Mailbag: incl. Spending a (hypothetical) $500m lotto win! January 14, 2024

36:46i've i think you really hit the nail on the head before with with understanding um this circle of competence and what is yeah what is um outside of that and for me most things are outside of it because i'm not that bright and when i i've i have looked and dabbled with payment companies before and usually hasn't worked out well and you realize that there's a whole i mean the kind of things that are important are usually the things that are not mentioned in the pitch decks and and the rest of it that's right you know so look at look at look at afterpay afterpay was the pioneer they invented this category i was like wow that's really cool uh everyone's gonna start doing it this way which is really just reinventing lay-by frankly um this is all they did um but then that wasn't the strength of the business.

37:38It wasn't the tech. I mean, tech's not, well, you've got to be careful here. Tech can be very hard, but like, you know, conceptually it's not, you know, I'm sure a half decent development team could rebuild the infrastructure of Zip and Afterpay without that much effort. Their strength was in being a first mover and having the brand recognition and then ultimately in building the network effect up. So people used Afterpay because it was accepted in more places. Merchants chose to partner with Afterpay because more people came in with Afterpay on their phone saying they want to pay for Afterpay.

38:08It's this virtual circle. You really just can't get to a point where it's just like, am I really going to have 18 different apps, BNPL apps on my phone? Like, it's just too hard. You generally have one. And now all the banks are offering it as well. It has become a commoditized product. And so you've got someone like Zip who definitely, I just had a quick look at their presentation. Like, yeah, they're very much pivoting towards break even. They're not there yet. They're seeing a bit of customer growth and the rest of it. Okay, cool. But there's still a very long road ahead, I would say. And in a hyper, hyper competitive market against people and enterprises that are very well resourced and very large and maybe have that more dominant network effect and, you know, marketing channels and all the rest of it.

38:55So it's all of the things that you said, yep, I'll take them as true. But there's all those other sides of things as well. So does that mean I think that they're going to go badly? No, it doesn't. It means I don't know. And that very fact means that I don't know, so I'm not going to do it. I wish them well. Good luck. I can't handicap it. Every now and again, you come across a business, you're like, I think I really get this. And then you dig into it and you're like, I really get it. And then I swing hard. I'd like, I swing really hard when I have a high conviction idea because they are rare. And when you find something that you have a lot of firm conviction in, it is something that, you know, when you get that fat pitch to use Buffett's term, you really want them to take a big swing at it.

39:41You know, like, because they're rare. They're rare. Yeah. And I'd also double down on your comment too about risk. I look at my portfolio and I reckon if I showed this to 99 % of financial planners and brokers, they go, whoa, that's super risky. Because they're small cap, often pre-profit kind of companies. Talk about behavioral flaws. Maybe this is one. Maybe this is one. But for my sins, I look at a lot of them, not all of them, but certainly majority of them go, no, that's not that risky. I think they're really well managed. I think they've got a really great product. I think there's really durable, sustainable sales momentum in this.

40:24I think if they're not profitable, they will very soon be. And the economics of the business and the sort of the way it's structured will mean that profit will come and will come significantly so. And it's probably a few years out, but no one's thinking that far ahead. And I'll just twiddle my thumbs for a few years and look like an idiot. And then one day, you know, be that overnight success that was like five years in the making. And that generally is the story of my big wins, right, is looking dumb for a long time and then sort of just being on the ground level when everything takes off. And it's not because I can't know when that is going to happen.

40:57But if you see the things that are in place there and, you know, you can make a case for it. But I'd say it's not that these are all guaranteed, far from it. But I think collectively it's actually, no, I'm not requiring a breakthrough in quantum computing or, you know, a revolutionary drug breakthrough or something. You know, these aren't the speculations that are being made. It's sort of like, do they have a reasonable presence in their chosen niche? Are people who use their products continuing to use it and use more of it? Are they finding more and more clients? And are they scaling the business effectively?

41:39And do they have the balance sheet to sort of see them through to that end? It's like we sort of check a lot of those boxes. It doesn't seem as risky as what it might. As to the first level thinker, he goes, oh, it's small cap, ergo it's risky. Oh, look at the beta relative to the index. Or look at this, or look at liquidity, or any of these other stupid academic kind of descriptors of risk, which I don't think any right-thinking person would necessarily equate with risk. I mean, yeah, it might lead to enhanced volatility, but that's not risk. um so so i i just i'd make that comment there as well and and again while we're while we're doing it and this is as i want buffett says that risk comes from not knowing what you're doing and i think that is the best description of risk that i have i have heard as opposed to what some of the more traditional descriptors would would sort of suggest so yeah i think that's right mate i think that's right i it's one of those things a bit like uh we talked about charlie's quotes not long ago where kind of Charlie says, you don't deserve to be an investor or you don't deserve to get the returns.

42:41I think Warren's right about risk is not knowing what you're doing. But it's also not knowing, you don't know what you're doing or it's a, you know, knowing what you're doing but being wrong. I think it's a, a couple of years a little bit too, you know, the old rule number one, don't lose money stuff. I think they're a little bit too trite, sometimes a little bit too short. I don't disagree with you, but you can you can lose money even if you know what you're doing because sometimes circumstances go against you now again he would say in overall sense i mean like the rule number one don't lose money is i'm not saying don't lose money in an individual trade or that you can't lose money even if you know what you're doing um he you know he lost money on the justin boots he bought a boot company that went broke um you know did he know what he's doing yes was he wrong probably yes was unlucky maybe yes um so you know i think generally speaking that's true and you're right i actually agree with you um these academic definitions of risk are completely useless but that bias thing you know hubris is one of those as well and i just would say to our listeners be careful that you don't assume you know what you're doing um you know the older i get the more i learn the more i realize i don't know uh there's there's some there's some hubris that you should be careful of and humility you should try and adopt in that in that context as well a couple quotes you just reminded me of one is like when i was 13 i couldn't believe how little my dad knew and when i was 20 25 i couldn't believe how much he'd learned in in the last dozen years which is always great such a great line so great the other one which you reminded me of just then was I think it's Twain but it's probably incorrectly attributed but it's the idea of it ain't what you don't know that gets you into trouble it's what you know for sure that just ain't so just ain't so that is such and it's beautifully written too some of those quotes they make sense because they make sense others just come off beautifully that one is just a lovely I'm pretty sure it's Twain too yeah if it's not it's JP Morgan although that joke's getting old whilst we had that but yes you know it's just beautiful beautiful quotes and well that's it you know the things you know for sure that are saints so there is uh you know the more certain you are i you know the more certain someone is about something less inclined i've i've learned to become less inclined to pay them attention yeah um there is something about there is something about conviction which is important but conviction and certainty different things yeah you know and i think if you got someone who's just so certain once you become certain something you stop listening to alternative views uh you know that strong strong opinions loosely held as a phrase we have for a while um but it's yeah it's such an important concept right by all means find the courage of your convictions but don't be so convicted don't be so certain that you stop listening um because that's when things will come and get you and that's that's ugly oh hey yeah i would go 100 in one one position if if that kind of certainty was possible right yeah right exactly and i'm pretty certain of some of my investments i feel as though i am and i feel i defend them but they're not 100 of waiting though right yeah exactly and that's always what worries me when i say i'm pretty certain about it's like oh i probably shouldn't be you know that here's the other thing right in terms of in terms of certainty um you probably should only ever be about 75 percent of anything yeah not not because not because you're stupid or because it's just because life happens maybe you're wrong maybe you're unlucky maybe it goes badly maybe there are circumstances you don't even consider maybe there are risks you do consider that actually do come to pass despite the fact they're really really really unlikely um etc etc etc right um you know transurban toll road business sydney airport airport business man what could what could wreck those businesses come on there they're toll road business everyone needs to use them you know surely planes won't stop flying and cars won't stop driving down toll roads and then you know covid19 hold my beer you know it's so it's it's it's those things you just got to be really really careful of and i think i don't know i think if you're more than 75 certain about anything not you personally obviously anyone on um once you get past that level of certainty i i find it even like i recommend stocks for a living to our members right i really do and even those i'm like which ones are you which ones do you feel really certain about and i i've got to have the humility to say kind of none you know like all of them to some degree and as a group i feel really good about them but individually you know can i tell you five years out which one's going to do best no um and i honestly think you know if i tried to i'd be doing everyone a massive disservice because you know it would it would require me to take a view to say all right you know get some hubris get some hubris ready get your arrogance out uh let's let's put stuff on the table come on show me the color of your money and that macho thing that blokes do so badly so well and so badly do the new macho thing so well it ends out so badly is you know that just that that idea of well you got to take a position you got to know what's wrong with you don't you have conviction don't you know what's going on you know What am I paying you money for, Phillips?

47:17But to be fair, no one says that to me, which is lovely. But that sense, as people, but as blokes as well, you start to go, well, yeah, I mean, yeah, what's wrong with you? Why don't I know? When the brokers advertise their day trading platforms, it's all, take a position, show you. You're a smart guy. You can tell them what to do. You know what's going on. Make money from that certainty. Make money from your ego. What they should be saying is, you're so arrogant, I'm going to make a fortune of you because I'm going to convince you that you know what you're going on. and you're going to lap it up because you want to believe it's true.

47:46And that's how we get to this sort of place. Well, what was it with long-term capital management that blew them up? It was what the mathematicians call a six sigma event. Correct. In other words. Six standard deviations. Yeah. It was, nothing is impossible as a good probabilist, you know, probability theorist, gosh, can't talk today, would tell you. but it was sort of like it had the same odds of throwing a tennis ball at a brick wall and it flying through because all the atoms just were in the right arrangement you know so yeah theoretically possible so very very unlike it might happen once every eight billion years kind of thing and it happened exactly yeah that's exactly what it is man and by the way this is this is by the folly of technical analysis and chart reading and stuff they'd say well it hasn't happened before so therefore it can't happen it wasn't it wasn't even that it it wasn't even that But, you know, they hadn't started first principles and said that, you know, the things that would need to happen for this to happen was part of it.

48:43But they also went, well, it hasn't happened before. And so, you know, what are the odds? And it's that, you know, again, the hubris, that idea of, you know, we modeled it and it didn't come out. So, therefore, we assumed it was fine. It's like, well, you know. Oh. Exactly. Oh, the GFC. The GFC. I mean, again, watch the big short. It's just like, well, we've got a lot of crappy mortgages in these products and these mortgage-backed securities. but for it to go like we a lot of them can go bad i mean the only way this is going to go bad is if the whole system goes bad but i mean you know how likely is that is like well that happened and it happened within you know in the space of a few years um so yeah even worse and this is this is exactly what you just said but i'm saying a different way even worse is they went well hang on these are all crappy mortgages but if you add them all together the rule of large numbers says well hang on these are all crappy individually but if you add them all together and you're getting paid a decent amount that makes these c-grade mortgages a plus all of a sudden because we it's not just one mortgage it's lots of mortgages and it's only part of them so add all this together and mathematically you convince yourself that well we're diversified right because we've got we've got a thousand mortgages in there not just one and it's only part of them and yeah as you say about what could possibly go wrong the the they forgot to realize that correlation was a thing and so when one went wrong as you say system wise uh that was exactly the problem uh what so you know should have been a c-grade product at the best anyway they convinced it was a grade product And even then, C-grade product was still not worth C-grade because the correlation of that was awful.

50:07Or if you want to quote Charlie Munger, which is always a good idea, he says, if you mix raisins with turds, you still have turds, right? And it feels apt to the example just given. God bless you, Charlie. Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener.

50:31here's adam who says hi guys hope you enjoy your much deserved break over the holidays thank you mate and thanks for the pre-recorded podcast says yes i know they're all pre-recorded by definition that's true i will enjoy them while on holidays in noosa now i feel slightly guilty adam because uh your holiday back's probably over the time this goes to where we have a lot of questions but hopefully you enjoyed noosa and hopefully you will also enjoy uh hearing your question to answer when you get back two questions he says i have one serious and one for a bit of fun i enjoy listening to a few money podcasts over the past few years yours is my favorite he says in brackets thank you mate and they all say to invest in low-cost index etfs and go fishing in november this year it was pointed out that the asx 200 has gone sideways for the past 15 years so you're relying on dividends at about four percent which gets taxed commentators say this is due to a large dividend payouts by companies and not reinvesting their profits as this won't change in future neither will the asx and you should look for etfs that only invest in companies that reinvest profits e.g berkshire what are your thoughts and do these etfs exist for aussie companies so there you go the market's gone nowhere in 15 years only dividends and anyway the dividends get taxed so what you should do according to some commentators apparently is only buy an etf that has non-dividend paying companies?

51:54No. Markets at a record high. So this was penned in November. We had a, we're recording this before the end of the year. The market rallied very hard towards the end of it. And again, I don't want to count chickens before they hatch, but the market's likely eight or nine percent. And even if it didn't, I don't think that changes anything, right? Because there's such short timeframes, it's all kind of meaningless. So yeah, I reject the premise of the question, sir. The next thing I would say is this idea of dividends, paying out dividends precludes growth is just really bad thinking. As always, it depends.

52:42If I can retain – Warren and Charlie have never paid a dividend and their shareholders have been just fine. right and they and and and because they have they have reinvested that and like i guess this is to your point like sort of like allow them to sort of get growth but the interesting thing here is is that they haven't necessarily reinvested the proceeds of those profits in the companies that generated those products profits that is the big advantage of a conglomerate kind of sort of structure uh and then on the other hand you've got the tobacco companies uh altria and the rest which have had no growth, in fact, degrowth, and yet whose shareholders have done incredibly well because they've paid out a load of dividends, right?

53:27So in other words, give me a rule of thumb and I'll find you 10 exceptions to it, right? That's right. And so I just, I don't like these. I don't like them. It depends. Is there reinvestment, sensible reinvestment potential? Sure, keep it. If there is not, pay it out. But I can't tell you because I haven't done the work. I don't think anyone's done an exhaustive analysis of it. But the amount of capital and shareholder wealth that has been destroyed by companies not paying out a dividend because the CEO thought that, well, we've been so successful in our little corner of the world. Let's go to the US and do the same there.

54:02Well, why don't we go into China? There's a lot of people in China. If we can capture 1 % of the market there, we'll be laughing. And yet virtually no Australian company has had success. any company that's had success through exposure to China has been by selling stuff directly from here to there. Yeah, that's right. I.e. rocks or wine or something like that. But no one, no Australian company, certainly no listed Australian company has gone into China and gone, wow, what a great move that was. In fact, it was, oh my gosh, we just had it handed to us and we blew up all of that kind of money. So were they right by not paying out a dividend?

54:39So I think too often commentators like to say things that sound good, but don't always work out in practice. So I would ignore that. And I would look at things on a case-by-case basis. Dividends are tax, therefore don't go for them. I don't know. Like, I think if, again, I'm not a big dividend investor because I'm not at that age yet. But if I was, you know, mid-60s or so and I'd spent my life building up a capital base and wanted to sort of have that work for me, I would have no problem with having some dividends even if I had to pay tax on it. And given that we've got this wonderful franking system where 30 % tax has already been paid on it, it's like, sign me up, dude.

55:22This is fantastic, right? And even if there is some tax at the end of it, it's like, again, gosh, Australians are silly like this. There is no better problem than a tax problem. and anyone who wants to winch to me because they paid a load of tax in a given year, I just want to slap in the face. It's like the only way you can do that is because you made a squillion dollars, right? Like that is the only way that you pay a lot of tax. So if you want to be clever and lose money on purpose and then go, ha, ha, ha, Mr. Taxman, I didn't pay you any money. I mean, you need your head read, right? Like give me a million dollar tax bill next year and I'll be happy.

55:56I mean, the only way that happens is because I probably made about$2 million, right? So that's a good year. That's a pretty good year. And not that I'm saying I'm desperate to, you know, what Kerry Packer says, like, you guys don't do, you spend all the tax proceeds in a really dumb way so you don't deserve any more. But, so I'm not happy about paying it, but I have to pay it. And the only reason I will pay it is if I've had a, you know, a profitable kind of year. So I think tax is always something to be mindful of, but it is too often the horse behind the cart kind of situation. Yeah. What do you think?

56:35Yes. I want to start with one of the statements that I think is incredibly misleading, Adam. Accurate, 100 % accurate, and 101 % misleading. The market has gone nowhere in 15 years. Absolutely 100 % true. If you take the highs of, in fact, 16 years, If you take the highs of 2007 and then compare the current level of markets, say, see, investing is a terrible idea. The market's gone nowhere in 16 years. That's absolutely true. If you had invested your entire life savings in one fell swoop at the very top of the market in 2007, you would have made dividends at 4-ish percent, and the share price had gone nowhere.

57:16That's still not true. Sorry, I've got to interrupt. That's still not true. It was 6 ,700, the all odds, at the height of the market. And now it's 7 ,700. Now, I'm not saying it's a spectacular return, but that's without dividends. 12 % in 16 years. Yep. Yep. Well, that's my point, right? So dividend, you got the dividend return. Okay, let's say shares didn't go exactly nowhere. They went up, what's that? Half a percent a year, 1 % a year, something like that. Terrible return. Why would you bother investing in shares? Stupid idea. Share investors are dumb. 100%, sure, sure, sure. The facts are the facts are the facts.

57:48when someone tells you that what you should do i'm going to be really really direct here because i'd like to do this what you should do is ignore that person and never ever ever ever listen to them ever again because there are there are as the saying goes people who know the price of everything and the value of nothing that person is you know the problem telling the truth is you then get to say it's like you can't go broke taking a profit true 100 true literally by definition 100 true uh so so therefore follow my advice no no it's like we're saying so uh the sky is blue therefore buy my etf you know the fact it's true doesn't follow that therefore it recommends a certain course of action now almost every day for the well effectively the entire history before 2007 the share market was lower and most days since then between that high and when we got back to that high whatever it was andrew you're right so we're up of that now but over that period of time, it's been lower.

58:48The thing is, if you're an investor, unless you invest your entire life savings on that day, and if you did, you still made some money. If you invested for the few years before and or the few years after, you put money to work in the market that has done really, really well for you. And if you were five years before that and five years after that, you've done really, really, really, really well. If you're investing during the GFC, you've done spectacularly well. If you invested during the COVID crash, you've done really well. If you miss both those periods and still dollar cost averaged outside that, you have done extraordinarily well.

59:20So someone who says you should take only one point in 2007 and ignore every single other day since then when you could have invested, just ignore those days. And just look at this one data point. So you see it's gone nowhere. That is just absolute bollocks. It is a complete misunderstanding. Now, I'm not bagging you, Adam. You hear that and you say, well, sounds real, sounds fair. i'm bagging anyone who stands up and holds himself out to be an expert and says therefore this tells you anything at all about investing it is complete bollocks it is complete codswallop it will mislead you those people are frankly idiots okay let me be really really blunt because it is either they don't know in which case stop listening to them or they do know in which case stop listening to them it is it is just it is a bit charlie here it's it's it's blanket numeracy it is honestly straight out in numeracy if you can look at that and decide that because that's true and it is true therefore you shouldn't invest it is honestly mate i i can't think of anyone who less who less deserves to give financial advice than someone who says that and says therefore this is what that means yeah so i want to put that on the record really clearly uh put my name on it i'll sign the i'll sign the document um anyone who stands behind that and tells you that as a result you should do X, Y, or Z is an idiot.

1:00:40Can I get the counterfactual before you go on? Imagine if you and I said, well, okay, we're taking the other side of that bet. And then we're like, okay, we'll make your case. And I go, well, okay. Did you know if you put all of your money into the market on March of 2009, you would have made 15 % compound per annum. And therefore the share market is the best investment in the world. Or more recent example, you put all your money in the market in March of 2020. And that's what I'm like. So what am I doing? I'm cherry picking the data. I'm taking the lows of the market and I'm using that to say that the share market is the most brilliant investment ever.

1:01:22And I think anyone look at that and go, well, that's unfair. You can't pick the best time to invest and then base your case on that. And the answer is yes, yes, that is correct. And so to your point, it's just sort of like, ask anyone even if it's not a daily dca it was just like i don't know i just put money into the market on the first of january every year and i've done that for any meaningful period of time you've done very well you know could have you should have you done better had you been someone who could foresee the exact turning point of every ebb and flow in the market well yeah okay but that's like saying if i only picked these numbers last week i would have won powerball like it's it's it's a nonsense it's such a nonsense so i just wanted i just wanted to add the other side of that as well which we won't we will never be guilty of making that that's why you invest in market because you know if you just back up the truck after every crash look how smart you are you know yeah but honestly it is blatant stupidity and i you know i will say by the way um i'm not bagging well i'm bagging those people i'm bagging that view they are just outright wrong and i've got to say to you if they don't realize that's wrong then they need to really relearn maths frankly statistics they need to they need to understand cause and effect a whole lot better and they need to understand you know the idea of investing much better than that if that's all they can bring to the table they're entitled to that view but they're dead wrong and yeah it is i'm happy to teach them the error of their ways if they if they want to talk about it um but the i i just talked about certainty and hubris right um i will hang my hat on this one if this makes me hubristic so be it if this makes me you know whatever it is just it is just outright certain i've never you know what mate i've never had the spare time i've had it i've probably watched tv i haven't made the time to sit down and do the whole yeah but if i invested a thousand dollars every month since or a hundred dollars every month since or every day since here's what i would have had or if i invested for 20 years 10 years either side of that here's what would have happened or whatever that whatever else i should do because those are the real numbers uh you know and even the vanguard chart doesn't do as good a job as it could of that stuff right because it's ten thousand dollars at a point in time at some point we'll roll forward that that period it's you know that's that's the reality but um yeah just anyway let's move on because i don't want to i don't want to spend too much time on it but i couldn't i can't be stronger there are fewer things in investing that i know to be true other than people who say that are missing the point entirely well i i could be a little bit stronger and i will um generally speaking um the person who says this is someone who is advocating a very active approach which is otherwise you have to trade because yeah yeah buy and hold anyone who buy and hold is an idiot it right like that's done yes you can't look at this you've got to be active oh it just so happens that i have the tools and the newsletter and that that's going to assist you with that you know i said because with me and my trading system and my little bit of software you would have avoided this and you would have known exactly when to buy and sell and so then so then the next obvious question is it's like if i said to you mate i've cracked the formula the alchemist couldn't do it but i've done it i've got a formula here that will turn lead into gold yeah do you want to buy the formula off me now wouldn't you just use the formula like what why i've always never had a satisfying answer to it because they're just grifters and there is no answer but i think you've got every right to ask in good faith not have to be rude about it don't have to be offensive about it but it's like well good sir and i say sir deliberately because they're always dudes good sir you have this technique that makes guarantees millions in the market uh why aren't you on an island or a yacht somewhere right now like you know yeah why are you here busting your hump trying to flog this to me yeah when you've got that capacity oh i've i've made so you see it on youtube i've made so much money now it's time for me to give back and to teach others like well you could go work for the Red Cross or you could donate some money.

1:05:15Or do it for free. Do it for free. Don't sell your training software. Give it away for free. No, it's full of, it is absolute BS. And I think if we haven't laid that on thick enough yet, then I don't know how else we can do it. True, true. Hey, I will say one thing, by the way, because the enterprising intelligent listener is now saying, hang on, aren't you bastards doing exactly the same thing? At least at the Motley Fool, we do that. And I think, I'll say, absolutely. And they'll say, well, what is the difference then? And I'll say, the difference is that we have a get rich slowly strategy. Yes, I see.

1:05:43That takes decades. I'm not telling you a get-rich-quick stream, I'm telling you a trading strategy. Why am I not hockey-beat-to-myself? Because I reckon I can probably get the market return, hopefully plus a couple of percent a year doing this. That is not going to put me on the Bahamas anytime soon. And me helping you do that is not going to stop me being able to do it anyway because me and you together, even if every listener followed, well, maybe every 20-something thousand, if enough people followed it, maybe it would change prices. But the reality is most of my portfolio are the same companies I recommend to our members, and I don't lose out by sharing that, so there's no reason not to.

1:06:16And I get paid to do it. So that's, you know, I just want to make the point, mate, because you're 100 % right, but the cynical or skeptical listening are saying, hang on, you bastard are doing exactly what you're accusing them of doing. No, no, I am offering to try to help. I may not be right, by the way. No guarantees, no fancy software, no promises. I'm trying to help our members get a little bit richer than they might have otherwise been by picking good stocks and staying the course and learning the right temperament to invest and i might help them get rich slowly yeah you know and so that's and that's that's why we are people say to me all the time why don't you just do it yourself because i don't have enough capital yeah i'm not i'm not well i am i am doing it i am doing it myself well that's yes that's also true yes yes that's why i'm not doing well it's why i'm not competing to myself because there's no there's no downside of me sharing it and i don't have enough capital to to uh not have to work unfortunately i'd love to but that's not where i find myself and i think this is worth just for anyone who was saying ah i got you guys that's honestly the easy easy answer yeah no try hard unfortunately i have to work for my money that's right mates uh we're running out of time well not really there's no there's no time limit but we are getting close to time i do want to get to the second question but also i want to finish answering adams first i i did a bit of a rant and that cost us some time um the so the a6 on firebase rubbish ignore it whatever um the the commentators of what you should therefore do.

1:07:36I couldn't think of a worse idea. The only thing you should do is say, which strategy maximizes my returns? Warren Buffett's actually no slouch. I'm happy for him to keep the money and reinvest it for me because you know what? I reckon he's probably going to do a pretty bloody good job. And that works for me. So Warren, don't pay me a dividend, not because I'm trying to avoid tax, not because of any other clever investment strategy, because I own shares in a company where the person in charge is going to do a really, really, really good job of making it work. Now, I also own shares in Telstra.

1:08:03It's not an active buy recommendation of my stock picking service. It is a current recommendation of our income service. It pays a nice dividend. I'm really happy with that because Telstra's growth isn't that much chop. It doesn't get that much opportunity to grow. Now, if it held its dividend and tried to reinvest it, it probably ended up getting subpar returns. So pay that out. In any case, our only thing is to maximize our total after-tax return. in whatever form that return comes that return comes berkshire's been buying back stock it could have been paying a dividend um whichever warren thinks is a better option of that i'm happy to back him i'm happy for him to to make that decision uh i i just again i don't know what the commentators are saying i don't know why they're saying it's it's not very useful um i would be ignoring it entirely and just going going from that so that that's my that's my general thought on on that one um here's his second question mate uh just for fun let's say you win the 500 million dollar jackpot in the usa what do you do with this much cash it's a nice problem but what would you do while you ponder that says adam i will sip my cocktail by the pool thanks for your great advice over the year just because the earth has moved around the sun one more time merry full-on christmas that's from adam uh 500 million dollar jackpot mate uh what's on the shopping list i would i would i would use it as a deposit on a one-bedroom unit in the because it's about what i'd need so you're a miserable bastard i really am i really am i've got i've got my favorite my topics and i just i will use every possibility to circle back towards them um there is that there is that you know i've actually i've thought about that a lot because hope springs eternal.

1:09:55But you know what's interesting is that there have been so many, so many studies in this. And generally speaking, people, the level of happiness doesn't change. Like obviously that night you find out you're euphoric, you have a pretty good first year, but you get used to it really quickly. Yes. And generally speaking, all your relationships fall apart because the brother that you gave a million to is peeved at you because you gave 1.2 to your sister. Or you didn't give him more and you kept 499 for yourself. Yeah, how come you've only given me that? And then your mates, every time you go out, your mates expect you to pay.

1:10:29And it's not that you can't, but it's more the principal. Relationships just fall apart. And the thing that are most important to human happiness, it's that hierarchy of needs. What's his name? Maslow. Maslow, yeah. So once you've sort of got shelter, and once you've got the basics ticked off, I don't have to worry about being cold and hungry and healthy and stuff anymore. The most important thing for humans by far is social connections, you know? And that's why solitary - Is that bubble below arguing about property for you, mate? Where does being gnarly about the property market sit on the hierarchy for you?

1:11:01Is it above or below shelter? It's like, I'll take the ability to do that over shelter, I think. That's how important it is to me. Honey, I'm outside in a cardboard box, but I'm going to rant, I'm going to rant, I'm going to rant. So, so I, I think I really, I think we all live in the future and we all go, if only this, then I will be happy. If I get that, I'll be happy. If I get a girlfriend, I'll be happy. If I get married, I'll be happy. If I get a million dollars, I'll be happy. And it's just like, not that those things don't bring you happiness, but you've kind of, you, you very quickly take it for granted.

1:11:35so you have certain um i was giving grief to a certain um iron ore billionaire uh wa based person the other day who i just have a lot of contempt for and uh she's a she's a miserable gosh she's miserable nice okay well just let's let's get us out of trouble can we and she's as rich as anything right and i i look at a person like that and just think imagine the good that you could do in the world and still still have the perfect life right and uh so what would i do it's kind of it feels like i'm like i'm um trying to like virtue signal or something here but i think yeah i would live in a very nice house and i would have a lot of nice toys don't get me wrong i'm not i'm not going to be a monk but i i would i would i don't know i'd love to go through a hospital and just give a couple million dollars out you know like or or i don't know maybe just like put some And just do a Clive Palmer with political ads, except not be a bastard about it.

1:12:34Like maybe even advocate for some things that I felt were really important. And you know why? And I say that from a non-altruistic perspective, because again, the research tends to show you is that those things bring you a lot more happiness. Then, you know, it's like giving a gift brings you more joy than receiving a gift, generally speaking. You know, maybe not when you're nine, but when you're 49, that certainly tends to be true. My young bloke has not heard that remote. and i i know i know i know how all of that sounds but i genuinely i i think that to answer your question i i think i would i would i would love to just be that fairy godmother that just you know finds that single mom nurse that's just busting her guts out doing more important work and just saying here you go here's a house or something like that would bring me so much joy

1:13:25i um nice nice question nice problem um

1:13:33there's stuff i do with the money and the stuff i do with my time i have to say and i kind of think that combination is worth worth thinking about would you do anything different time wise i'd work a lot less yeah but would you would you do different work i guess would you yeah yeah how would you would you fill your days would you i mean yeah i mean it's hard you're already making a billion dollars a year with straw man so that's probably it's hard for you to think about only making 500 million but i hypothetically i so i i would i love my job right so i'm literally you know i think i would i think i would give myself permission to be more flexible with my work week um by which i mean if i wanted to go on holidays i would and and i'd i'd hopefully come to some accommodation with the boss so look i love what i'm doing and i want members to be looked after so i'll do it for nothing because you need to replace me and make sure someone's you know at at the controls if we need something if someone's got to do some work do some writing do some you know someone's got to be there to do it right it's not fair for me to say i'm off i'm you know i'm wealthier than rich than god i'm getting around the country around the world and screw you um but i think i want to stay at the full or at least you know working work with the full in some in some capacity so i guess i'd start there um i'd certainly i'd certainly you know because i get paid because i have a responsibility i wouldn't want to shirk that but i think if i could say look i'll do it for nothing i'll do it for a dollar a year um get someone else to come and kind of fill my my boots so that someone's doing the work and and i'll i'll absolutely give as much value as i can but i'll also be freer to take off on a wednesday go fishing or you know go away for a week to somewhere just because i want to so i think i'd time wise i think i'd do that and when i say that stuff it is those deathbed things right of more experiences with more people doing more things if the young boy wants to go on holidays to go and do that if i want to go you know those things kind of matter so i think that's where i'd start and that's not what you do with the money adam and i guess you probably know us well enough that it wasn't going to be a uh here's the toys we buy only um i think i'd give the vast bulk of it away mate in some way shape or form uh either as a i may decide i enjoyed directing that traffic or like warren buffett who's just said to the bill and melinda gates foundation you take the money i don't want to you know i'm not good at this you're good at this you do it i don't know what i'd do there um but i'd like to think i'd give a very large chunk i mean you look after family and friends all that stuff that's that's that's a you know take that's done with that sort of thing you know the family mortgages and all that kind of stuff don't forget your podcast co-host my friend that's all i'll say i will i will buy you that one bedroom uh flat in fairfield you're after mate thank you uh just you know it's only reasonable i'll have some change hopeful um yes you know i do that stuff i think um i think on top of work i i mean my passion is finance right and it's both investing in personal finance um to your point i absolutely think i do a lot of advocacy um paid or unpaid and certainly funding advocacy and funding projects um i think we should meaningfully reform the financial advice industry not just the people not just the rules but the laws that go with it the the fact that financial advice is complex exists because there are so many different you know think about the decision tree of financial advice there are so many different if this then that you know the choose your own adventure is it's a telephone book um okay so you have that many kids all right well you got that job okay uh your partner does that oh okay um you know except it just the whole thing is so ridiculously stupidly complex financial advisors aren't needed but they can be beneficial for way too many people not because i don't want people to get good advice but because you shouldn't need good advice 95 of us should be able to have templated financial advice which is if you're this age and have this much money follow this investment approach and that's the best you can do should be that should be the answer for 95 of us you know the fact that it's not oh you can transition to retirement at this stage you've got this much money you can give that lump sum into super and you can do that much you've got that many kids and you can set up this family trust to do that thing for those people and and and and you know it is an absolute dog's breakfast so that needs to be fixed i probably would devote a reasonable amount of time effort and money uh to improving personal financial literacy to improving the access to financial advice, to improving the laws around it, whether I'm successful or not, maybe it's a fool's errand, but I'd give it a red hot go.

1:17:42And with some reasonably clear efforts, I'd go on that path. Here's something really left field, mate. And this is probably, we all follow our flights of fancy. I would actually, I'm a green at heart, as you know, I'd probably buy up a whole lot of dodgy land and reforest it as a project. you know the idea of a you know being able to kind of take a large swathe of the land and say right all that you know that's going to that's going to be go towards some sort of conservation project i think is almost returning you know quasi national park um i might even give it to the government as a national park or it depends whether i trust them to do the right thing um yeah just that something like that would be it'd be kind of cool right to be able to sort of put that money to work and say this is being protected effectively in perpetuity appeals to me pretty pretty significantly so i think some some large-scale projects like that sort of stuff is probably what I'd do with it.

1:18:32Let's be a little bit fun for the end of the podcast. I'd buy about five or six different cars. I've got my eye on. I'm not going to need that many cars just because if I had that much money, I probably couldn't help myself. A big garage with five. And by the way, not a single sports car among them. I might have like an MX5 or something. A convertible is always fun to drive. But they'd just be honestly lifestyle cars, right? I'll take the convertible out today because the weather's nice. I'm partial to a four-wheel drive. You know, and our listeners know, having gone bush, I'd probably spend an extremely obscene amount of money on doing a four-wheel drive up.

1:19:04So I'd have every bell and whistle on the place, not because I do the hard track, just like a touring four-wheel drive, just for pure comfort and pure fun. I'd buy myself an old Kingswood station wagon. We had one as a family and I'd miss that car terribly. Maybe an old EH Holden as well. Just literally the fun kind of lifestyle cars just for the hell of it, just because I could. You wouldn't be tempted to lobby against tax, you know, lobby for tax reform for the ultra wealthy and advocate against indigenous rights and shake your fist at solar panels. That would be a really good use of your time for someone with hundreds of billions of dollars.

1:19:44And, you know, and then you could get into legal disputes with your children about how you're going to give them or not give them money. I mean, that seems like a really worthwhile cause, hypothetically, of course, not, you know. allegedly allegedly um no i would i would i would i would intend not to do any of those any of those things probably because you're you're not a mean-spirited person i think you know i just there'd be something about winning a large enough amount of money that you could make a really big difference partly but you know the benefit of winning it as much as a lot of people lose you'll be really careful i put a whole lot in trust and invest a whole lot of stuff when i say trust i'd invest a whole lot of stuff for an income stream right because I'm smart enough to know that that's the way to do it rather than spending down the capital.

1:20:27If I'm going to give a whole lot away, whatever's left, I'm going to invest so that I have a regular income stream I know that I can kind of rely on more or less. But I think the benefit of winning it rather than making it is, I think some degree, your ego's caught up in that, right? If you build the company, I'm not talking about just the mining heiress you might be referring to, but Mike Cannabrooks, lovely bloke, lives nearby by the way, which is kind of cool. But a lot of people, Murdoch, Packard, their ego's kind of tied up in their business, right? So it's all about the next, the next, the next, the next, and keeping that position and adding more and proving you can do it and all that kind of stuff.

1:21:01And that's not a criticism of them necessarily, but it kind of comes with the territory. I think part of it, to kind of your point of like, I didn't deserve this, but I got it. There's no ego in that. There's no, I deserve it. I made it. I earned it. I should keep growing it. It's kind of like, hey, windfall. What do you do with a windfall? I think it's different to what you do if you build a business because you just have that culture, that DNA, that experience where you kind of, And frankly, moving in those circles, I don't want to move in those circles, you know. Would I move from my house here?

1:21:28I'd probably go and buy some more property. Like I'd like a larger, a block just for hell of it because I love the bush and I love just being in nature and that sort of stuff. So I probably would, but not a place in Point Piper or a fancy mansion on a hill. Other than that, like what more do you need, right? Go and make a difference for some people. I think to your point, you look after your nearest and dearest and then put some effort into improving the place. I think that's probably what I'd do. Yeah. Yeah, you got to have some kind of passion project right you you i mean right the first thing you would like again while we're being real the first thing you would do is buy a whole bunch of toys and just have a great year yes exactly yeah that's what get it out of your system yes you know stay at every five-star hotel do do the whole whatever you know go up the caribbean do all of that stuff i mean you take a year or two to sort of like find yourself and then but as i say you're it's gonna get very hollow very quickly it doesn't I know that I deeply know that, but I still have trouble believing it, you know, because you kind of think, how is that possible?

1:22:29But I know it's true. Yes. And, yeah, I would really take my time to sort of, we've sort of been shooting from the hip here, but I'd really take my time to think about it. I would say this, though. That's true, too. We've said this before, too. This is a fun question, and we're well over time. But I honestly, I don't want to really reveal too much about my personal situation, but I'm happy enough to admit that I don't have millions of dollars. I reckon if I got to, let's think about this. Yeah. If I got to four or five mil, I'm done, I'm out. Yeah, totally. Because that's enough to buy me a comfortable house and with the residual have enough of a capital base to generate enough of an annual return to provide more than enough income for me to live the kind of life I want.

1:23:18So I don't - That's the thing we're super too, right? Yeah. Go, keep going. That's all I need. I mean, you know, if I ever get there, hold me to account. I don't know if I will or not anytime soon. But, yeah, I really do look at people who have much more than that and just keep going for – for me, real wealth, you touched on it really. Real wealth is getting up in the morning and saying, I'm going to do this today and just being able to. Like there are no commitments. No commitment. And maybe today I do want to do some work or maybe I want to do some charity or maybe I just want to like stuff my gob full of like chocolate eclairs and truffles and have an ivory back scratch.

1:24:01I don't know what it is, but every day that I get to choose what I do is a day of immense freedom. And I will take that over being a billionaire that has to work 60 hours each week and answer investor calls and be hauled in front of Congress. And I'll go like, just like, nah, not for me, not for me. I think, you know what, I think that, I mean, they love the game, right? That's why they do it. and i i don't regret that i want to do but to your point i said like i love what i'm doing as i said i don't live the motley for like i love this podcast i love working with our members i love being able to you know hopefully help some people i i i'm not i'm not you know asking for any praise here i get paid for what i'm doing don't get me wrong um but i i love doing what i'm doing you know some people have this sunday afternoon i remember other jobs sunday night like oh god i gotta go back to work and it doesn't mean you know some monday mornings and i think i'd like the same bed but i kind of go hey how lucky am i to do this job so i i don't think i do what i love um that's why i said i wouldn't i wouldn't want to leave my job i'd i'd love to keep doing what i'm doing i love the opportunity to to help our members to help our listeners to help our readers um it's why i joined the company so i i wouldn't want to not do that in fact i i'd miss deep desperately not being able to say here is my suggestion to help you in this particular area whatever it is here's a stock to buy here's a you know i think about investing here's an answer to a question on a mailbag podcast when we're an hour and 25 minutes in um you know that's i mean i i genuinely love this stuff i would i wouldn't know what to do if i if i wasn't doing i'd be on twitter ranting anyway right so um you know that i i'm very very very fortunate but as you say the day when it's like actually no today i've got something else i need to do or want to do and i have the luxury to do that that is that i do a job i love the only thing i the only i want to add to my life is if i didn't want to work one day i could go and do something else and that's not fair to the company it's not fair to our members and our boss my boss would probably say um scott that's not how this works at least now but if i get to the point where i work for a dollar a year then i say hey mate look here's the thing i want to be around make me make me chief investment officer emeritus um you know give someone else a daily job if they're gonna if they're gonna you know sign the checks and and do whatever um i'll happily i'll happily take some honorific title and and you know be as involved as i can be but uh with a bit more as you said that's that freedom of saying what i want to do today i i'm gonna take two weeks off i'll see you see you in a fortnight No, Scott, thanks.

1:26:13Appreciate it. You know, that is freedom. That is success, frankly. That's the goal. That is the goal. We done? We're done. Unless I win 500 million and then we are done. In which case, this is the last podcast I'll ever hear. I'm out of here. You'd come back and do next week, wouldn't you? I never liked any of you. Screw you all. I'm out. You'd come back. I know you. You couldn't help yourself. Yeah, yeah, yeah. I should hope so, too. Cool. Thank you for spending a bit of time with us in a very, very long podcast. Lots of fun questions. Great to be in your ears. And until we speak next week, Fool on.

1:26:48Cheers.