Innovation, and the tale of three airlines. June 13, 2025

22:23Yeah. They're not following their own swords if they make a mistake. They're saying to these companies, will you please stop trying for the love of God? It makes zero sense. I wonder, think about innovation, mate. Do you have a marker or a series of markers for good or bad innovation when it comes to these companies? Again, I kind of use the example of the master stuff. Like I've, for the longest time, said Woolies was right to try masters. I still think that's true. But again, I'm kind of coming around to the point I made before, which is, did they have the internal DNA to really stand up a new business.

22:55Now, I'm not saying they didn't, but I also think they didn't get it right and they killed it early, which says lack of commitment, caved to pressure, didn't have the right people, couldn't see a future for it. Maybe just mistakes, maybe CEO change. I don't know what else was behind it. But Telstra tried a venture fund that didn't work. It's tried to stand up kind of second and third brands. Qantas did a great deal with Jetstar, by the way, a notable exception of saying something literally from scratch inside the business. That's a really good example of one, as much as I don't like the airline.

23:22and story about those in a second. But the Jetstar business was stood up as a separate entity really, really well. And maybe the lesson there is they did it literally outside corners, partly probably for legal and workplace relations reasons, honestly. But doing it, they're saying, you're not part of it. You're over there. You do it yourself. Build it yourself. Maybe that's what it takes. I don't know. Do you have any kind of heuristics as to how you value what innovation some companies are trying to do? Oh, no. It's super hard. The best you can rely on is track record, you know. But if you're a company that doesn't have, you know, haven't been around for a while, there is no track record.

23:59The thing is you've always got to remember as an investor is that the story is always a good one. It's always a good one. You will never, ever put the challenge out there. Find me a prospectus where it says, like, we're in trouble. Please don't invest. It's a really bad idea. It's nothing but blue sky here. And I'm not saying in any sort of necessarily nefarious kind of way, but it always looks good. And when a company, even once they've gone through the listing process and they're trying new things, it sounds good and very often it reasonably sounds good. It's not like even a cynic like me would look at it and go, that's never going to work.

24:41It's like, yeah, that seems plausible. As the way you've presented that, it doesn't seem like an entirely bad idea. So it's really hard. That's why you've only got history. If you've got a company, it's like it's in its DNA. We've been doing this for a while. We've had some misses, but we've also had some home runs. You know, I'll give a shout out to Bailador. Just disclosure, I own some shares in that. Basically, a private equity company that lists on the ASX and invests in early stage technology companies. They've had some, they've had plenty of investments that haven't gone that great, but they've had some that worked out brilliantly, really, really well.

25:16Does that guarantee anything? No. But, you know, it means like when they make an investment or a new one or they double down in one, I'm a little bit more confident than I otherwise would be because there is that track record as opposed to the new kid on the block who's just like sounds good, says all the right things. But, again, I'm not trying to say that they won't be successful, but it is more of a coin flip. You know the good thing about testing the new kid on the block is they've normally got the right stuff. They do. Boom, boom. Nice one. I got that out he's on fire for those who don't know I'm not going to explain but if you only know NKOTB by the way I was going to say isn't it NKOTB no no no the OG was New Kids on the Block NKOTB was the second one through anyway old person reference they're not saying you anymore no no old man on the block exactly old man get off my lawn why you know what so there's this boilerplate in our industry, which is passports is no guarantee.

26:18Yep. And that's often right, but frankly more often wrong because passports is a pretty good indicator. No guarantee, absolutely. Yes, absolutely. But is it a pretty good indicator? As long as the term is, the better the chance of some sort of indicator. The problem, you know, here's the other thing I've been thinking about companies, mate, is even track record. Think about how frequently companies change CEOs, change management teams, things change. The track record, oh, over the last 20 years, they've done it well three times. that is probably better than most except that if that as a bit like fund manager right oh this fund did well well since then there's been two changes of portfolio manager so is the fund the fund anymore or is it just the name over the door you know who was who's got the track record the stock picker or the brand yeah and we all know it's the stock picker yeah um i do even track records i find find really difficult because if you can find a business that has a track record with consumers you know co-cola right a monkey can run co-cola for 20 years and the business is still be fine.

27:13Yeah, just couldn't. Because you don't need to do anything differently. So it does depend on the type of business. But if you think about innovations, the chance that the person, even not even the CEO, but the marketing manager or the head of IT or the operations girl or the people who did the work who made it happen, who are they? Are they still there? That's the other thing I find hard about track records is, you know, if the thing that got you there is still there, brand, easy, right? Mark a position. Can anyone run Facebook? Yes. Zach did a really good job building Facebook. I could run it for six years and, you know, maybe it's better, maybe it's worse, but it's still around.

27:47Why? Because network effects are network effects and they're just so hard to kill. So, yeah, I always find that an interesting challenge too to try and work out can you say that what got them there is still there and will keep delivering or is it one of those, eh, worked at a time. Every business is mature. Same thing, right? It's like, well, banks are a great example, right? How did banks get to this size? Well, they grew and they innovated and they were bigger and they used scale and they bought their competitors and that sort of stuff. So, great. Yep. And people then say, well, obviously the banks are still great businesses I shouldn't say it on a bank rant, but that idea of what got them here, it's not that it's not there anymore, but the opportunities that were in front of them have been taken.

28:22And now they're big and it's oligopoly. Could they go overseas? Maybe that's different to what they've got here. Could they try other products? Well, they tried selling insurance to dead people. That wasn't a good idea. When circumstances change, you've also got to recognise that those things are meaningful as well. Yep. Well, it comes back to the original point, which is that's why you go gently, gently, softly, softly. And it's why you have the honesty to pull out if it's not going well or to double down if it is going well. That's what you've got to do. So I've got shares in a company. I don't want to mention them because they're so illiquid.

29:03Just mentioning them will move the market. It's so tiny. But I love it. I love playing in this space because there's not much competition. Anyway, they shut down some New Zealand operations the other day and that's going to reduce their revenue. And it's just like, oh, but it's going to improve their profit. Now, isn't that exactly the right thing to do? It's like we gave it a crack and in the announcement they basically said we don't really have any competitive edge here. It's a highly fragmented market, highly competitive. It's not a big enough market for us to ever really get scale. Yeah, we're making like revenue.

29:38We're selling stuff there. It's just uneconomic. We're not making a profit. In fact, it's been that way for a few years now. Now, here's your choice at the board level, at the management level. It's like, well, let's try and fix it. Let's divert all of our attention. By the way, we're crushing it over in this other segment here, but let's take our eye off the ball there and let's take all this extra money that we could be investing in the thing that works and let's try and save this struggling business over here. And even if we're successful, the prize at the end of the tunnel is not fantastic.

30:05Cut it down. I had another company, maybe I'll mention this one because it's a few years ago and it's a bit bigger now, but Stealth did the same, Stealth Group. They basically do like a Bunnings for industrial kind of companies. And they shut down a whole bunch of unprofitable stores at the expense of revenue, at a public market. We're telling the market, we're going to turn away, we're going to be selling less stuff. And it was absent, but the return on equity subsequently went up, the profit subsequently went up, everything went up. And we got to focus on the things that are doing well. And we put our attention there.

30:39We put our capital there. That is 100 % the right thing to do. Yeah. And where you see that not being done the most, maybe this is my prejudice. I've got no data to back this up. But it's usually the bigger. It never stopped me before. It's the top 200 companies. It's the mega companies that are the worst at sort of doing that. because, I mean, if I was, oh gosh, there's so many favourite whipping boys. Which one? AMP, Meijer, you know. Yeah. Meijer arguably should have just closed down half their stores. Yeah. And they still should. They still should, right? They still should. They're not going to.

31:19They're not going to. There's no way that they've got the capacity to do that because the market, to be fair to them, the market would absolutely, you know, torch them. 100%. Yeah, 100%. But if I was the chairman, I would be sort of saying, yeah, we're going to be a smaller business after this, but we're going to be a viable, profitable business with a good base for growth in the future. Here's the thing. If we don't do it, we're going there. We're going to be a smaller business, my humble opinion. I could be eating these words in the future, but I just, nothing's a certainty, but it's just like it's not like these are long odds for things not going great for them.

31:56It's just a structurally irrelevant company to my mind. Increasingly so as the world continues to evolve. So it's kind of like, again, I'm not saying it's an easy medicine to swallow, but it's like we're going that way. We can go there slow and waste a lot of money or we can go there fast, reposition and have a shot at being something bigger and better down the track. And to my point, bigger companies are just less likely to do it than the smaller companies. And they're less likely. Why? Because the fundies are up down their throats more. or they've got professional manager rather than founder slash CEO slash whatever, because that's what they're in.

32:33The incentives for someone who's a professional CEO, I don't mean to slander those people as a group, but if you're the Maya boss, are you going to try and find a reasonably conservative way to try and find some growth? Yeah. Olivia Worth, my ex boss of Qantas loyalty, what's she doing? Pretty loyalty program. Trying to leverage the loyalty program of people in a Maya. Now that's not the world's silliest idea. Which every retailer is doing, by the way. Right. But it works for us. That's the other thing. Does it though? Does it? Yeah, but how much does it move the dial? That's what I'd like to know.

33:02They know that they're... Well, so what... You know what loyalty program is code for? We get... Darn a harvest thing? Yeah. No, well, no. People opt in to our emails. Yeah. That's literally... So, you know, there is... I own shares. Super Retail Group. I don't own shares. Those two have massive loyalty programs and their club members spend a lot more than those who aren't there. And why? Because they've, A, created a bit of habit and B, because I get an email from both of those every second day saying, hey, you've got a special on. I'm like, oh, look at that email. The chance I buy something from them is higher because I'm opting into the stuff.

33:37It's also self-selecting though, right? Because the person who signs up is the hardcore. Like, yeah, I shop here all the time. I'm definitely, especially if you offer a bit of a sweet note, we'll give you 10 % off or this or that. So there is, and then they go after the fact. I think there's a bit of statistical trickery that's there. They go, look, the loyalty program, these people spend so much more. I was like, yeah, but, you know, the casual shopper who doesn't give us stuff doesn't sign up. So obviously, obviously they get, anyway, it's beside the point. I just think that the bigger companies, it's also the hubris.

34:12It's like, yeah, we can turn it around. In fact, generally speaking, the board has hired me, the new CEO, to turn it around. That's exactly right. They have not hired me to say, no, can you close down half of the stores and make us a smaller business, please? And there's no one who wants that. The fund investors aren't asking the board to do it. The board's asking the CEO to do it. The CEO's not going to offer to do it. Yeah. It's like, so that's what I'm saying. It's not a silly idea to use loyalty to try and reduce sales a little bit, but it's not, you know, you're still, you know, it's the band-aid over the gaping wound.

34:40You know, the, again, give my a little bit of credit, not to go, I think we're about five, 10, 10 steep. To give my a bit of credit, their online sales are great. They do about$1.05 online, which I am staggered by. Me too. If you ask me that, honestly, 10 years ago, is my going to make it? Even Adairs, man, I own shares, but I'm not bigging it up for the sake of it. I didn't think prior to owning those shares, it's Adairs, right? Yeah. I think something like a quarter to a third of their total company sales are online now. And so that's kind of the lesson for me on that, just a bit of a tangent, but the online thing is brand still matters a heap, right?

35:12Yeah. No one types in throw cushions and chooses pages throw cushions.com. I know a few people do, but most people are going, Adairs, I know that name. Or I've already shopped there. I shopped there before. I remember the brand. Like the brand really does still matter. I thought that's a fascinating one. And they've got the back-end infrastructure already built. They've got the warehouses. They've got the – well, they don't have the delivery trucks. But actually, they're using contract third-party delivery trucks anyway. They've got everything. They're just getting rid of the storefront and replacing it with a contracted delivery driver and a website.

35:40Which is my story, and that's where the value is for Maya. If I run Maya tomorrow, I'm closing everything except the CBD stores in Sydney and Melbourne, maybe Brisbane. Why? Because in those places, you've got massive footfall, so you've got enough people coming through the shops. I'm still half the floor space probably. Probably, yeah. I mean, I'd have to look at it. Well, maybe not half it. Yeah, you'd look at it, right? You would just have for sure. My original point, let the data guide you. Where are the unit economics positive? I'm keeping that. Where is it not positive? I'm getting rid of it.

36:11Like, I don't need to guess. I can look at the data and I can make an informed decision. Sorry, I cut you off there. No, no, I think that's perfect. You're exactly right. So, yeah, I think, what do we come to? This is the challenge for Maya, though, is what do you do if you're Maya? You know, like, is the department store business dying? Yes, absolutely. So if you've got to work out the future, this is the innovation problem of you saying, you know, do you close half the stores? Probably if they're losing money. And they almost must be. If you look at the, from memory, apologies to Maura if I'm getting this slightly wrong, sales were flat last half, pretty much dead flat, maybe up 1 % or like that.

36:41But online sales were up about 9%. Sales have been flat, by the way, since 2016. And that's as far back as my data goes on this screen. But here's the thing. If your online sales are up 9%, your sales are flat. What does that say about your non-online sales? Right. They must be going backwards by definition, right? And so you think about the size of the store footprint, the number of staff, the cost of those stores, which is your point about closing the loss-making stores, is at some point, if you're just making nice with the market, saying, see, our sales aren't down, and if we can keep the stores open, you are not doing anyone a favour.

37:09Now, they might have long leases, maybe they can't get out of them. There's reasons why you might keep stores open for longer. But at some point, which is your point, you've got to say, hey, we're done here. The challenge, I think, for them is, do you try and innovate? What does the future might look like? because do you have the people who can go and run another retail concept? Well, so here's the thing, right? They bought JJ's and Just Jean's and Portman's and whatever else they bought from Premier Investments run by Solomon Liu. He still owns Smigel and Peter Alexander and some shares in Breville as part of the new Premier, if you like.

37:41And in doing so, he managed to improve both businesses, which is just, that's alchemy, right? So he goes, hey, this is the worst part of my business. And Maya goes, huh, it's better than our business. So he gets to offload it and improve his business. Myer buys it and improves their business. That is genuinely the very, very rare win-win, which everyone kind of gets something more than what they already had. So that's a great result. But that's what Myer are now trying to do. They're trying to be a general retailer of a house of brands. And again, you've got to ask yourself, well, hang on. If we can't run Myer well, is it the people?

38:09Is it the structure? Now, I think in Myer's defence, it's the format. Massive stores selling everything where the front door leads to the rest of Westfield where they sell all of the same stuff but better and cheaper and more fashionable and all that kind of stuff. So I think they did the right thing buying those businesses only because you might as well, to your point, right? Yes. You're not going to make yourself worse by doing it. I mean, maybe you screw it up, but you might screw up the base business as well. So it's probably a good deal. But I don't know, if I'm my, what do I do? I close some stores, yeah?

38:36And then what do I get growth from? How do you make an apartment store relevant? It's a really tough one when you think about innovation and lifecycle management and the responsibilities of public company CEOs and directors. I don't know what you do. I really don't. Well, I think what you do, so if I was employed tomorrow to do it, I would probably spend at least a year trying to, like, who are the, again, where are the numbers good? Yeah. Why are they? And then understanding that, talking to customers. Why is it that you go here and not there? And so there's got to be something that we, I would be looking for the thing that we could do better or we've got an advantage in than other people.

39:13And that's where I would focus on all my efforts on that kind of stuff. Because if I don't, the only shot I have is to be hyper, hyper efficient on an operational basis. And I always tend, like, when people say, oh, that's what we're going to do, it's just like, why weren't you doing that anyway? That's the other problem. Exactly. You've got to be doing something. You always go for efficiency, right? Like, always. Like, productivity. Yeah. It's like, oh, you think we should be more productive? Don't get me started. But it would be hard. I mean, this is, again, it folds back onto the earlier points here.

39:46This is the chain around the neck of the public listed company. You know, if it was just you and I owned it outright, I wouldn't be thrilled by it, but it's just like, you know what? The market is telling us something very, very, very clear, which is they don't like us anymore. Well, they at least don't like a lot of parts of our business. Now, that might suck. I'm not saying, well, you celebrate it, but we can bury our head in the sand and we can throw good money after bad, or we can go, all right, well, try it. It was a good run while it lasted. By the way, it was a great run while it lasted.

40:18There were decades in there where they were just like crushing it because they, you know, and so I shut it down. I shut it down. And like, yeah, but you'll be smaller, yeah? And I said to you off air, it's just like the pursuit of growth has been the most damaging thing in the pursuit of capital growth. Yes, yes. You know, so ironic, right? In going for growth, we have undermined growth in so many different cases. And it's just like it's a very, very rare individual that has the capacity or the licence really just to sort of say, yeah, we're just going to be a much smaller business. But we'll be viable.

40:53We'll last for another 100 years. And, again, maybe once we right-size the business, once we right-size the balance sheet, maybe we're now in a position to start doing a few little experiments here and there. Let's try this. Let's try that. You know, it didn't work, didn't work, didn't work. Oh, and in the year 2058, Maya is the next, you know,

41:14hyper-nanobot, medbot company, AI-enabled or whatever. It's like, who saw that coming? Yeah, exactly. Anyway, I would get fired, right, because I would do this and my prescription would be to do this. Like, no, no, you are gone. No one is voting for that. And that's the challenge, mate. Even for Maya, like, I agree with you 100 % with one exception, which is what do our customers want? What do our customers want? I don't know. They keep dying. Because Maya's issue is not getting our current customer. Well, I mean, they can always do more for their current customers. You're always converting your current customers is always easier.

41:52Keeping your customers cheaper than winning one, right? So if you say to a customer, hey, you already shop here sometimes. Why would you shop here more? Or what else would you buy from us? They are absolutely the lowest hanging fruit. And you'd have to hope they're asking those questions already, as you say. You're sure they are, except very quickly, I'm sure that they've hired some idiot consulting firm who's just engaging with stakeholders and doing all this market research nonsense, which is like, how about you guys who are on a gazillion dollars a year just actually go into the shop and try the experience for yourself?

42:22How about you call customer support, see how that goes? And if you can't work out that something's fundamentally broken there and you need to employ Ernst & Young and give them$50 million to tell you that your call centre experience sucks, then, you know, it's just criminal. And I guess I mentioned Woolies culture. That's what Woolies did incredibly well. They were, you know, Roger Corbett would walk the shops six days a week. Yeah. You know, suddenly you just drive someone to go to a Woolies and turn up and find out what's going on in that Woolworth store, which scared me. And hailed as a genius.

42:51And yes, thank you. But it's like, how is no one else doing this? and by the way I scared the bejesus out of the staff it was when you heard the project call it was just I was in panic stations but yeah but sorry so yes my challenge for Maya though is okay so the customers are dying so the question is yes it's about how can your customers spend more with you but it's also how to get new customers I gotta say that is you gotta try you gotta find a way I wonder if the Maya brand is actually just permanently damaged like what is Maya and you don't want to change it and lose the customers you do have because they're your lifeblood.

43:29Lose them and you're screwed. You're not a jettison of your current customers trying to find some new ones. Yeah. But I do wonder who under 40 thinks, oh, I might try Maya. Like that's the fundamental challenge. Yeah, it's hard. I would be happy to see most companies, many companies. I don't know that I'd choose Maya. Yes, you would absolutely improve the business by closing doors, making the hard decisions about what to stop doing. That's easy. Yeah. You know, easy-ish. I don't know how you grow it. I really, really, really don't. Oh, I'm not suggesting it's easy. No, not at all. Not at all. And this is the other, just from an investment point of view here, there will be someone right now going, well, guys, I could have post-COVID bought these at 20, actually 13 cents, 15 cents a share.

44:14Right. And they're 70 cents a share now. Yeah. In fact, they've more or less been on a bit of an uptrend since then. I mean, they kind of, late last year, they were at$1.20 and now they're at 70, so they've come down. But, I mean, it's just normal volatility potentially there. But there's a difference between, again, the share price is not the business, right? There was a case, and I think it was one of the analysts with The Fool actually who made the case that was just sort of like, yeah, it's pretty ordinary business, but my God, it's so cheap. And a lot of people said that. And so there is something to be said for the deep, deep value strategy that is there.

44:53However, that aside, that aside, so I just want to acknowledge that before someone points that out. And it's just like, yeah, that's true, but that doesn't negate what we're talking about because what we're talking about is the business itself. And if you look at the business itself, well, earnings per share, what was it? Nine cents in 2016. It's seven cents now. It's gone all over the place in the meantime. They were selling$3.53 per share in 2016. Now they're doing$3.70. There's a business in decline. I don't need me to tell you that there's been a little bit of inflation, apparently, between them.

45:32So that's in nominal terms. What does that say in real terms, like what this business is doing? It's a pickle. I don't know how we got onto Meyer so much other than just thought it was a nice sort of case in point of a business that really kind of needs to reinvent itself. And there's no easy answers here. And I wish them all the best. But my point for investors is turnarounds rarely turn, as Buffett famously said. Hey, when they do turn, I've done well out of turnarounds, right? A couple I can think of, I've done really well, but they were tough investments to hold. But statistically, they are the exception to the rule.

46:09I guess my closing point here, just on this rambling tangential conversation is that it's always better where you've got the opportunity to invest where the wind's at your back because that forgives a lot of mistakes. If you're in an industry that's just exploding because it's a new industry and it's a new thing or it's just a new way of doing something, you can make mistakes like you will make mistakes like every business makes mistakes, but they're less likely to be existential. When a business is just in terminal structural decline and you really have to pull a rabbit out of that. It's not that you can't and maybe you get it cheap enough where it just still makes it sort of worthwhile, but just understand that it's super, super, super hard to do.

46:50And the other thing to do with that as well, if that is you're going to be approaching, there's nothing wrong with that approach, eyes wide open you're going into it with that, is that you don't change your investment strategy or your investment thesis halfway through. And I'm going to speak from experience here. So what you do is you go, well, it's a pretty ordinary company, but goodness, it's cheap. and you buy it and miracle of miracles, you're right. It's sort of like, oh, wow, I'm up 50 % on this terrible business. And then you go, I might keep holding it. And all of a sudden you've switched.

47:20You've bought something going, it's not good, but it's just super cheap. The market has finally agreed with you. It's recognised that it was too cheap. It's corrected that. And now you've somehow convinced yourself that it's a growth investment just because the share price went up. Well, the underlying business probably didn't, you know, maybe it didn't stop dying or, you know, it turned around a little bit. So it's kind of like I always, it was at Lynch who sort of had, he's got seven different investing buckets that he sort of put things in. It's not him, others do it as well. So it's like this is a growth play, this is a deep value play, this is a shareholder activist play.

47:54There's all kinds of different things. Just know what it is when you go into it. So if you're going into a Maya going, yeah, it's pretty ordinary but dirt cheap, it's like great. but when that gets back to your estimation of fair value, it's like, get the hell out. And I'm not trying to encourage people to trade here. I'm just sort of saying it's not... Recognising your thesis plays out. Your thesis has played out. Now, if your investment is Berkshire Hathaway because I feel like it's going to keep compounding for decades to come, then don't sell out. That's a dumb thing to do. Or, you know, a pro medicus or, I don't know, or whatever.

48:24That's just sort of like, no, there's a huge runway for growth here. It's going to go on for ages. like that's also a dumb thing to kind of sell. But know what it is that you're trying to do because, again, from experience, when you switch investment strategies midway through an investment, usually doesn't work out well. No, no, true, true, true. Mate, let's move on to the broader market for a second. Can I just say quickly? Oh, go on. 48 minutes is the timer. Yes. And peek behind the curtain, me and Scott were going, gosh, there's not a lot to talk about today. We're not even going to get through the three agenda items that we came up with.

48:57No. And the one we talked about wasn't anything we came up with. We just started off on a tangent and kept going for 40 minutes. There you go. There you go. Thank you for pulling back the curtain. I'd love that. Can't see me blush on the podcast. All part of the plan. All part of the plan. Our listeners would be shocked to know this isn't script. I know. I know. I know. Who could have thought? Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener.

49:26But yes, the ACX hit a record high. Now, we're doing this on Thursday morning, Tuesday and Wednesday this week, two record highs in a row. And I... By the way, we all have this conversation regularly. I want to remind people that two or three months ago, we were talking about the US market being down 15 % from the kind of pre-inauguration high, right? Yeah. And we're talking about volatility. We talked about the size of the falls. And this is not a victory lap. It's not even supposed to be, and I told you so, but it kind of is a little pit, which is just when things fall, we kind of try to say to people, okay, look, it happens.

49:59By the way, take advantage of it, which is your point regularly, but at least don't sell in panic, right? And we had people tell me at the time, this is different, this is different, the market was going to keep falling, the new world order was in place, Trump and China was going to... And look, they might have been right, but it's rare that they are because the market has always gone to new highs. And so it's... And I'm not even taking a victory of that now saying, ha, you didn't invest, we did, we kept our investments, we're geniuses either. It's just the idea of if we try and tell you when the market's down that you should hang on, it feels like a silly thing to say and risky and all that kind of stuff.

50:30So once it's recovered, this is the time we can say, well, you're not feeling those horrible emotions of, oh, my God, oh, my God, oh, my God. This is normal, right? This is completely and totally normal. It's more normal than not for the market to fall sometimes. I don't know what the numbers are, mate. I think I remember in the US it's a 10 % fall at least once every about 13, not at least, sorry, every 13 months on average. Oh, it's super. Super, it's normal. So just over a year, in just over a year on average, you get a 10 % fall at some point during that period, and yet the market goes on to new highs.

51:00And I just want to call it out because it's a time when you can, again, have that conversation with people without, you know, trying to, in the face of horrible onslaught of terror, saying, oh, it's okay, don't worry. What do you mean? What do you mean? There's something to say, you know what? And it's also, it's 15%. Like, honestly, like, that's a Tuesday for me. Like, who cares? It's like, that's what's going to, wake me up when we're down 50%, right? Like then I might start to get a little bit nervous. It's amazing how much it takes for people to get nervous. It's like, and this is every share market investor ever.

51:36Yeah. It's like, hey, there's really good returns in the long-term returns in the share market. Yeah, look at this chart. Wow, that's great. I'm interested in it. Beware, it's pretty volatile. I can handle volatile. People always panic sell. Be fearful when others are greedy and greedy when others are fearful. and then it drops 8%. I'm like, oh, I'm out. And they're like, what did you expect? This is why it's so quote unquote easy, simple but not easy, is probably the worst, of I think anyone listening here, you have every hope in hell. No, it's not the right phrase. You have every opportunity.

52:08You have every opportunity to do really well if you can master that one emotion. Because most people reckon they're good drivers, they're not. Most people think they're able to handle volatility They can't. And here I am from on high going, oh, it's so easy. I wouldn't, you know, 50 % fall. But no, the truth is, you know, you do lose, you do have the sleepless nights because you're a human being, right? And you don't know what you don't know and it can be scary. But it's just sort of like your point is such a good one, just when that was all happening, how doom and gloomish everything was and it's kind of like, what?

52:43And here's the other thing, particularly if you're in the industry, as we are, you can't get arrested when the market, like just like, hey, I'm selling advice or I'm selling insights. So whatever it is, and it's just like not interested. As soon as the market's at an all-time high, it's like people beat down your door. And like, okay, well, cool, but you do realise that the opportunity, like by definition, aren't as good now. Like future returns are inversely related to price. And so I'm not saying you wouldn't invest at all-time highs. I'm saying fully invested. Any new money I come across, I continue to invest.

53:20But it's just like the kind of person that just like won't go near it when it's down 10 % or 15 % from a record all-time high after compounding at 10 % for multi-multi-decades, you know, it always surprises me so much. And just one more thing and I'll pass it back. So just because I'm on the S &P site, and this is a total return, So we're going to factor in dividends as we rightly should here. So five years ago, it was June of 2020. This was when we were in lockdown at this stage. It was about as scary as you could possibly get. Now, if you'd done nothing but just bought the most boring ETF out there, you've done 12 % per annum over the last five years, which is what, 70-something percent compounded.

54:05You know, it's sort of, and we weren't, we were past the bottom at that stage too. That wasn't, that wasn't, when was it, when was the COVID bottom? March or something? I very, we, it was like very late March, very early April. It was a month and four days. Oh, you're right. Here it is March. I think it was from the 19th of February to the 23rd of March, roughly, I think from memory. It's burning my brain. You know, you're right. You're right. 23rd of March. So this is, this is after the market had already bounced quite significantly. So again, it's not like, oh, well, that's just serendipity that the five-year return happens to go back to the lower of the market.

54:41Actually, no, it doesn't. But my point is that it's sort of like, when's the best time to invest? Now is the best time to invest. Yeah, so look, I think your criticisms are absolutely valid, mate, but I also know that's why a lot of people buy houses rather than shares because they don't appear to be volatile and because you don't have to deal with the daily quotations of share prices. Our listeners are people who probably have a combination of both, and that's cool. but for those who are, you know, were worried or, you know, only held on despite themselves, it's just time to kind of stop and take a bit of a deep breath and look back and go, huh, that really was scary.

55:15And I know for you it's an average Tuesday. For a lot of people it's like first time they've been through it or second time they've been through it, still feel scary. And even if you'd been through it before, in that moment you're thinking, maybe this time they're right. Maybe they are onto something. All of them in gloom is saying I should rotate into this or go to cash or do whatever. And it's just worth just so that next time you hear the same stuff, in the media, the talking heads, the whatever, and you think, huh, maybe. It's a good chance to look back now on COVID or on the 2025, I mean, of course, the inauguration crash, whatever it ends up being, the tariff crash.

55:48You know, I'm not even saying it was always going to happen. It was always going to happen this quickly or whatever. Now the water's a bit calmer. People are feeling a bit better. They've made back their losses. Oh, okay, I can breathe again. Now's the time to reflect and say, remember how that felt? You will feel like that again. And when you do, this is the time to remember what happened in COVID and then what happened in 2025, then what happened in whatever happens next. The market will fall, maybe precipitously, maybe not, maybe for a long time, maybe not, maybe deeply, maybe not. And unless for the first time ever capitalism has reached peak and never gets back there, share prices will go higher again.

56:23And so that's the time to stay the course and, frankly, to deploy some money if you've got it because if the market's giving you a deal because it's freaked out, that's great. You mentioned the greeting of those, a fearful thing, and everyone does roll it off the tongue. It's also incredibly true if you can actually do it. Yes, it is actually true, yeah. And that's the good one. The other thing, just to mention on that as well, the other thing you'll get is that someone will do it, at least theoretically on paper, where it's like, yeah, the market's down 10 % or 15%. I'm going to buy because now it's good value.

56:53Again, it depends on what you're trying to do here, but if you're investing over any reasonable length of time, You know, buying it now or waiting for a 10 % correction, it's just not really going to make a difference. I had a conversation with a member recently actually. I really want to buy a company XYZ at$0.60, but I've logged on today and it's$0.64. Like, yeah? It's like, oh, I missed it. What? Like, no. Like, you haven't, like, this thing is either worth$2 in a few years' time or it's worth$0.20, you know? Like, and either way,$0.60,$0.64, Or you're nickel and diming this kind of stuff. It's irrelevant.

57:30So while you don't want to, you know, not invest because the market is down, you don't want to specifically decide to invest just because the market is down. In fact, one's got nothing to do with the other. It's just all you're trying to do. There's two different approaches here. One is I'm just passive index wide, in which case just buy whenever because it's on average. Dollar cost average. Yeah, maybe you'll get it perfectly timed. Maybe you won't. But over time, you'll probably do extremely well, particularly with the dollar cost averaging stuff because the starting point becomes less and less relevant sort of over time.

58:00And if you are a direct share market investor, where the market's high or low, there's always a bargain to be had. Sometimes they're much easier to find than others and sometimes they get even more of a bargain after you've bought. But that is, in fact, the market is largely irrelevant, especially on the Aussie bourse where half of it's like a handful of banks and miners. It's like, what has that got to do with my small enterprise software company that services, you know, hyper-defensive enterprise? Like, it just, it makes no difference. And if the market was to fall 50%, all these things would have happened.

58:41I mean, everything's interconnected to a point, but it's sort of like, it's so irrelevant. Yes. That for me is the best setup that you can find is when your share has fallen because of the general market sentiment and economic fears, not anything to do with the business itself. So good. They are just sort of like, because it's the baby in the bathwater trade, which is just sort of like, oh, my God, everyone's super scared. The market's falling and you turn on the news and everyone's jumping out of windows. and it's like, yeah, but my business is actually super resilient and doing great and even if things do get tough, there's$200 million of cash and no debt.

59:21They're like, tell me what's wrong with this? And now I've got the opportunity to buy it 20 % cheaper? Yes, please. Not only that, mate, but you get... So, I mean, yeah, the best example is Woolies, right? When Woolies falls and the whole market falls, it's like who's buying less toilet paper, baked beans and apples? Like seriously, of all the things that might change as the economy changes. And by the way, most of the scares are temporary. They don't actually happen. Or if they happen, they are transitory at best. So, you know, either way, even then, if you're getting a great deal. But in what world is that actually not?

59:54And I'm not saying it's always worth buying. I'm just saying share price falls 5 % on woolies because of tariffs. It's like, oh, come on, people. Like, you know. And I'm not saying buy. What I'm saying is that's clear evidence the market's just losing its mind. You know, if you can't point to a causal link, then you know the lemming's just running. And that's ironically a good indicator of excess panic because that tells you something about something. Now, some businesses won't come back, by the way, and during COVID, Webjet and Flight Centre famously had to raise more capital. So just because they'll come back doesn't mean they're always worth investing in, even if they are temporarily impacted because balance sheet matters, and you've said a million times, the first question is, will I survive?

1:00:29Now, those two did, but they diluted massively. So did they survive? Yes. Did your share survive unscathed? No, you were given half the value back. Now, they grew again after that, but they would have grown even faster how they're not able to raise that money. So that's the other part of the story, I think. Yep, yep. Mate, can we finish with just talking about airlines for a second because a tale of three airlines is the story this week and really interesting in very different directions. So you've got Virgin, which is set to IPO,$2.90 a share apparently. Yeah, I have to be bought out of bankruptcy.

1:01:00So yes, it's going to go back to the market. The private equity seller is selling, which is probably a good sign to stay away generally. So that's Virgin. You've got Qantas shutting down Jetstar Asia. So you've got Virgin trying to say, hey, everything's great. Qantas going, oh, enough of Jetstar Asia. And Rex may or may not return to the ASX out of administration. We've got Anchorage Capital who want to buy it apparently. Another mob from Renaissance who want to basically recapitalise and relist it or retain its listing. I think it's still suspended officially rather than its listing cancelled.

1:01:30So if and when it can kind of bring itself back to some sort of normalcy, the Renaissance wants to pay the government back for its loans and then convert all the other creditors to share investors or owners and then relist that thing on the ASX. There is no single kind of description here. There's no way to blanket them other than it's a really interesting time to have three different companies in exactly the same space, the only three Australian airlines other than Alliance Aviation. Yeah, doing very different things at the same time. It's a heck of a world. I've been asked for about Virgin and every time I'm on radio, who would, oh, Scott, would you buy shared version?

1:02:08No, not even with your money. You know, and it's like, well, what, what, what? So that's my usual one. But again, yeah, I mean, Qantas reckon that might be good for the rest of their business because they're bringing some planes over to Australia to keep, you know, use that. So 100 jobs created here, which is good. Rex is just on a – has been 10 months. Rex has been in administration, by the way, 10 months. Wow. That's how long it's taken to find a buyer. And they may still not get it done. The bids were closed last week, I believe, and they reckon there might be – maybe by the time this goes to air, there might be a better decision, but the next couple of weeks, apparently they're supposed to choose a buyer.

1:02:41But, yeah, it's just a fascinating time to be looking at airlines. Well, yeah, and what's also fascinating at a more meta level is that how airlines are just, what is it about that business, that industry that captures the imagination? So, like, if we were talking about three cotton mills or three aluminium smelters or, you know. Still works very different, as we know. Actually, that's true. But, you know, generally speaking, it's just like they just like the media loves a good airline store. I would get it in 1952 because they were kind of a cool, you know, commercial cheapish flights were a new thing.

1:03:23It was like ushering in the, you know, it was a marker of civilisational progress. That's right. Now it's just like a bus. As far as I don't want to sound like too, you know, I was like, it's a bus. It's a bus that flies. There's nothing magical about, I mean, there's everything magical about a plane when you step back. But in really modern era is like, okay, you take people from A to B. It was airlines, airlines. Oh, people lose their mind for these things. That's just the first point that I'll make. I've never understood that. And as we've got, especially when they are such just graveyards for capital, like historically as well.

1:03:57That's the other thing, which is like why the fascination given this? and as I said to you off air the other day, it's like how amazing is it that a business, that even before it got into all of its troubles and it was COVID that was the death knell for them. Yes. I feel so sorry for Virgin. He's like, oh my gosh, you're literally forcing us to collapse. Yes. Oh, by the way, a bit of salt into the wound. We're going to bail out your competitor. I know. What? That is brutal, right? Oh, okay, but I guess there's some strings attached. No, no, no, free money. Can we have some? No. But why? Because they've got a kangaroo.

1:04:44Come on. Dude. And a chairman's lounge. And a chairman's lounge.

1:04:51I don't, but you almost feel sorry for them. It's like, that's so unfair. How come? Anyway, so ordinary business. I mean, I'm not trying to throw shade here. I mean, it's just a very challenging industry. I'm not saying that they were reckless or criminal or anything like that. Oh, no, yeah. It's a very, very, very, very, very tough, super tough business. They always struggled. Shareholders never did that well. COVID came along. No one could have seen that. Okay, fair enough. So they got bought out by, they got taken out by private equity, who is famous for stripping the guts out of it, cutting costs, cutting investments.

1:05:28Probably in general, you mean, not just this particular organisation. Oh, I would never say that about Bank Capital or whoever it was. No, I would never ever even suggest anything like that. But they've done that and they turn around and it's just like, oh my gosh, no one's going to touch this. Oh yeah, people are going to touch this. 100 % people are going to touch this. And that's the most amazing thing to me. And again, I'll probably eat this because they'll go on to be the next best performing thing over the next day. I doubt it so seriously. But it's just sort of like, wow. I will watch with interest from the sidelines.

1:06:06I will wish them very well. I just really don't care about buses that fly in very uneconomic ways, frankly. And we do. You've made the point, but the romance of airline. I've said a million times, right, the money people will pay. If you offered someone, you know, if you have an uncomfortable sleep for 24 hours, give you ten thousand dollars i'll take that right will you pay will you pay 10 grand for a first class sit well out to london oh yeah i'm not gonna trouble business of economy if you're traveling business you're not gonna trouble the primary economy and the money we will pay and i'm not saying it's comfortable it's not i hate flying long haul like i genuinely i i said my wife the other day like we'll probably do a europe trip at some point in the next few years um with my young bloke but um i just i i was gonna say you couldn't pay me i'm gonna do it but flying long haul like It's fun for a while.

1:06:55It's romantic. Maybe I'm just getting old. I don't know. But we have to go to the US occasionally for work. It's seven hours. I can't even do anything worse. It sucks. I'd rather stick needles in my eyes. I'm going to drive for seven days to get to Darwin, right? I would do that a million times over rather than spend seven hours in a plane. I just can't even do anything worse. But we'd romanticise the whole thing. People would pay real, actual money to sit in a seat that's a little bit more comfortable and about five metres in front of them in the plane. Oh, humans, son. They're weird. It's like duty-free, right?

1:07:24People lose their mind for duty-free. Exactly. I would never buy that bottle of alcohol. Oh, 10 % cheaper. I'll get a four-litre bottle of rum. And I save some money, yeah. Because I save some money, you know. Anyway, airlines are a hell of a thing. You're right. The float will probably do great. They'll probably raise a lot of money. They benefit from a little bit of government protectionism, by the way, in terms of landing slots and competitions. I mean, any other airline? Maybe not. A protected airline? No. No. I mean, I can invest in it, but could you rule it out? No, because if they overflow only domestically, no third airline can get up.

1:07:59If Qantas Inversion stays super rational on capacity, there's money to be made, which is entirely, I'll say anti-competitive. I don't mean illegal. Very, very clear. No cartel, no collusion. Nothing's illegal, right? They're not doing anything wrong. They're acting in completely rationality. No, nothing illegal. Thank you. Well, but even then, it's just self-interest, right? If I know that if I don't put seats on, I make more money, I don't put more seats on. It's not even, I don't even think it's wrong in that sense. But what it means is the industry competition structure is an absolute mess.

1:08:27Anyway. Yeah, yeah. Anyway. Yeah. I'll make the other point too because, again, the media just is stupid. Like, oh, they're back. Who have we offended today? The media's stupid. Private equity is stupid. Investors are stupid. Everyone's stupid except for us, mate. That's what that is. And our listeners, absolutely. And the last one. Yeah, so shareholders have been wiped out here. The Virgin is back, if you want to frame it that way, but that capital is torched permanently. It's gone. Anyone who holds shares, it's gone. There was even something about Jane Hardlicker, the former CEO. There's going to be a big payout.

1:09:08Staff got a bunch of shares as part of the recapitalisation, and those shares will likely do reasonable well if this deal sort of goes through. What are they going to do? They'll probably dump them as soon as they're legally able to. Well, that's the other thing, right? Yeah. And it's like, okay, but it makes it sound like, oh, it looked like they were gone, but they're back and actually everything's really good. And I was like, no, no, no, no, that money is, the people who held it before all of this, the reason it is back is because you found a bunch of new bag holders to tip in a bunch of cash.

1:09:38And away we go again. The PE people came along and they borrowed money at extraordinarily cheap rates. That's where they got their money from. And they got that money from just for a short time or a good time, not a long time, right? So I was just like, we're going to do, we've got a bit of assets there. We're going to sweat them really, really hard and make sure we cover our debt. As soon as, as soon as we've put a bit of lipstick on this pig, we're taking it to market. We're getting the hell out. We're gone, baby. We're not idiots. Yeah. Like, you know, we may be amoral whatevers, but we're not idiots.

1:10:06And when, and, and I do not want to hold this bag. Thank you. I was happy to hold it for a little while, but I'm, I'm getting rid of it. And it's just sort of like, and you get the sidelines. You're sort of going, who is, who is really going to touch this? It's like, oh, no, there's no shortage of capital out there. And it's not like picking on the, you know, it's not the finance bro picking on the dumb mum and dad investor. No, no, no, no. I'm talking about, I wouldn't be surprised if our sovereign, if the Australian Fund, like, buy some shares in this kind of thing. There'll be very big, there has to be big institutional money because of the size of it that will be buying this kind of stuff.

1:10:40Like, I don't get it. I just don't get it. And I'll just finish by sort of saying, I've got to keep reminding myself, this is good. This is good. It is good that people don't think too deeply about these things because if you can just maybe think a little bit harder than others, then there is advantage to be heard. Lovely way to finish. Our listeners might have to do that, which is good, and that's exactly why we're trying to have these podcasts, to help you understand the difference between what everyone else says and does and maybe where the opportunity might be. Have a variant perception, as we call it, if you get that right.

1:11:12Yeah, and the variant perception isn't our perception. It's like you're just hopefully just forcing you to come up. with your own A variant perception. I certainly want to hasten to add that don't ever do anything based on what we said, but if we can sort of shake people out of the idea that this idea that the dude in the very expensive suit knows what he's talking about. Exactly. Nah. No. Think for yourself. Nice one. Mate, I reckon we're done here. Will you come back on Sunday? Yeah, hell yeah. Awesome. Looking forward to it. Until we speak again, have a great start to your weekend or your Wednesday lunchtime and full on Cheers.