GDP weak… but also too hot? September 4, 2026

25:44And you have to because conversations need to be digestible. But we miss so much of that opportunity. That being said, for all of that, mate, for all of that, the reality of a situation where we can't grow to any fast without causing more price pressure because supply can't keep up is still, I think, worth spending a bit of time on because that's kind of the key challenge where, I mean, we're going to annualize the quarterly number of 0.4 % and you shouldn't because you can't multiply things just for the sake of it, but that'd be 1.6 % for the year. And I don't think they've actually said it out loud as much, but inferred and I think reasonably well accepted is that's kind of about as fast as we could grow.

26:25Normally, 2 % to 3 % of what we would target as economic growth. Why? Because the economy would be bigger and people would be more well off and high wellbeing, all the things, right? Growing prosperity is good. And so you want that. We're kind of saying anything more than about 1.5%. And that's not actually growing prosperity. We can't do that in a way that is not going to simply cause more problems than it solves. And that's the productivity question. We kind of, you know, I talked about it before. and we'll talk about things we can and can't do about it. We'll do it again in a sec. But it's just worth kind of – I don't know there's been a time in my adult life where we have actually said, I hope we don't grow more than 2 % because this could go badly if we do.

27:04And it really does underscore the real challenge of the Australian economy. The only way you can grow – and we've said this a million times – the only way you can grow an economy is more productive. It literally is – I mean, bring more people in, but we've talked about that. So on a per capita basis, the only way you do it is be more productive. Why? Because you're doing more things with the same inputs. You get more value out of it. That's what we're measuring. And so unless we can fix productivity, so I say we and fix as if they're doable, and we've had the conversation before, and it's not a magic one.

27:28You don't say be more productive. But unless productivity improves is a better way to phrase it, we are kind of stuck in the slow line. Yeah. Should we move on? Well, I just, I guess we're my, I have, you framed it up really well, but it's sort of like when you really boil it down, it's sort of like all we're really saying is what? it would be nice to happen. Yeah. You know, and there's so many people beating the drum and saying, we should have been more productive. It's like, yeah. I mean, it's as silly as someone getting up there saying, it would be better if we were all wealthier. Yep. Be wealthier, you lot.

28:02Yeah. I agree. You know, like, we should target being more wealthy. Yeah. Okay. But I was anyway. Like, but if it helps you to have a national target on that, maybe we should put a task force around. We should be more wealthy. Maybe. Roundtable. Roundtable discussion. Let's get the stakeholders in mind. It's not, I don't, I don't disagree with anything you say. It's just like, it's all it is, is a aspirational, a vague aspiration. And it's sort of like, yeah, I'm, I'm, I'm on board, but I just, where I, where I, I, I sort of, I can't get on board with, it's just sort of like, what do you want to do about it?

28:41Or what, or what do you think more fundamentally? What do you think that there can be done about it from a command sort of perspective like from a very top-down thing it's like just saying be more productive like i've talked before it's sort of like there are things you can do to sort of like you know remove red tapes the classic one right like just like if you speak to anyone who's in business like just just help me just just make my compliance requirements not get rid of them people always people always have to go to like the absolute extreme in in washing all sorts of things like No, just be an adult for five seconds here and just say that if, can we just make whatever compliance and regulatory requirements are good and sound and are needed?

29:24And that's a whole other separate discussion. But whatever they are, let's make it as easy as possible for people to do that. Right? And then other than that, just people will figure it out. They've got a strong incentive to figure it out. So they'll figure it out. Right? I just, so it's just like, this is where, this is where I just, I don't get, I don't get what people are and politicians in particular and central bankers and major bank economists are all jumping up and down about. It's just sort of like without, other than just sort of saying something that sort of sounds good and warm and fuzzy with zero practicality to it.

30:00Or I don't know, maybe I'm, maybe I'm big. What would you do? What would you do if you were king of the country? Well, you're going to be the sun king. I'm the emperor. Isn't that what we decided recently? God king. I settled on. So I'm going to take a half step back before I answer. I will answer the question. But I think what I think is important is that we're acknowledging that's the problem. Because what it does is then lets policymakers understand and focus on that as an issue. Now, maybe the answer in the end is we can't do anything about it. That's okay, too. I mean, we have been discussing it for 20 years, but maybe they'll do something about it eventually.

30:32But to do something is, to your point, some of the regulation. I think that is the point. Can you make Bob's widget factory more productive because the treasurer decides to? No. And you're 100 % right about that. But it does. I think it does. It's going to say hopefully forces. You're right. It's been 20 years long. It never does. But in a perfect world, at least the common... Look, put it this way. If we're not talking about it, does the government do anything about it? No. Why? Because it's not their interest to do anything about it. Do you think that they're getting more regulations or less regulations?

30:57Well, that's what I was going to get to, right? So there's a lot going on here. A lot of extra regulation. while screaming about productivity. It's like look in the mirror for God's sake. Yes, yes, exactly. But I think it's the right conversation because it gives us the right lens. Not saying government fix it, but almost the reverse, which is are they doing enough to do what they can to be part of the solution? Which sounds like weasel words, but I guess I'm taking your lead, which is government's going to wave the magic wand and fix Bob's widget factory and all of a sudden make it more productive.

31:29But would Bob's widget factory be more productive? Have government made some changes that they could reasonably make without harming anyone? Yeah, probably. And so to your point, that is where we should be turning the lens, is what are we doing as a country to allow our businesses to be more productive without the negative externalities that otherwise might come from if we were too laissez-faire about it? And so that is, I think, you know, it feels a little bit unsatisfying. But the question really is exactly that. Okay, we've got a productivity problem. What are you guys doing? Don't tell Bob to make more stuff.

32:06Within your wheelhouse, what can you do to allow companies to be more productive? And allow is the right word here. Not make, not decide, not have a round table and cajole, but literally, what can you do to either get out of their way or improve infrastructure or improve education or whatever combination of tools and decisions can be made? Here's the other thing, mate. This is something you've done at me. I'm going to get hate mail now. Part of the reason we're less productive is the public service has grown. You beat me to it. I was going to say, you could stop bulking up the size of the departments with professional emailers, you know.

32:44I'm not going to defend it, but what I will say is one thing. And I've said this before, so I'll say, we can choose to be less productive if we believe that the tasks those people are doing are worthwhile. In other words, if we want to have - But if they were worthwhile, it would actually be more productive. Like it's sort of circular. No, no, necessarily. We can have more nurses in a hospital, right? So you put more nurses in a hospital and say we want to give people better quality of care. That is a – there might be a very, very, very slight increase in GDP because people don't die or something.

33:08But realistically, that is a social choice, right? True. We could have more national parks and have more national park ranges. And that would have a negative impact on GDP and negative impact on productivity. We could have more EPA pollution inspectors. That would be negative for GDP because we'd stop people polluting and their costs would go up. and the pure economist would say, that's hurting GDP. Well, that's productive because we're looking out of the environment. And I'm not meaning to put value to any of those three examples other than just to say, we can absolutely as a country, like, and you know, I've talked about before, you know, if we have enough money to retire, we become very unproductive very fast.

33:42And you know what? Don't tell me I shouldn't be more productive because I don't want to be and I'm happy to be in my family unit called Phillips Incorporated. Our productivity just plummeted and I couldn't give her stuff. You're more interested in your gross domestic happiness index, right? Right. And so that's almost my point. So I'm not defending the government spending at all. I think the public service has grown too quickly and there's waste and mismatch, all the things, right? So let's assume there's all the things. But I just want to hold out the conversation, which is if you only ask the economists, you'll get a very, very specific set of outcomes, which are measured in, particularly these days, measured in numbers because that's what we can do.

34:16You can put in a calculator, put in a computer, you can model it, therefore you have an output, right? When you start to say, I kind of like those trees over there being there, and you made the example before about employ people to dig holes to improve GDP. And, you know, you could do these things, but they would not necessarily be in the interest of the country or the people or the individual. So we can choose to be less productive. I think that, and I want to say it's a perfectly valid choice. It's an entirely valid choice. If Phillips Incorporated wants to be less productive because we're going to do more holidays and work less, and I'm happy to trade off the money for the experience, that's a perfectly fine choice.

34:47We can, as a country, say we want to be less productive because we want to have more time off because we just, you know what, we're wealthy enough anyway. Let's not kill ourselves working six and seven days a week. Let's work five or four and a half and just enjoy ourselves. Oh, GNP or four. I don't care. You know, no, I'm not saying that we should do that. I'm saying that would be a perfectly valid choice. Not necessarily the best one, not necessarily the one I would choose, but a very valid option. And we just need to keep that in our heads at the same time. Go. Well, just, I mean, this is more, I'll go even more fundamental here.

35:13It's sort of like it's even just the height of hubris to even suggest what other people should do. I just like there'll be someone out there going, I'm just a workaholic. Like I am in Nirvana when I am working 20 hours a day. And it's like, all right, cool. I haven't seen my kids for months. I'm loving life. I mean, who am I to judge? Chase your passion, right? And there's someone out there going, look, I just need to have some food on the table. Otherwise I'm just out fishing all day. Cool, you do you. This is like so much, I think, of the economic problems that we have is just people going, this is what others should do.

35:44Generally people in very highly unproductive bureaucratic jobs that actually don't do anything. people love to point to the nurses in the park rangers when it comes to public sector jobs but the boat has always been in the administrative kind of area here as well so these teams of dozens and dozens and dozens of people it's just like they're not changing catheters they're not in front of 16 year olds at a public school right like so it's it's sort of like i very much take your point um there are there are there are non-measurable economic uh benefits that that absolutely we should factor into all of it.

36:18And that would be a very reasonable way to choose to be less productive if we wanted to. Absolutely, right? But when you are bulking up a workforce and it's not having the numerical benefit or the non-numerical benefit, it's just like, what is the benefit? I mean, it's very clearly what the benefit is to that individual being employed. What is the benefit for us as a country? It's like, well, kind of nothing, right? And we are, we're taking money out of everyone's pocket to sort of pay for this and out of our grandkids' pockets as well who haven't been born yet to do all of this. It's kind of like, it's not an unreasonable kind of thing to sort of say, guys, in the last five years, the public sector has grown by 16%, twice the rate of the private sector, largely in administrative and bureaucratic jobs that don't actually do anything.

37:04Well, if they did do something, it's like point to where the outcome is. And feel free to point to a non-economic measure if you want to sort of say that, oh, no, has the environment gotten better in the last five years? No. Public schooling gotten better in the last five years? No. Healthcare gotten better? No. I mean, I would, you're not wrong. It's just that that's, I think, I've sort of said before, it's not the amount of government spending or taxation that matters. It's the bang for buck that you get. It's a return on investment and inclusive in that the non measurable kind of returns, every all of the all of the important one sort of fuzzy stuff.

37:40But when nothing is improving, then it's just like it's just reason and rationality and logic to just go at a point like stop doing and stop doing that. And for the love of God, stop gaslighting everyone else, telling us that we all need to be productive while you're putting more and more regulation, more and more red tape, bulking up more and more useless kind of professional email kind of roles and then going, gosh, we're all getting poorer. What's going on there? You know, and it's just, it's economic vandalism is pure and simple is what it was. There's two possibilities here and neither is good.

38:14And this is far from a hot take. But you either don't understand what you're doing or you do and you're doing it anyway. Now, which is the better? Neither of those are good outcomes, right? Yeah, yeah. Damn you on in either scenario here. Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener.

38:40Mate, we've talked before about what... You asked me what I would do if I was king. I would talk a little bit about this. I'd like your thoughts because... I still, in the real world, as opposed to, so there's the, you know, I mean, there's two ways to answer it, right? If I had absolute totalitarian control, do whatever I want with zero consequence, what would I do? And there is the, in the environment and the system we have, what is reasonably doable? And they're two different answers always. And they kind of probably should be. But once you say that you're emperor for the day, you're already in the land of hypothetical fantasy.

39:13So you might as well, right? Because if that first part is not true, then the rest is just a wash anyway.

39:22The break needs to be

39:27the institutional inertia. That's fundamentally where the problem is. Because I've given this story before, I used to work for a company and there was a global decision to cut temps out of the workforce. And we had to take X number of people out of the head office of this company when I was working at, and we did. and those people left the business and two weeks later I went we haven't missed a beat now everyone would have said they were doing valuable work their managers would have said they're doing valuable work the managers managers said they're doing valuable work and nobody nobody would have said we should get rid of those people and again not not the individuals weren't bad they weren't not doing the work but it does things like force you to be more efficient it forces you to we've lost three investment staff out of our team at Motley Fool we're going to replace one we've found ways to be more efficient uh and would would i have said i'll make a person about me would i have said 18 months ago we should get rid of two of our staff no because i wanted to give good service to our members and everyone was doing good work and the research was top quality all the things right and you and so you kind of go oh hey that's interesting and and the reality is that unless you make unless you're the the frankly the bastard who says people gotta go this is you know and of course then as soon as you do that people say well I would, what, fewer nurses do you?

40:46I had someone on Twitter saying to me, oh, you just want more bigger class sizes at school. It's like, no. And again, your point about jumping to extremes. Like, no, I didn't. I said productivity is important. Well, what do you want? You know, let's public service. No, just, just. And so that's, the institutional inertia is the problem, mate. I honestly think I would find a way, I don't know the answer because I'm not an organisational psychologist or behavioural expert, whether I would swap around the department heads and task them with finding waste, whether I'll put a bounty in place for employees who are able to eliminate waste and were able to you know recommend courses of action and frankly even a share of the savings you know um if you find a hundred thousand dollars worth saving give you 10 grand there you go well done um I think you know we've talked a lot about incentives I think I think some of those things are what I would honestly do uh and I would absolutely vet them through service delivery so no you can't give attempts at your teachers.

41:38No, you can't give attempts at your nurses. But also, let's really look at where I... This sounds, again, sounds hopeful that there are people who actually work for a living rather than you and I who just sit and press buttons. But if you ever go past a construction site, if I go back in time, you know what? I would start a company that sold witch's hats and barrier fences. Because there are more of those than there are sheep in Australia. There are just everywhere, right? And is it safer? Yes. is it meaningfully measurably safer oh i don't know i i doubt it um so i think across the board that's honestly what i would do some combination of a swap around so that you you remove you break the institutional inertia and some sort of bounty again back to incentives find some savings here and i will give you a share of the spoils and i suspect very very quickly you see things change real fast but you have to have the desire you have to have the interest and you have to have probably those inside identifying them and being incentivized to do so because much easier that from the outside i've also talked before about having a group of people who i would say your job is to look at waste and duplication i suspect there is if there's not two percentage points of gdp in duplication in government i'd be shocked and that's not even not even wasting you're doing back like just a multiple government departments with different systems or state fed local with overlapping systems or a lack of automational data sharing i mean two percent of gdp is an arbitrary number, it's a bloody big number.

43:03But with tax close to 30 % of GDP, if you couldn't find 2 % in waste and duplication, I would be staggered. So that's what I would do. What would you do? I mean, I'll just be vague. And so I think I would just change the incentive structure, which is basically what you're saying. The incentives at the moment are not there to do anything other than what is being done. I mean, show me the incentive, I'll show you the outcome. I'm sorry. I'm sorry. I'm sorry to repeat that again and again, but it is always the kind of way. You said before it's like being the bastard who would fire someone. It sort of comes back as like, why are they a bastard and why would they do that?

43:38And the simple answer is they've got the incentive to do it because someone owns the damn thing. And if it doesn't go well, then they're out of pocket or they're having to tip more money in to keep the whole guy. I'm not putting a moral judgment on it. I'm just sort of saying that there is an incentive mechanism that is there to keep things a little bit sharper. And whenever you have highly competitive environments, that's exactly what you get. you get highly efficient operations because if you're not efficient, you die. It's simple. It's pure and simple as that. So just like, so there is a wonderful incentive mechanism around the profit motive.

44:12It's like, it just, we don't have that in the public service. So, so we, you know, I think efficiency bounties and that kind of thing, really good idea. Just, it just changes the dynamic of things. But I tell you what, I just, it's a, it's a, it's kind of, it's a good conversation, but it's kind of like, before we have that conversation, can we at least just stop doing what we know doesn't work? Like that's, as I said before, it's just like these things are growing and growing and growing with no measurable improvement. Sort of like, so before we start thinking about how we could make it better and structure the system, like system more effectively, can we just stop, can we stop digging this hole that we're in?

44:50Cause, cause that, and it feels as though like we do the opposite of it, you know, It's sort of like we're actually accelerating on that front, you know, and it's sort of – it just doesn't lead anywhere good. The other thing I would say is I suspect it's the same problem. The answer is the same either way, right? Why do we keep doing the wrong things because we're not incentivized to do the right things? I suspect it's two sides of the same coin, unfortunately, which is, you know, when will you stop adding to the problem when you change the incentives? I suspect the answer applies both ways. unfortunately.

45:25I think if you address the former, you address the latter. If you address the latter, you probably address the former almost by definition. Yeah. Yeah. I mean, but at the end of the day, we definitely need productivity and people will do it, but you kind of need it just to sort of keep your inflation targets in check. I mean, just simply, right? So Australia's broad money supply has been growing at 7 % compound for like forever. So, so we need, and if we want 2 % inflation, we kind of need three, four, 5 % sort of productivity gains. I mean, the math's just, I can't do it verbally, but I mean, go and look it up and ask your favorite LOM to explain it for you.

46:08But it's just sort of like that kind of needs to be the case. So I know it's slightly adjacent to this conversation, but that's the other thing I would do is I would, I would, I would be far more observant and I take a much greater interest in credit creation. Because when you pump ungodly sums of money into the market by commercial bank loan creation, I mean, it's got to go somewhere, right? And it's okay if it's going into things that are really productive, which give you, you know, one plus one equal kind of three outcomes. But look at Bathurst. I mean, all of the money that was sort of sucked into that kind of thing just destroyed value, the opposite of what we wanted.

46:57I mean, what do you think that did, the sums that were being thrown around there did to our national productivity? I've moved the dial, right? Like, as one entity, given the size and scope of that kind of thing. $3 billion of the debt, yeah. You know, like these are, I won't get so far off the edge here to sort of say that it's the be all and end all. But as I sort of lament to you often, it's just the fact that it's not even part of the conversation. That's the bot that does my head in. That's just why we'll talk about everything except for that, right? Anyway, so let's cut to the chase. Let's cut to the chase because it's Australia.

47:36if there's only if there is any reason to talk about macroeconomics and productivity and gdp it's only because what does that mean for my mortgage payment there is no other reason to talk about this let's get real okay guys fascinating intellectual theoretical conversation blah blah blah am i paying more for my mortgage that's where that's where it comes down to that that's where it begins uh and ends so i've spent a bit of time in the u.s as have you Not a heap, though. And I do wonder, I don't know what the economic conversation is over there. And I mean the broad, not among the boffins, but just, you know, as you say, the headlines in the paper are largely economic event A leads to what in house prices slash interest rates slash whatever.

48:22And you're 100 % right. The vast, vast, vast bulk of US mortgage rates are fixed. And I don't, I mean, I could probably, again, I could look it up. but I wonder what the cultural experience of economic conversation is in the US. I assume it's less about housing, maybe, although they had the GFC because of the subprime crisis so maybe they're not as different as we think they are. Maybe it's not rates but it's speculation or flipping or something. I would just be fair. Do you have any concept? Because I have no concept of what the average American talks about economically when it's not a matter of every six weeks my mortgage rate might go up or down.

48:56I think it's a far cleaner system, honestly. it's far superior. Yeah, it's not going to be as

49:06direct a line. So I've taken my, when I choose to take out a mortgage, me and the bank sit down and we agree on a term and a rate and that's it. And then it's made. Now, whatever happens after the fact is sort of like beside the point. Now, what does the Fed do when it changes interest rates? It sort of tries to indirectly control credit creation from the commercial banks, which will feed into how many people are starting up businesses or how many people are buying new homes or, you know, who are straining mortgages today. But all of a sudden, what's so unfair with Australia's system is that you sort of, you enter into a 30-year, soon to be 50-year contractual agreement.

49:46And then years later, through no fault of your own, through poor policy choices or whatever, you're being made to bear the brunt of some poor monetary and fiscal decisions because you're spending too much or you're doing something like, wait a second, I signed this contract and I've done nothing here and you're telling me that it's all my fault and that's what we do in Australia. We punish the household sector, two-thirds of people who are either paying off a mortgage or paying off someone else's mortgage by rent, right? Like that is, that is, we all, we all have to, we're all in it together. So we all, we all feel the pain because of people like Bathurst and whatever getting silly and excess credit creation and poor capital allocation decisions.

50:30I feel as though it's not really answering your question, but I feel as though I think it, I think it's a, it's a far more fair and, and it's all a system. And also it's a far more important one rather than sort of trying to top down manage what demand levels are by making life easier or harder for mortgage holders is just a very roundabout way of doing it than the US, I think, which is like, well, we're more concerned about what happens now in terms of lending. We're not going to punish people for decisions made 15 years ago. I don't know. It just, it feels, it doesn't, and this is the thing, you know, it's, it's so amazing as to what everyone considers quote unquote normal.

51:21I'm always blown away by this. And I think it's why it's so important to travel, right? It's just like, this is how it is. It's always been thus. I can't possibly imagine it being another way. It's like, yeah, but you jump on a plane for a few hours and it's like, here's exactly how it kind of works. We can do this too, right? It's just bits of paper and agreements. We can, we can totally do this kind of stuff. You know, it's not impossible to imagine what it might look like. And in fact, maybe it pays to do that as an actual very deliberate and deep study of other ways of doing things around the world and sort of like cherry pick the things that work really well and maybe walk back from the things that don't.

51:59Again, we don't have these conversations. So what's Michelle going to do next on the second Tuesday of every month? Right. Like, yeah, I don't know. What do you think in regard to the US, the way they do it? I don't know. Oh, so I don't think, I think you'll all disagree just ideologically, right? So I suspect that if you are someone who thinks that monetary policy should be a thing, actually a directed policy rather than just prices find their own levels.

52:30Like we do for literally every other thing in the economy, but go on. Just not the most important pricing of all. You can call it ideology or you could just call it like... We disagree ideologically on what role a central bank should have. My answer was always going to displease you and vice versa because we're just doing it in different places, which is fine.

52:54I suspect that it's probable that variable rates allow a central body to be more effective than fixed rates just because you can, in both directions, by the way, up and down, because you can bring more to bear, to heavier on the brake, heavier on the accelerator with a small push. In other words, if you're impacting the credit creation and living expenses or special income, probably the better way to put it, of a greater number of people, you can, it's a force multiplier. You're dealing, you're impacting more people and therefore you can, in theory, be more, agile is the wrong word, but you can do more with less because your tool is broader.

53:41You can distort far more economic signal than you otherwise would. Yeah, put it that way. We can agree on that. But yes, I think in terms of – so I suspect if you – what I mean about the ideology, if you believe the central banks have a role, I suspect you want that role to be more – like I used to say agile, I don't think the RBS is agile at all, but as opposed to not – if I could push a button and have a broader – a greater impact for every time I press the button, then that would be an advantageous thing to have. So I think if I was going to design a... It chills down my spine, man. You say that.

54:14I just, that's so scary. But it's true. But it's true. I want more power as a central authority to dictate the wellbeing of more people is just, is a... We've already got that. I'm terrifying. You have to be prepared systems. Why is that terrifying? Where do you have it? Why are you here? There's nothing terrifying about the RBA. It might not be perfect. It's not terrifying. Yeah. Disagree. All right. So, yeah. Let's unpack that, man. We've got test tubes everywhere. We've got 160 of them around the world. There's like four or five you can point to that have any stability over multiple decades.

54:48And that's the system that you say is good and, you know, we should trust them because. No, you asked me to compare the systems and you said, how do you think about the American system? And my answer was, if your view is you want to have a central bank that controls policy, than giving them more, allowing them to do that as effective. I think the RBA would be more, I don't want to talk about the RBA versus the Fed because I don't want to get into the history of it. If you're setting controls and saying, I want a central body to impact monetary policy, then they can be more impactful, for better or worse, if their decisions impact more people.

55:22Sure. So I suspect the Fed's got a longer run up to have the same impact as the RBA would have because when they make their move, you know, one-to-one in the US, one-to-two or three here in terms of leverage, not literal leverage, but the leverage of their actions because of the number of people it impacts. Doesn't that make it more fragile as well? Because there is more scope. That's possible, yeah. Because of that added leverage, like it means that if you're right and you're doing the right thing, you can be more impactful. But by the same token, if you're pushing in the wrong direction, which happens, then you can do more damage, right?

55:57So it's a two-sided coin. I'm sure it absolutely is. Yep, no disagreement. But it comes into whether you think central banks are useful, right? So if you don't think they are, you want them to have – and you suck with them, you like the US system. If you want them, then you want the Australian system. It's just kind of – that's what I'm talking about the ideology. I'm not using it pejoratively at all, mate. I'm just saying from a – maybe worldview is better than ideology then. From worldview perspectives, like, you know, if you think – I prefer empirical than an empirical perspective. We will never agree.

56:29Why do you shake your head though? I mean, it's like - Because we're having the same argument every time. I know. I can't believe the faith that you have. I just, point me to where I need to, what am I missing? But it's like, it's working this very, very narrow band of sample size and therefore it's good. And it's just like, you can't get behind that. No, no, no, no, no, no. This is where I think you're, I will say I'll do this time, it takes over because you can't, you're not hearing what I'm saying, right? So I've never said the RBA is perfect or accurate. My view is that in concert with fiscal policy, monetary policy acting to dampen demand when it's too hot and to add to demand when it's too cool is a useful thing to attempt to do.

57:10And I think direction, this is not money printing, right? So we've got to separate printing from the rest of it because we're now aligned on that one. And this is where we get, it's important, the nuance is important rather than the headlines or the labels. I think being able to set the price of money is a useful tool in the effort to smooth economic cycles. The same as you do, the automatic stabilizers do that job with fiscal policy already. So it's a different version of that same thing. So money, hear me very clearly, money printing aside, are they perfect? No. Do they get it right in inverted commas?

57:44No. Is it directionally useful? This is where I think the ideology kind of comes in because we can't know. There is no way to know, but we don't... Why do we do it then if there's no way to know? Why are we so beholden to it? Because our job is to do the least worst job we can. So it's like, have we got the tax settings right? No. Well, then let's not have taxes. We know we're getting it right. We don't do that. We say, this is probably roughly right, and we probably should spend roughly these things, and we'll change our mind from time to time. Everything in a non-double-blind trial world has to be a best guess.

58:16We think this is probably the right way to do it. And frankly, the Nordics tax at 60%, the Yanks at 20%, Is anyone else in between? And is anyone, quote, right? You can't empirically say one is better or worse or right or wrong. You can philosophically say it. No, I think you will. We'll have a conversation another day. I think you very much empirically can say it. I think the numbers are really stark on all of that kind of stuff. No, because there's no way to control for the others. At best, you can draw a correlation and say it seems that this has been useful or not useful. How much tax is reasonable?

58:50The Nordics have the highest standard of living in the world, the highest standard of happiness in the world, and prettier living standards. The Yanks have the highest GDP in the world. And so it comes down to what do you value most and how do you perceive the world and what do you want to wait on to say this is better than that? I would argue they're both very successful in their own ways, but my core argument is if that's what people want, they're happy to pay it or not pay it in the Americans' case. They're both successful in their own ways. Therefore, it's kind of a question of what do you want the world to look like rather than what do you objectively think is assessibly.

59:21Should the Nordics halve their tax rates? Should the Yanks double theirs? I don't think either is going to work out if you did it. Yeah. We'll move on. We'll move on. And the Yinka Empire was very successful too and they did a lot of dumb things that no one would suggest we do at the moment, right? That's exactly the point. Entirely that's the point, right? So you can be successful and do stupid stuff. So we should bring back child sacrifice. Yeah. That was pretty core to their worldview and belief and system. Which is my point about correlation versus causation. Did it make them successful? No.

59:53Were they successful anyway? Yes. That's exactly my point. You can't just, you know. A lot of people died for no good reason, though. Of course they did. And then to sort of say, yeah, but they were successful and we never could have known the counterfactual, let's just keep doing it. It's sort of, I don't know, man. We're never going to agree on this one. Correct. But it's a fun show. That's why I was smiling because we're starting from our different ideological camps and wondering why we keep talking past each other. That's the answer because it's not. All right, right, right. We all want to be a certain way.

1:00:19Yeah, all right. Let's move. All right, let's move past it. So speaking of, well, we're talking about productivity. We've talked about AI a bit in the last couple of weeks and we don't, I mean, it's such a fascinating, you don't have to talk about AI off air more than we talk about AI on air. And so listeners, you're welcome. But fair to say, we're both passionate about it. I have, I said last week I've used the heaps and the previous week used it even more this week. I keep hitting bloody usage limits. Next week we'll use it even more, man. Right, right. after that. There's no going back. You don't walk out of that.

1:00:43You don't walk through that door and then walk back out of it again. You don't. This is too valuable and convenient and effective. I prefer doing things the hard way. Exactly. This is your fault. Well, it's probably my fault of mentioning it. There's economics going on strike at one of the unis about AI. And I just kind of feel, you might as well smash the sewing looms, right? Like the weaving looms. This is... A lot of it. Right. Well, yes, frankly. and only because they don't blame them for being scared for their jobs but to go on strike and imagine that somehow if I say well we shouldn't here's the thing first it's not going to work secondly and by the way what do you think what do you think going on strike is going to do to the economy oh zero productivity went up I wonder why but in the best case they're uni caves that uni never uses AI every other uni does and they get sacked because no one wants to go to the uni anymore there is no world in which this makes any sense other than I'm scared about my job and I'm going to stamp my feet and say la, la, la, la with a finger in my ears because I wish the world was different.

1:01:44It's like you can wish that all you want, but by all means. You're not holding back the tide, right? The water shouldn't come, the water shouldn't come, the water shouldn't come. Oh, bugger, it's got dropped by a wave. Yeah, I know, that's what happens. It just matters. Anyway, speaking of all that, Uber. Uber this week has announced a length of 10 % of their 34 ,000 employee workforce. KPMG earlier this week laid off stuff. We've talked before about WiseTech, Atlassian, Block. Some saying AI. By the way, Uber did not cite AI this time around, which I thought was fascinating. And I actually wonder, and maybe this isn't relevant, but it's gone through my head, so I'll throw it out there.

1:02:18I wonder to what degree companies are not citing AI deliberately now. Earlier I was like, we want to be on the front of the wave. We want to say what we do with AI because it's great. We want to show that we're technologically advanced. And I do wonder these days whether AI has become a bit of a lightning rod employment-wise, where you don't want to say out loud, I can't think other people can do that job. But they're laying off temps into the workforce. They're saying they got too fat, they got too bloated. And by the way, back to productivity and your point about profit motive, this is exactly what that is, right?

1:02:44They look around and go, I think we can get rid of temps into people and probably still do the same job. That is how productivity improves. Uber will be more productive as an enterprise after than before, even though they're not laying off people who are actually doing real jobs. This is exactly why... And what does that do to the cost of their service? Right, exactly, exactly. Or it's cheaper. Or they don't go broke. But either way, if they go broke, there's no service. So yes, exactly right. Competition does its thing. I just think it was really – so why is it important? I mean, we haven't seen Australian numbers on Uber yet, at least not at the time of recording, so we don't know how many staff in Australia will be laid off.

1:03:18But I just think it's worth – I think there's a few things going on, mate. I do think that because economies around the world are growing more slowly and because inflation is higher, companies are having to really savagely review their cost basis. And that's no bad, I mean, the circumstances are bad, but never waste a crisis. So why? We saw a whole lot of retails, we won't talk a lot about earnings season necessarily, but we saw a lot of companies during earnings season who got modest top line growth. But that got swamped by modest cost growth, which just because your top line growth comes with a cost of goods sold, you're not making enough gross margin to pay for your higher fixed costs, which is a whole lot of accounting jargon.

1:03:57Essentially, you get 2 % growth in top line, you need more than 2%, you need less than 2 % in cost because you're giving away some of your, your revenue in literally the product cost. You buy a widget, you want to sell the widget, you might make 25 % margin. Effectively, you're keeping only 25 cents in the dollar, so you've got to grow your sales four times as fast as your costs. That's kind of the way that maths works for those who've followed that along. And we saw that during earnings, there's a lot of companies growing modestly on the top line. Frankly, a lot of that growth was below inflation, so that's your first catch.

1:04:26Even though it was growing a little bit faster than inflation, we're keeping up with their cost growth. And I think it's in that environment, if you know that's the world you're living in. And also probably a side of Uber's maturity. It was a fast-growing, disrupting company. Now it's like, well, we've won that war. Yeah, they'll still pry and grow, but they're now in kind of maturity phase of we're now managing for efficiency, we're managing for cash flow, we're managing for maximizing profit, not just maximizing land grab. There are going to be, I suspect, and I'm no futurist, mate, no forecaster, but I suspect over the next 12 or 18 months, a lot of companies are going to go through this process where they kind of go, well, sales aren't coming in and we need to deliver more profit or our competitors aren't nipping at our heels or whatever else it is, we need to really seriously and significantly review our cost base.

1:05:11And I suspect the presence, the possibility, the availability of AI is a core part of that. I mentioned before about the motley full, we're using AI a lot in our internal processes to help us because we lost those two people. Now, would we have done it anyway? Probably, yeah. Was it because of it? No. we were kind of working on it anyway but you bet that when earnings season's coming up we're like well we're two people down guys we've got the same number of companies to cover and we're doing research and and writings and okay we'll either all work harder or we stop doing some stuff or we find smarter ways to do stuff and that's that's literally the working definition of productivity right and again not from a top-down treasurer says you must but i all right well we've got a certain amount of resource we've got to deliver a certain amount of you know um of output how do We do it most efficiently, most value-addingly, which is not a word, but it is now.

1:06:00And so I just, I think Uber on the back of, KPMG on the back of, and for all different reasons sometimes, it just feels like it is going to be in an economy of low growth, in a market of low revenue growth, when you can afford to maybe not gloss over expenses, but not really, no boss really wants to sack people. And it's a miserable thing to have to go through. I've been there more than once before. You know what wants to do? Very few businesses are cutting when things are going great, right? And they probably should, by the way. They don't want to. That's right. You know, again, you've got to put the morals and the ethics outside of it.

1:06:36It's just the reality of the situation. And it's sort of like we're on a trajectory here. If we don't course correct, we will be unviable. If we're unviable, we are all done. So something has to change. That's reality pushing back on you. and again it's sort of like you always feel like harsh when you make the comment i'm not trying to say it's good i'm not trying to say it's bad either i'm just trying to say it's it's the reality of the situation and and life is full of compromises and tough choices and you know it kind of it just here's here's going to be like the the irony that we will face i suspect in the coming years.

1:07:20We've got politicians jumping up and down telling us to be more productive and they'll be the same ones clutching their pearls when companies lay off stuff. That's right. You know, like, you wanted us to be more productive. No, but you need more people. We're like, well, what do you want here? Like, I need to be more productive or do I need to hire more people? Because, you know, it's just like they're almost mutually exclusive. Correct. I mean, not entirely. You can grow using productivity to get more out of your same staff, but you're right. Not only through technology. Technology is the only way.

1:07:55You said it before, like you either work harder or you have a thing that allows you to leverage your existing work. That's it. There's no third option there. Correct. Or you suck people, as you say. Yeah. That's getting the remaining people to work harder, right? Yeah, that's right. So it's sort of, and again, it's good, bad. These are, these are, these are, you know, is the color orange good? You know, is the number 17 bad? It just, it's not, it's not the right framework. I think it's where the socialists always go so wrong. It's, they're really big hearted people who don't like to see suffering.

1:08:36what's wrong with that nothing but but you must operate in a framework that that is aligned with the the reality of things and and there are there are there's a lot of things that just are you know is brain cancer good not bad it's bad right but it doesn't change the incidence of it that's that yeah and and if you're cursed with such a thing then you've just got to deal with it and i i feel as though it shouldn't happen is not a it's it's fine sentiment but it's not Yeah, I really instantly regret that comparison. But I'm trying to make the – I think too often we confuse feelings with economics, you know, and two things can be true at once, you know.

1:09:17There can be a horrible tragedy for the people that are involved, but a necessary adjustment for the – I was going to say the common good, but even that, I'm not happy with that as well. Just for the reality of survival, you know, like – and maybe not now. Nothing sort of hits a hard wall where it's like we either do it now in 2026 or we're scared. Again, it's the directionality of kind of things. I very much view all of these layoffs as in large part a consequence of not what's happening now, but what happened years ago, which was a period of extremely easy money and growth at all costs and low interest rates.

1:09:59And people just bulked up because that was the economic signal. Interest rates artificially suppress, credit being thrown from helicopters. It's telling you that there is a – I mean, that's the economic signal that is being distorted and sent. It's basic. There is excess capital. You should take some. It's really cheap. The world wants more of this, do they? Yes, look at the price of these things. And so business people, entrepreneurs reacted to those signals. They bulked up, and the demand wasn't there. The demand was never there. It was artificially created in the first – I'm not going to get back into the Keynesian debate.

1:10:33But this is the problem with it. This is the very problem with it. And now, years down the track, it's sort of like, I think the other thing that people miss too is the temporal nature of these things. We look at what's happening now and we look for a reason to point to now. It's like, no, you've got to hang over now because of what you did last night, not because of what you're doing today. It's not that you woke up and then, you know, it happened to be raining and that's why you've got a hangover. It's because what you did last night, the reason you're laying off staff today is because you overhired previously.

1:11:05Now, obviously with perfect visibility, you wouldn't have done that. And maybe you can argue that you should have been more prudent or whatever. Life is hard. Business is super, I'm not, I mean, again, I'm not trying to put blame or throw shade at anyone here. I'm just pointing to the very, and I can say the factual reality of the situation, because if this wasn't true, they wouldn't be laying people off. So it's self-referentially evident that you hired more than you needed. Correct. And now you are correcting that mistake. Now, you can deny that was a mistake and then have higher costs, thinner margins, be less viable.

1:11:42Or, you know, again, I would sort of say, but then wouldn't that open the door for someone? I'm going to come in here with, I've gone blank on the other ride-sharing company. What's the other one? market dominance of Uber. God, yeah. The Indian one? Gone blank. Anyway, whatever it is, right? They will come and say, well, we can actually do it with one third of the workforce. And that actually means that when you go to ride share, you'll be able to do it at a much cheaper price. Or the drivers will give the drivers more money and that builds scale. And this is the definition of productivity. And the productivity is what allows us to have more stuff for less.

1:12:25What do you want? You've got to always be like, what is it that we're after? People who can speak out both sides of their mouths on this thing, it just blows me away. You know, it's like everything should be really cheap and efficient and everything, but also no one should ever lose a job and that this and that, you know, it's just like, it just, it doesn't work when you throw it all together. And it certainly doesn't work when you try to steer the whole thing from, from up on high. You've just got to allow businesses to make their own calls. And, you know, some, some, maybe, maybe Uber is making a massive mistake right now.

1:12:57And they're going to shoot themselves in the foot. They can't deliver the kind of service that, that people expect and their brand goes into the toilet and no one catches it. And then someone else comes out of left field. And all of a sudden everyone with a Tesla is also ride sharing on, on, uh, when they're not using their car with the, with the auto drive on, you know, blah, blah, blah, blah, blah. Who knows what's going to happen, right? But this is, again, this is the nature of business. It is experimental in nature and people are making decisions. They're making kids. And it'll either work, maybe, again, maybe they're making a mistake, maybe they're doing something entirely prudent.

1:13:32Again, it's just sort of sit there on the side and gnash our teeth and go, I always feel like, well, get off your ass and do it yourself then, right? You've got a way to make it work, you know, and you can do all of these wonderful things. them and i'm not not saying it in a snide way it's like please do that for the greater good of everyone involved that is wonderful that you could create such value to the world and bring and and and a whole bunch of jobs for for people and cheaper ride shares or whatever the product happens to be for everyone like go and do it don't just sit there going living in a fantasy land is that these these two things that absolutely do are discordant with one another should both be true because feelings it just it's again i wouldn't i wouldn't be so maddening if it wasn't so impactful and important and so influential on policy decisions.

1:14:17But here we are. I agree, I agree. I want to pick up two things you said because I think they're really important. I had a conversation on Twitter about productivity in this week, right? And some people, to your point, I don't, I love the passion and I'll be a little bit condescending to say I love the naivety, right? And I mean that genuinely because I love the idea of, well, just, we should just do this then. Because it's that people who like don't necessarily understand the whole mechanism but kind of would like to think the world was a better place or a kinder place like that's why i always offer that invite it's like please show us how it's done please right and so well but i mean there's people aren't necessarily they just want to believe it's true that that's there's something nice about that without actually doing anything about it so that's yeah well no people don't know it there's a there's a comment on twitter surely this could be possible that kind of the vibe right which is that they're not economic experts they're just like this doesn't seem reasonable surely there's a better way and it's kind of that the hope right it's the hope of maybe maybe we just be find a different better way of doing it i think that's But why I think that's important, man, and the point I want to come to is productivity is like, well, surely we just tax people more, which I know we've ranted about before.

1:15:18Tax a billionaires more, we'd improve living standards. I'm like, well, no, you'd improve individual living standards. You wouldn't improve average living standards. That's distribution. That's not creation. Well, which they're saying they don't really care about because that's mad. Like if Gina has a little bit less money but the person on the street has more money, that would improve living standards. Well, yes, to some degree that's absolutely true, mathematically true for that person. But here's the thing. We could have had that argument in 1801. And we could have said, let's not bother with the Industrial Revolution.

1:15:46Let's just share out the money better and everyone will be better off. And that would have been – they would have been better off in 1801. But had you stopped the productivity train at any point between 1801 and today, people would be materially worse off, including some of those who are at the bottom end of the income scale and the wealth distribution. And so the idea of somehow that they are opposite things or they are choosing between the two, I just think there's a really, again, it's understandable, but it's naive, right? It's stupid. And that's okay. Very nice. But, you know, so, well, that's, I mean, I kind of think sometimes our job is to help explain why that doesn't work.

1:16:22I think that's a useful conversation to have because if people genuinely want to understand, if it's a genuine question, like, well, actually, that's a fair question. And Pauline Hanson, 30 years ago, wanted to print money to pay off the debt, right? And someone said to her, hey, Pauline, let me explain why this doesn't work. And she went, okay, I was wrong. And that's cool. You know, it was a silly thing to say at the time without actually having done the research, but first principles, you know, it is what it is. The second thing you said, mate, is the common good. And I want to pick this up because you kind of walked it back, but I want to walk it back forward again.

1:16:49And the reason I want to walk it back forward is because to address the people who say, you're presenting this as a fatal conflict. Well, there's no point in that thing about the common good because it just is what it is and that's just what it is. And some people might say, well, government could stop and put rules around it and not just let human nature take its course, but actually direct that. And ideology aside, despite our conversations before, we get back to the same kind of conversation, which is, yes, it's important to put guardrails in place. But for all of everything else we've tried, capitalism still remains the least worst system that there is.

1:17:20And yes, it's imperfect and it's imperfectly managed and governed and regulated and all those things. And it's all true. Competition is not always as good as it should be. But the common good is still served at the same time as, and this is the beauty of it. Why did we get to this point? because it turns out that what's good for individuals tends to be good for most people as long as it's appropriately guard railed. And so there is a common good outcome. And the reason I say this is not because it necessarily justifies it, but because people who kind of hear what you say as a fait accompli are like, well, we just have to let it happen because that's what's going to happen anyway.

1:17:50And so we put baby gates at the top of stairways for toddlers that don't fall down the stairs, right? We can put things in place. And people might have said to you, respond to yours, well, let's not assume it's... We can put those things in place. And we could. We can absolutely retard growth. We can absolutely retard competition. We can absolutely make employers hire people. We could do those things if we chose to. It's a democracy and there's an armed force and a police force. We can make people do things if we choose as a society, right? Again, morally – Ask those in East Germany how that worked out.

1:18:19Right, right. And that's exactly the point. And that's where – so the point about common good I think is important because it just turns out that the dominant system of economic organisation – and again, you won't like the word organisation. I don't mean top down. I just mean the way we've organised ourselves. the patterns that we've fallen into. Yeah, yeah, that's right. Emergent organisation. And why? Because it is, it does tend to be the best for most people. And so yes, the common good is, and with safety and everything else, is absolutely served by exactly that. And again, not to disagree with you, I want to add to your point, which is you're absolutely right with what you said.

1:18:50And it also turns out it's the least worst outcome for the common good. And so you kind of get both in the same box. And to undermine that by saying, well, shouldn't we just make workers, employers hire people? Shouldn't we just stop them using AI? Shouldn't we just issue? you can and in the short term for a few people that's really good it's it's protection is 101 it's every every bailout every every whatever is like is it good for those workers that company this year yes it is long term are we better off or worse off as a result we are worse off and those workers are worse off because some of their taxes go to pay off someone else's bailout and around and around we go we have lower living standards we have lower productivity we have less advancement in prosperity.

1:19:29And so those things, again, managed properly always and forever, just make sense. It's how it should be done. I just want to draw that out of the point you're making. Yeah. I mean, I don't know. This conversation that we're having has been going on for hundreds of years. Yes. I just don't know. You do reach a point where it's kind of like, I don't know what. I don't know I don't know I think it's like a lot of things physicists are good at this right like you do an experiment and it's just something really weird happens right and it's sort of like no physicist goes yeah but I don't like that quarks shouldn't have that mass and spin I don't like that it's really unfair on the bosons that blah blah blah what no it just is It is, right?

1:20:23And it's sort of like, because this is a field of study that's so impactful to our lived experience in our daily lives, it just gets bundled up with feelings and emotion, which is not to say that we should all be Vulcan-like in our appraisal, but I feel as though, as a general rule, and a pretty good general rule, when you deny reality, I mean, reality's always going to win. That's right. It's always going to win. You can argue until you're blue at the face, shake your fist at the ocean, do whatever you're going to do. It's just sort of like engineers, physicists, they get it. It doesn't matter how nice your workplace environment was if the bridge falls down.

1:21:02Right. It doesn't matter. It's just like something has to be fit for purpose. And I feel as though we need to just get back to a more mature conversation. Absolutely do what we can to sort of make things better. But just looking at these first-order impacts and going, oh, something bad happened and someone should make a rule to fix that. I mean, if rules fixed things so conclusively, then the world would look a very different place. It's just not that way. So anyway, I don't know. I spin my wheels on this kind of stuff. It's just all you can do, I think, in life outside of just this one domain is just constantly, you know, taking feedback.

1:21:51What's reality telling you? Have a working hypothesis. And as soon as that is proven unsound, untrue or not perfect, it needs to be refined. We do it in everything except economics. It's a weird thing. And we do it because it's actually, well, you know, you can get great personal advantage by playing the political game. And wherever there is advantage to be had, people will exploit it because we're people, right? In the same way that people exploit things for their good and the good of others, you know, read Machiavelli, right? What was his book? God, it was good. The Prince. The Prince. The Prince.

1:22:29Thank you. Thank you. Machiavelli. It was great. I haven't read that book since uni. It's actually, he's gotten a bad name. I mean, I think it's because it's got that term associated with it, but it was actually a very savvy political operator. And obviously, it's like you never meet your heroes, right? Not that I'm saying he's a hero. Yeah, that's right. But what I'm saying is that people are complex and multilayered, and he actually had an insight into human behaviour that was incredibly valuable to him and others. And it is, again, good, bad. It's sort of beside the point here as well. It's descriptive.

1:23:04It's descriptive. It's descriptive. And again, it's just sort of like, I wish humans weren't like that. Yeah, me too. Me too, man. I really do. But here we are. And so what do you want to do here? Do you want to move forward in recognition of how the world works? Or do you want to wish that it was different and then construct a system around how you think, I reckon it should be. And it's just like, well, you can. But again, reality is going to win that argument. It's always going to win that argument. I'm going to build a crane as if gravity was half of the force it is now. Yeah, because it'd be better.

1:23:36Good luck with that. Yeah. This crane will live 5 ,000 kilos if gravity is half of what it is. Okay. Well, you know what? That crane over there is costing 2 ,000 slaves their livelihood. We should just get some rope and we should hoist it up with pulleys and a system of boulders and levers. Right. Because they'd be like, okay, can I just use the crane? Because it's like, I'm going to build a lot of houses and there's going to be a lot of people better off than this. Exactly. Anyway, go on random circles. We are about a good chat. Will you come back on Sunday? Hell yeah, man. Hell yeah. Excellent.

1:24:10More problems to fix and more fists to shake. Mate, the... Why do I keep... Oh, the God King. I keep forgetting your self-appointed title. Maybe it's... I'm not sure if it's something... I don't know, subconscious, but I keep forgetting what we call the God King. God King page. We're back to solve the world's problems and to pronounce the solutions on Sunday. Until then, enjoy the first half of your weekend. And full on. Thanks. 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.

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