Mailbag, incl: Is SpaceX the next Amazon? May 10, 2026

18:12The fourth, utilities, up 10.5 % over the past year.

18:17Chris Hill:Utilities is a bit of a grab bag, but I am going to bet a small amount of money we'd have a single stock in any of those four sectors in our scorecard. Now, either we are horrible, horrible, horrible market timers and we haven't shadowed the index well enough, which is absolutely true, or we've done it deliberately because we're stock pickers. Now, I don't know what happens next, mate. So I'll be really, really clear, really honest, hopefully as honest as I can be up front. Maybe this doesn't change. Maybe energy stocks and material stocks continue to outperform the market and the financials continue to outperform the market.

18:46Chris Hill:If that's true, then I haven't done the numbers of everything else, but I would suspect every other of the eight categories I haven't mentioned, I haven't mentioned, or seven, sorry, they must be down a lot because financials and mining are more than half of the index. And if they're up 50%, 41%, and 11%, respectively, and they are more than half the market, I mean, the way the maths works, everything must be negative. So either that's justified, and maybe it is, or maybe it's not. And I'm not going to tell you which is which because I don't know. What I will tell you is I did some numbers. I read about this a while ago.

19:23Chris Hill:The energy sector in particular has been incredibly volatile over the past five years. It's been up and down 30 % and 40 % in given years for the last four or five years straight. So I can't tell you whether my stock picking sucks. And by the way, I'm responsible. I work with other people, but I make the calls and my name is on the door. So if it's bad, I've screwed it up. And that's cool. I don't like it, but I'll cop it. It's my name on the door. I make the calls. I make the executive decisions. So if I've lost my stock picking ability, if I never had a stock picking ability, then absolutely you're 100 % right.

19:54Chris Hill:And I've got to confront that might be possibly true. It's very, very possible, right? I don't think it's likely. I don't think it's the case. I think I've done it reasonably well for the previous 10 and a half years. I hopefully have got something to offer. But I can't, unless I wish to shadow the index, I defy anybody who's not invested in resources now or mining in general and financials to have a diversified medium to large cap portfolio that's kept up with that. We have 50 odd companies, I think, on the scorecard that are active recommendations. You know, I've also made mistakes. I'm down on some stocks just outright.

20:33Chris Hill:And that's absolutely my mistake, right? So I'm not going to say the market is wrong and I'm right. What I'm going to say is right now when resources are up 50 % and banks are up 11 % and not either of those two sectors and they're both outperforming the market, I don't expect to be able to keep up with the market on that basis. I just don't think it's likely. It's possible I might have bought every winning stock outside those sectors. So I'm not saying it can't be done. But I think that's why. So is it an excuse? Yes, absolutely. You have to decide for yourself whether it's a reasonable one, whether it's a valid one, or whether I'm just making excuses for myself for my own underperformance or lack of stock picking ability.

21:07Chris Hill:And if you decide that, then that's completely cool, mate. And if you feel like we've done the wrong thing by you, if you joined less than 30 days ago, we'll give you your money back. It's more than 30 days ago, sorry. You're kind of in for a penny, in for a pound, but you don't have to renew if you don't want to. I think you probably bought it relatively cheaply because we've been doing some really cheap sales recently. There's no excuse, by the way. If you're losing money, you're losing money. It doesn't matter how cheap the advice is. So yeah, that's my answer, Brendan. I said, no, I'm not going to, that's the numbers.

21:32Chris Hill:The numbers are the numbers. There's no hiding from them. That is absolutely the current position. And you need to decide for yourself whether you think I'm going to be able to get that back or whether that ship has sailed, I've jumped the shark. And if you decide that, I'm not going to blame you. You need to make that call for you, mate. I can't tell you what to do. But that's, I hate it. I hate losing to the market. We're up a lot, by the way. The average return is still 49.1%. So I'm pretty happy with that. But we're under the bench, we're under the market at the moment because the market is up phenomenally in those sectors in particular.

22:00Chris Hill:Other sectors are down and down quite a bit. You mentioned, by the way, some of the other categories just to fill out the answer just for fun of it. Healthcare down 38 % over the last 12 months. Tech down 27.5%. Consumer discretion down 17.2%. Consumer staples down 6%. These are, I mean, massive. Communication service is flat. Real estate down 5%. These are industrial up 3%.

22:24Emily Flippen:It's a stock picker's market. It's a stock picker's market.

22:26Chris Hill:So yeah, that's what's going on. So yeah, no, again, mate, I'm not going to make excuses for it. I'm not going to tell you that things are necessarily going to improve or not. I'm just saying that's where we are and it sucks. I hope that I can return to being ahead of the market. That's what I'm trying to do. But time will tell and the results will be the results. So that's the risk of investing. It's a risk of following someone else and following their picks. But I would absolutely encourage you, if you don't feel like you're getting full value, don't renew. Go on, absolutely. Buy the ETF, go fishing.

22:55Chris Hill:I've said that from the day one. I've always said that. If we can't beat the market, buy the ETF and go fishing. It doesn't mean every stock's going to beat the market all the time, or even the average portfolio is going to beat the market over time. That's a call you're going to have to make.

23:07Emily Flippen:Yeah. I mean, I don't want to make excuses for it. There's no excuses to make, really. It's not – I mean, I'm in the same boat. Well, I think every investor is – look, here's the only thing you need to know. I'm so sorry. No, I'm not. Sorry, not sorry. We always have to refer to Uncle Warren here.

23:23Chris Hill:Yes, yes, yes.

23:24Emily Flippen:I mean, no one's going to say the guy doesn't know what he's doing, right? Right. But one third of the time, one in three years, Berkshire has underperformed the market. Yeah.

23:33Chris Hill:Do you know how big the discounters now? Can I jump in? Do you know how bad it has underperformed the market recently? No, actually. 39 percentage points over the last 12 months.

23:42Emily Flippen:Yeah, yeah. It's massive. Well, I knew it would be big. Yeah. It actually happens all the time. It does. Buffett's just a nice example because everyone knows him and he's pretty tame in terms of he's not making moonshot bets kind of thing. But actually, when you look at Stanley Druckenbiller is like a really weird exception, actually, which is a whole other thing. But for the most part, underperformance is the, we often say that volatility is the price of outperformance. And I would add to that, that underperformance is the price of outperformance. Yes, that's a good point. And what I mean by that is that if you seriously have aspirations to outperform the market over any meaningful length of time, say five years kind of plus, I mean, it's almost a statistical guarantee that there will be periods within that that you underperform the market.

24:38Emily Flippen:I don't know why, but it almost has to be that kind of way.

24:42Jason Moser:And then when you see some investors who are very conservative and very risk-evere, not throwing shade at that at all. I mean, different people have different temperaments and there are different stages of life and the rest of it. But what you will tend to find is that their periods of underperformance aren't nearly as great, but overall their long-term average sucks. And that's a compromise that I think a lot of them are happy to make. It's like, yeah, I'm not actually trying to, you know, boost my ego by saying I outperform. I just want a decent return to live off. And if that means less sleepless nights because there's less volatility and periods of underperformance, I'll take it.

25:20Jason Moser:So it's kind of weird because although no one wants periods of underperformance, as soon as you start engineering for that, you kind of hobble yourself very seriously in making - 100%. Now, you've also got to be careful here as well because what would you say if - What would Scott say if he was a complete fraud? Same thing. Same thing. You would say exactly the same thing. And that's why it's so hard, you know, because I'm always mindful when you kind of -

25:45Chris Hill:I follow Buffett. I'm a Buffett investor. I'm a long-term guy. Stick with me. Give me more money. Yeah, in the short term, it's a voting machine. And you throw out all these quotes and it's like, and you see it. You see it. You see the stake oil salesman out there. It's like you suck as an investor.

26:02Jason Moser:And it's always, oh, just volatility. It's all the stuff that we're sort of saying. So I guess you've got to have your BS detector that's on. But I'm just, I guess I'm just sort of saying as a general, whether you follow Scott's advice or anyone's advice or you just do it yourself, there are absolutely going to be periods where that kind of happens. But that's the price of success, you know. And we often sort of make the point that very, very, very,

26:26Emily Flippen:very few people outperform the market. And this isn't me making this observation. It's not because – I don't want to say it's easy.

26:37Jason Moser:It's sort of simple but not easy kind of thing.

26:39Emily Flippen:The main blocker to that is the desperate desire to avoid pain along the way, you know. It's sort of like, what do you want? Do you want to outperform the market but have a bunch of volatility

26:52Jason Moser:along the way or do you want no volatility and to underperform the market? Now, everyone says they want the former, but when a push comes to shove, it's like actual – and again, no judgment whatsoever. Everyone's in a different position, but that's kind of the trade. And I really firmly believe that the choice to outperform is really within anyone's kind of grasp. But if you make that choice, like if you think, yes, I am going to start taking this sort of seriously. Just, you know, if you're going to, you know, pack up the toys and go home the second that there's a period of underperformance, you're out of the market.

27:29Jason Moser:And like the first rule of investing is do, the first rule of compounding rather is don't interrupt it, right? Even if it's a two-step forward, one-step back kind of thing. Totally, yeah. And this is beyond the Motley Fool. I'm just really making it as a general observation.

27:43Emily Flippen:So, yeah, I've underperformed the market in the last year as well. But, you know, feeling really good. Yeah, I actually feel it's really funny. Someone was saying the other day because, as you know, you'll be surprised to hear this, mate. I'm somewhat bearish on macro kind of things and, you know. But in a lot of ways, when I look at my portfolio, I've never been more bullish. I'm like so bullish at the moment. I have this like.

28:08Chris Hill:On the companies you own, you're talking about.

28:09Jason Moser:Yeah. Let's call it assets that I own and just leave it at that. But also on the companies, right? Like it's sort of like that underperformance has become because there's been an ongoing evolution and progress in underlying fundamentals that's just not matched by the share price. It's what every investor says they want. I want something that the market's missed. I want to buy a dollar coin for 80 cents. and it's like yeah well generally that's nice if you're coming in now but like often often the best stock to buy is the one you already own and if you want and if that's going to be the case and you want the bargain you're just going to have to go through periods where everyone thinks you're an idiot and and that's that's the hardest thing you know it's just like you know everyone thinking you're an idiot is very hard to take my take my word for it i'm very familiar with with with that But it's kind of, that's what you're signing up for.

29:13Jason Moser:You have to lean into it. Now, you just don't want, as I said before, you just don't want to use it as a crux of accuses. Like I've been doing this for 10 years and I'm performing every year, but hey, every investor has to lose a little bit. You can very quickly start rationalizing things. So at a point you need to be outperforming, But just accept that this is the way that progress is made in investing. Two forward, one backwards.

29:40Chris Hill:Nicely put. Hey, an anonymous question. She says, hi, Scott and Ram. There's currently a lot of noise regarding the current 50 % capital gains tax discount for assets sold after 12 months. Prior to this, the cost base was indexed to CPO. We've talked about this before. Now, this question is two weeks old, three weeks old. And now was the phrase at the time. It looks like it'd be reduced to 25 % to 33%. Now, probably going to get to indexation. The budget's coming on Tuesday. Can I say, I didn't say this on Friday. I am the one person in Australia who actually looks forward to budget every year, and I've seen this before.

30:14Chris Hill:You've got the popcorn ready. I genuinely look forward to it. I've told the story before, but I was in Melbourne working a million years ago, and I was going to get a tram home, and I looked at the tram time, probably else I wouldn't make it home in time, so I jumped in a taxi so I'd get home and make it in time for the budget. That's how boring and nerdy and lame I am. So your commiserations to my wife is walking from all of you. Anyway, our question says, has anyone given thought to how a capital gain should be assessed? E.g. in year one, what if, what's he said? No, it's not written particularly clearly.

30:49Chris Hill:In year one, which if a decent gain will be automatically taxed at a higher marginal rate or should be averaged over the life of the gain? Okay, that's the question. E.g. a windfall over one or two years will be taxed at the top marginal rate, whereas a gain smoothed out over 10 or 20 years might be an average lower marginal rate, which would give more benefit to lower income earners. Thoughts?

31:12Chris Hill:So we don't know what they will do. I'll get back to that in a second. Under the old scheme, the indexation was applied to the cost base. In other words, just for fun, I'll just use a single example for one year. It's going to be a year and a day, but work with me. You buy something for$10, inflation is 10%. And so your cost base, you bought a$10. Your cost base for tax purposes will be$11. So 10 plus the 10%, it takes you$11. You sell it for$12, you get taxed on the$1 gain rather than a$2 gain. So that's the idea. The cost base is inflated for tax purposes by the rate of inflation.

31:44Emily Flippen:Otherwise, just quickly on that, you hit twice. Correct. You pay tax on it. The whole idea is, do you want to tax a nominal profit? or the increase in your purchasing value. And again, one, nominal is absolutely irrelevant. The only thing that matters is how hard do I work or invest for each dollar that I own. And if I've made a profit, it can only be in the sense that it's allowed me to purchase more than I otherwise could have. So it has to either be a discount, as we do it at the moment, or an indexation method. Correct.

32:17Jason Moser:Otherwise, it's pain on pain. And not even that, just unfair. It's unfair. Yeah, you're taxing on a gain that doesn't exist. That's right.

32:25Chris Hill:Or the gain exists, but you're being taxed on the inflation, which is a different way of saying the same thing. Same thing, yeah. Yeah, you're paying tax on inflation, which makes zero sense. So it was one of the great features of the original scheme. I've been a big fan of going back to that. So that was the indexation method. The tax rate was averaged over five years. So effectively what it did was it meant you could, imagine a scenario, just for the fun of it. You're on 20 grand a year. You're on a zero tax rate. You crystallize a million dollar capital gain. And all of a sudden you're paying 47.5 cents in the dollar for that gain, even though for the previous and the next five years you're earning almost nothing.

33:00Chris Hill:The idea was you'd smooth that out over five years, you'd pay an average tax rate on that. And that was kind of the – to avoid – I gave a silly example, actually, because it makes you go from zero to 100%. It's to avoid you being pushed up a tax bracket just because of the gain in a single year, when the reality is the gain is over multiple years, because that is the very nature of capital gains tax, right? So it was the average thing, they call it, for the tax rate. the marginal rate you owed. I don't know what the government will do in this coming budget. They're apparently going to change it.

33:30Chris Hill:The reporting at the moment says they'll change it to indexation. The most recent reporting I saw before recording, recording this on the 7th of May, Thursday, was that they are going to use an averaging method rather than grandfathering a whole lot. If you own the asset for five, 10 years under the old scheme and five years under the new scheme, two thirds of the gain will be taxed using a discount and one third of the gain will be taxed using an indexation method from, I assume, today's date or something else. So that's how it is being suggested it will be done. I think that's a pretty suboptimal method, but I do support the return to indexations.

34:03Chris Hill:If that's how they do it, that's how they do it. I would grandfather everything and start from budget night, but that's the decision they might make.

34:08Emily Flippen:Don't waste an opportunity to make it more convoluted,

34:11Chris Hill:complicated and difficult to adhere to. Let's not do anything like that. It's just really silly. I mean, it'll raise more money overall. That might be part of what they want to do it for. There is some question if you grandfather it, people will be incentivized not to sell. And so if you kind of don't allow that full incentive not to sell, you bring more assets to market maybe. I don't know really what their thinking is. But to your question, anonymous question, yes, it should be averaged over some time period so you're not pushed up a marginal bracket just because of the tax gain in a single year.

34:41Chris Hill:And again, it makes sense, right? You earn a return over five years and you're going to pay all the tax in a single year. It would make more sense for that gain to be taxed at the marginal rate over the time you earned it rather than a single year just because you happen to crystallise it in a given year. So that's how it used to happen. That's how I hope they make it in future. Will they? No, we'll find out on Tuesday night. Any thoughts on that, mate?

35:02Emily Flippen:I mean, I do. Funny story. So I had a journo reach out and said, can we get some comments on the CGT? I was like, well, yeah, but it's nuanced and it's complicated and you've got to frame it within the broader context of tech time. You know what? Don't worry.

35:21yeah and it's just like i know you want a soundbite bro you want a soundbite of a typical

35:29Emily Flippen:investor this is bad yeah yeah i hate paying taxes bad i don't like tax on my investments i mean that that's what you're you're fishing for exactly that and you want to do that you can get on camera saying that and it's just more complicated than that and it is and so we i actually put the put the question on straw man to sort of say hey oh cool it's before i got candace like hey they abc wants to sort of ask me a few things what are our thoughts what do we think as investors and we and we got so many do i was gonna say with different views back they're all very sort of clustered around a particular viewpoint but what was interesting about it was that there

36:07Jason Moser:none of them were terrible it was kind of like yeah that's reasonable yep that is also reasonable It's a little bit different, but that is also reasonable. And also, too, just to push against the stereotype, I don't think a single person said, no, I don't touch my money, government bad spending, you know. No, it's like, yeah, tax has to be paid. That's the community and country that we live in. We're happy to do it. We just want it. You know what we want? We want certainty. We want it to be fair and we want to know what the playing field is. That's it. That's all it is. So I can get into my preferred, you know, implementation of it and Scott can go into great details on what his is and they'll be 85 % overlapped and there'll be some difference and all of it will be a million times better than what they will actually do.

36:53Jason Moser:So I'll avoid answering it specifically because I think we – yeah. Here's the thing that frustrates – one of the many things that frustrate me to no end is that the debate is always around the revenue side and not the expenditure side. I would love in the context of balancing budgets and having a more sustainable fiscal footing that we could, hey, here's my pitch. I'm throwing it out here. Let's not waste so much money. How about that? That's a good starting point. Rather than reaching immediately for how can we reach, can we tax people? And rather than going straight down the populist angle of anyone who's rich is evil and we should tax them to give it to that poor person.

37:39Jason Moser:Like these stupid, myopic, shallow kind of arguments. I'd just be like, hey, you know, all these dumb, like multi, you know, dozens of billion projects that are just going weed up against the wall. How about we stop doing that? That would be a really, really great, you know. Exactly, yeah, yeah. And anyway, that doesn't happen. Completely agree, completely agree. And I also think, sorry, I don't think, How can you talk about capital gains tax without talking about income tax or land tax or this? There is a reality of a requirement for a government. I think even if you're a very small government kind of person, I tend to be as a general rule.

38:20Jason Moser:I think you still need government. They still need sort of funding. But like any sensible plan, it needs to be holistic. You need to look at the whole thing. We actually commissioned a guy to do that a little while back.

38:34Chris Hill:We met Melo, some of the bands. I'm nothing called Ken Henry who, you know. I don't know. Never seen the sound of a government department, Paul Boak. He didn't know anything, so. I mean, not that I agree with everything he said, but it's just like, you know, a lot of smart people and a lot of resources were thrown at this exact problem. Yes, yes. And we just absolutely poo all about it.

38:54Jason Moser:And it's just sort of like, but let's spend, you know, countless inches of newspaper columns and hours and hours of on-air interviews having these really myopic, shallow discussions that completely miss the point and not even going to do the things that they say that they're going to do. So one of the big rationales here is we've got to improve intergenerational inequality and we've got to make housing more affordable. It's like, well, hey, sign me up. I'm definitely, I like the North Star there. But you made the point before. It's like, and not that there's a one silver bullet kind of solution to this, and it probably needs to be a multifactorial kind of implementation.

39:34Jason Moser:But if you think that these one or two changes to CGT is going to all of a sudden fix the housing market, you have rocks in your head. Correct. Yeah, I'm not saying, like, if it pushes us in the right direction, but therefore we shouldn't do it. Just broaden the conversation out. Don't treat it as a silver bullet. Yes, we're all angry. Well, most of us are angry about this kind of thing, but, like, it's not going to. It's not going to do. No, bugger all.

39:57Chris Hill:Yeah, bugger all is the technical term. And the economists on the left and the right have agreed on that, by the way. You won't see a single piece of analysis that says CGT changes. I think the most I've seen might be 5 % or 6 % max, which is kind of welcome. That's like the last year's one of the gains, right? Less than that. If you actually want to make a difference, don't do this. Do this, sure, but do other stuff. If you're not serious about making a change, that's okay, but don't pretend this is a change that's going to make any sort of difference on affordability to any degree. I mean, yes, technically, sure, and as you say, it's the best form of being right.

40:27Chris Hill:But if you're trying to strike a blow on affordability, this is not what you do only. And if this is all you're going to do, you're not genuine about striking a blow on affordability. It's just logically true.

40:38Emily Flippen:It's kindergarten stuff here, right? Like this is like, I mean, we were jumping up and down about it when the 5 % guarantee deposit thing was coming in place. Like, not going to work. Not going to work. Not an ideological position, just basic economic, not going to work. Lo and behold, color me shocked, you know, So every house under the threshold there has gone up in price. That's right. So you have made it less affordable.

41:03Chris Hill:More than the ones above the thresholds. Yep. Oh, the ones above the threshold have come down, right? In some cities, yeah. Yeah.

41:10Emily Flippen:Like, that is 101 kind of stuff. Correct.

41:16Chris Hill:It's madness. It is. I will say, actually, just for the fun of it, and really quickly, just to answer the question directly, you're right about more than just CGT but I've said for the longest time there was no policy justification for the 50 % discount at best there was a fig leaf of so-called simplicity and if you want to believe that in 1999 yes there were fewer computers with less power and no software as a service companies and yes maybe I mean you would have had Excel so it's not, it was only barely true then and it was barely true then it's just completely not true now I mean is it more complex to use indexation than discount?

41:51Chris Hill:Yes Is it meaningfully more complex in any meaningful way that would change the way you should set tax policy? No. It's a bloody – here's the other thing. Property investors never complain about doing depreciation schedules because it saves them money even though it's bloody complex. Funny that, isn't it, right? You don't complain about the complexity when you actually cost your money. That's okay. No, I'm happy with that. Yeah, right. So policy-wise, we've already talked about why it makes sense to index the cost base for the calculation of capital gains tax. Because inflation is inflation. You don't tax inflation.

42:18Chris Hill:that has really serious sound policy bases there was never ever ever ever a policy basis for a 50 discount other than a pretense of simplicity and the reality of buying votes and politicians got a politic right and that's fine so when someone says we should be with cgt my answer on all taxes is well go back to policy principles and work out what is the best approach to this particular form of taxation and it's that do i do i think that is reasonable have indexation yes Absolutely. Do I think the capital should be taxed more lightly than earned income? No. I'm lucky enough to amass some capital.

42:53Chris Hill:I'm going to invest it. If I earn a gain on it, that's quasi-income. Capital gain income, same thing, cash going into my account. Should I pay less tax on the same dollar amount than the brickie? No, probably not. I don't think there's a justifiable reason for that. Now, you can have a different view, but that's my personal view. I don't think capital needs more advantage than it already has, and I think it's reasonable to use indexation and tax it at marginal rates. That would be what I would do. not because I hate business, not because I don't want to be taxable, not because of any other reason other than I've always loved, mate, you'll kind of be on about the tax thing.

43:24Chris Hill:I've always loved your point of if you came in from out of space or you had a design system and didn't know which place you'd be, what system would you choose? If I didn't know if I was going to be a wage earner or a capital allocator, what system would I choose? And that's what I would choose. And indexation will cost me more tax than non-indexation. So I'm literally saying - That's Buffett's not me, by the way. I stole his. I think it was him or Mungo, yeah. Probably JP Morgan. an ongoing joke for those who haven't been here long enough. Oscar Wilde, maybe. Mark Twain. So yes, I will pay more tax under that scenario.

43:53Chris Hill:I just think on a first principles basis, I can't make a non-self-interested argument for anything else. So if you ask me, how would you do CGT? I'd say, give me a dollar, give me a million dollars. If I don't know where I'm born, if I'm in charge of national tax policy and your job is do it the best way possible with fairness and reasonableness and all those things, that's how I would do it. So, you know, and I would average it, by the way, to the point of the question. Over five years, I think it's entirely reasonable. That's how it should be done. And yeah, that'll cost me more money if it happens.

44:21Chris Hill:I just think it's, I don't think it's fair to have the discount. I don't see any policy justification for it whatsoever. So I think, you know, now you could make self-interest. I can come up with 15 different reasons why. If I was trying to keep this in place, I would argue for it, right? And they're all, they sound good because that's the point of arguments, right? You might say something that sounds good. I just can't come to a view other than that, even with those arguments. Do you think it's the most logically supportable first principles way to tax capital gains? It just seems to me pretty straightforward.

44:50Chris Hill:But that's just my view, so I'll throw it out there.

44:53Emily Flippen:Yeah. I mean, I disagree. Do you? Yeah, I wouldn't tax capital gains at all. Zero tax. And I wouldn't tax incomes either. So it's not a labor versus capital thing. You know me, land tax, consumption tax. Yeah. Do not disincentivise the very engine of prosperity, which is people working and people investing, whether you're a brickie or whether you're a fund. Like, you know, what you're actually doing. As I said on Friday, I mean, all production and jobs stems from investment, which stems from savings. You know, it's just like someone has created value

45:32Jason Moser:and they've chose to not consume it and they've chose to invest it with incredible risk, by the way. And it works out only because others have said that there is value created. Like, it's a good thing. Like, I wouldn't disincentivise it at all. And, again, it's not a libertarian, anarcho-capitalistic zero. It's just like I would just, I think, more broadly. And income tax is also very distorted as well because you can have good years and bad years and it's just like there's a lot of people out there who are very asset rich and cash flow poor and it's like, so they're really getting away with murder.

46:06Jason Moser:Where, you know, it's like it's just I think if I was to fund a society, I think that the wealthier you are, the more able you are to consume. I think that is probably best that you shoulder a little bit more of the burden, not in a punitive sense, just because you've got more capacity to do it. And it's just elegant. It's simple. It's hard to hide from. It's just nice. And it's never going to happen. It's like getting rid of the central bank, right? Like I know full well it's never going to happen. but if I was forming a colony on Europa, that's how I'd do it. When?

46:37Chris Hill:Yeah. I won't get to argue with you, mate, other than just a shit. It's not an argument. It's a different point. Just on the incentive thing, people say, oh, you can't tax investors because they're investing. This is Warren Buffett, who wrote this speaker for Quoting Uncle Warren years ago. In the meantime, maybe you'll run into someone with a terrific investment idea who won't go forward with it because of the tax he would owe when it succeeds. Send him my way. Let me unburden him, which I just love, right? And that's always my view. It's like you won't even tax on the gain. In other words, we're not taxing investment on the way in.

47:15Chris Hill:We're taxing the excess return on the way out, or not just excess return, the return in excess of your capital on the way out. And so if you haven't made any money, there's no tax. If you made a lot of money, there's a lot of tax. No, you made a lot of money. I don't know. I can't bring myself to feel too sorry for investors who make a squillion dollars and then complain when they get taxed on some of them.

47:30Jason Moser:I've long made that point too. It's just, yeah, it's actually interesting when you do the maths and that it's, for a lot of people, they would actually find a more advantageous situation for them because although your land tax in the GST would go up, I'd go, whoa, I'm not against that. It's like, yeah, but there's no income tax, bro. Like, do the maths.

47:51Emily Flippen:And if you live in a coupled arrangement or something, you know, like things actually look very, very, very different. Anyway, it's well beyond the scope of the conversation.

48:00Chris Hill:It is. I will say, not to make the argument, just to make the point, what I haven't worked out in that scenario is the compounded inequality and how we should think about that. I don't have an answer. It's a consideration that I think we need to bring to it. I don't have a view about whether it's good or bad or what we should do about it. It's just the idea of – it's why people say we shouldn't have capital gains because we've been taxed once. And I kind of have sympathy for the concept until you realize that someone without excess earnings is never going to put any money away. And someone who can put away a certain amount of money then compounds up the wazoo.

48:34Chris Hill:And we know what compounding does over decades, right? That's what we're in the business of. If you say to people, knock yourselves out, compound as much as you want, the person who can't save the extra dollars spends 70 years and ends up where they started. The person without CGT ends up with a squillion dollars. I don't know that feels great rolled forward too many times, but it's an interesting question. Well, can I have a go? Yeah, go. Yeah, please do. Oh, it's going to derail the whole podcast. No, it's fine. I just want to raise, I wasn't trying to start the conversation.

49:01Emily Flippen:I think we've always got to remember, too, that money is absolutely useless, except for one thing. That's to exchange it for things that aren't useless. Yeah. Like things in the real world that you want to consume or to enjoy. The person who sits there compounding away for many, many decades is, And doing it, we've got to admit, we've been saying as well, like most people don't outperform the market. Most people don't, you know, get a positive return, not a positive return, but not a very especially decent kind of return. But let's say that you are one of those people that have done it. You've been very good at allocating capital, which is just a fancy way of saying you've directed money to areas where society is deemed that it is needed.

49:44Emily Flippen:Like let's make that a fine point, right? Like that is, it's not some selfish inward looking thing. The only reason you can possibly be successful in a fair and open market is because of that thing. So you've done that, right? You've been very smart with how you've deferred your consumption. You've allocated it. And then you've just sat there compounding away. The whole time it's compounding away, there's a number on a screen going up. But you're not consuming anymore by definition. Because to consume it, you have to sort of sell it and then spend it. And when you spend it, it's just another way of redistributing the wealth.

50:16Emily Flippen:because you're giving it to the wealth of those who are creating value for you then. So it's sort of like you get to this mechanism where it's sort of like

50:24Jason Moser:the only time it sort of becomes like that you can enjoy your success is to spend it. And that's what I'm saying. Hey, let's take consumption. Oh, you don't want to spend it? Oh, I've got 18. That guy over there has got$18 billion. Like, yeah, but he has by definition put far more into the economy than he has taken out or she, right? Like, why are we angry at this person, Paul? Like, I don't understand what they've done.

50:48Chris Hill:I would separate the value judgment out of them. I think that starts getting the value judgment-y stuff pretty quickly. I'm not angry at it or there's no sense of the deal and got and gained or anything else. I just want to bring it back to, like, the reasonable distribution of wealth. I'm not for absolute equality at all. I'm not necessarily for meaningfully reducing inequality. I am pretty against an increase in inequality. I guess I'm trying to think through that compounding, what that would do over time between those two groups. You can't put a single dollar aside because of whatever accident of birth or history or misadventure or choice of occupation or whatever.

51:25Chris Hill:I think the model you highlight is perfect. I wonder about the real world. It does have to be done in a hard money framework. I will add that because when you start adding fractional reserve banking and fair, that's where the argument breaks down. rather than investing is also kind of, it's a little bit. Yes, yes, yes. And you can only put 40 hours a week. How many hours in a week if you worked, if you never slept? There's a maximum number of hours you can put into something, right? So you can't compound your time in that way. If you never have enough excess income to be able to put some aside, again, values aside, the person who's putting money aside because they can is not being immoral, they're just doing it.

52:02Chris Hill:But it does lead to, you know, yes, the only way to enjoy it is to spend it. And yes, we can tax a portion of it. But I wonder in terms of that, the inequality still grows massively, right? Let's say a consumption tax is 50%. But Gina can have a consumption of 50 % on everything she spends ever and will always be able to spend more and more and more and more and more because her wealth is going to compound quicker than she can reasonably spend it. And at that point, it just kind of gets run away a little bit and it does exacerbate inequality.

52:28Emily Flippen:That's how we structure the economy and monetary system. So yeah, you're right.

52:32Jason Moser:You're absolutely right to point it out. It's this Socratic perfect world. You're not wrong either.

52:39Chris Hill:Yeah, that's what I wanted to highlight. And your point, maybe land tax is the solution. Maybe that does. I'm not saying there's no solution other than taxing capital gains, by the way. I'm just mindful of when you start to. In my head, there's two tracks, right? You can't increase your personal output, work output, labor output, because there's not so many days, hours in a day, days in a week, weeks in a month. Money can multiply. It's why we invest. It's literally in the model. Money shouldn't just multiply. We just live in a world in which it does more than that. I very quickly hasten to add that point.

53:13You know what I mean. But yes, I take your point.

53:14Chris Hill:I take your point. But it's kind of, it's foundational.

53:16Jason Moser:I mean, like this, I told you not to lure me into this. It's so foundational to it all. And it's sort of like, it really beggars the question, you know, like, why is it a law of the universe that if I've got a certain amount of capital that I can realistically

53:29Emily Flippen:expect that to compound away forever and virtually no risk? That is a super interesting question. Like, why? And we don't have even time to touch the tip of that iceberg. But the short answer is because we're forever expanding the debt

53:48Jason Moser:and the money supply. That is exactly why. And that's where the disadvantage comes from to those with capital. I'll point to our double high money episode special. In that world, that actually is like reason 4 ,897 as to why you would do it is because it gets rid of exactly that problem. and it gets rid of the intrinsic advantage to capital over labour, which only exists because of the system that we choose to, which is a debt-based fractional reserve system. Those closest to the spigot get to compound away at virtually risk-free while those that don't are forever on a treadmill. It's my whole thing.

54:27It's my whole thing, as people know. Let's move on to the next question. And drink. All right. It's got nothing on Kogan, do you? Yeah, I know. I know. Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener.

54:44Chris Hill:Here's one from Darren. Hey team, big fan of the podcast. Thanks, mate. I've been listening for years and I find you help me with understanding how the economy works. See, Darren says this, Ram. And then he says, I invest in ETFs such as VGS and VAS. Now, I ask you, if he'd listened to the podcast for any length of time, would he be using ticket codes? I assert not. Am I wrong? Darren, am I wrong? Yeah, yeah. I mean, you're like me in hard money. That's your thing. It is my thing. And it's not wrong. It's not wrong. I'm also dollar cost averaging into BTC, which I don't know what stock code that is.

55:19Chris Hill:Is it a big 10 can of thing? Every week for the last two years. I also got lucky with Tesla shares years ago, so I'm doing okay. Nothing amazing, but okay. Well done, mate. I really enjoyed your podcast on IPOs and Guzman y Gomez. with SpaceX's IPO looming in the future I'm wondering what your thoughts are on this company and the IPO I've been trying to buy into SpaceX for years but I've been unable to do so I understand you can't give personal advice but I was thinking of buying half of what I allocated for this purchase when the IPO was released and the rest six months-ish after that I haven't done any numbers yet for SpaceX but this is more of an Amazon feel Scott had for the potential growth.

55:57Chris Hill:Love the pod, Darren Thanks Darren

56:00Emily Flippen:I think you have to do some numbers, Darren. It's unavoidable. I'm not saying you need to know what the numbers will be because you can't, but you need to have a guess at it. So you can actually, you can, I was going to say dumb it down, but that's not fair because it's actually a very smart way, I think, to do it, which is just start out broad, start out simple. What's the total addressable market here? What is the value?

56:28Jason Moser:What is the future value? And like, you know, there's no point going out 100 years because you're not going to be around then, right? Like no one's that long-term an investor. So what's the size? I'll just pick up some numbers here just so you can get an idea of how I went through the needle at least. So what does the space industry look like in 10 years? What kind of revenue is up for grabs in total? And so the whole market launching satellites and all kinds of things like that. You'll come up with a number, and I dare say there'll be some numbers in the prospectus and a bit of Googling and AI, and you'll get a ballpark answer and that's all you need, right?

57:01Jason Moser:And then you go, well, of that, how much can SpaceX capture? Right? Now, no, very, very few markets are 100 % dominated and you tend to find 80 % is about as good as it really gets and in most cases it's much, much smaller than that. So always err on the side of caution. Margin of safety is a pretty important concept. So you've got to thumbsuck it and then knock it back a bit. Not just for safety. And the same reason that when engineers build a bridge that's got to hold 100 tonnes, they build it to hold 150 tonnes. That's just, it's the same, it's the exact same kind of thing. Okay, there's two very broad, big guesses.

57:37Jason Moser:And what kind of margin can a company like this? It's very capital intensive. It's very fast moving. There's probably going to be a lot of ongoing R &D. I don't know. I don't know. It might be a market that's only Bezos and Musk that, you know, and some NASAs and some, you know, European space agencies that are all in the mix here. But, you know, it's very rare to see a company generate more than 20 % net margins. You know, for the most part, 15 % would be a good one. Yeah, maybe if you're the ASX, you can get 50 % if you're a regulated monopoly and completely regulatory advantaged. Don't start on that rant, Andrew.

58:15Jason Moser:But you get a number, right? Yeah. You get a number. And then you go, okay, well, that's what that would look like after 10 years. What kind of return do I want for the risk? I don't know, pick 10 % because that's about the average for the market. Discount it back, divide it by the number of shares. Boom, that's the fair market value. It sounds easy and it's going to be almost certainly wrong, but now you've got a line in the sand. You've got a line in the sand that you can now, you might go, well, I think, and actually you don't have to just, that's it. I've made these guesses. I will live and die by these guesses.

58:45Jason Moser:You go, okay, let's try a bullish scenario. Maybe the market's bigger than that. Maybe they capture more market share. And then you get a top end. And then you go, well, let's try a more bearish scenario just to test it. And you can pull out the numbers and you get this spread. And then you can sort of see, well, what's the price that they're offering on the IPO? And how does that fit into the spectrum that I have come up with?

59:09Emily Flippen:Now, where I always get excited as an investor is because these are all just guesses. And who knows how the future is going to unfold? but if I get a scenario where the actual available market price or IPO price is at the lower end of

59:25Jason Moser:that range, it doesn't guarantee that I'm right but the odds are so much more in my favour and at the very least I can say from a logical standpoint that not a lot has to go right within my framework of potential possibilities for me to make a really, really good bet here. Sometimes you'll do it and you go, well, it's not that I can't do well as an investor, but I know that these things have to happen. And that statistically or historically, they have been very rare that a company can achieve that in such a short space of time. And it might well be like an Amazon or something like that, which actually for the next 10 years, actually just, that's what SpaceX has been doing, you know, bleed cash, not in a negative way, but just in like in an Uber and an Airbnb kind of way you're creating a new industry there's a lot of loss leading kind of activities that go there's a lot of early stage investments and foundational capital builds of all these kinds of things where the money must go out before it comes in and and it just and then you'll go through all of this and if it ever gets to the point where it's like you throw your hands up in the air it's like great that that that is a that is an answer that is the answer is you can't handicap it enough to make an informed bet on it or you can get to points like i don't know i certainly don't know if I'm right or wrong, but I'm reasonably confident that I've got within a standard deviation that I'm in the ballpark here.

1:00:42Jason Moser:And now I can make an informed decision. Then you can absolutely go ahead. Just don't go ahead on, I'm as, again, it's political these days. You'll put Musk to one side. But, you know, SpaceX has a thousand, tens of thousands of people that work there, right? Some of the smartest people on the planet. It's awe-inspiring what they have done, you know? and I'm super excited about it, but I don't know if I necessarily want to invest. I don't know. It sounds like I'm hinting that I wouldn't do it. No, I've not done the numbers and I've not done the exercise. But I'm just saying as cool and as exciting and as inspiring as this space technology is, for me that's not enough to invest in.

1:01:32Jason Moser:It needs to have some sensible underpinnings.

1:01:37Chris Hill:That's a really good summary, mate. And maybe it does. Maybe it does. As I said, I've heard the numbers. I think that's true. So what's really difficult with SpaceX is two things. Firstly, how much growth is left? I don't know. Secondly, what price are you being asked to pay? Because I would make, I think, a pretty good argument that while Amazon looked expensive on a PE basis, you weren't paying a squillion times profit and you weren't paying a squillion times revenue given any reasonable level of ongoing growth. And the real question for you to answer, I think, is what is the price they're going to list at?

1:02:13Chris Hill:Not dollar price, but not in price per share, but in some sort of respectivity to both revenue and profit and future growth of both, right? Because that's kind of the key. Now, I'm not going to, this is not an Amazon humble brag. I didn't know it early enough to do this, but let me just share some numbers with you for fun. Audio is hard, so I'll round some numbers and whatever. Year 2000, Amazon made$3 billion in sales. By 2010,$34 billion. Sounds a lot, right? 2020, from$34 to$386 billion. Sounds like a lot, right? By 2025,$717 billion. So Amazon's effectively 350X'd in 25 years. or 300x maybe to be kinder now could spacex do that i don't know i have no concept of spacex's size scale margins total addressable market you made the point around of other potential competitors terrestrial and otherwise um what does it do to margins was it i don't i don't know any of these answers so again like you mate i'm saying maybe it is worth it so there i don't know that it's not what i would say is amazon's growth share price wise i didn't think amazon would 350x between 2000 and 2025.

1:03:25Chris Hill:And God knows I didn't buy shares back in 2000. I wish I had.

1:03:30Chris Hill:And so I think about Amazon, by the way, think about Amazon as a retail company. When I bought shares, I don't think AWS existed or if it did, it was tiny. This is their web services business, right? Cloud computing, AI, all that kind of stuff. It's now one of the biggest components. In fact, in Australia, the retail business is a minority of the revenue. Think about that for a minute, right? With Amazon, you think about the Prime, buy it the next day. That's how I interact with it. This is not an ad for Amazon, by the way, at all. I own shares. Everyone knows that. But I'm not saying it's great or it's going to be better than SpaceX or anything.

1:03:58Chris Hill:I'm just saying the returns came from a phenomenal multiplication of revenues. Now, profit too, but I'm just using revenue because even just starting there, the question for SpaceX, the first question I think is, well, I mean, all the numbers were random said, but then it's like, how much can it keep growing by? Now, if you think there's 100x growth ahead of it and the shares are priced pretty reasonably, then I could absolutely imagine saying, well, hang on, 100x of revenue, that could be 500x of profit if they make it profitable. And man, at that current price, that's worth its fortune. I get it.

1:04:26Chris Hill:I would ask you to think about not just the vibe of it. I get a vibe of growth like Amazon. It's like, well, maybe. And maybe it will. And again, as Ram said, I'm not saying it won't, Darren. So I'm not trying to warn you off it at all. I am saying my thought wasn't that, hey, I think Amazon's a 400x or I'm going to buy any paid at any price. I bought it at reasonable prices because I thought the growth it had might continue for a reasonable amount of time and it didn't look particularly expensive if that was true. That's a very, very different thing to saying this thing's got a 200X growth ahead of it.

1:04:54Chris Hill:I'm going to mortgage the house, sell a kidney, send this child down the salt mines, put everything I've got into Amazon. So just be a little bit careful. Even when I talk about Amazon, I always occasionally say something might be like Amazon. I never want to say it's the next Amazon because nothing is the next Amazon. It's just a freak of a business for all the reasons. So, yeah, is SpaceX it? I don't know. I don't know its market share. I don't know its size. I don't know its margin potential. I don't know what the competitors do. In some world, you only need one or two or three satellite competitors and the margin's a crater.

1:05:23Chris Hill:And maybe this is a utility-type Telstra operation at some point, right? Because, you know, if there's two choices and the speeds are roughly the same, what does it come down to? Probably price. Okay, well, you know, it's like mobile telephony. You know, why has Telstra's profit hardly grown over 25 years? because Optus and Telstra and Vodafone are kind of the same. You might pay a little more for one or the other depending on where you live or whatever. But you're not going to say, Telstra could be the market leader, so I'm going to pay any price for it. You say, well, the growth's kind of over and the competitors are stealing their margin and market opportunity.

1:05:52Chris Hill:There's not much left. So I don't know. I'm not saying it is, I'm not saying it's not. Maybe it's Amazon, maybe it's Telstra, maybe it's somewhere in between. Just be careful of the vibe of, I think it's going to grow. Ask yourself, look in the mirror and say, from what to what? If you can't answer that question, you're back at doing the numbers as ranch says.

1:06:09Emily Flippen:That's why those just thumbsuck of numbers, it almost, I would imagine any fund manager would fall off their chair with what I just said because it just sounds so rough. But I fall off my chair when they talk. So how can you, like the false specificity here is off the charts. Like how can you possibly read the future with eight decimal points of accuracy? Amazon's a wonderful example, actually, because I mean, I was, God, I wish I could mate if I can put my brain into my younger self now. All head on young shoulders, dude. There's not a lot of grunt power there, but there's a bit of experience that's sort of built up, right?

1:06:44Emily Flippen:So get this, right? So just on the framework that I laid out before, in 2001, you could have looked without reading forecasting, just looking at the stats from the US Census Bureau, and the total retail trade in the US was$3.36 trillion. E-commerce alone was$32 billion in 2001. Yeah. It was 1%. Online sales was 1 % of the market, right?

1:07:12Chris Hill:Exactly, yeah.

1:07:12Emily Flippen:So what would have someone done who was bullish on Bezos and Amazon?

1:07:15Jason Moser:They would have gone, well, the current market for online retail is about$32 billion, and that's 1%. I'm not going to be Nostradamus and go out on a limb here, but, you know, I don't know, call me crazy. I think that that will probably, you know, again, make up a number, 10%, 10%, something like that. Okay. Yeah. Right. That, that, that, that, like I can, I can get behind that. And, and how much of a market share could they make? Could they capture, et cetera, et cetera. And you look at it all and you go, hang on, I've chosen 2001 deliberately because it was after the crash. I haven't picked the bottom of it.

1:07:49Jason Moser:Like I could go, I could go to 2, 2 billion if I wanted in terms of market cap but i'll i'll double that you know and sort of say around four billion dollars in market cap for amazon absolutely you can make the maths work i mean it does rest on them being successful and the internet being bigger and online but but that's the bet here so you're not doing if you're bearish on all that what are you even contemplating it for but if you're bullish on these kinds of things and you start running some numbers what i'm saying is here is that no one could have known exactly how it unfolded but these weren't heroic forecasts these are actually very tight.

1:08:23Jason Moser:And that's why the people did very well who bought at that time. They didn't know about AWS and all these things. They're just like, I don't know. Seems like there's a big enough market. The market's only reckoned the whole damn thing's only worth, only, you know, but yeah, these are small numbers on the grand scheme of things. $2 billion for the leading retail company in a market that itself is rapidly, rapidly expanding. All I need to do is assume some modest market share maintenance, not even gains. Marginage maintained the market share and eventually spit out a half decent margin. It's like, I'm going to make bank on this.

1:09:00Jason Moser:And you would have. It's just that you would have had like, you know, eight different 50 % crashes along the way and everyone laughing at you at various points, which is how it always made to my earlier point from whether it was Friday's episode or this one. Like you're going to look dumb at lots of different points. To the point we made at the start of this point, you're going to be underwater at various points. You're going to be underperforming at various points. But I can't think of a single Amazon investor from that era who's not smiling like a Cheshire cat, right? Because of all the dumb things that they did.

1:09:31Yeah, yeah, yeah. The ones who sold the answer, right?

1:09:33Chris Hill:And that's the point. It's like you let the thesis play out, which is not our point before holding no matter what. It's not a hold or die game, but it is a case of if you believe in the thesis, let it play out. You mentioned SpaceX and the Musk kind of halo. So Tesla, I've said this a million times, Tesla went absolutely nowhere for five years. And then something like 10X'd within like two or three years, right? And at any point in those five years' time, someone's saying, you're an idiot. The market's going up. You're losing. You're behind. What's going on? Speaking of the, you know, nothing in ShareAdvisor was the next Tesla, let me tell you for sure.

1:10:04Chris Hill:But the reality is that, you know, you're losing. Not only the shares were dead flat while the market went up. So not only were you not making any money, you're falling further and further behind everybody else where everyone told you you were an idiot. Now, I didn't own Tesla shares. I hadn't had that much foresight. I wasn't that good. So I'm not saying I saw it. My point is broadly just that there's another example of a company that did well over time. But you had to let that happen. And you had to be there and wait through it for the result that you think you saw. Now, you'd be wrong sometimes too.

1:10:32Chris Hill:Maybe Tesla did crash. Maybe Amazon did crash. It's not a case of putting everything in one stock. I didn't do that. I wish I had. My US portfolio, Berkshire was a much, much, much, much, much larger position than Amazon. I'm kind of happy now that it's less so, still much bigger, but the Amazon growth has been better than Berkshire, so I would have been better if I'd reversed those positions. But I didn't because no one was that sure. I mean, to your point, Ram, I had the idea, I had the concept, I thought maybe this might be a thing. I should invest in it because if it is a thing, I'll make some money.

1:11:03Chris Hill:And I did. And I'm really happy I did. I didn't invest anywhere near as early as those numbers I mentioned before. I'll have to look up when I first invested. I've added more sense. But that idea was just, I think this could work. And to your point, mate, It was a case of not only – you mentioned the kind of, you know, could this be a thing at this margin for that or whatever. The other thing I did want to kind of throw in is the why. And this is not about Amazon, but it might help hopefully down with SpaceX. Why did I think it was going to? Because you've got to – so if it holds its margin, and that's a reasonable if, but you apply it in your question, Ram, is you think it will.

1:11:42Chris Hill:There's a reason, there's a rationale for you to think it will. And I've got to find it, speaking better, I've got to think of a better one than MySpace and Facebook, right? You say, if MySpace held its lead in social networking and if social networking grew, MySpace would be worth a fortune, right? That if applies to Amazon as much as MySpace. MySpace crashed and burned, Amazon took off, and the question is why? What was it about these businesses, right?

1:12:03Emily Flippen:Very quickly, that's why I'm all about generally right as opposed to specifically wrong. That's the only thing that matters. I mean, this is why you laugh at the hyper-specificity that's out there because no one's that good. And more to the point, you don't need to be that good. Sorry, I'll throw back to you, but you're just making the point that if you were roughly right on SpaceX on a very bullish show, like, fine, because you'd probably be okay. But if you're wrong, then none of this analysis is going to make, you know, if they lose market share and they all collapse in three years, then none of this is going to help you.

1:12:35Chris Hill:And a few different bets of the same sort as well, by the way, because maybe it's a SpaceX, maybe it's a MySpace, okay, but maybe if you buy a dozen of them, then maybe half a SpaceX and half a month. Maybe two of them are SpaceX and 10 of my space. You'll still make a fortune. You can only lose 100%. Right? And you can make a squillion more. So the Amazon story, the if quickly was just why if it held margin? Why if e-commerce continued to grow? And you had to have a thesis. Now my thesis wasn't, again, your point, mate, overly specific or overly detailed. It was like, these guys, firstly, they're winning more customers.

1:13:07Chris Hill:So there's a story about the customers seeing the value. So there is a sense they're doing something that people want. And that seems really, really, really basic, but man, people miss it a lot. I don't care whether you like it or not. The question is, are people using it more? Yeah, they are. And by the way, apply it to SpaceX as much as you want or not. So they're doing something that people want. Okay, that feels like something that might continue. Will it continue? Well, are the reasons that people like it, presumably, likely to continue to be available? Yeah, people are going to like convenience.

1:13:33Chris Hill:Yeah, they're going to like online access. Yeah, they're going to like delivery. Those things feel like they're useful. Okay, let's go about Amazon's range. Well, range is, you buy anything you want on Amazon. I don't have to chop around. Okay, that feels cool. Talk about their scale. As they grow, is that going to make them more or less likely to be able to beat their competitors across the board at everything from marketing to ranging to delivery to delivery price? Yeah, that probably is. Are they going to be able to negotiate with their suppliers harder? Yes. Cool. Okay, that all sounds pretty positive.

1:14:01Chris Hill:All right, well, do they have international opportunities? Well, yeah, they're massive in the US. They've opened in the UK. But if this thing's the thing, people are different, but not that different. So has this got a global potential? Yeah, it probably does. I mean, eventually they might come to Australia. Okay, well, that feels like... And so you start to layer those things in, and it's not a case of saying, here's all the great things. The downsides were, what if Walmart finally gets its act together? Okay, well, that's a risk. What if there are postage or tariff or other issues that make delivery less accessible?

1:14:28Chris Hill:Okay, that's a risk. Cyber attacks. What if the bigger range they're carrying ends up costing them money because they've got all this dead stock they can't clear? Big range is fine, but no one wants it. That's a risk. Okay, cool, got that. What if other competitors simply just price as cheaply as they do and just destroy Amazon's margins in the process? Okay, that's possible. So it wasn't just a case of plus, plus, plus. It was line up the pros and cons and ask yourself, do I think there is justification for the things you said, mate, which is if they just maintain market share and the market grows, can they maintain market share?

1:15:01Chris Hill:I think so. Will the market continue grow? I think so. Okay, well, but not just I think or not just I have a viable, I think growth, I'm going margins, scale, customer acceptance and love, net promoter score. Who's not telling their friend, hey, you should use Amazon. It's really fast and it's cheap and it's easy. Okay, I'm doing that. I want to search for a product. I'm going to get cheaper. Okay, I'll go to Amazon. Okay, I'll do that. My first port of call becomes Amazon. That feels like something that can continue to grow. Now, you can say with SpaceX, hey, I think it's going to do all these things at the same time and it's going to be wonderful and big and great.

1:15:29Chris Hill:And that's not necessarily untrue. It's just a question of asking yourself, can it continue in a way that makes sense to everybody in that context? If it can, then that's the job. But again, to Ram's point, I've done all about the business. Then go back to the valuation and say, what does the valuation require at the moment? What has to be true? Okay, it has to 40X in revenue to be worth the current price. All right, well, it might, but is it going to? And that's the sort of thing you need to ask yourself.

1:15:58Emily Flippen:The other good thing about doing these thought exercise is that you give yourself markers for if and when the thesis is busted. I mean, otherwise, you're just going on the share price. It gone up, I was right. It went down, I was wrong. No, it's far more complicated than that. Well, not far more complicated, but it's more complicated than that. So, yeah, I said that these things are going to happen next year. the year after you'll get a very clear sense of whether it's true or not if it's true maybe double down right if it's not okay it was a reasonable assumption at the time I was wrong I'm out whether the price is up down or sideways

1:16:37Chris Hill:perfect

1:16:37Emily Flippen:nicely put

1:16:39Chris Hill:everything will do us mate yeah will you come back on next Friday you know it you know I will budget special get excited depressed and that is Andrew and I in a nutshell 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 license 400691.