Inflation becomes domestic. November 24, 2023

26:54Exactly. So if I've got$2 million in super and I'm a debt-free boomer and I'm living my best life, You know, and I don't see what any of this does to influence me to spend even more. I'm already going on three trips a year. I'm already, you know, like my favorite example is always, do I run out and buy an extra three loaves of bread this week because I can? Like, no. I've got all the bread I need. I don't need more bread. You know, it's a nonsense to think that. And even if I did, back to my earlier point, bread is a commodity. Eventually, someone will just produce more of it and the price will adjust downward.

27:36So, I'd have to read the report. So, I don't want to make any accusations here that aren't founded. But it would… Yeah, it doesn't ring true to me. But again, maybe there's a point I'm missing. Can I… Let's stay in murky political waters for a second. Actually, before I do, I want to go back to that tangent because I'll forget otherwise. You know what I really… This is, I'm going to ranty a bit for a second. You know what I really hate is when we say the Albanese Labour government or the Morrison Coalition government or whatever. When did the person who was in the Prime Minister's chair, by the way, which isn't defined at all, we mentioned in the Constitution, when did that person take over the ownership of a government?

28:14Isn't it the Australian government either way? Like, I know why they're doing it and it's all about presidential politics and all that kind of rubbish. I just... It's a bit annoying. Well, you know, it's not the biggest problem we've got, but some of those things, you know, speaking about thoughts, speaking how many habits and all that kind of stuff. Sometimes we just actually heard of the Australian government that might be more useful in pretending that there's some sort of presidential politics going on. Yeah. Good point. Good point. What I was going to say speaking of political and murky political waters and ideological waters and really, Andrew's quivering right now, really annoying some of our listeners.

28:43The population thing, Matt, I want to mention to, I want to make a statement and then ask you a question. First thing I think is really worth noting just for those of us who like public policy and kind of think it's important. it is getting a trike load more traction. Yes. There have been lots and lots and lots of people now in the public sphere start to talk about the rate of population growth. Now, they're 12 months too late. And by the time anyone does anything about it, we will have taken in more people than live in Canberra. Think about that. Entire Canberra with people just all of a sudden rocking up.

29:13Where would you like us to live? I don't know. We'll promise to build more houses in five years. Will that help? No, I'd like a house now, please. Then we're in trouble. So there's that. So I think that's interesting from a policy perspective, from a politics perspective. I want to add to, mate, while we're way off. Interesting is one word. I would use a different adjective personally. Well, what I wanted to say, mate, is I have been very vocal about the population issues in the short term. We've talked about it, but I've been vocal on social media and otherwise. I'm also really, really, really fearful that we'll end up with a very race-based, xenophobic, ugly debate if this doesn't get resolved.

29:56I've had people on Twitter say to me, well, you can't bring up population because if you do, then someone's going to make it about race, therefore you should shut up about population. And it's kind of like, dude, that's not how this works. The reasonable people, I'll assume I'm reasonable for the sake of the exercise. Give me that assumption for now at least. The reasonable people are trying to have policy-based discussions on this based on the economics. They're not the people you want to shut up. The problem is when no one talks about it and you get to the point where the racists and the dog whistles and the xenophobes get their pound of flesh and get their opportunity to speak because everyone all of a sudden looks around and goes, geez, this is uncomfortable.

30:29Maybe it is population and that person over there is saying it's population that's a problem, therefore I'm going to listen to them. They say population is a problem and they say and the bloody insert race here or country here, people are wrecking our country or whatever else that becomes. So I really, really, I think they should address it from economic reasons but I do think if they don't do it quickly enough, this debate gets really, really ugly real fast, which I think is going to be a horrible thing for our country and particularly for those people who aren't middle-aged white blokes like you and I.

30:59You know, this could get really, really messy. We've seen the likes of Paul and Hanson and others take full advantage of those race-based insults. It's a story as old as time. You know, when things get tough, you look for the easy targets. And some populists somewhere will pick up the torch and run with that. That's what I'm worried about. It's scarily effective. Yes, I agree. And foreseeable, unfortunately, too, right? That's the other thing. Yeah. So that being said, what, if any, investment implications are there from the current or potential future policies? I've been interested recently in building materials companies, for example.

31:42Oh, yeah. If you've got a vacancy rate of somewhere around 1%, you can assume, I think, that for as long as people we're gonna afford to buy those new homes, which we just talked about inflation and interest rates, but you've gotta live somewhere. There's a reason to believe building materials companies may have significant medium to long-term demand. If you think about our banks, potentially more bankruptcies or defaults if rates keep going up on the flip side, what's gonna underpin house prices more than a dramatic shortage of new supply of housing and a lot of people in the country? Your thoughts on those and other investment implications?

32:22Maybe on the downside too, by the way. I can't think of companies that lose from a greater population. Maybe they do if things turn around, by the way. If the doors are shut in a hurry on population, maybe there's implications on the other side. Have you thought anything about that part of the investing landscape? Actually, just on Tuesday this week, we had a chat with the CEO and CFO of LaserBond. full disclosure I own shares in the company it's really interesting service engineering company they basically make machine parts harder and stronger so they work better and they last longer that's the value problem so it's a pretty cool technology actually really cool story anyway I shouldn't pitch it my point is that they were saying one of their biggest challenges is getting qualified staff and that they have had to look to bring people in from overseas.

33:22People who have a bit of a grounding in the engineering field who are looking to take on apprenticeships and understand their technology and grow. And so they've found real success with people from the Philippines. And so for them, it's just like, I can't come quick enough. So it's interesting, isn't it? Because you can have all of the objections in the world, but it's just like we have a lot of work. We can't find enough people local. We just can't. So we need people from overseas. And guess what? A lot of the people from overseas really value what we're offering here. You know, they work harder.

34:05They're much more driven. And it's just like from their point of view, it's like bring it on. Bring it on. We need – this is a – I wouldn't use – a bottleneck is too strong a term, but something like that. It's sort of like this is a bit of a handbrake on it. If we could have more people, we could do more work. And if we could do more work, we could make more money for all of our shareholders. And this isn't through labor exploitation. It's like, no, people in Australia working under a world – or better than a world conditions. And, you know, so it's all – it's – there is that side of things which needs to, I guess, sort of be highlighted.

34:39It's just that it's something, and I guess this is your point that you've long made and I totally agree, which is, I am actually of the big Australia camp, believe it or not. Not now, but in terms of what is possible and what would strengthen us as a country, I think there's no reason why we couldn't have a lot more people. It just needs to be planned. We just need to make sure that we've got the infrastructure and capacity to welcome people. And gosh, I've said before, I mean, imagine taking the best and brightest that the world has to offer and bringing them here. Like we're all stronger as a result of that.

35:15That is a really, really good thing. But yeah, it's just, it's not something that you do with abandon. And to my mind, it comes, this is the least surprising comment of the pod, it comes back to housing again. It just does. It's this massive, massive elephant in the room. and it's like governments are doing everything that they can to make sure that they keep this thing alive. And it's just like if you want to keep it alive, we'll bring in a whole bunch of extra people, right? Like that is because… Stoking the flames. Yeah, exactly. Yeah. I mean, it's just that it's a very effective way to prolong what might otherwise happen, all else being equal.

36:00It really is. Yeah. You know, it sounds very conspiratorial. I don't think it is. It's just sort of like, oh, gosh, this is a huge problem. I really don't want this to go bad on my watch. What can we do? Well, we can increase the grant. Yes, let's do that. We can relax some of the lending standards. Yeah, okay, let's do that. Do we need that much of a buffer? Probably not. Let's get rid of that. What if we added more demand? Yeah, okay. Hey, the IMF and others are saying that there's a lot of money laundering that goes on within our sector. It's actually the worst in the Western world. Maybe we should tighten up some of the regulations.

36:27No, let's not do that. Let's bring in a Canberra's worth of people every year. Yeah, let's do that. that one. It feels as though, I put my tinfoil hat as firmly on, it feels as though that is the bigger kind of driver here because you like any Ponzi, and I use that word very deliberately, the moment that fresh money starts flowing in, stops flowing in, is the moment that it all tips over. And I feel as though that's a big part of it. He said in the most least surprising comment of the point. I should say, mate, your tinfoil hat in the shape of a A pirate's hat was also a nice touch too. Thank you.

37:05Listeners can't see the pirate tinfoil hat he's got. He's also got a tinfoil eye patch. So he's going to be a conspiracy. You know why they're called pirates, don't you? I do, but please go on. Because they are. Because they are. One of my favorite jokes. There you go, the rest of my listeners. I will add, you know what? You said it's not a conspiracy. And a conspiracy implies stuff. I don't know that it's not in the sense that it's very deliberate, right? So does that make it a conspiracy? No, not in itself because conspiracy suggests a lot of stuff. But it's not an accident. It's not a surprise.

37:40The other thing I think on top of housing, mate, and it's the same issue, is GDP. How do you avoid a recession when you jam the country full of people so that they spend a lot of money so that you manage just to avoid a total GDP recession? There might be a per capita GDP recession, but as long as no one talks about it, then you can avoid worrying about that. Even though, as we've said a million times, mate, if I was in charge of the ABS, I think I would meaningfully, not for political reasons, but for genuine informational reasons, I would actually massively deprioritize GDP and really prioritize per capita GDP.

38:12Yes. Is the average Australian better off or not? Like it doesn't matter. If there's a million more of us and the country is slightly better off, and we're all poorer as a result, there's nothing, unless you're, well, if you're running a business, you're probably happy about it because at least you've got more customers, so screw everybody else. And I say that as an avowed capitalist. But, you know, if you're Woolies, you want more customers. Of course you do. If you're anyone, you want more customers. But at a country level, given we're a society first and economy second, the only question, I mean, there is a question about distribution of that GDP, of course.

38:42The average is high on a lot of distribution issues. But at the very least, at the very least, per capita GDP, is the average Australian better off or not? That's got to be the starting point. And I think when we pretend it's the total that matters more, we miss the point. You know what? The perfect analogy there is, particularly for this podcast, is the listed company that makes an acquisition of an equivalent-sized company and issues and doubles the share count to do so. So Page Enterprises merges with Philips Enterprises. We're both million-dollar-a-year businesses, and in merging with you, I issue double the amount of share count.

39:19So now we have Page Philips Incorporated. It's twice as big. Yeah, hey, look at us. But on a per-share basis, nothing has changed. In fact, a lot of acquisitions, you actually see shareholder wealth being eroded there and statistically very significant to a degree there. It's more common than it adding value on a per share basis. So that feels like it's a bit of a shell game, if that's the right analogy, in the sense that I want to call it a vanity metric, just general GDP. It is. It is. Absolutely a vanity metric. it's a boasting metric my thing is bigger than your thing it's an appropriate metaphor here it literally is right it's actually completely irrelevant for anything else does it make us safer?

40:10no does it make us better? no why would it if you're a government why would you care? and I've got to say I don't hold a lot of hope this is going to change because whenever I mention it on Twitter I get that well of course growth is good Is it? What sort of growth? Well, of course, we need to be bigger. Really? Why? Explain to me why that's necessary. And the whole idea of, I'm not saying they're necessarily wrong, but they don't have, you know, my favorite, one of my favorite West Wing episodes is where the presidential contender makes some sort of statement. And then Jed Bartlett, the president, says, what are the next 10 words?

40:45You tell me the next 10 words. You finish the paragraph and I'll resign the race right now. Tell me exactly what the next 10 words are after that slogan. And of course, the other guy can't do it. And that idea of like, well, of course we should want more GDP. Okay, why? Well, because it's going to be bigger. Really? Why? How are we better off? And again, I'm not saying they can't make an argument. I'm saying most people don't. They've just swallowed the line because we've been told over and over and over again. People say to me, oh, look at Japan. Their GDP is shrinking. I'm like, well, yeah, but the average GDP per capita in Japan is actually growing.

41:15So explain to me exactly why Japan's, now, they've got their own economic issues, but at a per person level, You know, where is the burning platform here? And again, I'm not saying we shouldn't grow or don't want to grow. I'm not saying there's not good reasons for it. But those who have pushed this line have had a wonderful, wonderful victory by getting us to accept that starting point of, well, obviously that's true. It becomes a self-evident truth, except it's not self-evident, other than we've all said it so long that no one thinks to question it anymore. You repeat a lie often enough, it becomes the truth, right?

41:45And that's exactly what it is. I mean, we should want to be richer. Yes. Not in a, you know, just for the decadence of it. Yeah. But, I mean, that is technology. That is progress. Me, as a middle-class person in Australia, live a life that is, you know, Louis II could only dream of, right? It is, and it's because of technology and it's because we are a richer purpose. But that is a very noble cause. We want a better quality of life for ourselves and for our children. And yes, I would add to that. We want that to be sort of fairly evenly or fairly distributed. Maybe that's the better term. Fairly distributed amongst all of that.

42:33But higher GDP doesn't necessarily make that the case. As I've said before in previous pods, right now in 2023 in Australia, whose GDP is going up, house prices are back at record levels, et cetera, et cetera. Food bank lines are the longest they have ever been. People living in cars is the biggest that it has ever been. You know, it's sort of, there is a distortion there within the average. And we're missing the point here, I think, of when we focus on these kinds of things. I would even go as far, this might be more controversial. I'll go as far to say as I think there's a lot of vanity in unemployment metrics as well.

43:13I mean, do we want everyone to have a, Anyone who wants a job can have a job. Yeah, absolutely. I'm not going to argue against that. But it's just sort of like we also want meaning and value and self-worth to be in jobs. It's just like I could make everyone employed, but, you know, we're all doing horrible jobs cleaning chimneys or industrial furnaces, you know. That's kind of Russia, 1980s, right? Everyone officially had a job because you all, you know, and there were still bread lines and, you know, making it so doesn't make it right or better. Yeah, I want meaning and value and purpose in my work.

43:49That's what I want. Interestingly enough, when the psychologists ask what makes for a well-rounded, happy life, one of the things like social connections, family, it's nothing controversial there. But actually, I think if not the biggest thing, one of the biggest things is purpose and meaning in one's work. and this is why I think we've often said before but you know, I win the Powerball I think I'd probably take a great holiday and knock about for a bit but after a while I would need to do something you know, like it's amazing how quickly that baseline of contentment resets amongst very big lottery winners same people who have very bad luck in life you become a quadriplegic or something you know, it's like not something that you'd ask for But a few years after that accident, you know, you ask people and they have a certain contentment.

44:41We are very good at adapting to whatever our situation is. And those happiness levels return to sort of that baseline. But we want to drive that baseline higher by ensuring that the work that we are doing is other people see it as valuable, feel as though I am making a difference. There's a purpose. It's not just I do X to get money to live, which is obviously the subsistence part of it. But beyond that threshold, I'd like to think in the 21st century, we're heading at least directionally to a point where we can all have jobs, but jobs that create value and meaning for us as individuals. Totally.

45:26I mean, that goes in a hundred different directions too, by the way, because it doesn't need to be paid work to have that purpose or meaning. Yeah, it does. That sort of stuff. The other thing too, we've made the point that communism is not good, so let's assume that our listeners have accepted that because the only thing I want to say is… You're on the wrong podcast. There are other podcasts out there if you're looking for that angle. That being said, even GDP itself, the whole concept of measuring GDP as if it matters, it's the old quote, you know, not everything that counts can be counted, not everything that can be counted counts.

45:55We measure GDP, why? Because we can. And so it's become the de facto measure. Not only is total GDP swamped per capita GDP inappropriately, but to pretend, which we do not overtly or consciously, but subconsciously, that's what matters. So, you know, we said before, if there's an earthquake and all the buildings are repaired, GDP will go up. Yeah. So hang on, we've replaced the buildings we already had. So we're no better off afterwards. We've got the same assets. We have to spend money to do it. And yet the boffins would say, hey, the economy is bigger. GDP went up. We're all happier and wealthier now.

46:26It's like, well, hang on, just explain that to me again. Car crashes. You repair a car that's pranked, guess what? GDP goes up. Yes. That's the broken window metaphor, right? It's like we should just go around breaking all the windows because it's going to create a lot of work. It doesn't create any value for anyone, but, you know, it does create a lot of work. It's a nonsense. I would go a bit further and say it's not even just GDP per capita. It's real GDP per capita. I've seen a few companies do this, actually. They'll report increased sales. Oh, that's fantastic. Yeah, but the volume of stuff that you're selling is the same and your costs have gone up.

47:01So yes, it looks as though there is growth, but that growth is purely an inflationary-driven growth. There's no real growth that is there. So real, per capita GDP, if you're going to use GDP at all. Yes, correct. Those two prefixes. We should go further than that. I think, you know, to your point, you've made many times, standard living-wise, you know, some of the poorest people today are better off than the richest people in the 800s. Yep. So are you better off or not? Well, you know, it's a whole topic story. Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener.

47:38Hey, let's move on because we are getting late in the podcast. Two big corporate stories this week. Let's start with the Optus CEO. Unsurprising for many, she decided that maybe Kelly Rosmarin, by the way, is her name. She decided that maybe being CEO of Opticist isn't the best thing for her or the company. She spoke to a Senate committee where the pollies got their 15 seconds of fame by being tough guys and giving everyone a hard time. And then she says, okay, that's enough. I'm now leaving. I have to say, I was joined by Jerry Harvey in this view, which I don't mind, but people will choose to blue certain things.

48:17I'll put that up front. I have long been to the view. I think I've made this point before on the podcast. I think we are way too Roman in our view of these things, that the need for blood, the need to be sated by someone paying a price, a head on a pike, choose whatever horrible metaphor you want. She brackets or quotes, had to go, end quote, because there was an optus outage for eight hours. Now, I've said before, mate, if you said to my grandparents, so here's the thing. I've got this thing in my pocket. It has the world's knowledge. I can communicate with anybody, anywhere, on video or audio.

48:58I can get whatever information I need. I can live my life, do my job on this thing. The bad news was, it was only available for 364 and a half days this year. And our grandparents would look at us and go, what the hell? I think we lose perspective so incredibly quickly. This technology didn't exist 30 years ago. And now when we don't have it for eight hours, we want heads to roll. So I think there's that. I think we need a bit of perspective. The other thing, though, I really do think is the need for someone to pay the price I think is not a great thing for our society. And I'm going to say as investors, this is the point I want to make.

49:37As investors, we need to be very, very careful about what we think we need or what we think is deserved. And here's the example I want to use. You used the idea of page enterprises before, right? Let's say you're running, Andrew Page is running page enterprises. and Andrew does something horrible and he decides that he wants to, I don't know, buy Bitcoin for his company. And, sorry. And in doing so, in doing so, earns the ire of the populace. As a result, Andrew says, okay, I made a mistake. He sells his Bitcoin. Sorry, man. Never. Never. Right, exactly. He sells his Bitcoin. Sorry, I made a mistake.

50:13Now, if I owned Page Enterprises, I wouldn't because it'd be Phillips Enterprises, but let's go with it. and Andrew Page was the best bloke to run the company because of his undoubted skills in running private online investment clubs, as I'm told he has skills in that area. And he makes a mistake that he then apologizes for and corrects. Does Andrew Page stop being the best person to run that business because he made a mistake? Is there really someone better out there? Because here's the thing. Imagine Warren Buffett in the same situation. He runs Berkshire. Something happens for eight hours. And everyone's like, oh, Buffett's got to go.

50:46He ran the company and it went badly for a while. get rid of him if that had been done in 1972 or 1984 or 1996 or 2005 the lost value from having some other schmuck run berkshire because buffett was somehow forced out because of a bad pr outcome i just i think we are really getting things very wrong i think that need for for bloodlust the the need for someone to pay the shock jockery that takes us to that person's got to go because then i feel like i've earned a scalp maybe she's not the best person for the job if she wasn't shouldn't be there anyway but if she is we've now lost or they have lost the best person for the job because of a tech adage she wasn't responsible for now she's accountable for it she's responsible for she's the ceo it's her call i don't think she needs to go man i just i don't get i don't get how people think optus is better off without someone who in theory up to that point was the best person for the job am i wrong uh i don't know if you're right or wrong because i don't i don't know what's gone on behind the scenes so there's two there's two possibilities I mean, I totally get what you're saying, right?

51:48So if the situation is that she was a highly competent executive making very good decisions, very good capital allocator, setting a good culture for the business, driving value for customers and ultimately for shareholders, and there was a misstep or just an accident or something that was just sort of unavoidable, then yeah, getting rid of her is a really dumb thing. And it's, you know, the PR people have gotten in saying, hey, we need to sort of be seen to be doing something. We'll do this. I'm sure the conversation was they just want to take one for the team. And she will be well compensated.

52:26You know, I don't think she's going to suffer too much. And I'm sure she'll get a job, no problem, elsewhere. So I don't feel too sorry for her given what I imagine is happening behind the scenes there. So, yeah, in that case, you're right. On the other hand, there is something to be said about whether it was your direct fault or not, that response – with great power comes great responsibility, to quote Peter Parker's uncle. And that is part of the reason why CEOs get paid so much, right? It's just like, well, you are – the buck stops with you ultimately, right? So you kind of have to do that.

53:09The other possibility is that, well, whatever went wrong, whether or not it was avoidable, maybe there wasn't enough emphasis on risk mitigation approaches and robustness of the network and whatever. In other words, maybe you just weren't doing a good job and maybe you deserve to go. And this was the straw that broke the camel's back. And so behind the scenes, there are people in the know who are very, very plugged in within the organization that would have a more objective and reasonable view on which two of those scenarios is true. So if it is the latter, then yeah, see you later. Got to go, right?

53:47If not, then I take your point. I think that's – my issue isn't even so much for Kelly. I don't know her. She's being well looked after. She's been paid a lot of money. It is the chance she's taken. She's just fine. I'm just thinking as an investor, if you owned the company, would you really want a good CEO gone because someone has to pay the price? Or would you say, that sucks. I wish you hadn't done that. I wish you'd fixed it up. Hope you've learned something for it, but I'm still glad you're running the company. Yeah. I want the best. If she's not the best person, as you said, if it's the end of a long line of disappointments, then hope, well, frankly, she should have been shown the door before now.

54:21Yes. That's almost, I just think, is it a chance is it the straw that breaks come with that possibly but man the board have been pretty tardy if they had to wait for this to get rid of if she's no good and if she is good then getting rid of her or letting her go just to cauterize a PR wound because you don't like bad press for a couple of weeks I just really think as an investor again think about that second order thinking right as an investor I want the best person running the company I mean Jerry Harvey himself is a great example I own Harvey Norman shares you know Jerry's not exactly immune to PR snafus right but he's run a pretty good retail for 50 years like you know would I like him to be less um cervix sometimes sure would I like him to maybe not you know make some of those outlandish comments yes I would like that a lot he's even been horribly wrong about online retail he was super late so wrong no one will buy the stuff online right and yet I guess that's my point and yet he's managed to run a spectacularly good retail for 50 years I haven't owned shares for anything like that long but that's kind of almost my almost the example right of like in a different in a different company Jerry gets pushed out at some previous point because of some perceived or actual mistake.

55:27But if you're still the best person for the job, who do you want? The person who's made the mistake and learned from it or someone who's coming in with no track record and saying, well, the other guy had to go. I hope you can do okay. But if you don't, then we're screwed. I really don't think probabilistically getting rid of a CEO who's learned a lesson as long as they're half capable is a smart idea. Yeah, I agree. And the other thing that's hard is that it's not immediately. These people are making decisions. It's like turning the Titanic, right? Like you crank the wheel to the left or port or I forget, whatever, you know.

56:02Don't test me on my nautical knowledge. I've got Popeye the Sailor Man playing in the back of my head now for a reason that may or may not be appropriate, but good going. So I turn the wheel and then like, you know, three miles down or knots or whatever the nautical equivalent is, the ship starts to turn. So a really good example. I can directly, because I've been a shareholder for many years, and this is with Catapult. I think the technology and opportunity is just fantastic there, and I think they've done a lot of wonderful things. But the premium management team was just very profligate, no cost discipline whatsoever, made some very bad acquisitions, et cetera, et cetera.

56:36And so they put Will Lopes in, former CEO of Audible, actually. And we're now seeing the business is really starting to hit its strides. But it took a few years, right? to do that. I could imagine in a world where it's like, right, let's get rid of them. They deserve to go, right? I don't want to be too mean, but they do. They deserve to go the form of management, at least from executive decisions. And then you imagine like a year or two later, the new bloke is in and the share price is still done. Okay, we're going to get rid of him. It's like, whoa, whoa, whoa, whoa. You know, you absolutely need to get rid of them if they're not doing what needs to be done, but also understand that it will take time for some of these decisions to become evident.

57:25And let's not forget too, just after that transition happened, COVID happened as well, and sporting leagues shut down. It was all this. There's so much noise. And that is the real or one of the core skill, art of an investor is separating signal from the noise because there is so much noise as we started the pod talking about. and it's just sort of like, well, what is the important thing here? And I've always thought this actually. The really important decisions aren't obviously – important and good decisions aren't immediately recognizable as good. ProMedica is a company we like to talk about, right?

58:03I just think it's one of the – they made this acquisition years ago and now everyone recognizes that what they bought from Germany has just like become the business and has underpinned such incredible wealth creation. It took years for that to become obvious, right? And it's just sort of like, so what am I trying to say? I'll tie a knot in it, which is, yes, there deserve to be consequences when there are faults that are evident. But be sure that you're actually connecting, you know, cause and effect here because you can have the most capable, honest, hardworking executives there. And as the saying goes, poo happens, right?

58:49I'll use the cleaner language here. It just does. It just does. And that's not anyone's fault, right? And if you want to see a scalp, if you want to have some, you feel as though you need something because your share price went down, I need someone to pay for this. Maybe it makes you feel better. But if you're actually getting rid of talent here, you're actually shooting yourself in the foot. And be careful what you're after, what you wish for. 100%. I think the only question is, is this person still the right person to run the business? Yeah. That's literally the only question. Are they the best person to run the business?

59:16If there's someone better out there, is there someone to sack her because there's someone better out there anyway? Yeah. Thanks, Kelly. It's been great. I found Andrew Page. He's going to do a great job running Optus. He's coming in because he's going to do a better job than you are. I have no problem with that whatsoever. Yeah. But if you say, well, actually, Kelly, despite your mistakes, you're still the best person to run the business. Getting rid of that person is literally a self-inflicted word by definition. You're replacing her with someone who's not quite as good. Hey, mate, speaking of controversial things, ANZ.

59:42Making its staff come to the office 50 % of the time. I am, this kind of goes to the same degree of second-order thinking in my mind. I think we've talked about this before on the podcast. I've certainly tweeted about it a lot. And I'm really surprised how polarizing this is for a whole lot of people. Yeah, it is. A whole lot of people really, really hate work from home. And I don't get it. I just, I kept being ambivalent about it. I don't get hating it. I don't, I don't, I really don't. I was really surprised. So maybe that's my own bias showing or my own way of thinking. ANZ have said to their staff, you must work from the office 50 % of the time or we're going to dock your bonus.

1:00:16That's pretty direct, right? Now, here's my take on this. Well, that's, so here's my take on this. That's the short version, idiots. Yeah, pretty much. That's, yeah. So again, think about it as invest. Purely as an investor, right? Let's ignore, here's the thing. People love to think about investing in the context of social issues or of ideology, right? Climate change, blah, blah, blah. Is it real or is it not? It doesn't actually matter. What actually matters is what governments, consumers, and companies do in the context of that. Now, of course, climate change is real. If you don't believe that, I need you to check the science.

1:00:47There you go. That's a lot of more listeners. Gone. But whether you like it or not doesn't matter. It only matters what companies, consumers, and governments do as a result. Work from home. I don't care if you like work from home or not. Here's the thing. Imagine you've got a company. So let's talk about Page Enterprise and Phillips Enterprise again. Phillips Enterprises says, all of my 14 ,000 staff, because I'm very big and rich and important and successful, all my 14 ,000 staff, you guys have to work from the office 50 % of the time. No choice, right? You can work from sometimes, but I'm going to make you be in the office half the time.

1:01:20There'll be a portion of the staff who go, it's okay, I was working from the office anyway. I liked it. I was there. It was cool. Portion of the staff who say, 50 % seems reasonable to me. I'm going to keep doing that, or I already was doing that, or it's not a big deal. I'll do that. And a portion of the staff who say, actually, Phillips, go and get staffed. I don't want to do that. Now, that group will be split into not even twos, but binary is always easy for conversation. The group who are great workers and the group who are terrible workers, the terrible workers are going to be terrible whether they're a homeowner in the office.

1:01:48Yes. And they're going to be disgruntled anyway, right? And if I've hired them, if I'm paying them, a bit like the opposite thing, my issue is having them in the first place, not where they work, right? If they're crap employees, they're crap employees no matter where they are. The other part of that group are actually really, really good employees who say, actually, I'm a rock star. I'm worth 10 times an average employee because I'm smarter, work harder, have better connections, better ideas, more skills. Whatever those things are, I'm better. And I really like flexible working. So you know what I'm going to do?

1:02:15Thanks anyway, Phillips. It's been, well, it hasn't been fun because you're a Muppet and I don't like you anyway, but you paid me and that was okay. I hear Page Enterprises allows their staff to work completely flexibly. Sometimes they need to be in the office for meetings or company events, but most of the time they can pretty much just choose their own thing and do what they want as long as they're productive. and Andrew Page is a pretty enlightened boss and he knows that if he hires the right people and he trains them properly and he builds a really good culture and he understands their workloads and outputs properly, he doesn't care whether they work because they can slack off on the offer.

1:02:44So he's really flexible. That good employee says, thanks Phillips, it's been fun. I'm off to work for Page. Now play that through day after day, week after week, month after month, year after year. The good people at Phillips Enterprises who want to leave for flexibility do. The bad people can't leave because page doesn't want them because they're idiots so they stay my company slowly but surely gets worse the average worker who remains at philip philips enterprises is less effective less productive less intelligent less hard-working than those who leave less valuable to me page meanwhile says well actually i'm getting all these great people because all i have to do is offer flexibility and i'm not going to hire the crap ones who want flexibility because they're crap so i didn't hire them anyway but i got to steal all philips's good people because they wanted flexibility and I can give them that because I'm a good manager and a good boss and I have a good culture and I treat my people appropriately.

1:03:37So what happens? The average quality of page enterprises employees improves slowly but surely. The average quality of Philips enterprises falls slowly but surely. Now, I'm not saying every good person leaves Philips. Of course they don't. Some love working in the office. They're going to stay. That's fine. Well, unless I'm a crap boss, which I probably would be, but let's assume I'm not. So I'm not saying every good person leaves, but on average, those who want flexibility and can get it elsewhere leave. and they're the ones that other businesses if they're smart enough like page would be to hire good people he gets those people i'm actually i'm actually handballing good people because i somehow want to mandate for reasons of micromanaging or not trusting the staff or hiring bad people who aren't productive i decide that i want to make them come to the office because i can then watch over their shoulders and monitor their keystrokes and you know and go back to the 1900s or 1800s you know looking over everyone's shoulder as they do their work making sure they're doing exactly what i want them to do because that's micromanagement gee that works really well i don't know mate that's i i've planted a pretty direct one but if i was i've said before if i was an investor i am if i could get a basket of flexible work not all work from home just flexible work companies and a basket of mandated inflexible work companies i would happily buy the former and short the latter because over a long enough period of time there are exceptions to the rule of course there are if i could get a group of a representative group of both those circumstances i have no doubt But in the long term, nothing's permanent, nothing's guaranteed.

1:05:00I have no doubt in the long term, the flexible one wins because they attract the best people. And by the way, when they do and those people are happy, they're even more productive than the best people who are unhappy. I just don't understand. I really truly don't understand. Unless you think your staff are so crap that you have to have them in the office and micromanage them, in which case you've got a bigger issue than where they're working. I just don't understand the mandate. No, it's crazy. I mean, this is, you know, I wish them well, ANZ. Good on you. But it is a free and open market, at least in theory.

1:05:32And, you know, people… You've got to understand it's not just… When I'm looking at a job, yeah, the pay is probably the most important consideration or certainly one of the top. But it's not the only one. Like, it's the full package. It's the conditions. You and I have talked many times before. Like, you know, Monquary could offer us a job tomorrow, double our pay. They're not going to. but I don't think either of us would take it I know I wouldn't because I value my time and my flexibility does that make me lazy or not driven enough I don't know maybe probably but it's just who I am and that's fine so you will inevitably I just think there's a competition for talent that's out there and any sensible employer will recognize that well to compete for the best talent Pay is obviously important, but it's not the only, you know, lever I can pull.

1:06:32So if attracting the best talent comes with giving some flexibility and some trust around all of that, then your point is 100 % accurate. And as you've said, if someone's, if your worry is that, oh, they're skiving off at home, well, they're just going to do it at work anyway. Of course they are. They just, yeah. Here's the other thing, mate. Flexibility is free. Yes. So you're talking about competing for staff. Pay is important. You've got to pay people money if you've got to get them across. Yeah. If you pay them the same way and give them flexibility, which costs you nothing, if you have a good structure, good culture.

1:07:08It's a saving because you need less workspace. Exactly. And I don't know about you, mate. Everyone's doing it. And look, I'm not saying people should work from home if they don't want to. My point is I'm much more productive at home. I've got to say, I've gone shopping at two in the afternoon when I've needed to. I've mowed the lawn at three in the afternoon when I wanted to. But this morning, I started my first work gig at half past six. I probably won't have a lunch break today because I've got plenty of stuff on. I'll have some lunch, and that's fine. It's all personal choice, Rob. No one's making me do it.

1:07:37I'll finish work this afternoon. Actually, I've got a late TV thing. I record at 10 past 10 tonight, right? And I don't have anyone who checks my Bundy clock and makes sure I'm working and not working and marks off the timesheet. I'm entrusted to do a job and do it well. And if I go and pick up the young bloke from school and bring him home, then I'll do that. It boggles the mind that instead you would say to somebody, hey, spend an hour on the train. It'll be longer for me to get to sit here these days. Hour on the train, each way. Take your full hour for lunch because you're not really enjoying it.

1:08:12You're going to have meetings and people drop by your desk and distractions and people talking and whatever, whatever. I am, I guarantee my employer probably gets an hour and a half extra out of me a day that if I had to go, not because I'd be lazy at work, just because I can't start as early if I'm on a train. I can't avoid the distractions. It just boggles my mind that any company thinks that making people work in a certain place, literally a certain place, think about what an office is, right? It's just a desk in another building, you know? Yeah. I mean, look, I'll play the other side. I do think, and I do miss this myself.

1:08:51There is the organic water cooler interactions that you'd miss out on. Not from the social perspective, although that is actually important for well-being as well. But, you know, it's like I am going to have those interactions in the lift or waiting for a coffee where I'm speaking to Cheryl from accounts and we come up with an idea. Or, you know, there is value. I think there is value with being in proximity to other people. It's not always easy to identify. And it depends on the job, right? Some jobs are very… Your job is very… You can work by yourself, right? Like you don't need a big team. and where you do need the team, you can easily sort of dial them up.

1:09:42Others are much more collaborative and interactive. Some are, you know, you need the physical presence, so there's no choice. You can't work from home as a plumber. Just good luck with that. So, but even outside of those physical jobs, there is value to be had. I don't deny it, but it's not. So it's not like this is much better in every other way and that is much worse in every other way, but it's a spectrum. And it's a question of what do I gain as a result of this policy versus what do I lose? What is the net result of that? And it can be a bit of both as well. It's sort of like, I know when I was with The Fool, we got together every Friday in a shared office.

1:10:24We didn't have to. But we found it valuable, right? And to be honest, we probably did less work. In fact, I know we did less work on those days than we did when we were by ourselves at home because of the distraction. But it was still valuable for team cohesion, for that organic sort of conversation, the idea generated. It was definitely valuable, which is why we did it, right? Even though on an output basis, it was probably less productive. Do you know what I'm saying? So I get a desire for that. And to be fair to ANZ, they have said 50%, not 100%. So 50 % of the time, you've got to be in the office.

1:11:07It's just that things, when you treat your staff and employees like children, you'll get children, right?

1:11:16You, I guess you just want the… I think I thought it was. Yeah. These are things that you can't mandate. There are things that you can desire and see value in, but you can't effectively mandate it. or and you so yeah I guess I guess I guess that there's each workplace is going to have to figure it out for themselves but this is where I sort of I get to the shrug of the shoulders and go well I wouldn't do that as Ian said but good luck to you because I feel as though others the free market of ideas will will will show them the error of their ways given enough time do you know do you know what so I completely agree with you by the way and that's my point about being an investor and not telling them what the shoulder shouldn't do just that if I was If I'm an investor, I'm seeing a company mandate that.

1:12:01I'm instantly thinking, I'm not sure what your culture is. I value company cultures really highly. I value the ability of people to. Think about what makes a difference between companies, right? Sometimes it's technology. Sometimes it's a monopoly or regulation. More often than not, it's the quality of the people and the culture and the organization. Oh, yes. Think about we're losing coals, right? There is no difference between those two businesses in terms of where they are, what they can offer, who the suppliers are. They are about as commoditized as it gets. And yet, those businesses have many different results and have done for years, largely because of culture, people, marketing ideas.

1:12:38The things that make the difference are often those people. I think you're right, mate. I actually am at fame. I'm going to the Gold Coast for work. I'm going to the US too. I'm not saying no one should ever have to go to the office. I think it's just finding the right time and place to make it useful. As you say, we got together on a Friday. Not as productive as if we'd be at home at the same time, but super useful to kind of build those connections and all that kind of stuff and the water cooler conversations the random hey have you thought about this we thought about that i will say by the way slack is an amazing alternative these days i i'll tell you i hated slack when it first came out because i've got a million slack channels like it's overload but the ability to kind of have that combination of project-based conversations the the hey matters just thinking conversations uh it's not as good as let's water pass the water cooler with somebody and i know myself i'm on the gold coast i'll stick my head over the proverbial cubicle and say to the boss, hey, what if we did this?

1:13:27Or what do you reckon about that? So, you know, it's absolutely useful. Yeah. It absolutely works. I think it's… Go on. Oh, I get you. I mean, this is the so what. It's like, what do you do as an investor? Yes. And I feel as though you… Well, speaking of laser bond again, I sort of ask them, what's… It's a common question, you know, what is it that sort of makes you better than others? and it's an easy thing to say. It's almost sort of cliched and can sound a bit cynical. It's like, oh, our people. But those who say it and mean it, I actually think that's a big signal. I think it's a huge signal because it depends on the business, of course.

1:14:12But it really is everything, especially if you're a small, and I focus a lot on small caps. When you've got relatively small teams, you know, gosh, if you have a team of monkeys, you just like nothing is going to work. It doesn't matter how well capitalized you are, what your balance sheet is like, how good your product, you are in massive trouble, right? And frankly, I've got no problem. Like, so at the moment, the real, what's in vogue at the moment is cutting costs because everyone's desperately trying to get to profitability. It's funny that I have to say that out loud. I was like, well, what were they doing before?

1:14:51It wasn't profitability. It was growth, right? It was revenue. But everyone sort of found religion and now we're sort of going in that direction. And yeah, okay, it makes a lot of sense. That's ultimately what you need to do. But my view is in a not insignificant number of cases, they will end up shooting themselves in the foot by firing people or not paying them enough or not giving them good conditions. I would much rather have an employee bill that per person is, you know, 50 % higher than my competitors. I can see some investors looking at that going, look how inefficient they are. Their staff bill is so much higher.

1:15:35And my point would be, yeah, but look at the productivity difference. At least in – you know, like, who do you – do you want a Wozniak on your development team? That's right. Or do you want some guy fresh out of uni that barely knows how to code HTML, right? One's going to be cheaper. Yep, undoubtedly. But it's probably worth paying the was what he's worth, right, in that instance. Because it's more about the bang you get per buck, not just the quantum of the buck. Does that make sense? Yeah, exactly right. It reminds me of the old line, the old kind of joke line of, what if we train our people and they leave?

1:16:15The other guy says, what if we don't train them and they stay? Yes. And the other one is if you pay peanuts, you get monkeys, right? Well, there is that too. And the other feedback I get on Twitter is, well, if your job can work from home, they can be outsourced overseas. Like, yeah, it can. Exactly. If that's, to your point about people mattering, if my job is so low value add, it's already been outsourced. It's already been sent overseas. Like that's, you know, will it continue to happen? Yes, absolutely. Wage arbitrage is real. But it's going to happen whether or not I personally work from home.

1:16:43The boss is going to look at my cost in the office and say, Phillips is working from the office. I can outsource his job to the Philippines. Or he's going to say, Phillips works from home. I can outsource his job to the Philippines. You know, those people are right if my job is at risk. That's absolutely true. But that statement is true whether or not I work from home. You know, that's the very reality, right? I've been working at home for 12 years. If I sucked, I don't know whether ASIC would allow it, but the Motley Fool could find someone to give investment advice and do podcasts from overseas if they wanted to.

1:17:11If they thought that was a better ROI, if that person could work for less and add more value, they'd do it tomorrow. And they should do it tomorrow. Why wouldn't you, right? Like, I mean, well, Please don't do it. Right, well, yeah. But you know what I mean? It's that kind of, just that kind of idea of the fear around, or the, I don't know if they, I don't know if people are replying who are micromanagers themselves, or who fear losing their jobs, or just like going to the office. I just, I get people saying, it's not for me. I'm happy to go to the office. I'm like, cool. When you literally are so against the idea of other people working from home or working flexibly, that I just, I find astonishing.

1:17:47Really. And there are people, those who feel that way, by the way. Go on. Sorry, I was going to say, so I've got two young kids, right? And so the normal sort of domestic dramas happen within our house. You know, it's like, kid one, unpack the dishwasher. Now, rather than objecting to the job at hand, almost invariably, it's like, well, why doesn't she have to? And it's not like they're agreed, not because of what has been asked, but because there is a sense of that other person doesn't have to. It's like, what has that got to do with me needing you to do this thing right now? Oh, but they did it last week.

1:18:24And I feel as though that's kind of what's at play here. Some people, I think the people who get most upset about the work from home, for whatever reason, can't or don't want to. And therefore feel as though, because others can, that they shouldn't be able to either. It's like, whatever that other person is doing has no impact on your situation. So it's kind of irrelevant to you, but it's probably a source of some of the angst. So true. Speaking of angst, mate, I think we've had enough angst for one particular podcast. Should we give our listeners ears a break and instead resume on Sunday morning?

1:18:54Let's put a pin in it, as they say. We'll circle back. Every management consultant ever said that. Have you ever been to a presentation or a consultant where there's a whiteboard and that's the parking lot? No. Definitely with the parking lot. It's like someone brings up an issue that's not relevant. It's like, let's put it in the parking lot over there. We'll deal with that one later. Yes. It's the way of being able to kind of move past that kind of, you know. We'll park that one for later. Someone did a translation of all the business jargon stuff. And it's just like, I think with the parking lot, it's like the translation is, we're never talking about this again.

1:19:29That's exactly right. And by the way, your HR file's been marked. Yeah. Yeah. We put a pin in it, but we never circled back. Let's circle back on Sunday morning, shall we? Absolutely. Let's do that. Until 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.