GDP matters… a bit. September 5, 2025

24:35You said before, even the inventor of GDP said, please don't use this as the bill on end all. It's just one number. Yes. And of course, what do we do? We went, well, we can do it. And why? Because we can count it. It's easy to count and add up and report and compare and calculate all those good things. So I'm going to try and find the – I did a couple of long tweets during the week. And one I did actually last week that got almost nothing in terms of feedback on kind of – which is fine – from people. We're just kind of thinking about what GDP actually is and what it shouldn't be or what else we should be including.

25:10And I'm scrolling madly. I don't think I'm going to find it in time. So we're going to have to make it up. Something like we start with GDP, right? What's better than GDP? Well, I've already said GDP per capita. Because the big numbers matter. And to your point about rich people and not rich people, let's say Gina's output doubled and the rest of ours went down by 1 % each. GDP was to go up. Yeah. Okay, well, it'll be better off or worse off. Well, in total, every Australian is better off. Yeah. Per capita doesn't matter. So per capita matters more than the total. Let's add to that, though, because even GDP per capita says that's the average, right?

25:43So again, back to the Gina example. GDP per capita is up because Gina's made a squillion dollars and you and I have lost money. Well, that doesn't sound right. We haven't lost money by the GDP. It doesn't actually go per person, but that's a whole different thing. So it goes down per capita. Okay, well, that's an average still. What about how it spreads? So the distribution of GDP or distribution of wealth or income, production, output, wages, call it income, call it what you want, that matters far more than an average, right? Because the 100-pound guy on one end of the seesaw or the one-pound guy on the other end, the average is 50 and a half, but they're very, very different experiences, right?

26:14So the distribution matters a lot. I'm not even saying in a socialist or communist way. I'm just saying it matters to think about. If you're saying, how's the economy doing? Well, how is the, you know, average Australian, that's per capita, but how is it distributed? Who's winning, who's losing, who's doing well, who's not got enough? Those things are really important. Well, let's understand. Even if you don't do anything policy-wise, having that information is far more important. And then what's more important than distribution? Well, it comes down to quality of life. So standard of living first.

26:41Sorry, standard of living. So what is standard of living? Well, it's all that stuff relative to the cost of actually putting food on the table, putting fuel in the car, paying for the shelter that we occupy, all those things, right? Standard of living is, you know, how much have we got? How much did it cost us? What's left over? How much are we going without? The only thing that matters. Well, I'm going to go one further. There's one more. So one more than standard of living is then quality of life. Oh, sure. Yep. And that's when you take all the statistical stuff. Everything we just talked about as a number can be calculated, right?

27:09Imperfectly, inefficiently, you know, estimates all over the joint, but it can be calculated to some degree. What's better than standard of living is quality of life, and that is all the other non-financial stuff. And so I talked about work from home and there's arguments that work from home is reducing productivity by a couple of percentage points. Now let's, I don't believe that generally speaking, unless I'm not sure it's proven. Let's assume it's true. Let's assume it's true. As a country, would we not sit around and go, so if we made 2 % less stuff, did 2 % less stuff, but we got to spend on average 10 hours less commuting in a week, if we could be home for the kids a bit earlier, If we could, and by the way, people say, well, traders can't work from home, and I get it.

27:50I'm using work from home as an example. My point is those other things that matter. If I had more leisure time and I had a lower reported, quote, standard of living, would I be better off or worse off? Well, it depends. I mean, sometimes more leisure time is not great if you can't put food on the table. But if you put food on the table and work four days a week rather than five, make a little bit less money but still enjoy all the good things in life, if you want it, is that a better quality of life? But it might make GDP not go up as much. Whoa, whoa, whoa. Cool, your jet's there, sunshine. Right.

28:19And so we've talked about this with productivity in general. But I just want to raise that because I think we all go to GDP. And by the way, some of the people on Twitter, and this is the conversation that I was mentioning before, it's a really, it's like your thing with sound money, right? It's a really difficult thing to kind of get yourself past. But GDP matters. If I say it doesn't matter anymore, then what's my anchor? Firstly, my life's been a lie. That's the big one. That's huge, right? Because speaking of regrets, That's like I just spent the last X years climbing the grizzly pole of the corporate ladder and realised that actually I would have been better doing something else than having some time with the kids or sailing or walking in the bush, whatever your thing is, right?

28:58Playing computer games, if that's your thing. When you have to kind of say, oh, my God, I've just wasted X amount of my life chasing this thing I thought I wanted, I realised I didn't, I mean, there's genuine grief there. I don't want to sound too, you know, could by that. They've done studies on nursing homes. They've done the work on this. what's the saying? No one sits on their deathbed and goes, gosh, I wish I spent more time at the office. Literally no one. And it's not only that, it might be I bought the, at least the expensive car, and I bought the$3 million house because I figured that's what I was supposed to do because that's what I was doing for.

29:30Only$3 million, so just a two-bedroom unit. Okay, fair enough. In birth. Sorry. It's, you know, you kind of think that's what you're supposed to do and that's what success looks like. And it's not even just the office time. It's like, well, if I'd spent that much time in the office because I like my job, but I actually hadn't bought all the other crap effectively, what else could I have done with the money? Could I have actually worked less because I wanted to? It's partly the job. It's partly work from home. It's all the stuff that goes with it. If we had a little bit less desire to keep up with the Joneses, actually realizing that not only was it not I did or didn't, but I didn't really care.

30:04I just felt like I probably should because my ego got in the way and I actually spent more time doing something else and realized I wanted that more. It's huge. The book Die With Zero, I've mentioned before, And the guy, I'll stop ranting a sec. The guy talks about, you know, people say, oh, yeah, but I really love my job. If I want a lot of hours, keep doing my job. And his point was a really confronting one, which is, do you really think if you try, if you want a lot and you try everything else that was able to be done in the world, would you literally actually go back to your same workplace, to your same boss and do the same work you're doing now?

30:34You do something productive and meaningful, of course, but the idea of kind of like that there's, because I've done that. I love my job. I genuinely enjoy doing what I'm doing. And I've said before, I want a lot to keep doing it. But then I think, well, that's me in my own – I'm not trying to think outside the box and say, well, actually, if someone gave me$20 million tomorrow and said, what do you want to do, would this specific thing be the thing I'd do? Maybe it would be, by the way. But that idea of just thinking about, I think I love my job, but if I had the opportunity, would I do something?

31:01Would I try something? I'll see if I liked it more. We get in the rat race and we kind of, you know – anyway, no, it's not – not complaining about the rat race, not complaining about anything other than just GDP is a data point. I got a long way from there. It's a data point. It's useful if it's used in context with the stuff that actually – and by the way, I didn't talk about the environment and other externalities in GDP. That's a whole other thing that's not even personal. It's kind of social and global, frankly, at some level. But, yeah, those things aren't measured, aren't captured. I won't say they should be because GDP is GDP.

31:30What we should do, though, is put GDP itself in a context and ask ourselves how does that fit in with some sort of balanced scorecard. 100%. And where it's particularly pernicious and, frankly, dangerous is that when it becomes the only measure that anyone cares about, particularly those with the hands on the levers of power, is that they go, it's dropping, we need to spend more. How do we fix it? How do we fix it? And it's like, but if you don't do that, quote, unquote, the economy will suffer. You know, and my thinking there is always, wait a second, if the only thing that is propping up all of these businesses is a desperate need to spend money for the sake of spending money, they're not good businesses, right?

32:13Yeah. Like they just, like that is such a backwards way of thinking, putting the cart before the horse is like we have to spend not because it satisfies some important need or one and frankly even some frivolous one. Like we're all entitled to have a bit of fun, right? You know, but it's like, but this hated really angers his bloody gaslighting. You know, we're all in it together. We've got to spend. You're not spending enough. You know, it's like screw you. I'm spending exactly what is appropriate to me. And you know what? Even if I am being completely reckless, that's my call to make. And if there is some greater purpose for the economy that I have to spend to buy something from a business that otherwise I wouldn't buy it, but it's good for the economy, so I guess I would.

32:55I mean, that is a badly broken, dysfunctional economy. You know, it's sort of like a good economy is one which supports itself by just delivering things of value to people that they willingly want. That's a great economy. Yep. Oh, man. Okay, I'm going to do one very quick thing. Go for it. Because what you said there kind of resonated with something. I was listening to a podcast. It's called Hidden Forces. It's a bit of a macro kind of thing. I quite like it, actually. Anyway, shout out to Dimitri, who does that. He interviewed a guy called Sonny Kapoor, who's an investment banker by training and then has gone off.

33:34He does a lot of charity work and stuff these days. And a very wise man. Anyway, the start of the podcast really resonated with me. Anyway, he says this. I started out, as many do, as a rather cocksure and overconfident young man, very quantitatively focused, convinced I understood the way the world worked. I didn't yet appreciate the subtleties, the complexities, and the nuances of life. Skip over this. But the older I've gotten and perhaps a little wiser too, the more the world has humbled me. The more I've seen, the more I've realised how much I don't know. Meeting truly smart people has only deepened that sense.

34:08I've grown less certain about things and more appreciative of the shades of grey. Life, I've learned, rarely fits into black and white categories and pretending otherwise often leads us astray. In some ways, I've swung to the opposite extreme. I have all the skills to dive into the equations and the quantitative analysis, but I don't particularly enjoy doing it anymore. Even with my work on climate, I've come to recognize the limits of purely data-driven approaches. The world is not and never will be governed entirely by neat deterministic formulas. In fact, I think one of the biggest risks we face today is becoming too reliant on data and algorithms, losing touch with the messiness of reality, our humanity, and the uncertainty that defines real life.

34:55Numbers can illuminate, but they can't capture everything that matters. boom, mic drop. Isn't that pure fire? Or is that just me? Isn't that brilliant? Yep. It's fantastic. It's the old line, not everything that counts can be counted, not everything that can be counted counts. Oh, mate. I was walking along the fire trail near my house just going, yes, this guy gets it. Preach, brother. Scare all the birds. Give me a hallelujah. Yeah. It's great. It really reveals a wisdom. And frankly, just between you and me and the three people listening to this podcast, it hit a little too close. My mum, your mum and someone else who.

35:37Yeah, right. And someone who pressed the wrong playlist. But I don't know about you, mate, but when I was in my 20s, I was exactly that dude. I was exactly that arrogant. I know it all, you know, and it's just sort of like as I've, I think I've mentioned I've turned 50 this year. It's just like, my God, I've really embarrassed it the way that I used to think. I think it's a journey. I don't think you can speedrun that learning. No, you can't. But I think I've gotten dumber cognitively, which is just as the grey matter. Like you're in your mental prime at the 25 or something. So that's well on the other side of that hill.

36:16But you do pick up a bit of wisdom. And I think that, what is it, Socrates? You know, true wisdom is knowing that you don't know much or something like that. Anyway, I loved it. I love that quote. Well done, Sonny. Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener.

36:36Mate, let's move on because we've got some other stuff we want to kind of try and cover. I thought we'd stop and have a bit of a, just a look back at earnings season. And I've kind of alluded to a little bit already. Obviously, we kind of do this every six months or so. We have earnings season. We don't spend a lot of time to make individual companies because there's plenty of coverage of that stuff elsewhere. and probably the individual company, it's interesting, we bring them up normally if there's something to be said and a point to be made about it. If it's just the company X is up or down or whatever, it's interesting for a few people and maybe some people want to, you know, we'll be interested in that company, do a little bit more work on it, but kind of end up just preaching to the choir a little bit and only a small portion of people will own those shares.

37:12So we try and balance it, a bit of both, and, you know, there's plenty of other places to get your earnings coverage, you don't have to get it here. But I do think we should dive in a little bit. I'll give my thoughts, man, and get yours. I thought earnings season was pretty good this summer round for the average company. The ASX was up 3 % over the month, not that it means anything other than investor expectations were probably met and surpassed to some degree. I think the average market is up 10 % or so in a year, so if 3 % in a month tells you something, now it might have been the prices were too low early and they got better, maybe they were average and got better because the results were good, whatever combination of those forces at play, the market finished the month feeling like Australian companies are worth more than they were at the beginning of the month, and that's probably a pretty good sense of earnings season's contribution to that.

37:59The banks were interesting. We saw them really struggle generally to get revenue growth. And I'll say not only banks but also retailers. One of the big things is cost inflation still remained a thing. And so my observation was if you grew your sales at 2 % or 3%, your profit almost certainly went backwards. And it doesn't always happen that way, hasn't, for years because inflation has been pretty low. But for whatever the reported inflation numbers are, And again, remember, we're working on lagging data here. Six months of data or a full year of data, we had higher inflation July 1 last year than June 30 this year.

38:29So the numbers probably get slightly better over time. But if you – Woolies had the same issue. Woolies and Coles, their sales growth was only different by 1.2 percentage points. And yet Woolies lost a squillion dollars and Coles made some money. We saw the banks, if they couldn't get top-line growth, really struggled to get bottom-line growth. I think CBA was the exception. So I thought that was just an interesting insight in general, mate, in terms of what interesting, give myself a wrap. I don't mean my insider, it's been interesting data, interesting phenomenon that's going on. I thought the outlook statements for most discretionary retailers were very good on average.

39:00So we kind of exited the year and got into the first six or eight weeks of this year. I want to say, I'll say nine out of 10. It's unscientific. I haven't done the numbers, but there's a couple that kind of had some mediocre outlooks. Most of them had growth in the first two months of this financial year that exceeded their growth for the last half of the last year. So it kind of feels like it's accelerating a little bit. It's kind of what Michelle Bullock talked about when she talked about the GDP numbers on Wednesday night, just that, you know, discretionary spending is improving faster than the way they thought.

39:31I think that seems to be true. What? Their forecast was wrong. Well, I think it's improving, right? So either way, I think there seems to be an uptick in that spending. We talked about consumer confidence before too. The miners were interesting, and again, no surprise here, but earnings fell on the back of lower prices. Again, who could have foreseen that? But that's kind of to be expected. I mention the miners only because between the miners and the banks, I've already mentioned that's close enough to half the market. So where the market goes is what happens there. Discretion retail was pretty good.

40:03Consumer staples were kind of mixed. Yeah, I don't know. Just some overall thoughts. It strikes me. I don't do predictions either, Matt, as you know, but I said on Twitter this morning, Thursday morning, it seems like the economy is picking up. There is momentum in the physical economy based on the GDP numbers, based on consumer confidence, retail spending. We've seen household spending, those numbers coming out of those companies. So, yeah, it feels like corporate Australia is on average and overall kind of getting better and it was a pretty designated season, I thought. I agree with that, actually.

40:38I do. But it's the same thematic. Like my takeaway is the same as it's been for the last, gosh, say how many half-year reporting seasons have we had since we've been hammering this dead horse, but probably at least three years, where it's kind of like it's hard to fault a lot of the results here, but the share price reactions have been brutal. I mean, we talked about it, I think it was last week, CSL was a great case in point. They grew their profit and then they said, actually, we're going to grow up by as much as 10 % again next year. and the shares fell 25%, 25%. Woolies we talked about there as well last week.

41:17They got absolutely walloped as well. So I did see Bloomberg put out a chart in the week and they said US stock market is its most expensive valuation history, surpassing the dot-com bubble and the run-up to the Great Depression. And so what they've done there is they've used a blended mix of different valuation metrics. So trailing PE, forward PE, the CAPE, the PB, the PS, the EVD, but the Q ratio, blah, blah, blah, blah. It's just a word seller to make me try and sound smarter. But there are all these sort of measures that people use to sort of use to evaluate. So, you know, they've all got their merit.

41:57They've all got their weaknesses. But when you use a blended approach and you go back to the start of the last century, we're at as high as we have ever been. And that's not necessarily a terrible kind of thing in the sense that, and I should hasten, this is the US market, but that is a quarter of the global market. It's a big deal. It is that kind of scenario that it's sort of like, well, they want to be bloody good, the results, right? And in fact, you can actually have very respectable, decent results, but not good enough results. And so this is, I hate the saying, but it's true in this instance, this is a stock picker's market.

42:35This is, you know, the market, you know, the Buffett ratio, right? Yep, I do. Which is basically the PE for the economy at large. It's the, what is it, the US market cap divided by? GDP. GDP, right. Yep, yep. Which is like the PE over the E. Yes, exactly. It's using the market cap and GDP is a price. It's basically a price earnings ratio. And I believe that's very, very high as well. That's the price to sales, actually, funnily enough, just for a little bit of fun because GDP is an outstanding. Output rather than profits, but yes. God, I wish I'd made that before when we were talking about GDP.

43:09Yes, it is. It says nothing about the quality of those earnings. It's such an excellent point. We made some stuff. We made some stuff, yeah. We could have sold it all at a massive loss. It was massively uneconomic, but look how much we sold. Yes, exactly. Which is like me buying every iPhone in the world and selling it for a dollar and going, look at my sales volume. Yeah, that's right. And the sales volumes would be great. I'm just going to be completely bankrupt. Is that what you're going to do with the trillion dollars you're getting from that comment? That's absolutely what I'm going to do.

43:34Just to stick it to the guy. You're going to ask this, Matt, what are you going to do? I'm going to cut my nose off to spite my face there. So that's the very, very, very tricky situation we find ourselves in. So, yes, good to see that on average results were pretty encouraging. I just make the point they'd want to be. They really want to be because it's priced for that kind of level. I do, so I, as you know, have a bit more of a focus in the small cap end. Yes, I've asked about that, yeah. It's really been on a tear. Oh, nice. And I think, yeah, woo. But I think it's a theme you see actually quite often across longer stretches of time, whereas the top end just gets so crowded out that it just forces people to look elsewhere.

44:27It's like, oh, this is a great company. Oh, my gosh, how much? That's super expensive. Oh, this is a great. You keep going down and down and down the capitalisation tables until you sort of get something that is sort of like, ah, because they've been overlooked in a lot of this run-up. And so if you want to find really great value, I should not, that's too strong a word, decent value, you kind of need to go outside of the top tier. I mean, I'll make a point that literally every person has made for a while now, but, like, it's NVIDIA. It's NVIDIA, stupid. That's why the US market is doing what it's doing.

45:06It's AI boom and it's NVIDIA. You take that out. You take out some of the other Mag 7 and it's a really ordinary market. It's a massively ordinary market. So, yeah, I don't know. I've got three thoughts. I'll try and run through from your thoughts. You made some really good points there. I think I don't care really about the market PE because to your point, you're not big stocks anyway. It kind of matters if you're buying an ETF, but even then over time, you'll be fine. The thing I would say about the dot-com era, I wasn't around for the GFC. Some people, that's for the Great Depression. Some will be surprised to know.

45:42Dot-com was really expensive. Prices being paid for literal crap, like rubbish, just stupidity. No business model. You can argue that people are paying too much for the magnificent seven stocks, but I don't think it's, not that you're saying this, but I don't think it's the same thing. Because here's the other thing too, is if those companies are the biggest, and they are, if they're growing the fastest, and as a group they are, the question is, is that growth justified? But it actually does mean the average market should have a higher PE if that's all true. And so, again, I'm not making the case for it.

46:14I'm giving my view on the theory of maybe I'm doing the devil's advocate thing a little bit. I own, by the way, some of those. I own Google shares and Amazon shares. I think there is a – I'm not making a case for the valuations themselves, but almost to your point, right, if the US market is a whole lot of smallish manufacturing-based businesses with no particular competitive advantage that aren't worth much and you've got then half a dozen, a dozen, 15, 20, 25 large companies across sectors but largely in tech, they actually are going to grow into their valuations and they're big. We talk about the banks and miners, so where they go, they go so good as the ASX.

46:54To some degree, if the tech valuations are justified in themselves and because they're the largest part of the market, that will drag the market's average PE up. So there's kind of the maths of it. Again, I'm not just – I'm not saying I haven't done a total market. I have no view of the total market. Other than to say there are forces at play that do change the composition, which would even if – if the PE was lower and let's argue the PE for the MAG7 were justified individually, the market PE would still be higher than it normally is because the biggest companies with the best growth prospects have the highest weighting in the sector.

47:30So there's kind of some math that would support some of that a little bit. On the Buffett ratio, I've said before, and I'm sure I've said on the podcast, we've done this for a long time. People say, you know, I always say if you disagree with Warren Buffett, you're the one who's wrong. I think the Buffett ratio is way outlived its usefulness. and I know I've said this to you before, it was invented, created, conceived at a time when the US market was full of US companies doing US things. And so comparing US market cap to US GDP made a whole lot of sense. The portion of revenue that the S &P 500 get from overseas now meant that comparing the US market with just US GDP, and I wouldn't compare it with global GDP either, by the way, but if we went back and actually looked at the Buffett ratio So using global GDP or some combination of use US GDP but factor it for external sales and profits.

48:22I don't have a really strong answer, but even once upon there were US companies selling stuff overseas but making the US. These days, nothing made by Apple is made in the US. Or Nvidia stuff, none of that is made in the US either. So you compare that as part of the US market to US GDP, I think misses the point a little bit. So I will say that just for the fun of it. And on stock pickers market, mate, I think, again, you make a really great point. It always kind of is if you are trying to beat the market by definition. Sure, yeah. That's why I hate it. That's why I hate the saying. Exactly. Because like, oh, but at other points it's just throw stuff at the wall and see what sticks.

48:57Well, here's the thing, right? This is where it depends what you're comparing against. So if you're in – it doesn't have to – if the market's down, I always say I'd rather you're a pessimist – sorry, an optimist is a room full of pessimists than an optimist is a room full of optimists. because when the market's down, during the COVID crash, everyone's freaking out like, oh, this is awesome. Now, I don't even have to beat the market to make a decent amount of money because the market's so rubbish right now. If I pick stocks that beat the market, I'll do even better than that. But the market fell 38%.

49:23At that point, if you pick the best stocks, you might have made 40 or 50 or 60 % as it came back. Even underperforming, you would have made 20 or 30 % when it came back. Making money, you didn't need to be a stock picker. Once the market itself is at elevated levels, it'll go higher. The market will be higher in 10 years from it as today, I'm very reasonably sure. Can't promise anything. So you don't need to pick stocks. But because the market itself is not cheap, then making the excess returns does rely, not excess returns, just decent returns, does rely on you picking the stocks individually.

49:55That's where the opportunity comes, the upside potentially comes. So I think you're 100 % right. But I just want to make that point that it's always a stock picker's market, but if you don't really care about beating the bogey, and you should, because why not if you can do it, do it. But when the market's down, buy – I won't say anything because that's stupid – but buy the market and you'll make a decent amount of money and you don't try that hard. When the market's up, that's when it is. That's when the value of the stock picking comes out because the total dollar value upside of the market isn't there anymore.

50:21And so you need to go and find some other stuff if you want to. Now, again, buy an ETF every month, go fishing, you'll be completely fine. I don't want to discourage anyone from buying ETFs at this point. Don't lump some of an ETF right now, by the way. But dollar price average, if you go to knock yourself out. Yep. Thoughts on any of that? Yeah, let's have a look at history, which, as everyone knows, is the best teacher in the world and also the teacher that no one pays any attention to. So the one thing we can learn, who said this? The one thing that we can learn from history is that no one learns anything from history.

50:55Exactly. Probably Oscar Wilde or JP Morgan. I'll look it up.

51:02So cast your mind back because this is when you and I were that cocksure 20-year-old male and it's the late 90s and the internet boom is racing ahead. Now you rightly point out that the Yahoo's and the Ask Jeeves and the Pets.com of this world really just, I mean, everyone knew the internet was a thing and was going to be big but we just hadn't figured out how it was going to kind of work. Cisco Systems was different. Cisco Systems was the bluest of the blue chips printing cache, printing cache. They were laying the fibres, they were doing the switches, they were doing all the hardware. They were creating the very backbone of the internet.

51:47So this is the classic like, look, I don't know what this internet thing is going to, how it's going to play out, but I'm going to take it from a pick and shovel kind of standpoint, which is, you know, if you want to make money in a gold rush, buy shares in the company selling shovels because whether, you know, you're always going to make money, whether or not the prospectors do, you're making money, right? If you want to have a really great case study in that, look at Levi Jeans and the origin there, right? Yes, yeah. That was selling it to gold miners and he made a bloody fortune. He didn't find a single ounce of gold.

52:20And that is, there's a whole lesson. We could do a whole podcast on that. Anyway, so with Cisco, right, it was the Nvidia of its time. So in other words, it was a decent established thing. It got to$80 a share in early 2000. Wow. It's$67 a share today. Yeah, that's right. Now you might go, well, you've picked the very tippy top of a bubble there. It's a little bit unfair. It's like, well, okay, let's say I bought it at half that. Like I bought it at, say,$35 or so. It was still, it wasn't until 2017, 18 years, 18 years later. I know there's a little bit of dividends in there, but okay, let's be generous and throw them in.

53:04It's probably 14, 15 years before you were sort of made whole. And that's, so your point, I'm not doubting your point at all. It's like, yes, when there's absolutely nothing there. And we've got those today. Hey, I'm doing AI. Okay. Yeah. How are you making money from it? I don't know, but we're doing it. It's going to be huge. Yes, it is. I mean, that's just, you know, you deserve the results you get if that's your thesis, right? But as you say, NVIDIA is different. They're making money. They're really knocking it out of the park here. I still think I wouldn't touch it. There is so much in the price there that it's sort of like the degree of performance that is required for you to not only get a decent return but an outsized market return, I wouldn't say impossible because the future is very hard to predict and things are changing very rapidly now and maybe they invent AGI and control the world's brain and, you know, but I wouldn't be betting money on it.

54:00And this is what's important. You're not even saying NVIDIA won't go well or it won't go very well. Oh, I'm sure. It's a great company. It has to go extraordinarily well for these things to be true. Even if AI can, and this is the thing, so let's say AI continues, right? Let's say it continues to pay. Let's say it accelerates away. And someone says, oh, I'm going to invent a new chip. It's not going to be as good as NVIDIA's, but it's going to be a third of the price. Now, maybe Vidi keeps the business. Maybe it doesn't. You don't have to know the answer. What you have to do is it's an audio podcast.

54:28Probabilities are all that matters in investing. Well, not all, but effectively all. It's what it's based on, right? So there's a range of potential outcomes. If your view is there is 15 different outcomes, but I need this particular one to be right. If any other 14 happen, I'm screwed. But if this one is right, could it happen? Yes. Should you bet on that accordingly? No. And again - It's Russian roulette. Exactly what it is. It's exactly what it is. And so again, even if it does work, good luck to you. You managed to spin the chamber. It's not even Russian roulette, mate. Except there's five bullets in the chamber and one empty one.

55:01That's what I was going to say. Exactly. And if you get the empty chamber, it doesn't mean you're smart. It just means you're lucky. And that's fine. You're entirely lucky and good luck to you if you did it. That's awesome. But playing that game of roulette, you know, Buff says you wouldn't play Russian roulette with a million empty chambers, right? Yeah. If you're playing Russian roulette with your portfolio on the basis that I think this thing will happen, but it has to happen, and it has to happen to the fullest possible extent for me to be okay and not lose money. And that's all the other options, other competitors, US trade sanctions, AI doesn't do exactly what we think it's going to do, they invented different AI, it doesn't need as many chips, all a range of potential outcomes.

55:37You have to have that one thing happen to make it worthwhile. Don't forget, NVIDIA was a distant second to Intel not that long ago. That's true. Not that long ago, right? They leaned into the GPUs and there was some mining stuff that they did there and then it got, they just, this, by the way, is such a great investment lesson, is like the winners of today are winners of today because they invested sensibly and appropriately and heavily yesterday. Yes, correct. Like you don't just arrive on the scene, you know, and I think investors forget that. And I'm just, I'm continually amazed when I speak to investors and they go, oh, earnings were down on this company.

56:20Oh, it's terrible. It's a crappy company. Well, maybe, maybe. Like sometimes that is very much the case. But when you, often you'll look at what was actually said beyond the headline numbers, like, well, actually no sales have been continuing ahead at a decent pace, but they, they're going so well. Anyone who's run a business, you don't need to explain it to, but to 23-year-old analysts fresh out of uni, you do need to explain it. It's just like, yeah, because they just built a whole other factory because they can't satisfy demand with their current thing. And guess what? They bulked up a whole bunch of costs.

56:52They had to sort of front load them. And, yes, I know there's depreciation, amortisation, but you've got to put staff on there. It costs you can't do that with. And it's going to just destroy their margins in the short term but provide the foundations for growth in the long term. And I think too often we sort of bemoan companies not making investments for growth. And at the same time, we get the companies we deserve because anytime someone tries to do any long-term thinking and sensible planning and investment, we punish them. And as I've said, you could parachute me into any ASX 200 company. I will absolutely make the profit rain in the first year or two.

57:25I will, and I would say without hubris and ego, I will make some acquisitions, I'll fire everyone. I'll just, brilliant. Cut the marketing for 12 months. Oh, yeah. I mean, the company explodes in three years. It ceases to exist in year three. Yes, yes, yes. And it's just like, you know, I feel as though it's really obvious, but it's obviously not really obvious. So I don't know. We've gone a mile away from the initial talking point other than to say, yes, it was a good earnings season, but bloody hell it wanted to be. And if you're out there, try and be a little bit fussy. Not that I would ever suggest anyone, well, you should wait until this thing gets to a PE of 12 because you probably won't ever get the opportunity.

58:03but don't just ape into something because, A, the share price is going higher, B, you're mistaking a buzzword for a business model, you know. I'll tell you 100%. And you just think that the trend is your friend and it's going to go up forever. That is just not going to make it right there. Just on AI too, mate, I just want to say, and I've said this before, but just for what it's worth, I'm no futurist at all. My suspicion is, and I'm not even betting on this necessarily, but AI, to your point about Cisco and others, AI becomes an enabling technology for everybody. Like, you know, who won the internet?

58:35Well, was it Amazon? Kind of, but they're a retailer. Just happen to use, is it Apple? They're a device maker. They just happen to use Wi-Fi and 5G. Who genuinely, did Cisco? No. I mean, they're fine. Clearly not. I mean, as a business, they've done well. That's fine. But again, where did the value accrete? By the way, the value accreted to the consumer. I paid my rego during the week, right? And I had to take the car to the mechanic. They can't yet do that remotely. but I went to the county. They did my pink slip for me. I think I call them pink slips around the country. Road weather is to be, anyway, for those who don't know.

59:07Did the pink slip, drove the car out, pulled over on the side of the road, logged on to the NRMA, paid my third-party insurance policy, then logged on to Services South Wales. They'd already received the pink slip and the CTP and I paid my rego, and I put the phone down and drove off. Now, I would have had to have gone to the mechanic, then the insurance office, or mailed some check-in or done something. Then I had to go to the RTA or the Reds and Maritime, whatever they call themselves, and do that in person and get a sticker. Kids, you used to put a plastic Reggio sticker on your windscreen with a month on it so the coppers could look at it and go, yeah, it's been done.

59:42The coppers now look up my Reggio online in the police car and make sure I'm ready. Actually, they don't even do it automatically. Just the camera at the front of the car that just scans and bing. They just have to drive past you and they'll know. Everyone knows what technology you can do. For those who have been around a while like you and I, mate, they will have known this sort of stuff. But that's, you know, who makes the money out of the coppers doing all that sort of stuff on the RMS? Well, the taxpayer and the consumer, largely. I mean, yes, there are providers who do some of this stuff.

1:00:09Someone's got the technology to do number plate recognition, but that's kind of dime a dozen now because it's available. Someone provides the service that allows the RMS to send, or the insurer to send the details to the RMS. But these are really, really small things. So I would suspect, will there be one or two winners from AI? Maybe. Maybe a chat GPT. Maybe they win the LLM kind of race and they're the Google of the future. So I'm not saying no one wins, but where does most of them? I mean, Google's probably the biggest winner of the internet purely because search didn't exist before it and it was a brand new, oh, Yellow Page did, I guess.

1:00:40But, yeah, some will win. I suspect the broadest value creation or value accretion goes to the consumer is my best guess. Well, isn't that a thing of beauty? Isn't that not? That's what's supposed to happen, yeah. Isn't that what's supposed to happen? When you take away all the BS crony capitalistic nonsense that's out there, That's exactly what any technological breakthrough absolutely creates value for the companies that prosecute that the best, but at the expense of the incumbents. It's like, well, sucks to be you. But, you know, not only have they made money by delivering value, but they by definition, it's in the sentence, they've created value.

1:01:16In other words, we've all won. And in a nice, free, open, fair market, when you have these things, we all should win. We should all win indirectly, absolutely through that kind of stuff. And it's such a key point to sort of make. So aside from the point we are trying to make in this particular segment. Yes. But that is true. I mean, the person who invented the internal combustion, I mean, think of the value for society that has created, right? Think of the steam engine or, you know, was it Tesla and his AC electricity, oh, God, I could think of them, rattle off a million scientists. And, like, some of them actually did well.

1:02:00Some of them benefited. And so they should. Bloody oaf. So they should benefit from all that value creation. Not all of them did, by the way. But society at large wins when we do it right. Correct. Mate, let's finish off with something I thought was fascinating this week and kind of not surprising after you hear it, but kind of surprising when you first hear it. And that is in the top 10 new car brands sold during the month of August, top 10 brands, listeners, how many do you reckon were Chinese brands? Let's just ponder that for about 10 seconds. The answer is four. BYD, GWM, MG, which is now a Chinese brand, and Chevy Cherry, C-H-E-R-Y.

1:02:47which I've seen a lot of BYDs drive around, by the way. I just thought that was absolutely phenomenal. These aren't brands that have a heap of different cars. It's like, you know, Toyota's got, I don't know, 20 models probably, something like that. Nissan's probably got fewer than that. BYD's got a Fugitive.

1:03:07There's not even necessarily a really, really important key takeaway other than markets change, consumers choose, technologies change, people do different things. I just thought it was, I still think it's stunning and an amazing change. Go back 20 years, Holden Ford were at the top, Toyota was behind them. I can't think of what it would have been at that point. The change in the marketplace has just been remarkable. I will say for what it's worth, there are people who are saying, oh, bloody Chinese, bloody Chinese, that. Just be slow to be critical. We didn't complain what it was Americans. why is it bad that it's Chinese?

1:03:46We can, you know, like or dislike the Chinese government or Chinese people or whatever, but just kind of be careful about the implication here. There is and should be no racial or national implication. You talk a little bit about government subsidies and what totalitarian governments can achieve, that's fair. I don't really have a so-op, mate, other than things change really quickly. Everything was the same for years. When I grew up and you grew up, it was, you know, the top five car brands I suspect were probably largely unchanged. Four out of five of them were probably unchanged for decades.

1:04:17And, yeah, life moves pretty fast. Technology moves pretty fast. It just was astounding just because it was true.

1:04:30Sorry, sorry. I was on mute. I was on mute. Dropping fire. Now I'm going to mess it up. Dropping fire, exactly. What wonderful things did you say or potentially? I was going to use my back to the future analogy. well not reference actually not an analogy okay there's that i just love it is that point in um back to the future where marty goes back to the 50s and he said oh the delorean's broken or whatever and the doc's looking at it goes oh no wonder this part was made in japan and marty goes doc all the best stuff is made in japan and he's like what now again put history man, history. God, read a history book, everyone.

1:05:10When you go back to the 50s, Japan was very similar to China was not that long ago. It wasn't a rich and prosperous nation as we would envisage it today, but it was rapidly industrialising. And usually what happens is things are pretty clunky and crappy, you know? Just like when you look at a lot of stuff, It's like, oh, it's so badly made, probably made in China. You know, and I don't mean any other dimension to it than just observable fact, which I think a lot of stuff from China is of a pretty low quality. But that's changing and the cars are a great case in point here. Why is it changing? Because they've taken technology, some may say stolen some technologies, maybe skirted around certain IP laws, but either way they've done it.

1:05:58And you know what? Like any human being ever, you do something long enough, you get better at it and you get better at it. And here's my point too with economics is they built up the capital stock. They had some pretty rudimentary factories and then they got some better tools and those tools made some even better tools and those even better tools made some better tools. And you go up that tech tree, tech tree for the Civilization fans out there and other computer games, which is the tech tree is sort You need to unlock certain advances to sort of progress to the next stage. But it's absolutely relevant here.

1:06:33They unlocked various stages of the tech tree. And so they've gone from like, you know what, we can't do much, but we've got a huge and massive and super cheap workforce, so we're going to sew all your jeans and all your T-shirts. Great. Well, now they're making the best electric vehicles on the planet in a blink of an eye, in a generation, in a generation, right? And that's exactly what happened. So I just, it's a really, and let's contrast that with the economic superpower as it currently stands, the US. I mean, what do they make? Not much. Not much. They've completely hollowed it out. And yet, this ties in nicely with our earlier statements, yet GDP's gone up and up and up and up and up.

1:07:17It's just like, is the economy stronger? Is the US economy, technological advances aside, stronger or weaker than it was 30 years ago? I'd say it's much weaker, but the GDP is not going to capture that because we've been consuming a lot. They've been consuming a lot because they've been consuming their capital base in a very indirect kind of way here. So this is absolutely going to happen. So China's on the ascent, US is on the descent, and let's fast forward 50 years and there'll be someone else. Maybe it's India. India's actually a very good candidate actually to do pretty well there. They've got a real advantage over the Chinese in terms of the demographic picture.

1:07:52Yeah, totally. very young workforce. The Chinese one-child policy was an absolute disaster. They're going to be dealing with that for many, many years to come. But anyway, what's my point? My point is just to sort of remark on the noteworthiness of your observation. If you had gone back even 10 years ago and said that this, you know, like what was it, four out of the top 10 brands are going to come out of China, you'd go, nah. Do you remember when Great War came? You started seeing a few of them around? Yes. Like, oh, they're dinky and crap. and no, I'll stick to my whatever, thanks. And that's just, things change fast, man.

1:08:29Things change really, really, really fast. And this is, it's often, unfortunately, the realisation is too late by the time it can matter. And I think much in the EU, here in Australia and in the West in general, the US especially, you know, we're coming to this very scary realisation, even to the point with the US, it's like, what is it, 30 % of their military componentry componentry comes out of their greatest geopolitical rival. It's like, there's a problem here, guys. There is a real problem here. And let's say cool heads prevail and wise heads prevail and they go, okay, we've got to do something about this.

1:09:04And let's say they actually manage to do it in a very cogent, smart, wise, effective manner. It's still a decade or so away before they're going to move the deal. Again, to my earlier point of the investment, of, you know, the lag between investment and bearing the fruit there. I can plant the most juiciest orange tree in the world, but I'm not pulling an orange off that thing for a while. And that is why I think you can look at China and very, very confidently say it is just a matter of time before they overtake the US. It's just the trajectories in train, momentum here is very real. And even if things reverse course, it's going to take time for that to have an impact.

1:09:49So, I mean, good on the Chinese is I guess what they said. They, not through perhaps the best means from a humanitarian lens, but they at least knew what mattered and what mattered was bulking up their productive capacity, increasing the capital stock and they're going to be, and they've put themselves in an incredibly strong position. and the EVs are just one symptom of that, I would argue. That's a very good point. I think you make a right point about Japan because, and this is the other thing about, you know, the way things change. When I was at school, you were at school, we were told to learn Japanese because we'd be dealing with Japanese people.

1:10:32Yes. And the Japanese were going to buy all the golf courses on the Gold Coast, right? No, I'd get about six or seven. I never did learn Japanese. My sister did. I did Italian and German. I was just behind that curve. But, yeah, it's a really interesting – so just that idea of – By the way, former world superpowers. Yes. Yeah. Right? So we do, right? Yeah, exactly. And things change. They sure do. And obviously, the other things are somewhat necessary other than – and by the way, it'll probably happen to China too. And that's your point. These are going to be – I mean, maybe it's India, maybe it's something else, whatever's happening.

1:11:06The other thing that's worth mentioning, and this is not for a second what you would wish on anybody, but you know what Japan and China had in common? Was they were starting from scratch. Yes. And we do have the innovators dilemma a lot. Now, Japan started from scratch because they got, you know, the Yanks bombed the hell out of them and they deserved it because they started the war. But people didn't deserve it. The military leadership deserved it. China was coming from effectively subsistence farming after a couple of revolutions. and, again, they don't deserve it and it's an awful thing. The old saying don't waste a crisis is really, really useful here.

1:11:42One of the – think about NVIDIA that came from scratch making a separate piece of technology. Intel was making computer chips, CPUs. NVIDIA started making GPUs, graphics processing units, that happened to be really, really good for Bitcoin and AI. Now, they didn't plan that. They didn't plan AI. They didn't plan Bitcoin. They was in the right place. But why? Intel didn't change because they're making CPUs. That's what they're making money out of. Why is it hard for America and Australia and Europe to compete with Japan and China? Absolutely because they've got lower wages. Absolutely because they didn't have any legacy whatever.

1:12:13I'm not saying those things are good things. What I am saying is be very, very careful when you come up against, whether it's a cut. I think back to investing, right? Aussie Broadband running circles around Telstra. Why? Because they didn't have 150 legacy systems to deal with. They said, let's start up an NBN reselling business. So they have a good brand, some good internal processes and brand new systems. And you get to start from scratch and do it your way, you know? So the innovator's dilemma is so incredibly powerful, really hard to beat the incumbent. Who the hell takes on Telstra? You know, think about the airlines, right?

1:12:44How many airlines have tried to take on Qantas and Virgin and have failed? All of them. But thus far, everyone that's tried to take them on has failed. Although they are fighting with one hand behind their back because of our jingoistic, you know, slavish dedication to propping up this, you know. Yeah, but that's a function of the power of incumbency is kind of my point, right? True, true. When you are the big dog, you know, trying to beat the big dog is really tough. But once you escape velocity, once you get past the can we actually wash our own faces, who's that guy? Aussie Broadband, I don't own shares, by the way, they picked up, I think, 1.1 % market share in NBN from like 7.8 to 8.0, whatever the numbers are, something like that.

1:13:23Again, not big numbers, but the others are losing market share. These guys, you know, they're the little guy, they're the price fighter, they're the service fighter, the brand fighter that's doing a really good job. And so that was Japan and that was China. China goes, again, autocratically and totalitarianly and without, you know, geographic human rights. But, and again, I don't say but to ignore any of what I just said, in doing so, they were still able to start, well, we've got no capital base, to your point. We've got no infrastructure. Let's create some things. Japan said, well, the whole thing's gone to hell in a handbasket.

1:13:53Let's build some stuff. What can we do? And once you do that, Japan didn't have to deal with decades of massive pension obligations from US car makers. So they're immediately at an advantage. China's worked out, hang on, we can go into new technology. We have to try and take capital from sclerotic old uses. We have this capital all of a sudden. What do we do with it? Well, let's do the things we – solar panels seem like a thing. Let's start making some of those really cheaply. Again, there are reasons why – there are horrible reasons why in a lot of cases that the world is the world, the reality is the reality.

1:14:24And I'm not saying we should do anything differently. We shouldn't have destroyed Australia and started again for its assistance. so we can compete with China on solar panels. You take the advantage you've got. You don't give them up easily. But just be mindful. Those are the circumstances we're existing in. Yep. A couple of quick examples. Amazon destroyed, intentionally destroyed its book business. Yep, yep. Because it was like it's just not, we're going to die anyway, so let's kill it and let's lean into other things. Kindle audio books, yep. Absolutely. It's another great example of that. I always wanted to make the point too, just of how quickly things change.

1:14:59I may have mentioned this in a previous pod, but all the things we're discussing kind of makes it relevant here. I don't know if anyone's been following what's happening in the UK, but it's a basket case over there. Same kind of issues, right? Massive debt, unsustainable budget deficits, blah, blah, blah, blah. When my grandfather was born, it was the world's superpower. Yeah, right, exactly. Its empire, not the United Kingdom as we know it today, but the United Kingdom empire controlled one quarter, 25 % of global production, right? The sun never set when the British Empire was the, yep. They had the strongest navy.

1:15:35They had the strongest military. They had the world's reserve currency. It was where the bloody Industrial Revolution took root. And in a few generations, it's gone to a basket case. You know, it's, my only point there is really, it's just sort of like things change. Things really change. And it's those that skate to where the puck is going that I think have really got the advantage. And the other side of it is those that see their position as unassailable are always doomed to fail. They're the ones that I think you were the one who I first heard this phrase from. They whistle as they walk past the graveyard, you know.

1:16:16It's kind of just, and I remember, because we're too old fogies, I remember, I remember in the early part of this century The media barons going, oh, this internet thing's nonsense, you know, and some of the established brick and mortar retailers, all laughing at it, all thought it was hilarious. Where are we going to? Oh, yeah, you're going to buy jeans? You're going to buy jeans on the internet? Like you can't try them on. Oh, yeah, I'm going to like, I'm going to go to a website instead of reading the newspaper. And like it's like it's laughable today. But that's that hubris. Whenever I see that, if you don't have a healthy degree of paranoia as a CEO, you're in trouble.

1:16:57I'm not saying you jump at it. Someone said that. Only the paranoid survive? Who was that? Anyway. Oh, God. Great saying there, right? Yes, yes. Great saying. Andy Grove? Maybe it was Andy Grove. I'll look it up. But anyway, so this is. Andy Grove, yes, it was. Yeah. And I feel as though you look at it with America now, this US exceptionalism, you know, it's like, yeah, at one point, not now, absolutely not now. And we walk around too. Like Australia is the classic little man syndrome on the geopolitical stage. You know, we're 2 % of the global economy. We have our entire population would fit into a mid-tier Chinese city.

1:17:38We walk around the place strutting us like we're cock of the walk, man about town, you know, and we look at our incredible wealth and our incredible good fortune, and it really is. I'm not trying to take anything away from Australia. I love it. I wouldn't go anywhere else, but we have been so stupidly lucky and it's the taking it for granted. It's not that, I mean, you play the cards you're dealt, right? How? Oh, what? Everyone wants iron all of a sudden, in particular China. Hell yeah, let's dig it up and give it. Let's make a ton of money out of it. But we walk around as if it's something special about the Australian character.

1:18:14And by the way, ceaseless. And not ending and ceaseless and it will never end. Not ending with the process. We've got to hit the backside with the rainbow for a period of time. Let's not waste this opportunity. No, build a sovereign wealth fund, to your favourite point. No, let's not do that. Do we make any long-term investments? No, let's not do that. Give some tax cuts and spend on some triplets. Oh, let's just flip property amongst each other, you know, and look how smart we all are, right? It's just sort of like, and it's just depressing because, again, it always sounds like you're a doomer with this, but it's just to try and sort of say it's like it's complacency and hubristic thinking that sows the seeds of our own destruction, not destruction, but our way.

1:18:54And, like, again, I would rather live in the UK than many other places around the world as well. But if they had farsighted, wise leaders, they would still be the world economic superpower, military superpower and that, you know. Complacency is the world. The US was their colony. The US was their colony. India was their colony, right? And they're both massively bigger than the UK now. Sorry, I'll shut up. No, Greg. Three generations. Gosh. Complaints is the right word because that's when you say it's fine, it's good enough, you know, whatever. Yeah, we're just smarter than everyone else. We'll figure it out.

1:19:26I used to work for, this is a million years ago now, I used to work for Heinz way back in the day. And for years, every time someone entered the baby food market, Heinz would drop their prices and beat them up. And Heinz was the, people don't realise this these days, Heinz was 90 % of the shelf space for baby food. You buy it in cans, which was all you could get, and they eventually introduced jars. So cans, jars, literally you look at the thing, they're colour-coded. It was a thing of beauty as someone who used to the shelf layouts. Like it looked great. They've done a wonderful job. They just beat everyone over and over and over and over and over again.

1:19:55I was there when someone had come to the market, we beat them back. Someone else had come to the market, we beat them back. Someone else turned up with pouches of baby food. I remember. Right? And all of a sudden the pouch turns up and Heinz goes, we'll just drop our price, we'll be fine. Now, these days you'll know Heinz are in pouches of baby food and they are one of, and I don't know the market shares of these, I don't know how much money they're making out of it, wouldn't be an appropriate share of it if I did, but I don't. They got, why? Because they stopped innovating. They kind of went, let's circle the wagons, and they knocked the first one away, knocked the second one away, knocked the third one.

1:20:25This is working beautifully. Problem with that is as soon as someone gets under your guard, you've lost the ability to innovate. You've lost the willingness to innovate. You don't have the internal DNA. You don't have the kind of the structures, the process, the people, the interest, you've made, and this is an innovation again, you've made the margins, such to the point of like, well, I don't want to make less margin, I'll pouch them jars, I'll keep making jars. That's fine until people stop wanting jars, then what do you do? Then you've got really, really profitable, you only sell two of them.

1:20:51And it's obvious in hindsight, and by the way, the other thing is if hindsight's every single time, I try to innovate every single time, maybe they would have wasted a whole lot of time and money. So there is some question, don't try to beat everybody on everything all the time, but if you don't stay on the front foot, eventually, someone gets through your guard and you are toast. You don't know how to respond. You don't have the ability to do so. I do a lot of CEO interviews and it's always a red flag for me when there's a cockiness about the CEO, you know. It's just one tiny subjective element to a much broader appraisal, but it is a flag.

1:21:29I just think that no one's that good. No one can predict the future. You don't, no one can see around corners, right? You just can't. And it's just, arrogance is just dangerous in business. It's just super dangerous. And so I always like, as I say, I like the healthy skepticism, the healthily paranoid. You don't want the CEO who is obsessed with the competition because you've just got to think competition is a fact of life. So be aware of it, but don't focus and obsess over it. But those that dismiss it, I just think you're just going to go the way of all of these other ones. and it's easy to do.

1:22:07It's easy to do, right? Super easy. I'll go back to your... Look, I mean, Microsoft is hard to be critical of because they have done extremely well, but they should have done a lot better than they did because a couple of dudes in their garage, literally in their garage, invented search, right? Well, perfected... They also missed the mobile OS. Thank you. Yes, yep. They should have done it. They should have done it, right? They should have done cloud computing before AWS. Now, they've all come there and they've done it and Microsoft's actually an incredible success story. Super involved, yeah, yeah.

1:22:40But, you know, it should have been much, much, much, much better because of all the things we're talking about. Yeah, yeah. I'm going to go back to your Amazon example. Just to finish my bit off, you can go again if you want, but we're probably towards the end. Use the Amazon example. I think this is really important. You said, you know, you shouldn't obsess about your competition. You're absolutely right. What you should obsess about is the customer. Yes. And I'm an Amazon shareholder and I, whatever. What Jeff Bezos did extraordinarily still at the company, he's not the CEO anymore, what he did extraordinarily well, extraordinarily well, was focused on the customer.

1:23:10He did focus on the customer. So what he did was he not only did not, it was just about the competition, he broke, you've already said this, he destroyed his own business. No, no, no. The book business still exists, right? But anyone else would have said, well, you sell books, we shouldn't really push the rise of audio books and e-books because if they do that, they won't buy our books anymore. And he would have said, well, when someone else does it, we'll try and do it ourselves. No, no, no. This will work. Not only will this work, we can make it ours. We can own it. We can lead the revolution.

1:23:37Consumers want it. Let's give them what they want. And we will adapt our business to serve the customer, which sounds mad. So, so. Right? But again, let's remember, will Amazon do that in 40 years' time? I hope so, but I don't know. They were 10 years old at that point. Yeah. Right? So all of the current sort of, you know, we do this, this is what we do, we can't do anything differently. You know, business has said from literally day one, I don't know why it's important. He's written a memo called it. Every annual report he writes, it's still day one. In other words, we are still scrappy. We are still fighting.

1:24:08We are still focusing on the customer. We're still going to innovate. Nothing is sacred. And as long as they keep that, that's why part of the reason I'm a shareholders, as long as they keep that focus, they will be, I can't guarantee they'll be fine. You mentioned AWS, the web services business. Yeah. That wasn't built because they looked around and went, someone's going to do it first. They went, we have extra computing power. What do we do with it? They created cloud computing effectively, not exactly, but close enough to it. Well, they needed it for themselves. Right. Oh, actually, we could sell this.

1:24:34Maybe their biggest business line? I don't know. I don't know, but I know if it was split out from Amazon and the rest of Amazon's business, the website's business itself would be something like a top 20 US company. It's that big. Massive. Extraordinary. Yep. Oh, man, so many lessons. So many lessons for anyone who's interested to learn them. If only they would sit at our feet and learn from the experts. I made your words not mine, but I agree. Nothing if not modest. Nothing if not modest. Thank you for spending a bit of time with us on this Friday afternoon or Tuesday at lunchtime. Mate, will you come back on Sunday?

1:25:10Hell yeah. Of course you will. Till then. 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 Licence 400691.