Is the ‘deal’ with the US actually a good deal? October 24, 2025

25:22But this just strikes me as overly generous, overly short-sighted and just sort of, you know, like who are the real victors out of this? You think, well, the Australian people and our strategic allies, like, no, Gina and co, they're the real winners out of all of this kind of stuff. Exactly. I think that's right. That's kind of, I completely agree with you. You and I are both capitalists, right? We like business and we think business is a really useful way to, you know, utilize the phenomena of capitalism really or to kind of make that work best. But it doesn't mean businesses should get a free hit above everything else.

25:55But that's not capitalism, is it? We're not talking about capitalism now. I was making the point that we're pro-business. So, you know, normally people are saying this, are the socialists or the Greens, oh, business is getting too much, this is getting that. It's like we're not something anti-business to say, that the taxpayer should get a reasonable return and should invest on attractive terms. Any investor should invest on attractive terms, not as a donor, not as a, you know, there's no need for, as you say, there's no need for us to be this generous. You can agree with, if we need to keep Trump on side, and I think we probably should, and again, should we have to?

26:25No, but the bloke's there for another three and a half years. Let's actually get the best at, we count at least worst we can out of that period of time. And it costs$8.5 billion. If the boffins in Canberra have decided that it's worth$8.5 billion to keep Trump sweet for a couple of years, okay if that if that's if that's the calculus fine but to your point you do the deal strategically and then you invest the money wisely with the best possible return for the taxpayer and that's the bit you're talking about which is by all means yes great if you want to if you want to do it fantastic i think i do think there's probably unlike the copper smelting and unlike the steel making there's because of the geopolitical realities i either the yanks don't want our copper they don't want our steel right but they want our rare earths and there's probably some value in us having them and maybe even having them at some sort of commercial ready stage and maybe that's worth something in terms of investment but to your point let's have those guys go broke because they're the pricing's under under you know um china's dumping so they go broke okay well that kind of sucks but that's kind of life it's not the government's job to protect businesses from other governments it's not that's not the role of of government and by the way those assets now stranded or thank you thank you i was gonna make that what happens when people misunderstand this.

27:34If they go broke, it's like, poof, everything disappears. The hole is still in the ground. The digger is still on site. The workers are still... It is a fictional corporate structure that has died. And someone else will come in and they will buy it at fire sale prices and they will make a go of it. And again, if there is genuine demand for this and the US or other strategic allies or just anyone in the free market decides that they want this stuff and that they can't get it for China, or they're prepared to pay a little bit more to get a surety of supply, which I think was a perfectly rational business-oriented thing to do.

28:19If your whole business is reliant on something that only comes out of China that you are worried could be turned off at any point, you will absolutely seek other things. And that's the beauty of all of this. That's what's going to coordinate it. If you want to take the socialist lens to this, and I don't even want to get into that debate, but let's see if people say, oh, we need to do it. And it has to be a government kind of thing. It's like, well, okay, let's set up, let's set up a government entity and then they, they can do it. Right. Or when our referral goes out of business, we'll, we'll come in and we'll appoint some executives and they can run it and it can be a hundred percent Australian owned.

28:55Now, I'm not advocating for that. I'm just saying if that is your philosophical leaning, we can do it that way. But this is where the water gets muddy. We go, no, we need to do it for all these broader socialistic kind of tendencies, but the way that we're going to do it is by enriching the pockets of billionaires. And I'm like, well, that doesn't gel. That doesn't make any sense. It's sort of like, it's just live action role play. It's LARPing sort of socialism. It's like, just do it. Do it the socialist way or don't. Or if you're going to do it, if you are going to blend it, and there's probably some argument you say for blending it, at least play the strong cards that you are holding and get the best bloody deal that you can for the Australian taxpayer because you can, because you hold all the cards.

29:44It's like, tell you what, Arafura, you don't like these terms? We'll go somewhere else. And it's the easiest thing in the world. And we still tick all the boxes. Like, right? Like, that's the thing that infuriates me with all of this kind of stuff. We, quite a quick aside, mate, because you're at the, you know, too many to list. The latest one is, I'll just read the first paragraph from the AFR. Industry and unions have backed a proposal for government to guarantee lower cost renewable energy to businesses, such as metals smelters, in a bid to avoid extinction moments and constant bailouts. Under the idea, taxpayers would fund a special purpose...

30:22To avoid constant bailouts. It is a bailout. This is the bailout. Under the idea, taxpayers would fund a special purpose vehicle to enter into long-term power purchase agreements with wind and solar projects, which would benefit from cheaper financing and potentially support from Labor's signature $15 billion National Reconstruction Fund, end quote. Of course they're going to benefit from it. When unions and industry agree on something, you know there's a handout. Absolutely. Which is your point, right? We look after the workers. We pay the private companies lots of money. Hang on, who? The taxpayers?

30:52Are they involved in this conversation at all? Where's our return? It's a very reasonable thing to ask. Right? The other thing I think, it came up kind of in the last couple of days, and I, again, politics is hard, right? And geopolitics is harder still. And diplomacy is just, you know, stupidly hard for all the reasons. Because sometimes my enemy is my friend, and sometimes there are things you just completely can't win. It's all about compromise, as Churchill said, right? What I was worried about on Monday is actually come to pass nothing dramatic yet but the risk was always you do a deal with the states on rare earths to poke China in the eye and then hope China doesn't realise they've been poked in the eye and they did they came out after it and said this is kind of like they're kind of compared to war which I thought was a pretty I mean China's not backwards and coming forward making our latest statements but again I'm not saying we should necessarily appease China either and maybe at some point you've got to make a choice between the two because they just make the choice and there's going to be implications I feel like they're heading towards that point.

31:53Well, that's kind of, I just thought, you know, for all the so-called win on Monday, if it is the least worst outcome to be aligned with the US rather than China, then so be it. If it's least worst to be aligned with China rather than the US, so be it. But it just, with all the back slapping, hey, it's such a great deal. It keeps Trump on side. That's okay and important to some degree. We just can't lose sight of the fact that we are choosing to poke China in the eye. We are choosing to say we will help them and they are doing it because they don't like you. and I don't know. There's not many places in life you can do that, at work or at home with friends, that doesn't actually cause some sort of, if nothing else, a bit of unhappiness, a bit of kind of, you know, bile rising.

32:35China's take kindly to that. We spent three or four years with wine and barley and seafood tariffs that were affected bans because ScoMo said something they didn't like. I'm sure it's been thought about. I wasn't the first person to come up with it, nor was it, I'm sure, only brought up the news and someone in the foreign affairs went, oh, yeah, that's a good point. I'm sure they thought about it. But it's just worth highlighting that for all the backslaping congratulations, getting a deal with Trump is good and useful, just not without its drawbacks. Well, yeah, exactly. And it's just like, is getting a deal something to celebrate or if it's a bad deal?

33:10No. Like, a deal is a deal, but you just can't make any commentary on its qualitative intrinsic value. Just because it's signed. Without knowing the nature of the deal. I signed this huge deal worth many billions of dollars. Okay, cool. What do we get out of it? Actually, they get everything out of it. We get very little out of it. It's like, well, that's, and why are we celebrating that? I mean, it's the same with AUKUS, right? It's sort of like, it feels to me as like, you're getting a better part of the deal here. Like in a hundred years, we might get some submarines, you know, out of all this ungodly amount of money that we've spent.

33:47And it's like, who, again, who's the real beneficiaries of this? And maybe, I don't want to make it black and white, maybe over the full arc of history, we do find that actually that was worth spending. So that is definitely a possibility. Yeah, I'm leaving that open too. I don't have a strong view on this one. But we just assume that it is and it must be. You get someone like Rex Patrick, is it? Yes. He's great, right? He's awesome. A former naval dude as well. He's very much against it. Submariner. Submariner. Yeah. It's like, no, I don't actually the strategic value of these things aren't necessarily that great.

34:23We could get the same capabilities for a fraction of the price. Again, I just feel as though we have the people who are making the decisions are more focused on the headlines and the optics and what it might mean over a next election cycle than what it might genuinely mean for the full long term strategic benefit. And in the context of other alternatives that could have been out there, maybe we could have gone to the French and got much better submarines or something. You know, it's just assumed that this is going to be the best deal. And it had to be this way. And I always say, right, there is nothing easier in the world than spending someone else's money.

35:02It's so easy to rock up and just say a trillion, billion, zillion dollars and then walk away. It's not, well, someone's got to fund that. There are, again, as I always say, there are opportunity costs for this. So this isn't just a case of, well, we can do that and we can build 10 new hospitals. Like there's always trade-offs that are here and potentially even if it's not being traded off against other sort of civic infrastructure and public goods, just the same exact good that we're shopping for but from a different vendor who may give us a wonderful deal on this. And again, I know I come across as a cynic, but it's hard not to be when you look at the history of these things.

35:46It's replete with all kinds of terrible deals that it just doesn't give you a lot of confidence. If it was like, you know, 98 % of the time this works out really well, you go, okay, cool. There's always going to be a margin. But when it's like, no, 83 % of the time we get a really fun steer on this. And then you go, well, I'm a little bit nervous about it. It's a bit hard to hand wave that off as just, oh, you're being negative and cynical. It's like, no, I'm being rational within the context of the observed outcomes of how these things go. And at the very least, surely we get to ask the question and get a good faith, reasonable answer on that.

36:27Like, is it okay if you're promising huge sums of our money that we have some pertinent questions asked within what is doable through a secrecy and strategic sense? Totally. I find defence a really difficult policy. Yes, it is. before on the pod. It is. I'm not a particularly strong student of history but I've read enough to know that when World War II broke out we were woefully underprepared because it was one of those well let's not invest because there's nothing going on as soon as there is something going on it's like well man we should have started five years ago or ten years ago shouldn't we?

37:03And so it's always that the counterfactual is always knowable in hindsight but never in advance and that's a bit I'm not I'm mindful that both parties from both sides have defended AUKUS as Prime Minister both Scott Morris and Alba are both fully behind this one. Now either they're all getting the same garbage from the usual suspects, and that's very possible. Maybe it's just a case of, well, don't rock the boat. Maybe there is some genuine strategic value in it that maybe they're privy to that we don't know. But I share your respect for Rex Patrick. It's an absolute disaster. He's not a senator.

37:34He's doing a wonderful job. As a senator, he does a wonderful job with Freedom of Information requests. One of the very few so-called transparency warriors who's genuinely trying to shine light on some of the areas that governments would rather us not know about and talk about. He does a spectacularly great job. So I'm not going to, for a second, disagree with him. I will say he's South Australian. They do love their shipbuilding in South Australia. So, you know, wanting stuff done there. Who was the... God, Christopher Pyne. You know, we'd always get a submarine or a naval boat deal done, just for an election for South Australia.

38:07Not to impugn Christopher or Rex, but they have a preference to make things in South Australia, which runs very, very deep. Absolutely. The thing that gets me about military spending is that when it comes to military spending, there is no financial reason as to no. We can always do it. You want some subs? You want some missiles? No problem. I mean, just recently in the news, there was some really horrible stories about meningococcal B, this horrible, horrible bacterial infection that can kill people and does kill people all the time. And the news report was we could ensure that everyone was vaccinated who wanted to be vaccinated and it would cost$17 million.

38:49And the answer is, no, we can't do that because of money. It's like, but that never comes up when we're talking about an aircraft carrier. Right. And it's sort of like the difference between 17 million per annum, which is a rounding error on the budget. Right. So it's like, hey, we could save some babies. I don't have enough money for that. okay oh we could buy some overpriced nuclear submarines that maybe won't even be delivered on time into spec and maybe we'll get it in 15 years like no problem like no problem whatsoever and it's like they're literally 2 000 times more expensive or actually more than that you know whatever it happens to be and it's just sort of like so i'm not i'm not saying we don't we spend on on on military hardware and capabilities absolutely but that but that fiscal it just what it does to me is it reveals the lie of fiscal constraint.

39:39We either have fiscal constraint, or we just acknowledge that we're just going to use the money printer whenever we want to do it. And it's like, well, and we live in this, we have a foot in each camp. It's like, well, we can't do that because that would be fiscally and monetarily irresponsible. Oh, but we can do it for this. It's like saving babies, can't do it. You know, giving money to defense contractors. Oh, absolutely. We can do that. And that's what rubs me the wrong way. We can do anything, we just can't do everything. Yes. And our choices are very, very clear, and they tell us exactly what our priorities are.

40:11I 100 % agree with that. And that's a general view. I think you make a very good point about these particular two trade-offs, but there is right through everything. We can afford to do anything we want to do. Sure we can. We can't afford to do everything. And the choice we make, they're below our priorities. Yep, absolutely. Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener.

40:35Mates, let's go to the other part of the deal because the other thing that was announced was... 40 minutes of the podcast, we've realised. The other thing that was announced was, and it was funnily enough not announced by the Prime Minister. It was in the US President's one-page communique after the meeting. I saw this, yeah. Where he said, Australia has agreed to invest$1.44 trillion in American... Sorry, Australian super will invest$1.44 trillion in American companies by 2035. And that wasn't announced by the Prime Minister. I wasn't discussed by the promise. It just happens to appear at the bottom of a page.

41:06All of a sudden, everyone went, well, what? Hey, what? How? What? Hey? Other people's money. OPM, man. It's the savings accounts of all of us listening. That's what has been promised on our behalf without our say-so and without even being told directly by the people making the decision. I will say it's not going to happen, by the way. So this is where it comes to what was actually discussed and agreed. But to give us some numbers, it's about a trillion dollars more. So I haven't seen the actual numbers. Three times the current level. Right. So, yeah. So we've got about half a trillion or so invested in the US now.

41:39Apparently, some sort of agreement that Australian super will invest$1.44 trillion total. So an extra trillion dollars by 2035. We don't know. This might be a horribly, horribly bad assumption because we haven't seen any detail at all from anybody on this. That's the point. That's the problem. Yeah. Except that, again, speaking of negotiations and deals and conversations, and we know what Donald Trump wants and wants investment in the US and all those kind of good things. I suspect someone in Department of Foreign Affairs and Trade has said, look, Trump wants some investment. Can we make some investments in Australia, in the US?

42:11Well, no. What's probably going to happen though, PM, is that over the next 10 years, superannuation has finally got to 12 % of salary and wages are going to go up and market's going to go higher. So if we kind of grab the old Soviet here and just work it out, there's a decent chance we're going to get close to about$1.4 trillion invested in the US by Australian super funds between now and 2035, just because that's probably what's going to happen. And they've probably gone, so if we tell Trump that we're aiming to do that, he's not going to be there in 2035? No. And PM, you're not going to be here in 2035, are you?

42:44No. But we can tell him we're investing in American business? Yeah. He'll like that, won't he? Yeah. Awesome. Let's put that at the bottom of the meeting. And I can be entirely wrong. I suspect there is zero. Bro, if I'm wrong, I will be full-throated in my, firstly, apology and then condemnation. I don't think the country, the PM, has any intention of telling super funds they have to invest in US assets. He's not going to tell the future fund they have to invest in US assets because by 2035, Trump will be likely to be alive, let alone in the Oval Office. Alba will be up on his clifftop mansion in the north coast of New South Wales by then.

43:18And it's one of those, it looked like their 1.2-minute house construction target, right? Oh, it was an aspirational goal from Mr. President. We said we'd try and do it. And gee, we didn't get to 1.44. We got to 1.2. And we got there because it turns out that 12 % of salary when the US market gains 9 % a year, do the maths, we got pretty close. Nah, we tried. I could be wrong. I'll tell you what. After having backflipped on super with the unrealized gains and all that kind of stuff, if the treasurer and prime minister are stupid enough to try and mandate that super should be invested in the US, they've got a world of hurt ahead of them.

43:52I'm sure they're not that stupid, frankly. I could be wrong. Yeah, no, I think that's an excellent point. It's just the fact that those kinds of things that thrown around that just scare me a little bit. There's a name for it, right? It's called financial repression. It's when you get government directing investment flows of private citizens and for, frankly, craven political ends. That's where it just, it's a slippery slope. I mean, you start off on things that everyone would go, well, that's not unreasonable. And then it very quickly ends up doing very, very bad things. Right. And so it's sort of it's more the it's more the precedent that it sets, I suppose.

44:34It's more the normalization of that, that we will have politicians telling people. Let's step back. You always have to go to first principles here. What are we doing with super? We're trying to make sure that people have enough to live on. And what is the fiduciary duty of the custodians that have this very, very important job? It is to make sure that we get the best risk-adjusted return. That's what it is. Now, as soon as it becomes a political play thing, as I say, it's a very slippery slope. Are we buying this because it helps meet our targets and it's the very raison d 'etre of what this whole thing is about?

45:12Or does it serve some short-term political craven ends? And it's a sort of, again, there's degrees here. Things lie on a spectrum. But philosophically, it does worry me a little. Yeah, I hear that. And again, this stuff happens actually all the time in all of the world, but even not that long ago in many parts of the West as well. As I've said to you before, let's not get into this conversation, but I fully expect AusSuper to have mandated bond purchase requirements as the debt situation continues to get out of control and they find that private market doesn't have quite the appetite for these useless IOUs anymore.

45:51And then they just start saying, well, you know what? Every super account must have 10%. It leads to a dark place. And we always got to remember that these destinations are never just jumped to. They're baby steps all the way. And it's sort of like, oh, I just cringe a little bit every time we edge closer to that kind of stuff. And that's what rubbed me the wrong way with this particular thing. even though what you say is probably the right interpretation I just think I think we need to be careful not to assume that that will be the we should guard against it to your very very good point but not assume just because there's a they put something in a piece of paper therefore it becomes this thing and there's a we shouldn't assume not either that's the other thing cross liberty is eternal vigilance as they say that's the thing that's exactly the thing but assuming it's necessarily that or maybe just yeah because we fear we see it everywhere sometimes I've got to be careful of that as well 100 % man mate Can we talk a little bit about work from home?

46:44Yeah. Because it came up in the news this week, and I do love the Finn. God love them. They clearly have an angle, and they're entirely at that angle. That's completely fine. But the headline was employer trap, I think was the headline. You can tell who their core constituency readership is. But apparently work from home, a new ruling is going to be a trap for employers. and it kind of for all for all of that carry on it does kind of though talk to the um the changing nature of work and i've been asked about this in a couple different places recently and it's a really difficult one right on one hand work from home is about flexibility for the employee and that's great for them uh it does bring with it challenges for employers how do i make sure i get productivity how do i make sure i get attendance how i make sure the work gets done um but also flexibility works both ways right some of the stuff in the awards for example are minimum work contracts at least four hours uh in a retail shift for example why because you don't we don't think it's reasonable like someone travel for an hour and a half to get a job they do for an hour and travel an hour and a half home so you know a shift should be a reasonable size and you should get penalty rates if you're working at certain times of the of the week or the day because you know any social or unsociable hours probably should have some extra money at least that's the this should be made in the past and they were all reasonable views to have and reasonable i think regulations.

48:08The challenge we work from home is that very flexibility the employee wants is kind of goes both ways, right? If I want to work between seven at night and 10 o 'clock because I want to be around for my kids between three and six because they're coming home doing homework and having afternoon tea and my partner might get home after that. And so I would like to swap those three hours for three hours later in the day because I don't want to give up my pay. I want to get paid and I like my work. But is that okay? Well, maybe it should be. Do I want to work a Saturday rather than a Thursday because on Thursdays I got the kid home from childcare?

48:38Well, maybe. Do I get paid more on the Saturday because it works for me to make that swap? And again, I'm not saying necessarily they're easy answers, but workplace flexibility, the word is the clue's in the word, right? It's about being flexible. And there's some really difficult conversations for us to have, I think, as a country, as a group of employers and employees, as a, you know, regulatorily, what do we protect? How do we protect people? Because we know that if you leave it up to the market, people work in salt mines for, you know, 10 hours a day, seven days a week and get paid, you know,$14.30 for the effort because you just can.

49:15So, you know, there are minimum wage rules. There are minimum condition rules for all the reasons. But it really opens some fascinating and quite difficult areas. Yeah, I've never liked that argument. I mean, I hear what you're saying. Which bit? But you can point to the most egregious exploitation of workers when there's a very big power imbalance, like a massive industry, which is really the only employer that can set terms and really sets them unfairly. And history has got lots of examples of that kind of stuff. It's true. But that is just such a mile away from some middle class Australian deciding whether or not they can work from home on a Tuesday.

49:52You know what I mean? I don't know if you're not saying that, but it's sort of, yeah. I was holding it as an example of, you know, we have got a series of workplace conditions, largely hard fought, largely won by regulation rather than by commercial negotiation. No, I disagree. I'd say largely won through the efforts of unions. That's what I'm saying. That's not regulation, though. Well, the unions didn't get, they exist in regulation. they don't exist in negotiated outcomes so the minimum award wages for example minimum working conditions um sick days annual leave that stuff is regulated so it was through the efforts of unions i agree but the but those efforts were put into regulation so it is thanks to regulation that they remain in force and are enforced the unions don't have to go on strike every three months to make sure they don't go away so it's my point i'm not i think we're arguing the same thing The unions did the work for sure.

50:50The unions were stupidly important for most of the 18th and 19th century. That's why we have weekends. Correct, exactly. But again, we have the weekends in penalty rates exist in regulation because of the efforts of the union. So we're saying the same thing. I'm just saying that it's the regulation that holds the minimums to account. They don't have to be negotiated or you have to strike in every employer every year to make sure you get them employer by employer. It's done as a minimum standard condition across the entire country by regulation. Yeah, it might seem a bit strange for me to advocate for the benefits of the union movement, given what we usually sort of say about free markets.

51:24But I don't think there's, I don't think a discordant at all. I think it's actually a wonderful example of an organic ground up solution to a problem that doesn't require central government overview to instill. So just back to the point here. So what is the issue? The issue is that some people like to work from home and some bosses don't want them to, right? Now, I would say through my philosophical lens that it's just like, well, I actually think employers can demand whatever the hell that they want to do. And if you don't want to work there, don't work there, right? And you will find that, in fact, you find with a lot of places that they fail to attract the necessary talent because the conditions aren't that very good.

52:10It's like, well, I'm going to go work over here, you know. And the other, the person might say, we actually don't have to pay this person anymore. We just have to give them some flexibility. So it actually becomes, it's that wonderful competitive element that helps drive the right outcome there. So it's like, we just don't, we don't need the government to get involved. And when the government does get involved, we have to, we can never get around this very prickly problem of having to put a small group of people, we unavoidably have to make subjective decisions and then push that onto the entire wider economy in some places where it's reasonable and a lot of other places where it's not.

52:43So it's just this really sort of blunt edge kind of instrument that is a good idea if you happen to agree with the philosophical leanings of the people who are making the decision is terrible if you don't. And in some cases, they're right. In other cases, they're wrong. It's like, let the free market figure it out, right? Now, the exception here is just like, well, that's all good and well if I'm a killer coder and I'm just sort of like I'm absolutely in demand and I can sort of name my conditions. If I happen to be an Amazon warehouse employee, that's a very different story. And just back to my original point here, that is why the union movement is such a, you know, this collective action really helps balance the scales.

53:21Now, again, no one decreed that there needs to be a union movement. It organically and spontaneously formed and it led to incredible advancements in the rights of workers. And all it did was just recognize that actually, you know, individually, we don't have anything, but together we've got a lot of bargaining power. And then again, you have this natural tension, right? So on one hand, if the unions push too far, the business becomes unviable and no one has a job. Correct. If the corporations push too far, the conditions become so terrible that they can't even get workers under really punitive conditions and then their business suffers.

53:57So things tend to have a way of figuring themselves out. We've got to remember that the economy is never static. It's a process. It's an evolution. It's an emergent phenomenon that is always shifting. Thousands of experiments playing out every single day, some failing, lots failing, some working out. And that, I just think it's a beautiful thing. And I always get a little bit nervous when we start getting the heavy hand of government coming in, telling businesses what they can or can't do, even if it happens to align, as it does in this case, with where I think is appropriate. I'm a very big advocate from work from home.

54:34But I think as you and I have said on the pod before, it's just sort of like, honestly, for a lot of people, and again, not everyone, but for a lot of people, it's just sort of like, good luck to the employer that wants to just, you know, adhere to these antiquated notions and enforce all these ridiculous conditions. Because all you're going to do is get a very low quality workforce and your business is going to suffer, right? Like the market will figure it out. And other places like this is a great place to work. I literally had a conversation with a friend just yesterday who took another job on lower pay because of the work from home.

55:11And he's got very young kids. It was all flexible. And he said, yes, for me, it was the absolute right decision. And he's brilliant at what he does, right? So someone has effectively poached this very capable person and offered less in terms of their remuneration package. And he works in development, right? So it's like there are things called computers. You and I, you're in barrel. I'm in the Blue Mountains. We're having a face-to-face conversation right now. Exactly. And we've got, you know, 70 ,000 people listening in from all around the world. It's like we can do this kind of stuff, right?

55:42Now, if you wanted to sort of say no. We used to go to Bondi Junction. No, Citi, CBD. And stand around a desk and talking to microphones. And the audio was just as good. This is just as good. The reality is, you know, we could still do that. But there's no need to do that, so we don't. Well, and if some bureaucracy said that we had to, I was like, well, I'm not doing the pod anymore. I'm not traveling in an hour and a half. As much as I love doing this, right? But I guess, do you see my point here? You say that you still be there. You're two weeks. Yes, you're probably. Two weeks without rants.

56:13You'd be like, okay, okay. I'm jogging in. I'm jogging in. But my point is, and just that initial comment, I find that when you have something that in large part is a perfectly workable functioning kind of system of working things out. And then there's an appeal to these weird edge cases. Well, we have to do that because otherwise there's three-year-olds in a salt mine. It's like, well, that is a leap, man. Like, I know you're not saying that, but that's the argument that kind of gets used. And it's sort of like, very small fringe edge cases shouldn't inform our direction when in 98 % of cases that's not applicable or whatever the percentage happens to be.

57:00100%, I completely agree. I think the only thing I would say is I think we need to be careful not to be too ideological in either direction on this one. Yeah, true. So you talk about government getting involved, and I kind of get that. On the other hand, I've mentioned before, there are government-regulated mandated minimum work standards. And that is always government getting involved, right? The award wage system is the government getting involved. Four weeks annual leave, sick leave, maternity leave. Is the government getting involved? Now, could it have been won at an employer-by-employer basis with the union movement regularly, maybe?

57:36Well, it was initially. It was initially. But kind of, mate. It wasn't universal. The unions fought for it and then got the victory codified in law. So there's a temporal sequencing issue. I disagree. I disagree. You don't? Yeah? In the sense that they... Well, they never would have made it law if there wasn't. Agreed. I 100 % agree with that, except that it wasn't everywhere before they made it law. No, it wasn't. The union's got overwhelming acceptance of it via their actions and the government said, okay, now we'll do it. If you took the laws away, there would be employers who didn't offer annual leave.

58:07And I don't think going back to an unregulated workplace and assuming that unions will be able to negotiate everything that needs to be done, given, frankly, that most employers are employed by small businesses in the country these days, workplace by workplace, would we want to go back to a situation where government had no role in workplace regulation, I wouldn't personally. You may. That's okay. I think you're right. The union has absolutely earned, not for a second saying anything otherwise, I think unions have been really important. But the move to then say, right, there are now, and what do unions want?

58:36The unions want the governments to negotiate, to legislate those things because it protects all employers without requiring union involvement, strikes, whatever else, to try and get those things either earned or maintained. Every time there's a new business, there'll be a new strike or new negotiation. I think minimum regulatory standards are important. So that's why, you know, you're smaller government than I am, I think as a general rule. Yeah. But I think there's – government is really important in this space to codify, to mandate, to set minimums in those areas where we believe as society those minimums are appropriate.

59:09It shouldn't have to be one, you know, door by door, factory by factory, office by office, by collective action. We're not a mile apart. Honestly, we're not. it's it's it's the yes i i we're actually very close on it yeah it's more it's more that the it's the direction directionality of things and the and the and the scope of things and again just as an observer of of what has tended to happen is that these you find that these bodies and bureaucracies and regulatory age they only grow they only grow and they never get smaller and And so people often go, oh, so, you know, laissez-faire, you know, anarcho-capitalism.

59:48Like, no, no, no, no. Not even in a million years of Sundays would I advocate for that. But there is, you know, what am I trying to say here? It can be, it's more that it gets too heavy-handed and then it becomes counterproductive. And it's one of the things that I just see more and more these days where something that is a good idea, i.e. someone looking out for the interests of the little guy through some regulatory and legal frameworks is a great idea. You blink and then 10 years later and the entire industry is captured in a regulatory sense where the fox is at the negotiating table, absolutely mandating what gets to be said, keeping competition out, keeping dynamism out of the economy.

1:00:31It's just sort of like it's entirely counterproductive and it always starts from a good place. So I just feel as though, these discussions are really important because it's not a black and white thing. It really is on a spectrum with a huge amount of grey. It's just that when the pendulum starts to swing too far, as it does throughout history, right? It swings too far one way and it swings too far the other. And we'll never know where the exact sweet spot is. I'm just trying to make the point that I think with a lot of these things, as I've said a lot recently on the pod, is that the knee-jerk reaction is the government should do something and we're going to trust these small group of people who just happen to be philosophically aligned with us these them to do the exact right thing and again you what you you wake up 10 years later the size of the the the agency is now 10 times as large it's actually creating all of these frictions and unintended consequences and and paradoxically entrenching the corporate interests of a very small comfortable cabal of oligarchs you know it's like whoa how did we get here and it's like well that's how we got here right like the the road to hell is paved with good intention so i really bristle when people sort of just but they they make the the black and white arguments so it's either this or it's that and i'm i'll really be abundantly clear i'm not saying that but it's just like when i read this just to go back to the point when i read all this work from home stuff it just seems to be that's the only way that we can do this because because lord knows employees and employers aren't capable of working this out on their own so let's let's get you know a team of of people together to make the decision at large for the broader economy.

1:02:05And it's just like, ooh, that's something that we need to at least think very carefully about before we started going further down that path. I think where we end up being 100 % of agreement is just keeping that tension. Yes, exactly. Between involvement and uninvolved. Are we really sure we should do this? Yes. What are the positives? What are the negatives? And sometimes it will be, yes, we need to do this because otherwise, there's the outcomes. Other times it's like, yeah, we could probably do without that. That would be okay. yeah um you know and that's the thing right like putting a putting a kid down a salt mine okay there's there's there's one thing you know should should bruce be able to work from home on a Thursday I just think oh come on I really are we exactly and what what he what he's he's a he's a management consultant for a big four you know bank really well I mean it's just they can work that out this isn't this isn't like an ideological thing to sort of say do we really need the government to get involved in this kind of stuff and another layer of bureaucracy and another another thing that anyone who wants to sort of operate in this space and again it's fine if you're like a 400 billion dollar mega cap company it's like no it's scott his wife and their family business trying to stand something up and offer a good value service to the community is like oh by the way you need a team of of lawyers and 58 people to make sure that you're regulatorily compliant you know just sort of like i just can't like i'll take the example um well one that one that i had directly was you mentioned before year 100 years ago i had a a cafe and like it's just like barely profitable i was so super hard and one of the things that was really tricky were there were these workplace rules that you couldn't hire people for less than i think it was a four hour a stint and um and then you had to give maternity leave and again i'm i'm really big on maternity leave and putting you these kinds of things first but but what it what it meant was is that i actually ended up employing far fewer people than i otherwise would have liked to because i just the the economics weren't viable for and i'll admit this on air i did not employ when I say employees like four people that work there right but it was just like I was biased against younger women of child rearing age not you know I'm embarrassed to sort of say this out loud but it's kind of like I just like the I want to support you in every way I can 12 months of maternity leave and employ someone else at the same time I'm bankrupt and I'm not in business anymore and then you don't have a job either so you still don't have a job and now I don't have a job and neither do these other people have a job and and we're not we're not providing coffee to the community.

1:04:39So it's sort of like you can take a good idea, but if it's not feasible, if it's not practically achievable, the unintended consequences are different. Now, does that mean if you're Woolies or if you're Bunnings, and that's a different story altogether, right? And I really, because I know I've put my foot in it and I know that this is going to come back to haunt me because I think those entities are in a different category. You've got a large enough workforce. You've got the capacity that these things really need to be something that that you, you, you can be more forceful on, but do you see what I'm saying?

1:05:13Again, it's this, it's this crony capitalistic dimension to it where all it does is entrench the large incumbents at the expense of the small up and comers. And it's like that, no one, the only people that win in that scenario are the incumbents. And I think whether you're right or left or big government or small, I don't think anyone looks at that and goes, you know, for the sake of, That's a terrible outcome for the consumer, for the worker, for everyone. But if, yeah, anyway, I'm just digging myself in a deep hole. Hopefully, I really hope that that came across in the right way. I did, absolutely.

1:05:50People don't see me as some arsehole that didn't employ certain people for my own selfish capitalist interest. It was really just a question of can I be viable or not, right? I don't think you're any worse than that. Instant regret there. Instant regret. I'm not a bad person. I'm really not a bad person. At all, at all. Mate, we hit a minute, eight hour five. I'm going to call this podcast here because there are two more topics on our list, one of which is housing. And frankly, you know our listeners have that much time. I will very, very briefly, and I say this every time we're going to talk for 25 more minutes.

1:06:24I just want to mention Chemist Warehouse because I wrote the news this week. And we don't talk as much about individual companies as maybe we could. I just, I have not much to say other than to share a couple of numbers and then just give them credit for how amazing a job they've done. So everyone knows Chemist Warehouse, right? The largest chemist chain in the country have come from nothing, just an absolute juggernaut. So that's all true. And in the last quarter, they grew sales by 17%. Amazing. That is just – a small company growing at that rate is amazing. Chemist Warehouse, I'm sure they're the biggest – I'm trying to think of any categories.

1:07:04I used to work in the vitamin business, so maybe there's categories they're not biggest in, but I'd be surprised if they weren't the largest retail pharmacy chain in every category across the store. So they were already the big guys, and they were at 17%. Sales, not profit. Right. That's right. It's not like they just halved all of their costs by firing all the soon-to-be-pregnant young ladies. This is just phenomenal. So 15 % growth, same store sales too, by the way. It's not even opening new stores. Yes, that was, you know, what, a sixth of the total growth was new stores. The rest of it was just the same stores selling 14%, 15 % more stuff than the same period last year.

1:07:46It is just an impressive, impressive juggernaut. The other quick aside, the sales of a Zempic doubled, which is the weight loss drug, which is fascinating itself. And this is prescription stuff, by the way. It's not just off-the-shelf stuff. This is prescribed drugs. but the chemistry we talk a lot about JB Hi-Fi we talk about Bunnings as great retailers and with absolute justification and we're always biased not because we are shares guys just because public companies are in the public their public knowledge by definition right so we see their data we see what they do as I said I used to work for Blackmore a lifetime ago now probably about as long ago as you had a cafe I suspect mate and these guys were amazing retailers then and they have just continued to grow and grow and grow and grow by just providing, giving people what they want.

1:08:30And you say this regularly, mate. Businesses will find their niche, they'll find their opportunity, they'll find their traction by doing things that the market rewards. And that's kind of exactly what this is about. And they just, I don't have anything really to say. I mean, the model is amazing. They're, you know, the shops are chockers. They're not particularly wonderful shopping experiences. They're most like a JB Hi-Fi in terms of they're crowded. There's display bins of specials everywhere. they just decided to win on price and they did and they continue to win on price now if you're a pharmacy you're not part of Chemist Warehouse you probably don't like them I would like someone who took my business away either but as operating businesses as organisations as companies or a company that has just found a way to offer people more of what they want which is just what you know talk about capitalism that's what it is right you can have this or that which do you want and people say I will have the Chemist Warehouse one please okay well I'll shop there instead of Terry White instead of Chem Mart or instead of whatever I will say, I've said this to you off air, there is an argument which has some traction in my mind, not enough, but some, which is that pharmacies are both – and this is – I won't get too deep into it.

1:09:37The pharmacy was originally a dispensary, right? And that's a really important function because someone goes to the chemist. Doctors give me this prescription and they say, well, okay, well, are you on this drug or on that drug? Or do you need any help understanding what you need to do? or if you have another health complaint, you can ask me while I'm here and I can help you because I'm a trained medical professional. I'm not a GP. I'm not going to do what a GP does, but I have a role in the health system. And that's really, really important. What happened over time was the pharmacy, the dispensary said, what if I sell nappies at the front?

1:10:06And then what if I sell some hand cream? And then what if I sell some vitamins? I can turn this healthcare business into a retail business. And they're entitled to do that. Again, free market. And that worked for as long as there wasn't any competition for the front of store stuff. The vitamins were sold at full price. I'd recommend a retail price rather than a discounted price. The nappies were sold at full price. There was some products you could only get in a pharmacy, so that worked for them because they were sort of protected from competition from woolies or coals or there was ownership rules and God knows what else.

1:10:32They had this little nice little cottage industry. The pharmacy is the most protected industry in the country and woefully and necessarily so. And so, frankly, you mentioned the unions before about eventually a union gets to a size where they demand too much and the company goes broke. That's exactly what happened. The Pharmacy Guild is the most powerful union in the country, bar none. They are phenomenally powerful because the police are scared of them. They're scared of little old ladies going to the pharmacy and they say, well, you know that bad Mr Albanese, don't vote for him because he wants to take away your health care.

1:11:00I have seen signs to that effect in many pharmacies. And whether it's genuinely powerful or just assumed to be, it doesn't matter because perception is reality, right? So the pharmacies throw their weight around, the governments are scared as hell. And so I think we're up to the eighth community pharmacy agreement. They basically sign five-year deals promising to protect them from competition. That's how this works, right? And so honestly, and there are some good pharmacists out there, probably some who are listening, and I'll respect that, and we'll get some emails, I'm sure. But the reality is the Pharmacy Guild have put the other pharmacies effectively, they made them protected species, but they also made them fat and unfit and flabby and not ready for.

1:11:38But someone from inside the tent, another pharmacy said, this is crazy, we'll just do cheap products. And that completely undermined the cottage industry, the protected industry that was pharmacy. Cartel? Well, not in terms of the individual pharmacists, but yeah, by definition, the existence of the union, the Pharmacy Guild, I'm not calling it a union, literally just went, well, we'll protect you and protect you and protect you. So they're not competitive. They're not competitively fit in any way, shape or form. There's too many of them because the force of competition was kept away from them.

1:12:08So when someone came from inside and said, I'll have some of that, thank you very much. They went, but hang on, we don't have to compete. This is not what we do. And turns out they had to. And this is what markets do if markets are allowed to. I said, I'll go back to the point about dispensary. That's the point, right? Like the people who suffered under that arrangement was the community paying more than what they otherwise would have had to in a free and open market. Yeah. With that said, with a half exemption or exception that there is some healthcare being provided. And I don't think it's controversial to say you're probably going to get better service from the dispensary at a small independent community pharmacy than a massive high throughput chemist warehouse.

1:12:44And so it's not a zero. net positive but not a gross positive. There are sorry, net positive not a total positive. There are drawbacks to that sort of system and that's so you know we'd say who's harmed I just want to hold out that reality of there are dynamics that differ and there will be some people who get worse service from Chemist Warehouse than they got from their local pharmacist who went broke because they couldn't compete on cheap vitamins and perfumes. And that's still the market doing what the market does. I want to be fair to some degree so there are drawbacks. I don't think we should have done anything about it.

1:13:15We should have the competition that we've got. Frankly, Woolies and Coal should be allowed to have pharmacies in store. Sure, I'm all for that. Why would you not stop them? Well, the why not is because the Pharmacy Guild doesn't want it and the government is scared of them. But why don't they? Why does the Pharmacy Guild want it? Money. Yes. They pretend it's not, by the way. The Guild will tell you, no, it's about healthcare, it's about whatever. And that's part of it. It's absolutely part. The pharmacists want to make a fortune. They do also care about their customers. All of us do. Yeah, totally.

1:13:42That's just human nature. We all want more. Correct. Yeah, they're not special. I'm not criticizing them for wanting to do that. I'm just saying when you have, let's call it for what it is, an effective collusion, you know, then at the expense of competition and price. And I think the other thing too that often gets missed in these discussions is that we assume that everything is about price. And price is very important, right? Don't get me wrong. It is the signaling mechanism that coordinates everything. I could write a book and others have many, many famous people going back hundreds of years have written old books and, you know, great tomes of academic work on the significance of price.

1:14:20But consumers aren't purely myopic on that. If it was, we would only be eating two-minute noodles, right? It's value your price, right? It is value. And I would imagine that in a completely laissez-faire pharmacist kind of world, that we shouldn't naturally assume that the pharmacy that's just handing out everything dirt cheap without any mine to appropriate medical standards is going to win. Because, again, you think downstream of that, it's sort of like, well, there's probably going to be adverse consequences to such an approach. and they've probably, you can imagine a young family taking their little baby to, you know, gosh, we need some advice on some medication here.

1:15:06It's like, well, this one's cheaper, but they just give you whatever you want. This one's a bit more expensive, but they know us. They give us really good advice. We've been, like, there is value in that, right? There is absolutely value in that. And I think it's always a little bit paternal or just derogatory to assume that, no, people can't make an effective choice for their own circumstances without someone there to tell them what is proper and appropriate. You know, it also assumes that there's no pharmacy guilds out there – oh, sorry, pharmacy within the guild's purview that offer bad advice.

1:15:42Yes. Or, you know, hand out drugs at papes they shouldn't be doing or that Chemist Warehouse is only, you know, is letting things slide. So it's complicated. I don't want to apply for a second chemist's house doing a bad job of writing service, just that. They will have some great pharmacists. There's some pharmacists in the dispensary at Chemist's Warehouse, and they're still trying to do their best work. They just want to hold out that model is different. I think you're exactly right, and that's my argument where I'm not saying, therefore, we should change. I just want to recognise that there are trade-offs.

1:16:10Those trade-offs are absolutely real, and we still choose them, and that's okay. Because, by the way, the individual consumer wants service and cheap drugs. So, well, okay, you say you want... I very rarely give Polish and sympathy, but this is where the Polish get a bit of sympathy from me, which is I want those things. Well, you can't have both. That's not how it works. Yeah, but I want them both. And what do you do? Well, most Polish say, take the user. Okay, you have both, and then that's how you end up with the Pharmacy Guild, right, where you get service and whatever. But yeah, you're right.

1:16:37I mean, we say we want X, but we want Y at the same time. Everything should be made in Australia, but I want to pay the price for Chinese or Bangladeshi T-shirts. well which one you have to make the choice well I want to make it in Australia which one are you buying oh the cheap stuff well guess what that's how this works that's how this you know the choices are choices even if you say you want something you know money talks and BS walks that's kind of the you know that's the reality of decisions that we make and to some degree I think sometimes we want gamers to do it for us so we don't have to do it ourselves right if you let me I'll buy the cheap stuff I probably shouldn't but I know I will so if you could just put the padlock on the fridge for me.

1:17:17I won't have the midnight snack. That'd be really helpful. I want the freedom, but if the padlock's there, I won't complain too loudly. That's the challenge of modern governance, I think. Yeah. Oh, it's such a big topic. We won't go on with it, but I'll just say that I think the chemist warehouse phenomena is a really good example of why competition can be a force for good. And let's remember, its success has been a direct result of the opposite of coercion in other words in other words you me and listeners going oh i need to get some makeup or i need to get some panadol or i need to get some i'm going to go there why because it's convenient and it's cheap and i like it you know the value i get from it to your point which is that's why they do it yeah yeah no one said i'm against the pharmacy guild and i'm going to make a political standpoint and i'm going to go over here like no it was just like and again that's That's how the whole damn thing is sort of meant to kind of work here.

1:18:12And I don't want to be a cheerleader for Canvas Warehouse because, honestly, if someone could come along and do it better, I was like, screw them. You know, it's that article that I wrote, I pointed to last week on our blog at the moment. It's just like true capitalism is in service of the consumer. That is who should win and should be the focus of these things. And this is a great example of us as consumers winning, you know, by, I was going to say allowing more competition, but frankly, by these guys just going around the established powers. And they have earned their success by delivering increased value to the community.

1:18:49And I say, well done to you. And if someone else can do it better, well done to them, right? It's how it works. It's how it works. It's how it works. By the way, even the current community pharmacy guys that are complaining are part of franchise groups that gave them more buying power. Terry White doesn't own all of those chemists himself. And once upon a time, there were 1 ,000, 5 ,000 independent chemists. They thought, well, let's get together so we can do this and that and the other. And they would have taken that process for each other happily. Exactly. That's how it works. Yep. By the way, Priceline makes far more money on makeup these days.

1:19:22Actually, I made a lot of money out of Priceline when I was an individual company. You did, API. Yeah. And again, they delivered better service at the time and there's an old thesis sort of behind it. But yeah, no, I, yeah, go capitalism. Go capitalism. On that note, will you come back on Sunday? Yeah, hell yeah. All right. Until then, enjoy the first half of your weekend and full on. Cheers. The Motley Fool and people appearing in this program may have positions in the companies mentioned. General advice only. Please speak to your financial professional to understand how it may pertain to your situation.

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