist. You have to be able to pay the way of the store to keep the store open. And I just think that happens sooner than...

1:10:47People will decry the loss of Meijer in large numbers because most people still want to. When three-quarters people still say, but I still want that Meijer, and Meijer's gone, yeah, but there's not enough of you anymore. I expect that's what happens first. Rather than everyone abandoning Meijer altogether and saying we're never going to shop there, It's like, we'd like to, but there's not one in my area anymore. And what people really say is that I want you to still be there and I want the same price. Yes, exactly. That's what they're really saying. And the response there from Maya would be, it's like, well, unit economics being what they are, I just can't do that.

1:11:18But I can do it if you want to pay 15 % more or whatever the number is. And maybe that's worth a trial. And maybe and almost certainly there'll be plenty of people who go, yeah, actually, I love it so much. and I'm not happy about paying more, but if that's what it requires to be open and for me to have that experience. Well, I'll go to the city store and I'll travel for extra half an hour and I'll go there on a Sunday to make a day out because I like my, and my local one's gone, they'll go there. The ones in between are the ones, I think, where you just have that slow leakage to the point of like, well, we can't afford to renew the lease here, guys, because we're not making any money.

1:11:50I suspect they close down pretty quickly. You mentioned Soliloo before and regarded as one of the better retailers that's out there and closing stores. I mean, you can't close your way to prosperity, right? Yes, yes. But you can't ignore reality on your way to prosperity either. Store counter is just vanity, right, exactly, yeah. It is, and too many companies just, they know we can't, they see a store closure as a fauna. I'll give you a very good example because it gives me a chance to sneak in a humble brag. That's the main reason to do it. But I own shares in a, not as little as it used to be, company called Stealth Group.

1:12:29And they've got a bunch of, they do sort of hardware kind of stuff. And in their recent trading update, they sort of made mention of the fact that they've had to close down a bunch of stores. And so it actually nullified a bit of the revenue growth. Actually, wasn't much revenue growth at all. But look beneath the headline there. It's like, yeah, but same store sales of the remaining network grew at 5.8 % and net profit grew at 87%. them. Now, what do you want? Do you want lots of stores or do you want lots of really, really good stores with very strong economics? And you absolutely can and should shut down those.

1:13:10They are dead weight. They are dragging you backwards just for the sake of having a store count vanity metric, or we said we would have a presence here and that's what we're doing. It's like, okay, but just recognize that there is a cost in that. I think Mike Arnold itself has done a great job is just basically saying, yeah, we've got a store network. It's got a lot of opportunity. We think we can scale it. There's just, there's a bit of dead wood in there and it doesn't make any sense to do it. And what you sort of, you close those down, provided that the existing and remaining stores, sorry, can maintain that kind of sales momentum.

1:13:41It's sort of like this temporary hit and then you will see, like, why not focus all your efforts where things are going really well? People get confused with businesses that aren't familiar or not sort of, I guess, in your immediate experience. But, you know, if I've got 100 pizzerias and 20 of them are losing money, close them. Yeah, correct, yeah. Oh, but now you've only got a network of 80. Yeah, but they're all making more money. Exactly. I can absolutely, I can reduce the size of my business in terms of staff count locations and make more money. Take out costs, lose less money. The only thing I will say, only think of devil's advocate slash broadening the conversation is there might be a reasonable argument on the margins for a breadth of store footprint.

1:14:30You know, and I own shares in Domino's. If there's a Domino's in my local town, that's losing a little bit of money, but the others around there make money. If I take it away and I reduce the store, I shop somewhere else for pizza. There's some... Moreover, it's the franchisee's problem and not yours. Well, it's true too. But yeah, call it Linkraft or call it whatever. So, you know, in some, it's a very marginal argument and it would kind of be one of those, we're losing a little bit of money or not making as much as we'd like, should we keep it open? You'd probably go, yeah, because, you know, rather than shop with us in the competition.

1:15:01J.B. Hyfield bought the good guys years ago, right? And that was an objectively value-reducing decision. They make less money on good guys. The money they've spent, they should have returned back shares or bought back shares or something else, they reduce their return on equity doing it. except if they hadn't done that and Harvey Norman had bought it or a private equity model had bought it or someone else had bought it and they're competing with good guys, there was a bit of game theory involved. And again, I'm disagreeing with them. I'm just broadening out the conversation. There are arguments to say the competition or store presence or brand usage or loyalty or whatever.

1:15:38But I think it would be a very great decision. We all know half your marketing budget is wasted. We just don't know which half, right? and say, I'm just going to get rid of half of my budget. It's like, yeah, but if you're getting rid of the wrong part, you know, you make an excellent point. This is the nature of it. This is what we're talking about here. We're just talking about people trying to figure out the best way to serve their customers. And they want to do that because if they get it right, they'll be rewarded. And if they don't get it right, they're going to be punished. They're going to lose a bunch of money.

1:16:06It's like that's a really good way to sharpen one's focus. And, again, if you're successful, it's only because you did intuit what actually people wanted and how much they would pay and in what manner that they would do it. And I, in the age of multinationals, that's a whole other conversation. But I really think for the small business owner, if anyone out there is in that field, my humble opinion is go niche. Go with a big guy's car. I reckon that, you know. And it's service and it's range and it's all the things. 100%, love it. Yeah, go kick it. There's a little area near me and there's a little sort of individual store.

1:16:44They do clothes. My wife loves it. It's the only store that exists of its kind because it's not a franchise and it's not a network or any of these kinds of things. But it's 40 % more expensive than what you get elsewhere. But as my wife likes to tell me, it's very good quality and et cetera, et cetera. But my point is they clear and they're doing great. Well, from the outside, they look like they're doing great. I'm certainly doing my part to keep them in the black. you know and and it's sort of like i think you could look at that and go oh they should open up in a westfield it's like nah no don't don't definitely don't do that they should open up in the main street in pit street and wherever you know it's like no no no no i i think go to the niche where you are not competing on price because as soon as you start competing on price as your only point of difference you're going to lose out against people with far greater scale and far cheaper cost of capital and the rest of it.

1:17:38You do something and it's like, yeah, we're more expensive. I mean, actually another good example in my local area is a place that does pretty good pizza. You know what? It's twice as expensive as Domino's. You know what? Everyone who goes there knows it's twice as expensive as Domino's and doesn't care. Right. And I'm not even making a value judgment. They serve a particular group of people with a particular product at a particular price and they've found enough of a market to make it worth their while and hopefully deliver them a profit. And I would say, if you're out there bemoaning, as a lot of people do, there's a lot of hand-wringing with Lincraft.

1:18:12There always is when an Aussie company goes on top. We hate them when they're successful and we pity them when they go under. That's just what we do because we don't understand capitalism. You're just right above the breadline. That's where we need you to be. But if you're bemoaning all of this, and as we said, 62 stores, I reckon some of them are probably in some pretty prestigious neighborhoods for people who are far less price sensitive, who want to go down and touch the fabric, see it, try it on, look at it under the real light. You know, all of these kinds of things that people who sew and make stuff like, you know, want to know.

1:18:51And I reckon you could probably make a go of it. Would I advocate for you should try and raise$100 million and open up a global network of retail storefronts for fabrics? Well, you can, but that would be a very different proposition. And I think that is part of an opportunity in the world that we live in now for various reasons. So I won't get into it. It's just like go niche, go bespoke, because that's the area that a Domino's can't compete on, right? Domino's can't compete on a$30 pizza with the dough that's freshly made on site every day. You can't do it. And fresh ingredients. Yeah, exactly.

1:19:33You can do it. And by the way, both are – so back to investing a little bit. Both have their markets. Yep. And this is the beauty of investing. You don't have to – it's not – some categories are arguably winner take all or winner take most, right? But even winner takes most, as long as you're paying a decent price for a business with a decent future and decent cash flows, that's all you need. And, you know, we start by talking about Musk and trillionaires, right? Yes, it's lovely to be a trillionaire. But if you kind of break it back, the question is like, well, what do I need? Do I need the new pizzeria to – I've got a local bloke, right?

1:20:06He's a lovely guy. Runs my local cafe, my local favourite. I'm a creature of habit, as the listeners may know. And my local cafe is the one I go to, and I knew him from there. And his kid's actually out of the school. My son goes to. He's, since I've known him, bought three other cafes in the Highlands. Because he's just really, really bloody good. And he's not trying to be Maccas, and he's not trying to be Gloria Jeans, and he's not trying to – it doesn't need to be. And the fact he hasn't got a thousand cafes or a recognized global brand. In fact, the four cafes are on different brands. He's not trying the chain approach.

1:20:37This is, I won't say on his behalf, from the outside, he knows how to run a good cafe, right? It's good food. The staff are great. The locations are good. It's a pleasure to go and grab a coffee there. What kind of person do you want to run a cafe, by the way? Is that the kind of person that you want? It feels like that's kind of a good thing. You're not going to pay McDonald's prices for the shares because he's never going to have 1 ,000 cafes in the country, right? But he doesn't need to. I don't know how much money he's making. I don't care. I'm never going to ask him. But I hope he's making a good amount of money because he's serving people.

1:21:07The cafes are full. They like the price. They like the product. They like the staff. They like the service. He's doing a good thing. And that kind of – And he still needs a market price for that too. Absolutely, right? Of course there is. But you just need to know, and that's what I'm saying, McCafe will do spectacularly well, right? Let's go to a drive-thru coffee, pretty good coffee, pretty good food. You get what you want. It's quick. There's a market for that. And there's a market for the local cafe in the local suburb, which does a really good job. And so both are true at the same time. The job of the investor is to, to some degree, without predicting necessarily, work out what you're investing in.

1:21:41Now, I'm not paying$2 trillion for Starlink, personally. I might be wrong, but I'm choosing not to because I don't think it's got enough growth there. Would I pay$1 for Starlink? Absolutely. Yeah. The only question is what point between those two extremes, right? Right. And how much growth is left? And so how do you price that growth? And what size is the business and what makes it successful? The things that makes the local cafe successful aren't the same as make the cafe successful, even though they're both doing coffee and food. There's a very, very different recipe, literally and metaphorically.

1:22:11And if you know that, that's what you need to start thinking about. So back to our kind of the online and the unique economics stuff. I take your point where there'll always be stores around. I'm not buying shares in a physical retailer unless they're either, to your point, really differentiated or have a great online strategy. I'm not buying shares in a retail REIT, real estate investment trust, unless I think they are a destination location or they've got reasonable protection because they're convenient like the local Woolies and a cafe and something else. Why? because I don't suspect, or better I'll put it, probabilistically, I don't expect those mid-tier, stand-for-nothing, caught-between-the-two have a particularly bright future.

1:22:51So I could be wrong, but I'm not going to do it because I think unit economics mean, if not fewer retail stores, I think it will be actually overall. But, you know, can you charge those rents? Probably not, okay? Can you cover your costs? Probably not. We know there are ghost malls in the US. Will we have that here? I don't know. but probabilistically, does it feel like a winning bet to try and buy shares in a mid-range retail REIT? Not to me. And other people might disagree. If you disagree, listening, knock yourself out of the markets there, you can do it. But from an investing perspective, I guess that's my – I say insight, it sounds like I'm being a bit of a wanker.

1:23:24My thought is just in this environment – Never stop me, mate. Or me, frankly, I just don't normally pretend. The point is just in this environment, I don't think they are good bets. And so I'm choosing differently. I think focusing on those companies that are doing best. If you're in the retail space, which ones are winning the e-commerce? Or, as you say, doing a fantastic job of serving a local specific niche, probably with high prices, probably with high margins, because that's why you would shop at the local. Those are the things I'm looking for when I'm thinking about how to invest my money.

1:24:01Yep. Yeah. I mean, I agree with all of that. But it reminds me yet again that the easiest way to destroy shareholder value is to try and grow the business, which is like the very counterintuitive. And I'm not saying growth is bad. If growth eventuates, then brilliant. And should you pursue growth? Absolutely, you should. But should you pursue growth doggedly and unreasonably so when those unit economics, back to your term there, don't make sense? If you are – the amount of ASX companies that have gone to the graveyard, pretty much you could sum it up as management empire building. Like I want to be the CEO of a bigger company.

1:24:46I want to acquire this. I want to – you're not actually looking at the individual kind of store level. And it's just all predicated on – but at some point we'll have enough scale on it all. work. And sometimes that does, but it's just like, to me, I, I agree with all of you. There's, there's no retailers I'm interested in or hold. Um, but if there was one that was out there, I would actually be really interested in the company that sort of, we kind of do this and, uh, we actually don't really plan to grow only because there's not any good opportunities. So we're just going to just keep churning the cash out and paying it to you.

1:25:18Uh, if anything changes and there's an opportunity to reinvest that cash or make an investment for growth, will absolutely pursue it. But in the meantime, we're just going to throw it out there. The market would price it at a low multiple and I would probably make out like an absolute bandit. Not because the share price goes to the moon, but because I just get a wonderful free cashflow compounding machine that just like, well, it's a free cashflow machine that I can then use to compound elsewhere, either in that company by buying more shares. And these are why, you do have these insanely successful, long running, profitable private companies that have never listed because they don't need the capital.

1:25:53Why would you want the headache and the cost and all the nonsense that goes with it? And a bunch of idiot shareholders jumping up and down saying you should do this and you should do that. And it's just like, no, we're just in the business of making as much money as we humanly can. And sometimes making money in that fashion is actually saying no to growth. No to growth that is uncertain and risky. Don't risk what you don't have and don't need for what you have and need, right? As you like to say. And it's just a good reminder outside in investing, but also outside of investing as well. It's like, I made my piece with Shawman long ago.

1:26:26We're not going to grow. I just, we're not. And I figured that - You're already a multi-billion dollar business. Who needs money? Exactly, right. But I've actually, it's been incredibly liberating. And, you know, we, I like to say this to my wife, we make more money than most ASX listed companies. And that's not because most ASX listed companies are loss-making pre-profit. That needs to be on the website or on your business card or something, mate. Yeah, but it's true. Like it's like a lot of that is generally the case. It's not a lot of our market suitors quietly. We keep going. That's kind of the point of the market though is to raise capital.

1:26:59But it's like I can name a thousand people in our space and wider who have just been so desperate for growth. And I get it. I mean, don't get me wrong. It's not like there is growth just there waiting to be picked up and I'm ignoring it. It's just that when I look at all the opportunities there, there's just nothing that's really enticing and obvious and got a good risk-adjusted sort of return potential on it. But the others who have done it raised money, raised money, raised money, you know, and they've been around. Top line's growing incredibly well, but you're just bleeding cash, bleeding cash, bleeding cash.

1:27:33And you're at a point where the only Hail Mary is a nice big exit at some point because you find someone who's got the ambition or the hubris to think that they can actually finally make it work or plug it into their network and sort of make it work. And it's the opposite of what everyone tells you to do. Go for growth, go for growth. And it's like, yeah, I'm with you. You've just got to put that, you know, the subtext here is where appropriate and reasonable. Go for growth, where appropriate and reasonable. Otherwise, do not go for growth because all you're doing is just like you're spraying and praying and you're more often than not just shoveling very precious capital into a black hole that you'll never get back out again.

1:28:11Yeah, you say appropriate and reasonable, we're talking about growth. what you're really saying is where it creates value. Yeah. Where the investment actually has a positive return. It's like that's – no, I mean, you said I was kind of drawing that to it. Our listeners are smart enough to work it out themselves. But it was that point of like – so that's – the point of that actually was kind of like there's something really bizarre about having to actually make that statement out loud. And you talk about the companies losing money. You talk about the businesses. And I made the same point with the business closures, right?

1:28:40If you're not closing – I don't know how many, But I suspect, I'll make a stupid number up. If you're a large retailer and you're not closing five senior outlets every year, you're probably not helping yourself. Not because they're always losing. Is this really the best location? Is it really the best rent? Is it really the best customer? Maybe, probably. I say five, not 15 or 20. One in 20 stores. Look around and go, are they all the right stores in the right places making money? Are they the best places to be, you know? Or is it easier to go, are we going to add stores instead? Because then we're bigger.

1:29:07Look, the store networks. Every bloody retailer owns some. Oh, we think the store network opportunity is this many stores. I mean, hopefully it is, right? Hopefully there are genuinely underserved groups out there who would love to shop at your retail outlet if you have one in their area. Knock yourself out. But if it's like – Starbucks did this two or three times. The old joke used to be there's a Starbucks in the toilet of every Starbucks. Yes. And they did, and they got their master's, and they went, hang on, we need about – and they cut – I want to say about half, which sounds outlandishly large, but I think it was something like that, mate.

1:29:36Well, they kind of just went, okay, we got a bit silly here. Let's be realistic. Whisted by their own petard, as we like to say. That's always lovely. Shakespeare's always a good quote. It is worth calling out. Mate, I think we've probably done this to death. I think we're probably going to leave it here. I've really enjoyed this conversation. Will you come back on Sunday? Mate, I ain't talked. As everyone knows, I can talk underwater with a mouthful of marbles when it comes to finance, economics and investing. So, yes, I 100 % will be. In that case, we will do that. We'll answer some of your questions this Sunday.

1:30:07Stay tuned. In the meantime, have a great weekend. and Fuller. Cheers. The Motley Fool and people appearing in this program may have positions in the companies mentioned. General 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.