Mailbag, incl: Four big ideas for Australia’s future. September 28, 2025

24:35So it's sort of like it's just fairer if we all accept that there are some funding for a government required. And I just think that's easy. But what we have at the moment, I've always just, I've disliked the idea of taxing income. Like why would we disincentivise people being productive? That doesn't make any sense to me. That's why I would move some of those money and reduce tax rates rather than fund a sovereign wealth fund. I think that'd be a fair national outcome overall. I mean, we're so far away from the ideal that I think any step towards it is a positive thing. So I would never let perfect be the enemy of the good.

25:12And so there's nothing – I'm not going to push back. We could have a few beers and, like, talk this stuff all day long and then some even more because it's fun if you like to nerd out on this kind of stuff. And we do. And we do. But no, I've got no great issue with what you said. I think that would be much better than what we've got now. And, Nathan, if you want to – what do they call it? If you want to Shanghai me and make the leader of the party and I get$600 ,000 a year for being PM, I will reluctantly accept, mate, but otherwise it's probably a pipe dream. You know what's funny, mate? I'd like your thoughts on this too.

25:43You talk a bit about sound money, about inflation, about devaluation, and this is not that at all, except it has really significant parallels. I was very late. I would go a few years ago now, but very late to the idea of population growth, effectively devaluing each individual resident's share of the national wealth. So if you think about Australia, we had 14 million people and we still had X thousand tons of coal and X hundred thousand barrels of oil, and X hundred thousand front metres of beach and all that kind of stuff. Effectively, as quasi-shareholders, when you double a population, my share, your share of the wealth that exists at the time is diluted by the growth in the population.

26:23Are you talking about Qatar? Yeah, effectively. You know, or Saudi Arabia. And they have got an incredible natural endowment and not a large population. Right. And the more you add to it, the less each person... Yeah. And it's pretty hard to emigrate to some of these places as well and certainly to have equal rights and the entitlement to the payments and this is a whole other thing. And I'm certainly not going to defend. Please don't get me wrong. I'm not saying we should be those countries. It's just the maths of that works for share dilution as much as it does for currency printing, as much as it does for population growth.

26:57It's just that maths works just because it's against maths, right? Yes, it does. For natural resources, not for... Yes, you beat me to it. So natural resources is the one exception. Outside of that, I would say, well, more people are doing more stuff. So the pie grows larger. So it's more like the per capita stuff. It's different on natural resources because they are finite and shared amongst the population. That's my idea. It's not a huge deal either way, but it is worth noting. To put that Qatar or someone else, if you're a Qatari, you're like, well, hang on, if we let more people in, I'm getting less of what's left over.

27:34There's something to that. Something to be said for it, yeah. It goes all the way back, by the way, to your point originally about it's really a question of just natural resources in terms of just the economic value. The rest of it is just manipulation of those resources. It really is. Do you really want to boil it down? Yeah, yeah. You've got energy, however you want to produce that, and you've got human action. Yep. Like that's it. Yep, yep. Because from that, we dig stuff out of the ground and turn it into a smartphone. Like it's energy and people. That's it. That is all there is. And even the energy itself is kind of generated by people and it's a bit of circles all the way down.

28:09It's all human action. Let's go to a question from Danny, who has a really specific question, which I quite like, and I think you're familiar with this company. Greetings, Scott and Ram from the other side of the pod machine. Good day, Danny. I love listening to your podcast and have had previous questions expertly answered. I wonder what podcast he was talking about. My question this time around is regarding net tangible assets. And in particular, one company I own shares in, Bailador Technology Investments. The code is BTI on the ASX. This company invests in both listed and unlisted small technology companies, and I like the exposure I can get, especially to the unlisted businesses that are contained in the portfolio.

28:46I expect to hold long-term, provided my investment thesis holds. But I'm not quite sure what I'm missing at present. The net tangible assets of the company trade a significant discount to their valuation. I think you meant the other way around. The other way around. So the share price is less than the net tangible assets per share. In my time owning a part of this company, said Danny, they seem like they are conservative in the way they value the unlisted part of the portfolio. They're quick to downgrade under any underperformers and having a sensible valuation uplift only when warranted. I'd be interested in your views on net tangible assets in general and also particularly in this company as its share price is currently around 60 % of their stated NTA.

29:32Any insights would be appreciated. Regards, Danny. Do you own Baylid or mate? I think you might have. Yeah, I got a few. It's not a big holding, but yeah, I do have it. And so, yeah, they're an investment company. They invest in, well, there's a couple of bigger holdings are now listed, but a Sightminder being a notable one there. And Straker. Straker, which is an AI translation kind of deal. So, yeah, they're an investment company and it's generally early stage tech. And so you give them money, they go off and invest it for you and hopefully they do a good job of it. That's the simple version of it.

30:07Kind of listed venture capital firm really in some ways. Yeah, exactly that really. And Danny's right. So if they took all of their assets and sold them and then paid tax on them and then divided that up amongst the shareholders, they would have$1.77. This is of August 2025. I brought up their NTA statement. Nice. And they're trading at$1.27. And they're trading at$1.21. So hang on, I can buy shares for$1.21 and get$1.77 worth of assets? No. Well, yes. That's what you told me. Well, yes, right? And it's such a great - Which is Danny's point, right? Hang on, if it's worth$1.77, why are people only paying$1.21 for this thing?

30:50Ah, so it's a good question. So the reality is, like, these are carrying values. These are values that have either been – and this is a big part of it for me. If this wasn't the case, I wouldn't be anywhere near it. But they're reasonably, I think, conservative in how they value stocks. And generally, where possible, they'll use a market event. So the company that they've got shares in went to the market, be a private market, they raised some capital. What was the valuation of that raising? That's the value of that company. It's all good and well, and it's perfectly appropriate and reasonable.

31:24The trouble is, as we all know, that what you were able to raise an extra$10 million at might not be what you're able to sell the whole company at. So when it came, if it actually, let's just say, let's just play it forward and say, right, I'm the chairman. Let's liquidate everything. Well, fire sale is too strong a word, but in a selldown of such magnitude, of such stakes, I don't know if they would actually get that. Maybe they would. Maybe they would, but maybe they wouldn't. We don't actually know, right? The other thing is, is the share market teaches us every minute of every day that it's open is that valuations change very rapidly.

32:01So there are some companies that are being carried at a certain value. Next year's results rock around. They're absolute dog's breakfast. And the company gets revalued down 50 % lower. So that$177 ,000 post-tax is, I'm not saying that there's anything dodgy with that whatsoever. But what the market is saying is like, well, that's reasonable from an accounting perspective, but can I actually quickly and effectively sell at that price? Maybe not. And also, by the time that the next valuation is calculated, it could be very different. So there's liquidity issues and there's uncertainty issues. And there's also probably a market perception towards effectiveness of management.

32:47I'm not going to say anything bad about it. I mean, I've got some shares in them. So I think they're good guys. I have had others on Strongman rightly point out that they're well compensated for their efforts. So let's not pretend that they're there as a charity.

33:06There's a lot of moving parts to all of that, right? I'll give my own business as an example. Strongman's just a private business, right? And I can say it's worth whatever. And maybe I can convince me, I say, Scott, I'll sell you$10 worth of shares at a$10 million valuation. And for 10 bucks, you go, all right, fine, I'll do it, right? But does that mean it's worth$10 million? Like, you've agreed to it in part, a very small stake when the whole thing is blown up to that vein of value. But this is like, probably not, when it really came down to it. And having a time - It goes both ways, right? You invest in Facebook when it's worth$10 million, also it's worth a billion dollars, you make a lot more upside.

33:43But either way, the current price may or may not reflect the future value of the whole business. And so there's just an uncertainty dimension to all of that kind of stuff. So the same question comes up from time to time in terms of listed investment companies just in general, or, you know, there's a discount to NTA and people think it's a free kick. It's not a free kick. The market is very rationally, I would say, providing a bit of a discount there just to allow for the uncertainty of things. The more liquid the asset and the more conservative the valuation and the higher trust you have in the key people, then the closer that the market value should be to the accounted value.

34:26But in the real world, which is uncertain, scary, volatile, it is actually a little bit prudent to have a little bit of a discount. Now, I would share your perspective that, gosh, that is a big discount. It's a lot. It's a big discount, right? Which gives me some comfort. But I'm not under any false pretenses that there's any rule of the universe that says that that valuation gap should close. What you do notice with Bailador is that when they do have an exit event, and this is what's kind of interesting for me, is like whenever there has been a revaluation or an exit opportunity, the valuation has occurred at a much higher level than their carrying value.

35:09In other words, it doesn't prove anything going forward, but it knows, at least historically, they haven't been over-egging the pudding there. If it had been that every time they'd gone to exit something or sell something down, it's like they could only get it at a smaller fraction than what they actually were carrying it. I would say your accounting is a little bit dodgy. And, you know, if you've never been able to sell at the values that you've been carrying it, why would I have any confidence in what you're saying they're worth now? The fact that it's reversed actually gives me some good deal of confidence.

35:37So I expect the return to be realized not so much in a valuation, in closing of that valuation gap. I suspect that there will always be a bit of a discount there. But just that they will hopefully continue on. They won't get it right every time. No VC company does. But hopefully over time, they continue to make good investments. And then those investments continue to provide good returns. And both the NTA per share and the share price will get lifted up as a result. Yeah, I think that's right. What's nice about it is, I would say, is that a third of that NTA is from listed companies. In other words, very liquid, very accurate.

36:21Like they're priced every day on the stock market, which is very different from a small, illiquid private company. So at least, you know, a third of that valuation is pretty spot on. I'm scrolling desperately. I'm trying to remember what they, for a while there, they had a huge amount of cash as well. It's only 1 % now. So obviously, 0.8 % is the most recent cash allocation. Back in the day, though, that was sort of like, well, that's - Is that a third? Yeah, it was huge. Yeah, it was. Super, I mean, there was no conversion risk. It's cash, right? That's right. It is the very definition of liquidity.

36:55So it was sort of like, didn't make any sense whatsoever. Yep. So, yeah, I'm not trying to shill for it. Do your own diligence. They could be sitting on a pile of garbage, right? That's the risk. and that that NTA per share next time is quoted could be cut down by 90%. I don't think it's going to be, but it could. It could absolutely happen. And all of a sudden you're going from a discount to a massive premium. And that's what you've got to be aware of. But Danny, if you feel confident in their allocation, capital allocation skills, and you feel as though they've been pretty conservative in the carrying value, I think it's a point of comfort for shareholders.

37:30I like that, mate. I do, at some point we've seen other listed investment companies wind themselves up because of persistent discounts. Yeah. And at some point, I suspect Baylor's shareholders don't want minority shareholders in these VC investments. So it's a good reason to stay listed to some degree. But at some point, there's an immediate 40 % uplift in recognisable value. It's actually distributed the shares they owned to shareholders relative to the massive discount they're running at the moment. At some point, I suspect they've got to at least think about that on behalf of shareholders. Maybe they never do it.

37:59Maybe they're remunerated to it. Maybe they believe in their own strategy. And again, if some of those private companies become listed at some point and they're either cash out or you simply concede the value, then it is worth much more. A 40 % discount is one thing now. A 40 % discount at the share price and then$5, still a 40 % discount, but you've been well and truly rewarded for hanging around. So it's going to be about, in my opinion, less so with big, mature listed investment companies that own equity portfolios. You know, there's the Argos and the Affix and that kind of stuff. And if they own CBA, Westpac, and Woolies, and they're trading at a 10 % discount, you can pretty much buy the businesses themselves.

38:34But for Baylor, you're absolutely betting that the private investments are worth more in the future than what they paid for them. And if that's the case, even with the discount, you'll do very nicely. I was hoping you'd talk for 10 seconds longer. Let me just buy some time here. Anyway, so the other day - Here we go. I've got it. So Argo's pre-tax NTA per share as of the 12th of September. So a couple of weeks ago, it was$10.66. $10.66, yeah. And they're trading at$9.21. Yep. So proves the point, right? Yeah, totally. The discount is much smaller for the reason that you discussed, but it's still there.

39:09Can I say one more thing quickly? I haven't looked at Bailador and I haven't looked at their fees, but there's a very good argument that if you capitalise the annual cost of running the entity, that should come off the NTA. Yes. So it gets a little bit detailed for audio, but effectively when you do discounted future cash flows, you're saying, hang on, there's a, and I won't pick on, but I have no view, by the way. I don't know what their internal costs are, but effectively what you're saying is, well, I've got all these assets, but from these assets, I'm actually paying a fee and that fee in present value is, as we say this all the time, discounted future cash flows, right?

39:43Net present value of future cash flows. Effectively, okay, I'm going to have to pay 1 % a year for the next 10 years in my number. Therefore, the value is the assets I own less the cumulative value of those fees. And so generally speaking, I haven't ever done the maths myself because I don't do a lot of listed investment companies directly. So that's different for different reasons, more conglomerate than a listed investment company. But if you're doing an LIC, about 10 % is an approximate reasonable discount to account for those fees you might otherwise be paying just for what it's worth. And that should be in the price, right?

40:16Because if it's sold for the NTA and then you're paying fees on top of that, it's more expensive to own the LIC than to own the individual shares. So it should be at a discount, which is the value mathematically of those future fees or future costs of running the business. And again, if you know what Bailador paid themselves, there's some element of that. I doubt it's 40%. It's not the difference. But part of that, you shouldn't expect that gap to ever, ever, ever close. If it does, it's probably a fair bet they're probably overvalued for exactly that reason. Yeah, yeah. I mean, it's interesting, right?

40:44Like you bring up the chart with Bailador and five years ago it was around about$1 and now it's$1.23. you know it's not setting the world on fire no it's not but they have paid 32 cents in dividends along the way can I say that I think that's the strangest that's the strangest part I I've spoken to both those guys Paul Wilson I think his name is David Kirk really great guys ex-Allback very cool which is that was without a medium frankly I'm a Wallabies fan when you meet the ex-Allbacks captain there's a bit of fanboying going on also ex-chair of Fairfax yeah chair or CEO CEO I think anyway Anyway, I was going to make...

41:25So dividends, why are they paying out dividends? If you're an investment company paying dividends, I suspect they're doing it. Apparently, they've got some... Did they have franking to get rid of, I think, which justifies some of it. I have to say that if you're an investment company, you're investing other people's cash, paying a dividend felt to me more like them trying to keep faith with investors of getting them some sort of return while they waited, which I get from a shareholder relationship perspective. But it's a bit like Buffett, right? If you're Buffett, you don't pay a dividend. Why isn't he paying dividends 65?

41:51Because he thinks he can invest the money well. And if these guys reckon they can, and by the way, the track record's pretty good. Guys, don't give me the money back. I'm giving you the money to invest. I bought a dollar's worth of shares. You gave me five cents back in dividends. I want the dollar invested in the company. I don't want five cents back. So I would absolutely say to them, I kind of get why you're doing it because it kind of feels like you should and maybe gives you some credibility. And please don't. If you can invest well, do it. If you can't invest well, then give up. Give us the money back and liquidate the company.

42:17But it's either or all for me. It feels like they're a bit half pregnant with that one. Yeah, so two points. So firstly, on a total return basis, it's been a very good return. Oh, nice. Not knocking it out of the park, but it's a very respectable return. Also remember what the technology investment landscape was like five years ago. It was very frothy. Yes, yes. To have delivered those returns from that starting point, I do give them credit. Tech flew in 2020. It just went nuts, right? I think it was 21 as well. We printed a bunch of cash and we dropped it out of helicopters. It found its way into all kinds of dumb technology companies.

42:53Tech specifically went through the roof for a little while. Oh, it did. It did. And I know because my personal portfolio between 2020 and a couple of years ago was like rubbish because it was really lofty valuations. So I make that point. The other – and I think your point is spot on. The only pass I will give there is that you can only operate with the opportunity set that is presented to you. Oh, yeah. Yeah. And if it was that there was just like, well, look, which honestly, we are, we're good at what we do. And believe you me, we've been looking. There is just nothing that has met our threshold for quality and, you know, potential growth.

43:33So we are paying a dividend. In that case, it's like, absolutely. If you're Buffett and there's tons of opportunities, absolutely, you know, keep the money. But if not, and particularly, you know, you need to sort of like bolster up the investment merits of the whole entity. I think it's not unreasonable to pay out a bit of cash. Yeah, I don't think that's what they're doing. But conceptually, I agree with you. Look, you're not alone. They haven't cancelled the dividend since, have they? Let's be honest. Look, I don't want to go too far in trying to defend all of this. Yeah, it's a reasonable point.

44:09I mean, at the end of the day, you go round and round. It's just like, do you think they're good investors? And do you think they'll allocate the money well? As every financial disclosure statement will tell you, past performance is no guarantee of future performance. But I've spoken to them a few times. I feel as though on balance, they're pretty good. I acknowledge the fact that they're on a good wicket. You know, they charge fees. Oh, they deliver the results. Yeah, yeah. You know? I'm having to pay for performance. And I shouldn't over-reg it too, because it's not like this is a massive cornerstone position for me.

44:39It's a very small kind of position, which sounds like now I'm covering my butt and walking out backwards. But I'm not. I just think that those things are true. And I do share Danny's, you know, some comfort, I suppose, in the fact that there's a margin of safety to a degree built into the share price at the moment. You're still not overpaying, are you? You're not overpaying, right. You know, as much as I gave those, you know, I think it's like everything, right? We shouldn't be fanboys. So, you know, I like those guys. And they're doing a good job. I think they've delivered really great results.

45:11I don't think they should pay a dividend, but that's our view. And I like the company. I don't own the shares. I like the company. I probably should own shares. I really do like what they're doing. I like the approach they're taking. One last one really quickly. Sorry, mate, just to really nail this one shut. While you make the very valid point that the public company valuations are known and can be simply calculated, you really should also have a view, in my opinion, because particularly SiteMinder is a large, large, large chunk of that. Yes. You kind of always have a self-advalued. If you think that's overvalued.

45:43Right, exactly. Or undervalued, by the way. But yeah, you probably should have a view on SiteMinder. And this is why I always don't like thematic ETFs for the same reason, right? I like AI. Well, have you evaluated every individual company? You just like the idea.

45:55If SiteMinder is 50 % overvalued, then the discount to NTA comes back a long way, right? And I'm not saying it is. If it's undervalued by half, then the discount to NTA is even bigger. or at least it's not really TA because it's not tangible, but you know what I mean. If you assess the value of the assets and say, well, hang on, I think that's undervalued, then there's an even bigger margin of safety there. So it goes both ways, but just be mindful of that because there's a couple of large positions. It's going to have an outsized impact on the eventual result you get. Yep, 100%. Motley Fool Money.

46:24For more, subscribe to the free newsletter at fool.com.au forward slash listener. Mate, let's go to a question from Matthew Hi Scott and Rampage I've seen arguments recently that Australia has been de-industrialising less diversity and more specialisation houses and holes I doubt either of you like this and have argued previously for a certain level of diversification however, I've also heard you both argue against tariffs and against government picking winners if I recall correctly you are against quote future made in australia end quote how then do you reconcile these viewpoints surely with increasing geopolitical risk economic diversification is more valuable than ever before thanks to the audio you stick in my pod machine each week you two have truly changed my life with your patient and engaging episodes matthew p.s this is a statement ram not a question doesn't require a response rams argument for the state uh rams argument for investing in bitcoin uh sorry for the state investing in Bitcoin from the most recent pod sounds especially like Pascal's wager.

47:32It's rational to believe in God because the potential reward dramatically outweighs the risk. I await news, says Matthew, of his conversion to Christianity. I love the reference. With a big tongue stuck out. So there we go. There's a nice philosophical throwback there. A bitcoiner should be a Christian. Is that? No, let's not go there. Yeah, no, let's not go there. What do you reckon, mate? We're saying on one hand, you know, houses and holes are not cool, but also we don't believe in future made in australia are we are we talking out of both sides of our mouths here uh i don't think so i look there i'm more laissez-faire i gotta be careful even the terms that i use here i just i do not think that when government gets too involved in private enterprise particularly in areas where there are functioning the capacity at least for functioning free, open competitive markets.

48:25You just got no business doing it. I say, you're not there for that. And history would suggest incredibly strongly, irrefutably in my mind, that they're just very bad at that kind of stuff. So, you know, we'll make the coffee cups and the cars and all that kind of stuff. And you guys look after the prisons, the military and the police force. And that kind of thing. You know, things where there are natural monopolies, that's right up government's alley. Everything else is not. But they don't. They tinker. They interfere. and we're all left off a little bit poorer as a result. Both sides of parliament, right?

48:57Frankly, when it comes to that kind of stuff. So I'm more, where my philosophy lands on this is, I think the misconception is that the economy is something to be managed. Where I would say the economy is a dynamic, chaotic evolving fluid system and it's best left to its own devices when people demand more stuff suppliers will meet it if suppliers have too much stuff that no one wants no one will buy it's auto correcting unless there's a social need for intervention yes the market do its thing I mean this isn't a new idea Adam Smith was writing about this over a hundred years ago and he was I wanted to read that book, by the way.

49:45The language is really... I really wanted to. And I wanted to read... It was the other one. It was some of Cain's early stuff. Yeah, it's dense. I haven't read the Austrian stuff yet, but it's so... It's just arcane language. It's really dense in its thinking, but add the arcane language on top. Sorry, keep going with... It is. It just needs to be translated. It's like reading Shakespeare. Yes. Maybe English majors have... I've never been able to appreciate it. I'm sure it must be genius and brilliant, but I'm just too dumb to get it. I don't know what they're talking about. That's just me. Light through yonder with no breaks.

50:19It's the east of Juliet is the sun. There you go. But before all the English majors write in, I'm sure it's genius, right? But it's just there is something lost in translation if you don't speak the language. I think that same thing can be said for economics. Yes, good point. And so we can sit here and go, we should do this. And I just feel as though, why? Why should we do that? If the economy, again, under a more sort of open free market system is in a certain shape and style, it's thereby via a reflection of our revealed preferences. In other words, no central party has had to engineer this and did engineer it.

51:03It just is. It's why when you go to Barrel, there's a certain kind of foliage and eco-biome and you go to my house and it's different. Is it better or is it what? No, it's different. Why is it different? Because the circumstances, it's got Blue Mountains, clearly better. But it's just - Yes, no, you're right. And it's like me going, I live in Coogee and this should be more like Barrel. We should do things more like Barrel. But this is clearly the way it is here. And it's just like, the road to hell is paved with good intentions. So it's not like these are evil people trying to engineer the end of...

51:41They're not. They've actually more often than not, I would say, have their hearts in the right place. But it's more of a philosophical objection I have to think that it is there to be managed. Like we have a Bureau of Meteorology, but no one at the Bureau is there thinking that we should make the weather. Like they just report on the weather. And I think we need to do that with the economy. Now, there are... Just because there are some, in very small minority edge cases where intervention is entirely appropriate, particularly where there are externalities such as like with carbon pollution or dumping industrial waste into a river.

52:20Provision of education. Yeah. Military. You know, again, it's like people tend to argue absolute extremes here. Yes. And it's stupid. Yes. But for a politician, particularly more often than not, a 68-year-old white male who's got some romantic notion of what life was like in 1940 and thinks, we need to do this because then life was just better then and therefore we're going to like stick our noses in and divert public funds towards propping up. We just talked about it on Friday, the insanity of propping up unviable smelters in the middle of nowhere for no other reason than good vibes and it just sounds good.

52:59It leads to bad outcomes and it leads to bad outcomes in a way in which we're all a little bit worse off, except for very, very narrow, small interest groups. And so let's just get out of the way. And so rather than you and I right now having a debate as to, well, what should we do and how should it look? We just go, just an elephant should look exactly like an elephant looks because evolution grew it to be that way because for its environment, that was the most optimum shape that nature has shown that it just, that's, that is how it is. And even then, evolution is not a static process. In a million years' time, elephants, if we haven't destroyed the planet, will look different than they do today, just as the economy will look different.

53:44It's a process. It's an evolution. We don't need to put our judgment on top of it as long as it's fair, as long as your actions aren't unfairly impacting other people. Let it be. And it will be whatever it is. The reason we have houses and holes to the detriment of other things, and I do bemoan that kind of stuff, is because we've stuck our noses in and we've engineered it that way. We've given foreign companies complete carte blanche to do whatever they like. We won't tax you. We'll give you all kinds of subsidies under the sun. Want a home? Let's reduce the lending stand. It's like the reason that we have that is because of what we've stuck our nose in.

54:24And I would say, and I made this point a million times before just to pick on property, someone like Steve Keen was absolutely dead right. Except that we got in and we fiddled with it. It didn't allow for the fact that, yeah, exactly. The property market never would have got to this extreme if we didn't stick our noses in with good intention to do it. And you can take that example and you can make it writ large across the whole economy. So how should the economy look? The economy should look exactly how it would look when people are left to make their own personal decisions as to what they prioritize in life.

55:00What do you value? What do you want? What are you prepared to spend your money on and not spend your money on? What consequences are you facing with your opportunity set, your personal subjective opinions? It will look exactly as it should look if that is allowed to run its course. And yes, on the edges, we can tinker around. But as soon as we start messing around with the more fundamental stuff, we're all screwed. Well, most of us are screwed, are more screwed, and some vested special interest groups are partying like it's 1999. And maybe to be a little bit less absolute, we're likely to be screwed.

55:34There are no guarantees. And not to pick just to say, you know, directionally, the more you do that, the more likely you are to have bad outcomes. I think that's, you know. Yeah, and it's like both of us, you and I, as much as anyone need to be careful with making assertions. Well, it's just this is how it is, and then we move on. I was like, whoa, whoa, whoa, back up there, cowboy. That's a lot. We've got to unpack a lot of what you said. My thinking on this is always guided by, like you said before, I've got a background in science. And the great thing about science is I can just like test a bunch of assumptions and see, like, I think this, here's my hypothesis.

56:10Oh, I can actually build a decent theory around this because this theory explains all of the observable fact. And until a better theory comes along. And it's repeatable. And it's repeatable. Then I'm going to go with that. Now, we can't exactly do that with economics. The closest we can get is go, well, let's have a look in this country when they did that. And when you do that, and it's hard because you can't have a control and you can't control that all the variables are the same. But when you do look at certain economic systems and processes, certain systems and processes without fail always lead to worse outcomes.

56:45And so that's why I feel as though we are reasonable in making certain assertions is because it's not an ideological assertion. It's one based on observation over hundreds and hundreds and hundreds of years of experience that you go, guys, communism doesn't work. and to be fair maybe this is the one that proves the rule you know the exception proves the rule but it's probably not because as you say we've done so many times before like is this really the first time is this the time it's going to be different well maybe but if you're making bets are you going to bet that this time is different after those hundreds of years in multiple countries and no you're not you're going to say well hang on we're pretty you know even if you're wrong it was a smart bet and that's investing by the way it's entirely investing if I use the right if I use the right process each time I'm more likely not to get a good result sometimes I'm not going to get the result The exception doesn't prove the rule.

57:32So the exception doesn't invalidate the rule, it proves the rule. That's almost the point, right? That one exception stands in stark contrast to every single other time when it's been that way. And betting on the exception is always, always a stupid bet. I mean, just think, I mean, even without that, right? Even just, let's just go with a pure thought exercise and think about what some of these alternative proposals are. It's like a group of individuals can at once understand every single subjective preference across millions of people, can understand exactly what the factors of production are, the cost of production, the access to resources.

58:10There is variables on variables on variables here and that any one group of people, no matter how well credentialed, no matter how intelligent, no matter how much data that they have, they cannot possibly, possibly predict and plan and prosecute a strategy to account for the best. It just cannot be done, which is why we just should go, well, that's impossible, so let's just not try and do that. But unfortunately, I would actually push it to the mainstream. Mainstream economics tends to hold that kind of view, that that's exactly what we can do. And to me, it's laughable. It's also why large, very, very large national single agenda things tend not to work.

58:55Yep. Because when something starts to stop working, if I can use that together, if something stops, yes, if it stops working or starts, oh man, starts to stop working is actually what I want to say. It just sounds clumsy, but it's true, right? So if all of a sudden - It's not an instant point in time thing. It starts to deteriorate. But my point is that when that happens, if you've got one producer doing all of the things, that producer is either one or zero, right? What tends to happen, because you've got lots of different actors doing little things, is the marginal producer over there goes broke first.

59:24and lays off two people. And the other companies either then fill the gap or the thing slowly shrinks to fit its size based on the demand you just mentioned, Ram. If you say, well, I will do the thing, I'll be the only person who does the thing, and if the demand for the thing is problematic, then what do we do? There is no ability for these things to correct in really incremental ways, which is far, far better for an economy, for a society. And again, I say for an economy, I've said a million times, the economy serves the society. So we want to have a system of economic interactions that actually allows for those changes to actually flow through in a really responsive way.

59:59There's a bit of pressure over here. Let's relieve that bit of pressure rather than what a government would do is – and I'm not anti-government, by the way. No. But if you're a government entity and your job is to make widgets, you keep making widgets when people stop demanding them. And you keep making them and keep making them, keep making them, try and make people buy the widgets you make because you've got a widget-making factory. And no one has the jobs, right? So we've got to keep making them. Exactly. Rather than say, well, we need a few less widgets. Those people are laid off. they're going to go and make thingamabobs instead.

1:00:23And the thingamabob market picks up, the widget market drops off a little bit, the market finds an equilibrium. And these are perfect things, by the way. They're not, and they're not dictated things. They just tend to be the way things work out in a very, very imperfect way. Just less imperfect than everything else, as I've said a million times. Churchill said democracy was the worst system except for everyone else that's tried. I've perverted that. So democratic capitalism, right? Democratic, i.e., needs to be well-regulated. Capitalism, i.e., the market's going to largely get push and shove.

1:00:49It's just going to be imperfect. It's going to be messy and have perverse outcomes and bad results for some people, but it's less bad than everything else. And this is why if you search for the perfect, A, you'll never get there. B, you'll design a theoretically perfect thing that doesn't bear reality at all, which is your point about communism. In concept, perfect. Everyone works as hard as they need to, gets as much as they need. That sounds like a pretty fair system. Yeah, it's great. We should do that. Okay, well, let's try it. Oh, it didn't work there. Let's try it again. Didn't work there.

1:01:16Let's try it again. Didn't work. Not just didn't work. like led to crushing poverty. Like it just wasn't like, oh, it wasn't quite as good. No, it was like, I mean, ask anyone who's lived under that regime. It's not a good outcome, right? So it's not, you know, gosh, it just ties me up in knots as to like how in this day and age you can still have people advocating for these things. And one thing I will say in response to all of it, I actually get it because I think people look at the state of the world and they look at some of the really nasty consequences of capitalism and they go, this sucks.

1:01:52You can't hear these two dudes advocating for free markets. And my pushback there would be, yeah, you're right, but I'm going to go right out on edge here. I don't think we've ever tried pure capitalism. We've never tried it. We certainly don't have it now. And it's like, well, what do you mean? Obviously we would live it. It's like, well, it's a spectrum. It's not a black and white thing. I mean, we have an implicit system where we just talked about it on Friday, where the government will bail out failing companies. That's not capitalism. We've talked in our lifetimes. We've had multiple events where the central bankers bailed out the worst actors that caused the crisis.

1:02:28That's not capitalism. Charlie Munger used to talk about you can't have heaven without hell. You can't have capitalism without failure. We want capitalism on the way up. And the moment those who have most benefited from that screw up, we revert to socialism for them, for them, and we all pay the price. And it's like, it's outrageous. And then you wonder why there's 23-year-old university students painting their hands to the road and being angry at capitalism. I get it. But my only pushback would be you're right to be angry, You're right to understand that the system is rigged and unfair, but that's not capitalism.

1:03:09It's actually got a term, and I've used it before, it's crony capitalism, where it's political interference, which is cosplaying capitalism when it's convenient, and the moment it's not, it's not capitalism. And people rightly get, and I'm front of the queue holding the placard there, like that is wrong. I am 100 % against that. But don't blame capitalism. blame the fact that we're all pretending it's capitalism, right? Largely. I do want to hold out the reality that capitalism does have crappy outcomes sometimes for some people, but that's, again, it's in the least worst argument. So does capitalism sometimes suck?

1:03:47Does it cost you your job? Yes. Some people never work again. Yes. Those things are all absolutely negative outcomes of capitalism. I don't want to get into the Tylenol conversation because God knows I've done enough for this week on Twitter. But the reality of, let's use that as a very quick example, and if you have a view on Donald Trump, tell someone else, not me. Is Tylenol potentially risky? Yes. Is it also potentially beneficial? Yes. so you don't get to say therefore i should avoid it well you can i'm no expert right don't it's not about title, for God, I don't take medical advice from me.

1:04:21The reality of the public health officials have to say chemo is a poison. Should you drink poisons? No. Should you take chemotherapy if you've got cancer? Hell yes, if that's what your doctor recommends. But I'm putting poison in my body, right? Water in enough of a quantity. Chemo at least has a benefit, but yes, I get what you're saying. My point is that there are going to be benefits and costs with everything. There are downsides. Capitalism is not perfect. Even pure capitalism is not perfect. It's probably the least worst, but it's not It doesn't keep everyone in work. It doesn't pay everyone as much as they would like.

1:04:50It doesn't avoid polluting the rivers. There are absolutely downsides to all this stuff. And our question, our job as a society is to try and work out the least worst solution, accepting there are downsides. And God love the people paying their hands to the road. They're probably right, frankly, about the way the country's run. But they would like to believe that somehow there's this perfect solution they could replace capitalism with and it would be great all of a sudden. The degrowth people who just think, all you do is tell people not to grow anymore, it'll be fine. It's like, well, yeah, sure, but that's like communism, right?

1:05:19If we just had proper communism, proper communism is probably better than pure capitalism. I love how you're coordinating on social media, using, like, godlike technology, you know, to argue against, like, going backwards. Like, what? That doesn't make any sense. Anyway, back to Matthew's question, though. I do want to go back to it, Matthew, because for everything Ram said, I think a responsible government does have a responsibility to worry about things like so-called Dutch disease, which is where a country has so much of one thing that it becomes destabilised and the potential outcomes are pretty risky.

1:05:56And I don't necessarily know what they should do about it, but I think you're right to ask the question because at some point, can houses keep going up forever? Well, yes, but they won't. Will Hull save us forever? possibly, but at some point maybe we run out of it or maybe the world doesn't want our coal because they don't want to burn it and maybe China doesn't want our iron in the same quantities. And so where are we as a result of that? And I think this is where sensible, responsible government is important. Do I think we should do future made in Australia? No. Why? Because they're picking individual industries based on ideological and philosophical grounds and we should make solar panels.

1:06:32Politically driven economic activity again. It just doesn't work. Now, should we? Great noble idea for the record. Let me go back to the first question we had. We should be taking a lot of this stuff and putting it in a sovereign wealth fund. If you want to guard against Dutch disease, what do you do? You save some of that so when the rainy day comes, if I'm a football player, right, and I get paid a million bucks a year to play AFL for five years, I'm stoked. I'm making a fortune. And then at the end of my career, if I know I'm going to be working as a sales rep for a cement company, because that's all I can do, because I'm very good at football, but my career ends, it's probably wise we not spend all that money up front And then, you know, should I not play football because my future career might earn me less?

1:07:12No. Take the money, right? Sell our coal, sell our iron. Make hay while the sun shines. But plan for if and when, and if might be as good as when, this thing stops. That's the government responsibility, right? Is to scenario plan for, geez, this feels pretty off kilter, guys. Should we try and create artificial industries to somehow fix it? You can, but I think it's a stupid idea. should you though say oh god look maybe we should invest in a bit more research and development in our universities innovation kind of matters should we save some of that money and not by the which innovation just let's put money around because scientists are smart people they'll find ways to use that money should we create a sovereign wealth fund so when the iron ore sales dry up we can go thank god we put some money away so my acorns away for the winter yeah that's a good idea let's do that other things we could should we have you know available training for people who want to you know learn different skills That's probably a smart national decision.

1:08:09Again, how involved or how not governments are, they're a spectrum question, and Ram's probably a little more hands-off than me, but not by miles. Because we're saying, well, where's that line? What cool should governments do to give us the ability to be resilient? That's what they should be in the business of, resilience. Not in the business of picking winners, not in the business of saying, I know, too much iron ore in houses. Let's make solar panels, people. Let's bail out copper smelters, people. Let's bail out steelworks and wow other people. The idea that that is going to be a smart decision is really, really, really small.

1:08:44The chances are small. But there's a lot of things they can do. Resilience is a word I would use. I just came up with it then. Not came up with it. It's an existing word, obviously. Just thought of it then as we were chatting. But that captures what I was trying to say earlier, which is the Australian government should be responsible for making sure we have the ability to bounce back from any untoward scenarios. And they'd be absolutely right to say, by the way, Dutch disease is a phrase used about the Netherlands. Massive amounts of oil, crowds out of economic activity, which is exactly, Matthew, what you're asking about.

1:09:11So that's why I raise it. And it can distort and destabilize an economy. But the answer is not trying to un-destabilize. That's a new word. Otherwise, no, destabilize. An economy by picking other stuff to do. That's just dumb. But they can absolutely make sure we're resilient and can bounce back. I mean, we talked about Qatar before, right? Yes. If that's Dutch disease. Yeah, that's right. Hand it to me, right? I mean, with the caveat of what you said. Just like one day the oil demand will dry up and we need to be okay for it. And they've got a massive sovereign wealth fund. It's just sensible planning.

1:09:50I think the role is we want fair, open rules. I've always used the analogy of the game of soccer, right? You're there to set the rules and referee it, but you're not there to tell which player to stand, which place and then kick the ball in which direction because that's just a stupid game and no one's going to watch it. And it's, you know, it just doesn't work. But what you do need to do is make sure that everyone has got the best opportunity to realize their own potential, you know, to work in an environment which is fair and is not unfairly prejudiced or disadvantaged by any set of circumstances.

1:10:26Humans are wonderfully creative people. They're wonderfully entrepreneurial. They're wonderfully creative, like all kinds of amazing things humans are capable of if allowed to flourish, you know? And it's just like you look at any single of the greatest inventions that have ever happened and not one single one of them has come from government decree. You know, the English government didn't say to Newton, invent calculus, right? Like, and I extend that out. There is, think about it. Think about what civilizational changing technology came out of government. Right, exactly. Well, by the way, the things that people now say are things like the internet.

1:11:04And that's absolutely true, except it wasn't government. It was government funding research and development. Yes, I just came up with it. Right? If you want to do that, I think it's absolutely appropriate to fund those kind of things. The other thing I probably would say is, you used to referee analogy. I'm going to go have a slightly different view of that. And you may disagree, which is cool. And it's not a perfect one either. Some combination of referee and coach, I would say. Yes. And I guess when I'm saying coach, I'm saying the coach doesn't say, hey, Jim, kick it to John. John, kick it to Sally.

1:11:31Sally, kick it to Mary. Mary, kick it back to Jim. They can't because the game works on people responding to the circumstances as they exist. You can, however, train, coach, develop, set the conditions for, assist, educate. You know, the stuff that happens in the football club, government's going to have a role in that, which is not to say we're going to decide which kicks you take. But, and again, I'm stressing the analogy horribly here, primary and secondary education, tertiary education, that's the equivalent of the coach during the week getting people ready for game day. And so, again, you know, there's over coaching.

1:12:04We say this is the play you must play, and it's an imperfect analogy. But some combination in my mind of referee and coach, which is there's some national stuff that we should do. You know, there's a reason the education system is not privatised. We don't have privatised healthcare. We don't have privatised roads. We don't have other than tall roads. You know, the idea is these things are common goods made available to provide us the opportunity to flourish. That's the coaching bit. And then to your point, once the game starts or while the game starts, you're both coach and referee. you're saying, right, well, I've helped you get to game day.

1:12:32Now I'm going to make sure you play fairly. That combination, I'm torturing your analogy. But just as you were saying, I was thinking there's some role for the coach there about providing the national infrastructure, the national stuff that gets us ready to be players on the field. Can I finish it out with a half-baked thought that I had late the other night? Is it about Bitcoin? No, it's not. Thank God. Okay, let's do it. What's your half-baked thought? So we were talking off air about like where the algorithm leads us on YouTube. And it's showing me more building stuff. Yes. Another rich vein that I've explored is Korean street food.

1:13:10Oh, no, really? Oh, it's wild, dude. But actually, as a much younger man, I did a bit of travel through Southeast Asia. And it always struck me. I never really connected the dots. Maybe I still haven't. But at the time, I was like, why is it I can go down Bangkok? and have the most incredible array, variety, quality of food for a really cheap price, not even accounting for the currency sort of differences. It's like, why is it that places like South Korea and Thailand and that have these amazing kind of environments, and if anyone out there listening has been to these places, you know exactly what I'm talking about.

1:13:48You'll go down to the street and there'll be a cart there that will make you a banana pancake that will make your brain explode, right? If I go down Martin Place here in Sydney, there's a Starbucks and there's a few sort of soulless kind of megacorp franchise. Like, why? Why don't we have that? And it's because of government, right? And it comes from a good place. It comes from a place of we need adequate food safety standards. We need regulated, make sure people aren't being poisoned. Well, we just can't have anyone with a card here, so you need to have a permit from the council. And like these things start with good intentions, but really they, as a pendulum can swing so far and it's swung so, anyone out there who's run a cafe or any food service hospitality business, and I have, and like, I guarantee you they're out there going, yes, yes.

1:14:40right he said it's so impossible to to deliver good quality food and the reason that you go to these places without a single bureaucrat coming and telling you how to flip your pancake and how to make your dough is because you have unleashed human ingenuity and entrepreneurism and people over a long period of time have been going oh beryl's got this little cut she started making pancakes she's making out like a bandit i'm gonna do that too turns out my banana pancake recipe is even better so now i'm getting a bit more of the business wrong scott's got a bit of the action as well he's gonna start this and then you get this competitive dynamic where at the end of the day who wins is the person who provides the best product and more to the point consumers of banana pancakes are the winners because they've now got this competition which has driven a super high quality and a super low price.

1:15:37And not just that, but other people have thought, well, if they can get a cart and wheel it down the street with a banana, I'm going to do a chicken, satay chicken skewer. And I'm going to do it really well. And that is why in these places you have quality, price, value, convenience, all of these things without a single government bureaucrat instantiating it and making it happen. And in Australia, such a thing is a wild, fevered fantasy of a madman to even think that we could have that because the amount of regulations and things that you have to check off just makes it impossible, which is why we have Megacore, you know, Starbucks.

1:16:20Coffee kind of stuff, yeah. Crappy, I'm sorry, Starbucks. Crappy coffee, right? Like, because they're the only ones who can do it at scale, right? And anyway, there's my little half-baked thought. But I reckon it's a nice little analogy as to why when you leave things alone. And in my example too, the banana pancake person isn't flushing a bunch of industrial sludge into the canal, right? There is no externality here to be part. So this is a perfect little microcosm, a perfect little example of look what happens when you leave people alone. Everyone wins. Everyone is sort of better off. And when you get too much and too involved, we're actually in a situation.

1:17:04I would love to be able to walk down my main street and have that experience, right? But we can't because of all the well-intentioned people who like to feel like they need to control and stick their nose in where it doesn't belong. And that's, anyway, I've butchered the point and I've rambled too long. I like the point. I have a lot of sympathy for it, mate. I am less again free market than you are and the really difficult point is working out the level at which government should be involved and the points at which they should be involved and I think that's a conversation we're not having enough of I mentioned I mentioned chemo or Tylenol and other things I think the risks and rewards thing we've gone too far on is my personal view not because I'm a ultra libertarian at all but it's in no one's interest to increase the speed limit because if you decrease it and fewer people die you win if you increase and someone else dies it's on you so what so speed let's take an increase in our local area we've had two or three streets have been decreased from 60 to 50 and 90 to 80 right i'm not i'm not aware of a single death but someone said we should do that probably be safer so we did now is it safer yes a million percent yes right here's the other thing we could take road deaths to zero by speed limiting cars to 30 k's an hour zero literally zero you know you'd have to literally drive over the top of someone reverse back over them to kill someone at 30 k's now i'm being flippant but not by much why don't we because we've accepted inherently the trade-off between the benefits of higher speed travel and the cost of people dying on the roads and that feels stupidly callous to anyone listening right now i get it if that feels callous we do that with safety on building sites we do it with food safety your very point is every single regulation governing the cafes in martin place in sydney make it safer for me to eat my food without a question right is there going to be someone poisoned by banana pancakes in the street vendor probably yes from time to time so but not much because that person goes out of business too quick like you know what I mean like oh don't go to Scott's cart because everyone who goes there gets sick right but there's a cost to that and so as a society now I'm not arguing for I'm trying to I'm trying to hold the tension here because at one level as a society we've gone we could do something about that we could stop people getting sick and potentially dying from poisoned banana pancakes we're a wealthy, mature, well-organized society.

1:19:23We can put a rule in place to make sure that at the very, very, very, very, very best of our ability no one dies eating a banana pancake. And we've said that's a good idea. And it's hard to argue against that because why would you not? Except the answer to your point is it comes at a very... So we don't have them. That's the result. We just don't have them. No one dies of banana pancakes because you can't die from banana pancakes because there's no banana pancakes. Well, the one you have is served at a chain store at triple, quadruple the price for all the reasons you said. And half the quality.

1:19:54Right. Because you can slash have to. And this is a really, it's literally impossible to answer. Yeah. Because on one hand, you say anarchy is the other option or authoritarianism is the other option. Because which rules wouldn't you take away? If you take away the banana pancake food safety rules, where do you stop? On the other hand, if you add banana pancake food safety rules, where do you stop? And so people get this stupid ultra-libertarian, ultra-authoritarian, it's all a slippery slope. Yeah, like they're the only two choices, right? And so I think to your point, I'm not against that idea at all.

1:20:26You know, I don't know that it's the right thing, but I don't know that it's the wrong thing. I think that's the tension we have to hold in society is what rules should we take away? Because housing is a great example. The cost of housing, we talk a lot about immigration and other things. I think they're very real and probably more prescient. But how much cheaper would housing be? If we took away just simple stuff like how many regulators do you need? How many proposals and applications should you have to submit? Could you do it in one spot for starters? And then actually, are those rules all that important?

1:20:59Could we take away the rule about, I don't know, minimum door height or something? Would it make a difference? I'm not saying we should. Again, I'm not a builder. I don't know these things. But unless you're holding that tension really, really meaningfully and really make yourself justify the diffuse cost. That's the other thing. we talk about tariffs all the time why are tariffs really seductive because i know which job was hurt by foreign trade right the the the the underpants factory in glenelg shut down because we started making mcwala lupa and if we said we have a tariff on underpants i could save that one job and that would be easy for me to justify because i saved the job i'm a genius what we don't count is the fact that all of us 28 million of us buy underwear that's 10 more expensive forever to save that one job and that's that's really i know you know this mate i know our listeners probably know this and i'm probably banging on about it but it's just that it's that idea that i want to keep really direct in people's minds is there are absolutely cost which is exactly your point and the tension we've got to hold is where is too much and where is not enough and there is no single answer yeah we've got to be mature enough to have those conversations otherwise we end up with no banana pancakes nothing of anything else that's the only place it can go and that's you end up with road limits coming down forever to zero because at that point no one dies and again does it sound callous you bet do i feel uncomfortable saying you bet and yet we we already implicitly explicitly allow for 300 people a year dying on roads because we say that the speed limits that cause that are worth having at those levels because of the benefits they bring and that's the uncomfortable truth that's the reality of a messy but very real trade-off system opportunity cost Back to that number again.

1:22:41And it also comes almost to the point of the cranny-ish element of capitalism. Because when you've got a system with extreme regulatory barriers, all it does is make it very hard for the small business operator to set up in competition. Because I've now got to spend$50 ,000 in legal fees. I need these compliance costs. And again, it's people, oh, so we should have no compliance. No, you idiot. There's a spectrum here. And you know who can afford to do that? A massive global megacorp multinational who's got an army full of high-paid lawyers and consultants and political lobbyists. They can do it.

1:23:21And they don't want so they can keep doing it over and over again. So the cost of the chain is much lower than someone who wants to start up who wants to incur those costs up front. You can't do it as a single business. I've made the point before on the pod. Go to a Westfield and see if you can find a company that's not a chain. like yeah it's it's almost i used to it started out as like oh wow i've never really noticed how much all these companies are listed on the asx to like i except for the you know those little pop-up stores in the middle i cannot find an independent store why is that is it because that anyone below a certain scale is incapable of operating a business no the barriers to entry are too high which is exactly how the big companies like it right which is exactly why we have reduced competition and reduce quality and reduce range.

1:24:06And it's exactly why they get to exploit all these, these sort of advantages. And we go, capitalism sucks. Like, yeah, that capitalism sucks. Cause it's not really capitalism. Right. And there's one thing I won't mention. I'll mention it and I won't pursue it other than that. The other great advantage you have is much greater access to capital as well. Because when you're Starbucks and you go up to the bank and say, give me$10 million. I'll go, hell yeah, I'll give you$10 million because you've, you've, you're, you know, you're, you've got much more assets that you can peg against it. You've got much more cash flow.

1:24:36It just makes more sense. Whereas like, you know, Joe and his partner, Jill, who trained to start up, it was just like, no, we're not going to give you the credit. So now you get, now you get the credit advantage as well. And it becomes impossible for anyone. It becomes impossible for, go back to Adam Smith. It becomes impossible or very difficult for his invisible hand to start directing things because the invisible hand has a handcuff on it. And only if you've got the keys, can you actually sort of see it work and i'm torturing this analogy beyond anything that's useful but but do you see what i'm saying there it's like like you know why is it that that we we can all point to some of these big food chains and go oh the pizza is disgusting and horrible and tastes like cardboard and that is like how hard can it be to spin up some dough and some flour and put some pepperoni on it's like it's not that hard except once i layer on all the conditionality and the regulatory stuff and the legal stuff and and and again just slide that slider back more towards what is reasonable not abandon at all but and it's come up in it's come up in the news quite a bit recently we've talked about it even maybe a month or so ago where it was like was it like 30 bits of licenses or something i forget the exact phrasing but like to have a cafe in Melbourne required some ungodly number of permits.

1:25:58It's just like, it's just easier for me to be a real estate agent. Right. I'm just going to do that. It's also why you end up with, speaking about chains, not even chains, but franchises. Because if you want to be open a pizza shop, you could do it all yourself. Yep. Or if you just walk up to a Domino's, I own chairs by the way, and just say, I want to make some pizzas. You guys got the systems, the processes, the money, the people, the, the, the, the, the whole, right. Yeah. Yeah. So I'll just, I was locking into that rather than you know so I'll open a competing pizza over here and incur all those costs and try and get myself started it's hard enough to compete against a large business anyway they've got scale they've got reach they've got recognition super hard to start it was a great small pizza place near me do a great wonderful job I don't know how hard it was to start that thing up but I bet it was bloody hard I can't find the answer to the thing it was 30 something regulations and it was Brisbane I remember it was Productivity Commission I don't think I can find it before we finish off but yeah it was that idea of just how hard it was to get things actually going.

1:26:55It's just, it's mad. Absolutely mad. And this is like, of all the things we can point at with the US and how screwed up that society is and is going. I mean, they do get the entrepreneurial stuff, right? They're very forgiving of bankruptcy. It's much easier to start up a business. A lot more businesses start and a lot more businesses fail there. But in aggregate, get there's a lot more people out there trying to i guess in their perspective trying to chase their dream but indirectly creating value for fellow people and the ones that do really well are the ones that have the they just your banana pancake is really good that's that's why you won it's like who's the victim here who's the victim like there is no victim i tell you who the victim is the one self-interested party who wasn't really good at making banana pancakes they're the victim right But they've probably got other skills that they can add elsewhere.

1:27:48And that, again, doesn't need someone to direct that. It'll just happen naturally by people going, geez, I'm in the mood for a banana pancake. I'm going to go to this one because it's always better. That's all it is. That's it. That's capitalism. You're allowed to own stuff and you're allowed to freely exchange your time and energy with other people's products and services. That's capitalism. That's all it is. All the other stuff that we layer on top of it gets further and further away from that ideal. and it's why it's messy and it kind of necessarily needs to be to a certain extent. But I feel as though I need to make the case for capitalism more these days.

1:28:22As much as I'm angry at all the crappy, crony capitalistic stuff, if you really want to define it, that's the two things. You can own something and you can freely exchange something. That's it. And you know what? We were doing that when we were hitting two rocks together, right? Like we were doing that back in caveman times. Yeah, exactly. And it's natural. It's a natural season. That's what people will say. capitalism is a natural state of affairs because it is exactly that. It's just humans being able to sort of, Scott's really good at chopping down trees. I'm really good at fishing. Why don't you do that?

1:28:53I'll do this. No one needs to tell us that. It's just I'm better off and you're better. You do that. I'll do this. We're all richer. And it just happens. It's beautiful. It's beautiful. When left to do it in this unfettered way, not entirely unfettered, but is unfettered away as is practically and feasibly possible. No, I'd never heard of the Page Research Centre, and no part intended, obviously. I don't imagine you're moonlighting, but it's literally called the Page Research Centre. Yeah, page.org.au. It seems to be a right-wing kind of or right-of-centre. John Anderson, former National Party leader, is one of the executives or one of the boards.

1:29:27Page.org, did you say? .au, yeah. So I won't draw too direct a line, and let's assume there may or may not be some ideological leadings. But here's a report they did. I'm just going to read the phrase and we'll finish up. Quote, regional businesses are ensnared in a web of up to 90 state and 37 federal regulations with environmental guidelines alone running into millions of words Queensland environmental regulations total 2.73 million words we had 2.21 million in Victoria 1.49 million in New South Wales so they go into a whole lot of stuff small business challenges revenue job losses all sorts of stuff um again I'm sure this report is probably you know it's by people who had a particular view to start with, but it just gives you a sense.

1:30:0990 state and 37 federal regulations for regional businesses in Australia. It's madness. As I said before, mate, someone's got to be... Every cafe is going to be breaking the law every day, I would suspect. Why wouldn't you? Well, not deliberately, just because I don't know how you don't. I don't know how you... I've seen you before, you've done it. I wouldn't start a cafe. Why? Because I think, well, there's food safety and there's people and there's cooking and there's temperatures and there's cleanliness. Not that these don't matter. Minimum amounts of time that you can employ someone for. Right.

1:30:37Minimum shift requirements. How many chairs I can have on the footpath. How many tables I can have inside the building. And again, I'm not anti-regulation either. So you don't want me to create jobs. Is that what you're saying? Right? Totally right. That's exactly right. Go on. Yeah. No, sorry. I think we're done. Hour and a half in, we're probably beating this dead horse to within an inch of its, well, inch of its life. I just feel it's so obvious, right? I think when you think about it, it's very, very obvious when it all comes down to it. And it's just frustrating that we've gone so far away from that ideal.

1:31:13Again, I'm not as far as you because I can imagine people having very real answers about, I'm happy for it to cost more and for transport to cost more because cars drive slow to save some lives. That's a valid view. So I'm not as strongly of that view as you, I don't think. Just use that example and it wasn't your example. Or, you know, I'm happy not to have banana pancakes if it means that the food I can eat is not going to kill anybody and I'm okay with that as the trade-off. There are some people with that view. So I want to kind of keep space for the breadth of views. I tend to agree with you directionally.

1:31:44I don't know if I'd go as far as you're saying anyone can sell a banana pancake in Martin Place. Maybe I would, by the way. I don't know. I don't know if I would say that by the way either. Yes, and that's the point, right, is moving in that direction or at least I said just holding the tension. There is no balanced conversation at the moment about the risks and rewards, there is only removing risk. Well, you're right. So it's doing that and it's also when we do, when society writ large does perceive a problem and a real problem, the discourse these days is instantly the government should do something about this.

1:32:20Yes, right. Yes, 100%. Which is like, you're right, there is a problem. Yep. And I'm going to quote Reagan here, which is going to make me a bit uncomfortable. It's like, you know, government's not the solution, It's the problem in a lot, not in everything, but in a lot of these kinds of sort of arenas. And it's sort of like, so the people that have, with best intentions, sort of helped engineer the state of affairs that we're now complaining about, they're the ones that need to fix it, as if they've got an unlimited set of money and they've always got our best interests at heart and they're always good actors.

1:32:50And it's just, it's not true. Not because you're in any government, it's because people, I know what, people are people, right? And there is, I think you said it right, with directionality of things here. So I'm not laissez-faire. Because you'd imagine going down to Martin Place, right, or Queens Arcade or whatever capital city you want, and there is literally every man and his dog there with a cart. Like, it's going to be madness. And there's going to be dangers and there's going to be trip hazards and there's going to be all kinds. Like, so, yeah, obviously. And the same with building standards.

1:33:22And so we're just going to start cladding our buildings and highly flammable material because it's slightly cheaper. No, we're not throwing everything out. But the pendulum, my point is just finish it off, is that the pendulum has swung so far as to not be feasible and practical anymore. And it's not that the only solution is to throw every regulation and rule out the window, but just to walk it back a little bit. So it's not impossible to start a business. And yeah, I'll leave it at that. Nicely done. feel better I do actually I do you're welcome our listeners hopefully also feel better although I'm other than people listening at this point so g'day mum thanks for listening until next week 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 subscribe to the free newsletter at fool.com.au forward slash listener The Motley Fool operates under Financial Services Licence 400691.