CBA’s AI SNAFU. August 22, 2025

26:40It shouldn't be hard. And I'm not entirely sure why it's not. I mean, and by the way, the short term it costs more money. So this is a hump we've got to get over and we don't really like complex solutions as an electorate or as a policy. But you say, I'm going to go and spend$35 million a year extra. I'm going to go hire a thousand great people. I know what the numbers are going to get out to. And those people are going to be tasked with looking at both department by department and function by function opportunities for improvement and savings. I can go and do them. And you'd pay for it a year easily.

27:10But it costs more money out front because you have to employ people to do it. And then you go from there. It makes so much sense to do that. You need it in the public sphere, I think, or something like that. Because in the private sphere, if you don't do a good job, you just go out of business. The market to start for you. I mean, that's the good thing about it, right? And it just doesn't work for public institutions. And nor should it. I want to very quickly add that. And there are considerations beyond economic efficiency when it comes to running a school. or a hospital. Like, let's be really close.

27:46Prisons, jails, these kinds of things, you know, but, but it is, I think it's called Simpson's law or something where it's basically bureaucracies just tend to grow because there is no corrective mechanism. These aren't evil people. They're not incompetent people. You're tasked with a job and you're going to do the job. And this is the job that we're given. No one in that institution, given the incentives at play are going to go have a meeting and go, how can we do things so much better that we can half of us lose our jobs? Like no one, and I'm not saying, cause it's, you know, for any other reason that just, no one's going to do that.

28:21Right. And everyone's trying to do really well, but you're sort of, you're stuck in an office miles away from the frontline. There's no direct feedback mechanism that's there. It's just the work, the work fills the available time every single time. And when you double your workforce, you know, eventually they'll all be busy and you could do it again. I'm pretty sure it's called Simpsons law. It's I'll look it up. Yeah. But yes, yep. Can I – so I want to give a massive rap to Danielle Wood. Yes. She's the Productivity Commission Chair. And I've got to say, I've always been a fan, frankly. She's from the Treasurer side of politics.

28:56So you could have been, you know, reasonably assumed that maybe it's a captain's pick and maybe it's all going to be, you know, pro-government this and everything the government does is right. You know, same sort of side of ideological politics. Danielle Wood would say she's fiercely independent. She absolutely is, which is what I'm getting the credit for. But, yeah, it's worth kind of calling that out as well. But no, so she talked about regulatory hairballs earlier in the week, which is a brilliant phrase. Basically, you know, things are getting in the way. Here's the quote, a couple of quotes.

29:21Quote, growth has simply fallen down the list of priorities in policymaking. Nowhere is this more evident than in the growth of regulatory burden. Regulatory creep is, in part, a function of demand for governments to do something every time an issue emerges. When combined with Australia's tendency to look to government for answers, our Canberra fix, we have ended up with a system that dampens growth. Last quote, mate. She says, quote, no one wants to be the big meanie critiquing a worthwhile objective, but we need to remember that not delivering as much housing or infrastructure or gripping future innovation and growth are also deeply undesirable outcomes.

29:52Nailed it. And I just, end quote. And I thought that was just, you know, and this is coming from someone of the left. So this is not a, you know, a right-wing libertarian, not that I'm banging them necessarily, but, you know, it's not like someone you think, well, of course, they're going to say, you know, less government, small government, less regulation, get out of the way, the market will decide. is just saying, hey, don't default to adding bureaucracy, adding regulatory burden. Not everything needs to be resolved or solved with a regulation or a piece of legislation or a rule. Now, some things do, and again, this is important.

30:18It's not either or. It's let's make sure we understand where it's appropriate and needed and where it's not. And that's the stuff. By the way, that's probably, I suspect, the best thing of this week of the economic roundtable. It's actually not the roundtable itself. It's probably Danny Oldwood's speech. And if it does get through the heads of those in power, both on the government benches and the opposition, if we do have less of this moving forward I think that's probably a very good thing I really don't like how it always those we will always interpret ideas through the lens of well that person is on the left or the right to me it just seems like no that's just common sense I mean what's it got to do with where you are on the political spectrum can we just do things in a smarter more efficient way like what's that got to do with left or right that's just that's just like common sense doesn't make sense or not that's right one plus one is two no matter where you're on the political spectrum yeah exactly i'm just making the point that you know it was a captain's pick and some people would have otherwise said she would be she would be just spouting um accepted wisdom from the left because that's her ideological yes i guess i just wanted to make the point that basically to give a rap firstly because if you heard that if you heard someone say that you'd be like oh that's probably coming from insert right-wing think tank here right and it's just again that that very point you're right to say it shouldn't matter i guess i'm almost doing the reverse with saying not that it matters more but it's it's worth the it's worthy of consideration because it's not someone on who is opposing the current government saying you should fix this or my guy would fix it or you guys suck because you don't fix it it's someone who's ideologically aligned at least on the left of the center in some place saying actually there's an issue here that my political opponents would ordinarily be raising i'm raising it because to your point it's common sense it's the right thing.

31:57I don't need to do it because it comes out of the playbook of, you know, the red playbook or the blue playbook. It just kind of makes sense that we should maybe dampen growth and productivity by adding regulation every time someone sneezes. I've got to correct myself. It wasn't Simpson's Law. It was something else. I love all the laws and the raises. You do love them. I love it. Hanlon's Razor is a great one. Occam's Razor, obviously. Anyway, Parkinson's Law. This was penned by historian Northcote Parkinson in The Economist in 1955. He says, work expands so as to fill the time available for its completion.

32:29He proposed a related rule about bureaucracies. A bureaucracy expands at a rate of 5 % to 7 % per year, regardless of the amount of work to be done. The observation is that administrative bodies never shrink, even when their workload declines. Because people create subordinates, not rivals. And we invent work for each other. More staff leads to more reporting, more meetings, more approval, more feeding, more self-perpetuating growth. And I want to really hasten to add here to this isn't a public versus private thing. I've worked in, as you have made large private commercial for-profit organizations.

33:02And at a certain size, you just, I've caught myself in that zone in a little while where it's sort of like, I have just finished a week where I've worked 80 hours. I've been busy as buggery. But when I write on a piece of paper, what was achieved, I just sent a lot of emails. I sat through a lot of PowerPoint presentations. there was a lot of interfacing with my colleague who's like what do we actually do like nothing absolutely nothing I um so a couple of a couple of examples I worked for an organization once I've said this before I'm sure they laid off 10 % of the workforce I told my head office it was an international company told my head office we're just laying off people that's what we're doing okay um 10 % of people and it was they were people who worked hard who had jobs who had outputs all that kind of stuff and if you really remember two weeks later kind of going nothing actually stopped happening after they left we're still making sales we're still the organisation function perfectly fine with fewer people when you force to make the hard decisions did we stop doing a few things probably yeah was there a few less meetings probably maybe I didn't count them but it didn't change the other great example is Jack Welch who is now reasonably discredited in the fullness of time but he gave an example in his book of there was a report that used to get done at the end of the month.

34:17It took three days or four days, 11 different columns from different sources. This got pulled together every month. And he just started to take columns off. It's like, let's not do that column, that column. And it kind of just took less and less time eventually to stop producing the report. And nobody, I should, it might be apocryphal. He said, nobody ever asked for the report. So they'd spend days and days doing this thing every month from different sources, different people. And then the report went away. I was like, oh, maybe done. I go and see 80 % of the people listening right now are going, uh-huh, yep, yep.

34:45Because it is so widespread. Do you know what I heard? I may have mentioned on the pod before, but a little while ago, I heard this saying, I just love it, which is if you want something done, give it to a busy person. Yes. And it's so good because it's I love things that are a little bit counterintuitive. You're thinking, wait a second, they're busy. Why would I give it to a busy person? It's never going to get done. But a busy person is forced to prioritize and just get on with it. When you've got all the time in the world to complete a project, you will take all the time in the world. If you need any example of that, just think back to your 18-year-old self having to do a high school assignment.

35:23It's like, oh, I've got six weeks. You know, I've got all – you do not spend much time at all, if anything, until the night before. And then you do it. And guess what? It gets done, right? Because it's like I have to do it. And there's a lot of wisdom, I think, in that. I think and this is this is where to your point without some sort of external motivator like a profit motive or something else and I there is a there's a very cynical view of bureaucracy self-perpetuating I think that's partly true a lot of the time there is something that's absolutely genuine if I had more staff in the department of x I would do more things with those people I would I would try to produce more reports better reports um we could always do this service, provide that function, do it better, do it harder, do it longer, spread the workload more across the field, already overworked.

36:11You can always, always, always justify adding more staff because you want to do a better job, even completely objectively and with the best of intentions. It's still the same problem because you're not forced to economise. You're not forced to... This is where the efficiency dividend was kind of a bit Orwellian, right? The idea of you reduce your public service budget by 2 % every year and you just got to make do with that. So either you don't replace people, you find better ways to do it. But that's probably the most – I think it probably is – as an ongoing strategy, that's probably the best starting point, which is you're going to have to lose some staff, so choose where you're losing them.

36:44And so you make people think more about efficiency, about what's actually needing to be done. So I think it's partly – but again, to Danielle Wood's point, it's partly the police as much as the public servants themselves. And this is – I gave the example during the week, and this is – I mean, speed limits are a dangerous topic, but where's the last thing we saw a speed limit increased anywhere? Right? Now, I'm not saying it should be, but think about speaking of Charlie Munger and incentives. What's the incentive to increase the speed limit? Well, people will take it for granted and you won't get any credit and maybe there'll be more pranks.

37:15Because maybe too fast is too fast. Well, okay, so there's no upside. There's no downside. If I reduce the speed limit, what's the downside? Well, it takes people three minutes longer to get to work, but they're not going to really notice it. There might be fewer deaths, so that'd be good. and I'll get some credit for safety around schools or whatever it is. And again, those aren't bad outcomes. But take it to a conclusion, if we'd made everyone drive at 10Ks now and no one would ever die on the roads, we accept this as a populace. And again, this is a really hard truth, right? It's a really, really, really fraught area.

37:47But we accept that a certain level of potential injury and death is acceptable for us to be able to get around the country at a certain set of speeds. and that sounds really harsh. Everyone's saying like, oh, it's kind of, you know, not sure I want to say this out loud because it's going to be a sort of trouble. But we do. We never say that. We never say the price of 60, 80, 100 k's an hour is 400 deaths a year. But that's exactly what we do. We can stop it tomorrow. Tomorrow. But we don't. Why? Because we recognise there is a trade-off and that's just kind of like human life, right? It's not nice and it's not good, but it is what it is.

38:23Every time you step outside, you take a chance. you might, you know, take it to a conclusion, you'd stay inside in cotton wool. If I pick up that hairdryer, might I drop it in the bath? Let's scoop it myself. Yes. Okay, I'll never use a hairdryer. Okay, well, I want to cut that tree down. Yeah, I don't want to use a chainsaw. I'll leave the tree where it fell because just in case something. I mean, there are always risks in everything and that's kind of Danielle Wood's point, I think. I don't want to put words in her mouth, but she's kind of saying there is a trade-off here between the good stuff we get by using whatever it is and the risk that something goes wrong.

38:50And getting that balance right is the key question about being the big meanie. that's exactly what she's saying right just every regulation might possibly be good so we should do them all yeah but you've got to weigh the downsides the so-called counterfactuals of what else do we stop how much growth have we given up how much productivity how much quality of life by making some of those rules and goes back to housing i think those housing rules are reasonable but there is a frankly a fair thing to say well actually maybe we don't have windows because that costs money okay well we can have that conversation we should and then try and work out on balance where we actually want to fall, not just in complete harm minimization to zero, but at some sort of trade-off.

39:26Yeah. I mean, some of those things I feel as though there are, safety is in its own category of its own. They're non-negotiable when it comes to certain regulations, just on that last point. But other things like that, I just would, I would sort of say, let the market decide. Like if a developer wants to go and build a bunch of like two by two meter shoe boxes with no windows and no ventilation or whatever, and they can fill it, okay, the market clearly is happy to have that. Maybe that's not entirely appropriate in a world where there is zero supply, so no one's got any choice. Yeah. But I think housing is a weird one, but I take your point entirely.

40:04It's just one of the – I think that's where my ideology just butts heads with a lot of the well-intentioned do-gooders. It's not that I disagree with what they would like to see, but it's the mechanism to make it so is to shake a big stick at people, not imagining that people are actually pretty good at making up their own minds on a lot of things and we'll choose what's appropriate for them. Anyway, just on that, we've got to move on to the next point. It's gone on longer than we thought. But just on that Parkinson's law point, did you remember, I think we spoke about it on the pod a month or two ago, which is like the vast, vast, vast majority of all jobs created in the last few years have all been in the public sector.

40:48Classic example of that as well. Or in the private sector funded by public sector. Yes, yes. So the NDIS, for example. Yes, it's like it's all come from that. And the other one, which I'm just trying to find because I did have some notes on it, which I can't find, sadly. But just to go back to our first topic, the RBA is a classic case in point. When you look at how big an organization it was at the turn of the century. By the way, it actually had a better track record at that point in time than it has had since. It was like a much, much, much smaller operation. It's only grown. And you just got to ask yourself, what do you think is likely to happen over the next 20 years?

41:25Probably going to get bigger, right? So again, yeah, a corrective mechanism is worth considering, particularly when every man and his dog's up there going, productivity, productivity. You know the other thing, though, and this is, I mean, yes, a hundred times yes, I've already said, we will move on, as you say. But for me, the easiest one is just duplication. It's not even the size of, insert government department here, that's absolutely part of it, but it's just state, federal, local. Okay, that's the lowest hanging fruit, right? If I've got to ask three people for permission, that can be fixed.

41:59Again, the example in Gittin's article, I think it was – I can't remember exactly what it was and I won't look it up. But some – maybe it was not even his article. Some productivity comment during the week was basically an organisation that might be in childcare or something else and they have to give effectively the same information multiple times a year to multiple departments. And it's just kind of like – And those departments don't talk to each other either. Right, exactly. So each in their own way, I'm sure justified, but looked holistically at. And maybe that's where you start, right? You start with at a business level or at a consumer level, take me through what you have to do, right?

42:32Well, there's five versions. Okay, well, that seems like it sucks. Let's fix that from that. Rather than sort of top-down saying, what can we get rid of, which is also worth doing. You just start by saying, what's your experience of this? Lived experience, as the cook could say. What's your experience of having to comply with these regulators? Well, you listen to this. Okay, well, that seems duplicative. Let's work on fixing that. A approach like that is a very, very good starting point. And frankly, these days with computers, how hard is it, right? But it may be, again, you create something extra.

42:58You say, this is the childcare information repository. I mean, we've done it with MyGov, right? So all your data gets uploaded there, and then various departments can access that data as they need to, if that's necessary, make those decisions. So it's uploaded once, once a year or whatever it needs to be, rather than ever fill out another form, another form, another form. It doesn't talk to us, you say, to each other. The forms are all independent. Even within departments, I'm sure you have to submit the same information multiple times in some cases, right? I'll give New South Wales government and the tax department are two really good examples of business or governments doing it well.

43:28The MyGov stuff, the ATO stuff, really, really good. Data matching. Yes, they're trying to do it to keep the tabs on us, but things you're having to do. When money's in, when their livelihood's at stake, they really do what they need to do. Yeah, but think about it, right? The pre-population of healthcare, interest, dividends, if you give your tax file number, it's like, is that all right? Yeah, actually it is. Saves me a heap. Easy. Services of Wales do a really, really good job. The app that they put together with, Drivers Life, so working with children checks and regos, and it can be done really...

43:57Victor Dominello was the minister. I think he was a Liberal minister. Did a really, really great job running that thing. It's a spectacular work. Just really improving it. That sort of stuff is not hard. Right now, the biggest challenge, it's no one's job. And that's why we need a separate department or minister or something to say, actually, why would the services of Wales bother talking to the Federal Roads Authority, whoever they are, and the local council, unless you say, well, I'm going to make you do it. Because they've each individual got their own fiefdoms, they've got their own costs, they've got their own whatevers.

44:25It's someone who says, actually, guys, this needs to change. That's how we fix it. Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener.

44:39Earnings season. We talked about being two-thirds of the way through. And you made the point before we started recording, mate, that three, well, two very large companies and one that's pretty big and reasonably well-known-ish, CSL, James Hardy and Ordinate, all got absolutely hit for six this month with share prices down at one point sort of, you know, meaningfully. I think Hardy's was off by 27%. CSL might have fallen 15%. Ordinate's share price fell by on earnings. You really, really don't want to disappoint the market. No. I mean, I said to you as well, like in a small cap world, It was like, yeah, 20 % fall, but these are big, big, big companies, extraordinarily profitable companies in the case of CSL with a wonderful pedigree and history.

45:24You know, the thing with the CSL, which is just so interesting is that that you could have, I don't think it's a controversial statement to say this and different people might have a different view of it. But I actually think most people would put that at least in the top 10 of companies listed on the ASX. not in terms of this is the best stock that you should buy, but in terms of the business with like the biggest moats, the most earning power, most likely if you were to say a company on the ASX most likely to still be around in 20 years and earning substantially more than it is today. It's like, yeah, CSL is pretty, there's no guarantees in life, but that would certainly be up there.

46:00It's a good bet, yeah. But you know, if you had bought that, gosh, when was it? I'm trying to find my notes here. If you had bought that right back at the beginning of 2019. So six years ago, shares are about the same. Yeah. It's crazy, isn't it? That's not the crazy part. The crazy part, well, yeah, it is crazy because you know what's coming. The crazy part is in that same period of time, revenue nearly doubled and operating profit more than doubled. It's like, what? So again, I'm getting my time machine. I go back to 2019. I go, Scott, I'm from the future. I'm from the year 2025. and I'm going to give you two bits of information.

46:39These bits of information are revenue will double, operating profit will double for this business. Jump back in the DeLorean and go back to the future. Now, you go, okay, look, markets can be irrational, all kinds of crazy things, but it's probably not going to be a terrible investment. And I wouldn't, a terrible is not too strong a word because you haven't really lost any money. A few dividends along the way, but yeah. But a very incredibly mediocre one. And so the question, of course, is, well, how do you square that circle? And the answer is, back in 2019, people were paying 47 times earnings.

47:16Now, is it a good company? Yes. But an incredible, like a giant company, big companies trading at very high multiples are always a risky proposition. Because it's just when you're that big, it's hard to grow. If it's just you and me in our backyard, I mean, we could go from zero to a million dollars. That's incredible growth. But to go from however many billion dollars in profit and double that, it's so hard to do. And yet they did it. But over a five, six year period, doubling your revenue and doubling your earnings doesn't qualify a near 50 times PE. So it's just example, 4 ,387 ,219 of. So that's being made up on the spot.

48:03I think that is Simpsons. I think that's Simpsons law actually. Something to do with statistics. But yeah, it's sort of like I come across it a lot and I like to hammer the point when I can is because you hear investors go, well, I just like it because it's a really great company. And it's like, yes, but that's only half of the equation here. So there's you, and Munger used to say, you can, no business is worth an infinite amount, no matter how wonderful it is. And in this particular environment, I mean, let's go with my favorite whipping boy at the moment, which is CBA. We talked about it recently on the pod, but it's kind of like we can discuss how the quality of the business is, but by Lord, the valuations on these things.

48:47And what this reporting season has again reminded us is, well, it's okay so long as you can convince the market rightly or wrongly that you actually are gonna grow. Like, you know, maybe it's unreasonable, but if enough people think that, yeah, no, you will be able to keep going forever, that's cool. But then you have this result that comes out, which sort of is a slap in the face that goes, well, actually, you're not growing that fast. And in the case of CSL, you've just announced some big one-off costs and you're going to spin this off and get rid of your R &D or slash it back, et cetera, et cetera, et cetera.

49:22And basically sort of say, there's no chance we're growing at the kind of rates the market has priced us to grow at. There is only one thing left to give, which is the multiple, and it falls away. And the second mistake that people make off that is they go, oh, now it's cheap. Now, I don't want to say that it's not cheap, but I'm just saying you can't make that statement in isolation with reference purely to the fact that the price has fallen. You can go from excessively overvalued to overvalued after a 30 % drop. Cheaper. It's cheaper. Objectively, it's cheaper, but it doesn't necessarily mean it's good value.

49:59Better value, by definition, good value is what you want as an investor. Now, again, often you'll hear us say you don't want to overthink things too much when it comes to a very, very high quality company. If you're the kind of person who says, I'm only going to buy Woolies when it gets to five bucks. I mean, yes, incredible buy, but you probably will never, ever, ever get that opportunity. and 30 years will go by of you sitting your money in a term deposit while you wait for that opportunity. Missing a good return while you wait for the never arriving great opportunity. We're waiting for this big fat pitch that's never going to come.

50:33So I'm not saying to overthink it. I'm not saying to be too clever. I'm not saying be one of these people who will put a bid in for a stock that's three cents below the last traded price because they feel clever about it when it makes zero difference to your returns or anything like that. But it is a very good reminder when you are owning or considering buying a good company, a very good company whose share price has been going up. That's the hard thing as well. It's very easy to have conviction in a bull market when the share price is up and things are rosy and stuff. Just be very or as confident as you can be that those growth expectations are realistic.

51:10And remember that even if those growth expectations are realistic and the market is right, by definition, that means you'll get an average return because the market has priced in that growth. So to get the outsized return, you not only need these rather ambitious expectations to be fulfilled, but then some to get the better than expected return. So it's tricky. This investing caper is hard. Hey, by the way, Simpsons Rule, I looked it up for you. Oh, yes, yes. It's a numerical integration technique used to estimate the definite integral of a function where the analytical solution is difficult or impossible to find.

51:47Okay. So I was completely wrong. It approximates the curve of the function using parabolic arcs. Ah, right. I go, oh, hmm, hmm. A what now? There'll be a few people listening who understood what that was. I've got no idea. Area under the curve, apparently. Anyway. No, you're right. So I was way off. No, I think you're right. And this is where it's really important. I'm going to underline your point. Share prices approximate the market's view of the future. And that can be rationally irrational. Commonwealth banks, you mentioned, I think it's an irrational expectation. And maybe it's not even estimating it correctly.

52:25It's almost certainly not estimating it correctly if I'm right, that it's irrational. But that's the job of a share price. And so when you disagree with the market, you are saying, I think the market's estimation is wrong. Either the market's not thinking or it's thinking and is wrong. So as people have genuinely said, I think CBA is worth 25 times earnings because I think it's going to grow at 14 % a year for the next 10 straight years. I doubt that's the number, by the way. You might think, well, no, it's going to go at 16%, so it's cheap. Or it's going to go at 8%, so it's less expensive. So that's one.

52:54Or you simply say, what is the market assuming? Well, they're not doing the maths because they're just thinking it's good stock and they should buy it. In either case, your job is to say, What do I think it can grow at? What multiple would that justify? And if the price is cheap on that basis, and you've said this many times around, do you estimate first then compare it to the share price? Yes. So I think I've done the work and I reckon CBA's got this much profit. They're going to go up 5 % a year. The next five years and after that, it might go up 3 % a year. So I'm going to whack all this in a DCF, which you're not going to go to in an auto format.

53:23I said, right, good news is CBA's worth$100 a share. So I'm going to buy it at$100. And you do the math. Again, I'm not saying I've done that work either, by the way. You do the math and go, hang on, it's$172 a share. Right, well, I'm not going to buy it. That's okay. I just don't think... Now, maybe the market's right. Maybe it does grow up 14 % a year. Or maybe it grows at 14 % a year, but the market always pays a stupid multiple. That's okay. You'll always miss some of those. But the real challenge is to make sure you don't fall for, like in CBA's case, or James Hardy's fell 27%. CSL fell 20%, 16 % on the day.

53:55Of saying the market thinks it's worth this, now it doesn't. It's changed its mind, right? So that's where you say, well, if I have to pay 25 times forever for CBA, maybe they will. But if the market ever says, you know what, I'm going to pay 18 times instead, even if the profits grow nicely, you're still going to get whacked and you're not going to make that back because you're overpaid. So, again, you can buy CBA, actually, 27.7 times earnings. You can buy it at that. Maybe it goes to 30 times earnings because the market pays even more. But what fundamental basis would you have for assuming that would be true?

54:24Yeah. What fundamental basis do you have? Now, you can, by the way, buy some good value if the share price still falls. Yeah. And maybe it falls for a long time in a long way. And there's no guarantee things will ever trade at fair value. It's an indicative likelihood based on history, but there's no guarantee. That's just investing 101. Yeah. I have come across several people, though, who will go, you know, you've been negative on the banks for a while that keep going up, therefore you're wrong. And I'm not going to say for a second that I've not been wrong, but it's framed as an argument as to why you should still buy and hold it.

54:56Yeah, that's right. In other words, you're not refuting. I mean, okay, the timing was terrible, didn't work out. And that's why I don't short stocks because I can't time these kinds of things. But things can remain irrational for a long time. So it's just sort of like, it's the best analogy I've got, because we all know someone like this. It's just sort of like, I've been smoking a pack of cigarettes a day for the last 30 years and I don't have lung cancer. Ergo, all the science is wrong. It's not bad for you. It's like, well, you know, it's like, I've been buying this ridiculously overpriced stock where there's this huge downside risk.

55:28and a little bit of upside if everything manages to stay together. And nothing's happened yet, so there's nothing to worry about. Exactly. You can have a different view, but don't base it on a relatively short timeframe. I just, anyway. I've been juggling knives for a while and I haven't hurt myself yet. Right. That's a good idea. And just the earlier point too, just with James Hardick, because I did the numbers on this roughly, but they had that massive fall. And even after that, on a forward basis, the PE is still somewhere around 25 to 30. Building products company. Right, right. You know, a very large one in a hyper-competitive industry, in a very precarious macroeconomic environment, in an industry renowned for its cyclicality, and on a balance sheet that's rather leave it up, that's also going through this massive acquisition.

56:20And, you know, it's just sort of like, holy moly. It's like, how is... Of course, now I've said this, it's going to... It's going to go to the moon. So the gods love to screw with me in this way. But I just hammer that other point. Just because something's fallen doesn't mean that it is good value. Yeah, good point. Can we, speaking of good value, two interesting stories, both in large amounts of money and arguably not particularly great value, but really interesting. So this week we had Qantas being fined$90 million for illegally sacking 1 ,800 baggage handlers. And the National Australia Bank fessing up to having to fine$130 million to back pay staff that underpaid over a number of years.

57:07What did they call it? It was called a payroll classic spin on it rather than saying we didn't pay everyone what they deserved. It was a payroll error. and you know the funny thing that I always think it's not funny it's tragic right but but the the the depressingly funny thing about it all is that have you ever come across a payroll error that is in favor of the employee like you would think I mean look computer systems go wrong you know there are there are errors that are made all the time that's just that you know to to err is to be human so that you can't be too critical but it just seems odd that you'd think statistically at least, some of these errors would go in the favour of the employees, but they never do.

57:51They never do. It's really interesting. Oh, actually, I've heard a couple where they have actually. Employers can't tell you, you have to pay us back this money. You pay too much. Do they have to take them to court and then they get forced to do it by the regulator? No, you're paying the wage. It's easy when you're the one paying the wages. Okay, yeah. But not the size or scope of this one. And I've got to say, mate, I find this, you know, here's the thing. I also don't reckon it's deliberate because I don't reckon anyone in the payroll office is going, you know what I'm going to do? Hey, Jim, let's have a quick meeting off the side.

58:21Should I do Jim, Jim Thomas? Hey, Bob, let's have a quick meeting off the side here. I reckon we could probably make profit higher if we screw our employees pay a bit less than they're supposed to be paid. Yeah, we might get a jail or we might get fined if we get it wrong, but let's do it anyway. I don't reckon anyone's having that conversation. I do reckon to your point. Yeah, I do reckon to your point there's not enough care and attention taken. And you mentioned regularly, you know, if directors and executives were a little more on the hook for some of these things they doubly make sure there wasn't bad stuff going on money laundering is the same thing i don't know no one wants to no one wants to have money go to terrorists with it it's happening i know but i'm not gonna bother looking for it just sure it's just not something that's in there they're not incentivized to spend enough time money and effort looking for the problem so they don't find it yeah i will give nab some credit by the way they found this one because they were changing their systems over and realized they made a mistake yeah so they fessed up put hands actually we did we made a mistake we're gonna make this right and again it's not okay because people went without paying benefits, but at least to their credit, they've said, okay, we found it, we've got a problem.

59:15We're interested in a new system anyway. And when we did that, we realized the old one sucked. But it doesn't justify them getting it wrong in the first place, not putting enough time and effort into making sure. If you've got any obligations, sure, it's, well, there's probably obligation your products and services are reasonable and fit for purpose. But the second one, pretty close by is paying your employees actually what they're worth and believe they should be paid based on whatever agreements you've got, either an award or an individual agreement or enterprise bargaining. agree. But there's something that says, we will pay you this much.

59:42Cool. Thank you. Maybe we should make sure we actually do pay them what we said we'd pay them. That can't be too unreasonable, surely. And it's more, and this is not the case with NAB, so I'll be clear on that. But it is, in most cases, it seems it's not so much the crime. Because I do agree with your point that these are just like not enough care being taken. But it's the cover-up. It's like, oh, you can imagine the meeting, right? It's like, oh, gosh. You mean you're going to walk into the... So we owe $50 million because for the last 10 years. And, you know, there'd be one thing, oh, bugger, we stuffed it up.

1:00:15Okay, let's make it right. It's like, no, how can we get out of this? And it's classic. It's why it's a cliche. The cover-up is often worse than a crime. But yeah, did you notice with Qantas, I want to say that shares actually rose on the day. Did they? Yeah, they did. They're at a record high right now as I look at it. Yeah, yeah, yeah. Virtually. $11.59 is the top tick, I think. Sorry. 11.72, very top tick of the wick. 11.42, so it's, you know. You didn't say top tick of the wick then, did you? Top tick of the wick for the traders amongst us. I was going to say, Andrew's trading tips will come in on the podcast.

1:00:53But isn't that interesting? Because it was a bigger fine than expected. It wasn't insignificant at all. And the judge, I forget his name, was basically saying, listen, I've got to make an example of you here. It's like, okay, cool. But the market reaction says a lot. I think. Correct. I think that's what I think. In other words, you got off with it lightly. Well, also, too, it's also there's always that relief thing of either it could have been worse or we didn't know what it was going to be. Yeah. And, you know. The uncertainty's gone. Right? So now I'm happy to do it. Let's talk about the most interesting part of this was the$19 million fine.

1:01:27$50 million that was actually given directly to the Transport Workers Union. So$40 million is going to be divvied up and it hasn't yet been determined exactly how, but it will be basically amongst the 1 ,800 workers who were sacked in some form that that process is going to have an outside the courts decision-making process. They were appointing someone to do that. But 50 million going to the union itself. And I thought this was really fascinating, mate, because, I mean, look, it gets pretty ideological pretty quickly. People love or hate unions, and I don't really kind of have a lot of time and interest in that general conversation.

1:01:56But it is worth kind of just highlighting the fact that Lee was very, very... critical of Qantas asked whether or not there was just performative apologies or performative remorse i think was the phrase he used um although definitely sorry they got busted he he i love i love a lawyer judge knows lots of good words he he's he described quite as having adamantine so adam a-n-t-i adamantine self-righteousness adamantine apparently according to smh means unwavering to the point of arrogance so so unwavering the point of arrogance self-righteousness um it you know he's been very very very clear and he basically gave the union the money essentially to hold other companies accountable effectively what they said.

1:02:39Here's the money so that you can keep doing what you did. And it's also mindful too, very, very specific. He basically said that Ombudsman didn't do the work. So it was up to the union to do what, I don't want to put words in Justice Lee's mouth, largely because it's not right also because he's a justice, a judge. But basically saying, Ombudsman didn't do it. You guys had to do it. You took the risk. You can keep doing it. Here's some money. Keep it up. which is a fascinating decision to make to effectively say the regulator sucks you guys are working hard keep going yeah yeah uh yes yes i mean it is it is um i think it is important to set examples you know that is the very foundation of what we do with knife crime and petty no i don't know not that knife crime is in any way a petty crime but a lot of petty crimes you'll hear the argument for is we need to increase the punishment to set an example it needs to be an effective deterrent i think there's a lot of um flaws in that argument to a point right like there are some pretty strict penalties and if you know i don't think if if you know a 10 million dollar fine in 10 years in prison doesn't put you off well a 20 million dollar fine or you know he's probably not going to do it either but there is there is there is there is certainly substance to it and um i think it's important to set set a clear standard to other corporate actors to sort of say, listen, you know, play silly games, win stupid prizes here.

1:04:04You can try your luck at this, but there are real punishment. Again, you've got to show me the incentive, I'll show you the outcome. If it's going to be, which is depressingly too often the case around the world, where it's sort of like, well, we got busted and there was some big notional dollar value involved, but really it's just the size of our Christmas party budget. It's really small for a big company like us. The public feel as though justice has been served, but for us, it's a cost of doing business. So we're actually just going to keep being silly because chances are we won't get caught.

1:04:35But even if we do, it's kind of like it's still worth it. Once we account for the cost, we're still ahead by having done this. So you need to make, you absolutely need to make it hurt. It's got to hurt. And you've got to make shareholders angry because if that's not the case, no one's going to change, right? Yeah. And that's the, that's the chance. Here's, can I just read this? Because this is pretty, this is Justice Michael Lee. Quote, this case would never have been bought without the union and it did have the beneficial result of establishing a breach and providing some compensation to many.

1:05:07Looking at the case now after it has been safely been concluded is very different from assessing the risks of litigation when it was about to commence. End quote. This quote continues, but I'll just stop here because this next paragraph is really the kind of, the really tough one. Quote, it does not assist the enhancement or enforcement of the Fair Work Act to only incentivize common informers to be flat-track bullies. That is, to only bring proceedings where the risks are perceived to be minimal or only against those without extensive resources to defend their position and interests, end quote.

1:05:36It's effectively saying the regulator has taken the easy option here and not bothered because it might have lost. Yes, yes. Now, I am a little uncomfortable with a judge making that decision rather than elected representatives. you do get somewhere towards activismishness um i forgot for a second bagging justice lee he's taking a very obvious view my point is necessarily he did it but rather governments and regulators should be doing it the fact this has to be decided in court and basically saying here's some money to effectively a third party i mean unions are very involved but effectively a third party because the government is going to do it anyway and the regulator didn't do anything about it so in that case what have i got to do i'll give some money to the unions so they can do something about it And again, I'm by definition bagging the ombudsman.

1:06:22And I don't know the details of the case. I'm always really careful commenting on court cases and court findings. I wasn't there. I didn't receive the evidence. I'm no trained jurist. Don't ask me. But the outcome seems pretty straightforward into what it did and why. Yes. Yep. I think it's a win for common sense. But yeah, like, gosh, that's a lot to the union, isn't it? Isn't it? $50 million war chest, yeah. Yeah. Yeah.

1:06:50You've got to be careful here. I'll say at the start, I'm very pro-union. I think they're important in places where collective action is really the only way you can sort of protect and advocate for workers' rights. It's different if you're like, you know, one of a handful of preeminent brain surgeons, you look after yourself, right? You know, If you're on a factory line somewhere else and you're very easily replaceable, et cetera, you kind of need these things. And they've done a lot of good for the world. At the same time, particularly in some quarters, there's not a great reputation there. And there's like in all institutions, there is a degree of corruption, some places more than others.

1:07:32And let me very quickly just emphasize that in all institutions. Right. So I'm not pointing the finger specifically at the union movement here. but gosh that's a lot of money 50 million dollars right like it just seems like that's that's that's i don't know it's a lot of dough it's i just can't see the sense in it like should the union be compensated for its efforts yes cover the legal cost absolutely even given some a bit of money to sell further the court yes yeah yeah sure i guess i'm just i don't know i I don't even know what I'm saying. It just, I am a little awestruck by the quantum of that.

1:08:12And it's more than half. Yeah, that's right. They got more than the workers. Yes, yes. That was interesting. Yeah, it's huge. It's absolutely huge. Maybe they'll distribute it to their members? I believe, well, I suspect they'd keep it as a war chest because the point was here is some money to keep doing this stuff. I don't know how, I don't suspect there's any particular strings. Justice League was pretty clear about why it was given. I have to believe, honestly, that given the statements, a union that said everyone here's some free money may well get some negative press. I expect they'll keep it to do what it was given for just because I felt they should.

1:08:45But I don't know. I'm not on the inside. I don't know what's going on there. I will echo your thoughts, by the way. I think it's really, really important to have strong employee representation. It is, though, interesting in this day and age because we have the regulators who are supposed to have done this work. Yes. And Justice Lee's point was effectively it shouldn't have come to this, at least from the union's perspective. And the fact that it hasn't been done And yeah, it's fascinating. Hey, mate, can we finish with a little bit of egg on the face? Because you like Commonwealth Bank so much.

1:09:13I know you'll hate the story. The Commonwealth Bank last week, the week before, laid off 45 people. And they did so because AI was going to help with their customer service. In fact, AI was going to save or had reduced the number of calls a week by 2 ,000 calls because it's voice bot, they called it. Effectively, it's AI sort of chatting backwards and forwards. was going to solve the problems, had reduced the call volumes, and those people weren't required, so they could lay off 45 people. And that was kind of big. I think we probably talked about it. By the way, it's going to happen. It's absolutely going to happen.

1:09:45The thing about this one was it didn't exactly work out that way. That's not yet. And so the CBA was taken to the Fair Work Commission, speaking of unions, by the CSPU. No, Financial Services Union was, FSU. Financial Services Union took them to the Fair Work Commission, and CBA had to admit, I assume under questioning, that not only had the calls not decreased by 2 ,000 a week, but it actually increased, and that they had to bring people in and make people, current staff, or offer current staff overtime to handle the increased inquiries. So they've trumpeted this whole AI taking over, laying off people.

1:10:19Turns out they've now had to, or chosen to, because they realise they're on a losing thing, I suspect, offer those people their jobs back, or they still let them take voluntary redundancy if they like the money they get to keep it and leave. But if they want to come back, we're really sorry. We apologise to them all. Sorry, we made you redundant. it. We really shouldn't have. You can have your jobs back. Which I just thought was, I mean, it's funny because it's funny. AI is going to be massive. You're a massive fan. I'm a massive fan. It is going to revolutionize workplace all over the joint. So many jobs.

1:10:45Just not yet. Apparently it's not at CBA. Yeah. Why is it that call centers are, no big business can do call centers well? Like zero. Show me one. Maybe, I think Aussie Broadband had a pretty decent reputation, wasn't it, at one stage? And that was the whole shtick. It's like we're a commodity player, so our thing is that when you ring up, you'll speak to someone who can help you out. And isn't that the point? Does anyone think I'm ringing my insurer or my bank for a chat? Yeah, I'm sure there are some troublemakers out there, but 0.0001 % of call volumes. It's just like, again, I don't need to point this out to anyone.

1:11:29We've all been there on the phone to a telco or a bank or whatever. It takes you eight minutes just to get through entering in all your details and having to repeat it. And it is, I've said it before, like it is the most innermost ring of hell is a call center. And it's the company's own fault because they don't empower the people to do anything. And so you've already offshored it, you know, in some exploitative way to some other country, which is fine if those people were given any authority and power to, you know, help redress the issue. They don't. So the incentive is just to keep turning you around and around, just delay, distract, defer kind of thing, which is why people get so frustrated.

1:12:15and to think that an AI bot who certainly can't make executive decisions, not yet anyway, on some of the, I just, dude, I just want my thing fixed or there's a weird transaction in my account. Can you just fix it? I just, you know, and can I do that in under a four hour phone call, you know, and to think that that was going to solve it. It's just, it's just another example of, of companies jumping on something that's the new black and AI is most definitely the new black and look how cutting edge we are. and we're doing this. And I just often wonder, it's just like, if any board members of big companies are listening, they're totally not.

1:12:52Just next board meeting, call up your own call center. Yes, that's right. With an issue and see how long it takes to resolve and see if that's what you're happy with, right? Because it's so diabolically bad. I actually was, I'm at a point where I'm saying bring on the AI. if it can actually address my problems easier. And it will. It will get there. Yes. But it's not there yet. Correct, correct. It's not there yet. But just don't do it for the sake of saying, oh, AI, look at us. And really, it just allows us to save a bunch of money. It's like, wait till it's fit for purpose. Then by all means, do it.

1:13:31Not for any other reason other than, I just want my issue handled. That's right, please. That's it. That's all I'm asking for, right? It's funny though, you know, so for all of that, and I think this is where it's fit for purpose stuff. I mean, TBA 45 staff was weird. and it felt like a strange way to do it. But Temple and Webstar, I haven't – I was just trying to plot because I wasn't quick enough. They shared it really well recently up and down again on earnings. But last year, so this is more than 12 months ago, they talked about having, say, I can't remember the number, something stupid like$4 million in customer service costs using AI.

1:14:04Right. And that was 12 months ago. So it is absolute – now, it's easy to probably get a return on a couch than fix my – which product do I need or something. financial services are hard. But yeah, it's coming. It's absolutely coming. It's going to happen. We're seeing it already with the online, the chatbots on the websites and stuff. It's another version of that. And they just get smarter and smarter over time. Got to love them. The Google Assistant is just woeful at the moment. I love Google, but woeful at the moment. But the first time we chat to you is brilliant. It's not going to take that much long.

1:14:33It has an LLM of some description, a large language model of some description that has access to information about a bank's products and services in my account. Hey, I've got an issue with this. My card has been sold. Can you please put a stop on it? Yes, I'll do it straight away. Would you like a new card? Yes, please. Do I send it your current registered address? Yes, please. It's this? Yes, it is. Cool. You'll have it in four days. Yes. I mean, you know, the ability to handle that, as long as it can be done without too many errors, obviously. You know, can I please open a new term deposit account?

1:15:02Sure. Would you like it with your current branch? Yes, please. How much would you like to put in this much? Okay, put in your phone, pin to confirm it's you. Okay, done. And those things have got to be seriously within the grasp of institutions very, very quickly. I've got to say, they had to put this 45 staff on. If they haven't got rid of double that number in two years' time, probably triple. I'd be shocked, absolutely shocked. I could be wrong. Maybe it's much harder than I think, but I would be shocked if those sort of jobs aren't effectively gone very quickly. Well, given every single call since forever has been recorded, there is an immense training set.

1:15:33Full of training data, correct. You know, like, it's one of those, it's the 80-20 rule. Yeah, I mean, like, but this is the problem though. Again, it's like, it sounds cool. We get some consultant in, they plug in some API to chat GPT or wherever. And it's just, it hasn't taken the time to customize it and make it fit for purpose for your exact thing. Right. So yes, it will answer questions, but it won't. And then again, it's got no power to sort of do anything with that anyway. So it just tries to answer. It's basically like an FA, a little bit of a better FAQ, not something that's going to help you address your problem.

1:16:07Yeah. but as you say it will get there but until then don't do it wait wait till anything and I can understand that and lay people off once they sit around doing nothing because the phone's not ringing and you go hang on we've got some people the productivity's down 20 % because the call's being done by the chatbot alright well now let's start making some changes also 45 roles yeah how many people are employed at the company that's what I thought was really I mean at some point it's proportional because if it's 3 % of your phone calls, then it's 3 % of your staff. I mean, at some point, you do sort of slice off things.

1:16:43I guess, but even from a brand management perspective, carry the 45 rather than get the headlines and then wait till it's 400. Don't be first. Yeah, exactly. And do it once the phone's not ringing. Well, hang on, we've had 14 people sitting there that haven't answered a phone call that's already midday. Okay, we've probably got an issue here, guys. We can probably get rid of them now. You'll be surprised to hear this, but I will give CBA some credit for its tech. I think they've done better than most of the big banks. They have. Yes, they have. They've done, like, I've never really was appreciative of that because I've just always banked with them.

1:17:16Why did I always bank with them? Because when I was a kid back in the 19th, early 19th century, I had a Commonwealth bank, like, you know, when there was, it's hard to imagine now that there was this Department of Education sanctioned program where a bank was allowed to go around to schools and sign kids up to accounts. To be fair, it was a government bank back in the day, so probably less weird than it seems now. You wouldn't do it with a press back. Yeah, still. It's kind of like, but I mean, that was a huge part of Commonwealth Bank's success. Not only if you were there for a positive affiliation if you didn't.

1:17:50Yeah. Infinity, sorry. Even if you didn't do it then. Yeah. You're spending your primary years being indoctrinated by the Commonwealth Bank guy at the school. I literally got the same account that I had then. Oh, wow. That's cool. Yeah. I mean, I've got other accounts, obviously. Anyway, so with the home loan recently, we got up with ANZ. And their app sucks. Well, at least in comparison. It's funny because like, what's the one thing I want to know with my app? Because I only use it for my home loan. It's like, when's the next payment coming out and how much? You try and find that on the app. I've got to scroll through 15 winter saving tips.

1:18:23Would you like a new credit card? Here are some budgeting tips to help you get ahead of inflation. Like nonsense, nonsense, nonsense. This is like a newsflash guys. I just want somewhere that's going to, you know, allow me to transact my money, hold my money and just give me a clear interface to do it with. That's kind of what I want. You'll give me everything under the sun except the most important information. It's there before anyone says, well, actually, it's like it's maybe bringing some UX specialists there because it is it is a nightmare. And then I tried to change because they put you on the default longer term repayment frequency.

1:18:57It's like, I don't know why they would do that. Oh, that's right, because they get more money that way. Anyway, so I tried to change it to a fortnightly repayment and eventually found out how to do it. Did it, never recognized it. Three weeks later, I'm on a call center. I'm trying to do it. Oh, you've missed a payment. And even to this day, I get these notifications. Well, you did miss that payment one time. So we're just going to have to be extra careful. And I was like, I missed the payment because you didn't bloody tell me when I was going to be taken out. And you didn't action my request to change payment.

1:19:27It was just such a terrible experience. So anyway, hats off CBA, at least on the app front. I think you're at least ahead of ANZ. I'll say that much. I will. The podcast is at its end, so I'll share a little funny personal story. When I was a kid, CBA guy came, little Martin Place money boxes, the whole box and dice. Guy came, everyone had a Dolomite account, was what they were called. A Dolomite account, for those who remember the ad. Had one. Well, they had them, right? But I was never allowed to have one. and it comes down to when my old man came back from Vietnam he went to get a mortgage and CBA wouldn't give him a mortgage and so he I like your dad already he swore off the Commonwealth Bank for life he didn't use it I would have done the same my mum didn't use it we were never allowed so we never had Dolomite accounts everyone else in the bloody class had a Dolomite account I couldn't have a Dolomite account because they hadn't given him a loan back in the whatever it was 1970s and so that was I can just see little Scotty little Scotty coming home dad over my day And Bonnie, those bloody bastards, not getting a send out of a...

1:20:30Yeah. Pretty much, pretty much. Stick it to them. I do have a ComSec account these days. Speaking of bad apps, my lovely wife has a business account with Bendigo, which is just even worse. I don't have bad... I've got an ANZ credit card, so I can't have a little bit of your experience with ANZ. And it's not great. Bendigo's even worse. Just, yeah, don't. Anyway. Do you know what? Enough of that. We went back. I reckon, and this is not to give any of these guys excuses, But, you know, banks originally, I mean, at one point in the computer age came around, there was big banks of those IBM computers with magnetic tape spinning in the basement.

1:21:05That's right. With what was the original programming language? Anyway, it was something, it was just, and then things get better and it just get built on layers with sticky tape. You've got systems talking to systems and it's just, you know, you fast forward 30, 40 years and it's just a spaghetti mess of different code and different legacy systems. So I'm sure in the boardroom they're going, look, it's just, here's the thing. We can spend a kajillion dollars, build it from scratch, have all the usual teething issues, or we can just patch this. It seems to be working. The sticky tape is holding for now.

1:21:42You know, we do have to, we did give guidance to the market this year for this. Like that's exactly what it would be. I mean, and that is really what is required, not just for the banks, but for a lot of large legacy enterprise systems. You just have to tear it down and build it again. You do reach a point with software. Telstra has spent 30 years and still has got more systems than it wants to have because it's just like, how do we take everything about our telecommunications network and put it all in one spot? And it's just legacy plans and legacy systems and you turn something off and it doesn't work.

1:22:13So you've got to make sure it's absolutely working. It wants to be migrated properly. The plans are on the new system. Being a legacy provider is wonderful, right? The brand value, the customer loyalty, some really, really great things about it. you mentioned aussie broadband before aussie broadband's greatest i don't want to oversimplify one of their greatest advantages has been we're new yeah we will we will create a system from scratch so that when you do call up our people look in one system find your details built in the 2000s and can fix what you want and give you great customer service yep the poor like a telstra again i'm a very small telstra shareholder though to be for the record but then you know um okay so we should just argue that okay let me have a look and so i can only imagine the background they're like some sort of green screen bloody terminal trying to find some customer record back from some period of time when it was set up.

1:23:00And, you know, yes, money and time just to kind of modernise. So, you know, I'd rather be tossed with Aussie Broadband as a general rule because, you know, you've just got all of the good things that come with that. But it's not without its challenges. And that's where innovators can absolutely lap an incumbent if they can't or won't change quickly enough because they kind of go, hang on, Aussie Broadband's gone from nothing to, what is it, 10 % market share now? Yeah. And largely through cool ad, great customer service, great reputation, and just a very, very, very simple business to run. Yeah, exactly.

1:23:28I was actually, when the neobank phenomenon really started up, I kind of thought, oh, this is going to shake things up a little bit. It hasn't at all, at all. And my main thinking at the time was, for exactly the reasons you outlined with Aussie broadband, they're coming in fresh. We've got a system built. We don't even have branches. We never have. We've never had them. Our entire platform is built from the ground up in the modern era so we can be faster, leaner, better. And, you know, at the end of the day, we're just holding your money for you. Ones and zeros, yep. Yeah, ones and zeros. Like I say, you're giving an interest-free loan to the bank.

1:24:06But, you know, now we don't have time to go into it. But isn't that interesting that they've had zero, I wouldn't say zero penetration, but next to zero penetration. People probably assume that I've got some conspiratorial angle here. I think it's probably nothing other than, it's just nothing other than, it's a bugger to move. It's inertia. I'm a million percent sure you're right. And if I'm going to move, do I trust the Neobank? I get an extra 0.1 % because the branch network costs money, but not all that much. This isn't annoying, but you've got scale to counter it. So you're starting off as a little guy.

1:24:38Aussie Broadband's great advantage, by the way, was largely they're all reselling the NBN. So Rysiport is a retailer. They're an online shop. I mean, it's not that simple, but it's not that much more complex. We've got other businesses now. When they started, it was kind of like, so we can just plug into the NBN's interface effectively. Again, not this simple. And offer a price and a great system for billing. We're a billing company. It's what neutral or also broadband is, right? But if you're a bank, it's like, well, I'm starting up a new bank. I've got no branches. That's good. But I have no scale.

1:25:06I have no systems. Whatever I pay for all these things, I've got to pay probably up front rather than per user or per whatever. I've got one CEO. I've got no brand. No one knows me. No one trusts me. No one likes me. The trust issue is the funny one. They have a Dolomite account. So who the hell are these new guys? Can I be bothered to save half a percent? Not really. It doesn't feel like much money. And individually, it's actually not much money, right? At a total economy level, it's billions. But individuals, like I just, the initial one. But even, here's the other thing, mate. You know why they should have known?

1:25:35Because take Commonwealth and Westpac side by side. How many people change between those two for a better rate? Yeah, right. And if you want to do that, are you going to go with a new guy with limited? Yes. He's not, right? So, yeah, it's massive. The trust thing is the funny thing for me because the government has got a backstop there. It'll guarantee you up to$250 ,000. So, if you're Scrooge McDuck, okay, maybe you'll balk before you put your$4 billion with, you know, recent startup NEO kind of bank. And when it comes to the loan, it's sort of like, no, you're the risk. From their perspective, you're the risk.

1:26:07So I was like, so borrow as much as you bloody can because, you know, if it goes all bad, it's sort of like, what is it? Yeah, if you owe the bank a little bit, it's your problem. If you owe them a lot, it's their problem is the old saying. Yeah, exactly right. But it's just, it's funny. And here I am sort of going, that's really strange. And I've just said, I bank with ANZ and come off bank. Yes, it's exactly what it is. So here's the other thing. Just quickly, they nailed this before. Remember there was a big debate a little while ago about portable bank numbers because the main hassle with it is that now I've got to, because my credit card is linked to this and my pay goes into this.

1:26:43So I've now got to contact every other institution in the world that I have a relationship and change all my bank details. But if I could just sort of say, I'm banking with you and I'm keeping this, like you were with the phone, I'm keeping my same phone number, but I'm going from Optus to Telstra or vice versa or whatever it happens to be. You can see why the banks were so fighting tooth and nail for that because that might've actually changed things. I find that a fascinating conversation. We won't do it in justice here, but trying to work out as a government, at a policy level, what you should allow a business to keep as an organizational business model feature versus what you take away, I think is really fascinating.

1:27:23Plain packaging cigarettes, same kind of conversation. Easier to decide because it's the cancer sticks, but account number portability. It's like, well, hang on. If banking becomes an entire commodity, and I literally make a bank do things that make it less competitive. For no, they haven't broken a law. Well, they've probably broken lots of them, but in this case, they haven't broken a particular law. You know what I mean? It's like, what should governments, they can do whatever they want, as long as it's constitutional. But what should governments kind of take away from genuine, authentic businesses following the rules, again, when they are, versus leave in place, knowing there's competition issues?

1:28:01I find that a really knotty conversation. I don't have a good answer. and there's no single answer, but where do government say, you know, they could make every petrol station send a notification to your car. They could, you know, when you would pull out a petrol station, they could have, some of the flashbacks say, actually down the road, a kilometer is cheaper petrol. You could make every supermarket publish all of their prices online in a public database and make AI crawl it, be able to crawl it and just fulfill your order in both, all three supermarkets, depending on your uploaded list, right?

1:28:33You could make them do that, which would remove price discovery or price discrimination. Lots of things you could do. I'm not sure what you should do. I don't have a view on that. But at some point, the things that make businesses businesses, the things that, you know, put in place to be successful or not, I find a really, really difficult question to try and answer. Oh, it's no easy answer. There's not. The only thing I will say is that, as I've said many times, I do put the banks in a special category. They're just so systemically vital and important that they deserve special rules. Like as I said before, if you want to be as a politician, you deserve more of a spotlight on you.

1:29:10If you want to be a bank, you're going to get more screwed. There's going to be more rules, right? We're giving you the power to literally create money. So I'm sorry, there's strings attached. Don't like it? Don't start a bank. Go start selling pies or shoes or sneakers or whatever you have, you know, that's cool. So yeah, as you say, we don't have time. I'm not defending them. I was not sure how you, you know what I mean if you made if you made Telstra Optus share all their mobile towers yep okay well then what's left nothing it's just a brand well okay you're meaningfully destroying value and you know the investors have invested money to build their network or to keep costs down move the goalposts on very big capital allocation decisions yeah but I'm not normally sure we shouldn't do it I really don't have I can see the benefit of both sides it's a very very difficult conversation to have oh it is we've just about ticked over an hour 30 I reckon we should stop before we get there what do you reckon please yeah I think otherwise because I was going to start talking about gas terminals and things there.

1:30:02I was like, no, no, no, no, we don't have time. So let's... The only reason we have time, we just choose not to punish our listeners. So you're welcome, listeners. The three of you who are still listening, thank you for spending some time with us. You'll come back on Sunday, won't you? Hell yeah. Gas terminals for everybody. Until then, full on. 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.

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