Is it our turn to try tariffs? January 23, 2026

24:22We get more with less. And then companies fight it out in the arena. And those that win are those that win by virtue of being able to best satisfy consumer demands. And we have our own free will and volition go, oh, that's a really good. I want that one. Yep. Why? Because I want it. That's why. You don't need to know why. I just want it. It's like enough people do that. It is a thing of beauty. And even from an investor's standpoint, this is wonderful. This is where, look, there are lots of different ways to make money on markets and investing. But I can tell you, as a student of history, the big money, the really big money is always made when you see big structural shifts.

25:05You know, the internet being one, smartphones being another, probably put SaaS in there as well. At the moment, it's sort of AI. And so while it does – I mean, I interviewed one of our straw man members earlier this week. He's celebrating 40 years as an investor. He ran a big managed fund there for a while. And he was just talking about some of the lessons over that four-decade investing career. And he just made the point that when he started, there was an article in the Australian or the AFR was about the top 100 companies in the world, right? And this is like how you wouldn't recognize. Like 90 % of them are gone.

25:43Yep. Right? And so what I'm saying is that I don't know what the future will hold, but it's a pretty good bet that all of the biggest names that you – or put it another way, the biggest company in the world in the year 2040 might not have even been incorporated yet. And so this is why I say it's like, yes, that feels like a risk to incumbents, but to other investors, it is an opportunity, I guess is what I'm saying. Change always represents opportunity. And you can make money by investing in a company that just manages to grind away by, you know, eking out a bit more of an efficiency or maybe successfully expanding into new markets.

26:21That's great. You can do really well, though. You can run a long way with that. You know, the big money is made is when Microsoft gets incorporated. You know, Apple turns up, right? When OpenAI turns up or whatever it is, it's when you have that structural shift from the old world to the new world. and you have literal hundred baggers over a decade or two. So it's sort of like I feel as though, and I'm not saying that, you know, everyone should do it the way that they think is appropriate, but there is from an investing lens, I think there's two things. It's like if you do have part ownership in a lot of these big established players, you want to hope that they are adapting to the new world, not in a radical kind of way where they're throwing a baby out with the bathwater.

27:07and also keeping your eye always on the horizon, not to jump at every sort of new shiny thing that's sort of out there, but when the world is legitimately changing, you can ignore that or you can laugh at that. But I just think that there is, your regrets as an investor in 10 years time won't be the stocks that didn't underperform a little bit, is that you didn't buy X will be the regret that you have. Yeah, exactly. I don't know what that is, by the way, but I'm just saying, you know, you've got to stay open-minded and alert to this. You have to balance the optimism and the positivity of a lot of these technologies with a bit of, you know, cold water and reality because both sides of the spectrum are wrong.

27:49The bar humbug people are just always get left in the dirt and the people who think, oh, this is the new normal, you know, just always get over their skis and do themselves in. But somewhere in between those two ends is something where you can probably do very, very, very well. Yeah, nice. You're absolutely right, mate. I just pulled up a YouTube video. I just muted it and paused it in the background. And this is not ranking charts is the name of the channel. 1980, the 10 largest companies in the world by market cap, just for fun. IBM was the biggest company in the world. IBM, right? Still around.

28:26X1 Mobile, number two. Number three, AT &T, US telecommunications company. Number four, Schlumberger, the construction business. Amoco, number five. Shell, the only non-US company on the list. Then Chevron, another oil company. General Electric. Mobile. And some mob called Atlantic Richfield, which I'm not even kidding. I've never even heard of it. I don't know if they bought or renamed it to something else. So that was back in 1980. I'm going to pull this forward just, again, for the fun of it. It's not easy to do. By the time we get to 1990, and this is funny just because, again, speaking of changes, dominated by Japanese companies.

29:01So think about where the Japanese stock market got to. So NTT, Industrial Bank of Japan, Sumitomo Bank, Fuji Bank, Daichi Kangio Bank, then ExxonMobil, MUFG Bank out of Japan, IBM, Toyota, and General Electric. This is 1990. Fast forward now to 2000, and you start to – actually, I'll do 1999 because it's fun. GE, then Microsoft, turns up number two by then, Cisco Systems, Exxon, Walmart, Intel, Pfizer, the drug company, Citigroup, Vodafone, and what is then by now, by then Royal Dutch Shell having merged with, Shell having merged with everyone who's going to merge with. A couple of years later, by 2001, GE, Microsoft, Exxon, Walmart, Citigroup, Pfizer, J &J, BP, Royal Dutch Shell, Intel.

29:52Come forward now to 2000 just for the fun of it. 2020, I'll stop then because it's not much fun after this. By 2020, Saudi Aramco, the Saudi Arabian oil company, it's now a listed company, so it kind of drops in, Apple, Microsoft, Amazon, Google, Alibaba, Facebook, Berkshire, Tencent, and Visa. Some Chinese names in there, right? No telecommunications companies. GE's not there. IBM's disappeared from view entirely. Yeah. Because they ran their call. Well, I mean, my postmortem of that is that you have these new technologies which require a huge amount of infrastructure build out and integration.

30:36And it is a good time to be in that space. But eventually you reach commodification status. It's just like you, I mean, those services, we still need wires. We still need those kinds of things that are out there. We still need switches and all of that. But they've just become so commodified because we've become so good at making them because the industrial base, the capital stock has just been built out. It's like we can do it. And I think the Japanese lesson is, I think it's very interesting. It doesn't get talked about enough. I think we are in real time witnessing the same thing with China.

31:08China was dirt poor. They industrialized. And the first part of that was they just made a lot of stuff, but it was all cheap and nasty. And it's like, have you seen the Chinese cars? They're brilliant. Like, they're really good. BYD outsells Tesla globally, despite the fact no BYD cars will either be imported in the US because of prohibitive tariffs. And my very strong view is we will see the same thing with China that we saw with Japan, is that it is wrong to assume that it is just all about cheap and nasty stuff. And it is the inevitable outcome of massive investment in capital stock. We have got so much stuff, right, That can make other stuff.

31:53And again, market dynamics are going to do their thing where people are just going to get... It's easier to make a thing when all of the various components that go into making the subcomponents are getting better and better. So someone will figure out how to put them together better. And it just evolves and evolves and it gets better and better. Again, ideally, the consumer is the ultimate winner out of all of this kind of stuff. but it strikes me as this is why it is not a hot take or a new take, but why I think it's as a, I'm convinced of as ever that the 21st century belongs to the Chinese, primarily because they can just out-manufacture everyone else.

32:33And the implications of that are massive. Can I give a little tangent here, mate? Go on. Did you ever play Warcraft or Starcraft as a kid? No. Okay. No one knows what I'm talking about. There's maybe some old gamers out there. I was obsessed with this as a younger person. Nice. There's a game called Starcraft. It's a real-time strategy game, right? So you'd start with your base. You'd have these little SCVs. You'd go and collect some crystals. You'd get some resources. And then you would ultimately try and build up an army and crush your opponent. Fantastic. Unbelievable fun, right? And what occurred to me over the holidays was that it was such a great metaphor for the economy at large.

33:15There's a lot of economic lessons in that. And the point that I'm getting at here and what's reminded me of it in speaking with China is that usually if you're playing a single player campaign against the computer, you started off very, very minimally with what resources you had. And there would be some AI army out there. They had a lot of units, right? But that was dumb. It was dumb AI back in the day. They'd just sit there and wait for you to attack. And what you would figure out is a very worthwhile strategy. By the way, there's still tournaments on this. It was such a big thing and still is to some degree.

33:49Is that real wealth, real power, real strength didn't actually come from the units that I had. It actually came from all of the buildings and the resource collection infrastructure that you'd built up. So the strategy to win was to invest very heavily in production. So at any point in time, if you were to take a snapshot, if you had some God view where you could look at all the players on the map and you would take a snapshot of what was going on, you would be mistaken for thinking, oh, the AI is going to win. They've just got so many more units. What they don't have is they don't have much production capacity.

34:25And they're not focusing too much on mining. You've got some other player over here who doesn't at this point in time have a lot of units, but they have invested very heavily in resource collection and manufacture. And eventually you pass this tipping point, where it's like the best strategy is you just, I mean, it's a bit like a meat grinder. You put the ethics aside for your little units, right? They're taking it. You're just - We'll run all over again. You just, really, right? What you would do is you would create a bunch of units and you just send them off into the You know they're not going to be successful, but they're going to chip away, right?

34:59You're going to lose 100 % of your units in that skirmish. They're going to lose 10%. The difference was is that by the time they rebuild up their 10%, I've now tripled my production capacity, and I can just walk all over you. So where I'm getting at here is that look at the US today and look at China today. So you've got – I think you take a snapshot. Well, let's look at the military hardware, right? The US's army and infrastructure is massive and much bigger than China's. The difference is that China can float an aircraft carrier in six months. The US can maybe do it in 10 years. So if there was ever a skirmish here, right, you're going to see the US win a lot of battles, but they're just going to get smaller and smaller and smaller while the Chinese just outpace you.

35:42Put the military stuff to one side. It's the same on the economy as well. It's just sort of like you just can't. It's such a force of nature when that investment is brought to bear, right? It is – the US doesn't stand a chance. Even if you put someone who I regard as a great economic manager and farsighted leader in charge today, they're still kind of screwed because it just – as China and as Japan before it and as many other civilizations through history have shown, these investments take decades. So it's kind of like the race has won. So at this point, in the same way that I can look at a StarCraft map and go, oh, that player is going to win, not by looking at who's got the most, the biggest army, but who's got the biggest production capacity there.

36:28And even if the AI was to finally, you know, you know, see, see reason and go, Oh, I need to expand. And that's going to divert resources to that. It's going to take a while to catch up. And I, I feel as though when you, when you look at all of this kind of stuff, I don't know how we got into this topic compared to where we started, but there's something, there is something in all of that. And that's why I'm not, I'm not a momentum investor by any stretch, which just sort of talks about share price momentum, but I think there is definitely business momentum and there is industrial momentum and all of that kind of stuff.

37:02What do you make of the view, though, that Chinese population will peak and start falling? Because I think it's actually fallen for the last three or four years straight. That's the biggest problem. I think everything you just said, I think, is a really perfectly good point, with the exception of their economy growth is going to be constrained in an aggregate sense. And we talk a lot about GDP per capita, so I don't really care, other than in the context you're talking about, which is that kind of race for global dominance, that does require pure scale. I'd rather Australia have fewer people but richer per capita than have more people and less per capita.

37:34And I saw the Chinese would feel the same individually. But nationally, the argument is that the Chinese economy will never quite catch the US because the US continues to grow its population. China is just shrinking. I don't know if you have a view on that. That's the only thought I'd give what you just said, and how I might think about that differently. There's two sort of ways out of that problem. You can handicap the likelihood as you see fit. One is robotics, frankly. I don't know if you've seen the latest Boston Dynamics stuff. Not the backflipping one. They're all old now. But the new electronic ones, fully electric ones, they're insanely good.

38:14And the thing about a humanoid form function is that a form factor is that it's very versatile. It can do anything, right? Like in the same way that a human can do anything. So if, and I don't know, I'm not saying this is inevitable and it's next year. But if progress continues apace there, I think that changes that dynamic. The other one is, which I don't think is likely, but immigration, right? Like there is most of the world, we forget it because we live in our little comfortable Aussie bubble. Like, you know, most of the world would, in a heartbeat, go somewhere else which offered prosperity and opportunity and higher living standards.

38:57And I don't think it's going to happen because there's certain, what's the word for it, political, maybe even cultural kind of issues at play there. But could you imagine that if China was just said, send us your smartest and your best and your brainiest and your hardest worker, they could fix that. There is a whole world of hardworking, smart people that would love to go there for a better life and opportunity. Whether or not they're able to do that, probably not. But in answer to your question, I think that they have to do one of those two things because otherwise they are going to miss out.

39:29But I would also say that the thematic you're talking about, where it starts to really get prickly is still a good decade or two away. So a lot can happen in that time. I think that's right. I do. I think your automation question, though, is it kind of turns almost ironically population on its head from exactly that reason. If the automation can be done anywhere, then it changes the benefits of the advantage of low-wage countries have on a per capita, I don't know if it's per capita, per dollar basis. Yeah. It may be – a growing consumer base is always useful. A growing population base for lots of other things, including military and other things, is kind of useful.

40:10But at some point, when and if automation becomes the answer, those – I mean, even the US or China, I mean, they're the biggest and they've got the best chance of staying, the biggest just because you've got the resources and momentum, as you said. Yeah. But at some point, it may actually be, well, hang on, the robot could be in Beijing, but the robot could be in Sydney or it could be in Auckland or it could be in Vietnam or it could be wherever. The difference is in Sydney, there's no factories to work at for the robot, right? There's nothing. You can have a real estate agent robot because that's what we do.

40:39You're not making anything, right? But to that point, I mean, Townsville, you could put it anywhere that has decent, if it's an export product, decent shipping or if it's a local, you know, it doesn't need to be. I say Sydney just to pick a city in a country really rather than Sydney per se. But yeah, you put it in Coober Pedy, you know, or wherever it, wow. I mean, you've got plenty of land there if the steelworks closes. All of a sudden, you've got a situation where the current benefits that – I've always said China's got three key benefits over us and most countries do. First is labour cost.

41:10Second is scale. And third is proximity to markets. And roughly in that order, right? And so you think, well, hang on. If labour cost becomes less of an input because more is being automated, then that's one leg of that stool that starts to teeter a little bit. scale you can never really get over but at some level if the robots are doing the work and it's relatively able to be scaled from one robot to a million robots the economies of scale there the economics almost is at a robot level rather than at a factory level so scale starts to drop by a little bit proximity marks we could never fix sort of towing australia you know further north but i don't know i'm not saying australia's got some sort of robotic resurgence but i do think potentially i'm again no futurist potentially those things start to change the implied or current momentum because the things that are driving it are just less relevant, less important.

41:58And again, the other thing I'd say, frankly, is we've got to be careful what we wish for because we're a service economy, which is a higher wage economy than a manufacturing economy anyway. And so we've kind of already got some of those benefits of being able to do that in the first place. Yep. But I mean, it's still the things that I mentioned before, still a big advantage for China in that world because they can be able to produce the actual robots. They've got the steel manufacturing. They've got the electronics manufacturing. All of the inputs into that robot and then what the robot can be tasked to do.

42:30Not that we couldn't catch up. Absolutely, we could. But we're too busy doing, you know, populist politics and, like, you know, performative politics to actually do anything of substance in this country. So I just – I do feel as though you're getting a lot of things dovetailing all together. You've got an empire in decline. You've got a rising power in the East. You've got new technologies in AI and robotics. You know, there's a whole thing that I think is just very much – the century is for the Chinese to lose, you know. That's absolutely – I agree with that too. Yes, yes, yes. You know? Yeah.

43:05And I feel as though, again – If they have Yanks to lose if they were able to get themselves – I mean, it's Yanks to lose for the next 10, 15 years. Yeah, yeah. If they get out of their own way, they're the biggest economy. Yeah. It's still the Americans to lose, but it's getting very close. Once you've passed the tipping point, then I agree that China is to lose thereafter. So they've done the opposite of China. So while China has been industrializing, they've been de-industrializing. When you look at the structure of the US economy, you talk about us being a services-based economy. They just outsource to everything.

43:31The finance sector is one of the largest sectors, which I've ranted on during the break. It's not that capital allocation and distribution is very important for a functioning economy, But when that sector metastasises to the state that it does, it's just like there's nothing, there's no substance to it. There's a lot of middleman and speculation and stuff. It's what I risk, by the way. Yeah. Take that layer out. I mean, the pity of it all is that, and if we were to sort of structure things properly, we really should be going, I mean, Musk talks about this, you know, we should be going into a period of prosperity that's just unimaginable, really.

44:14It's just like if, again, because everything's downstream of the commodities and stuff, and there's plenty of that kind of stuff around if you're prepared to go get it, right? It's just like we should be insanely rich and hardly ever working. That was the fear. You will remember. Well, you won't remember directly, but I'm sure you've read it. But back in, you know, Cain's time, they will worry that, oh, my gosh, we are getting so good at doing stuff. What's everyone going to do? For our work week stuff, yeah, exactly. Yeah. And it wasn't, oh, that's a whole other deep dive conversation, but it wasn't realised.

44:47But the short answer being just for a very, I think, a very poor political and economic system that, you know, but properly realised that is something that we should be super, super excited about, not something that we should necessarily fear. As long as we can, as long as we can, making stuff is always good, right? As long as we can do it in a way where we incentivise that properly and we share in the rewards properly, then that's something we should be absolutely striving for. Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener.

45:25Let's take a nice segue here, mate, because... I think we took four segues just to the last bit. Sorry, that was my fault. I meant from the last one, not from the beginning. Whenever going back there, I can't swim that fast against the tide. I want to talk about tariffs. And we talked about tariffs a lot last year and I probably did it during the pre-records too, I suspect, because that's just what we did. But I hate tariffs, as our listeners well know. And the less optimistic side of me thinks that the populism of the politics of tariffs is just too strong for our leaders to resist because why the hell wouldn't you?

45:59You've got some propeller-headed economists saying, yeah, tariffs are no good, and three-quarters of the population saying, almost to your point, the extension of that, not what you were saying, but there's a group of people listening or who otherwise would have been listening who are saying, yeah, Andrew's right, we should make all the things here. We should stop the Chinese making the things cheaper. We should make them here instead and we should have tariffs so we can make more of them. And that's - I agree with the first part. I disagree with the second part. We should make stuff here, but you know.

46:23You make stuff here, as you've said many times, because that's how the market generates. Because what? Right. There's no government dictates. And because you're leaning into the stuff that you're good at doing. Right, exactly. And that you establish the foundation that enables you to do that and gives you the higher order capacity as well. Exactly. Yeah. This time around, though, the Steel Institute of Australia, surprise, has called for tariffs on Chinese steel into Australia. Now, apparently - The forwards are paying more for everything that's got steel in it. Right? Well, not everything, but they're being very generous.

46:50We currently apparently import 700 ,000 tonnes of Chinese steel. By the way, made with Australian iron ore, so let's be careful what we wish for because, you know, what they want us to do is the first 400 ,000 or 450 ,000 tonnes, they're generous, should be tariff-free, according to the Steel Institute of Australia, who are the lobby group for steel makers. Thereafter, Chinese still should be tariffed at 50 % is their suggestion. And much to my chagrin but unfortunately not surprise, the Treasurer has said, yeah, good point. I'll get the Productivity Commission to look into that and see if we should put tariffs on Chinese steel.

47:22And I just – by the way, anyone who said you are just in tariffs because Trump's doing it, what do you say about the other tariffs? I've said Chinese tariffs are bad. I'm now saying Australian tariffs would be bad if they're put in place for exactly the same reasons we talked about before, which your point, Ram, is I'm looking forward to paying more for steel. I said, no, whatever. And that's, this is what, this is where that lives. I look forward to a lower quality of life. Right? Thank you. Yes. Yes. Yeah, that'd be great. I'm going to buy fewer things. I'm going to pay more for steel. I'm actually, so that cost me more money.

47:51I'm actually going to take some of that money I would have spent on steel. I'd actually be on steel, sorry. I would have actually bought another coffee down the street. So I'm not going to do that. So the barista's out of a job. And look, I'm not going to replace the car. Sure, it's made in China, but the bloke selling the car yard, he's going to lose his job. And some of that money, unfortunately, is going to go renovating the house so the local chippies are out of work. The stupidity of the roll-on effect of this, the first-order effect is would there be more Australian steel jobs or avoiding having less Australian steel jobs?

48:20Yes, by definition. Absolutely, that's true. The impact of that, we are going to, if we do this, be inefficient and produce steel for too much, meaning the people who are doing it aren't as efficient as they could be if they were doing other jobs. The business capital, money invested in the steel industry, could have been doing better returns elsewhere. The people who are buying the steel could have been buying more stuff elsewhere. But we've said we don't want any of those things. We just want to make stuff so we can say we make stuff. And it is just maddening. And I know I'm repeating myself, and so be it, and apologies.

48:52Well, that's kind of what we do on the podcast in general. But more to the point of saying, you know what, I've been accused by everybody everywhere. No, not everybody, but everywhere. of, oh, you just hate tariffs because Trump's saying them or you're anti-Trump or, no, no, I hate tariffs because tariffs make things worse. They make people poorer. They make economies less productive. They make businesses less efficient. They are just the absolute antithesis. I'm not going to say they're worse than socialism or communism, but it's kind of, it kind of is worse. They're borrowing from those philosophies really, aren't they?

49:23Because it is a market. Yeah. It is an interference in the market process, which is kind of what communism is all about. But you know what's worse is we do it and still pretend it's capitalism. That's why it's more insidious, right? Because if someone said, let's be communists, we all go, oh, be nice, dear, but we know it doesn't work, so let's not do that. I don't like bread lines and being cripplingly poor. Except this time we say, no, no, but it's capitalism with tariffs. And by the way, I hate with a passion people who hold socialism and communism up as some sort of criticism of like, you know, you're a dirty socialist or if you want any government intervention, you're a socialist or this still leads to communism.

49:59There's no nuance. I've said before, those words don't even mean it. It means different things to different people. I can't even use those terms. And you use the slur rather than instead of objective. I mean, I think communism is a terrible system. But calling you a communist as an insult is a stupidity. You might be misguided or you might be wrong. And saying that something social is just because it's not pure capitalism is also stupid because, again, you should say the labels don't matter. But I think the risk here is we say, no, we're not doing communism. We're doing capitalism because that's better.

50:23We're just doing it with tariffs and subsidies and trade protections. And it's like, well, so – and again, I'm not saying you are doing socialism either. But my point is that it's more acceptable and somehow people don't notice it or wave it away or allow it because somehow it's capitalism with an Australian flag on top. So it's still capitalism or something like that. It's a nonsense and we know that. But I hope it's worth making the point, A, for those Trumpers who want to call me names, but just generally, to be honest, it's not about the US or China or the EU. if we have tariffs on China's steel, we will pay more for steel.

50:58We'll pay more for products that are produced with steel. We'll have less money to spend elsewhere. The economy will be worse off. We'll be less efficient, less productive. We're talking about productivity. Productivity is the only way you grow GDP over the long term. This is literally the opposite of that. This is an anti-productivity measure. If the Treasurer says we should be more productive and we should have tariffs on steel, you can happily say, Treasurer, you're talking rubbish. so yeah and look it we actually had a um i'm trying to google it the keel institute uh recently released a report looking at the impact of u.s tariffs okay and i mean the subheading was something about the biggest own goal for the u.s economy i mean you don't need to read the 500 pages to realize it's just basically it it it didn't really hurt the people it was targeted to hurt and it very much hurt US citizens.

51:48Yep. Right? And I totally, you're right in everything you say, they're talking about productivity and efficiencies and that I think though, but you also said in there, poorer. And I think that's the language I prefer because I think when a lot of people you hear about, we talk about these economic arguments and it's like, I don't really give a crap what, you know, some efficiency measure is for the economy. Because like everyone, I really just care about my lot, my opportunity, my level of comfort, you know, all of these kinds of things. But when you get past all of the quirky economic stuff, that's what it means.

52:22It just means we're not getting as much as we otherwise would. Not for some base materialistic, you know, consumption for the sake of consumption or conspicuous consumption. It's just like, no, I just, I have to work longer to get the things that I need and want. And I don't, how do you, how do you sell that? Right. But, but they do sell it. They do sell it because at a first – I mean, I do genuinely think for the vast majority of cases, there's no grand conspiracy here. It's just very, very well-meaning people wanting to make a positive change to the world. That's what it is, right? I've got a lot of friends like that there.

52:59God bless them. And it's just sort of like they don't think beyond that first order impact and they're not able to answer a lot of the prickly sort of questions. And it's sort of like, it's all good and well to say, everyone should have everything and we should do this and blah, blah, blah. Okay, how? Oh, well, we just, the government will just do it. Well, how? Oh, we'll just do it. And it just, you get very quickly tied up. And when all of these, again, well-meaning kind of initiatives get put out there, we've always got to come back to, at this point, very well-established economic principles to say, okay, but there are trade-offs there.

53:32if we as a country want to create another 200 still working jobs and as a consequence of that be materially you know worse off across the board then we can make that decision but let's go into with eyes wide open here right and again it's not it's not for trying to maximize gdp or other some nonsense kind of metric it's it's it's about us having the highest level of prosperity and opportunity that we possibly can for ourselves and our children so i'm so passionate about all of this kind of stuff. Economics is ultimately, I mean, it feels really crazy to me that the people who are making most of the policy decisions are largely economically illiterate.

54:13You can be illiterate in quantum electrodynamics because that doesn't impact on most policymaking decisions. Economics impacts all policymaking decisions. And how can you possibly make an effective policy if you don't understand basic immutable laws of economics? Quite simply. Well, you want to say and ignore them is my concern. My real concern here is if you're a treasurer of Australia or somewhere else, even if you understand, if you don't understand, I mean, the other thing is treasury tells you. I hear what you're saying, Matt, and I wish, I've said this before, I wish that was the excuse.

54:47I wish we could just blame their ignorance because that would at least be like, all right, well, they don't know any better. That sucks. They should because they're running into that place, but they don't. So I guess it is what it is. This is, I may or may not know any better. I have a team of thousands in the public service, any of which and the head of which will say to me, treasure, here's actually the answer. This is kind of what's going on. And so they don't have the excuse of they're illiterate or they don't know or they don't understand. It's worse. Right, that's what I'm saying. And so I'm not going to slam Jim Chalmers necessarily because I don't know what's going through his head.

55:18Hopefully the product of the commission says, treasure, no, that's stupid. Or Chalmers himself says, I asked, they said it was okay, but I was not going to do it because I know it's the wrong thing to do and I'm going to leave those open without deciding because he hasn't decided yet what he's going to do. But if you like this... The fact that he's contemplating it is the worry enough, right? Right. And that's, again, is he contemplating it for economic reasons or is it just the flag up the flagpole? See, I'm a nationalist too, like Donald Trump and like Xi Jinping and like, you know, I mean, I'll do tariffs too if that's what we have to, you know, because I care about Australian jobs and I care about Australian workers and I'll show you because you'll vote for me.

55:50Not I'll show you because it's the right thing to do, but I'll show you because you'll vote for me. And we've seen that. By the way, if you think I'm whacking Labor, Andrew Hastie, whether we should make Cars Here Again video before Christmas. I mean, it's just nonsense. And it's populist nationalist nonsense that has no basis in economics. It's good politics. And so knock yourself out if that's what you want to do. But let's call a spade a bloody shovel and say this is just rank politics done for those reasons. Ironically, maybe Donald Trump's got an excuse because probably he's not asking anyone for advice.

56:21So if he thinks it's a good idea, at least you can say, well, actually, he is that ignorant, right? Maybe that's the case. He's got some pretty good, you know, pretty well, pretty experienced and well-educated economic advisors. I don't think that's even true there. But given the structure of the public service, you can blame Jackie Lambie or Clive Palmer for getting it wrong if they just went off on one themselves and did the work, I guess. That might be ignorance. If you're running the country, you have treasure at your disposal. It is just an absolute nonsense. So, yeah, I don't know. I know what they'll do, mate, but like you, I hope they won't.

56:49The other thing I wanted to say quickly too on the economic stuff is that's all true if it stops there. When it gets worse is we do all that. So we're poorer, as you say, and I will throw in less productive and less efficient because I just want to and I'm an economics nerd. That's bad enough. What's next is when China goes, huh, really? All right. Here's your tariff back on your wine and your barley and your seafood and your coal. How do you like them apples? So not only have we made Australia still more expensive or imported Chinese still more expensive for Australians, we've then gone and destroyed export jobs by poking China in the eye and having them retaliate.

57:25So it would be bad enough if they just said, you guys are idiots for not retaliating, we'd still be worse off. When we say we're going to make Australians poorer and then Chinese are going to make us poorer again by losing the export-related jobs, it's the gift that keeps on giving, right? It's just stupid all the way down. And the further you go down this path, the higher, the broader, the longer the tariff wall is directed around the world. It's just layer upon layer upon layer of making things worse and worse and worse and worse. and it's just, it's evidently true. And if you're listening now and you're thinking, yeah, but yeah, but yeah, but I get it.

57:59I get the, I've said to you before, man, I'm sure on air, it is the one topic where people really respond quite, I'll say emotionally, I don't mean that in a pejorative way, although it sounds like it. The deep seated urge to make things here, that somehow we should just be able to do it if we can't do it, we should make sure we can because making things is good and we should make more things and someone should make sure we can do that. But it's just – I'm sure it's in the DNA because I don't get a response on any other topic anywhere else, right? Lots of disagreeing, lots of things. But the overwhelming like, no, you don't understand.

58:29We need to make things here because, because, because. And a lot of the becoses are just kind of – they are rational justifications for the emotional view of I just need to make stuff here. And that's why it's such a political category. And I always think too it's like, great, do it. Exactly. Do it. Start a business and do it. Oh, I can't because of this. Exactly. Yep. And so I'm not opposed to these kinds of things. Make it here. Yeah, yeah, yeah. But - I'm a close to the Australian Australian that's due most voluntarily. Do you think entrepreneurs don't like money? Like, do you think capitalists don't like money?

59:02Do you think we're not making a car because like there's some business out there that just hates Australia? If there was an opportunity to make a competitive car and make money, people would do it. Even a foreign national company would do it here. So it's too surface level. You're missing, you're not digging down deep. And I definitely think we should be doing everything we can structurally to create a environment where, where we give anyone who wants to create a business the opportunity to do so. And again, if they're successful, it's because they, they, they have created something of value to the market and they're like, do it.

59:43That's exactly what it is. Great. Yep. But just to say, we should have a, I mean, what, we should have an Australian smartphone. Should we? Okay. We should make things here. We'll go do it. Oh, I can't because of – once you start – once – it's a very – again, it's a very no – I get it. It's noble. There would be – if we could do it viably, we'd create a lot of jobs, it'd create a lot of wealth, it'd create a lot of prosperity, all these great things, like, great. But go one layer, at least one layer deep. If you can, go ten layers deep and ask yourself why isn't that the case. I tell you, can you allow me a very quick detail here because it gets to the exact point that you're talking to.

1:00:22Just before Christmas, I caught up with a straw man member. Now, shout out to John, if you're listening. He's based in Singapore and we had a beer and it just made me, it prompted me to read up on Singapore. Do you know much about Singapore's history? No, I potted history, but I couldn't do justice, so go for it. I'm going to try and do it as quickly as I can. In 1965, Singapore was dirt poor, like dirt poor, third world, impoverished poor. Is it Lee Kuan Yew? I think, apologies if I've got the name wrong. Very interesting guy. The short version was, you know, they got incorporated into Malaysia.

1:01:01The Malaysians kicked them out and they said, right, we're doing it ourselves. Now look at Singapore. It's a swamp. There's no natural resources there, right? And it's a hodgepodge of different cultures and ethnicities, was just nothing other than a really good port and pretty well located. So what they did was they slashed red tape. Even today, you can incorporate a business in 15 minutes online. They cut corporate tax – I'll come back to this, right, because it's going to sound like this is going to trigger a lot of people. They cut corporate – they cut red tape. They cut regulations. They cut corporate tax rates.

1:01:44and here's the other interesting thing they did. They paid their politicians extremely well. You know, Andrew, there's a lot of, I'm going to be triggering a whole bunch of people here, but let me fast forward a little bit. What they did, and I think this is where there's so many lessons here, so many lessons from Singapore, is that rather than sort of regulate the hell out of everything because they don't want to have the bad stuff, they basically said, no, go on, because most people do good things most of the time. If you do something bad, as a business person or as a politician, we're going to hang you.

1:02:16Now, there's a human... So you're tricking people? How are we going so far? I mean, he's often sort of talked about as sort of the benevolent dictator. This is not a clean picture. Sometimes less benevolent, but yes. I don't want to paint this as some utopia, but the lessons in it was this. Corruption plummeted because people don't like being hung. It's like you get bound to be corrupt here. It's like you just lose your pension and off you go, right? or you get kicked off the board or something like that. Or, you know, you're one of the major banks that like screw over the population every second day and then it's like, oh, there's a$25 million fine.

1:02:50They did it. It's just like, we're not going to regulate you too tightly because they understood that business and markets are the basis for all prosperity. And so the short version is, is that Singapore today is one of the richest nations on earth. It has one of the highest levels of social cohesion on earth. And you might say, you know, they've got one of the strongest militaries in the region, even though they're between Indonesia and Malaysia, populations 10 times the size. And Singapore would crush them in a second because they built the industrial base. They allowed business to function really well.

1:03:24And before you go, oh, yes, but there's all these other kind of issues, this isn't a clean picture of just laissez-faire capitalism or public housing. Most housing is public. You buy it from a 99-year lease. So they ensured that everyone had a house, right? There's a really good healthcare there as well. This is why terms like ideology and social are just useless now because everyone means different things. What they did was they understood the basis for prosperity and they did everything that they could to do that. And while corporate tax rates are quite low, they still raise plenty of tax for all these public things, right?

1:03:58Because it was a lower tax rate but a much bigger economy as a result of all of that. Now, if you're not a Singapore citizen and you're working there on a foreign visa, you're going to be treated pretty bad. I don't want to paint this as some utopia, which has absolutely no issues whatsoever. But there are a huge amount of lessons in all of that. Now, contrast that with Australia. We've got really, we've got, we've actually got a ton of resources, right? They had none, right? And we've got a far bigger population. They've got, they're like, you could fit the population of Singapore into Sydney, right?

1:04:33It's like 7 million people, I think, the overall population. And no one there said, we should have a car industry. It's like, if one evolves from the structure that we've created, we will let it evolve. And a lot of businesses were started and a lot of businesses failed. But the ones that succeeded did so because they were creating a lot of value for the government, for the people, right? And that was taxed. And everyone was like, everyone lifted out of the dirt there. And it's also a really great example of multiculturalism as well. There's so many great things that you draw from all of that.

1:05:13And that's just one example, right? You can take the counterfactual, you can look at Cuba and North Korea, you can look at Venezuela and other places that have really leaned much further to the economic left. It was like, oh, absolute disaster. And we've seen it in other parts of the world too. It's just sort of like when you allow people the freedom to create, you know, you've got to have rules, obviously. And public services need to pay for, obviously. But we're all better off as a result. And no one planned it. No one planned it other than, I guess that's the key point that I'm trying to make here with people who say we should build cars here.

1:05:50It's like no one planned for half of the things that happened in Singapore. They just allowed that process to unfold and for the market to find its own way. and it just sits there as a very, very recent example of how these things kind of work. And when you hear, so just to tie it back, when you start talking about command control stuff like tariffs and interventions and regulatory nonsense, it just handicaps us all and it makes us all poorer. And unfortunately, when you start advocating for this, it just always comes back to, well, okay, but all the poor are going to suffer. It's like, look at the rates of poverty in Singapore, man.

1:06:28Like, you know, the world's far more complex than that. And I bang on about it because it's not some stupid little, you know, economic ideology that just appeals from some, you know, intellectual kind of level. It makes us safer, more comfortable. Yes, yes. Gives us more opportunity. All of the things that you want as a person, as a human being, it makes things better. And unfortunately, Europe is lurching and really in the wrong direction. Australia, we're going in the wrong direction. The US is going, of all irony of ironies, the home of free market capital is going in the wrong direction. And we only accelerate our demise.

1:07:14And so this is a long rant, mate. Sorry about that. But I would encourage people to read up on Singapore because of the example it offers. So when you start seeing some of these policy things being discussed, just remember that, And, you know, this isn't – we've tried this stuff many, many, many times. It's not like, well, it works half the time. It never works. It never, ever, ever, ever works. Can we stop talking about this stuff? It is an absolute nonsense. Sorry, mate. No, nicely put. But I have to add two, mate, just because, you know, I like my sovereign wealth funds. Not only that, Singapore having no natural resources, no natural resources, has built itself to sovereign wealth funds.

1:07:54Temasek Holdings, as people know, which is kind of run as a - It's a monster. Right? It's kind of run as a private company. It's a strange structure. But yeah, Temasek is one business,$484 billion worth of money. And it has its own sovereign wealth fund directly called GIC Private, which has another trillion US, Singaporean dollars. I meant to mention that. I meant to mention that. US$744 billion. And they built that from no resource. As you said, we could do that plus have all the resources we've got, Capture all that, save that, build something. And that's, I think everything you said - They attracted investment.

1:08:29They attracted capital. They attracted entrepreneurs. They did everything right. Sorry. Everything you said is true. And the and is, you mentioned the benefit of the dictatorship at the beginning. That was the difference, was we are building a national project as opposed to we are trying to win elections or we're trying to get some handouts this year or whatever games we're trying to play. and I'm not for dictatorships necessarily and as always, if you have a dictatorship, you better be careful who gets chosen as a dictator. So, democracy is still the best option but yeah, a little tiny bit and maybe if you're very generous, maybe it's easy to start from nothing and build something and have that long-term view because no one expects anything.

1:09:09Maybe it's harder for a politician in a developed country like Australia or the US or the UK to be, to take that approach because there's people, there's too much people to lose maybe if it goes wrong or if they don't get the money because we put it aside. But again, I don't want to make it just about that. But all the things you said, plus it has two sovereign wealth funds, which is funded from proceeds of running a booming country, which we have all those opportunities plus the resources, and we still have nothing to show for other than a trillion dollars of debt. It is just mind-blowing. And we get mired in these stupid ideological debates.

1:09:44You know the genie kind of coefficient, right? It talks about wealth distribution and that. So Singapore's got a super low one. And so in other words, there's not this massive wealth divide there. There's very low levels of poverty. Things that you feel, and unfortunately we feel today, is like the only solution for that is direct intervention. And again, let's not get carried away. I'm not saying there's no room for intervention. They do a lot of public social projects over there. So it's a complex kind of picture here. But it's really, you know, you can only redistribute stuff that you have.

1:10:12You've got to have the stuff before you can redistribute it in the first place, right? And that is the lesson that I just wish more people would pay attention to because a lot of this stuff is just on the chalkboard. It's hard to do controlled experiments in economics, but just we're pounding the desk and I'm sure we sound like ideologues here, but it's just sort of like, I just think any objective, leave your baggage at the door, objectively look at the historical example and ask yourself this. What are the societies that have offered the most fairness, the most equality, the most prosperity?

1:10:47They're all ones that make use of the market mechanism, which when you think about it is really just saying, you know what? You're allowed to own stuff, Scott. I don't think anyone in Australia would be against it. You mean I'm allowed to have my house and I'm allowed to own money and I'm allowed to do stuff? Yes. Yes, you are. And you're allowed to trade with one another. That's it. Now, yes, people focus on various edge cases in arguments for that. It's like there are lots of edge cases. But as a general rule, I find it a really bizarre thing that some of this stuff is so controversial. Like, how can you be against that?

1:11:24Especially when we can look at that historical record and go, wow, that is like, we're talking 50 years from third world country to one of the richest nations on earth. and not in a Saudi kind of way where there's this very, very rich upper kind of massive working poor. No, no. Like it's like I would rather be poor in Singapore than anywhere else, right, you know, on a relative basis. I think they should put a bit of gold or a thing, you know, kick their boot through a bit of red dust and realise there's iron there. They've built it from the ground up by letting humanity flourish. I think that's, you know, it's why we mentioned the labels before.

1:12:01It's why this is so problematic, right, because the idea that you can't, you need to have all or nothing. It's either pure capitalism and screw the poor or it's everyone has to have the same amount of everything. And that's exactly what we break down. It's like Singapore is incredibly prosperous. It also has massive amounts of subsidies and transfers, as you already mentioned, public housing or private housing. There's rebates and vouchers and all sorts of stuff. So it does all the things. One is not incompatible with the other. It's a question of how would you put this together? Give everyone every opportunity to thrive and generate wealth and value and make sure that value is shared reasonably across society and you look after those who can't have it and you do things like, hey, housing is probably shelter, not an investment class.

1:12:49Oh, okay, well, we chose that and that would be different. And does that mean housing is not a free market? Yeah, it does. But aren't we free marketers? Yeah, but only when it makes sense to do so. If it doesn't make sense, you don't do it. The government's there to do things that the private sector won't do well or properly or sufficiently. So guess what? If housing is actually shelter and a human right rather than just an asset class, it doesn't need to be a free market. Now, I'm not saying government should control all housing in Australia. I'm just saying you don't say, I am this. I'm an absolute this or absolute that.

1:13:18That's why communism doesn't work. And that's why free market capitalism, to its extreme, if seen as a social policy rather than economic one, leads to enormous, you know. I mean, look at America with the number of working poor. Singapore is a perfect example, not of perfection, because again, you've made the point that's wrong and I don't want people hung either. But conceptually, taking the things that work and saying replicate those things, that's not a difficult thing to do unless you don't want to see it. And that's unfortunate when most people start and stop. Well, unfortunately, a lot of the things that you might rail against, it's sort of like a wrong.

1:13:57But if you, there are people who benefit from the current system. You're not going to advocate for change. It's like, I'm very comfortable with the current system if I'm on the right side of the fence, right? So that's part of why it's so hard to do. Yeah. What else was I going to say? I guess it's just, again, you look at Australia, and we started off with tariffs here, but our response, what are we doing as a country? You know, we're very blessed with our resources, which we're literally giving away. you know, not literally, virtually we're giving them - It's only slightly not literally. We're giving them away, right?

1:14:33Our biggest industries - BHP makes software margins. Just let that sit for a minute. Like, think about that. You know, we have a huge finance sector, which is large, and all our major banking institutions are the biggest institutions that we have are all geared around just giving loans to people to buy houses, which are unproductive assets, right? So we do houses and we do holes and we regulate the buggery out of everything. And all that does is just limit competition and stuff. And all it does is entrench the lazy incumbents who aren't really delivering that much value. And I've said it probably every single pod since we first started recording, which is that great Charlie Munger line of show me the incentive, show me the outcome.

1:15:18You know, why don't you want to fix corporate malfeasance? Like, make it sting when you do – I would much rather say, look, we're going to get rid of a lot of this red tape because it's just hamstringing us. It doesn't – not only does it prevent a lot of job creation and wealth creation and the rest of it, it actually doesn't solve the problem it seeks to solve, right? But if you were to sort of say to a bank, like, hey, next time you rig the FX market, you're going to lose your banking license and all the C-suite's going to get fired and they're going to spend two years in jail. You fix that problem literally overnight.

1:15:55Now, who's arguing against that? Yep, exactly. Like, maybe the people who seek to lose some advantage, but it's like, well, don't break the law, dude. How about don't break the law and you've got nothing to worry about? I'm not talking about hanging them like Singapore does. You've lost a breaker, though. We're not talking here about some sort of judge's interpretation of something. It's like, no, no, you literally did a thing you're not allowed to do. For the 12th time in 10 years. Right, yeah, exactly. Yeah, yeah, yeah. Now we have, and think about the cost, think about the infrastructure that you need and the systems and processes and bureaucracies that you need to run these regulatory things, which, again, they're there, like, ostensibly they're there for a good reason because people do bad, breaking news, people are selfish and self-obsessed, right?

1:16:42Like they are and a lot of people aren't very nice, right? So it's incentivised to break the law too. I mean, the bankers that are breaking the law aren't breaking the law because they're just awful people who decided just to be malevolent. They went, hey, guys, we can make a fortune as a bonus here. So it seems to work both ways. The C-suite is incentivised to not do it like, you know, lose their jobs, go to jail, whatever, lose your licence. But the workers themselves, if you put those incentives in place, you are willingly saying, I want you – now say this out loud. Maybe you're not even saying it consciously, though I think it's a long bow.

1:17:14You're saying, I want you to take a lot of risks because you can make a lot of money. So a sale is close to an anything you can get away with if we can make some money out of it. And if it doesn't work – If it doesn't work, you'll get a slap on the wrist. Right, exactly. There's a bit of wet lettuce across the face. Why wouldn't you? Yeah. And to administer that whole wet lettuce process, we're going to spend$10 billion a year on this ineffective, you know, limp-risted bureaucracy that can't actually do anything and doesn't stop any of the things, the bad things that we want to stop in the first place.

1:17:38It's just a madness. And again, I've just completely stopped watching the news because it is just performative politics. The most stupid things. I feel as though we as a country have the world as our oyster, even with our small population, given our natural endowment. If you really wanted a visionary leader out there, you would just sort of say, hey, this is what we're going to do. We're going to make it super easy to start a business. We're not going to punish the hell out of you if you fail. We're not going to put regulatory barriers around the incumbents to protect them and their ineffectiveness.

1:18:14We're going to do all of the lessons that we've just sort of talked about here. And if a car industry evolves out of that, then great. But something will evolve out of it because you can't help. Humans are very clever. Humans are very, very, very clever. And people will think of all kinds of different products and things that we can do. Australians are really smart, right? Like humans, I hate saying it because there's nothing exceptional about us. There's a lot of things that are exceptional about being human. And we are very, very creative, you know, and there'll be all kinds of people who take a lot of risks.

1:18:46A lot of it won't work, but the things that do will have ripple effects that just go down the generations, you know. And we started off much more like that in our earlier days, right? And unfortunately, I think it's a bit of a symptom of wealth and comfort. You know, it's sort of like you get to this point where it's sort of like you forget what engineered the very prosperity that you enjoy, and therefore you don't see it as significant, and therefore you don't nurture it, and therefore it starts to erode, and, you know, the pendulum swings back the other way. And so, I don't know, mate. I just, this all started with you wanting to talk about the steel tariffs.

1:19:27So it's just very – it just exemplifies a far, far broader problem. Yeah, yeah, for sure. Alexis will be very pleased to know that we had five things on our agenda and we got through one of them plus two that we didn't intend to talk about. And it's been an hour and 20 minutes. So guess what? 2026 is exactly like 2025. We were going to talk about StarCraft as well, so that was fun. Oh, there you go. See? And Singapore and all sorts of stuff. Yeah. I'm not sure what to make of that. Other than if you're still here, thank you for listening. We will see you on, well, I'm going to assume, Andrew, we haven't formally set our calendars for 2026, but can I rely on you to deliver a mailbag episode once a week on a Sunday morning?

1:20:06You know you can. I do indeed. Until then, enjoy the first half of your weekend and full on. Happy New Year. Cheers. The Motley Fool and people appearing in this program may have positions in the companies mentioned. General advice only. Please speak to your financial professional to understand how it may pertain to your situation. Subscribe to the free newsletter at fool.com.au forward slash listener. The Motley Fool operates under Financial Services Licence 400691.