Mailbag: incl. What can we learn from the Rich List? July 28, 2024

29:25It's like the balance sheet is much stronger than what the accounting rules would suggest. there was a business I was looking at recently who had a big divesture. And so you sort of see this massive drop in revenue and go, oh my God, that's a disaster. It's like, is it? No, they got rid of really low quality revenue. And actually the operating profit went up despite that. It's more complicated than that. And I know that when we make these comments, the response could very easily be, I get what you're saying, but it also sounds like very hard work. to which the answer is yes yeah and and but but not hard just it just takes time harder yeah this is the thing this is the thing that i mean it's the same with the diet industry right we want to take a pill and be super fit i want to be able to get this one bit of advice and make get and be super rich and it's just it just i mean i wish it did i honestly really wish it did but it doesn't but my point is it's just like being reasonably healthy doesn't involve you You don't need a degree in health and fitness, right?

30:32With investing, you don't have to be sort of Warren Buffett. But if you can just go those one or two steps further than most people are prepared to go, and most people are extraordinarily lazy in their thinking and in their research and in their effort, the edge that that gives you is not only significant, but if you can stick out at the endurance of that application of that edge, I think puts you in an incredible position for very, very successful returns long-term. I think that's right. So if you don't want to do it, don't do it. But if you want the prize, do the work, right? Like Federer didn't get to be number one in the world because he just, I'll have a hit on the weekends.

31:13Like, you know, it's just how it is. Yeah. And again, if you don't want to do the work, that's fine. Grab an ETF, go for it. Yeah, no shame. Yeah, exactly. no shame in that I recommend M2 Telecommunications an old telecoms company that's been gobbled up by a few couple of you know acquisitions in a row recently and the accounting was fascinating to speak about accounting with the stories it was telling if you if you were to go out put some advertising up and a customer signs up with you then you just get the profit for as long as that customer is a customer when M2 bought I can't remember they bought it now I can't remember they bought something else anyway Oh, I remember.

31:51Yes. And they were obliged under the accounting rules to amortize the customer list. Can I just explain that a little bit more? So, it's an asset. It's a list of customers. But the accounting rules will say, well, each year that goes by, that becomes less valuable. So, you need to – amortization is just depreciation except for intangible assets. It's the same concept. Yeah, it's a paper write-down. Yeah. But the point is, though, that is not a cash cost. Correct. And it may or may not be accurate, but it's based on the assumptions, reasonable or otherwise, by an auditor and an accountant. They could be way off on some of these things.

32:27Well, not only that, so it's the same customer acquired on the same day. One was bought in a merger, the other one signed up to your business. You spend money either on marketing or the acquisition. You don't have to amortize your marketing. The marketing is gone. And it's not necessarily even wrong to amortize it because the value of the acquired business is less if the customers you acquired leave you. So it's not unreasonable. Except as you say, the money's already gone. So what was actually happening was that amortization is a negative. It's an expense, right? So it reduced the reported profits.

32:54Well, hang on. They've already spent the money. So that's gone. They don't have the customers they've got. Those customers are giving them money. Maybe the customers don't hang around forever. But if they go away, there's not an expense. They just stop adding to revenue. In this case, maybe they were going away anyway. So you're losing their revenue and you're recognizing the expense. So it's making the profit seem lower than it was. And so this thing was on something silly, like 12 or 14 times earnings before, so after the amortization. So I was like, well, hang on. So earnings are undervalued and it looks cheap anyway.

33:23So again, looking beyond the numbers, once you do that, it's like, hang on, there's something here super worth doing. Can I give you another example? Because now there's 100 examples coming to mind. Transurban. Yes, great example. Someone said to me once, and it just really stuck with me, you only dig a tunnel once. But that tunnel will be depreciated each year. Now, I'm not saying there's no maintenance here, but what do you think is the more expensive part? Digging a tunnel? Or a kilometer underground? Oh, yeah, painting the lines. Like one is – and so transurban, well, they do it because they need to because there's a massive upfront cost and then you've got 60 years of an asset.

34:02So it makes sense to kind of do that. But it also means that their cash profits can be higher than their reported profits. Much higher. So, you know, much higher. So, you can look at this and go, well, but the net profit margin is not very good. It's like, take a look at the cash profit, my friend. Take a look at the cash profit margin. It's significantly better. What do I care about as an investor? Show me the money. Show me the money. I don't care what an accountant's come up with. I mean, I kind of do because rules matter and they're there for a reason. But what really matters is the cash. And if you can – one more example and I'll shut up.

34:39Woolies works on negative working capital, effectively. That's so good. Do you want, like, that was an epiphany. It was like, whoa. I agree with that. I know. So working capital is just all your current assets minus your current liability. It's the amount of money you kind of need in the business to work, right? Like, I've got to buy inventory. I've got to do all of this stuff. Well, they get the inventory, the fruit and veg, and there's all kinds of, it's in the news a lot at the moment, right? And it's up the middle of the shop, by the way, too. Go on. Is it consignment, the term is? No, it's not even that.

35:09They just have long payment terms. Right. So they get the goods. It's not even consignment. Sorry, actually. A very small amount of the business is consignment, which is you only pay for when it sells. Yes. That's consignment. But most of Woolies and Coal's volume, I used to work for Woolies and I used to work for a supplier. Do you want me to just quickly throw this in? Do it. Do it. Please do. So if you're, I won't use examples of the specific industries or customers because it's all changed since I've been doing it. Let's say a supermarket chain says to their suppliers, we would like to buy your baked beans, please.

35:38and thank you, we'll pay for those baked beans in a month's time. So which is, you know, net 30 days, end of the month. They're kind of standard payment contracts, right? Which is fine. So Willie says, okay, I will pay you for your baked beans you sent me at the end of the month, in the next month, right? So that's the rule. Cool, no worries. Willie's average inventory, I haven't looked at it recently, but it used to be nine days. So you get the stock in. It's a lie, but you now owe the supplier, right? So you now owe Andrew Paisers But no money has changed, Chance, yet. Right. So you got the baked beans.

36:08You sell those baked beans to Scott. Scott pays you for the baked beans. You get the price. Right, cash. So the money you get, and that includes the profits. You're not only paying the cost of the baked beans, you're getting the profits. So you buy the baked beans for 70 cents. You sell them for a buck. You get that dollar after the average of nine days, so nine days of inventory in store. But you don't have to pay the supplier for somewhere around 20 to 45 days, depending on what part of the month you bought the stock. So you get to use their product and their money. and the customer's money for a couple of weeks for free.

36:40Multiply that up over the entire country and baked beans and the toilet paper and the milk and the... And the fruit and vegetables and everything else. Yep, exactly. Negative working capital. Someone pays you to operate your business. There's other examples of that around there as well. And that is, I mean, that is one of the key strengths and moats and the ability to kind of do that is fantastic from their perspective. But again, the reason I bring that up is not to get lost in the weeds of Transurban or Woolies or M2 or any of these things, but just to really emphasize the listener's point here is that this is why you dig into the weeds.

37:14This is why you become a student of business because you pick up certain insights along the way that are just going to allow you to see things that aren't obvious and they're not obvious. But once you see them, you recognize that this is a thing of beauty. This is the kind of company I want to hold, right? Right, that's right. And on the other side as well, it's like, oh, you guys have to do it like that? That sounds... I mean, you stated statutory profit numbers look really good, but when I think about it, it's sort of like... What's also... What would you rather own, the retailer or the supplier?

37:47Yeah. I mean, now, I want to say quickly, actually, I want to give the other side of the story for a second. That is a wonderful business model, okay? Except that it then becomes factored in a price if your competitor does the same thing. So Woolies and Coles margins are lower than they otherwise would be if they had to cover the cost of holding inventory for longer periods. And so that's also true. Now, it's not perfectly true. There are competitive elements and dynamics and there are market power realities to some of this stuff. But the very simple reality is having it in any advantage or any circumstance is not enough in and of itself unless it confers an advantage which your competitors don't get.

38:23And why I say, not because you need to be better than them, but you can only earn excess profits if you can exercise some particular attribute that someone else can't match. Because as soon as they can, it effectively all gets capitalized in a price. So Woolies and Coles have negative working capital. Beautiful. Except they both do. So they can both lower their prices because you don't have to pay the cost of holding the stock. And they're not going to drop their prices just because of it. Don't get me wrong, they're not a charity. But as soon as Woolies says, so you know, guys, we make 6 % margins right now.

38:54We've done the maths and we actually can get the money earlier and pay the suppliers later. so if we drop our prices a little bit we can afford to do that and then we can get a march on coals and coals goes well now we're gonna have to do it so they both do right yeah and around and again it's not perfect competition i'm not defending the supermarkets god knows there's been enough of that in the in the media recently with price gouging allegations which by the way are not true um with different topic but um that that's that's that's the reality so you there's two things to think about one is what is the advantage where does it come from where is it how is it conferred but then also is it being competed away or does it give that business the ability to earn excess profits and those two things together are really important yeah yeah and all of which is to say dig dig deep yes and it's worth it when you're under and we know cover that stuff it's like oh wow hang on there's something there and it's really cool i just had another example but i won't i won't go there let's let's move on well we get to we get to stay with our with our financial statements actually because we got another another question which comes from chris chris is dear scondrew i.e my name for the siamese coupling of scott and andrew during podcasts.

39:59A few questions to keep your pod machine pre-recording, motoring along on Renewable Energy while you take a short break. Thank you. We're back down to the balance sheet and the P &L, mate. Question one. Could you please explain how a company's choice to either expense or capitalise research and development costs affect the profit and loss statement? Which ASX listed companies choose to capitalise or expense R &D, and Should an investor view this favorably or unfavorably in specific circumstances? Oh, what a great one. Go on. So, there's a bit of discretion that's allowed, but you should argue.

40:41Well, when I say, let's break it down a little bit. When they say capitalize it, it means that I'm going to spend$10 ,000 building something. And rather than use that as an expense on my profit and loss for that particular year, I say, no, it was an investment. I spent$10 ,000, but now I've got an asset that's worth$10 ,000. So I capitalize that value on my balance sheet. So rather than incurring an expense, you're purchasing an asset. It doesn't show up on the profit and loss. So I can spend a whole bunch of money and it doesn't impact my profit and loss either way. And that's appropriate. So you use a transurban example.

41:16Yes. Just to tie that back to what you were talking about. This is the tunnel at Transurban of Doug. And they've said that tunnel isn't a one-off expense. it's an asset that I now operate. Yes. And so I'm going to depreciate that asset over years. It's going to reduce my report of profits because its useful life is 30, 50, 100 years. So I'm going to list that expense against the revenue I earned during those years under the so-called matching principle where you match your expenses and your revenues. Yep. And I would argue that the period over which it is amortized is shorter than the reality.

41:48And that's the other thing to think about. Sydney Harbour Tunnel will be there in 100 years time, but I guarantee you they're not amortizing over a hundred years. In other words, the amortization bill is bigger than what is probably reasonable, which probably means that they report less profit than they actually make, et cetera, et cetera. Some things are really clear, like I'm buying a tractor or something like that. It's less clear for IT companies. And like, you know, there's a lot of software companies out there. And so the example that comes to mind here is Objective Corp, which I've long been a fan of.

42:18And for whatever reasons that escape me, I don't own now because it's valuation, but for years I've loved it. Anyway, what an idiot. There's a lesson there in not being too finicky with price. But they had a policy for the longest time, we expense everything because our developers, they're working on the business. Sometimes it's just to keep things ticking over. Others, it's because they're working on the new software upgrade and they're working on a new module or a new product like that. But either way, they're here. We're paying them. It's an expense. And we don't capitalize anything. So it looks – so in other words, their profit and loss, I would argue, is actually pretty clean and very conservative.

43:06Very conservative. Now, they've changed policies in recent – I think last year, the year before. Bit of a push, I think, from analysts and they're going, well, no one else does. Very few people do this. Why are you doing this? You are understating your profit here. Sorry, you're understating your profit here. Your expenses are larger than they would have been if you capitalized it and amortized those expenses. By the way, it's another great example of an insight that enabled you to see the value better than most because once you realize that they didn't capitalize it, you could look at their profit and loss and go, this is much better than what they're saying.

43:38And that was an edge that you had over people. Now you don't because now they do what everyone else does. Is it right? Is it appropriate? Again, it's not unreasonable to do, but the discretion element is, it has been abused, I would argue. Oh, yeah. On the ASX, on everywhere. Not by objective, just to be really, really clear. No, no, no, sorry. I'm not trying to throw objective under the bus here, but people will just sort of say, no, no, no, we're all built. Just because you spent 100 ,000, make it bigger numbers. Let's say you spent$10 million on building the latest software for whatever. It doesn't mean it's worth that much.

44:12In fact, this is why you have write downs in later periods. Like, so you remember that$10 million you capitalized to build that software that no one uses? We can't carry that on the balance sheet at$10 million in good faith anymore. The auditors do not like it. Like maybe when you first capitalized it, that was reasonable. Five years later, no one's using it. It generates no revenue. There's other competitors. It's just, it's not worth that. And you'll take a write down and the company will go, oh, it's a non-cash write down. Don't worry. it's like yeah but it's just recognizing the massive loss that that was that was um it was absolutely evident now it's just being accounted for it and being realized so i've kind of tangled myself up in all the detail there i'll pass the ball to you right um so there is no there is no easy answer as to who should do what so the question of you know which companies do it i don't know we don't have a list of them honestly uh we probably grab some examples but i don't know um the pros and cons andrew's kind of been through i i have gone full circle this we've mentioned this before a little bit so i'm not going to spend too much time on it but just in respect for those listeners who've heard me heard me talk about it before i was like all of us you start with the pnl you learn all about that you learn about the matching principle and accrual accounting and that kind of stuff and that makes some sense right if you if you have a if you have some revenue and it costs you money or you have to allocate a resource towards earning that revenue the tractor drives around the field for a year a year's worth of you know the cost of that tractor should go against the year's worth of production it makes a whole lot of sense and you're matching one with the other and working out the underlying profitability of the farm and if the if the matching thing confuses you think about it in a whole in a whole of life circumstance instead if you have a tractor for 10 years you have 10 years worth of crops then the 10 years of revenue and the 10 years of tractor expense obviously match off the problem is in a single year or a single month or a single six month period you have to kind of slice up that pie so that's what you know when they talk about matching you could aggregate it and then divide it back up but you hopefully it's just a way of explaining the same thing yep there's straight line depreciation there's more of an exponential decay it's very yeah yeah and this is where the this is where the manipulation can come in um so i used to i used to be a fan of that and then i went to a fan of well actually the cost the money's been spent let's not pretend the money doesn't exist it's been spent it's real to andrew's point the trans urban cash profit looks better uh you know focus on the cash the cash is the cash or it's actually the money that comes in and that's that was where i got to i've gone back to the matching principle now for the most part but again as always it depends and both and so i the reason i the reason i've gone back to is take take an appreciation of software if you were to uh if you let's say you you you update the the version to version one then version two the version three every three years you do a new version right that first version has a three-year life the second version has a three-year life the third version It's a three-year life.

46:56And on it goes. Let's pretend it's that simple. It never is, but let's assume it's that simple. First year, you put all the costs into it. You spend a million dollars building version one in year one. Year two and three, you don't do anything. Year four, you put another million dollars in it. Nothing in year five and six. Now, if you depreciate it, you say, okay, it's$300 ,000 a year or$333 ,000 a year. Every single year, that makes a whole lot of sense. Cash accounting would say, no, no, no, just look at the cash. My concern on the cash only is in year three, you look much more profitable than you really are because there's going to be version two that's being released next year.

47:29And while you're not working on version two yet, you're much more profitable because you've got no R &D expense to offset against the revenue. So year one, you lose money. Year two and three, you make a fortune. Year three, you lose money. Year four and five, you make a fortune. And my question is, which of those statements most adequately demonstrates the underlying earnings power of the business? And so generally speaking, I prefer a capitalization, in other words, recognized as an asset, and then depreciate that asset over its life. The but, or the it depends, or the both, is Andrew's example of the tunnel, where there are arbitrary lives assigned to some of these things.

48:04In which case, you know, speaking of energy policy we did the other day, the reality of, for example, solar panels. You know, how much life is left at what point? People say, oh, it's only a useful for life for 25 years. Turns out there's some 31-year-old panels out there still producing 80 % of their power. Now, under the accounting rules, those panels are now worth exactly zero because they depreciate over 25 years. And yet, they are still pumping out power. So if you knew that, you could re-evaluate the P &L and say, well, actually, the depreciation is X. It could be a little bit less than that.

48:39So profit's actually a little bit higher. Therefore, I found something about the business. It is more profitable than it appears. And that's the opportunity. So that's why I'm going to sit on the fence, not to not take a view, but because looking at both, I think is the most important. I talked about M2 and capitalization of, you're talking about R &D particularly, of course, Chris, but capitalization of customer lists, for example. Same kind of idea. If you look at it and say, the accounting rules are appropriate, they should be like that. However, the thoughtful analyst, I don't mean professional analyst, I mean anyone, any investor, the thoughtful person who's analyzing the statements and goes, but hang on, in reality, this is a bit different to that.

49:14That's where the opportunity can come. Yep. Let's go to question two. This is about Solpats. I own shares, as we all know. Some questions from Chris about Solpats. A company that frequently comes up for discussion as having beaten the market over the longer term and has periodically featured as a recommendation, says Chris. At the time of writing, a recent presentation, Solpats announced that the total portfolio value is$11.5 billion, with a strategic portfolio more than half of that at$5.9. that consists of New Hope Corporation, TPG Telecom, Juas and Brickworks, Pengarna Capital, Apex Healthcare and Ares.

49:50Apart from Brickworks and TPG before its merger with Vodafone, I don't think any of these companies in their current form has ever been recommended by the Motley Fool. However, my view of various share price charts indicates TPG has been a poor investment since its merger with Vodafone. Unless I'm mistaken, both Ares and Pengarna Capital are trading near 10-year lows. Despite New Hope having done very well in recent years, it was trading around these price levels in 2011-2012. That doesn't seem to me like a great buy-to-hold investment, even if it's currently generating good levels of cash. Unless this time it's different, I can't imagine either of you recommending a coal miner, particularly due to fluctuations in commodity prices.

50:31So how does Solpads outperform the market? And should the company's board review its strategic investments that haven't performed so that its returns improve even more? i'll take first week this one mate because i'd love your love your thoughts yep so chris um i'm gonna start from top down mate uh i would never buy new hope coal uh i also don't have rob milner's experience or new hope managers experience in the coal industry and for me solpats is absolutely an investment in the underlying businesses but it's also an investment in a group of people who have a century plus track record of creating value for shareholders so there is part of my investment thesis for solpats is the people running it not just or only the investments they're in in fact because i could buy them individually if i wanted to right i could i could pull the whole thing apart and buy the bits and pieces if i if i wanted to so that's that's that's probably the first thing um second thing you ask about the individual companies and i think i don't want to get into i don't want to get into being defensive about it or justifying it or arguing robert in his corner because he doesn't need that and i don't need that um so a couple of things new hope apparently allegedly if you believe the stories at the time i've never asked never had this confirmed was on the chopping block or was on the sale block in 2012 ish uh when the coal price was high and they didn't get a deal away um what you're gonna be careful of in investing is comparing tops with tops if you like a lot of people say to me well the market's only up x percent since it's the high in 2007 therefore investing is a terrible idea as if the time before, during and after wasn't a good time to buy.

52:05So could or should sell parts of Sold New Hope in 2012? Probably, yeah. Then when the price fell, what should they have done? Well, by holding it, they've recovered all that value over that period of time. Does it make it a great investment since then? No, not if you use that high point. Since their purchase, probably very different. And I guess my point there is, it's only a question of what do you do at a given point in time? I.e., they tried to sell it then, couldn't get the sale away. Could they have tried harder? Could they have asked for a bit less? Could they have done a different deal?

52:32Yes, absolutely. Do they regret that? I don't know. You have to ask them. But since then, has it performed really, really well with both cash flow and share price? Yeah, absolutely. After that subsequent low. So what should they have done at the time? Sell it. What should they have done after that when it was low? Well, you should hold it because the recovery has well and surely justified their patience. When it comes to Pengana, they only bought pengana recently so if it's a 10 year lows they bought it recently it's probably a good thing right you want your company to be buying at 10 year lows uh or not not at 10 actually it doesn't matter what the share price has been doing you want to buy cheap prices so the pengana deal is relatively new uh they bought it i want to say less than two years ago i think i could be wrong by six months either side there um you know what happens next matters more than where it's been in the past.

53:19Other than that, I think the broad view is that, well, first, they have beaten the market, right? So I guess the key thing is if we cherry pick, it's been like a portfolio. It's like if someone said to me, Scott, your Motley Fool Odyssey service, three of your companies are down by this much. If you hadn't bought those and just bought the others, you'd be doing better. It's like, yeah, I really absolutely would have. That's very, very true and very good. And I absolutely appreciate it. If you'd picked these numbers, you would have won the Powerball. right so it's a little bit it's a little bit and again i'm not being defensive about me or or shop so i don't need me to and i don't need to but um there is some element of kind of like but there's some bad stuff there so surely it's a bad idea right uh you say how's it beaten the market i think the kind of point is that it has and it has because the value creation for all of the assets overall have done really well tpg for the last 10 or 20 years has done remarkably well yes since since the merger it hasn't absolutely uh should they sell it now maybe yeah um i wouldn't as far as they do actually because david teo has kind of walked away and that that deal with teo was kind of part of why they held the company in the first place so i dare say it's something they would be thinking about it if they'll do it but i have no special insight i've not asked them about it um but yeah they may well if they don't like the future of it the flip side though is of course it's on badly since the vodafone merger but doesn't mean it'll go badly forever or or from here uh as many companies have been down 50 from their highs and you'll see look the companies have 50 amazon's a great example it's dropped 50 dozens of times i think i don't know the actual numbers it's at least a dozen it might be dozens you know in its history right so any one of those points of time someone would say let's have 50 from as high as how can you possibly own amazon depends what it goes to now amp's been down 50 from as high as lots of times and keeps falling so it's not a justification at all but it's just a reminder that these things move in different directions so that's probably my view should the company's board review its strategic investments um yeah i'm sure they do um they should they should they should do it as a matter of course but Chris then finishes with that haven't performed so that its returns improve even more the question isn't again will they go back five years and sell some stuff that hasn't performed?

55:22Yeah of course but should they review them because they haven't performed to date? No that would be a terrible reason to do it all that matters and you've talked about this before Ram is what happens next not what has happened so here's the thing we talk regularly about going to cash if they sold everything that went to cash and bought them back they buy back at the current prices and if they do well from here, you go, see, look, I bought them at cheap price, they did well, which would be exactly the same as holding them at cheap price and not selling them just because they're down. So really, really important one there.

55:51Any thoughts on that, mate? No, I think you got it. Look, it's just, you are buying, it's a jockey play for want of a better term. You know, you're buying the expertise of these people with a pretty good track record to go, okay, you seem to know what you're doing. In much the same way as if you might invest in a managed fund with an active stock picker that you like, right? Similar structure. I'm sorry, different structure. But it's the same idea. You know, there's nothing. It's not so much about the assets per se. It's the person and people that are buying them and their rationale. And I'm like you.

56:27I'm not a big, I'm not a big, I'm not a commodity investor at all, really. New Hope was different though. New Hope was, they dug the hole. Talk about depreciating costs. Yeah, that's not true. Yeah, yeah. They dug the hole. The hole's dug. They're just like extracting it now. Generally speaking, it's a bit of an aside. Mining companies tend to not be that great because it just takes so much money to sort of get the thing set up. And then once it's set up and you start making money, well, it starts depleting and then you've got to start reinvesting again elsewhere. So, there's this ongoing capital or capex requirement.

57:04New Hope was different. They had a ton of coal there with most of the assets and infrastructure already around it built. So it was just sort of like they didn't have, it was a different kettle of fish than what you might more broadly generalize to. And that's why there are always exceptions to rule. I would never invest in X except for this one over here and for these reasons. And that's perfectly sensible. And I think that shows, you know, you don't want to be too rigid in your thinking, right? It's like, I generally don't invest in X because of Y. Okay, cool. Why did you buy a company that just said you weren't going?

57:39Well, because it's different. And that is perfectly reasonable. So, yeah. And, you know, I've actually heard them speak before on that. It's just like it's not that they're blind to the fact that coal is likely a sunset industry. They're not blind to the fact that there's all kinds of regulations and difficulties around that kind of stuff. but the world ain't changing tomorrow. It ain't changing that quick, right? There was plenty of, you remember a few years ago, there were plenty of people who was, what was it called? Burson at the time, dumping Burson stock because electric cars meant that there were fueled parts in cars.

58:17And, you know, I remember speaking to the CEO, Daryl Abotomy at the time was like, even if the transition happens under the timeframes that people think there's still, you do realize that the car, they call it the car park. The car fleet out there is still going to have a huge number of ICE, internal combustion engines out there and in fact they're going to be older and they're going to need lots of parts. So you can get too sort of hung up on generalizations that might be true but still miss the specific point. So again, it's yet another reminder this podcast of the devil's in the detail. It depends.

58:50And thank goodness it is because only those that look will recognize it. Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener.

59:03You will love this question, I'm absolutely sure. Here's the third question. Australia's top 200 rich list was recently published. Of the top 10, I think only five individuals or couples had much of their wealth tied to their current or previous involvement in publicly listed companies. And Chris mentions Fortis, U, Atlassian and Glencore. And only one of these companies is ASX listed. Of the next 10 wealthiest, only five accumulated wealth from involvement in publicly listed companies. WiseTech, Seven, Rees, Aristocrat, Crown Resorts, Westfield. Of the next 10 wealthiest, only two have their wealth tied to publicly listed investments in Premier Investments and Goodman Group.

59:45It appears that the founders of Canva and Chemist Warehouse may soon join that list. But arguably, like the Atlassian founders, they were rich listers before their companies floated. I'm sure this trend would continue if I look through the next 170-odd rich listers. Does that tell you anything from an investment perspective about publicly listed companies, the way they are managed, and if there are any qualities that these top 200 all have in common that we should look for in the managers and boards of listed companies? Warm regards, Chris. Yeah, it's interesting, isn't it? Good question. You know, one of the richest people on the planet is allegedly Vladimir Putin.

1:00:26There you go. He doesn't own a publicly listed company either. It's a kleptocracy. Yeah, you know. So you do you? Is that your advice? Yeah, no, I just, it is absolutely not the, I think it's right to make that point that listed entities aren't the most likely way for extreme wealth. Yeah. In fact, I make this point where I can. why would you list? Why on God's green earth would you list as a business owner? If you were to keep running the thing, yeah. There's two reasons and there's only two. I don't care what the investment bankers or what they say or how they spin it. There's two reasons. Go on.

1:01:11You need money, right? Because you want to expand. And the public markets are a great source of capital. It's kind of the point of a public share market, right? They kind of why they exist for, if you really want to get to the fundamentals of it. So that's why you would do it. because it comes with all the regulatory burden, the insight, the reporting requirements, any number of idiot analysts knocking on your door and backseat drivers everywhere. Just like what a pain in the backside. I reckon most public CEOs spend more time dealing with idiots like us in the financial sector than running the goddamn business.

1:01:46And it's a huge distraction. But you'll do it because I want to raise a bunch of money more cheaply than I could in the private space. Right. The other reason is because you want to sell down. It's a really great way to sell down. It's hard to sell. Private businesses are much more illiquid, much more difficult. If you want to sell the whole thing, it's a little easier. If you want to sell some of it, it's almost impossible. It's not impossible. You can find partners, but it's a whole lot of grief. I'm not saying that they can't be good in better. Obviously, lots of listed companies. Elon's one of the richest people in the world, and all his money is in – well, I shouldn't say all, it's SpaceX.

1:02:19But, you know, a publicly listed company, Tesla accounts for a lot of that, right? So I guess, what is the so what? I don't know what the so what is. And it's not to say that any company that lists is doing so for nefarious reasons. It's not about the money that you may need or want or raise. It's about the return that you get on that. And we've seen gazillion examples of companies that have raised money through the public markets and gone on to just like absolutely dominate their space. Look at NVIDIA, look at Microsoft, look at Apple, all these big names, Google, they're all listed companies and went on to create immense value after listing for their founders and the owners as well.

1:03:00I think partly the reason you may find that it's a lot of people in these rich lists are not in listed companies is because it's kind of because they haven't had the easy mechanism to sell down. It's kind of forced them to retain their ownership, right? so I don't know what my say what is I'm just going to pass to you so I like this question a lot I think I think that the

1:03:36so there's two things you you on one hand Chris as I don't mean this badly by the way you're asking about but what can we take from it? And so I think that's different to how do they make it or is it reasonable or whatever else. It's really hard to make a fortune. Buffett is one. And even then he kind of had a controlling shareholding in the business that he used as his vehicle anyway. But it's very hard to slowly compound away your own money. You know, the claim we normally hit with is, well, if this is so, why don't you do it yourself rather than telling us how to do it? Firstly, because I can't help myself when we're like ranting secondly i didn't i wasn't born with a trust fund right if i was born with a with a 10 million dollar trust fund i probably wouldn't be doing this job i'd probably be on a yacht somewhere right and that's you know i'd be nice but i also enjoy my job so i'm glad i'm not there um so capital takes time to accumulate and it's very very very hard unless you start with a really large lump sum for any of us to go from zero to rich list just from investing you just you just can't compound fast enough the reality is you will always always always make more money running your own business, if it's successful, than investing.

1:04:41It just is because you're creating that value at a faster rate than share prices can compound. Not every share price that we want. I mean, Fortescue is a great example of one that was, you know, you could have put your license at Fortescue when it was two cents and, you know, you'd be on the appropriate yacht at the moment. But on average, investing in shares, it's a spectacular way to compound really impressive wealth. But never, never, never rich list wealth unless you're Buffett. so and those founders do it because they were just they were by definition buying or investing in the company when it was zero it was a twinkle in their eye so they're on the ground level so obviously if it's successful they're gonna get better compound returns and you invent Canva to a global market of X million billion people whatever it is you know that is always going to you know the idea is always going to now here's the flip side going into business is a terrible idea for most people because most people lose right most people this most small businesses fail so you've got again think about risk and reward that that's this is exactly they're not they're not risk doesn't equal reward don't let anyone tell you that but you know the the the risk you'll take to stay in your own business is is phenomenal most people don't make it and and so you look at camera say well if everyone did that you know everyone would be a billionaire why would you invest the answer is because most people can't and so for most people most people started a business shouldn't have they should invest it instead because they lost all their money and so you kind of you know the thank goodness people do though right well that's what i was gonna say you need to be really careful of using single examples of success as emulate to do it yeah my canon brooks did this therefore i should do it's not a very good idea um even though he did it and other people will most people won't even if they try then around this point you have you know we need those people we need we need the absolute naive idealism of a small business person who wants to invent the next canva because you know who in their right mind says i'm going to be a billionaire by by writing a piece of software to let people just design fancy powerpoints online now it's not that i know but work with you yeah yeah you know that like and frankly who gives them money who says great idea microsoft's a massive conglomerate uh there's a million million other graphic design pieces of software out there adobe and everything else and you want to what how what no don't be stupid and again remember there's 50 000 other people who tried it haven't It didn't get to be Canva.

1:07:01Only Canva did. Survivorship bias is really something you'll be aware of. Right, exactly what it is. Every business biography, I've called it, you know, in the past, I think, yeah, in the past, I've called it, you know, success adult movies. We get excited about the one idea, the one example person who made it and think, I want to be like that. Yeah. Now, all that said, what can we tell from an investment perspective about these businesses? I think the crossover for me, and despite Ram's a little bit cynical view about why you would list. It's absolutely true, by the way. But what is the lesson?

1:07:33The lesson, frankly, for me is I much, much prefer businesses run by founders or by people who think like owners. And they're often the same thing, sometimes different. Sol Pats, to use the previous example, not a founder-led business because the business is 100 and something years old, the founders died. But the fourth generation of the same family is running the company and they're running it like their own. They're running it on behalf of shareholders. That's a pretty good place to be. But if I can find businesses, not everyone will be successful. but an ASX business run by a founder or someone who's like a founder you mentioned Musk Musk is not Tesla's founder despite common perception but he it's his own fiefdom right he runs it like it is he runs like his company for better or worse by the way uh Daryl Abadmi at Burson or now BAPCOR you mentioned before mate he's now left that business but he was the architect of its growth you know he built it in his image effectively that stuff is really really powerful so I love founder CEOs I love founder owners um I love founding families or owners with skin still in the game lots of you know big shareholdings why because people who build these businesses are a different breed to quotes professional managers and i don't mean necessarily run down those people are professional managers but i do think people who start these things they think about graham turner at um flight center right he jerry harvey is an even better example an iconoclast if ever there was one but he runs it his way and he runs and so you're kind of like he wants this is his baby it's it's his business it's his name on the door uh literally he's the guy who wants to make this work now he's not the ceo he's the executive chairman um katie page is the ceo but he runs or they run harvey norman like it's the iron shares by the way it like it's their business they want to make it successful they want to get in and do that you're not they're thinking about on saturdays and sundays they're they're living and breathing this thing um that is a pretty good starting point so by the way so the passion and the insight too the person who started the company who bought it to fruition and made it ASX worthy in terms of size, it's doing something right.

1:09:26They know something, right? Not always, not forever, but they know something. So if you care more, if you have more vision, if you have more passion, if you have the insights that made it successful in the first place, and they go public and you get to invest alongside them, that's general. Twiggy at Fortescue, I own shares in that as well. You know, again, will he get it wrong one day? Yes. Will he get it catastrophically wrong one day? Maybe. But for more often than not, I'd rather have him running the place and calling the shots. uh because he's the guy who built the thing he's he's building his image he he doesn't play the game you don't have to play the game if you're you know independently wealthy uh owner of most of the company or the largest single shareholder you run it your way people look at jerry and say oh jerry's doing this yeah true but he's running his way and he's been successful you can back him or not but i i would so that that's can we take anything from their the way they do it a little bit can't be replicated not easily so i wouldn't probably invert the question chris and say you How do we take what they've done as independently wealthy private business owners and put it in the public markets?

1:10:26I'd say look for public business owners who behave like private business owners. That's actually what I would be looking for. Yeah, I have in a lot of ways even more respect for the private business founder operator because they have done it without the cheaper capital from the public markets. and I've incredible respect when it's all been internally funded. Yeah. You know, I think. Some of debt though, I suppose. Yeah, that's true. Yeah, they've used it as long as they just didn't get lucky on it, I suppose. But yeah, you find that I think when the private market without the institutional imperative and the distraction from all the analysts who can't think more than six to 12 months in the future, you just make longer term decisions.

1:11:12You think under longer timeframes. you're not just you're not going to do silly things to bring revenue forward or delay costs just to sort of make someone happy in some specific quarter or like that's like people start with doing that it's like drugs right it's like i just i'm just going to give it a go and then before you know it you know you're in a gutter with a needle out of your arm it's like it's the same with the it's the same with the executives are like well maybe we should like the market is forecasting this maybe we could just do this and that before you know it it's It's like it's all a sham.

1:11:44And you've got to – you remove the poorer incentive structure for private companies and they've been able to do it. We've invested a lot of money, but we invested our money that we generated ourselves or that we were able to secure independently. We've retained a bigger ownership stake as a consequence of it. I think the other thing to realize too is that money is an incredibly potent incentive until you've got it. And then it's not. and then it's more about ego and legacy and those kinds of things. So it kind of matters because money is the measuring stick that when I'm at the, I don't know, the club in the Hamptons, I'm so far out of my world, I don't know what rich people do, but the money is still there.

1:12:30It's not because, oh, now I can finally get that car that I want or take that overseas trip that I wanted to do. It's there purely because of ego and you get people who are insanely wealthy that are still incredibly passionate and driven because their identity is tied up with the business. And they want – it's probably more of a male thing because that's how pathetic we are, but they want that legacy. They want to be in the history books. They want to be looked at retrospectively like the Fords or the J.P. Morgans or the, you know, insert your favorite industrialist here kind of thing. and it sort of sounds like very base and the rest of it, but you know that they're trying a lot of the time too because you could, if you're Elon, you really could just go sit on your yacht and do whatever the hell you want, whatever he, you know.

1:13:21You could do the John McAfee kind of approach, which we won't go there too much in details, but, you know, you could, but they don't. Why ego? You know they're trying, right? Correct. I think that's exactly it. And I think that's, I mean, look, that can be dangerous as well because ego can push you to throw one bet too many, one set of odds too far. It can also give you false confidence. So you've got to be a little bit careful. But you're right. That's, you know, there's no surprise most of the great business people, most of the great successful entrepreneurs have had chips on their shoulders.

1:13:55They're out there to prove someone wrong. And, you know, that is, I don't celebrate the fact they have these demons to deal with, But it also means that, you know, what's Elon doing? He's spending his entire life trying to prove the rest of the world wrong. I'm no psychologist. I'm no Elon expert. Got bullied at school. The nerdy kid that no one wanted to play with. He is just out there saying, stuff you. I'm going to show you guys. Look what I can do. And that's dangerous, but it's also incredibly, incredibly, you know, attractive as an opportunity because if he does manage to get it right, then that's what's driving him, right?

1:14:31He wants to be the best. He wants to be the biggest. he wants to do so you harness that stuff um it is the and again i say this with absolute love it is the ego and the uh reality deprivation of every entrepreneur who thinks i've got a solution i can do this i i can i can see what they can't see i can do what they can't do it is it's a special form of madness right it's there is there's some there are some really special kind of yeah it is i mean i i gotta say with absolute love because i as you say mate i'm glad people are doing it This is how innovation happens when people go, I can do that better.

1:15:02I mean, Steve Jobs goes, I'm going to invent a new type of computer, which operates on an entire operating system. The operating system until, effectively, until Chrome, I suppose, like there's Linux and stuff and Unix, but you know, for the rest of the world, the operating system, the only operating system was the IBM PC compatible operating system. And Jobs goes, nah, go do something different. I'm going to, like there's no one in, there's no, and 95 times out of 100, that doesn't work. It's a stupid idea, right? But what it does work - Or I'm going to have a phone with no buttons. Right, exactly.

1:15:30No keyboard. What the hell, you idiot? And so, you know, honestly, it's that vision that you have to have. Because again, other people try it and fail, right? Microsoft tried the Zune music player to try and beat the iPod, right? It's just one of those things. So, sorry, long diatribe. I think the best thing you can learn from the rich list is find public companies that operate with the same DNA as private companies. Yeah. I think, honestly, that's how it would take. That is a great – yes. Actually, I will just add one more at the risk of extending this conversation further than it needs to go.

1:16:05But I think – and it's not to take anything away from anyone, but what I always notice when you look at those lists is the role of luck that was played. Yeah, that's – yes. You know, were they smart? Yeah. Were they hardworking? Absolutely. Did they have a good idea? Yep, no arguments there. The number of smart, hardworking people with good ideas that went bankrupt outnumber the other ones 100 to 1 exactly what was the difference right place right time yep you know and and and again i'm not trying to take anything away from people but it is it is really important to recognize that that had they done exactly what they had did but five years earlier or five years later you never would have heard their name that you wouldn't know and it'd be someone else who did it it was not like there's no one was ever gonna come up with the smartphone stone steve joe just was the first but if he didn't do it someone else would have done it and if something you know a little bit had gone differently it luck is just such a massive role where these where these founders get in trouble to my mind i've mentioned this to you um probably off air but if not on air um was was and this is what worries me a bit with someone like musk is that you surround yourself with sycophants and yes men yeah who stroke the ego and i think after a while you just form a god complex and and you you you insulate yourself from constructive criticism and doubt and oh you're a genius oh another triumph your majesty another another masterful stroke of genius and it just that leads to bad decisions now in the early days they've got something to prove and no one believes them they've really got to work hard for it now you're in a situation where everyone just going to, whether it's a dumb idea or not, told you, you know, and that's where, that's where I start to get worried with these kinds of individuals.

1:17:56So, and I, I define anyone to resist that. I reckon I could take you, Scott. And I reckon the first two or three years, you're humble enough and modest enough to go, well, thanks guys. But no, I've still got to keep, keep, you know, a level head on things. 10 years later, I don't know. You start thinking, yep, I'm God's gift to business. and you will think it after, you know. We've talked about it before. Was it the Roman emperor used to hire a slave? Hire a slave. Have a slave. Hire a slave. That's brilliant. Have a slave behind the bridge's whisper in the ear. Remember, you two are mortal. You know, when they would parade down the main street of Rome.

1:18:33And it was just a very, very, very important thing. And if ever I become some multi-billionaire global business person, And I would want someone just to regularly come up to me and say, you know, you're probably wrong on this. The only, of course, if I tell you to do that, you wouldn't want that person because you'll do differently. That's the hardest part. There's a great podcast, How I Built This, Guy Raz. Yeah, great, great podcast. He interviews people and he's asked, I haven't listened to it for a while actually. I must admit, it's like a lot of podcasts. Yeah, me too, yeah. But he used to, I'm sure he still does, ask people at the end, what percentage of your success is down to luck and what is skill and hard work?

1:19:08And he asks it apologetically every time because I'm sure he's scared of the person who has a guy who has the temerity to ask the question as to whether it should be hard work or luck. And I always, always, always cringe, but it's fascinating because the number of people who say, no, it's all my hard work, it's all skill, I did it all, and I just want to go and sell their shares. I don't necessarily even own them. It's like if you got to that point and your only assessment of your success is what's all my hard work and skill, and there's the occasional one who says, oh it's all luck yeah i mean i worked hard but man like and i my personal view is you know and i think let's take back to investing for a second that's this is the other bit when you start to believe your own stuff your own your own press you're in some real trouble right yeah so you know have have your strong opinions have your conviction your stocks when you're when you're when you're when you're writing air quotes right when you make money is it is it hard work of course is it skill to some degree always is it luck you betcha even the stuff that goes really really well you know the ones i've made money on you know what was i was i lucky to come across that company yeah was was i lucky to have the insight yeah was i lucky to have the experience that gave me the insight yeah um you know right back to being born to the parents i was born to and in the country i was born i mean you know the the it's not just self-flagellate or to to hide your your light under a bushel it's just to be really really humble about it because pride comes before a fall right it just does it's again speaking of cliches the reason why it's a cliche okay um it when you when you stop remembering the role of luck other people consequence circumstance all that stuff and you kind of go no that's all me i'm just really really good um it is it is dangerous and i've got to say musk is already on that train yes you know and and frankly this is the hard part with ego right sometimes he's got a big ego because he's just a really really really stupid smart guy which is absolutely true is his judgment as good as his intelligence i don't think so which is no no slight on him by the way because he's so intelligent it's hard if you just be that good but you know if and when musk brings it all undone i've said before i think elon musk is tesla's greatest asset and greatest liability it's greatest risk and for exactly the same reason that musk being musk it tesla doesn't exist without musk being musk he couldn't have been any more humble he couldn't have been any less certain he could have any less ego he wouldn't have got there you can't have taken on what he tried to do without that right the problem is when he when he continues on that path and makes a bad call or gets some bad luck or just just misunderstands a situation you want to be really careful it is it is death or glory genius is no guarantee of wisdom as i quoted from the oppenheimer movie the other day it really stuck with me yeah i mean twitter was a god awful purchase maybe that changes in 10 years time we look back on that and go okay no it turns out it was actually pretty good but so far it just got awful investment that's a great that's a great example someone actually back to bitcoin let's let's finish this episode with bitcoin we're over just for fun someone i was talking about this bitcoin thread that i mentioned um relatively recently but long story but anyway i just tried a bit on my thoughts about bitcoin here's what i think here's what here's what's going on here's what i reckon uh and and someone posted uh by apparently michael dell of dell computer is a bitcoin fan these days so i'm told right and he he tweeted this other guy tweeted me like well obviously you understand obviously you must respect michael dell right or something like that.

1:22:27And it wasn't the wrong question, but it was applied in the wrong space. Domain expertise in one area doesn't mean you're an expert in others. Maybe he's dead right about Bitcoin. Maybe the guy's a polymath genius, right? Charlie Munger was. Who hated Bitcoin. I don't mean about Bitcoin necessarily, but yes. It's not about Bitcoin at all. My point is that Michael Dell is a great businessman who built a great computer company. Does that make him right about the future of currencies in general, Bitcoin specifically? Maybe, but not necessarily. any more than if I'm half good at this investing thing doesn't mean I'm necessarily going to be great at something else completely unrelated.

1:23:01Isaac Newton lost most of his money in the South Sea bubble. The South Sea bubble, that's right. Great example. He was a fundamentalist Christian. He was a... Yeah, he's very hardcore. Yep. And he was... What's the... Led into gold people? Alchemist. He believed in alchemy, right? So now look, let's not throw stones at someone who lived hundreds and hundreds of years ago. About 10 times as smart as you and I combined. Clearly one of the greatest minds ever. But it illustrates the point. This was one of the smartest individuals to ever walk the face of the planet and they did all kinds of dumb stuff.

1:23:45The man who imagined the way the planets move and was right and wrote it down in a formula that was pretty accurate it wasn't perfectly accurate but that's all of it but it was pretty accurate right that's enough so what oh so therefore everything this guy thinks is good no he's apparently a really real difficult person to be around had some very rigid views in a lot of kinds of things just fundamentally wrong and a whole bunch of others and i i i really support that that take that you have there as well it's just it's called the appeal to authority argument and it's a very poor form of argument which is well such and such thing so therefore you know it's right they got this thing right so therefore they must be infallible i see i'm honestly i mean this with the greatest respect but i see it in our industry with doctors obviously miracle makers doctors are great i'm not against doctors please for the love of god don't at me i love doctors they're no one's gonna treat me anymore oh you think that do you but i tell you what medical industry and i I say this nicest way possible, ask anyone in finance what they think of doctors and they're the worst clients.

1:24:50Why? Because they're very, very smart, very capable people with incredible domain expertise. Yep, yep. And they assume, not just doctors, but they assume that because of their intelligence and capability in the field of health and medicine, that that translates to everything else. And then when they get to finance, they think the same thing. Now, Michael Burry was a doctor. There's plenty of doctors who are great investors. So I've got to be careful to make that point as well. But that assumption that you are good at this and therefore I will be bad at that leads to a lot of bad mistakes kind of happening.

1:25:24So, yeah, it's a point worth emphasizing. By the way, Harry was right once and hasn't been right since. So I'm not even sure. And again, I'm not saying he won't be. It's that idea of just be really careful about extrapolation generally. Yeah, and again, talk about luck, right? he made the right bet at the right time and he had to do it as well i'm not taking anything away he saw it that no one else saw and they're in brilliant and the rest of it but then you're very easy for people to go okay i'll do anything this guy says from now on and it's like well you wouldn't have done very well um uh andrew grove the ceo and uh president of intel at one point wrote a book called only the paranoid survive right which which was really kind of make this kind of point of trying to avoid the gold complex and the rest of it just to just to to recognize that you are only mortal that you don't know everything it keeps you sharp it keeps you focused it doesn't guarantee you avoid mistakes but it puts you in a far better position than the arrogant hubris that a lot of these people have that just like everything i touch turns to gold until it doesn't exactly that being said straw man billion dollar business coming up Take a unicorn on the way.

1:26:35Well, so I'll tell you something about that, right? Like, just before we wrap it up, I'll be honest with you. When I first started this thing, I imagined it. It would be much bigger than it is. Right. Like, of course you do, right? You wouldn't have done it otherwise. You wouldn't have done it. You would have said, I'm going to take a massive risk on a business that might be this size or smaller. Yeah. Oh, I thought. The business, by the way, he's underselling it here, listeners. Stormy is doing very, very well. To his eternal credit, done an amazing job of it. well it's not over i mean look it's it's it's it pays the bills and it it affords a decent license i'm not i'm not complaining in any way shape or form but also i don't want it to sound like you made it sound like it was a business yeah i just said underperforming it's not very well or anything else if i went back in time to 2016 and said andrew this is kind of where it's going to get to and that's probably as much as it ever gets to and that's you know it's sort of like a a a decent small business yeah yeah i don't know if i would have done it right i kind of thought well well, you know, 200 ,000 people in Australia to have shares.

1:27:33Maybe we can get that. We'll get them to do this. You know, it's like if only, you know, one in 10 people in China bought my product, I'd be a billionaire. And you rationalize things that way to yourself. So it's kind of, you need those dreams and that naivety to get there. But I don't know what my point is, but it's just, yeah, it's not, it's something that, actually, I'll tell you something else that's been about that, that I think has actually helped me in sort of thinking about the business, is that recognition of that, that this is it, this is as good as it gets. And maybe it could be a lot bigger, but I've said to you, Private, I don't think I've got the drive, the interest, and certainly the capital base that might require something like launching in the US.

1:28:18I really seriously thought about doing that for a while. Maybe if I was smart, maybe I should do that. But it's just like, God, that's a lot of work. Oh my gosh, that's a lot of money. oh my god that's a lot of risk or let's just we've got a really cool set of members here yeah you know and it kind of it covers the bills and i can spend most of my time on stocks and not the business and it's just like that more businesses put myself up there on a pedestal but i mean more businesses should do that i think because more money has been lost in in hubristic empire building when it should be just like, just stay in your lane.

1:28:58And I say that as an investor in many of these businesses, because I would do far, far better as a result of that kind of stuff. And again, it's that arrogance and that Midas complex will often lead people that way when sometimes there's nothing wrong with a business that ain't growing if it's providing a really wonderful income stream. We actually spoke to a CEO recently. they were talking about some of the acquisitions that they had made recently. And how, you know, one of the members asked, well, how come you got the business so cheap? And he said, it wasn't growing. Well, why wasn't it growing?

1:29:31They didn't want it to grow. Why? Why not? It's a family-run business. It threw off$2 million a year. Real pride in the service that they deliver to their customers. And they were the go-to supplier in Perth. And that was good enough. Yeah. That was good enough. And they're not bad, right? There's no need to drive more than if you're happy with where you get to. Now, again, you don't really get the big companies for those that don't dream a bit bigger. But also, again, think of the alternate reality where they did go, wow, look how smart we are. Let's go take on the East Coast. Oh, my gosh. We just blew up$50 million in trying to displace the incumbent there.

1:30:08Well, we've got no special advantage. And it just was an absolute disaster. So I don't know what my point is. There's a point in there somewhere. There is a point. And when you find it, you will be much wiser for the effort. No, it's a good point, mate. It's a good point we've made. This is officially, I think, the longest episode we've already recorded. And it's appropriate that it is our last pre-recorded episode before I return from leave. Thank you for bearing with us over the past four weeks. Thank you again to Andrew for putting the effort in to pre-record some of these. So you've got things to listen to while I'm off gullivanting around the country.

1:30:37As Andrew said recently, putting up pressure on inflation. Thank you again for mentioning that, mate. You're welcome. until we see you with a brand freshly new recorded episode of Motley Fool Money. Have a great weekend and full on. Yeah, cheers. The Motley Fool and people appearing in this program may have positions in the companies mentioned. General advice only. Please speak to your financial professional to understand how it may pertain to your situation. Subscribe to the free newsletter at fool.com.au forward slash listener. The Motley Fool operates under Financial Services Licence 400691.