Investing lessons from Nvidia’s blowout quarter. August 28, 2026

25:56Because it's really, that way pain and loss lies. And everyone knows this intellectually, but it's very different emotionally and at that point in time. So it's worth having that friend who can slap you in the face for the best of reasons, because it's a very, very, these are hard impulses to sort of fight against. So I don't know, repeating ourselves. No, it's good. What I really liked about it, mate, was it kind of, it was just really a microcosm, kind of all those things that we've talked about. I love that, you know, because it's a week long, a really big rise, right? So again, you'd be pretty happy about it.

26:30But the, I haven't checked my Bitcoin yet, I've got to work out how much that's worth. I think you bought the absolute Pico top I did 105, 125 I can't remember now yeah I'm still miles underwater but again but that's the point it's only what happens from here am I glad I'm down? no because no one wants to have less than they used to have but it's like what happens from here? if it goes to 40 it doesn't matter how much I paid if it goes to 500 it doesn't matter how much I paid I mean it does mathematically but conceptually it's like that's what we're talking about now and you talk about too the behaviour of just checking regularly and that kind of stuff and kind of when it becomes Sometimes activity and movement creates attention.

27:08Yeah. And that's kind of a really fundamental thing to get our head around. Because you were saying, you found yourself checking regularly. As I started going, I was like, I wonder what it is now. I wonder what it is now. And you'd kind of, you'd wind yourself off doing that for years. And you're like, you didn't used to do it. All of a sudden now it's like, it's moving again. So you had this kind of, I think I'm putting words in your mouth and I hope you don't mind me saying it, but you mentioned, you know, you're kind of looking at saying what's going on and is it up now? Is it down now? What's, where is it?

27:30And then you're happy about 80 grand. and I'm happy about 80 grand on the way down. And it was a really lovely little microcosm of the things that come and get us. And why I want to talk about specifically, mate, is you're a very good investor. You're a very sensible bloke. You have a really long-term approach. You're the bloke for most people would say, well, he's got it together then. So obviously, he doesn't have these issues anymore. Then the illusion is complete. But that's right. But that's literally almost my point because none of us are that good. And so when we say things like, don't do this, or you shouldn't do that, or it's not healthy to do that, Please don't ever think we don't do it.

28:03We're not being hypocritical. We try our best not to. We're probably, you are, I think I am better than the average bear when it comes to some of this stuff because we've just learned not to, but we're not immune from it. And particularly when something changes, like you just mentioned, when the market crashes next, we will all check our portfolios more. When the market's on a bull run, we will all check our portfolios more. On the way down, because we're scared, it's like, oh God, how much worse is it? On the way up, because it's going up, I feel good. If it goes a bit more, I'll feel even better.

28:27So we'll go and check, get the dopamine hit. The sirens will be there wherever we are. The sirens are there. And they will call you onto the rocks if you let them. And so I just wanted to raise that, mate, because, and again, not to call you out, but specifically to say to people, Rams are one of the best in the game at this, right? And it gets all of us. And so just because you used that example earlier today for me off air, I just thought it was really worth saying to people, the failure is not being tempted. And the failure is not even giving in to temptation. It's just making sure you go, ah, that's what I'm doing.

28:57I will just make it double my efforts. And you've done this yourself over the last little while. I'll double my efforts and say, what am I doing? And you said to me, I said, what am I doing? This is stupid. Or what am I doing this for? And it is. It's that act of catching yourself back on the wagon. That stuff is where it really matters. And don't see it as a failure. Don't see it as a, you know, I'm not as good as those guys or I can't do it or they've got it sorted out and I haven't. It is a perpetual and perennial problem because markets are markets and humans are humans. So, yeah, you get addicted to dopamine.

29:33Dopamine's addictive. Like it's up there with nicotine and heroin, right? Like it's the best drug, dopamine. And it happens in small caps, happens in Bitcoin, happens in stocks, where it's sort of like nothing, nothing, nothing, and then it starts going up and you feel good. It's like this is a great feeling. I like this feeling. There's nothing like opening up your phone and just saying, oh, I'm significantly wealthier than I was yesterday. Make some money today. I will look again. I will look again. I got to go to the toilet in the middle of the night. I might just quickly check my phone, you know, and it does like, and I got to, just lamenting to you off air, it's just like, I caught myself doing this.

30:08It's like, this is not healthy. It's not healthy. And more to the point too, it's sort of like, even in raging bull markets, there's all these little sort of mini corrections along the way. And you find yourself, oh, it's only 115. It was 120 last. It sucks. That's right. I start looking at it again and again. And it's just – and then I finally – that was a good thing about sort of this bear market sort of that's been happening since October. And particularly since February or so, it's kind of essentially gone sideways. And it got boring. And I stopped looking at it as often. It's true. My conviction is sky high.

30:46It's my lightest position in rah-rah-rah. So, you know, don't feel as though I've left the church. You're not walking away. I'm not walking away. But I did beat the habit, right? Like I did get away from that. I caught myself as like, this is not healthy. It's not making you feel any happier. Just don't watch it. You cannot make the petals of a flower bloom. You know, it will happen in due season when it is time for it to kind of happen. And you think, good, and you get to a better place mentally. And then the thing starts popping and you go, oh, well, maybe I'll look at it again. Oh, this is nice.

31:22you know and then and then the funny thing is right 25 at one stage on the week right and then i'm checking and i'm checking and i'm checking and i'm checking and it's like and it dips two percent you know it's like and i straight away clocked it it's like what are you doing so yeah i i think there is no cure for it but i think there is recognition for it you know that the best analogy i always give is the dieting one it's like you woke up at three in the morning and you found the ice cream in the freezer and you're just scooping it directly out of the cart. No, I think you know what you're doing, right?

31:54Yeah. Everyone's asleep. No one can see you, but you know, you know what you're doing. And it's the same. It's exactly the same when you're checking your app for whatever price movement is on. And I don't think I'll ever stop that. You've, you've, you've always amazed me at the kind of guy who will go weeks without checking your portfolio. And I've admitted on air, it's like, I virtually check it every day. And I just do. And I know it's so stupid. I know it's like, but the frequency will change, you know, and it's not like religiously checking every five minutes. But I can't. I work in front of a computer.

32:27There's a bookmarked link in the bar at the top of the browser. There's a little button. I just click that button. Just click it. Just have a look. Just have a quick look. It's fashion. No, don't do it. Don't. Oh, click. Why not? Then I feel dirty. It's just there. And it's the dopamine stuff, mate. It is the dopamine. It is the same thing that happens when you scroll Instagram or Facebook or Twitter. It's the same thing. It's literally all that. It's just the brain wants what the brain wants. You're right, it's addictive. And this is quite literally the idea. But it's also reasonably quick to get out of.

32:58I do our kind of country trips every year in winter. And I've got to say, both happy and unhappy, that the Telstra coverage is getting better and better every time I go somewhere. The last trip we went on, I was almost never out of range, which is lovely if you want to get something. But also, so we went to Birdsville for the Big Red Bash, the music festival, a few years ago. And I said, no, I've told this story before. But I would pull my phone down my pocket 40 times on day one. In the zero reception, right, which is lovely. But you still, because I'm so used to it, because you want the dopamine hit, right?

33:30So it's partly physical habit. As far as dopamine hit, I wonder if anything's happened on Twitter. I wonder if anything on Facebook. I wonder if the shares are up. I wonder what the news is. I wonder, wonder, wonder. And it's that idea of like, we want the input. We want the input. By day three, I don't think I checked at all. And it really is, you know, there is something really powerful. I hate the idea of detox because detox is stupid. We know medically it's a stupid idea. But the idea of just the tech detox, just not doing it for a bit, it does, you know, it's not hard to change. Now, I went home from the thing and started checking my phone as soon as I was back in range and I'm back into it again.

34:04So it didn't cure me of anything. But yeah, it was nice for a while just to kind of go, there's nothing, I just can be in the moment. There was no, there's nothing that can drag me out of this, right? And it's a really lovely thing to do. So the extent you can, whether it's frankly Instagram as well as share price and everything else, the tech detox is super, super, super powerful. If only because it really does show you. Because you clock it every time you can't access it. Have a look at the phone. Oh, that's right. Nothing. I say, oh, geez, what am I doing? And it really is a nice way to kind of remind yourself that how often you do it when the dopamine can't come because there's nothing to get from the screen.

34:35It really does remind you how kind of addictive and seductive this stuff is. The best practical tips I've had on this is from others and I haven't been great at following them, but I do regard it as good advice, is just removing, adding friction to it. So, you know, like if you find yourself overusing Twitter or whatever, take it off your phone. I mean, you can still log in, right? You can still go via the browser. You can still access it. Or even just take it off your desktop or your home screen, right? So you've got to like scroll through the full list of apps, something like that where it's just not right there.

35:11It's kind of like putting the ciggies up on the top shelf as opposed to on the kitchen. You know, something that just like, I still get them. They're still there. And I know that they're still there, but I don't, you know. It's just a really healthy thing to do because you're going to, what you're going to find is that obsession is going to just make you, there's two great mistakes that you'll make. The one is feeling good about a short-term gain and selling it because you never go broke taking your profit, as all the traders like to tell me. and then 10 years later, you kick yourself for the thing that would have changed your life irrevocably.

35:44You took the first 20%. I made 20%, you know, and I would have made 200 times my money, you know? So just putting that distance between yourself. The other one is the panic on the way down. Oh, I need to make this stop. I'm going to sell. I just, you've often said, this is why it's so good for companies to report on a Friday afternoon after market close. Yes, yeah, very much my preference. I just, it just, for the good of their shareholders in the market, it just, you've got no, like you can panic, you can be greedy, you can do whatever you want, but the market's not closed for, it's closed for another two days, right?

36:19And you've got, you've got at least forced thinking time on it and doesn't guarantee anything, but it probably remove, probably significantly diminishes the potential for you to make a rash decision. Oh, we haven't talked about this, mate. And we hadn't planned to talk about this, but as you were talking, it reminded me of the Friday afternoon thing. NASDAQ has announced plans, or reportedly is announcing plans, to trade 23 hours a day. Have you seen that? Well, I haven't, but it's coming, right? Yeah, yeah. It'll come here. Yeah, of course it will. And in fact, at some point, exchanges kind of collapse into themselves because if you've got something open 24 hours a day, it doesn't matter where you are and you can choose currencies and things.

36:59I would normally do ASX for a million reasons, including that one. Dude, it was T plus five settlement when I started in this game. Plus five? Yeah. I don't remember that. No, no, no, no. No, no, no, no, no. I stand corrected. It had gone to T plus three. Wow. I remember some of the old guys, oh, I don't know about this. What am I talking about? In the old days, kids, T was the trade, right? Yeah, trading day. So you buy shares on a Monday and plus three would have meant that Tuesday, Wednesday, Thursday is when you had to come up with the money. And same if you sold, there was a three day. Now it's T plus one.

37:27Yes. And you kind of think, but it's all just bits on a database. Why isn't it T plus zero? Why isn't it banking's faster than that? Yeah. I'm swapping my share for your money. I'll give you my share I'd like my money now. I was like, why would you not? That makes no sense at all. So I didn't mean to interrupt you, but yes, it's probably not a good thing for all of these psychological reasons, but I feel as though it's inevitable. It's coming. Yeah. And the reason I raised it, mate, in the context of what you were just saying, though, was because when I talk about this, people, of course I should be able to trade whenever I want, and of course I want to respond to the information, and, and, and, and, and, and.

38:08And I'm not going to, I should not say for a second we should ban that. I'm not that person. Well, sometimes I'm not in this case. So I'm not saying you shouldn't be able to do it. What worries me is that the, all of the reasons for, quote, needing, unquote, 23-hour trading is very much the case of so I can be the master of the universe and so I can do my thing so I can show how good I am. It's just me, right? No one else. Well, it's not even that. It's just... It'll only be me who's doing this. It's just the idea of like, well, of course, I'm so good at trading that if I could trade$20 ,000, I'd make even more money.

38:39So it's not so much just me. It's the I can use that tool for my benefit. And that's just me you're talking about here, which is better of like, is there reason not to do it? Probably not. Do we need to trade at 3 in the morning on Woolies futures? Rather trade at 10 the next morning? I mean, here's the thing. The number of traders aren't any different overall. The number of companies aren't any different overall. Well, his future isn't any different overall. The chance that trading at 3 o 'clock is meaningfully different in the morning from 10 or from 4 in the afternoon is so infinitesimally small.

39:13I need to respond to that bit of news. And as you said, well, someone else is doing it anyway. It's not even someone else. It's someone else's army of bots. Yeah, right, right. Exactly. High-friced traders. I just think the whole idea is, again, I'm not saying we should ban it. Those who say we should do it because then I can do X. That's the mistake. That is fundamentally the mistake. You're changing ownership stakes in business. Well, if you're not, you're trading. If you're trading, then good luck to knock yourself out, but I reckon you're nuts. But like, what is the share market? It's a place to exchange ownership interests.

39:47The further we get from that, the more we casinoize it. And again, you're welcome to do it if you want to. Go to the casino if you want. Day trade in the ASX if you want. Do it if you want to do. But the idea that somehow more access, more trading, more open hours improves outcomes, when we know that fees continue to eat up more and more of our returns, well, it's going to make so much profit. And that's shared amongst its shareholders at some point in time. You can play silly buggers and try and trade if you want to. And again, go for it. But I think the arguments for it are largely fallacious or frankly egotistical.

40:20Just that idea of like, you know, if I could get access to it, I could do this. It's like, well... I don't think I'd be even more cynical. I'd say the reasons for it are is this like, we make money when, when do we make money? Sorry, yes, absolutely. Oh, when people trade. Oh. Right. Hey, should we let people trade more? Yeah. Yeah. Oh, why? Why should we do that? Well, you know, it enhances liquidity, don't you see, and price discovery. Price discovery. You know, okay. But it's not because people will trade more. No, no, no, no. No, no, no. That's, you know, follow the money. It's the golden rule of life in the modern era.

40:56Follow the money, you'll find the reason. There is more money to be made. If you can reduce the barriers for the average person to start trading and you just make it, again, remove all the frictions, right? Just put it right there and you can press a button and you can own some of Nvidia. Okay, great. Maybe more people will do it and maybe they'll do it more often. Let's go back to your story about three in the morning, you jump up and go to the toilet. Yeah. You check the Bitcoin price. you might also say, well, I'm going to sell my Woolie shares at three in the morning because I'm up, and I might as well.

41:29And the institutional trades and all, it's just, you know. So I actually can do it with Bitcoin, right? It's 24-7, 365, you know. Part of me is horrified but also fascinated by the idea of checking out the trades placed after midnight on Friday and Saturday nights by some drunk bloke in the back of a cab when he's finished betting on the horses and decided to turn his attention to the share market. It's an interesting idea. I don't know that the Friday and Saturday night trade is probably not the best. But mate, your point about taking stuff off the phone, there probably should be a breathalyzer or something on the trading app before you decide to go and sell your shares after a few shandies on Saturdays.

42:05As I say, I'm with you on whether, like, do we really need it? It's coming. We don't. It's coming. Oh, it's coming. For all the reasons you said, the obligatory monger or buffer quote is never think about something else you should think about in power of incentives. Yes, exactly. It's not the exact quote, but it's close enough. That's the story. Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener.

42:32Mate, let's take a pretty big right turn. Big business collapse this week. We saw Bathler, who frankly I'd never heard of before they started reporting this thing. Maybe I've been living under a rock. If you're outside of Sydney, you definitely wouldn't have heard of it because it's a Sydney-based developer. They apparently have 15 ,000 homes under contract to be delivered. I don't know what stage each of them are, how much money's on the line here. It went broke this week. They appointed a voluntary administrator, a voluntarily appointed administrator, probably should say, and apparently has debts of over$2 billion.

43:05I said 15 ,000 homes at risk here. The reports in the paper on Thursday morning were that they wanted$20 million additional from creditors just to keep the thing afloat. So the administrators have basically said, look, you're in the hole for$2 billion. If you don't give us$20 million now, and not a toward, right? The administrators are separate. So their job is to, they're not going to lose money to make this thing work. They are literally, we don't have the money. We can't keep this operation running unless you give us another$20 million to see if we can get to a point where you can have some of your$2 billion back.

43:32That's how dire the situation is for the company and for the administrators to try and manage this business now. And I thought it was worth thinking about the why here. And I want to separate out very quickly and very early and maybe you disagree. I don't think you do. Business failure is not bad for the economy. It's bad for the people involved. But businesses fail all the time. It's good for the economy if I can be that guy. Businesses fail all the time. And when they do, the resources, financial and human, get redeployed to more productive, more efficient, more successful, more profitable, more value-creating avenues.

44:05By definition. That's why they failed. Right. They couldn't deliver value in an economically sustainable way. Exactly. And so, often when I do media, I'm asking, oh, there's always numbers going every three months about the number of business failures. And it's X thousand businesses. And it's kind of, I try, because you can't, in an hour-long podcast, people know us pretty well. In a five-minute radio spot, you kind of care, business families are good. Anyway, let's move on. So you've got to try and sort of explain that, you know, it happens and it's not unusual and it's kind of normal and it sucks for the people involved, but it's, you know, it's what creative destruction is, what capitalism does.

44:36Things move towards better outcomes. Yeah, he's not to celebrate. Absolutely. Right, exactly. But it's to recognize as a, it's not a bug, it's a feature, right? Like it's, yeah. So families happen all the time and we shouldn't, again, sad for the people involved, of course it is, economically overall. This is always the challenge with the economy, right? And I know we talk about the economy. I know you're very justified. There's no such thing as the economy and there's not. But overall, it's the needs of the many needs of the few thing. People are deciding this thing is better over here. We are all better served by a bad business going broke in time.

45:05And it's a bit like tariffs, not to want to open that wound again, but tariffs have generally concentrated costs and diffuse benefits. They put a couple of American oil workers out of work, but every other American gets a cheaper car. Yeah. All right? So diffuse benefits, so everyone gets a little bit, concentrated costs, a few people lose their jobs and probably their homes. And that's just the way economies function. And if that sounds harsh, I apologize, but it's kind of the story of progress, right? So if you don't like that, good luck renting your videos at Blockbuster and using your Kodak camera and driving your 1950s Ford Edsel because Toyota's never allowed to make the Edsel fail.

45:43This is how these things work. You probably know that if you're listening. Anyway, I say that because Bathurst collapsing in and of itself isn't necessarily notable and necessarily a big deal, other than it's a very, very big thing. It's housing, which matters a lot socially. So there are some really significant ones, but businesses fail all the time. So that's not the story. What I think is fascinating, mate, for me anyway, is the way the building construction sector works and the extra challenges they've had recently. not as an excuse, but we saw a lot of builders go broke in 2021, 22, I think.

46:16I'm getting old, so my years are all coalescing together, when we first had the outbreak of inflation. And the reason was a lot of those builders had signed fixed price contracts in what was then a low inflation world. And so all of a sudden, building materials go through the roof cost-wise and the builders are like, well, hang on, I thought it was going to cost me five and I was going to build a house and sell it for six. Now the building material is going to cost me$6.50 and I've still got a fixed price contract for six, I can't... If I build the house, I might lose money. And if I've got a dozen of them to build or 1 ,200 of them to build or 1 ,000 to build, I'm sorry, 10 ,000 to build, I will go broke.

46:50So I can't... And that's exactly what, literally what happened because they'd signed fixed price contracts in a high inflation world. And no, sorry, they signed a low inflation world and they got swamped by the high inflation world. What's weird this time around is I suspect the causes are kind of the same, but these are contracts that was done in the last couple of years for the most part, right? It's like they don't get to say we didn't know inflation was a thing. No, this is my take. It's an operational failure. They didn't manage the business well. I mean, I'm not celebrating that. I'm not trying to be mean.

47:20It's just a statement of fact. Yeah. Like there are other developers that haven't gone broke. They didn't sail so close to the sun, you know? Anyone who's working on fixed price contracts, right, where you're the one carrying the bag. Yes, that's right. You add in some padding, some buffer there. You know, it's like, you know what, if everything goes absolutely perfect, we'll make a nice little margin on this. But if the one little wobble comes into it and timber goes up or something happens or there's a delay with the cement being delivered and then we're out of business, like you have entered into an extraordinarily risky proposition.

47:53And it's only a matter of time before you go bankrupt. You know, so it's sort of like, or on one hand, you can say they, it was unlucky. On the other hand, you can say, this is the world that we live in. One of uncertainties, one of unfair left field, you know, black swans. It just, so, so we always, we haven't done it for a while, but we've talked about the value of the balance sheet, the value of conservatism, absolutely pursuing growth, absolutely pursue growth. Of course, you want to pursue growth, but just doing it in a prudent way that accounts for the inevitable challenges and speed bumps that the world is going to throw at you.

48:37I always find, it just sticks in my craw when something like this happens and, oh, there's nothing that anyone could have possibly seen. But I bet you if things had gone the other way, where all of a sudden there was a massive spike in demand and you made absolutely squillions that wasn't part of the business plan, you're not handing that back either. And then neither should you, right? Like that's just that people are taking calculated bets. They're taking risk. And if they're right, they're rewarded. And if they're not, they're punished, right? And over time, what you get is people who are far more prudent, far more practical and far more better at operating.

49:11And it's like, it feels a bit harsh, but I kind of say, well, you guys. Also, not just these guys are like, you really had to have a think about how you were running things here, but also the private credit that gave them the money. Right, exactly. Well, that's fascinating, right? We'll give you some money. It's like, at these rates, okay, great. Did anyone do due diligence on these guys as to exactly the nature of their contracts and the risk? This is, you know, fixed interest, man. I'll say it all day long. It just really bugs me how it gets put as this sort of low-risk kind of asset. And it's like, it's full of risk.

49:44It's absolutely full of risk. And here's a great example of it. There's some people out there who put their money into a private credit fund. Hey, we just develop in diversified. We invest in diversified developers and there's very strong tailwinds and we lend them at, you know, we get 8 % on our return and rah, rah, rah, it all makes perfect sense. It's like, yeah, but as long as the party is going here, right, and they've come unstuck and they've come unstuck, yes, the economy was a little bit nasty for them. Yep, that's what they do. That's the world pushing back on you, right? And I feel as though it's not to, I'm not trying to look for, you know, a bad guy to bash or to blame or anything.

50:27It's just to acknowledge the reality of the situation. I actually said on, I got on Twitter for the first time in forever, just to make the point that here comes a bailout, right? Because it was just so peak Australia. If it was like, you know what, Albo gets up there and says, hey, we should bail these guys out. It's like, it's an absolute madness. is no, do not. They are clearly not able to run the business, demonstrably not able to run the business, regardless of what the factors were at play. Someone else said we should take them over. It's like there's nothing there. It's a people business.

50:58There's no machines there. It's a bunch of contracts and a bunch of people. Half a dozen hammers and some wood that hasn't been used yet. They're a coffee machine and a photocopier. There is no hard assets. There's nothing to take over. There's nothing to take over. I mean, the contracts could probably be bought for pennies in the dollar and arguably there is value in that, right? And someone will probably pick up that. The administrators will find a way to do it. They have signed contracts with other people. Someone will come and say, well, I can make it work at this price. Someone will eat the loss and life will go on.

51:29And it's exactly what needs to kind of happen here. So it's kind of half joking when I said, here comes a bailout. But at the same time, would have you been that surprised? Would have you been that surprised if they came out and took them over or bailed them out? which is the absolute worst thing to do. It's like, hey, you wasted a bunch of resources. Let's reward you by allowing you the opportunity to do that again. It's absolute madness. Here's the other problem, mate. If anyone wants to buy this business, how do you – I'm talking about bailout. So the administrator appointed. The administrator's job is to see if the business can be salvaged or sold off or something else, right?

52:01The asset's sold. To your point, there's probably no assets there anyway other than a truckload of debt. But also, this is a business that has literally looked at it and gone, we can't complete this work for the price we quoted. Yeah. Who buys that business and goes, well, I want that. I want to honor those contracts at loss-making prices. So effectively, even if the brand survives, and look, I'd love to think those workers can find work with another builder. We'd love to think that people get their homes completed by someone in quick time. There's a whole lot of human misery involved in this collapse, right?

52:29So let's not gloss over it too quickly. But the reality is buying the business as it is, A, there's no asset. B, it's got some effective, well, presumably loss-making contracts. So even if you – who takes it over without putting more money in? You can't. It's going to have to be repriced. Who's carrying the can at the end of the day is the people who prepaid their deposit. Yes, exactly. Well, so them, the people who put money in for private credit, they're going to wear it as well. And the people who are employed here are going to wear it. They're all going to wear it. And again, it sucks, but it's – you've got to keep this two ideas in your head at the same time.

53:07And I know this really upsets some people. That is still better than the alternative. Oh, gosh. Now, some people will yell at this machine. Well, it's easy to say, Philip, you're not losing your dressing, you're showing your bum pants and someone's out there, the carpenter's lost his job and the person not getting their house completed. I get it. But there is simply no – I'm a polyandry at the best times, right? But there is no utopia in which we can say, actually, what will happen is we can run a system whereby those people get the house at the price they want. The workers keep their jobs. the company gets to make some money uh it just worked out there that is there is no world in which that is true and so we are capital we are rewarding waste we are rewarding value destruction like it's the opposite of what we do yeah yeah this is the process of of finding the least worst set of outcomes and it's not going to be negative i'm not it's it is literally a case of there is no there is no perfect right there's because we can't so it's not even that mate it's it's i think these things always have a, people are desperate to impart a moral dimension to it.

54:09It's just reality. I just, they're at least just boil it down. You know, someone said, I'll pay you this much to buy me a, build me a house. I'll do it for you. And then they didn't build the house. And it's just sort of like, well, contracts fall over all the time. I mean, it's again, for a million reasons, it's a different tragedy, but that, that has happened. This isn't what could we do? What might happen in the future? This is historical fact without a time machine. machine, you can't change it. The damage has been done. The loss has been made. We can either accept that reality or we can deny that reality.

54:44And it's just like, to accept the reality isn't because you're a nasty person or that you're celebrating in the misery or that, you know, it's just how it is. It just is. I would prefer if the sky was green. Sorry, it's blue, But it should be green. Yeah, but it's blue. It's what makes the whole discussion so frustrating is because people just feel as though there needs to be almost a moral dimension to it. I mean, maybe if you wanted to, we're cognizant of the risks and stuff in here, you might sort of say, listen, if you're going to be a property developer, you need to carry a certain amount of padding or insurance, you know, on the balance sheet to make sure that you can weather losses or these kinds of things.

55:27But too often the, the, the, the, the mug puncher is seduced in by this, like, Oh no, I signed a bit of paper. And therefore the universe now will honor this no matter what. No, you literally, you literally put some ink on a piece of it. And that, that is all that has happened. And someone said, trust me, bro. Like that, that, that is exactly what, and the, and the, and they, and they didn't, they didn't earn your trust. They weren't able to validate that trust. And, and, and that's what it is. Now we can, we can think about what we go, we do going forward, but that, that fact is immutable. I think that's right.

55:58The only thing I would say, I think you've described the past. What people will want to believe could be true is that somehow from here, there is a solution which nobody loses. And the problem with that, and you're talking about moral hazard a lot. But they've already lost, is my point. They have lost now. People like them to make them whole. So maybe, to your point about it, the government could bail it out. We do anything. The government could make sure all those houses get built by those builders and just wear the loss, for example. That is a choice that governments could make. Oh, totally.

56:27And may well, to your point. Moral hazard is a phrase that describes a phenomenon which is real. It gets used too frequently and too regularly. But in this case, the challenge is – It's very apt. It's very apt. Give me the Charlie Munger quote about heaven and hell. Oh. You can't believe in – no, how does it work? Capitalism without – Oh, yeah, sorry. Capitalism without loss is like heaven without hell. It was like religion without hell, right? You need that element there for the whole thing to kind of work. Yeah. And the point of that, sorry to put you on this part, you're normally your favourite quote, so I thought I'd let you do the honest.

57:09No, yeah, I do. And that's kind of, I don't know, see, I guess why I'm pausing, mate, is I know I've talked to people in real life, IRL, as the cook could say, and on Twitter and other places about, you know, surely there could be a world where this wouldn't happen or where we could solve those people's problems when they happen. And we could. We could choose to case by case. The problem is if we don't let failures happen, what happens? Well, every builder is going to quote under so they can win the business. Why? Because they know that they're going to get bailed out. And be looked after. Where's the incentive to pad, to your point?

57:42And if that happens, then who wears it? Well, taxpayers are going to always fund it. Okay, well, that means more tax money. Well, that tax money means that money can't be spent on something else so that other business goes broke because the tax money is being spent there rather than over there. There is no scenario in which, and almost back to your coconuts on the island thing you've used in different areas for sale money and stuff. There's no area in which we can create the extra coconuts just for the sake of it, to make all the other coconut trees okay. You take coconut off one tree, put it on the other tree because it lost its coconuts and around and around you go.

58:08And eventually you say, this actually is value destructive. This actually makes us all poorer overall if we allow the system to work. For all of its failures, and for all of the, you know, it's the old Winston Churchill line about democracy. Democratic capitalism is the worst system in the world except for every other one we've tried. And so it's kind of like, would it be nice if there was a better system? Yes. And if you're a dreamer and you want to dream up a better version or want to imagine a world where it couldn't, we wouldn't have failure, go for it. The problem is that right now, we have no workable solution or frankly, even a workable theory that is less worse.

58:41This is not perfect. I'm not for a second saying it's perfect. It's just not, this is the least worst system with the least worst set of outcomes. and the other 99 % of the time, people get cheaper houses because builders compete on price. Bathurst just pushed too far and got caught out. This is the point of finding equilibrium prices, right? What is the price at which a house should be built? This price. Well, actually, that price should go broke. Okay, well, now a higher price. Well, okay, as a homeowner, I don't like that, but if the home's going to get built, then that's, okay, that's a market price.

59:08It is the process of working out supply and demand of exchange. I don't want to get too ideological about it because it's not ideology. it's just a very practical reality of how these things work. So for all of the awful outcomes for the individuals involved, and they are genuinely awful, it is still the least worst system. And yes, I am saying that overall, we're all better off because in every other part of your life, even if you're someone who got caught by this, you want to build a home, you signed a contract, every other part of your life is better than it would be because you have a capitalist system running, which makes your fruit and veg cheaper than otherwise would be if it was a command economy.

59:42It makes your, you get a job that you can do and add value in a way you couldn't do otherwise. You don't just get to say, I want all the good things and I want my house guaranteed because it just doesn't work that way. No, it's something funny about housing, isn't it? Like, I mean, you can frame it. Yeah. Well, you can frame it up. I mean, we talked about Bitcoin before, right? So let's imagine that I and all the Bitcoiners got together and we

1:00:09lobbied the government to sort of say, hey, we made an investment and it dropped 50%. Yeah. You should pay us out. It's loss. Now, people would spit their coffee all over your face before they fell on the floor in a laughing fit. Like, no, you made an investment and it didn't work out. An investment is the acceptance of risk. It's almost axiomatic. It's almost part of the core definition of what an investment is. It is to expose oneself to risk for the hope of gain and the potential of loss. And again, you don't need to put a moral dimension onto that. It just is what it is. And I'm not trying to make light of the situation, but if we're going to protect people from investment loss, then just none of the calculus makes any sense.

1:00:54And the bottom line, get rid of all of the sort of finance speak, is that we all just become cripplingly poor and we actually ensure that people who are doing most of the damage get rewarded. Like that just seems like ass backwards to me. Like why would we do that? I was like, hey, and by the way, I don't know anything about the people running it, but I bet you the people at the top were on extraordinarily good salaries, right? And they took all of the, they signed contracts with counterparties, ordinary mum and dad Aussies who wanted our home built and they let them down. And we're going to turn around and say, yep, we're going to allow you to keep doing this because you're obviously so terrible at it, right?

1:01:36We'd like more. Like what sense? And go, oh, but jobs and this. And I'm like, yeah, again, it's a tragedy, but you've got to follow through on the thinking of what happens at the other side. And I guess what I would say, just to round it off because we've flogged it to death, but when you are investing in the property market, whether it is as an investment or you're buying your own home, remember that there is a potential for loss here. I don't know why we've somehow gotten to the stage where we think that this is just a God-given right, that I should be able to buy it and I should get, and I should double my money every seven years, you know, so saith the Lord.

1:02:16No. And I'm not saying, I'm not trying to say don't invest in property or property is a bad investment or anything. I'm not saying that at all. I'm just saying you're putting, you're exposing your money to risk and you must be cognizant of the downside. Like if we were talking about, you know, NVIDIA again or something, I'd be saying the same thing. I always say the same thing. Be prepared for it. You might be wrong. These are the things you've got to look for. But I think the conditions for the outrage and the moral indignation really are just reflective of a very poor understanding of what was actually going on here, you know, which is human beings making contracts with each other, with both parties under the expectation that they will profit from that relationship.

1:03:01And honestly, even if people didn't - And if they're wrong, they're wrong. And it just is what it is, right? Even if people didn't realize it at the time, and again, homes are shelter as well as investments. So there is a line there which is unusual for some other assets. But at the time, you probably bought the Bathurst property because it was cheaper. And why was it cheaper? Because they were taking the risk of not being able to complete profitably, which is exactly what has happened in the event. Now, I mean, you're bad for taking the cheapest price. It's just that we don't think about that in that context of, I've got to buy something from one of two people.

1:03:30I can go to a website I've never heard of in a country I don't know the regulations for because I can buy that thing at$14.99 or I can pay$14.99 and buy it from Amazon. I own shares for the record. Who do I buy it from? Well, you can, now, we instinctively get, nah, it's not PayPal. I'm going to use my credit card directly. I've never heard of that website. The price looks too good to be true. I'll pay a couple of bucks to get from Amazon because there's no one can trust them. Right. That's kind of the equivalent, right? We don't do it with housing. Or I go with the cheap one, but I accept the risk that it might not come through.

1:04:01Fair. Sorry. Yes, you're right. Yes. And I don't know that we should necessarily... It's hard for people... Again, we've said millions of times, the housing market is the housing market. The cultural realities or the cultural expectations are the cultural expectations. I really don't blame people that much. I know I've said it before, for not having to be financial analysts when buying investment property or properties at all. I will say this is the one area where I do, and I get people feel like they're desperate or they don't have a choice, or I know there's lots of moving parts here, but buying off the plan is just the world's worst idea.

1:04:33Now, if you're a property developer - So many people do it. If you're a property developer and listing, then I'm my apologies. You're paying before you know what's completed, before it's being completed. Under the laws, and I'm not going to, I'm no property law expert, they're allowed to change the floor plan by some percentage in the process of building, and you're stuck with what you get. I mean, it is absolutely stacking. Assuming they complete it. Right? Yeah, well, that's right. So you assume it's completed. If it is completed, you assume you're getting something that's reasonably like what you thought it was.

1:05:00In the timeframe, you thought you might get it too, which is the other factor. And I get you might think, I like the area or I want something brand new. That's all cool. You know what I think? If you're buying an established home, I think you're entitled to believe that will settle based on whatever legal, you know, whatever can be brought to bear. I just think we, to your point about, you know, why do we believe? The why is complex and detailed and historical and cultural and all sorts of stuff. But I really, really, really, really do think, if you're listening to this, please think twice, three times, and eight times about buying off the plan.

1:05:30Here's the other thing, by the way. Why are developers doing that? Because they want your money up front. And they're entitled to want that. If that's their business model, that's their business model. Of course they do. Of course they do. So think about why, right? I'm not even throwing shade at them. Who doesn't want to be paid? Would you like to be paid now or 180 days after you deliver? I'll take it now. Yeah, yeah. Because I'm not an idiot. Just please, please, please, please, please. Good thing about property, you don't have to be licensed to give property advice. My advice to everybody is don't buy off the plan.

1:05:58Just don't. Just please don't. I tell your friends, and I know the new place looks good. You go to the showroom and it looks great, and the scale model looks wonderful, and there's trees everywhere, and it's this big, and it feels awesome, and maybe it will be. And it probably will be in most cases, frankly, but man, just buy the one next door. It's already there. Because you know what you're getting. You're settling with someone who owns it. The property's been built. You can get your inspections done. You're not dealing with dodgy work, but if that happens, and again, there are some, most don't.

1:06:23So I don't want to, I'm not besmirching every property developer. Most go up, they get built, they're good, they're fine, they're wonderful, everyone loves them, that's great. But just, your point about risk, mate, is like, what is the risk that I, if I'm spending high six figures for a home, it's a lot of money to bet that the place that gets built is going to be what I think it is. And maybe there's a 10 % chance I'm unhappy and a 1 % chance that I lose my dough. It's like, that's too high for me. Am I going to put six figures on the table with a 99 % chance of losing it? No. No, I'm not. Because all I get is what it's worth.

1:06:56There's no upside. There's only downside. So the greater, the more risk you take. I just, yeah, I'll stop ranting, mate, but please don't buy off the plan. Please. Yeah. And just, I mean, it's such an interesting distinction between the pre-built home and the one that's going to be built. I mean, this is what the administrators are doing. They're now going, okay, they can't fulfill the contract. let's see what we can do to make them whole oh there's nothing there oh there's absolutely nothing there coffee machine and a photocopier now at least if if something happens with an existing house like well here's the thing over here you know we can we can we can settle we can make you whole because it's over there it's just there it is right there you can grab it we can give it to you and it's yours right and instead of like i think counter party risk is something that just doesn't get thought about enough i'm trying very hard not to talk about u.s treasuries right now, but you know, but it's a thing.

1:07:47It's a thing, right? Like you, there, it, it, it feels like I'm being flippant, but I think it's actually very on point to just say, it's a, trust me, bro. It's a piece, it's not even a piece of paper. It's really, I promise I will do this thing. And, and I'm not, that, it makes it sound like, oh, you should never trust anyone and go live in a bunker and you know, no institutions or systems can be true. I'm not, I'm not saying that, but I am saying we've got to be cognizant of whenever you're doing any kind of deal, who's on the other side of the trade? What can go wrong? You know, if they can't make good, where is my peace of mind?

1:08:22What is the, you know, what's the word I'm looking for here, the collateral that will make me whole? And when you're buying off the plan, you've literally got a contract that says I promise, and if they can't make good on their promise, there's nothing else to back it up. Yeah, yeah. You know? Yeah, I think we've heard of that. There's probably something to be said in terms of consumer protections. There's probably something to be said in terms of licensing requirements. You know, like if you want to do this, okay, this is just the nature of the game you're getting in. You need to make sure that this, this, and this, and in the event of blah, blah, blah, blah, blah.

1:08:55So let's have a serious discussion about that. So we're not so evil to be jumping up and down on the grave of Balfour here and the poor people who suffered as a result of it. It's like the data center debate. You know, it's just like it's too surface level, shallow, irrelevant to be serious about it when there are absolutely legitimate grievances and practical solutions. It's just that the level that we debate it and discuss it is just juvenile, frankly, and very likely to be unproductive. Yeah, it is. And look, you know, I really feel desperately sorry for people who've been caught up in it. It breaks your heart.

1:09:33It really does. And also, too, you mentioned protections. The other thing is just that reality of why are we in this situation? And people are saying, well, it's not what I can afford. I can get it a bit cheaper because it's off the plan, and I feel like I have to take the risk because I can't afford to buy otherwise. So it's wrapped up in all of those things. And again, it's not a justification entirely, but you can understand where people get to of, well, everyone else is doing it, and it's been okay so far, and maybe I'll be okay, and it's all I can afford, and I really want the new place. And that's, I mean, back to the Bitcoin thing, the stories we tell ourselves, right?

1:10:03Not the big deal, not the big deal, not the big deal itself, but the stories we tell ourselves around, you know, well, I guess I can try and justify it to myself because I feel like I have no choice and I want it to be okay and, and, and. It's just really hard. And I don't, I really, I know I say it all the time, mate, I don't think, I don't think in a mature society we should expect people to have to be, you know, high class risk managers in some of these things. Buying a home, I don't know, you know. The taxi driver and the factory worker can't buy a home with a simple contract, knowing what they're getting, what they're getting, there's something wrong, right?

1:10:35Yeah. We can afford to do that. If you're buying an investment property, a different level of, well, again, even then, the accountant says it's okay, the mum and dad say it's okay, your mate's doing the same thing. There's just something to be said for things for first principles and, as you say, Matt, allowing for the what can go wrong. That's the real key question is, okay, this all sounds good, but what could go wrong? If it goes wrong, where am I going to be? And is that a risk I'm comfortable taking? And I think, you know, if we're genuinely clear-eyed, Hopefully the answer is either I won't take it or I'll do something different just to minimize the chance of that being a problem.

1:11:07And it's so easy now too. We were talking off air about this. We will continue to revisit this topic because it's unavoidable. Yes. But now you can just ask the AI, here's my contract. What can go wrong? What am I on the hook for? Just have a – for God's sake, you're going to put six figures on the table here, spend an hour or two just going back and forth with an infinitely patient expert lawyer, right? Like to do that, do that is probably a good idea. It was – I mean, that's where it was I think much more difficult in the past is you're right. Do I have to be a contract law expert? Do I have to understand this?

1:11:45I don't understand the ins and outs of this. Now you've actually got expertise on tap. and before you sign anything, any kind of contract, just like run it through the aisle. Dumb this down to me. Explain it to me. I'm 12. What are the things that can go wrong? You know, just keep going back and forth. And you'll at the very least come out with a far more clarity and at least know where the risks lie. We've just got to stop treating this stuff as riskless. That's the tragedy, right, is that whenever something is too good to be true, it's too good to be true. And there is nothing that is more too good to be true than a riskless investment.

1:12:22Anytime someone ever pitches you a riskless investment, run. Run. Particularly if it's a riskless investment that has a good rate of return. Yeah, that's right. You know, they don't exist. Don't exist. I think it's – you're 100 % right, mate. I think the – I don't want to go to the AI thing necessarily, but you mentioned it. I think what's really important and where – I'm a massive fan of AI. We'll talk about it a bit more. We talk about it most weeks, so we won't do it this time necessarily, other than to say – and again, I say that and we'll probably talk about it. But my point is the critical thinking that AI can't do for you is the questions you just mentioned you should ask the AI.

1:13:01And this is really where we've got a job to do with or without AI, which is just thinking about – AI makes the questions easy to answer, which is the beauty of it, right? And eventually it'll probably also – if you say I'm buying a house, what I went into to know. It'll give you the critical question to ask as well. So it'll get there. But the kind of point is, if you ask AI, how am I buying a house? You know, you can ask any sort of questions. But the question of what should I be worried about? What risks are there? What am I not thinking about? What's in this contract? Unless you think to ask them, you don't ask them.

1:13:30And so we're kind of, you know, AI is as always the tool, which is not to say for a second you're wrong. You're a million percent right and AI is going to get better and it's going to be awesome and amazing for all the reasons. But it does still require you to ask the question you actually want answered. And too often, you mentioned the thing too good to be true, we get lollin or false insecurity by when things don't happen, right? The earthquake that hasn't happened, the volcano that hasn't erupted or whatever. And then it does like, oh, okay, that was a thing. And it's, again, human nature about recency bias 101, right?

1:14:00But nothing's happened, nothing's happened, nothing happened. I guess it won't happen then. Well, maybe, or maybe this was an exceptionally dull, quiet period, which is the exception to the rule. And that's where the kind of, again, I don't necessarily blame people directly because it's like, what is happening? What things am I not seeing? It's the dog that barked in the nighttime, right? So what isn't happening? What am I not seeing? What's not there that I need to be mindful of? Actually, that's the God-level prompt. I use that a lot. I use it a lot, particularly when you're coding and stuff, and you just don't know what you don't know.

1:14:29Because, hey, can I do that? Yeah, you can do that. Let me do it for you. Oh, okay, cool. It's very tempting to go, go do it. Should I? And I speak from experience, and then you spend the next few days unpicking the disaster. you know um but what a really good prompt is outside of coding for law for anything like that is what is the thing that i am not considering what is it that i don't what is it that i have that that most people miss here i assume that i'm missing i'm going to assume that i'm missing something and i'm going to ask the ai and then it's very good it's like oh you should totally consider this this this and this but it won't do it won't always do it's getting better but it won't always do that yes unprompted it just wants to it wants to please it's it's it's the way the training works, it rewards, it gets rewarded when it, when it makes a human happy.

1:15:12Yeah, that's right. You know, it does. And so, and so I think that's, that's always a great way. It's just like, what don't I know that I should know? And you can frame that any way that you want, but that's a really good prompt to always sort of add in, particularly if you're going to use this stuff for, we'll do that one day too, how to use AI for your investing research. It's just like, you can be very like, what are the kind of things that might be important to know? Why are they? What are they in this particular instance? And what is the non-consensus view of this? I'm always trying to sort of go around the, thank you for that answer.

1:15:48That's actually very helpful. And most of the time it's almost perfectly right, but maybe I'm missing something here. And I think with these kinds of things, it's very good. I've never bought a property off the plan before. Or what are the things that usually go wrong when this happens? What are some of the legal clauses that I need to be aware of? You know, just be aware of what, know what you don't know. Or know that there are things that you don't know and find out what those are. I want to bring it back, mate, because I bought AI into it, but didn't need to have been. And so, I want to go back to your point.

1:16:21Is those the questions you asked whether you got AI working for you or not? And what it requires, and this is, again, back to our investing, and I don't know about properties, is about any decision in life, is if I want this to happen, what questions am I going to ask? And so the hardest thing in the world is to be dispassionate, right? I've done a week's worth of work on Company X. I want to buy the shares for me. I want to recommend them to our members or something. I'm so invested in this thing. I want it to be true. Yeah. And I'm going to work really, really hard to be like, I might blow up this entire week's work, but I should if I've made a mistake.

1:16:55and so the emotional drive is, and by the way, we also have said this before, we know from research, I'm no social psychology researcher, we know from research that largely most of our decisions are emotions that are justified by rationality after the fact. So keep that in your head, start with that. I'm going to see something and I'm going to say, I want to buy that property and I'm going to tell myself, I want to buy that property and I'm going to say, why do I want to? Well, obviously it's close to the train station and it's new and it's big and there's a swimming pool in the complex and my brother-in-law lives down the street and it's cheap.

1:17:31And I'm already talking myself into it, right? I insidious want it because it looks pretty or I like the color or whatever, whatever emotional response I had to it. And that's, by the way, why marketing is so bloody insidious. So you go, right, okay, I want to buy it. How will I rationalize myself for these five reasons? Okay, cool. Is there any reason I shouldn't do it? Now you're immediately thinking, no, no, no, there's not, of course not. Maybe there is, but that's probably – so what you start to do is rationalizing away the risks. Well, it's a risk, but it's only a 1 % chance, or it doesn't happen very often.

1:18:00How often does a builder collapse really anyway? And again, I'm making that troppily back about any decision you make in life, right? We rationalize the decision away. Oh, you know, that potential employee, oh, they've got these couple of character traits, but they're smart people, so they'll be okay, or partners, frankly. You know, we just do. We just – that's a lot of money for that new laptop. Yeah, but it's got the Intel Pentium 48 AMD NVIDIA chip that does eight tera haskells of whatchamadova thingies. And so I need that because you can't possibly have a computer that uses without all those things.

1:18:34Okay, I guess I'll get it then. It is just our brains, you know, it's not even our brains, our instincts are conspiring against our brains. So whether you're using AI or not, the genuine question of, I need to really pretend I am my best friend who is trying to make sure I'm not rushing into this. And in slowing myself route down, I need to really genuinely confront this and say, if I'm making a terrible mistake, I really, really need to know now. And yes, I want it. Yes, I'll be sad if I don't end up doing the thing or buying the thing or whatever it is. But at least make sure I've done the right thing.

1:19:10And the reason I make a big deal with this Ram is it's stupid hard to do. Like checking share prices, right? But it's just hard to try and talk yourself out of something you really want. Once you decide you want it, good luck talking yourself out of it, right? But that's exactly what you have to try and do. Using AI, the best part of AI is it'll give it to you straight as long as you ask a good question. Try to conflate your own concerns. I could buy that place. Build it back. It's okay. I'll move on. And you've already talked yourself out. If you ask an AI, they're going to give you the full answer, right, whether you like to read it or not.

1:19:40So that is the benefit of AI in that sense. and also its ability to research and give you constructive evidence-based stuff. So do it. I was just making the point that these things aren't new because AI exists. These questions are questions we should have been asking ourselves since we were cavemen and we need to keep doing it. Yeah, it's just a better way of doing it. Like in the same way that the internet was better than going to the library, which was the same than having an elder pass it down verbally, which was better than having to figure it out yourself. These are just better and better ways to do it, but there are also better and better ways to make mistakes at the same time, right?

1:20:14So Robin said, you know, give two different people the same high capability frontier model. You'll get two very different results, you know? One will cure cancer and the other one will produce a mountain of AI slop that's absolutely useless. So, you know, it's a tool and you've got to, like any tool, you've got to respect it, you know? Nicely put, nicely put. Mate, I reckon we're probably done here. Will you come back on Sunday? Yeah, hell yeah. In that case, until then, fall on. Cheers. The Motley Fool and people appearing in this program may have positions in the companies mentioned. General advice only.

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