Dare we hope for a Budget surplus?. March 20, 2026

28:32It's the surplus of deficit left over at the end that is the real issue. Anything else is just ideology. And again, I'm happy to have the conversation about how big it should be. It's just a very, very different conversation to what's contributing to inflation. And that's pretty straightforward. Every time, what I will say, money that's not productively being used, like propping up these guys, that's inflationary because we're taking productive money and saying let's just use it to do unproductive stuff I mean we've got a productivity problem that is the very opposite of productivity every time government spends money to prop something up we are saying please be less productive and so when Jim Chalmers gets up and says and I'm sure the Libs would say the same thing because Andrew Hastie is on his Made in Australia thing as well and God love them all when he says we are going to try and focus on productivity and we're going to try and spend responsibly it's like well let's talk about the money you threw at Man Isle let's talk about the money you threw at Wales let's talk about the money you threw at the oil refiners.

29:21Because what you've done is been inefficient, spent more, made the budget balance worse, and made us less productive. So congratulations, guys. That's a really, really good set of results. Yeah, they love saying the productivity word. I don't think they actually know what that means. It's the only explanation I can. I don't think that word has the definition you think it has. It sounds good. It does sound good. Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener.

29:56Anything else on oil prices? Well, there's a lot to say. I mean, everyone wants to know is like, well, what's happening with it? And the answer is, well, it's... Who knows? Yeah, how quick does this conflict resolve itself? And even if it ended tomorrow, there's a lot of infrastructure that needs to be rebuilt, right? 100%. And this will have a price impact. It should have a price. I made the case last week that it is good in a very holistic way, that it is what will coordinate the fixing of this issue. But the damage has been done. The terminals have, you know, a lot of the infrastructure has been destroyed.

30:34There's no government policy that you can make. You don't want government announcement, I should say, that's going to kind of fix that. If we fix all the announcements, we'd be fine by now. Yeah, we're going to have higher oil prices for some time. I don't know how long and I don't know to what degree, but I do know that eventually it will resolve and it's probably going to be pretty painful in the interim. And as we made the point last week, it's not just in filling up the car, it's in everything that needs to be moved around and things that require energy. So it's going to be huge. It already is huge.

31:10You don't even need me to say that, right? Like people are, yes, I know Einstein. I did a grocery shop last week and I filled the car up. It will be huge.

31:21And I don't know. What do we do about that? Let's make everyone pay more on their mortgage. That's where we're at in this cycle, just to come full circle.

31:33On a more positive note. Oh, come on. Let's just time how long the positive note goes. Ready? Go. Oh, we're not on a more positive note, but I mean... You can never do that. Come on, give us something positive. Well, look, these signals are very important when they're allowed to be true and accurate signals. Don't forget that there's another part of the zeitgeist that's very concerned about electrification and decarbonisation and the rest of it. Now, anyone who's not been living under a rock and has been following this space for any length of time will tell you that one of the real challenges with all of that is priming the pump and building it up and getting it to scale.

32:11It's why there are certain subsidies and programs, all of that there and there to make it more comparable, better on a relative basis. Well, guess what higher oil prices do? It makes it better on a relative basis. And if something is better on a relative basis, it represents an incentive. It will influence decisions. It will probably push a lot of people on the margin or do we get the EV, do we don't, I don't know. It's like I'm sure that decision is an easier one today. So, again, I'm not trying to push a barrel here on what I think the world should be doing just other than that people have their own desires and now the option set is a little bit different and the balance of how things look is a little bit more favourable to one.

33:01So it's sort of like there is, I don't want to say the word silver lining but there is yeah i i think for there are consequences that can be good my cards on the table i think we should electrify i think that makes a huge amount of sense yes for the environment but also for a whole bunch of other other reasons as well so right but it but it but it but it's sort of like we we want that i i think i think most when i say we there's always division out there but i think all the polling sort of shows that a majority of australians sort of want that kind of thing and here's something that's going to push in the right direction and yet we're going to push back against that thing that you know that would organically naturally help us route around the problem and and and build a more robust base for the next time that this happens right and that's kind of the issue i um you know it's interesting though i was speaking someone asked me about that you know if we had more evs would it be better for inflation and the answer actually is yes um but i kinda and it was it was a funny conversation over the last 12 months before the Iran crisis, more ice cars actually helped inflation because the petrol price was falling and the energy prices were rising.

34:04So literally, and I'm with you, mate. I'm a card-carrying greenie, lowercase g. Sign me up as a tree hugger. I have not much time for the greens as a party, but let's not screw the environment. And as you say, let's actually have a better, more defensible, more efficient economy and power system. I completely agree with you for all those reasons. It's just also true that sometimes the numbers are inconvenient. So over the last 12 months, the petrol price has fallen, the energy price has risen. The more EVs we had, the worse inflation got because of the way the basket works. That's how it happens, right?

34:37Now, I'm not saying it's bad overall. It's just the way the numbers worked. And so it's a bit like ESG investing or ethical investing, right? When tech companies are rising and the oil companies are falling, ESG investing looks wonderful, right? Ethical investing, oh, it's so good. We beat the market all the time. Over the last 12 months, ethical investing has sucked returns-wise. Why? Because the resources and the miners and the drillers are the ones that are getting massive returns. And so the market's been driven higher by resources companies. And again, the same thing is true. I'm not saying it's not a value judgment and it's not true overall.

35:06Just sometimes the numbers are the numbers and it's just inconveniently true that things don't look and work the way you would like them to. Again, it's not about your larger point. And right now, yes, more people will look at the price and go, yeah, but let's just get the EV and be done with it. At least we know then. So I get it. I'm net, net, let's not get the government subsidy waste of billions of dollars on EV subsidies. But the more people do it, the better off the environment is going to be and probably the better off the grid is in time. Whether we have the electrification capacity at this point is a whole other conversation I don't want to get into.

35:37But yeah, it was an aside. But I was literally asked that on radio this week. It was like, turns out kind of no recently. But yes, no over the last 12 months, but yes, a lot recently. I think that's the thing that we need to do more of as economic and financial commentators is zoom out. We are so myopic in the – because you're dead right. Like in a short-term timeframe, that is going to happen. You know, these things move in these sort of cyclical kind of fashion. It's not just a straight linear line. But structurally is more the dominant point. There will be periods when there is a technology or an approach in ascendancy in which, you know, you'll find various periods where it looks like it's not going against that trend.

36:27I mean, actually, the share market is the perfect metaphor and analogy for this. I mean, what do we know about the share market? It tends to go up over and over. Like, great. It's like, well, but then some, you know, you always get the bears come out when after a 30 % crash, you go, oh, I see the share market's rubbish. They're like, yeah, if you look at that narrow period, you're not wrong, but I would just make that broader point, I think, in the context of the structure. Yeah. In the structural longer term, that is kind of what we want, even though there will be periods where it pushes against that.

36:58It's just how it is. And by the way, let's go back to rates. Your book was asked about, you know, might there be a recession? And she said, yeah, there might be, because that might just be the net result of what happens. And I don't want a recession. She doesn't want a recession. but doing absolutely everything we can to avoid one in a way that is going to cause more long-term pain would be more madness altogether. And it's just, I don't know how to have this conversation. Well, I might disagree with that. Okay, go on, tell me. It depends on what causes the recession. So what I mean, let me be abundantly clear.

37:31I think the outcomes are better. It doesn't really matter what causes it, it's better how bad it gets and how good it is afterwards, doesn't it? Yes, but let's, I'm trying to think of a different analogy than the hangover drunk analogy.

37:46But if Keating got lambasted for the recession that we had to have and it was just like it was not a politically smart move. But he had a point. Yeah, correct. He was 100 % right. He had a point. And the point was that we got over our skis, as I like to say. We were spending irresponsibly on very low return, negative return kind of things. Lots of debt. So I really want to be abundantly clear. I am not cheering for recession. I don't want a recession. Recessions are bad. There is real suffering and human misery. I don't want it. But sometimes, oftentimes, most times, particularly in our sort of credit-driven system, when there is a recession, It is not something just that arrives in and of itself, you know, miraculously conceived out of nowhere.

38:40It's like it is a response to what came before it. And what came before it was just a whole bunch of unviable, reckless kind of stuff. And when that happens, and it's happened, again, we don't have a time machine. It's like, well, what do you do? Well, you've got to, there needs a cleansing. It's, you know, economists call it that creative destruction. It makes it sound like a real piece of work, a-hole, but it's like, again, there's kind of like, well, that's really bad. Yep. So we shouldn't do that. Okay. But then remember that then, well, how do you not do this? So you're saying that we, well, we do it.

39:20Actually, what are we doing? We continue to prop up unviable, uneconomic enterprises. You know, we continue to pretend that it's not happening. we continue to drink the wine when we're well past the point when we should have stopped, thinking that that is actually a better path and that that actually solves it. When what we know, and again, any student of history will tell you, is actually it just compounds the problem and leads to a much bigger crisis down the track that requires a much bigger intervention. So I'm not saying the recession is good, but just to fill out my point, I want to say, is it bad?

39:49Well, I would, for one, prefer lots and lots of little recessions rather than a mega depression once every 30 years. Yeah, yeah. You know, which is kind of the trajectory we are on, frankly. Yeah. And then we will look back at that point, whenever it is, and we will go, oh, this really sucks, right? And it's like, yeah, because every time some idiot megacorp did something wrong, we let them get away with it. We avoided them having to take their medicine. And this is the outcome of that. So, again, there's no free lunch in any of this kind of stuff. So does Michelle Bullock want to avoid a recession?

40:28Yes, she absolutely does. But if she thought about it in a broader sense and wasn't reflecting in terms of how it might reflect on her personally, and, again, depending on the situation, she might have a different appraisal of the situation. But I think it's actually – it is revealing for her to say, no, we don't want a recession. It's like, well, that can't always be true, right? Oh, no. Even under the Keynesian mindset. You can always not want it. It doesn't mean you do everything to avoid it. That was her point, was I don't want people to lose their jobs and businesses and whatever. It may happen, and if it happens, then it'll happen.

41:03That was all I liked about the comment was she's basically saying, hey, in this context, if certain circumstances happen, there will be a recession, and it will be bad, but it might happen. I think that was the comment. We're actually kind of agreeing because my point was exactly that, that this is really, really unpopular. We have been told over and over and over again how bad recessions are, and they are, right? The problem is, to your point, the point I was going to make was, Keating was right, as you say, I was going to make that point. That's a good point to make. But also, a recession can actually be less bad than where we are now, where we might be if we don't do something about it.

41:42Not that I want a cause or create one, just there's a point at which the cost of avoiding the recession is more than the cost of going through the recession. You mentioned the stock market analogy. Morgan Housel's got a great line, which is, I think it's his, more money's been lost in trying to avoid a downturn than the downturns themselves. And his point there is you would have got a lot more money staying invested and then suffering through the downturn than staying in cash the whole time. And I think that's the analogy for me anyway for this one, which is exactly that. And you made the point.

42:12The further we kick the can, the bigger the potential issue. So she doesn't want a recession. No one wants a recession. but her point was and I think that's why I thought it was she explained it was like maybe it'll happen she wasn't like no we'll do everything we can to avoid one she was like maybe it'll happen and that was I thought at least a positive way to start addressing that conversation rather than avoiding at all costs which at all costs is the point right we say that like it's nothing like no no you actually have to realise the cost is a capital C like at those costs there will be costs of awarding the recession we're going to have to pay them at some point in way shape or form and maybe it's just hyperinflation, maybe it's a recession down the track, maybe it's both, maybe it's something else.

42:51You don't have to know that to know that maybe not doing it, doing anything you want is a crazy idea. I'll take recession over hyperinflation, my friend. Right, totally. I'd even take it over, you know, modestly ongoing inflation. We've had 25 % inflation in aggregate more than that since 2020. Transitory. Well, right? But it's also not over yet. We might get 5 % this year. So, okay, then that becomes 30 % 35%. Real wages aren't keeping up. You know me, I don't, I'm not as worried about the cash devaluation per se as you are because the amount of cash held is generally pretty low compared to other assets and we get into a whole lot of conversations I don't mean to other than to say my real issue is the real purchasing power of, excuse me, our wage is kind of where I draw that broad line.

43:34That's the only sensible lens in which to understand it, right? You can't say anything's bad because cash always gets devalued as I should never be and I don't want to get back into that. I'm just drawing a slight difference between the two. Okay. I'm just the little bit of hardcore than you, but... To the quote-unquote man on the street, it's like, how long do I have to work for the stuff I want? Yeah, totally. That's pretty self-evident. Or I'm already working as long as I can. How much stuff can I now have to give up because I can't afford it anymore? Yes, yes. And so, yeah, so my point is broadly, I'm not saying we should have had a recession during COVID.

44:04We did have a technical one. It's neither here nor there. But my broader point is over time, the longer we let this go, the further we let inflation climb before we deal with it, the worse we will all be because, I've said this a lot of times, rates go up and then they go back down. Economies go into recession, then they climb back out. What do prices do? They go up and then they go up and then they go up. And so it is far, far, far, we've said this before, and I apologize for repeating ourselves, but it is far more insidious. Inflation is far more insidious than temporary recessions as much as, and this is, I'm saying it now.

44:33Preach, brother, 100%. I'm so on your side here. The problem is we all agree, and it's obviously and rationally. No, we don't. A lot of people, I'm not going to go into that argument, But I mean, the whole mandate is we want to target a degree of inflation, right? So I won't get back into that. No, I'm in the recession bit. I think we've been taught to fear recessions so much that the average person on the street will say, it is terrible, do whatever you can to avoid them. And I think we've been horribly, horribly misled, miseducated, not even in a Keynesian versus Austrian sense, just in the sense that we've been taught to fear this R word so desperately.

45:09And yes, there are horrible, horrible, horrible outcomes when we have a recession. I'm not for a second saying it's okay or fine or it doesn't matter or who cares or none of that, right? For all I know, I get fired during a recession. So it's not about, it's just saying a recession is bad, unquestionably bad. We just have to recognise there are things that are worse and a recession is not the worst thing that could happen. And unless or not until you recognise that, you're not really thinking about the economy properly. I want to say you, I mean, yes, listener, if this is news to you, I hope we've been clear.

45:36Our politicians, our media, our iconocrats, the oppositions of the day who say, oh, I mean, Paul Keating got crucified for 20 years for the recession we had to have, it was 100 % right. And what was, it was poorly worded, I'm just coming back to that and I'll stop. It was poorly worded because he allowed his words to imply that it wasn't a problem, wasn't bad, and somehow we wanted to make it happen. We had to have it. Almost like it's, you know, like he didn't care that it happened. And I think what he should have said in my opinion and I'm sure he regrets it he may he's got an ego PJK he may refuse to reword it himself what he should have said is it's the recession we couldn't avoid because of the circumstance that we were in which is what had to have means it's just because he said it that way the interpretation was taken differently to what his I can't speak for him but I suspect he wasn't saying yeah yeah we just let it crash because who cares it was well we got so far over our skis to use your analogy maybe your metaphor the only the only when we landed we're always going to crash.

46:39And that sucked. But by the time we were mid-air over our skis, again, torture the metaphor, it's like, well, I guess we're going to have to have a crash. Not because I want the crash because I'm in this position now and this only ends this way. We didn't get the settings right. We caused this problem. We're going to have to take the medicine and get on with it. And that's kind of what happened. That's the key thing. We've always got to remember is that this is a – a recession is a reckoning of what happened before. And what happened before has happened. It's done. It's not changing. It's happened.

47:12So you can recognize it in one of two ways. Essentially runaway inflation or a recession. They're both bad. They're both bad. One's worse than the other and one's more unfair than the other. But that's just how it is. Very quickly, come back to where we started. I wanted to make this point at the time because I've sort of been banging on in this podcast for years now that they're never going to lift interest rates significantly. and here's two interest rates later. Mark is saying two more this year, by the way, which again is a forecast pressure, but who knows. Well, here's my point. We'll see, all right?

47:44I'll double down on it because I'm stubborn enough to still think I'm right. Because I never said they won't put up interest rates. But I mean, think of the amount of hand-wringing and column inches that have been written over half a percent. I just put this in context, right? Like this is relatively very small, except in the context of a highly indebted economy and household sector, right? So the point remains that whenever they have the scope or perceived scope to be, quote, unquote, doing something about inflation, even if it's a completely unrelated to demand and a supply shock caused by a war in the Middle East, they will do it.

48:29And maybe there's another one or two 25 basis point increases. But I think my broader observation is true. It's like about the market going up all the time, even though it goes down a lot of times in between. The structural long-term direction of interest rates is down. And I firmly believe that as much as I ever have. And you kind of got to it just there with what you were talking about. But in the sense that if things get bad enough, the dual mandate always is preferential treatment to the stable economic growth over inflation. Yes, we want a strong economy and we want moderate inflation, apparently.

49:16But there is one of those, there is a favorite child in that family every single time. And let's say that we do have a recession. Let's say that oil prices stay well above$110 a barrel. It ripples through the economy. We start getting some of this, you know, I was going to say, we start getting sticky inflation. We get stickier inflation, right? My view remains the same because it's just not because there's no real, you don't have to be subjective about this. It's just maths.

49:50They've only got that one hammer and it's like, oh, the economy's in trouble. They'll slash interest rates rapidly. dramatically anything anything to avoid the recession you know uh and and i and i still i still on that view i'm still on that view and i think i think i think you're right i think that's and i i know you don't like the show bankers and i'm always mindful every time i talk about i risk setting you off again so i will i'll apologize in advance or restrain myself no you know i just I need to say, I think the COVID rates were so low because they started lower because they were scared of the recession.

50:28Exactly. COVID's a great example. Even before COVID, they were so worried about a recession. They had themselves, and again, for very reasonable reasons, right? I don't want to screw people. I don't want people to go to jobs. Businesses fail. Some will lose their jobs and never work again. They'll be suicidal. I mean, this is not an academic exercise, right? This is a very real world outcome. Hell yeah. And so if you're sitting there going, well, if I could just keep rates low to make sure we didn't have a repeat of the GFC, then I should do that. I should avoid a recession at almost any cost.

50:56Again, I mentioned that phrase before. I think they'd say they started too low because I was so worried about it. Every time this might happen, jumping in shadows, cut rates just in case, cut rates just in case. And so what do you do? You create those circumstances. Then COVID, they cut them further. And so because it was from a low rate to start with, we end up at zero. And that's when you do it with 2 % mortgage rates. And then you come out of that. and I think even still we're having inflation now our government spending is part of it I'm not going to go back down that path here but I'm sure part of it was they kind of went you know eight nine months ago inflation's down oh thank goodness let's cut rates so we can help people again I don't I don't think I honestly do think it was with the best of intentions and maybe I'm being too generous but I think it was hopefully inflation is dead and we want to preserve these low unemployment numbers which of course you do so let's cut rates now and I just think they've been at almost every return over the past couple of decades certainly 15 years wrong but not but but wrong but next time they'll get it right no no wrong in terms of being they try to be too kind which sounds weird to say but i think in every case they've just been too dubbish they've just done the whole let's not let's not risk causing problems and in doing so cause problems and i think with the best of intentions i don't agree i think for a second they're trying to do the wrong thing right yeah i agree yeah i think that's just i mean i've criticized them all day long i don't think they're evil.

52:11I think they're naive. I think they're misguided, but they're not evil. They're doing the best they can under the framework, incorrect framework that they've adopted. I just think the most annoying thing for me in hindsight, I said at the time, I'm pretty sure I read it at the time, we took the foot off the throat. Inflation was on the mat, bleeding out, and we went, oh, it's okay, we'll walk away then. We'll go. And in the police procedural drama series, also they look behind and the guy's got up and he's got a knife and he's coming again. It's like, oh, I thought you were dead. and it's kind of it's every horror movie ever right and I think that's double tap always double tap wise advice one on one hey you get wise advice here whether it's finance or macroeconomic law enforcement you're welcome listeners yeah it just they took the foot off the throat and so it became resurgent they did it because I think you know this dual mandate I do they've always had the dual mandate they were either forced to or chose to return full employment into their commentary in the last 12 months.

53:11I can't say that Michelle Bullock taking the role, speaking of the Treasurer choosing someone whose views he probably knew. Michelle Bullock, I don't think for a second being pressured by the Treasurer. I think if you're a Treasurer, you choose the RBI governor you want based on what you know about them. That's what Trump did with Morshin in the US, right? So they said, oh, I want to preserve these employment gains because of course you would if you could. Why would you not? They'd be, again, mad not to. I think they've overstepped. They may well kill the economy with kindness, is my broad concern.

53:39Exactly what they, no, that is exactly what will happen. 100 % what will happen. Because again, I just want to lay it out here as simply as I can. Whatever our situations is, we didn't just blink into existence, right? Exactly. Something happened before this, something happened before that. Like there's a series of events that lead us to where we are and it's not a great place, right? But that is it. We are here. Yep, 100%. We are here right now with some stuff that we've got to deal with. And to think that some kind of policy setting can just make that go away, it's just like how do you want it?

54:21I was watching Mystery In Between. I was really late to that series, right? Hitman series. Great. And he's going around to someone who owed some money, right, and they didn't pay it. And he's like, I've got to rough you up. You know, it's just how it is. It's like, where do you want it? And that's kind of the deal that's at play here, right? It's sort of like in the face, in the guts, I am going to hit you with this thing and it is going to hurt. Where do you want it? Yeah, exactly. Where do you want it? Yeah. There is no option C of, can you just not hurt me? No. I'm chopping off a finger or I'm cutting off an ear.

54:58Something bad's going to happen here. You can choose. You can choose what you want. I'm going to extend that analogy a little further And without being too macabre, after your double-tap comments, never chop your fingers. But welcome to Motley Fool Money. It's also not just – you can choose, but the longer you wait, the worse I'm going to do. Oh, yes. So it's only where do you want it, it's when do you want it. It's like, well, you can have it now. Okay, we won't do anything now, but I'm coming back for a leg or an arm. Yeah, a finger now or an arm later, it's going to hurt. As you say, there's no choice.

55:31I'm not walking away without doing it. But the longer you wait, the higher that goes. So just tell me when, because when is fine. Start with a fingernail, then with an arm, you're cool. But just know that the longer you wait, the worse that the pain is going to be eventually when we get to that point. This is the world we live in. It is. Let's go companies for a bit, mate, because we've done a bit of macro for the first 50-odd minutes of the podcast. Unlike us. Unusually for us, I know, exactly. I want your thoughts on this. Just a quick one, probably. The SEC, the Securities and Exchange Commission in the United States, It's their version of our ASIC, the Australian Securities and Investments Commission, responsible for, among other things, regulations on company reporting.

56:08And they have, well, they're apparently about to decree, about to recommend anyway, that US companies will not have to any longer report their earnings quarterly. They can move to half yearly reporting, which is actually what we have here. Only over a certain threshold. Proper companies, yeah. Yeah. oh that's all of my companies pretty much do quarterly reporting that is true there is quarterly reporting based on profit or cash flow I can't remember what's the rule it is cash flow anyway so yes that is absolutely true you're right mate but for all companies from Tesla and Nvidia down would be able to move under this rule from quarterly to half yearly reporting and I will say something you haven't heard from me very often in this podcast Donald Trump was right on this one it was his he said he would do it and no surprise the SEC has done what they're told, even though they're supposed to be an independent statutory agency.

57:01So short. I know, right? What would you be a cynic for? It doesn't make any sense. Exactly. What do you think? Good, bad, indifferent? Yeah, I think good. Actually, I agree with you. I mean, well, the counterfactual is investors need to be informed. Yep. Right? So if you're doing this, there's more silly buggery kind of stuff that can go on, which is true. Yeah, that's true. But I mean, you know, it's also the evidence will out itself at some point. And most companies are not trying to fail, right? The reality of it is, though, is that there are negatives and unintended consequences to it. It is a huge undertaking and ordeal to get the books done every three months.

57:47You know, you have these massive apparatus and therefore this massive cost. And you also then have a lot of management around that as well. And I wouldn't say a lot, I would say most businesses are trying to make spending investment decisions that go well beyond three months or six months, frankly, even a year or two, right? And because you tell the market, we're going to give you this information all the time, that's what they're going to focus on. You're going to start to try and manage that, which means that you're going to start optimizing short-term optics as opposed to long-term viability and robustness.

58:26So there are definitely negatives. There are definitely negatives with it. Don't forget that this is, again, not in a vacuum. The other thing that we do is that we say, well, for most companies, well, not most companies, actually, it's the minority of companies because there's a long tail of very small companies. um yes you you you for the big companies you only have to report every six months but there is also what they call the continuous disclosure rules which says if any material happens you have to update it right away regardless of whether it's three months two weeks that a day since you last did that so if a company is you know going along its merry way and it's like oh gosh something really bad happened or by the way also we just want a big contract a really great thing just happened they have to tell the market they have so you have to you you kind of you don't get you don't get audited reports that's the difference not financial reports as announcement on hey we did a thing or a thing happened to us yeah you get you get you get kept in the loop i think to his investors we've got to we've got to recognize that there we are in the passenger seat here you know for for almost all of us even the big guys right like it's sort of at a point you've just got to have a degree of faith and trust in management to do the right thing and And, you know, because you can push the logic and the rationale even further.

59:42It's like, well, why not monthly reporting? Why don't we do that? Why don't we do weekly reporting? Like, well, that's silly. It was like, well, I agree. But where isn't it silly? Well, it's three months is perfectly fine and six months isn't. Like, it's very, very subjective and it's very, very hard. And I just think at a point you're just going to like, here's the business. I want to part ownership in it. I'm trusting the board to represent my interests and that of all other shareholders to elect a management team that are going to do the job and they're going to do that. Now, here's the reality.

1:00:12Quarterly reporting doesn't stop bad things happening. In fact, all the time bad things happen. So it's kind of one of these sort of quote unquote remedies that actually doesn't stop the bad stuff anyway. So I just think it comes with a good intention, regular reporting, but it actually doesn't solve any of the issues it pretends to do. It adds a massive cost burden and poor incentives to the companies that actually don't serve common shareholders very well. Love it. I completely agree with that, mate. I've got nothing to add. Yeah, there's no need for it. To your point, if it was already monthly and we went to quarterly, someone would say, we shouldn't do that, or if it was six-monthly and we went to quarterly, the status quo effect is real.

1:00:53Australian companies are no worse off, Australian investors are no worse off having six-monthly reporting. Yeah, there's no reason not to. Yeah, and look, we talk about productivity, right? This is one of those things that's – it's not going to change much. But if corporate offices can have a few less finance staff, I mean, think about quarterly. Basically, it's all you do. By the time you publish the last lot of numbers, you're already counting the next ones. You're back at it again. And so it's kind of, which is, it keeps them busy, it keeps them occupied. But in terms of productivity, and I'm not for removing all red tape, I'm not anti-red tape, I'm not one of those kind of, you know, get rid of everything.

1:01:21There are some really, really good and important regulations. This is one of those where it's like, so if we could do less of that and no one was harmed, shouldn't we? It's like, yeah, of course we should. Why would you waste non-productive time? And look, I'm saying accountants aren't productive, by the way, if you're out there listening. Finance people provide an important service, but we don't need more of them than we actually need. So if we need fewer of them, that's a good thing for everybody. And that's, I think, in this case, the approach we can happily and easily take. Actually, I had a CEO interview recently where we were talking a little bit about this.

1:01:51And I was talking about a company called Lycopodium, which is a WA engineering services company, a really interesting company. It was just a really unique company in a lot of ways. It's just like in terms of they don't announce every opening of an envelope. And I don't know in shares. I shouldn't go down this path. It's an interesting company. But as an engineering services firm, they just get big contracts every now and again. And then all of a sudden the customer pays. Now, let's say the quarter ended on a Tuesday. Yes. Right? Yeah. And all of a sudden you're looking at the quarter. It's like, oh, well, the quarterly cash flows were down.

1:02:27What happened there? It's like, yeah, we got it on Wednesday. That's right. They're a day late with their invoices. Anyone who's ever run a business, they're like, yes. Even more so in small business. Not even late necessarily. You get 30 days, they happen to buy it 29 days ago. It's not even late. They're just not due yet. They're just not due yet. If they bought it a day early, we'd be part of it. And the CEO is just going, ah, just. And that's where this is a great way to sort of emphasize the unintended consequences. So then companies start trying to do things to be clever, to manage those cash flows, you know, so you can make the quarterly optics look good.

1:03:05And it's like anyone who actually cares about the actual business itself and its long term viability and its prospect, Wednesday, Tuesday, next week, last week, I don't care. It is irrelevant, entirely irrelevant. Right. And so, yeah, it's a nonsense. So thank goodness it's sort of going. And by the way, let's say that you're really supportive of it. You're not going to be able to avoid the bad things if the company comes out with a very bad quarterly result. You've seen this happen. The market reacts instantly, right? There's an army of bots out there that before you've even blinked, in the space of time it took your eyelids to blink.

1:03:50Yes, yes, yes. You know? The trade's done. Half trades are done. It's like, oh, but if they had quarterly reporting, I would have been able to see it and I would have been able to get out on time. Bless your cotton socks, because it's absolutely not true. It's absolutely not true. The shoe still falls. You find it about every three months or every six months. It makes no... The company's... Add two quarters together, it's going to be exactly the same as it would have been if you had reported quarterly. Yep. Makes no sense. I like it, mate. I agree. I agree. It's a dumb... Speaking of end of things, end of something really, really big.

1:04:21I didn't see this, but you saw this story. It's the end of the metaverse. Yeah. Tell me the story. So there's a company, you might have heard of it. It's called, well, it was called Facebook. I know that one. Did it change its name at some point? So Facebook, like all technology companies, like all companies really, but especially in the fast-moving tech space, you really got to look around corners. And, you know, technology was evolving. And I was sort of like, you know, we had the mainframes, we had the desktop, we had the mobile, we kind of had the smartwatch. You know, the next platform, quote unquote, is the VR, AR, virtual reality, augmented reality glasses.

1:05:07And as a concept, it was like, yeah, I mean, forget about technical limitations. Let's just go to fantasy for a moment here. Science fiction, maybe. Science fiction is so important, right? because it actually, it's what drives the innovation and people to push for things. Everything in Star Trek other than, you know, the transporters has pretty much come to pass, right? Suicide booth. Yeah, yeah, 100%. So it's very easy to laugh at. So I just want to give some, I will criticise very heavily at the moment, but in a concept. Just draw and draw and then kill it with a killer blow. That's right. So if VR headsets were going to follow the same kind of trajectory as other platform technologies and get better and better and cheaper and cheaper, and people are going to develop more and more apps, then just think about it.

1:06:00It's almost hard for kids to understand today. It's like why you even need a desktop when I've got my phone. I can do everything on my phone. Now, you know, imagine if I've got a pair of glasses where I've just got a really clear heads up display that I can interact with verbally or just by waving my hands in the air. I can see everything real time. I can have overlays, you know, following Google Maps, you know, there's a line on the right, follow the green line. You know, it was like it was incredibly seductive. By the way, still is. I don't think it's not ever. It's not yet, maybe, but it's not ever.

1:06:37I think that's very much in our future. We can debate as to when it is. So Facebook saw this and thought, actually, this is not our first rodeo. We know that a lot of these technologies are winner-take-all markets. We want to own the platform. We want to – when everyone goes – you would have seen Ready Player One. I have. It's the Spielberg movie. Better book than movie. Have you ever read the book? No, I haven't read the book. The movie was disappointing. I know it's an old movie versus book thing. they took a lot out of not a context but yeah read the book do some favour it's good really good I do like sci-fi but I mean that was sort of like what was it called the oasis in the movie and it's wasn't explored as part of a theme but it's just like obviously the people who owned the oasis were the biggest best company on the planet because everyone spent all business all free time all leisure everything was on the oasis and Facebook very rationally thought, well, we would like to own that, please.

1:07:37Like, right, obviously. So they did a couple of things. And again, at this point in time, it wasn't a silly kind of thing. I actually saw the Lex Friedman interview that Zuck did in the metaverse. Right. And they had some really cool technology. The avatars that they were using were really kind of crisp. And, you know, there's a lot of tech that sort of went behind. But anyway, I'm drawing this out longer than it needs to be. They threw ungodly sums of money. Billions. Hundreds of billions. Was it really? right like oh it was up there man maybe 100 i don't like more money more than the gdp of most countries and for a long time so they went in and they not only went in it that hard they changed the company name but you don't change the company name on a whim right they so we're putting all about not all but like the lion's share of our our massive r &d budget we're directing our rivers of gold cash flows towards this thing we're changing the name we're going all in on meta Meta And In a parallel universe With maybe There was less Sort of technology Blockers That That were overcome That was That was the stroke Of genius And every single You know Magazine Magazine Look how old I am Every single Every single Social media post Yeah It's got Zuck's face on it Man of the year Man of the century You know But it didn't happen It didn't It was actually A complete flop So far $70 billion, I've just looked it up, mate.

1:09:04What's the amount? I knew it was close to$100 billion, right? $70 billion. Yeah. Just torched. That is - Is that the most expensive failed program in business history, I'm sure? Must be a must - Yeah, actually. It'll be up there. Must be. Yeah, yeah, yeah, yeah. Anyway, what's the point of this? Is it's kind of like - Don't forget, there's a lot of ego tied up in this as well. So for that to be killed, I think, is a very interesting kind of thing. So I was kind - Sorry, man, I'm going to let you get a word in in a second. I was kind in sort of saying it wasn't an unreasonable direction to push into.

1:09:38Where it was dumb was they went all in well before it was, you could confidently say this is, we're skating to where the puck is here. So like the puck might be going here. Let's skate there anyway. It's like not, no, the puck is definitely going here. Let's skate there. There's a subtle difference there. And so we've often said on this podcast that we applaud companies that fail. which is a really weird thing to get your head around in the sense that you should be trying new things and innovating. You just don't want to risk all this wonderful other stuff that you have. So you make all these little small experiments that if they fail, it's not a big cost.

1:10:15And if they succeed, it's a big upside. It's my favorite concept in investing, which is asymmetry, which is whether you're a company or you're an investor, it's what you want. Heads, I win. Tails, I don't lose much. That is how you play the game for any capital allocation kind of perspective. and what they did is that they went, heads we win, tails we lose a lot. That's right. That was the mistake that they made. Sorry, mate. It's funny, you know, I completely agree with you and I just, only because we like to be contrary sometimes. You are a million percent right. We absolutely love companies that try some stuff.

1:10:47Don't bet the farm, but spend some money. If it works, it doesn't work, that's okay too. And, you know, keep trying. Keep trying new things because that's how, you know, Apple tried the iPhone, right? If you don't try new things, you will eventually die. Your Kodak or Blockbuster, right? That's literally what happens if you say, what I've done is good enough. I don't care what else is happening. Yep. I will add though, just to be contrary for fun, there are companies out there now who are very, very successful because they did that and got lucky. Oh, yeah. That's the key word though, right? And that's exactly the point I wanted to make was we need to be really careful.

1:11:18Annie Duke is a former poker player and writer. Oh, she's the books. Yes. Great. She's talking about resulting. Resulting. Yes. Yes. I wrote about it just the other way. Oh, did you really? Nice. Yeah, yeah. And basically the idea is, you know, you look at the results and say, oh, obviously I made a good decision then because the result was the result. And absolutely. I actually tweeted. I knew it was a great idea to put all my life savings on black at the casino. Yeah, yeah. Because I won. So it was obviously a good idea. Yeah. That's the perfect extreme example. And so, and it's just worth pointing out because I wrote during the week, I said, never ascribe to luck anything that, sorry, never ascribe to skill, anything that can be reasonably put down to luck.

1:11:54Right? Because whenever you do that, Whenever you assume it's just good or bad effort or skill, you are overemphasising the role of the input you provide and completely ignoring everything else that happens around the place. You've mentioned before, Matt, Quick Flix was an Australian Netflix would-be clone. It died not because online streaming videos were going. No, they weren't a clone. They were before Netflix on the streaming side of things. Okay, there you go. They probably were. Oh, I might be wrong. No, you could be. Either way. There or thereabouts. Because Netflix was mail delivery in the early days.

1:12:28That's right. Yeah, DVD delivery. And the point there was not that it was a bad idea. And in some other parallel universe, Australian broadband speeds absolutely skyrocket after their launch and QuickFlix buys Netflix out and QuickFlix is the global player for online streaming, right? In some parallel universe, that's exactly what happened. And so, you know, was QuickFlix unlucky or was it, you know, now I suspect we might look back and go, oh, guys, that was bleeding. streaming speeds were never going to be good enough. You wasted money. Yeah. So I'm not saying they did a good or bad thing. All my point is, is their butt for the role of luck goes a whole lot of stuff.

1:13:03And there are plenty of companies who are successful now, having made those bets and just happening to get lucky. They will tell you what skill because human ego is human ego and it's what we do. We need to believe that our good performance is skill and our bad performance is luck. But that's, you know, hubris is so incredibly damaging. Investing in particular is what we do, right? So in that space, it's just really worth thinking about where the roles are of skill and luck. And as I said, generally speaking, if you're not sure, call it luck. Because even if it is skill, you don't lose anything by saying it's luck.

1:13:37The idea of just remaining a bit humble, memento mori and all that kind of stuff, I had no idea. I have people, I wrote on Twitter, someone said, oh, yeah, but if you do that, then, you know, it's like, all you're doing is explain, you're trying to take credit for your success. Why? Because your ego wants you to. And that's fine. Do your own thing. Just recognize that when you start doing that, when you stop removing the role of circumstance, you are going to rush headlong into some serious mistakes because you think you're the master of the universe and you can control it all. And you stop being careful.

1:14:01You stop taking precautions. You stop doing things like being diversified because I'm good at this. I'm right. I'm skillful. I can do all this stuff. And it's just pride cometh before a fall has been a phrase for as long as human history, as long as we've spoken, I suspect. The first bloke probably said something like that. It remains true and will remain true forever. So yeah, just always the bad stuff that happens. Zuck was silly to bet that much on the business. He would have been just silly to bet that much if it had been successful, right? Because of that asymmetry you're talking about, Ram.

1:14:28Yeah, and he was right to do it. He just, you went too high to. Yeah, exactly, yeah. Just to clarify, so Netflix did launch streaming before QuickFlix, but QuickFlix launched in Australia before Netflix was available in Australia. So in the Australian context, QuickFlix came first. Absolutely. On the global context, Netflix came first in terms of streaming. I know the way QuickFlix could have, if streaming speeds have picked up quickly here, it's entirely, I mean, we are super fast adopters, right? Very, very possibly, QuickFlix goes through the roof, it starts to expand New Zealand, it goes to Asia, and all of a sudden it's as big as Netflix and they do a deal.

1:15:04You know, that's absolutely possible. Just circumstance and luck is so stupidly important. We talk about Steve Jobs. Without Gorilla Glass, the iPhone doesn't exist. Without Wi-Fi, the iPhone doesn't exist. without the 2G to 3G to 4G, the iPhone doesn't exist. Or at least I had a Palm Pilot knockoff, XDA it was, and it was this little dinky thing. You had a tap with a button and it was post-Blackberry but before iPhone. And it was just rubbish because the glass was rubbish. The speeds were no good. You'd sit at a bus stop when I used to get the bus home from, I worked at Fox Studios in Sydney at the time.

1:15:42It's a long time ago. And you sit there, you press on the SMH button and you wait. And you'd wait. And you'd wait. And you wait. The bus might turn up for it after you downloaded the homepage. But it was cool because you could do it, but data was expensive. And so, you know, Job's absolutely a genius. But without the circumstances that allowed him to use that genius in this way, we have a very different, it's just a very different story. Oh, I make the point all the time with a lot of these supposed visionary leaders. And not that they weren't visionary and hardworking and just built special, but they were very much a product of their circumstances.

1:16:19What you don't see is what's called the silent evidence. You know, it's sort of like, and I mentioned on the pod before, years ago I used to love reading sort of biographies and autobiographies of entrepreneurs. And it's just like, I just stopped because like they all said that I was a genius and I worked really hard. That's the TLDR. All you just do, look what I did, you know. Yeah, the genius thing, I mean, you work hard. It's even the genius thing of like, you know, I had this flashing insight. So I'm sure a dozen other people did too or whatever their circumstances were, they didn't get there.

1:16:46And, you know, we are smart or lucky, both. We've said a million times, hard work and persistence is necessary but not sufficient. It doesn't get you there. There's probably a thousand people on planet Earth out there that have an IQ that's three times that of Elon Musk and work twice as many hours, you know? And it's like, and you'll never hear of them and some of them might be living under a bridge. And it's like, well, what's the difference? Well, the circumstance. Circumstance is the difference, you know? Before Musk himself has admitted, had there been a recession in the early years of his running of Tesla, the business would have gone broke.

1:17:18It wasn't even that they were unlucky. He was also lucky on top of that just to have the right economics. Different point in the cycle. He takes over Tesla in 2018. The thing dies in 2020 and we never hear about it again. Yeah. It's just, you know, yeah. And it's not just a sort of, I mean, the wrong take on all of this is to say, well, it's all a crap shoot. What can you do? You know, it's like, no. So I'm a very big believer in that you make your own luck in the sense that you want to, you embrace the uncertainty, the probabilistic nature, but you try and foster the conditions that allow luck to strike, right?

1:17:52What's that luck is when opportunity meets preparation, I think is the phrase. Bam, that's the one. It's such a great line. And it is so true. You know, it's just like, I've got, I'm sure we all do. You know, you've got those people that you know, just woe is me i never do anything and oh you're so lucky this happens that happens like yeah but you don't do anything bro like get off your backside like i you know i i know you've been dealt some bad cards i know other people have been lucky and that and that sucks and guess what life isn't fair but moaning about it and not doing a damn thing about it okay i can guarantee you that your odds are precisely zero if you don't that's right like you know and and yeah anyway it's it's it's just always worth keeping all that kind of stuff in mind.

1:18:36Yeah. I'm a little bit, I'm a little bit back on that though. I am a little bit, you know, I'm a little bit disappointed. Zuck didn't make it work because I want, I want the metaverse. Maybe not, maybe not, maybe not the dystopian Facebook owned one, but as a, that's right. You've seen Ready for One, you still want the metaverse? I definitely want it, man. And that's how they win. Cause we know better when we want it anyway. I suspect, I suspect that stuff is still very much coming. Yeah, yeah, I'm sure that's well. Google Glass did it too, remember? Actually, Google Glass is the great example because they did it.

1:19:10Yes, that's a good point, actually, right. People remember, gosh, 2017, something like that, 10 years ago, something like that. They started, whoa, you know, new platform. And they launched this thing and it just wasn't, the tech wasn't ready for it. But Google didn't miss a beat. They didn't change their name. They didn't put$70 billion towards it, you know. Launched in 2013, just continued to do it in 2015. 2013? I know, right? Are you joking? Well, according to AI, Google's Gemini AI, so I don't know. Oh, there you go. It's crazy, hey? Wow. And the other thing is, mate, I suspect these things actually happen in a new way eventually.

1:19:47Oh, they will? It's just time and, you know. And that's the other thing is being early is indistinguishable for being wrong in a lot of cases and being sufficiently early anyway. And it's kind of like, you know, maybe it works, maybe it doesn't. Maybe it happens, maybe it doesn't. I suspect AI probably revitalizes most of this stuff anyway I'm not even sure I am I do wonder I mean, Zuck spent too much money on this thing obviously by definition, you can see it I do wonder whether killing it may actually be the capitulation trade that he comes to regret as doubling up I know this should have been another 70 billion but I would be keeping this thing alive and afloat so you're ready to pick it up at the right time, right?

1:20:24Because it just makes sense to say, well, the tech's not here yet but when it's here, it's been like AI itself It's like, when it's here, now we can do a thing. It's like, great, go and run with it. I suspect walking away was in large part a response to the share market rather than corporate strategy itself, which is just, we have to show we're more profitable, so we should stop spending on this thing. I hope for you, I don't have Facebook shares, I don't particularly, don't have a lot of love for Zuck, but it would be a shame for all concerned if they abandoned it at exactly the wrong time rather than just putting on a care and maintenance and waiting for it to kind of, the wave to catch up with the surfboard.

1:20:54Yeah. Actually, we don't have time, but very quickly, I just give a shout out. The whole backstory to that is fascinating. Have you ever heard of Palmer Lucky? No. Look him up. He's one of these tech billionaires that is pretty controversial. That's a way to say it. Oh dear. But he was literally a genius. He's the guy behind Oculus Rift. Facebook bought that off. He developed it as a kid in his bedroom. And he was actually making breakthroughs with VR technology that a lot of the big labs around the world were struggling with. and eventually bought out his tech. So he became an overnight billionaire with Facebook.

1:21:31They parted ways because he was posting stuff on. He's a big Trump supporter. He is a fascinating individual and clearly incredibly smart. Now, again, whatever you think of his politics is a whole other kind of story. But now he's taken that success and he's folded it into Andrew. Have you heard of Andrew? No, I haven't lost his name a little. of andrew is the name of uh aragon sword in lord of the rings just shout out to the nerds out there i know what that means yeah that's right flame of the west i forget it's been a while since i've read the books um uh god outing myself is a massive note here because anyone was yeah it's all twice mate we're well drawn out on that one but his whole deal is it's a military company and they're doing super soldier kind of like just the most like wild kind of things yeah um anyway one day we'll talk about it because it uh there's there's probably a joe rogan podcast or something in fact i'm sure there is out there of it and he's just like it is fascinating in terms of just talking about that that genius founder right place right time what's happened Just the story, how that led into Facebook making a push into the metaverse, providing the foundational technology for all of that to kind of happen.

1:22:54It's a great story. And also how he's trying to re-engineer the military industrial complex in a, how do you even say this, in a smarter way.

1:23:15That's too big a topic to unpack. And we haven't run out of time in theory because the internet's not completely boundless. Maybe it is. Anyway, we will stop here because if we don't, we'll keep going. And if we keep going, we might not stop and we'll just at some point disappear into the metaverse. Even more abstract Lord of the Rings references. Stay tuned for the After Dark version of Motley Fool Money. In the meantime, we'll perhaps finish this one here. We will have a bit of a break and we'll come back on Sunday morning with, of course, a very special Mailbag edition. We'll see you then. Fuller.

1:23:43See you then. 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.