Do our banks make enough money? April 12, 2024

26:18This is very ancient Mesopotamian banking 101. This is kind of where we started, right? Right, right, right. And it made a lot of sense because you can't ever go too wrong here, right? Now let's say that I've got$100 in depositors' money and I lend out$200. I'm fractionally reserved. That's probably okay because most people don't need most of their money most of the time. And so it's just fine. They're not going to call it straight away. They're not going to call it straight away. And if someone does, someone will be depositing money elsewhere and the system will kind of balance us out. They keep some reserve cash just in case there's short-term, you know, they call it a tier one equity ratio.

26:53They've got some money left aside just in case a few more people than expected come and get their money. Absolutely. Now, what is that reserve ratio? Is it 50 %? Is it 80 %? It's about 10%, I think, internationally. It might be 12 % or something. Yeah, most of the Australia seem to have about 12 % or 13%, but yes. Yeah. Yeah. So, in other words, should their asset base drop only like an eighth, you know um they have more liabilities than assets they are insolvent so so and again i don't want to worry but just that it tends to be a standard to which we've found that it's usually okay depending on here's the big asterisk where you've actually lent it if you've lent it into a bubble then that's probably not going to be good if you've lent it very sensibly then you're probably okay but but again the whole system's based on trust as soon as people go i don't know if you're good for, I've lent you, when I say lent you money, I've deposited money with you.

27:49I've lent you money effectively. I'm assuming it's going to be there when I want it. But if I don't think even though there's a chance that it might not be, and I can click a few buttons and just transfer it to another, I'm going to do that, right? So things rapidly change. And my point is just to come back full circle on how you laid things out. Yeah, we didn't get into all of that strife, but it was the gap between where our banks were structured and those banks wasn't as wide as I think people assume so we dodged it we were sort of we when the room started filling up with water our shoes were tall enough that our nose stayed above the water and there were other people that are a couple inches shorter and they just weren't weren't as lucky but i i don't think it was something that is just like oh we were always going to be fine was like well it actually things deteriorate i don't know i'll make it up deteriorated 10 more than yeah we would have would have happened to us as well um except except that just quickly our issue would have been counterparty risk.

28:39Well, it's always the risk, yeah. But I guess my point is our banks didn't make – counterparty once removed. So our banks didn't make the stupid investments. They weren't piling into Icelandic money management. They weren't investing in Irish builders. They weren't – Not to the same extent. Well, not really much at all. But I mean, the CDO's exposure was almost zero. In Canada, there was only one bank, TD Bank, that didn't play the game. Everyone's played the game and everyone in the US played the game because TD Bank kind of went, we don't really understand this. We think it's silly. Everybody else was like, well, they're doing it.

29:08I guess we better do it too. We all want to make money and we've got to make some profit. That's the game theory part, isn't it? Well, that's what I'm saying and that's where I kind of get back to our banks of I don't mean to suggest they are pretty naturally or somehow specially better or different. But I think there is some sense that for whatever reason, and I guess I'm presuming or assuming that maybe it's because they're profitable enough, they didn't feel the need or desire to play that game. They simply said those guys over there are trading CDOs. We could do that, but we're not going to.

29:37And I guess the game theory that I'm talking about is they kind of went, we don't need to do that because we're actually profitable enough where if we're fine here and - Are they doing just fine with their own property market? Which is kind of my point, right? But that's almost my point is, you know, were they, you know, if there was portable banking, if their margins fell by half, would there be someone at CBA or NAV who says, we're going to try and find another profit stream here? What we should do is start proprietary trading CDOs. Yeah, potentially. You know, that's a bit I'm curious about.

30:04I'm always mindful with banks in particular of saying, yeah, would I like to make a little bit less money on behalf of every Australian depositor and mortgage holder and business customer? Yeah. But I'm also kind of like there's a limit at which you say I'm kind of okay with them just doing a bit more than okay if it means things are a bit more stable than they would be if they started playing silly buggers to chase the next fraction of a percentage point of profit growth. Yes, yes. But the issue I've always had here is what they call moral hazard. Yes. um the i would i would there's a part of me that kind of says let the banks do whatever nonsense they want to do i don't care you want to do that do that fine um if i'm not comfortable with that as a depositor or as an investor i won't i won't play that kind of game but play stupid games win stupid prizes is the saying and and i feel as though that the moral hazard part comes into it and game theory comes into it because it's never explicitly said no one's signed a contract no one's had a meeting but Matt Common knows that if things get real we're going to bail him out and it's kind of like and he also knows that if any government's got that$250 ,000 deposit guarantee I mean depositors will be effectively made whole up to that level and frankly if it comes to it probably more because the government may just voluntarily say all right we'll keep you all happy so we don't we don't cause the run on the bank that they fear you're right it'll deposit that's particularly be backstopped?

31:25I think, so this is really harsh, but I think let them fail. Let them fail because that's the incentive not to do this. When your whole operation is facing existential risk or you're playing in an area where there's existential risk, you won't do, you want that the investment committees will be like, you know what, let's not, because if we do this, there's every chance that we blow up. If instead the conversation is let's do it. Like it might go for five years before the party ends. We'll make a school in dollars and worst, worst case scenario, we're going to get bailed out. I might miss my bonus for a year and why not?

32:00So it's got to, there are systemically important reasons is why you need, I've, I've, I've often referred to Charlie Munger's quote, you know, capitalism without a failure is, is, is like, um, Christianity without hell. And it's, it's, it's, it's such a good line because that's the incentive for all of us shaking our fists at the sky, saying the banks should do this and they should be nice. And they go, right. And it's like, no, no, no, Let them do what they like, but just understand that the cost of failure is death in the corporate sense. And that sharpens the mind. And that I think would lead to much better market outcomes.

32:31Now, I know what you're going to say. And I would say I would have minimum deposit guarantees. And I wouldn't make it unlimited, but to a certain point. So depositors will be made whole. But if the bank has to fail, the bank has to fail. It doesn't happen anyway, mate. I mean, we saw Lloyds with no upset owned by the UK government. All the Irish banks were effectively taken on the Irish government balance sheet. I don't suspect the Australian government would bail out shareholders. I could be entirely wrong. Maybe they're more craven than I believe. Well, they did for Qantas just recently. It's exactly what they did.

33:09Why? Because Australia, you know? And I'm like, what? And that literally just happened. And so I'm not, look, I'm not saying it's a guarantee. And look, you're right. You're right. I shouldn't be so deterministic. But it's on the cards, right? That's possible. I agree with that. Absolutely. I could imagine too, especially when the big cohort of people go, all my money was there, they did this, who's going to do something? And the politician who gets up there and says, well, actually, this is just the nature of markets. We'll teach them a lesson and in the long run we'll all be better off with a more robust anti-fragile system.

33:37No. You say, I'm going to do something. Just like we're having a supermarket inquiry right now, just like we're going to have any number of other dumb inquiries or what's elbow on now? Are you going to like incentivise manufacturing or something? I think this is where fundamentally we often differ on things is I think you're right in everything you say, but you have more faith in the power of institutions than I do or the intent and capability of institutions. That's probably true. With a very capable, competent, fair, honest administrator of these things, yeah, okay, I'm with you. But there's not a lot in history that gives me confidence that that's going to be the case.

34:14And for what's worth, I'd actually agree with you in terms of the failure bit. If we talk about the equity base rather than the whole of the business. And again, I'm separating out the shareholders. Yeah, you're right. We end up in the same place, which I would absolutely let the shareholders of ComBank fail. We should not – I'm sorry, any ComBank shareholders or ANZ or Westpac. Well, everyone, every single person listening is exposed because through your super, there is such a major part of the – there is no one in Australia that doesn't have direct exposure, which is why I think they would be bailed out.

34:42But I will say, so the only thing I know, you and I kind of come back to this sometimes, I think I am more worried about the so-called principal agent problem, as they call it in the theory. So, and again, Lewis talks about this in the book. You love asymmetry. You haven't mentioned asymmetrics for a while. I've got to bring it back. We've got to bring it back. The asymmetry in banking is if I take this stupid risk and it pays off, I personally get paid$5 million. Yes. If I take this stupid risk it doesn't pay off, I lose my job and I go and work for the other guy across the street. Exactly. That's a good bet.

35:18Which is why – and this is the only way – so I agree we should let the businesses broadly fail, including banks, as long as you don't screw depositors or the system in doing so. And I think that was the Lehman Brothers problem in the US, was that contagion problem. So that's why there's depositor insurance or the banks – the government's prepared to say, look, the bank might not go to the wall, depending on whether you're right or I'm right, but depositors will be okay. I think that's true with one exception, mate, which is when you say the investment committee sits around saying, if we do this, we might blow up the bank.

35:46I think deep down, there's a too large number of people in those institutions who say, yeah, but we'll get our$15 million bonus if it works and we won't lose much if it doesn't, so let's just do it anyway. Or even not that transparently, more opaquely, I've got a$15 million bonus if I can make this work. I'm going to try really hard to make this work. And I think I can because I think I'm smart. And so all of those human behavioural psychology biases and everything kind of comes to play right at this very point, which is, you know, I think I'll do it. I think it's okay. Everyone else is doing it so I feel good about it.

36:19I'm taking all the precautions I can and I stand to make$15 million. Or maybe I don't and maybe nothing goes wrong anyway. Maybe I miss the chance of$15 million. Or maybe I do it and I lose my job. Those are the three outcomes. I'm still going to be like, well, I think I'll roll the dice for sometimes really, really nefarious reasons, sometimes just plain self-delusion. And my only concern with all of that is when you have the – so principal agent problem suggests that there is effectively a management team who are doing things in theory on behalf of the owners, but they're not the owners. And they have different incentives and different outcomes on the owners themselves.

36:51So on one hand, when we say let CBA fail, I think that's still the right thing to do as long as you protect the depositors, by the way. But I also do feel for particularly the banks and the Woolies and Coles and we kind of take exception of the mum and dad investor that kind of label because it's a bit patronising. But there is people like our mums and dads who are investing in CBA. They're not saying to the guys, hey, go and take these risks. They're assuming or hoping that the companies are being run well. And this is where I only step in and probably more than you on the extra bit we haven't really mentioned is just the regulation.

37:25So you can let it fail and say, push the boat out. If it sinks, it sinks. You can though say, boat's a little bit overloaded, guys. Take a couple of people out before you push the boat. But if it still sinks, then that's bad. But we're going to try and make sure everyone's got a life jacket. Yeah, I'm actually with you on that. Look, I should roll back some earlier comments there. There is a huge, you know, it's the Peter Parker thing, right? Great power comes great responsibility. And the banks have great power. I think if you're the government and you're going to issue a banking license, you just basically say, like, look, if you want to play this game, you must have a capital ratio of 20 % or something.

38:00I would make it rather high. Absolutely. And no, we can't make profit. I was like, all right, don't do it. I would say the same to the gas company. It's not like this is a world. It's too much. Durham, see you later. You know, I'll call that bluff any day of the week. 100%. Yep, agree. I think you're right with the capital ratio. And the thing about these capital ratios, by the way, is it's an exponential line. You know, a company with a capital ratio of 10 % is – sorry, I'll go with 20. A capital ratio of 20 % is not twice as safe as one with 10. It's going to be 10 times safer. So much safer.

38:32Because it's just – the way those percentages work when you go from small to large numbers, it just changes the math so dramatically because the size of the run, the rarity of the run that causes that, it just becomes exponentially better off. The one that's 30 % capital ratio is probably 100 times better than the one with 20%. It's just the way it works. Now, at some point, we're going to have to pay more for banking services if the bank's going to be comfortable. Yeah, you would. So that's the point. This comes full circle very nicely. You said I'd be happy to pay a little bit more for a safer – and I think you would in other services.

39:10A lot of things that we get for quote-unquote for free aren't really for free. They're sort of to entice us there to attract our money. But yeah, I'm with you. I would absolutely prefer more bank charges, et cetera, et cetera, if it meant that there was a far more robust system. There you go. with the caveat that there was a nice, as always, it's always the standard with me, but a nice, open, competitively accessible kind of market to ensure that whenever there is anything too egregious, you know, someone else will go, well, I'll take your market share. Thank you very much. And that will keep things in check far better than any heavy-handed regulation.

39:53Although, you're right, you definitely need regulation to agree. Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener.

40:05I'm glad you mentioned regulation. This is a wonderful segue into our next topic, mate, because God love our Prime Minister, Anthony Albanese, who this morning, we're recording this on Thursday the 11th of April, has announced that, as the AFR calls it, protectionism is the new competition. Now, let's assume the Fin might be slightly biased because they can be sometimes, they're editorial. real in any case uh the pm has flagged massive new amounts of investment into lots of different industries in theory to i don't know what exactly in theory to compete with the rest of the world somehow because australia because australia apparently it's going to be called the may future made in australia act which is just you know what i was going to hate more than anything i hate lots of things the governments in the u.s been doing this for years right they call on the the nebraska is the best state in the country act or you know and and australian governments have doing it where it's like you know repealing uh rolling back bad regulation act or just they try and kind of you know put marketing tiles on this sort of stuff this one goes even further because they're launching it given given the name uh for the regulation or the legislation's even drawn up yeah future made in australia act i i i am i don't i've voted for both parties in the past we try and be apolitical here i i thought the last term of the last government was atrocious frankly the way it was run for lots of different reasons without being political.

41:25And whenever a government is replaced, you kind of go, oh, hopefully the new guys will do some things, at least for a while, right? New governments tend to be more principled. They tend to have higher aspirations. Eventually they get worn down and chucked out. That's kind of what happens. And you kind of look at it and go, oh, really? You're doing that? And that was what I thought this morning. It was just like, there's a lot of stupid policies recently from both the government and the opposition. Hands up, shadow Treasurer Taylor with the super housing as a start. This one, I think, almost takes the cake, mate, because the government's decided - Well, they've decided they're going to spend billions and billions of Australian taxpayer dollars in subsidies and or tariffs.

42:05We're not really sure yet. It seems like it's going to be subsidies or direct investment in these businesses to do things that these companies can't otherwise do by themselves, which is the first clue. Because if a company can't do something by itself without government money, then that really means the taxpayer is effectively on the hook perpetually for this stuff now let me be a little bit kinder because there's plenty of partisans who already have hit me on twitter this morning and god love you thank you for engaging oh no it's only going to be seed capital it's going to start it then it's going to stand on its own two feet to which i reply we spent 40 years propping up the car industry waiting for it to find its own two feet it never quite got there uh the frustrating thing about this mate is the hawk and keating labor governments the same party as everyone knows that is in power now, spent the best part of their first two or three terms dismantling tariffs, dismantling subsidies, dismantling protectionism because it makes sense.

42:58It makes sense for us to trade with other people. If they can do it better than we can or cheaper, we should buy their stuff. And if we can do stuff better or cheaper than they can, they'll buy our stuff. We both win. We get to make the stuff we're good at. It's called comparative advantage. It is. And I had to share this with some people on Twitter because it's not competitive advantage. It's a very different thing. Comparative advantage talks about the opportunity cost of producing it. We could make iPhones in Australia. They would cost$7 ,000 to make, but we could do it, right? We could absolutely do it.

43:26So why don't we? Because the people who would otherwise work in that iPhone factory could work in other industries more profitably at higher wages for better economic outcomes for the country, including the fact we buy cheaper iPhones. That's exactly why comparative advantage, I think it's why globalisation of foreign trade is so incredibly important. Now, people have taken an issue with globalization. I would agree it's been poorly handled by politicians over the last 30 or 40 years in terms of making sure the consequences were dealt with such that people enjoyed and appreciated their benefits because that's the other thing.

43:58Sometimes competition is fine, but if you don't recognize it, then the political changes can be wrought against it, which is exactly what's happening now. And I just, mate, I don't even, I'm literally lost for words. I was on radio this morning. I said, I don't know how to describe this. It is just such a terrible, terrible idea. Now, apparently it's solar panels and clean energy and apparently it's safeguarding our energy future, all that kind of rubbish they throw at this stuff. Here's my issue with that. Sorry, I'll diatribe and then you can jump in. Go for it. People say to me, I know what they're really doing because what they're doing, they realise the geopolitics stuff.

44:32So what they want to do is make some panels in Australia. And I'm kind of like, if you genuinely think that the geopolitics is a risk, if you genuinely think our Australian economy and society is at risk. You're going to have to say to the Australian people, so here's the thing, guys. We're going to now reduce all of your standards of living by 25 % tomorrow and we are going to nationalise or create new industries in everything. We're going to have car industry. We're going to have to make our own phones. We're going to have to make our own computers. We're going to have to make our own clothes again because we may not be able to get them.

45:03If the South China Sea is blocked and there's a naval blockade, we're going to have to start drilling our own oil. That's going to suck. We're also going to have to smelt our own iron. I mean, you would have to create, at the very least, if you think China's the enemy, everything China does. If you think China can block access to Australia from foreigners, everything everyone else does for us. I mean, that's national prepping, which, again, you can do if you want to do it, but then have that conversation. Or you say, well, we kind of won't do that, so let's stop trying to do bits and pieces and pretend that somehow make a couple of solar panels in Newcastle is going to save us from energy reliance on China.

45:38It is just not going to happen. So I don't know, mate. It is just – I called it stupidity this morning. I think it is. The madness of pretending this makes a difference in any other way than costing either more taxpayer money for subsidies or putting up the price of those imports for Australians, in other words, reducing our standard of living because now computers cost$1 ,500 rather than$1 ,200. It just makes – am I completely barking mad, mate, because I think I'm going nuts. No. Let me try and fill it out a bit more. Please. Actually fill in the gaps on my diatribe. I get the frustration. I share it.

46:13But I do get the desire though because it feels good that things are made here. We feel like we can stand on our own two feet. We want more local jobs. I mean who's against that? I don't think anyone is. The problem is though is that when you add public money, it distorts things. You get to a situation where these companies are only viable if they're subsidised. Take away the subsidy and they're not viable. And okay, maybe for some things that have a greater societal good beyond the economic wellbeing of that particular company, then okay, that's fine. But for a lot of these things, that's not the case.

46:55The only rational reason to really want to, like manufacturing, have that here, I would argue is for security grounds. So if you've got a pretty dark outlook on geopolitics, there is an argument because, you know, things get real. You want to be able to know that we can at least make some stuff here because – But is some stuff enough though? I guess my kind of point is what if we make 10 % of the stuff here? It's like, well, the other 90 % still doesn't get made. Like I'm still not sure on a risk-reward basis you either say, I'm in, let's pull up the drawbridge and literally nationally prep. Yeah.

47:27As in, you know, there's a doomsday prepper is kind of where that phrase comes from. I guess people are wondering. Or you say, it could suck. Let's stockpile some stuff rather than having to make it here and just kind of work on, by the way, not having wars. And it's a pretty good incentive, right? I just don't get the halfway house. You can't be half pregnant, right? That's what this feels like is a token effort to sort of say, well, maybe national security. Well, maybe national capability, but not really in any meaningful way. Yeah, and it depends on what you're making as well. Like national security doesn't depend on T-shirts, right?

47:58Well, you don't want to see me walking down the street without a T-shirt, mate. Maybe it does is all I'm saying. I guess I'm saying there is a strategic dimension to that. You're right. But the broader point I was going to make is the trade is good for the very real reason that it makes things cheaper. It's mutually beneficial. The person selling and the person buying both get something out of this, right? It is a good thing. but it fosters global peace. If you're in on, if you like global peace, I'll out myself. I'm a fan. I'm, you know, sign me up to the newsletter. I've got people bombing and shooting at us yet.

48:36I'm a supporter of that. You know, I'm anti-war and death, okay, I guess you could say. And I tell you what, I think that tensions, look, there's every chance that the US and China would have already gone to war if they weren't so interdependent on each other for trade. Yeah. That is a massive, like China can get very angry at the US and vice versa, but guess where most of the exports from China go to, right? They need each other. They need each other. I mean, Neil Ferguson called it Chimerica, right, which is a really great name because it's got the Chimera kind of angle to it as well and it's the portmanchu or whatever it's called, the joining of the words.

49:14But it is phenomenally beneficial for both of us. So this is why we're doing it. The other thing is this. Name for me one technology that came out of the Soviet Eastern Bloc countries, right, or Cuba or North Korea or, you know. Whenever you try and distort industries, you effectively break down the signal between consumers and manufacturers. Hey, I'm going to make this and I'm going to make it because I think people will want it. Well, people don't really want it unless you make it a lot cheaper. So I'm going to artificially make it a lot cheaper by taxing you and then giving it to them so that you can get it cheap.

49:59And you end up with this rubbish goods that no one really wants. Because there's no – again, I know it sounds really harsh. You want bad products and services to fail. Yes. Or put better, you want the superior product, as determined by each individual person's own desire and wants, whatever they happen to be spending their money on, you want that to flourish at the expense of all of the not so great stuff. We'd all have Nokia flip phones still if someone didn't sort of come in, innovate, and no government decree said actually we're going to give Apple this much market share. No, the market did because it turns out that an iPhone is a lot better than a Motorola flip phone, you know, not to just pick on Nokia.

50:44And that is how it should be. Now, for whatever reason, the people at Motorola had incredible good lobbyists and they were able to sort of encourage the – in my hypothetical parallel history, you know, support Motorola by we need to manufacture this here and we need to blah, blah, blah. And it's just like – I know Motorola is not a US company. This is a terrible analogy. Go with it. Push on, push on. I don't think it is anyway. Anyway, my point is is that we all suffer. We all suffer. And it's not that it's – we don't even get the feel good, well, at least we created some jobs here because they aren't the kind of jobs that, I mean, those jobs are being funded throughout Texas.

51:22The piper always pays is what I'm trying to say. That's the thing, right? That's exactly the problem. And if the piper isn't paying, it's because someone else is just inventing more money somewhere else. It's like there's a cost at every level of this kind of thing. So I'm with you 100%, Albo. I get where you're coming from. I get it sounds good. I get it's got a good, you know, soundbite to it. but the reason that we don't do this stuff here is because we're not good at it. If we were good at it, we would do it and we would do it not for the greater good, but because someone would go, Hey, we're really good at this.

51:51I'm going to do this and I'm going to make a ton of money doing it and everyone's going to buy it. And that's, and that's why it's going to be good. So why do we supply all the iron ore? Why do we supply all the wool? Why do we, because we're just better at it than any, you can't bring it, you know, Australia's we'll go toe to toe with anyone on some of these fronts here. Cause no one can do it better than us or not, not, you know, Not many people can do it as good as others. Let's lean into that. And guess what? We kind of have and we kind of done really well as a result of it. And that's the thing.

52:18If you want to start making solar panels, right, you've got to pull people off those farms, out of those iron ore mines. Yes, you distort the economy. Out of the banking. Well, not only distort the economy, but you actually replace something we have an advantage at and with. And you said to tell that capital, those people, go and do this thing that we don't do as well as they do. We're the world chess champions. Let's train everyone on checkers, right? Let's forget that. We're going to put out, we're just going to play that game instead now. Now, if a company wants to start up, you know, I'm going to try to torture your analogy.

52:50If someone wants to become a checkers champion, they're entitled to do that. And good luck. And if you do, then great. And maybe more people will join you and maybe we'll have a nation of checkers champions and chess champions, which would be wonderful. Yeah. But just deciding arbitrarily, you know what? We're really good at chess. We're not very good at checkers. The Chinese do checkers better than us. and that's bad. So we should actually waste time, money and effort getting good at checkers. We'll never be as good as them, but we'll pretend we can, just in case the Chinese take all the checkers away, we'll have some in Australia.

53:19I'm talking the metaphor horribly. You get the idea. It's just madness. Can I just be clear on something here too? There is, my worry is, just reflecting on what we've both just sort of said here, is that it implies a ideology of laissez-faire economics and capitalism, like let the market decide. And I say that a lot, but I've really got to be careful with the language here because I don't think that. I don't think that. I know some people do. I don't think that. As we were discussing off air, I think the government, what they need to do is they need to stop acting like the puppet master where I'm pulling all the strings and they need to be more worried with setting up the stage to have another terrible metaphor.

54:04No, and that's where we both agree. You come across more free market than me or more whatever. I come across more regulatory or oversight than you. But that's exactly where we agree, which is the role of the government is to decide the playing field. Yes. And then let the players play. Then let the players play. Don't field your own player, right? So here's the problem as it's perceived. We don't make enough stuff in Australia. Now, let's look at it critically. Well, why don't we? We've touched on the reasons why. We just don't have a comparative advantage in that. Is there anything that we could do to make it easier for people who make stuff?

54:40And there were people on the radio this morning. It's like, you know what? Can you get rid of all this stupid red tape? Like that I have to, you know, now, again, again, I'm not saying throw all regulations out the window, but I think anyone who's operated in these industries will tell you, OMG. You know, there's a place in China which just pumps all its waste into the river and is done with it. We've got to do this, this, this. And again, it's like, well, good, good. But there's a continuum here. there's a spectrum and a lot of this regulation a lot of this compliance is very costly and and a lot of it is good in necessary in terms of intent and purpose but badly implemented and so when people operate businesses and anyone who's run a business knows this you've got 50 plates spinning in the air i've got to look after that there's this problem over there i've got to put that fire out oh and by the way i need to hire an accountant and a consultant we need to spend six months and 200 grand to make sure that the government thinks that we're not doing something wrong and it's Again, the government should be checking in on things, but do you have to make the burden so heavy handed and so difficult and so bureaucratic?

55:40And so like, let's clear the air there. And now whether that particular industry or niche thrives after that, well, that is yet to be determined. But if you want to do something, that's the best thing that you can do. Don't get in there and say, I'm just going to start giving you money. And again, where does the money come from? It comes from us. It's either taxed or it's created out of finesse. And there's no free lunches. And then I think too often we expect in the modern world that it's just like we could just solve every problem by throwing money at it. It's like, no, it turns out you can't.

56:11And that's the thing. People say, well, we want to make stuff. Your point, like there is something super deeply, I assume it's human, it may be cultural, but either or it's about making stuff here, right? We kind of, the idea of a physical good. Ross Gittens was on the Conversations podcast with Richard Feidler a little while ago. And I love Ross. We don't always agree with him. But I did on this one. He made the point. We've got to stop obsessing about the making of specific physical widgets. We're in a services economy. We're in a services world. Think about where is the growth of the economy?

56:40We talked about AI ad nauseum, digital products, digital software, services. That is the future of the economy. Why? Because we're all getting richer and wealthier and we're making products cheaper, easier, and more quickly. So we've got more discretionary income to spend on other stuff. Who's going to do that other stuff? will other people and they're going to get paid more to do it. That's literally – this is – it's literally progress. And I know people kind of look back and go, oh, we used to make televisions in Australia and we used to do this. Yeah, and they used to be rubbish. I know, right?

57:10Or cars. I mean, God love it. I had a VP Commodore back in the day and I loved that car. It wasn't better than the European alternatives or Japanese alternatives. It was cheaper because the government threw GM some money and said, can you please keep the price down? So, you know, it made it easier. Well, no, no, no. It was cheaper than it otherwise would be. It was still more expensive than the imports. Yes, sorry. Well, it depends on the car. Even with that. Yeah, depending on the car and class. But generally speaking, Toyota just came in and crushed it, right? Right, exactly, exactly. And again, because they do it better.

57:37So I think that's, you know, we all want to make stuff. I get it. And we all kind of want to think that we could go back to making stuff somehow without cost or even some people want to believe that somehow it makes us better. And I think, I will say very quickly, there is an absolute benefit in being a more complex economy. You know, we're derided from as many houses and holes. Right, we've been derived as houses and holes and that's frankly not even close to true in most cases. A little bit true. The holes thing. Mining employs a tiny fraction of Australian people. It's good for tax revenues, but it doesn't add that much to the physical economy other than the money gets chunned through the government.

58:15And it's not real, by the way. It's real money. But in any case, being more complex is good because it makes us more any fragile, to your point. So we should do more things if we haven't got enough complexity in the economy, and I mean complexity in a good way in this case. Yes. That's positive. But wanting to make stuff is completely logical. It's just we don't have to – we need to get over it. Honestly, if you're listening and you think, well, I'd still like to make stuff. I was like, well, hang on. If you want to make TVs again or clone or whatever it is – Have at it. Go at it. Well, not only that, but if you want us to as a country, what you're really saying is I want people to be paid less or I want to be taxed more just so I can say we made this here.

58:54and you might want either of those things and that's fine just be really clear that's what you're if not deliberately or explicitly you're implicitly saying I want people to work for less more than they're earning now in a crappy job that means they can compete on price with China good luck with that or you're saying I want to buy a television for 500 bucks that costs$2 ,000 to make and I want my taxes to go towards subsidizing a TV for everyone who buys one by 1500 bucks a unit rather than letting them buy the same thing or better from overseas for a cheaper price and paying less tax. Those are the only two options.

59:30The other thing that's worth touching on here is that when we speak of comparative advantage, it's worth asking, well, why is it that places like China do have? Well, where is their comparative advantage? It's ultra-cheap labour. That's the same with India, same with Bangladesh. They've got scale as well and they've got proximity. There are some advantages. If you've got a billion people in your country, whatever you're making locally, you can make a lot of it. You're closer to other places generally, so your shipping is probably cheaper. And as you say, the wage is just bloody cheap. Yeah. I mean, so that's their advantage and that's the one that they have exploited.

1:00:05Yep. However, I don't – there's actually a whole bunch of issues with that, human rights and stuff like that. This is complicated because then you get into the internal politics of foreign jurisdictions and should they and shouldn't they. And, well, I think so, but is it up for me to say? I don't really know. But I think one really interesting contrast with that is Germany. You mentioned Germany before. Yes. Germany is an industrial powerhouse. Yeah. But they don't make T-shirts. Correct. They don't make coffee mugs. That's right. If you want the best, you want the really good machining, you go to Germany.

1:00:38You want the best car, you go to Germany, right? And guess what? They're a lot more expensive. So why is that? Well, it turns out that for a lot of the high-end manufacturing, the manufacturing I think Australia should be doing, you know, if, oh, I think, let me qualify that after I've come to say, not should be doing, has the capacity to do if we so chose and could exploit certain intrinsic advantages that we enjoy. I've long said that we could do a lot of stuff in terms of value adding the commodities we dig out of the ground. We don't have the workforce advantage, and I don't think we should, I think we should start paying people minimum wage of three cents an hour, but this stuff is generally made by robots and very big machines.

1:01:20So you don't actually have a huge factory floor with a thousand people on it. You might have some very high-paid engineers and a bunch of very, very expensive equipment. And that's what Germany does and that's why it can churn out kind of stuff. And they have done that to a degree where they have built up the capital base. Capital is – I wish there was a better word for it because sometimes it means money, sometimes it means productive capacity and equipment. In this instance I'm talking about it. Human capital, yeah. Yeah, human capital. something that can make something else, right? And that's money, true.

1:01:50So it's why it gets bundled together. But the capital base of Germany in terms of the machinery, the infrastructure, everything they have, levels them up. Imagine if you're playing SimCity, if anyone knows those kinds of games or those, you know, satisfactory or they're really fun games actually. It's like what do you want to do to get to the higher levels in the game? You've got to build up the base levels, right? And Germany has done that incredibly well to the point where it's just like they're building products that no one in the world is going to do better than the Germans. And for us to give it and get to the point of where we can effectively compete, we have to build up so much of this capital base to kind of get there.

1:02:26But it shows you what, the reason I raise it is it shows you what is possible when a company leans into its comparative advantages and its strength. And that's what the Germans had. The Germans just had engineering know-how. They could have said, hey, this is brilliant. Let's go make a bunch of, I don't know, Coat hangers and low end kind of stuff. No, no, no. We can't beat China on that. Tell you what though, MRI machines, let's make a few of them. China's not doing much of that at the moment. Let's make a nuclear fusion cause. Let's make, I don't know. I'm trying to think of very high end stuff that the Germans make, but they've done it and it's brilliant.

1:03:02So if you want to, if you want to, very long deviation here, but if you're the prime minister and you, for whatever reason, want more manufacturing here, start with first principles and start with, well, what can we do that no one else can do? What have we got here in Australia? We've got excellent education. We've got a very educated workforce. Let's make sure that we churn out some more engineers and mathematicians and these kinds of people. Let's make sure that those that want to develop businesses in this space, they've got a very clear runway to do. We're not going to set up a lot of barriers to entry and everything to get in the way of that kind of stuff.

1:03:40and then let's have at it, right? We will develop technologies that we just happen to be better at than other people and let's build on that. Like just as a company does, let's do a bunch of R &D, here's a bunch of products, which one works? Oh, this one works really well. Let's discontinue the other ones and let's just double down on this and this is what we do now. And that's kind of how these things kind of evolve and it's not just let's build cars because we should build cars and here's a bunch of money. That is not going to end well. Never does. Two quick thoughts. as people say to me, well, you know, we should have industry policy.

1:04:12Japan had industry policy. So did Korea. So does China. We're not competing on a level playing field. And it was kind of like what you've really said is that governments took advantage of ultra-low wages in each of those countries at those points in time to build the capability you've talked about, mate. And I think – They scaled up. Right? And as you would and do if you're a developing economy, we did the same with wheat and iron ore. Literally, this is – you know, once you're a developed country, you don't go back to being a developing country and subsidizing industry or wanting lower wages so you can somehow win this.

1:04:42There's no point. You don't want to win this war. The other thing is we're a country of 27 million people. People say, China and the US pay subsidies. We should too. It's like, really? You want to actually take on – we need to be guerrilla fighters here. We're not going to win if we're lining up in the trenches across the combined financial might of the US and the EU and China. You don't win that war. You can subsidize up the wazoo. they could buy our economy and it's we're the size of california right this is not a big deal so if you want to play you need to play the and this is the comparative advantage point you've been making which is it's guerrilla fighting so what niches can we fill what what things can we do what drafting can we do what what you know what do they want that we've got yeah that we can trade with them because they're the they're the gorillas in the room we're going to make out we're going to make the best we can and people that's the other thing is this national kind of ego of we want to play we'll sit at the big table you know we're very very very fortunate and frankly our forebears have done very well to make us responsible global citizens we built a very good small economy and so we earn a right to sit at some of those tables because we're developed and we're we're uh you know wealthy and we're you know we've got some things to say and do but let's not pretend let's not pretend we're fighting dollar for dollar we're not you know when if you're lining up for the arm wrestle with the US or China, you know, it's Mr.

1:06:01Puniverse versus Hulk Hogan. It's not, you know, there is no, you know, there is no, we're not going to win. You don't win this. People say, oh, well, it's not free trade. We should do the same as them. And arms race is just dumb. You don't fight these guys head on. You outflank them. You go around the back. You use subterfuge. You do whatever. And I'll give up the military kind of analogies here. But you find ways of winning that aren't direct conflict. That's how you do it. And that's what comparative advantage is all about. You wouldn't think it was possible with this conversation. I'm going to try and bring it back to property.

1:06:34At least you're honest, mate. At least you're honest. Well, as you were talking there, I kind of thought, actually, what is Australia's comparative advantages? I'll come back to tourism in a moment because you mentioned that to me years ago and I've just so internalised that because, well, no one else has got the Great Barrier. Right. That feels like a comparative advantage that we can lead into. No one's got all the roo. climate and people and culture and, you know, we've got brand. And I said that literally because of all those other things you said are real things. People just like Australia and they like Australians.

1:07:05And that's – Well, go on. So, the property is – I've got to try and keep this as brief and as narrow as I can. Property has obviously been in very high demand and despite some of the challenges and increased funding costs and all the things that we've talked ad nauseum about, you know, demand is still high. And part of that is the exploitation of our national brand because Australia offers something really cool. And, again, you don't see it when you've lived here your whole life, but anyone who's travelled, particularly if you've travelled to, you know, what they call the global south or the developing worlds or places that don't enjoy the prosperity that we do, you think, OMG, right?

1:07:44So firstly we speak English, right? So it's the international language. So it's very accessible. Like even people who aren't born in natively English-speaking countries, English is the obvious second language. You've got that going for you. We've got brilliant security and safety. You've never seen a tank roll down Martin Place, right? You've got great social services, like free education, free hospitals, all these guys. What is not to like here? And not to go too far down that path, but it strikes me as that is a big part of our economy, as we all know. Maybe it's gotten too big. But I suspect it is that exploitation, not necessarily driven or designed as such, but that is a big factor in it.

1:08:28Wouldn't be the same property market if we were, you know, plagued by corruption and the odd civil war and our social services were crumbling or crumbling more than they are. And anyway, yeah, it's like, and so again, there is, where is the, how could that be used smartly? Well, I tell you what, if we want to attract more talent, more brains, more capital, like, hey, come live in Australia. We've got some great places. We've got beautiful beaches and we've got a wonderful, stable economy. The government's not going to do anything too crazy and confiscate your business or your assets. You know what I mean?

1:09:07Like, come here. And it's like, that's California's strength, by the way, right? That's how they've done so well. They've built this center of excellence because it was just, it was a beacon. it's a bit, I know, I know how this sounds, but it was a beacon to the rest of the world. If you had, ask anyone from anywhere in the world who's got ambition and talent and a dream, it's like, where do you want to go to pursue that? I'm going to go to LA, right? Like, or the state, it's the US and Australia and Canada and New Zealand and other places around the world have sort of up there as well. I don't want to downplay our hand, but it's America, right?

1:09:39Or at least it was for the longest of time. And has that helped America? Yeah, that's helped America a lot. Absolutely. Like, look at all the major, look at all the major, look who runs NVIDIA or Tesla. They're all immigrants that came across and we're nurtured within this wonderful system. It's like, again, what would I do if I was dictator for a day? It was like, I would do everything I can to attract the best and brightest in the world. And we've got the opposite problem in Australia. Well, not problem, we've got the opposite issue, which is that you're a highly capable, talented person. You probably go and work for Google.

1:10:18You probably go into California. You probably go and work at, you know, the top medical facilities in Europe and stuff. We have a very well-known and well-documented brain drain here. And it is a – talk about not exploiting your natural comparative advantage. It strikes me as that's a real miss for us. I completely agree, mate. I think, you know, brand Australia is incredibly powerful. I, there was a lot that we said for benevolent dictatorships, right? The, we should be doing everything. To your point, you know, we can choose, not to quote John Howard, but, you know, how many people come, who comes, when they come, how they come.

1:10:55We can literally, and to your point, we have all these things. We can be picky. Right? We're the best looking, you know, bloke on the school. Yes. We've got our choice of partners here, right? Absolutely. It's super powerful. I think you can throw it on top of that. But I guess I mean brand Australia more broadly, right? Think about Australian wines. Think about home, chest, and treasury. Not that it matters, but, you know. Think about Australian formula and milk products. Think about trade tourism. Seafood. Yeah, right. And so you kind of think, you know, if you're a judge of brand Australia, you do everything you possibly could to really, and not just marketing, but actually make it happen.

1:11:27That's why the dictatorship is important. We want to be seen that way increasingly. We want to be the destination for tourism, for immigration, for education. We want to be the brand of choice, the national brand of choice for all of these produced goods that we can do, again, as a comparative advantage. That's where the upside is, right? It's huge. Because you get volume, you also get pricing power, which we all know about that. The value of that is enormous. I just think the opportunity for us to use that, as you kind of rightly point out, instead of deciding we're going to try and compete with China and solar panels, it's just, you know, it's, I just, I just, you know what also worries me a little bit, mate, is we've talked a little bit about, I've mentioned in the past, I think one of the great sadnesses of Donald Trump's ascension has been teaching other politicians they can just get away with stuff if they just pretend it doesn't happen.

1:12:17There are no consequences. Right. So Nixon resigned, Barry O 'Farrill resigned, Trump just marches on, everyone else says, I can probably do that too. Now eventually he gets you voted out as he did in America, as arguably I think Scott Morrison made some missteps here that got him voted out eventually. So it has consequences eventually. But in the medium term, I think that's – the pollies are happy to play to Australians' ignorance on economics. And again, even on Twitter, it's not exactly a representative sample. But I've had some people say, well, obviously, we should make more stuff like we used to in the 70s.

1:12:46Or obviously, we should just – they're playing protections. We should do it too. And none of those things are wrong as impulses. Hopefully, the value we're adding here on this podcast, this episode particularly, but in general, there's just that idea of sometimes first impressions aren't right. or they're not the whole story. And that's where I worry about our politicians when they go to that populist route of I could explain or I could just go and try and chase some votes with some slogans. That's where things get ugly. And that's, I guess, to kind of wrap it up, my biggest concern is the future Made in Australia Act is everything bad about sloganeering and everything bad about pretending that throwing some money will fix something or that we can somehow compete because we all want this national ego of, yeah, let's show China or let's compete with the US.

1:13:30We like to do it in sport. We think somehow we can do it in economics just by saying, let's throw some money at this and build it here, as if there are no consequences, as if there are no side effects. Actually, sport's a great analogy here because the kind of stuff that we're talking about takes decade-long thinking, like more. Yeah, true. You know, because it just takes time. And the reason I say sport is such a good example. Now, Australia, as everyone listening knows, we punch well above our weight. And it's not in that, it's not, you know, we love to think it's something intrinsic about Australians that just make us better at the start.

1:13:59It's not. It's not. It's because decades ago they invested a lot into the Institute of Sport. They put a lot of support around these kinds of things and they recognised - Sporting schools, playing fields. All of that kind of stuff. And guess what? That investment didn't bear fruit in the first year or the second year or the third year or the fourth year because, you know, Tim Cahill was four when some of these things came through. So I don't care how good a soccer player he was at the age of 12. It's just like none of that investment is paying off. But then it does pay off. Now, again, I'm not trying to make it about sport or we should invest more or less in sport.

1:14:32My point being is that we have these – these outcomes aren't an accident. These outcomes were – I heard someone interviewed not too long ago talking about the thinking and the planning that went into that. Oh, right. Cool. Yeah. What do we want to do here to be better on the world stage? Well, we've got to make sure that we've got this. And it was just – it was one of these programs, the exception to the rule, that was planned and it seems – I don't know. maybe people who are closer to it can correct me, but it seems from the outside implemented pretty well. And now we have the benefit of that, but it took ages.

1:15:04And I reckon if you started implementing that, so you made me a dictator for a day and you set those rules in stone, I can just imagine like three years later going, well, that was good work there, fellas. Like nothing is like, well, give it time, right? Because it is going, these things play out. But the nice aspect of that lag is, and we talked about this the other day on Strowman actually with some companies, is that when you're in that, it takes a long time to get in that position, but it also takes a long time for those that would compete against you to get into that position as well. So if you can build a bit of a lead there, a bit of a first mover advantage, if you will, you know, it's not that you're golden and, you know, thou shall never be touched and disrupted.

1:15:46But it means that even if you do, it's going to be a slow death and you really have to screw up here. And so it's sort of, again, that comparative advantage is built up over time. And the potential is there. And it's just these jingoistic, short-term, myopic, populist kind of policies. I love your elbow, but this is a bad move, dude. And unfortunately, not many people are going to listen to what are we up to now, hour and a half podcast, which we've scratched the surface on, right? And when you're just there at the voting booth, everyone's trying to put food on the table and get things done. It's just like, yeah, I think we should do that.

1:16:24It works. That's the disappointing thing with all of this is that no one's going to listen to the complex, nuanced, but right answers, but I will listen to the easy but wrong answers and just get on with things. Do you know what, just one last comment from me. The other thing about this whole idea of let's do it here is, let's use the radiology machines in, the MRI machines in Germany, right? Let's say we invested in trying to make radiology machines like Germany and let's say we even got relatively good at it. So we've spent less money in time and effort and we're as good as Germany. Yeah. So where's the benefit?

1:16:59But there's something in the jingoism you talked about, mate. Americans talk about American exceptionalism. And I think there's some implicit exceptionalism in the way people want to think about Australia. And you're seen as being disloyal or not having pride if you don't kind of follow this line. But let's say we do some of these things. Why do we think that if we then started to try to do that, we would somehow come out on top and permanently in some of these industries? I mean, companies in Australia struggle to be the best in any of their industries because there's competition. And so the idea of like, well, if we just started making solar panels, then we'd obviously be able to do better and cheaper than everyone else.

1:17:35Even if we got to the point of starting this thing up and being somehow self-sufficient, the question still is, why would the customers, Australian or otherwise, buy from us? What are we doing better? Not just could we do it, but if you want to have a market in this thing, what are we doing better than everybody else and permanently better? Some people say, oh, we're going to have this new solar technology. Okay, so that'll work for the next four years. And then China's working on how to do the same thing. So what does that do with our early lead? Yeah, good for a while. Now, to your point, if you get to be Germany and making MRI machines after 40 years, the barrier is do I want to try?

1:18:07It's hard to catch up. Right, do I want to try? But that's almost the thing is like if we're not doing new stuff, we're just trying to catch up with our old stuff, the chance of getting there is abominable. If you do get to as good, can you be as cheap? Probably not. If you get as cheap, can you get it there at the same time at the same cost? Probably not because we're at the other side of the world. The idea that just because if we start making it, we'll have markets open up to us because we do the thing. But, guys, we make these now, so you should want to buy them, right? It doesn't exist in anything other than these people's minds, unfortunately.

1:18:37You've really just got to end this damn podcast here, but you've really hit on something I think is important there, which is that there is a sense that these things need to be orchestrated and directed, and I think it's such a false starting point. It's like, no, if it's worth doing, someone will do it. Right, exactly. Because someone wants to get rich, right? Right. Yes, yes. Someone somewhere will do, and by the way, someone somewhere will do all kinds of dumb things. And every single day someone opens up a stupid business and it fails a year later. And it's kind of like, it's great. It's like it's a natural selection evolutionary kind of thing.

1:19:16It was just like we're just all these hairless apes are just doing all this stuff. Why? Not because they've got grand visions for the future in society because they're like, I want to get rich, you know? I've got a passion. I think other people would like this solution. I think I can do it better than the other solution and I'm going to do it. And the great thing about capitalism, it's just fill your boots, brother. If you want to go and do that, knock yourself out. That's fantastic. And the point is, is that your incentive is to make money. To make money, you must create value. To create value, you must be able to do something better than someone else can do.

1:19:52Yes, exactly. No one's planning this. If I just rock up to your local market one day and I'm selling a jam that is just out of this world and just knocks everyone. I don't need some bureaucrat to sort of say, now, listen, everyone, Andrew's jam is made with a little bit better ingrained locally. You need to come over. It's like, no, people will just do it. And the person who's making the really sticky, awful, disgusting stuff over there is just like, no one's buying this. And then what comes out of that organically is the better result for everyone. And no one had to plan it. No one had to orchestrate it.

1:20:24People are just throwing stuff at the wall and they see what sticks and the stuff that sticks, we double down on. And that is progress. And that is – don't – it's just so stupid to sit there at the very top and go, we need to do this and I'm going to make this happen. It's like, no, no, no, no, just get the – again, America's superpower has been that, has been that fostering of entrepreneurism, private property. I mean, America does a whole bunch of stuff really wrong. So I don't want to come out as too, too much of a cheerleader for it, but they get that part really right. You can start a business and fail and it's not as consequential as it is here and in other parts of the world.

1:21:00And it's like, it's a good thing, right? It's because it allows that natural experiment to play out. It allows the better things to percolate to the top. And it's why, you know, when, when you want, um, when you want the best solutions for you individually, selfishly, and also for society at large, you've got to let that process run its course because it's beyond any one individual or group to plan, foresee, coordinate any of this. That's the first thing that you've got to understand despite your intentions. And this is where even the idea of a benevolent dictator is dangerous a little bit because like, I'll do this because it's the best, but there's 50 other unintended consequences I didn't think of and that are going to come and bite me in the butt.

1:21:41So it's just, I just make that point. It is and should be an organic process. And you, once you recognize that the way that when there are quote unquote problems, the way you address that, as we said before, it's more about changing the field rather than changing the players, so to speak. And you will find that good things just tend to happen. You know, there's, there's pain along the way, but, but, but like anyone in, in any aspect of like growth, a pain leads to growth and you kind of need a little bit, you don't want too much, but you kind of need a little bit just to keep us sharp and keep us moving forward.

1:22:15Yeah. I'm going to add to that only very briefly, mate, just to say that people will say, well, Gavin has to invest to do this stuff. And I just want to mention that Twiggy and Mike kind of Brooks are going to invest a total, I think Twiggy's out now, but the Sun Cable project, sending power to - Yeah, right. Is going to cost$30 billion to get up and running. How much did I have to pay of that? Zero. Oh. Well, who told him to do it? No one. Oh. So no one told him to do it. It didn't take any of my money. What if it does really – what if it generates a lot of value for people? Will he do well? That sounds like he probably – He probably will.

1:22:48Okay. What if it's a terrible idea? What happens then? Well, it'll go broke. Okay. So what does that mean for me? Oh, no, nothing. It's all good. Okay. But if it does work, I'll probably get cheaper power or something, right? Yeah, good for the economy too. Probably more tax revenues and yeah. And I'm just surprised that this happened without anyone in Canberra coordinating this. Now, I will say, I do think there are times when seed, I don't, the one except for my Yeah, you can't be blocking away. I was going to shut up. Seed investment can be useful. My point was just people will say, no, no, we need to do this because without government money, these things won't get done.

1:23:20And that might be true for some small project, some specific project. Case by case, yep. But Twiggy and Mike Canterbrooks threw in 30 billion, or going through a total of$30 billion for this project. They didn't need governments to put the money up or like, that's, you know, the idea that you need to come from government can and maybe is sometimes necessary, but it's not always necessary. We shouldn't allow ourselves or other people to default to that. Well, obviously they have to, so therefore everything should be waved through because nothing you can get done without it because it's just not true.

1:23:49Maybe the solar panels was a good example. I have to think this through, but there is this – what you're getting at there is I think whenever there's a chicken and the egg problem, like sometimes you do – products and services that we're talking about, they just need a bit of investment capital to get going, right, And it's hard and they're volume-related games and they're just not going to work at small scales. You say, look, we're going to prime the pump here a little bit. So we're going to incentivise this. We're going to give you tax breaks. We're going to give you R &D grants. We're going to do all of this kind of stuff.

1:24:17But just to a point, right, the fact that we give diesel subsidies to the big global mining companies, like that is the most insane thing in the world. Like they'd be just fine without that, guys. Or R &D discounts to multi-billion dollar businesses. That's nonsense, right? It's nonsense. So I get your point and I think it's a good one because we've got to avoid being black and white on this stuff. There are cases for it. But, yeah, more often than not, probably it's best just to get out of the way. And with that, I will get out of the way because if I answer, Andrew will answer and if he'll answer, I'll answer.

1:24:48Oh, one more thing. There were two, I was in. But we will put a pin in it, as Andrew likes to say, at this point very, very early on in the podcast. Circle back. Asymmetric outcomes. Oh, I'm not going to say it. I'm going to simply say thanks for listening. We'll see you on Sunday and Fool 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. The Motley Fool operates under Financial Services License 400691.