Mailbag, incl: How big is too big a position? December 14, 2025

23:10I think this volatile weird thing, I can only comprehend it in the context of what it means in Australian dollar terms. I think it will go up in Australian dollar terms at some short to medium term timeframe and when that happens, I will flick it back into Aussie dollars. Now, again, I don't want to cast judgment on that if that's what you want to do. But I'm just not doing that. And I would certainly never advocate for that because that is just fair. In the same way that I wouldn't say, here's a really great company, I think you should buy it and then it'll pop next Tuesday and you should sell it and lock it in.

23:38It's like, no, the money is made by sitting on your bum. The person who's like a squillionaire is because they bought Fortescue metal shares, you know, 15 years ago and they didn't do anything. Yeah, yeah. As opposed to the person who bought a thousand bucks worth and sold it for$5 ,000 and thought they were, King Muckety Muck for like a year or two until they look back and go, oh, I've made a terrible mistake. I like it. I like it. Mate, let's move on to something completely different. Actually quite cool. Scott and Ram says, Joseph, g'day mates. I'm skipping the ring kissing out of haste. Forgive me, loves, but I wanted to quickly get you the good news, the gospel indeed.

24:15And no, it's not Bitcoin. Although you both complained how difficult it is to read, but now you can both plan to spend your weekend catching up on the wealth of nations made easier. Oh. Easier but not quite world nations for dummies, which you two certainly are not. You've got to give a listen to the ongoing series of Mike Munger's The Answer is Transaction Costs podcast featuring Adam Smith's An Inquiry into the Nature and Causes of the Wealth of Nations. We're up to seven episodes so far, he says. The seventh, which I'm eagerly awaiting, was coming out later today when he wrote this, which is the 21st of November.

24:52Several more episodes will follow and each so far has been fantastic. I am 100 % adding this to my playlist as we speak. This is right up my alley. The first six episodes, says Joseph, have covered the historical context of the Scottish Enlightenment, the connections between his 1957, the theory of moral sentiments, and his 1776 wealth of nations, as well as the broad economic and historical context across Europe over a thousand years or so. And actually the introduction through book four. Yes, seven episodes through book four. I read that right. And I've listened to each episode of an hour or more, sorry, hour or so, more than once already.

25:29Yes, more than once. But here's why. Here's some advice from Joseph. The great naturalist essayist John McPhee, once quipped in response to a complaint that his writing was quite dense and so then a bit hard to remember things, said in an interview, if you want to remember things, read it again. He then went on to explain the great detail required, gathering evidence far and wide, collecting it in a hamper of sorts and sorting it out over many weeks, even years in some cases, along with engaging in follow-up discussions, all before settling down to write and then rewrite and work it all out with the New Yorker magazine editors and fact checkers.

26:05He said, but I digress. Yet is it also true that Smith too had been working on his masterpiece for a good 30 years or more? So kudos to Mike Munger for taking on the project of making Smith completely understandable. For me, Smith's book and Munger's podcast are brilliantly connecting disparate pieces of my education and filling in gaps in my extension of moral philosophy. And like your wives, as a teacher, I'm constantly trying to slip these ideas into conversations and even lessons, making our systems of applied home economics digestible and above all relatable for my high school students. Enjoy the podcast series, boys.

26:43I know you won't miss the chance. And fool on, Joseph. Oh, brilliant, Joseph. Yes, yes, more people like you. I mean, you know what I find fascinating? There's a couple of things to say. Firstly, the Scots are like the Kiwis. Oh, my gosh, I was going to compliment the Kiwis there for a second. I had caught myself. But they punch above their weight. like the intellectual firepower that has come out of that part of the world. James Clerk Maxwell, Maxwell's Co-Equations, that was the foundation of relativity and a whole bunch of other stuff. David Hume is a great philosopher. Adam Smith, of course, just talked about.

27:19Who's the other one? Lord Kelvin, great physicist. The list goes on and on and on. I don't know what is in the water. Maybe it's the whiskey up there, but it's just absolute giants, giant intellectuals. And the other thing that I would make in regard to Adam Smith is that this was 250 years ago. Like, you say that again, right? Yeah, yeah. Think how much the world has changed since he penned his thoughts. Yeah, right. And you used the term evergreen at the start of the pod in asking for questions. They really are. They really are. It's a shame because too much of economics has gone, you know, which I won't go too much on a diatribe, but they suffer physics envy and it's devolved into a statistical, falsely empirical.

28:13I hate that. It's just nonsense, you know, and it just, you know, you need to read Human Action and Mises and a whole bunch of other stuff, I think, to sort of understand why it's a bit of a nonsense. But these foundational ideas are so super important. I challenge anyone to read them, particularly if, as Joseph has indicated, there are people out there sort of translating it into a modern English. And not just the Greek. It's axiomatically true in the same way that it just, because it just, there are certain things that just feel undeniable. It's certainly not controversial. I think they're controversial when you associate them with a later evolved school of thought or you attach it to a right or left kind of thinking.

28:59Yeah, yeah. But, you know, like we often talk about some of the very rare but universal sort of laws, quote unquote, of finance and economic supply and demand being one of them, you know. You'll find a lot of that stuff in there. And so anyone who can break that down, translate it into a more accessible language, is doing God's work, honestly. And I would say this, if it is the source material is super dense and opaque, it's not because the subject matter is dense and opaque. It's just the language, right? That's exactly what it's a good point. You know, but the concepts, any, you know, year eight, nine, even lower, I think, could get their head around the big ones.

29:40And it's like Munger often says, I'm a big fan of Charlie Munger, and obviously, and he was a great believer in sort of trying to be a polymath, be someone who's across all of the great domains. But he would often say it's not as, you can spend your life trying to master quantum physics or, you know, electrical engineering or computer science or whatever it is. But if you can just try and get your head around the six or seven really big ideas. In my head then I just went six, seven. Anyone who's got kids knows what I'm talking about. But if you can get your head around the six or seven big ideas of those kinds of concepts, it will carry you so far and you will find things that you read about in English literature that are really handy for an investor or things that you might find in history or in sociology or, you know, physics.

30:37Like it's just, it's worth doing. And so anyway, I'm obviously very passionate on this kind of stuff. The fact that this is not taught more foundationally in schools is a bit of a shame. And thank goodness there are teachers like Joseph out there that are spreading that knowledge because it really is evergreen. And it will be true. I don't care what happens with our future civilization and humanoid robots and AIs are doing everything. you will always be dealing with an issue of scarcity, which is what the study of economics is. And these fundamental axiomatic truths will always have bearing. Yep, love it.

31:16And, Joseph, thank you for the work you're doing as a teacher, mate. Any more of them? Any more of them? Great teachers. By the way, I really like the way you phrased your question, your letter. It just beautifully set out. Obviously a smart and thoughtful guy and you're doing a great job teaching your kids. So thank you for doing all that sort of stuff. Yep. got a question from an anonymous listener good morning gentlemen how did how did they know it was sunday morning just one of those tricks of the internet i've been following your show for many years but this is my first time submitting a question i can say you i have completely changed my investing approach thanks to you both and i'm very thankful for the both of you that's very kind thank you my question relates to the concept of balancing your portfolio which i understand to mean that you sell shares which are a very large proportion and use the proceeds to invest in others.

32:07This is something Warren Buffett seems to be doing with the sales of Apple and other holdings. What I cannot understand is that selling will trigger capital gains tax, which now means you have lost a proportion of your holdings and now need to invest in something else that has to perform extra well to recoup that loss. Am I missing something? I am particularly interested, says our questioner, because I have a holding in Apple, which is 40 % of my portfolio. Also, doesn't Uncle Warren say never interrupt compounding? I'm confused. Also, given the doomsayer suggesting a big market crash is coming, it would perhaps make sense to sell some of my holding and keep cash until the crash.

32:44I know, I know. You can't time the market. I'm lost. Please educate me. Do you want me to go first? Yeah, go on. Yeah, I mean, these are big conundrums. I mean, these are the hard thing with a lot of these buffettisms because you can, if you're a little narrow in their interpretation, find contradictory statements. Yeah. I would reject the premise of sell something because it's become too large. I think it probably urges you to think about reweighting just from a pure risk perspective. Like if you've got something that's, you know, 80 % of your portfolio, gosh, you want to have super high conviction on it.

33:26And also, not only just super high conviction, but super high conviction in the context of, and it's kind of exactly what you said, because I want to add to this, which is if you're wrong, you are losing a lot of money. Yeah, yeah. And so it's kind of like, which you do for super high conviction, but super high conviction sometimes for some people is just the positive, right? You know, I really feel good about it. It's like, okay. But also, no matter how good your conviction, if you are wrong, there goes a bloody large, part of your portfolio. So it's almost, and again, it's exactly what you said, but I just want to add that other side of it because we often think just in the terms of am I positive enough rather than have I really thought through what happens if I'm wrong?

34:06Keep going. Absolutely. But I do reject fundamentally the idea of selling at a certain percent for the sake of it. Yep. Very, very high quality ideas where the thesis is playing out as foreseen. Yeah, Uncle Warren's right. you don't want to interrupt that. Like, you know, and then it's your point. And then I've got to pay a mountain of tax on it. And then I've got to reinvest a much smaller proportion of that. And I've got to see that go up quite a bit just to break even, you know, for the tax. So, so there's no, there's no number I can throw out there. And it's like, well, at 37.6%, that's where you reweight, you know, it will always be a subjective and personal decision.

34:51I would encourage you not to overthink it. So in the case of Apple, if you've got very high conviction on that, you feel as though the shares still represent decent value relative to other alternatives out there and accounting for the necessary tax hit that's going to be there. I wouldn't rush to sell it for the sake of it. I might look at re-weighting a little bit here and there as new opportunities come up that are worthy of being replacing. But I listened to a talk, I actually wrote about it on Strawman recently. There's an investor who I think has got some really nice ways of framing things.

35:30He's called Monash Pabrai. He wrote a book called The Dando Investor, which is worth a read. And his whole shtick is he's a cloner, not in sales, but in ideas. And he's a huge Buffett and Munger advocate. I think he paid, what did he pay, like$100 ,000 to have lunch with Warren or in some competition or something? Yeah, yeah, yeah. He was speaking at a recent value investor conference and I caught the talk on YouTube. Yes, that's how I spend my time. I know it's pretty nerdy. People just surprise you or not, there wasn't a Bitcoin podcast, frankly. Oh, there was plenty of that in the playlist too.

36:03Just to be sure because that would shock a lot of people. Oh, yes. I mean, people sort of see YouTube as just like silly cat videos and stuff. There's some awesome, awesome stuff on there that will keep you thinking for a long, long time. Anyway, he made the point that if you're investing right, it's almost inevitable that at a point in time, I think he was probably over-egging the pudding for emphasis, but he said that it's inevitable that you'll have a stock which represents 95 % of your portfolio. And like that's a bit silly to take literally. But I think what he's getting at here is that you will find that portfolios have a tendency to weight themselves in the sense that I buy a bunch of shares.

36:45generally speaking, you know, actually speaking of YouTube, I watched a really great Veritasium video on power laws the other day. Power laws are things that sort of, we've got two exponentials into playing with one. Let's not try going down that rabbit hole. That wasn't a bad intention even for us. I'm going to spend a long time in the weeds of higher mathematics here. But it was one of the examples that they were sort of using in that video is that stock returns tend to follow a power law distribution, not a normal distribution, the bell curve distribution, but generally speaking, a whole bunch of mediocrity, a whole bunch of really god-awful investments, and then these massive outliers.

37:25And these outliers really make or break you as an investor. This is true of Warren Buffett. It's true of all of the great investors. I mean, look at Buffett's history as an investor. And yeah, he's got a good strike rate, But, you know, you take out Coke and Apple and, you know, what's the big insurer? I've gone blank. You know, he is unknown to the wider world. And that is normal. And so what Monash was sort of getting at here is that of all the stocks that you buy, you will find that, you know, a lot of them just disappoint. And it's in their disappointment that the share price will go down, which means that the weighting in your portfolio will go down.

38:11At the same time, there'll be a handful and it'll only be a handful. It might only be one, frankly. This is 100 % true for me. Like I could take out two or three investments and all of a sudden I go from euro to zero very, very quickly. But again, it's normal. It's like people view it the wrong way. They go, oh, it's luck. If you didn't do that, you'd be terrible. It's like, no, no, no, no, no. this is exactly what I'm expecting to do. This is exactly how VCs operate. They understand the power law distribution of type of returns. And what they do is that they recognize that I'm going to try and put myself into a target rich environment.

38:47I want the companies that have this asymmetric kind of upside, realizing that very few will realize the potential and the promise. But if I'm doing my job half well, and I snag one, it's back to my earlier point with Bitcoin. Why am I going to sell that? Because it got 10 % of my portfolio or I locked in a 50 % gain because now the gain is nowhere near large enough to offset all the other mediocrity and crap that's sort of there. You want to let it run. And this was really the point. He's getting to a profound truth here for investors, which is that you, and again, I think he over-egged the pudding with sort of saying that if you're doing it right, and the natural end state is 95 % of your money is all in one stock.

39:27but he's right in the sense that it will just weight itself that way because all the all the nonsense goes to a very small percentage and the very big ones become a very very very large percentage so you want to somehow and i you'll have to wrestle with this yourself dear listener because i i wrestle with it we all do there's no easy formula for it but you you do not want to do what the professional investing class do which they offer under different incentive structures and different mandates and et cetera, et cetera. But, you know, locking in profits quickly, rotating portfolios, going risk on, risk off, all these sophisticated sounding things is just a clear path to mediocrity.

40:04And I am firmly religiously of the view that when you find yourself hitched to a rocket, cling to it for as long as you can. Now, there will come a point with extreme weighting and extreme valuation that, okay, okay. But it doesn't have to be an all or nothing thing. You know, like shave it off if you need to. But do it through the lens of overall, your overall assessment of risk and quality and value because there will be situations, and I'm kind of in this situation now where my biggest holding is unhealthily high, but it's just very, very, very high conviction and I think it's very, very good value.

40:48So I'm, you know what I mean? Yeah, totally. I'm kind of, I'm talking out of both sides of my mouth here We'll see whether that proves to be a mistake or not. But I just, I lived the experience and I've seen the experience of being too clever by half. And I think that's what Monash and Buffett and these people are really trying to get across with these quirky little witticisms, which hide a lot of deeper truth and understanding, even though they're sort of short little snippets. Does that make sense? Totally makes sense, 100%. I will try and add something a little bit different. You mentioned the tax question, dear listener, and that's a real one.

41:27So absolutely, every time you sell, should recognise you are reinvesting the after-tax proceeds, and that means there is more to be done with a caveat. And this gets mathematical and doesn't lend itself to audio format particularly well. If you – I'm not even going to try and do the maths. Effectively, if you don't sell, you carry forward the tax obligation you've got to eventually pay anyway. So you're kind of not, it's not like you're avoiding it. I mean, if you turn a gross stock into a dividend stock and never, ever, ever sell and live off the dividends, you can probably avoid capital gains tax forever.

41:58In some cases, that's absolutely true and reasonable and fair and not even an unreasonable prospect to try and do if that's what you wanted to do. But for the most part, whether I sell Apple now or in 10 years' time, I'm going to pay tax on that gain and I will make a bigger gain over the next season if it keeps going up. The question is whether the other thing would have gone up further and so what's the total tax dual? So let's say you're, just for fun, You're going to cash out your portfolio in 2035. If you were to say, I'm never going to sell because I want to pay tax, and my Apple goes for$100 to$400 over that period of time, you're beauty.

42:27I made$300 worth of profit. I've got to pay tax on that rate. And for the fun of it, I'm going to make it maximum tax rate, keep my maths easy. You're paying 25 % on that. Okay, so that's – no, I'm having to make myself easy. What's a quarter of$375? Yeah,$75. So you're paying$75 in tax, right? So that's holding and not selling. Let's say your Apple goes for$100 to$200, and you sell because it's getting too big in your portfolio. and you pay your 25 % tax, again, assuming the number's right, so you paid$25 and you're reinvesting$175, but that goes to$1 ,000 by 2035. Okay, what was the better option?

43:00You paid more tax in the latter example, but you sold something that was no longer worth holding at the current valuation given the future you saw of it and you invest that money in something you're going to do even better. So the approach we haven't used this phrase for a while, mate. Sorry, Bitcoin for too much. You want to maximize your after-tax returns, not minimize the tax you pay. Yeah. Now, both are relevant. Tax is relevant in both those examples, absolutely 100%. If I think two assets are going to go up at 10 % a year from now, I'm not selling one and buying the other because I'm investing in the second one with after-tax returns.

43:31I'm making less money. I'm not doing that, no. But do I think that tax should drive it? Absolutely not. After-tax returns, not minimizing tax. Back to your – you're throwing a couple of comments in. I want to address them. I've got it in front of me. It's easier for me. So I've done the tax thing. You say Warren's selling sales of Apple. He's not doing that to rebalance his portfolio. Apple is big, but the company, the wholly owned companies that Berkshire has are multiples the size of the equity portfolio. So Buffett is not selling Apple to rebalance his portfolio at all. Well, he's never said exactly that, but I would be, you could knock me over with a feather, with a tiny puff of wind, if Buffett was doing any sort of rebalancing at all.

44:14So I don't think he is doing that. He's selling them, but not for rebalancing purposes. So the action you've identified is right. The motivation, I'm pretty sure, is not correct in my understanding. You also say, doesn't that want to say never interrupt compounding? Yes, absolutely. But he says it, never interrupt it unnecessarily. And Buffett himself has, to your point, sold Apple and bought something else because after tax he thinks, right? After tax he thinks it's a better result. So his only job is to maximise the value of the portfolio over the long term. and everything is in the service of maximising after-tax returns.

44:46So it's that. And then I'll get back to the waiting because that was kind of the key question Ram was talking about. You know about a big market crash coming? I don't know. Who knows? Is it coming? I don't know. They've been saying it for years. They're right one out of every ten times. Maybe this one they're right about. I don't know. I've never known. I will never know. I have no objective opinion on it because you can't know when the crash is going to be. It's impossible. You can't know. You can guess and be right, but that just makes you lucky not smart. So I don't know. But over time, we've said a million times more money is lost waiting for or preparing for the crash than the crash itself.

45:21The Morgan Houser line is a great one. In other words, ride the waves, take the occasional dumper, keep going is my general opinion. In terms of weightings, yeah, I'm with you. So my two largest holdings are actually Solpats and Berkshire. And no surprise, probably they're similar type businesses, both in terms of their approach to running a business and investing, and also the fact they are very diversified conglomerates where I'm not taking company-specific risk. So would I have virtually... And they've probably outperformed other holdings to have become larger weightings. That's absolutely true too.

45:52Yes, absolutely. And, yeah, where I've sold others that have underperformed and disappointed, the businesses keep performing well. So not only do I not need to sell them, but they've gone into bigger pieces. That's a really good point, Ram. Thank you for making that point. So, yeah, is 40 % too much in Apple? I don't know. I can't tell you. I wouldn't personally have 40 % of my portfolio in a single, line item, single vertical company. I wouldn't have 40 % Apple personally. I wouldn't have 40 % Kogan drink. I wouldn't have 40 % anything I own with the exception of Berkshire and Solpats probably.

46:24An ETF, yeah, but that's kind of cheating. Would I sell to rebalance? I mean, at some point, yes, at that level. I don't think I would sleep at night with 40 % in a single company, personally. Would I rebalance for the sake of it at an arbitrary number? No. would be, and I'm talking both sides of my mouth like you were, Ram, because I'm saying at one level something's too much. How much is it? I don't know. It would depend on the company. It would depend on the future. It would depend on the business. It would depend on the leadership. It would depend on the valuation. If you're losing sleep, that's a good sign you've got too much in it.

46:53If you're obsessively checking it, that's probably a sign you've got too much in it. Yep. I think I'd speak this. Yeah. One other thing I wanted to make was that when you find yourself in that position and you are considering selling down, It is a wonderful opportunity to take some dogs out the back of the shed and shoot them. And I say that as a dog lover. Sometimes you say things and animal activists write in, and I don't mean it in a negative way. It's just a turn of phrase. Calm down, all right? But when it comes to various dogs in your portfolio and in the derogatory sense, you know, we're very bad at selling underperformers because we like to convince ourselves It's not a loss until we sell and, you know, hope springs eternal.

47:39But if you all got, gosh, got 40 % in Apple, I'm not sleeping well, I'm a bit worried about it being too much, wait a sec, I've also got something over here that's down 40%. I can sell that, get that monkey off my back and get a capital loss, which will offset some of the capital gain. So it's a nice opportunity to at least prompt you into thinking about, is there any dead weight I need to cut here and give me a little bit of a tax benefit as well. Does that make sense? No, that's a really good point. A quick example. I'm hesitant to bring this one up because I ran my golf on a tangent again, but we'll see.

48:20We'll see, people. We'll see. Might, might. Commonwealth Bank is a great example. It created enormous, stonkingly large amounts of value for a few decades, and I haven't got the chart in front of me. I remember it pulling it up now. For a very long time, CBA just absolutely streeted the field, generated massive amounts of wealth. And then after that, Ram will be happy with the second part. Actually, CBA's probably – CBA's done moderately well. One of the other four banks are probably easier, NAB or Westpac. And I am cherry-picking deliberately in this case because I want to make a point, which is for a period of time, we're talking about adoption and maturity, businesses have growth and maturity.

48:56Now, they're not all destined for absolute maturity. Some can grow for decades and they can reinvent themselves. American Express used to be a stagecoach company, right? He's done a pretty good job of defying its own mortality. Perkshire used to be a clothing mill. Thank you. Great example, right? So not everything has to go through these maturity phases. But when a business does, at some point, and this is obviously hindsight, so yes, again, I'm cherry-picking, I'm choosing hindsight, all this wonderful thing. At some point, it would have been reasonable to say about CBA, I have made a lot of money, I don't want to pay any tax.

49:28Fair. It also would be probably fair to say, I suspect looking at the chart, that at some point you should have been better saying, I've made a lot of money, I'm going to have to pay a lot of tax, but after that tax, I can reinvest it in better businesses and actually have more money overall after tax than sticking with it just to avoid that tax. And so at some point your inertia of, I'm avoiding the tax, saves you some tax, but costs you even more in foregone capital gains and dividends and income, all that sort of thing over time. So it's really important, That goes back to my point about maximising after-tax returns.

50:00Pay the tax when it makes sense to pay the tax. Yes, on my 25 % example, you go from 100 to 75, you've got to start from there, and your$75 is going to work harder than your$100. Accept that, remember, when you get to the end of it, the$100 has got to be – you've got to pay tax on it. You'll sell it at some point unless you're going to turn into a dividend stock. So you don't avoid the tax forever. You just delay it. That's worth something, but it's not worth everything. It's not the entire saving because you don't save it in perpetuity. Someone pays the tax at some point. Speaking of Commonwealth Bank, I mean, the number of – I'm going to pick on that because there's a lot of older investors who I'm very fond of pointing out because mostly the banks have not done nothing for a long period of time.

50:35But for those that bought in the late, mid to late 90s, they did incredibly well. And I, you know, being in this industry and talking to clients and various stakeholders, the number of times, I'm sure you've had the same experience where people say, well, I know it's a lot of my portfolio, but if I sold now, I'd have to pay tax. Yeah. Yeah. Yeah. You know, it's sort of like, so, or the other one, which is the classic, it doesn't matter if it goes down. Cause I only paid$5 for it. It's like playing with house money. What? It's still money. Like you can still, you don't have to lose. I mean, the, the point of investing was to make it and now you've made it, you're going, Oh, it doesn't matter.

51:16I've lost it. Cause I made it like it's this weird circularity to it. So So to Scott's point, like, you know, if there's good reason to sell it, then absolutely. But, you know, at the same time, don't not sell it. Yes, I agree with that too. Just for the sake of because I don't want to give the – I read an article. Here's a tangent for you. I read an article. I'm going to try and find it here while I'm scrolling. Where the AFR, God bless their cotton socks, said something. What was the article here? It's like SMS super trustees plan not to sell to avoid tax. Right, right. It's like, what? Isn't that?

51:56Wait, you're going to die before you pay money to the ATO. Now, look, I'm no fan of the ATO. Don't get me wrong. That's pretty funny, though, isn't it? But that feels like you're going. And that's actually, I can't find the exact article. It's the ultimate pyrrhic victory. What do you find out? It's the ultimate pyrrhic victory. I'm going to live a poor, poor life so I can die with a lot of money just to screw the tax man. I'm going to be miserable for a decade and a half just so the nasty tax man doesn't get an SMSF 15 % tax. I mean, you know, I'm not going to sell my million dollars and end up with$850 ,000 left over to spend.

52:28I'm going to live on baked beans just so I can stick it to the tax man. Here we go. Sorry. SMSF members will hold until death to avoid super tax. Retirees could defer the sale of assets to minimise the cost of Treasurer Jim Chalmers reworked tax on us. Like, oh, we'll do it. Don't you threaten us. Like, okay. I mean, that's a pyrrhic victory, as you say. That's the definition of a pyrrhic victory. Like, I will not enjoy the fruits of my, all of this effort. I set up a special structure. I sacrificed. I saved. I invested prudently. I've won. And now I'm just going to die with it. And they're like, good on you.

53:08Slow clap. Like who's the real winner here? Big middle finger from the hearse on the way to the crematorium. You idiots. But it's also such, I just call that bluff as well because I know it's like various lobby groups that will say, they will, with a dead straight face, go to the, you know, when they're special access to the treasurer, they'll be going, well, that's what we're going to do. Don't make it. Don't. And again, if Jim had a modicum of sense, he'd go, all right, I'll call that bluff any day of the week. Do you know what, mate? I double dare you. For all, I a million percent agree with you.

53:43Can I also say we know that something like a quarter, I think it's a quarter, I'm making this up from absolutely pulling this from somewhere, a quarter of superannuation actually will die with more money than they retired with. Yeah. So as much as you're like, they're not going to do it for that reason. Yes. But there's a very real problem with people actually kind of, and this is, I love superannuation. Part of me thinks that if we turn super into an allocated pension, not with one of the stupid, expensive ones, but if we kind of made people's the wrong phrase and it feels, it's my money and all this, I hate the it's my money thing.

54:17Anyway, I'm not so sure super would be better for retirees themselves if you made them take out a fixed amount of money. There is a minimum, but a much larger amount every year just because there are people who are dying not spending money because they're worried they might run out. And that is there is something really sad. It was much about laughing at those people who are saying, you know, screw the tax man. There's a second group of people who are trying to screw the tax man, but it's like, well, what if I live to 85 or 90 or 95 or 105? What if I did it for medical expense or a nursing home?

54:45And there's a whole lot of people who are living. What if they do and then you force them to sell? Well, I would – you don't have to spend the money. You get to keep it, right? Anyway, so at a percentage of a diminishing value, either one. Okay. The broad – there is something unfortunate about a group of – that group of people who are – and that's what it is. I think it's a quarter roughly. They didn't need to. And they have that money left over. And they probably in some slash most slash many cases lived poorer lives, literally physically poor, monetarily poor, or just less enjoyable lives because I was so worried about running out of money.

55:19And this is where, I'm not saying we could get rid of super and go back to the pension, but the pension at least was like, I'm getting this much money every week. I know what I'm getting. I can use it for whatever I want. I know it's coming next week as well. I don't have to hoard it. There's just something about that mentality of, and this is the flip side, you talk about saving and sacrificing your entire working life, turning that off, going from saving, sacrificing, accumulating to, I love your friends, I won, go and spend it. I might need it. And again, not to the nth degree, not to have everyone run out of money, but it's just a bit of a shame.

55:51It's human nature. It's not the system's fault. There's something, a bit of a shame about the human nature element of people dying with$5 million but didn't replace the car or didn't go on the holiday or didn't go and see the kids or didn't, you know, didn't buy the expensive TV dinners rather than the cheap stuff just in case. I think it's a shame that people have that experience and aren't able to more confidently, and again, it's the person, not the system, confidently recognise when enough isn't enough rather than the idea of just in case, just in case, just in case, and kind of dying, as you say, with all that money going, well, shit, excuse my language, I probably could and should have actually got the nice, you know, steak.

56:28I didn't have to eat the mince. I could have bought the sole liner. or I could have bought the eye fillet or – it's just – there's something a bit sad about dying with – not having as full of life as you could because you're worried about running out of money at the level where you're never really going to. You've got$5 million, you're fine. Spend the money for God's sake. You know, that's what I'm talking about. I don't disagree. I do – I wouldn't legislate any – I feel as though I'm pretty big on personal choice. So I kind of think if that's what you want to do, it's a bit of a shame and it's a bit silly given that just what, you know, even if you just pop that into a high interest savings account, you should be, you know.

57:04I get that and maybe you could do an education campaign. I get very nervous because you're actually starting to see a little bit of this stuff now. It's kind of like in the EU they're talking about saving money is hoarding it and it's a selfish act. And I'm like, what? No, saving an investment is the absolute foundation of future prosperity and you're turning it into a bad thing and moreover you're guilting people into spending it for this amorphous weird concept of quote-unquote the economy and, you know, and if you don't do it, we'll tax it, we'll do it for you. I just feel as though it's a very, very slippery slope and I just like, and let's not forget the person who does die with$5 million has by definition created more value than they've extracted from the economy.

57:48It's sort of like isn't that an act of benevolence? I don't know. I'm not sure. No, I agree. The only thing I would say around the legislation bit is I think the Australian taxpayer slash society slash community slash nation slash whatever phrase you prefer is entitled to put rules around the conditions under which tax benefits are provided. Oh, sure. It's a fancy way of saying if you get 45 years of compounding it at concessional rates, we're talking about it. And here's the quid pro quo is all I would say. I think there already is a minimum of it all you have to make out of super based on your age.

58:27It already exists. Again, I'm not going hard down that line, but if we were to increase that, I don't think it would be particularly onerous and I think it would be fine. I think people would spend the money or put it back in the term deposit, but at least know it's there. And there's something to the income stream approach, which I think is better for people and probably better for the system more broadly up to a point. I'm not arguing for legislation necessarily, early, but I just think there's something to that idea of it's designed for – you know what it goes back to, mate? And probably not intentionally, but as I think about the answer to that very good question you raised or the point you make is super is designed to provide retirement income, not as a tax shelter for inheritance.

59:08Yeah. And to some degree – That's the delineation I definitely would lean into. And I get there a different way, but it's essentially the same kind of idea. If we as the taxpayer have provided John Smith's kids with a tax, you know, a concessional inheritance, that system doesn't work the way it should or is well as it should. Yes, yep. Particularly when you're in a situation where you are never, ever, ever at risk of being on the pension scheme. Right, exactly. Yeah, and yeah, miles better off. There's no justification for that over and over. Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener.

59:49Let's finish off with... Oh dear. It's a Bitcoin question of sorts. It's actually a big question for me, Andrew. So sit down. It's all about me and my Bitcoin. Thank you very much. Take it and run. I love it. Actually, there's one for you as well. This one's from Steve. He says, I love the pod, and I've got a question each for you both. Firstly, Scott, I'm very keen to hear your thoughts on why you have decided to buy Bitcoin. You have snickered at Andrew for so long and gave the impression you were very much against it. What changed this? Did Andrew's voice wear you down? I was very shocked. The short answer is just if this shuts him up, I will spend a lot of money to shut Andrew up.

1:00:27Narrator, it didn't. It's not going to work. I was very shocked on a recent episode hearing you had caved, says Steve. I'll get to your question, second question, but I'll do this one first. Yeah, yeah. So you know what's really, you know what I don't like about the question? It's nothing to do with Steve. It's I gave the impression I was very much against it. And I had believed of myself that I was very much directly and deliberately agnostic about it because I'd said for a million years, I don't know. I'm neither bullish nor bearish. I don't know what happens next. I'm just not prepared. I'm not shorting it.

1:01:02I'm not buying it. I'm just saying that's interesting. I'll keep an eye on it. And I kind of thought I'd said that. You didn't like to put the boot in though. Let's be real. Oh, God, yeah, but that's what I mean about the impression right like I I mean for a bit of fun sure um did I I didn't mean to give the impression I was against it I genuinely didn't I've I've said forever you know I've talked about this it was always that case of I don't know I don't know I don't I'm not buying it I don't know too hard basket yeah right for sure and well actually no and no actually to be fairer to Steve I did go from buy it for a bit of fun then I think it's a bit silly I don't see where the I see I see too many problems and it was the it was the approach you've rightly criticized in others and you were too nice to criticize it in me which is the whole yeah but yeah but yeah but yeah but yeah but which is kind of starts from a position of um i'm pretty sure this is crap and there must be reasons why so here they are right rather than actually genuinely trying to understand the answers to the questions it was that dismissive stuff and that was probably true and i my memory's not good enough i don't pay enough attention for x number of years right up until i don't know two or three years ago probably um and then i went from that to just directly agnostic which is just i've always said i'm well always i'll say for the last three years confidently i hope longer at least three years super cool technology love it could it be a thing absolutely could be a thing do i know whether it will be no my question was always adoption and i didn't know and that's that's been my my my reasonably firm view obviously badly badly explained steve so so So again, I'm glad you raised it.

1:02:35But my view was just, I don't know. Outright, no. I'm not bearish, not bullish. I don't know. I'm living on the side. Interesting? Don't know. What changed my view is probably Andrew's rants. But also, I'm actually not even kidding. I'm kidding a little bit, not much. There is some element of, we say regularly, you become like the five people you spend most time with. I spend more time talking finance and business and investing with Andrew than anybody else, even the people I work with. because we spend like three hours a week just hardcore doing this, right? Yeah. And the topical stuff, right?

1:03:09Yeah, there is that too. We really must record some of the pre and post chats for the amusement of our listeners. So, yeah, probably there was probably some element of not echo chamber, but, yeah, you become like the people who spend most time. So was I, have I given it more consideration than if I didn't spend three hours a week talking to Andrew? Yes, almost certainly, almost by definition because I haven't got anyone else in my ear for three hours a week telling me the stuff that he thinks is worth. No, I don't mean that. I don't mean it. I'm not having a go. I'm not being a smart artist. Genuinely probably true.

1:03:38I was just laughing at that. It was three hours. That's pretty true. Plus the comments, plus the tweets. Direct message on Twitter. But it's also, if I can interject for a second here, I just, we live in this culture where people are always a little bit snarky. Steve's not at all, I'm sorry, but in general it's like, ah, you changed your mind. Yeah, true. And I'm always fond of the idea of, you know, it was like, well, if you can't change your mind, you have no business investing. In fact, please stay away from any public discourse in general, if you don't mind. Get off Twitter. I said that it's 95 % of Twitter, to be fair.

1:04:16It is, right? But, I mean, it doesn't mean that you shouldn't hold firm to views that you are high conviction in. But if you are the person who is, I will never change my mind no matter what, I just can't take you seriously as an intellect. You know, it's the same for the, I'm probably going to offend a lot of people right now, but whatever. It's the same person who goes, I'm a Labor voter or I'm a Liberal voter. Yes. And I always go, what do you mean? My side is right about what they say. Yeah. And it's just like, no, I just always have. And that's what I've always done. And it's like, so they come out tomorrow and say, we're going to, I don't know, you know, emulate the Nazis.

1:04:51It's like, well, my granddad and my dad, and I've always voted this party. So I guess I'm just going to throw my lot in with that. But it's sort of like it's giving up your voice. And, of course, like, you know, I'm trying to say it in a party agnostic way. I don't care which of the major parties or minor parties it happens to be. They evolve and they change over time. New people come in. New thinking comes in. You know, the Labor Party today is a very, very different beast to what it was 20 years ago. And same is true of the other side as well. And just this is the, and I say this particularly in the context of investing.

1:05:28that, you know, I will never invest in that company. It's like, well, that's a, never is a long time, right? And also on the flippers, I love this company. It's like, well, things change, you know? Like things go from the best thing in the world to the worst very, very quickly. If you're going to go la, la, la, put your fingers in your ears and your head in the sand and just not think. So I'm really a long-winded way of trying to pay you a compliment, mate. I think it's sort of like, and I was the same, like I hated it. and then you take it seriously and you really try and wrestle with it. And it's hard.

1:06:02I'm not saying it's impossible, but it is hard in a good faith examination and contemplation of this not to at least go, well, all of the hackneyed tropes that people talk about, there's no weight, there's no validity to it. In fact, it's actually very different. I guess I need to change my mind. It doesn't mean I'm going all in or I'm general, but to go, well, in 2012 when I knew nothing about it I hated it and that's it the die is cast I shall die on this hill is just intellectually lazy and frankly embarrassing if I can put it out there so good on you for changing your mind and hopefully and if things change you'll change your mind again it's like oh I kind of thought it was a good idea and then XYZ happened and now I've changed my mind and me too hopefully like if there is a set of events that could occur with Bitcoin or with any other, it's got nothing to do with Bitcoin, any of the investments I make.

1:06:57I go, I was wrong. I need to change my mind and I need to be decisive on it. That is how you have to be. Sorry. Sorry for the rant, but it's just, I don't know how you can look at it in any other way. I like it. So, but your question, just to answer directly, Steve, what changed my mind was the increased adoption. I've said for a period of time, I don't know how long, For me, it was a question of adoption. No, I'm not sure. As I've said before, I'm not here for the mission, and I'm not sure that adoption will continue. It's why I haven't put 85 % of my portfolio in Bitcoin or 105 % of my portfolio or 58 % of my – it's 1%, right?

1:07:35It's tiny. Andrew will say that's not enough, and he might be right. But that's – You got off zero, though, and that's the main thing. Well, that's kind of the point. So what changed, Steve, is more evidence that the thesis – that Andrew's thesis, that the Bitcoin thesis, that my, I guess, I kind of had this proto-thesis, right, which was not I buy it because of this, but I would buy it if. And we should, Andrew's having a, you know, keeping a log, keeping a written record of why you buy. So you're honest with yourself, you think it through, you put it down in paper. That's what strawman.com, Australia's premier online investment club, is all about.

1:08:08Thank you. You're welcome. And that's, but also there's some sort of, it shouldn't be called a proto-thesis, but there's something, a watch list thesis or something, which is actually I would buy if. which actually I don't do and I don't know if you do, Ramon. I probably should now think about it more. Yeah, I've got watch lists where there's, because we speak to a lot of CEOs at Strom and you go, oh, that's really interesting. We spoke to one actually this week and they're in the midst of a bit of a pivot and I actually congratulate companies that pivot because it's not working. What else are you going to do?

1:08:35Again, change your mind, right? Good idea, didn't work. What assets have you got here that you could sweat and pivot into and rah, rah, rah? And it's like it actually makes a huge amount of sense. We'll see. We'll see. Like if they can do that, then they're off to the races. So not yet. For me, I don't want to name the company, but I sort of like I can see the strategy. I can see the merit in it. And it just comes a point where it's like it goes from that sounds good until there is just too much evidence for me to deny it. Did I think after pay was going to be a thing? No, not at all. Like it was crazy to me.

1:09:11I don't understand why that would happen. But I came to a point where it was sort of like, well, literally every shop is offering it. Like it's just you're denying reality at a point. And I've always sort of said this with Bitcoin or with any investment. It's like you don't have to buy it and care. Do what you like. But at least have a line in the sand that you would say, if X, Y, and Z happened, I would change my mind. And that's how I got my dad across the line recently because he was a never coiner, as we like to call him. and I just sort of said to him, it's like, well, what if this and this happened?

1:09:46He goes, well, I guess I would change my mind and it happened, right? And so he's like, I just hold him. I think, again, he just did it to shut me up a little bit. But, you know, what is that? Is it like I'm never going to do it. Okay, the RBA now holds 5 % of its balance sheet in it, which the Czech Republic actually just, the Czech Central Bank just did, not that much to that extent, but interesting, right? Right, yeah. Vanguard, let's talk about Vanguard, right? Vanguard, I've got a huge amount of respect for. Incredible institution. They started the ETF, right, phenomena. When the BlackRock Bitcoin ETFs were launched at the beginning of last year and all the other ETFs associated with it, their CEO is on CNBC and said, we're never going to do that.

1:10:26We have a fiduciary duty. We are not going to expose our clients to this rubbish. And just this week, yesterday, in fact, as we record, so this podcast coming out a week and a bit after we record it, Vanguard bent the knee. they said we're gonna do and i'm not i'm not like just say ah you idiot no it's like of course of course they did right because they they just sort of saw the writing on the wall and it's like are you going to be the person at the start of the industrial revolution going you know this steam-powered business and production lines and you know like it sort of sounds interesting but i'm going to stick to horses thank you very much it's actually completely plausible you know 20 20 years in, it's like literally everything is kind of, you know, mass produced and mechanised and, you know, Henry Ford's rolling out a new car every five minutes and they're just selling like hotcakes.

1:11:16At that point, it's silly, right? Sorry, mate, I went off on a big tangent again. Obviously, you need to draw that line in the sand. You had the line for you was I don't really see it as a game changer for my life, but if more and more people are using it, just anyone who understands network theory will get that it becomes inherent, the utility goes up the value. Yeah, so we can talk about the future and who knows what the future will bring. But when you look today and you look backwards, it's like, wow, this looks exactly like an S-curve. This looks literally identical to every technological S-curve that I have ever seen in history.

1:11:52And that doesn't guarantee it doesn't die tomorrow. But I always said, if adoption continues to grow, then I need to change my mind and credit to you. That's what you did. And that's why you're here. And I suspect to our earlier conversation, as it continues to do its thing and adoption continues to grow, there will come a point, I dare say, if you could get to a level of comfort that we have gone from 3 % to 4 % to 5 % global adoption to 10%, that you will probably increase your weighting, right? Because now it's sort of like, well, the risk reward has changed fundamentally again. And then it gets to one in four.

1:12:26100%, right. And then it gets to Berkshire Hathaway holds some of its mountain of cash balance. until I put 3 % in Bitcoin. It's like, well, what else are you going to do? I've got like, yeah, the world is changing. I can deny it. A lot of people right now are going, Andrew, none of that will ever happen. And to which I sort of say, cool, we'll see, right? But my point is, if it happens, then you must be able to change your mind. If you're going to be, and decide it now, because to preserve your ego, you will do all kinds of mental gymnastics to avoid that realisation. And if you sort of say, well, if this happens, I will make a 1 % allocation.

1:13:04I just think it's prudent. Yep, and that's kind of exactly right. And just for those who are wondering, I'll make this very quick point and I'll move on to your question that Steve had for you, Ram.

1:13:16You've made the point, mate, Bitcoin is different because as a money, there's no fundamental profit produced or widgets being made. So you can't evaluate it the way you would evaluate a business. Well, it's because they sell more baked beans. Okay, they're going to make more money. That kind of thing. I get that, right? There's zero intrinsic value to Bitcoin. But part of what changed, again, Steve, to your question, was that I belatedly, along with the Eucharist adoption itself, which is the important thing, I belatedly saw the adoption itself as akin to the use, adoption, popularity of consumer goods.

1:13:57Okay? So I can measure the amount of profit Coke makes and I can use that to justify a price I'm going to pay for the shares. I can't fundamentally value Bitcoin in any way, shape, or form the same way as I can with Coke. What I can do is use the approach I take with those companies to say, hey, Coke's getting a lot more popular. Lots more people are buying Coke. It is proving out its brand. It is demonstrating, and maybe your point, network effect, social media, given it has a network effect, A social media example might have been better. But I'll go with the Coke for now because I looked at it and said, hang on, more people like Coke than they used to.

1:14:34More people are drinking Coke than they used to. Coke is more popular. Coke is more valuable. Can I put an absolute price on Bitcoin and say at 50 grand it's undervalued, 80 grand it's fairly valued, 100 grand it's overvalued? No, I can't for the reasons you've just talked about. There's no intrinsic value. There's no fundamental basis. What I can do is directionally say, and you've made this point before too, man. I was just late to catch on. the increasing price is in and of itself justification for the increased adoption that go hand in hand and so see that was the other thing is for me it wasn't the price going up per se but it was the idea of more people more wallets more adoption and yes things like the black rocks of the world you asked me plenty of times ram what would need to change you know what would it be that that kind of got you to change your mind and i didn't even necessarily know in advance, in terms of specifics.

1:15:23But the proto-thesis was always adoption. And I just got to the point where I was like, okay, the ETFs are investing in it. People are using it. You made the point about Square accepting Bitcoin payments, the JP Morgans of the world. This thing has become more probably permanent and more probably part of an increasing adoption curve. And if the adoption does continue to increase, very likely the price goes up. Now, if its fundamental value was, and you can never do it, but let's pretend, was$10 ,000 and the price is now$100 ,000 and it triples in intrinsic value, it's worth now$30 ,000, okay, it's still overvalued.

1:16:00So I am very aware and open to the possibility that even with the accruciation adoption, it's like we always say, there's no such thing as too high, sorry, it's not impossible to pay too high a price for any business. You pay$1 trillion a share for Berkshire, you're overpaying, no matter how good the company is. And maybe I'm paying$1 trillion for Berkshire buying Bitcoin at$100 ,000. I don't know. This is US, by the way. I don't know. But what I do expect is that if the value keeps increasing, the chances of me making money improve, even allowing for sentiment, which has whipsawed stuff all over the place over the past few weeks.

1:16:31Yeah. I mean, and it's weird too because of all the things that you have been trained and studied over the years, which make an incredible amount of sense when studying business, just don't apply. And I think that's why people in our game are the last to grok it because it just... We also don't say grok. I'm riding the coattails of the kids. I've got teenagers. I'm picking it all at 6.7. 6.7. You're working. Yeah, like it looks like a Ponzi. It sounds like. I was on the Equity Mates podcast in 2017 calling it a Ponzi. It's like why would you do it? I don't get it. I've got my credit card. I don't understand what problem it solves, right?

1:17:12So it looks and sounds like a duck. It walks like a duck. It's probably going to be a duck, right? And then you go, well, okay, I'll try and take it seriously. Well, how would I, what does it actually do? And it's really hard and then you realise that it's actually the completely wrong framework to understand it. It's like trying to do a course in gender studies to understand quantum mechanics. It's not to denigrate the social sciences in any way, shape, or form. It's just completely appropriate to the task at hand. And if you want to take intrinsic values and discounted cash flows and industrial use cases as some kind of lens through which to look at this thing, it's like you're going to see nonsense because those tools are nonsensical to apply in this regard.

1:17:57And I know this is hard and it feels like it's like so you're saying that I shouldn't pay attention to any of these things. I would just sort of say these very reasonable challenges, again, point them into the mirror and ask yourself, what backs the Australian dollar? Where's its intrinsic? value? How do you value that? I mean, it's like they're profound questions. And that's really what hooked me in right back in the day was you start, someone challenged me on that front was like, well, what's backed by the government? What do you mean? Well, actually, no, I don't. And you stumble and you realise that, oh, and like, it's just like you look at the world a different way.

1:18:43anyway maybe you should ask my question before I ramble on too much longer let's do that and I need you take a deep breath and answer any reference to anything anyone else has said just the things that Steve is asking in good faith in your response to these things no people saying bring it Steve what do you go for he's being positive he's asking a question about something else compared to Bitcoin and so I'm prepared for no don't is the short answer but go on ask the question Okay. Thanks for listening. That's what we've got time for. He says, Andrew, I would love to know your thoughts on XRP. Is that Ripple?

1:19:18Yes. There you go. Compared to Bitcoin. It's not financial advice. I'm just interested in hearing your opinion on it. I can give you financial advice because there's no law that says I can't give you advice when it comes to property or crypto, only equities. So I'm going to give you overt, direct advice and it's going to be sell. Let me finish. Ripple had massive gains when Trump came to power. as well as your thoughts about better regulation as a purchaser so we can feel our money is safe. Much appreciated, Steve. So one of the things you need to understand when you do start thinking about the nature of money and what money is, money is a winner-take-all phenomenon.

1:19:59You can try. If you don't believe me, you don't want to. It's not just if someone gets all the money but the money itself, there is a superior version of money that ends up taking the whole life, is what you mean, right? Yeah. You know what I mean? Someone gets all the money. You mean when there's a comparison between monies, the superior money wins and pushes everything else out? We all coalesce around the same standard because the money, the economists and the monetary theorists would say money is the most saleable good. In other words, it's the thing that everyone is happy to exchange for. Yeah.

1:20:30Now, if you don't, if you need proof of that, take the world reserve currency, take$100 Benjamin Franklin, walk into your local Woolies and try and buy something. They don't want it. It's like the network effect is like, we are only going in any jurisdiction. I know that there are places around the world where they do use multiple currencies, but it's only because the government points a gun at them and says, you must use this currency. And in the black market, they use the harder currency, which is more often than not the greenback. But barring forced coercion, people will always aggregate around the one network.

1:21:06Think about it this way. I invent Internet 2.0. So we don't use TCP IP. We use a different protocol that sends informational packets around a network of connected computers. And it's a distributed network. And I have done it in such a way with my computer science brilliance that we can actually pack a little bit more data into this. It's got some certain advantages and it's really interesting. How likely is my chance of success in usurping the internet? Particularly when they're not interoperable other than how you can go through. Oh, they're not interoperable. It's completely different. So you have to disconnect from one.

1:21:43I mean, you can have different currencies, but fundamentally you're not going to run two internet systems side by side. You're not going to have one. VHS and Betamax, I mean, it's not that at all. Nowhere near as strong a network effect as the internet, but it's kind of the same as well. That didn't need to be winner-take-all. There was no reason you couldn't have both players. but you kind of, well, there's more VHS players and there's more VHS tapes. So there's more VHS players, more VHS tapes. And that very simple network effect, and kids ask your parents what a video player was, that simple network did enough.

1:22:12Money is even stronger than that because it is the - The strongest network effect. Because the interaction between not just the video player and the video rental store, kids ask your parents, but that idea of like, hang on, I have a money and I want you to take my money and the guy in the street to take my money and the person who pays me to pay me with my money and the person who buys my house and the way I invest and I need to use all that, why would I have multiple, you know, currencies, multiple accounts? If you go to France, you might take euros, but that's a very specific use case. You're not using it as your preferred money and there's no one else you exchange with regularly.

1:22:47And you're really requiring here, in my analogy, to completely tear down all of the infrastructure built around the core protocols of the internet. Google needs to re-architect everything. Netflix needs to re-architect everything. And we need to get everyone else to do it as well because I'm not going to be able to connect to the new Netflix unless I'm on the new thing. So there's a chicken and egg kind of phenomenon. And it's just, this is why Bitcoin really, and this was probably the biggest of all the epiphanies when I was going down the rabbit hole. This is a one-time invention. Like you can't pull that trick twice.

1:23:25It's the only one that has an organic ethical launch. Let's talk about XRP. Let's talk about Ripple. Let's talk about those dudes. You can Google it for yourself and see about what you think of their character. But they've done what everyone does in quote-unquote crypto, which is they pre-mine it. In other words, me and Scott copy the innovation that Satoshi invented and gifted to the world for free completely selfishly, and we secure 40 % of all tokens that will ever exist for ourselves. We go around, we lobby with government, we tell everyone this is the greatest thing and then we dump it all on you, right?

1:24:02Like it doesn't sound ethical or more to the point, if you're going to have an open permissionless digital currency for the world, are you going to centre on something that's run by a corporation? Like it makes no sense and it doesn't even have to be like throwing shade at the Ripple guys, although they deserve all the shade that they get. But it could be Warren Buffett himself comes out with his own token and says, I'm Warren Buffett, I'm the most ethical capitalist that's ever existed and here's my currency. And he's like, yeah, I just don't think I want to use a money that one dude or one set of people control.

1:24:39So think about it. I mean, maybe you're out there going, no, I'm actually really cool with that. I would like to use a money that someone has secured the majority of it for themselves or a very significant proportion and who can control it at a whim.

1:24:55They call it decentralisation theatre because there's nothing decentralised about it. Look at Ethereum, right? Ethereum's going through, I think it's actually this week. I need a bell. I need a bell. Sorry. When you go off the topic. But, I mean, it's a really good question. I think what happens with Bitcoin is people look at it and go, oh, it was a cent. It's now$100 ,000. I've missed it. Oh, look over here. Zedcash, what? Zero knowledge proof. Oh, yeah, we can do this. Oh, what about you guys? Oh, we do smart contracts. Oh, that sounds really cool. And it's like, maybe I should do that. Oh, and if I look at the unit buyers here, this thing's only trading at$1 ,000 a coin.

1:25:31It's cheap in the same way that it's nonsensical to say that CBA is more expensive than, I don't know, another company whose share price happens to be lower. It's sort of irrelevant to it. And these are very big assertions I'm making. and you will need to go and dig into it yourself. But the race has been run. And the way to think, oh, shut up after this. The way to think about it is not, Bitcoin isn't a separate thing to the internet. Bitcoin is an evolution of the internet. The internet is just a stack of various protocols. There's a really cool thing called, oh, I'm going to go blank, Gaul's Law.

1:26:11And Gaul's Law, I'm pretty sure it's Gaul, G-A-L-L, states that any sufficiently complex system that works is built on a bunch of smaller systems that are simple but work. In other words, you can't engineer something that does everything. You have this Rube Goldberg machine of over-engineered complexity and it's going to break, which is Ethereum, which is Ripple, which is all of these other kinds of things. The internet itself is TCP IP at a base layer. Then we've got SMTP. That's how you send emails around, right? Then you've got HTML and other versions. Here is how webpages render. And they're all protocols that are just so baked in at this point because everything else is built on top of them.

1:26:54And now we have Bitcoin. It is the money value transfer protocol of the internet. 10 years ago, we could have had a really good debate about this. In 2025, the race has been run. It's over. And you look at the share of market cap that's out there, it's sort of like there's this one giant 400 foot gorilla and there's a bunch of scammy little monkeys scampering around the side. And so just, I can't say it strongly enough, Steve, stay a mile away from it. Go and don't feel as though you're too late. As I say, 95 % plus of the world thinks this thing is a joke. You are so insanely early and you can buy a dollar's worth, right?

1:27:33You don't have to buy a Most of the world will never own a full Bitcoin. I'm going to shut up. Shut me up at this point because I'm just going to keep going, but hopefully I made a couple of good points in there. You did. I have some sympathy with Steve's view, and I think, you know, it's funny, mate. Me too. Everyone shitcoins before they Bitcoin. Altcoins, sorry. Everyone altcoins before they Bitcoin. I had Ethereum. I had it all, right? And I think this is the challenge of Bitcoin. You made the point beautifully, but I just want to highlight it because at some level you've got the eye, we are so used to money having a backstop controller, approver, authoriser, you know.

1:28:16Very recent historical phenomena, by the way. And so that, but that, oh, we're ish. I mean, I guess the Roman coins were minted with the emperor's face and that kind of stuff. Yeah, but they were made of gold. Yeah, but you knew the purity of it because you trusted the coin was the coin, right? Sure, sure. And so some idea of like, who do I ask if something goes badly? I think I really get that intent and that concern. And the idea of having, I still, part of me still think, maybe I haven't got as much Bitcoin as you think I should have. Part of me is still like, and I know you've addressed this, so I'm not even saying you're wrong or I'm right.

1:28:49Just instinctively, like really deep down, at that very back of the brain, the amygdala, where I'm thinking, you know, I'm still a reptile. I've just managed to crawl out of the swamp to merge my evolutionary metaphors. And I'm like, okay, I finally got money. I get that. And do you want me to change that? You kind of make sense, but I kind of want to go back to what I know, which is if my bank account gets hacked, I go to the CBA and say, can you please fix it? They go, yeah, okay, we'll fix it. I'm like, oh, thank God. Same thing as Bitcoin. I want to get someone to fix it. There's no one to go to.

1:29:19Well, I don't want to do that. Then I want someone I can go to. Well, that's not even true. Well, if you want to be a puritanical, and a lot of the hardcore OGs are exactly like that, Yeah, feed by an ETF. Right. But my point to you was that that view is what I get Steve's view is, which is I feel more comfortable with someone who runs the thing and that I can say, hey, at least Ripple has someone standing behind it so I feel like there is a solution. Yeah, look at the people standing behind it. That's all I'll say. You can give financial advice. You can't slain the people without ramification.

1:29:49So let's say allegedly.

1:29:54Yeah, I'm not saying he's right. I'm not saying you're wrong. I get the idea of the – because we're conditioned to have a government and a bank and if someone screws you, scams your credit card, they say, we'll fix you up. It's like I like those safeguards in my financial life, right? And so letting go of those and saying, well, I get Bitcoin, but maybe if there was a Bitcoin but had like some authority that could fix something, something went wrong, that feels pretty good to me. And you have to get past that point, which you made eloquently the argument for. But I just wanted to highlight why I see someone like Steve saying, is this Bitcoin better in these sort of ways?

1:30:27You're very clear if the answer is no and I respect that. I just want to kind of highlight why that journey for different people takes time to get to because of things we're used to. And you've made the point. Yes. We don't even know what we're used to, but it's used to it working and so we kind of accept that it has and it always has since I was born and so what else do I have to think about? The questioning, again, is absolutely central to all this stuff. Let me assuage some concerns there. So firstly, I mean, you see it more and more because the government is out there trying to offer more education, but how many people out there have been scammed where their bank accounts have been emptied?

1:31:01They don't get that money back. Yes, if there has been a credit card fraud of some description, there is protections there. But if you're on a catfishing attack, for example, and these things, the amount, I mean, I heard some stats the other day, like millions of dollars from Australia is stolen in financial fraud. There's no one to go. You can go to the bank and the bank will go, well, you signed the terms and conditions, you wired the money to the Philippines because you thought that, bro, I don't know what to tell you. So I just make that point because I think there is a false security there.

1:31:36Yes, there are certain protections, but people get scammed all the time out of their money. So it's kind of the same. The other thing is as well is that without getting too technical, and this is funnily enough one of the sort of the criticisms and that ill-informed people like to point to Bitcoin. It will never be a transactional layer at the base. Box sizes aren't big enough and it's not fast enough to process transactions for 8 billion people. That's why we have higher level layers, also protocols, also owned by no one, also trustless, built on top of these things and let's not even get into all of that.

1:32:11But I think if this is something that scales to the entire world, very few people are participating on chain. it will be more likely just because one, there'll be a consumer demand for it as much as it might annoy a lot of the purists in the Bitcoin community who will just be like, like my mum and dad, it's just sort of like, yeah, I just want to sound money that no one can screw with, but I want to see it on my common bank app and I want them to worry about seed phrases and all of that. I don't want to deal with that. I just want to have a relationship with my bank and they look after it all for me.

1:32:42And that's exactly what's going to happen. Even within Bitcoin. So I've got non-custodial wallets and I've got some custodial wallets. So one I'm very fond of is Strike. It's a US company. You sign up with an email address. All I have to give them is my email address, right? If I lose my phone and I can, like I would with an Amazon account or anything like that. And again, someone will say, oh, not your keys, not your coins is the phrase. And it's like, yeah, true. I'm not gonna install my family's wealth in it. But if I wanna put 500 bucks in it for walking around money, I'm more than comfortable with that.

1:33:12And I've got all of those protections that you've talked about. So there is a spectrum here is all I'm saying. And don't let some of the – because when you start digging around in this space, you're going to find some pretty interesting characters on Twitter who, you know, all laserise and eat steak and pump iron and they're all about the culture. It is all a little bit weird. If I can say it with love, fellow Bitcoiners, a little bit weird. You know, you've got to do this and you've got to do that and you've got to be a self-sovereign individual. I'm like, look, no one owns it, right? This is the whole point.

1:33:41whether you're gay or straight or male or female or black or white or you live in Paraguay or New Zealand, it doesn't matter. Bitcoin doesn't know and it doesn't care and you get to use it in any way, shape or form that you want and no one owns it. There's no political leaning towards a protocol and there never will be. So you can be a hardcore socialist or you can be a laissez-faire capitalist and it's just like if you like money, it's probably a pretty good money to use and just don't let some of the things that you invariably stumble across out there put you off because some of the more vocal voices out there are a little bit crazy.

1:34:22Not all. Said with love. Not all. Yeah. Said with love. A lot. But we've had this discussion off air, right? Because you're a little curious and you start Googling around. It's like, dude, what was this guy? I don't want to name names but it's like what was he going on about there, about this and that? and it's like, you know, I don't know, he's an idiot. But no one owns it, right? And this is the difference between Ripple and these others. Someone does kind of own it. But you know what's a really great example is Elon Musk. How's that for a divisive character, right? People love him or they hate him.

1:34:55Now, as the world's richest man, imagine if he was the one who decided we're going to launch, it was part of Tesla, we're going to launch our own. Actually, better example, Sam Altman, because he actually tried to do it. called WorldCoin. Did you see the orbs? No. It scans your retina? No. It's weird. It crashed and burned. Obviously. He's like, well, all of the problems that we've talked about, you know, it's not fair, we need a proper distribution. He sent these orbs around Africa and everyone's put their biometric data into it in exchange for this made-up currency from a tech billionaire called Sam Altman.

1:35:30Now, some people out there are going, Sam's great, and other people out there are going, no, I hate him. And this is the genius of Satoshi to disappear. We can't get to judge him because, in fact, his creation is beyond him, as it should be, because it's money. Gold doesn't get to be owned by King Midas. Gold doesn't get to be owned by anyone. And whatever affiliation you have politically or ideologically, it doesn't really matter because gold is gold is gold. It's a pure outright commodity. And that, again, I'm sorry, mate, I'm going on too much here, but it's just sort of it's a very hard thing to get your head around.

1:36:04but just pick at that thread or pull at that thread with some intellectual honesty and an open mind and you'll be surprised where it leads. Very good. In that vein, let's let it lead where it does this afternoon. Let's roll off this, sign off this podcast here and maybe I think there's a fair chance we'll be back on Friday. What do you think the odds are? Keep getting, look, can I just say this before we end? Oh, dear. I'm sorry because I know that we've had a lot of loyal listeners for a long time. I am sorry, not sorry, kind of. that we are doing more of the Bitcoin stuff. But I also am very hyper aware that it's not everyone's cup of tea.

1:36:40So if that is you, send us some other stock-related questions because if you keep sending us Bitcoin questions, I'm going to keep answering them. So it's on you. It's on you to give us some fodder that leads us in a different direction. Yes. I've said to you, I think we said this last week, it's a bit too Bitcoin heavy, but what I love about it is it's also, So if you don't, if you never ever want to touch Bitcoin as an investment, currency, money, whatever, whatever, the concept and the conversations, I hope, are at least useful from that. If you're like, I don't get it, but gee, the sound money thing is cool or the tax thing is cool or the way we consider money or the way the economy works.

1:37:22Yeah, it forces you to think about what we have now, right? And that is an incredible value. I hope so. The topic du jour right now and for a long time has been cost of living. And so I often say to friends and family, it's like, research Bitcoin. Because all you talk about is cost of living and inflation, as we all do, because it's like the biggest thing in the world right now and it's affecting everyone. It's like you don't come out of that process deciding that you're going to put laser eyes on your Twitter profile. but if it helps you understand what's going on behind the scenes and have a more nuanced and accurate understanding of it rather than it's the immigrants or it's the billionaires or whatever stupid, you know, narrative and, frankly, very widespread narratives that are out there, you'll at least have a more accurate view on the world regardless of whether or not you touch these magic internet beans.

1:38:16And there we have to stop. Until next Friday, 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.