Mailbag, incl: What if the government borrowed a motza? October 26, 2025

25:27I mean, it's not the only problem, But I think discussions of negative hearing and immigration, they're not important. I hasten the way. I think there are a lot of things we can do on that front. But it's the one thing that never gets discussed. And I would put it as the dominant factor in allowing or having these affordability kind of issues. As people have made the observation before, people don't go to the bank and say, I would like to borrow a million dollars. That's right. People go to the bank and say, how much will you let me have? Yep, exactly right, mate. That's what you do. And then you go, okay, now this is what we're working with.

26:04So if the bank's going to - And by the way, you do that because everyone else does it. I don't want to blame the borrower who says that. They say it because - No, of course, they're just being reasonable. Everyone's paying$1.7 million for the median house in Sydney. So you're going to the bank and saying, all right, well, I know that's the market I'm in, so I guess I'm going to borrow as much as I can to get the best house I can afford to get because - Yeah. No one says, I can buy a five-bedroom, three-car garage on a quarter acre within a kilometre of the Sydney for a million dollars. Please, Mr.

26:27Bank Manager, can I borrow two? Yeah. You say, well, of course, you're not going to borrow more than you have to, but the problem is everybody is borrowing as much as they possibly can just to get as much as they possibly can, which is going to be short of what they actually want. And by the way, that's also supply and demand. But that's why it's not the borrower's fault. It's like, well, no, it's one million dollars. Well, okay, you can, but now you're in a one-bedroom unit 45 kilometers from the CBD with a four kilometer walk to the station. It's not even the bank's fault, really. I would go down another way.

26:53Here's one quick insert of let's bash some central banks here. But I mean, the banks do it because they can do it in full confidence that if they ever overextend themselves, they'll be bailed out. So why wouldn't you, right? Like it's almost, it's so evil in a way, but it's also rational in the sense that in a world as I would imagine it, you can do that if you want. But if it goes pear-shaped, then you and all your shareholders, bondholders are all wiped out. And that probably would sharpen your pencils a little bit there and make you a little bit more conservative. But when you have this massive moral hazard, it's just like, wow, heads I win, tails I don't really lose.

27:30So I guess I'm just going to keep playing, right? As we said before, just for the fullness of the conversation, I would go further. If and when you're going to do that, you make banks private businesses. Yeah. Because for those who don't know, the agent principle problem is effectively where I own the business, but Andrew manages it for me. Andrew should, in theory, care about what happens to me because he's in charge of my investment. But realistically, Andrew's going to say, well, I am, of course I care. Yes, I do. But also, you're offering me$3 million as a bonus if I grow the bank. Well, I guess I'll do that.

27:59And maybe Scott won't be quite so close to how I'm doing it. And the principal agent problem, the idea is there is two separate parties who are even, in theory, the agent acts on half of the principal, but there's always that gap. And so right now, you could say - You've got a great salary no matter what. And if it worse comes to worse, I guess I lose my job and I'll find another job somewhere. For you, you're wiped out, right? And if I take the risk and it works, I get a$10 million bonus. So I get a nice salary. The downside is I lose a bit of salary, which is not great. The upside is I get three, four, five years worth of salary as a bonus in one year.

28:29Again, think about the incentives there. So again, you would say, well, the incentives could be set differently. I agree. But public companies don't work that way. Again, because of the agent principal problem, you've got the shareholder who probably owns it through their super fund or through a managed fund. The fund manager, who's another agent of the principal, who says, I just want to get my quarterly bonus for getting the share price up. So I go and talk to the CEO and say, mate, can you please do something now this month, sack some people to get the share price up, would you? Because I get my money.

28:54You're like, well, I'm also incentivized to get the share price up because my shareholders think that's a good thing and it would be if it's unappropriately. So the reason I only call it out, mate, is I know I keep doing it every time you mention it, but when we said the bank, there's really three or four different parties there. And I don't think the bank managers would do anything differently if there was no moral hazard, right? Why? Because they still have their own moral hazard is heads I win, Taz I don't lose much. In which case, you're going to keep doing it. When you say to a bank, you must be a private business, think about Lloyd's of London or, you know, when the Medici's from Italy, you know, when Kerry Packer or Rupert Murdoch or I'm just trying to get old people here, own the bank themselves and they're on the absolute hook for all of it, they're going to start thinking very carefully.

29:37When they see the CEO, they're only going to be the CEO themselves because, man, it's my money. I'm not letting this thing go. Or it's, dude, we're going to have a really serious conversation because I own this bank. It's not 40 ,000 nameless shareholders. It's me. And I really would like not to lose any money or at least not much or at least manage my risk. So let's talk again about the risk management. And I think that's – if you go to your point, mate, which I completely agree with, by the way, you do it in such a way that the principal agent problem is resolved or hopefully resolved. Oh, it's – yes.

30:03You know what? What's interesting about that is that this isn't something that's like, well, I thought about this for half a second. It sounds like a good idea. This has been trialed in history. It's been done. There's been actual, I think it was Germany that had, in Europe at least, they had, like, so here we have four major banks and then we have a handful of nothing banks, right? We were talking about one off air that had a market cap on the ASX of less than$50 million. I'll mention it by name, but no one would have heard of it, right? In Germany, they had hundreds and hundreds and hundreds of regional banks.

30:35A couple of things that was really nice about it. Banks failed all the time, but none of them was systemically important. And they only failed by an imprudence of their lending practices. Also, because they were very local affairs, it's sort of like everyone knew everyone. So there was a bit of social cohesion and pressure there to do the right thing. But also, too, let's not forget, I'm the first person to bash banks in their modern incarnation. But when done properly, banks provide a wonderful social good. They connect people with excess money, savers, with people with insufficient capital, borrowers.

31:11And if they do that in a good way, they give money and they direct it to productive uses, which generates a return, which is shared with the savers. Everyone wins. The borrower gets capital they don't have access to to go forth into the economy and create value. If they're successful, then the bank makes a profit and the saver makes a profit. Everyone wins. And because if they don't do well with the money, you're very careful. You don't just, at the moment, it's like, think about what it takes to get ahead. I've just gone through the process not that long ago. You know, you have some idiot mortgage broker come out with a clipboard and just tick a few bollies.

31:50It's so like there is so much distance between what actually matters in terms of working out whether this is an adequate use of capital and not that all kinds of dumb decisions get made. But when it's sort of like, no, we're on the hook for this, it's like, I'm not going to fund every stupid business and some 18-year-old kid with a PowerPoint who thinks he's going to invent the next Facebook. I will absolutely fund anything that I consider to be a good venture. And it might have been just a home line, but I'm going to give it to someone who's got a really good credit record. And I think this is going to be a good return.

32:22And it's just a wonderful, elegant, socially beneficial, wealth-creating kind of endeavor, not this crony capitalistic bastard. You know, everything's just been so financialized, replete with moral hazards that we've just, you know, the incentives are give anyone who can fog a mirror money as much as they want, and then when they don't want any more, give them some more. And if they don't want any more home loan, give them a credit card. They don't want that. Let's give them a buy now, pay later loan. Let's give them that. By the way, equity, mate, you can use your house as a credit card. You can buy a car and you can go on holidays and you can put a renovation on.

33:02And that's the incentive. And it's hard to see, but I would, again, argue it's probably one of the more dominant factors behind all this mess that we're in.

33:22A one from Alex, two from Alex. Hi, Scott and Ram. I have two questions for the podcast, if I may. They're related, so we'll go with that. One, Scott, what are your learnings from being a long-term Domino's shareholder? It hurts, Alex. That's a short one. Whilst holding and recommending the business over that period, were there things that were unforeseen that happened? Or was the risk-reward asymmetry not in your favor? Second question about Domino's, but we'll stick with that one. I'll answer it first, mate, because it was a company I own and I've recommended, but I love your thoughts as well.

33:52long term is a funny question, Alex, because the shares done really well long term, even after some big falls. They had been much, much, much better in the recent past and have cascaded meaningfully down from those absolute high points. I'll try and go from the beginning in a really quick, short version to give it different lessons, Alex, and draw them to a conclusion. The first mistake I made way back in the day, I've said this before, was I bought them and I sold them when I thought that in one year, sales were seeming to slow down. and I kind of went, well, this is, by the way, like eight years ago, nine years ago.

34:25But well, maybe this is the end of the growth. Maybe it's all over. Maybe there's nothing more to come from it. I've already made 60%. I'll take the money and run. Now, the shares then went on to 10 bag from there. Okay, so first mistake was let businesses have some rope. But we then say, well, hang on, they did have, if I had given them that rope, it would have absolutely skyrocketed and then crashed almost all the way back down. So what happened there? the the second lesson i made the same mistake with kogan frankly is it's tempting to look at raw blue sky potential and not appropriately wait it for the downside risk so dinos and kogan did really really well during covid and my thought at the time was that the extra business they'd got they'd received would largely be maintained and probably grow from there so you change consumers experiences and behaviors.

35:18And my thought was, by the way, I still am sure I'm right on e-commerce. I'll get to that in a second. But, you know, when things go really, like, well, okay. I mean, they've gone well, obviously for that reason of COVID. But, you know, if I'm a long-term shareholder, should I see this through? Now, Domino's got to 140 bucks, I think. Kogan got about 25 at one point. Domino's now about 14 or so. Kogan, I think about 350 or something. So, you know, really big falls. And I think in hindsight, it's unquestionable that I made the mistake of hoping, believing, trusting that the good times would continue.

35:48Not that COVID would not, you know, not that we'd never go back to the shops, but that the changed behaviors would kind of have an echo or a changed behavior, a new hire, a new starting point. More customers had the experience shopping online or buying pizzas from Domino's and the scale they grew would continue to help. And that was just straight out wrong, at least in terms of timing. And if I've made mistakes in the past, I have, trust me, It's been in timing. I bought Telstra years ago when I thought, hoped, believed that the mobile business would grow massively and did. But I misjudged how quickly the copper business would go away.

36:25And that was super, super profitable because copper is already in the ground. Telstra is minting money with copper coals. And so what happened was mobile grew, but didn't grow anywhere near as fast as copper declined. So I got smashed. Well, not smashed. I didn't actually. I think I still made some money. But, you know, the returns were rough for a bit of time there. So I think if I made a mistake, it's being too optimistic about timeframes on Domino's in terms of that continuing to do well. And if we fast forward from there post-COVID, I would say Domino's has done a wonderful job of stealing defeat from the jaws of victory because the Australian and New Zealand business is still remarkably profitable, remarkably strong growing.

37:06This is a really, we're eating more and more pizzas every year, even with the inflation that we're seeing on costs. Domino's doing a really nice job growing sales in Australia and New Zealand. They should arguably do well in an inflationary environment because it pushes people who may normally go for the$50 artisan pizza into the cheap stuff. It hurt a little bit, though, to be fair, because people were used to paying$5 for a pizza and if the price of cheese and meat and labour goes up, you can't stay at$5, so there's some price signal as well. The so-called known value items, you buy Domino's because it's cheap.

37:37If it's no longer as cheap, do you buy it and do something else? So yeah, maybe a bit of both. As long as it's cheaper, I suppose. And then people down trade from pizza to eating from home. There's a whole lot of... But you're right. You're absolutely right. So the Australian New Zealand business is doing really well. Growth last year was flat, but the year before was like 6 % or 7%. So compound-wise, they're doing completely fine. And it's really profitable. And the business model scales beautifully. And what I still... I still like it. I still recommend it. I still own it. Because my view is, and I might have to change this view in time.

38:05I do give companies a lot of rope. you shouldn't be able to screw up for too long a beautiful business model Buffett talks about buying a business and a ham sandwich could run the idea of was that Buffett or Lynch? the idea of basically the business itself is really strong you have a super deliverable pizza it stays hot more than any other delivered product maybe the possible exception of Chinese or Thai but you're not going to deliver McDonald's or burritos trust me have them warm and taste really good when they arrive at your doorstep pizza arrives really well It's small. It's flat. You can make them in really small stores.

38:41You don't have to have any dine-in. Franchising is a wonderful model because as you grow your sales, you grow demand. What does that do? Well, it actually means you can deliver more frequently, more quickly. You open a new store in between the two old stores because you've got more demand. That lowers the delivery times as well. It's a beautiful feedback mechanism. And so Domino's, there's a great – I've mentioned this before, I'm sure. I think it's Invest Like the Best or one of those ones. There's a great example of Domino's in the US. Now, they're different businesses entirely. Same brand, but entirely different businesses.

39:05but they go through the business model in lots of detail and it is just a beautiful business model that should, as long as you can keep growing, make a fortune for you. And that's what they've done in Australia and New Zealand. The problem is they then went, hey, let's go to Japan and do that. Let's go to Asia and do that. Let's go to Europe and do that. And all of their troubles, all of their troubles right now are in those markets. And so kind of, now, what mistake did I make? Did I believe too much in management? Yes.

39:33Could I, should I have pulled the pin earlier? I don't know. It's a good question. They didn't change quickly enough. They didn't recognise their mistakes quickly enough. I mean, share price-wise would say, well, yeah, of course, if I'd known the price would fall from 50 to 14, I should have sold at 50. That's obvious. But performance-wise, should I have sold? Maybe because they refused to recognise their mistakes. Maybe. Maybe it could have got back in after they recognised the mistakes. By the way, they're now two CEOs down to Jack Cowan, who's the executive chair. He's also, by the way, the Jack of Hungry Jacks, for those who don't know.

40:05He's the largest single shareholder at Domino's. I didn't know that. Yeah, yeah. He's the largest single shareholder at Domino's. He's in there now, basically executive chair, just kind of bashing heads. So could I should have sold earlier? Yes. I think if it's a mistake, the mistake is trusting the model and not realizing management can screw it up. If there's a virtue in being patient, it is that if they do manage to solve it, then I'll be glad to hold a lot of the shares. So that's kind of the unforeseen stuff was probably that the, just your question, Alex, the acquisitions, the acquisitions opening in different markets was way too ambitious.

40:44Could I have foreseen that? I guess, I don't ever avoid scrutiny or responsibility, but I'm always mindful of the counterfactual, which is in another world. Maybe they do that. You've got to be careful you don't learn the wrong lesson. Right. Well, it could have been fantastic. They could have gone to Netherlands and Netherlands could be bigger than Australia and New Zealand now in terms of the size of the market. could I have known in advance? No. Some people listening to this go, of course they would never go sell pizza in the Netherlands. Maybe that's true. But then, of course, insert whatever unusual or unlikely thing happened, right?

41:14So, could I, should I have been, should I have been more decisive? Maybe. So, I should have sold at a higher price. That's true during COVID. It got to a point where I just held on blithely and that was stupid. So, that was a mistake I made and if you're a member of mine and you follow that recommendation, I apologise unreservedly. I should have, I gave it too much rope. I was too optimistic. Subsequently, though, when the fundamental business potential is as sound as it ever was, if they just get out of their own way and start making some money, I think that's why I still hold it. I still think from here.

41:44Now, two things could happen. That's the proper way to do it, by the way. Don't let past baggage influence what happens going forward. Yeah, that's fair. So one is, if it works from here, it'll be because Jack managed to bash some heads, get rid of the rubbish, and get back to growth. and that will mean a higher share price. It's possible from here, because if the future was certain, the price would be higher. It's possible you can't manage it. The overseas businesses drain cash for the next two or three years for contractual reasons or other things, and it takes until 2032 to get the Australian business back in shape and free of that rubbish, in which case it would be better to sell now.

42:20And I don't know which is which. If this goes for another year, it feels like a long time, right? But if you're a long-term investor, it's not. And Jack doesn't get traction, I'm probably going to have to cut my losses. That's a horrible phrase. Don't ever cut your losses. At Taran's point, work out from here what's likely. Because whether I was up or down, if Jack's not going to fix this or won't fix or can't fix it, then I think I'm probably going to have to admit that I shouldn't be in the shares until I had a higher level of confidence that it would get fixed. And the beautiful thing is you can always change your mind, right?

42:52It's like, I don't think I've lost confidence. Right, exactly. There's zero to do with whatever's happened. Always make this point. Whether you're up or down, the market neither knows nor cares. It's so hard to get past that, but it's so obvious when you spend half a second thinking about it. Because, I mean, you know, all that matters is where to from here. Because you can't travel back in time. So, yeah, I think you make a really, I think that is the proper way to think about it. And I've made this point to you before. I love to sort of whinge and whine about how, I do it because it's a great way to humble brag.

43:26where I talk about ProMedicus, right? Which is I love to tell everyone who'll listen. It's like I bought it below a dollar, right? And then I sold some at whatever and some more at whatever, you know, well below the current price. And I look at it now and I go, oh, could have, would have, should have. What an idiot. That was so dumb. But I think, and this is very flattering to myself. So just, you know, entertain me here. But, and I mentioned to you as well, it's like, well, I've done that with, also with Pointera, right? I bought something at$0.04. It went up to$0.90. I didn't get anywhere near that, but I sold all along the way.

44:02And thank God I did, right? Because it just ended up crashing back down. Same thing happened with a company called Envirosuite, which I was kind of keen on at one point in time as well. I actually made an incredible amount of money off it. But overall, long term, the business has not done well. And what did I do? It's just like it got to, whether it was Pointera, Envirosuite, or ProMedica's, they all got to levels which I just thought, listen, I still like the company. I just think the price is ridiculous. So I just, I cannot, and again, whether I'm up or down is irrelevant. I just, going forward from this point, I would not, if I didn't own shares now, I wouldn't own shares.

44:34I wouldn't buy shares now. I should probably sell. And, okay, with hindsight, no, you should definitely not have sold ProMedicus. But how did I know? I mean, if you had said to me at the time, it's like, oh, yeah, I know that you're looking at it going 100 times earning is a little bit excessive, but it'll get to 300 times earnings. Yeah, that's right. Which is what it is, by the way. Exactly, that's right. And like, it's not that that could never have happened and that I could have or should have known that that was impossible. Well, clearly it wasn't impossible. And so that's why I said before, you've got to be careful to what lesson you learn from this.

45:10Taking an individual outcome. I mean, you know, I could play Russian roulette five times in a row and live and then go, well, look, obviously it wasn't a bad idea. It's like, no, it was a dumb idea. You just got incredibly lucky on this kind of stuff. So, yeah, I think that's the absolute right way to look at it. I am increasingly of the view that growth is bad. Can I try and unpack that? Yeah, please. I'm usually, if ever I try and listen to this podcast back, I make it about 30 seconds in and turn it off because I'm so disgusted with my nonsensical disjointed ramblings that I cringe too much.

45:51because I, what are you saying? Get to the bloody point. And I apologize for everyone who has to endure this. So I will direct you to the straw man blog because recently I've written a couple of articles on it. One's called not all growth is good. The other one is called growth gone wrong. And in it, I'm trying to make the point that no growth is great. Growth is a wonderful thing. But when you force growth and when you take unnecessary risks to achieve that growth, it's an incredibly imprudent thing to do. So you're running a business, you've got an incredible product, you've got an incredible brand and reputation, you've got an incredible market opportunity.

46:29Is expanding your production capacity a good thing? Well, no guarantees in life, but it's probably, gosh, it's going to cost$50 million to build another warehouse and we need another plan. It's going to be another$20 million. However, I'm super, super, super confident that whatever we push out, we'll be able to sell it at a good margin. Absolutely, I should do those things. When I say I'm really good at making a Cooper Hats, I'm going to go to Alaska and I'm going to start doing it there. It's like, well, again, there's uncertainty involved. It may work out, but there are different things, right?

47:08There's a different risk reward proposition that's there. And when I look at all of the, like Domino's and Kogan, Domino's in particular is just such a great example. As you said, the Australian business is on fire. And it's nothing, people miss it. People go, oh, the pizzas aren't very good. No, they're cardboard. Sorry, Domino's, they're crap. You know, they just are. But that's fine, right? Like no one goes to McDonald's because they think it's a five hat, well, two, three hat restaurant. It's beside the point. Domino's secret sauce is their systems, which are just incredible. That's how they out-competed everyone.

47:41I know I'm going to order a pizza. I know exactly what I'm going to get. It's going to arrive, to your point, it's going to arrive hot. It's going to arrive on time, at least 98 % of the time. You know, that's their value proposition and they did it incredibly well. The mistake that they made was, well, let me be careful of how I phrase this. It wasn't so much in thinking that they could do it in foreign markets, was having the hubris to be so convinced of their success in foreign markets that they didn't do it in a measured way. had dominoes gone to japan opened a few stores tested the water and go wow this is going really well maybe we'll open some more and they did it in a more staged fashion um and then they ultimately failed i wouldn't have any like no you absolutely did the right thing you you took some small experiments they showed very encouraging results and you expanded from there i would have suggested that if they were probably more tempered in their expansion and they would have realized sooner rather than later that actually we don't really have that much of an edge over here.

48:44They still would have lost money, but the amount of money lost would have been far less significant. Moreover, management often give themselves enough rope to hang themselves. Messaging is so important, right? Narrative is so important. And what they do, and they do it because this is what the market incentivizes them to do and the investor relations people incentivize them to do and we as shareholders incentivize them to do, is that we don't want any timid, cautious kind of narrative. We want bold vision. We want big numbers. And I would have far preferred if Don Major sort of said, listen, we've got a cracker of a business here, but it's a small market.

49:25We're pretty much mature. So we're going to try going overseas. We don't know if it's going to work, but we're going to try it. It's going to be very staged. And what they would have avoided there is that they would have avoided what's been a big part of the poor share price return is because the multiple was so high in anticipation by the market that it was going to be a success. And they leaned into that. It's going to be great. Yeah, it's definitely going to be great. And again, they're not evil. They're not lying. They're telling people what they want to hear. And they're probably telling people what they themselves believe in their heart of hearts.

50:00But that hubristic sort of stance has made it such that, well, you bloody want to be successful because you've kind of given that expectation. And if it doesn't work out, two things happen. You end up with a bunch of write downs, which is just another way of saying you lose a bunch of money. And you suffer massive multiple compression as the PE goes from 47, which I think it was 10 years ago, to 22. Right. And so I think if I was running these businesses, that's what I would do differently. I'd be more tempered in my expansion plans, not only in how I do it from an operational sense, but how I convey the narrative and the messaging around that.

50:39Because it is a good thing in life and a very good thing in business as a general rule to under-promise and over-deliver. And yet listed companies do the opposite. They over-promise so much that it's like, well, even if you deliver, I kind of already was expecting that. Yeah, that's right. And all you're going to do is under deliver because you've set such a high expectation. I mean, hindsight's 20-20, so I'm not trying to be too critical here. And the final point I want to make here is just like, do you have to grow? Let's do a hypothetical scenario here. Let's say that Domino's got to a stage where they absolutely captured the maximum market share that they were ever reasonably going to take.

51:24We're never going to take 100%. There's always room for the local artisan pizzeria and the rest of it. But maybe they realize that 70 % is the best that we are ever going to do, and we've hit that. And what they do is they go, well, that's it. So all of a sudden, we're not going to grow, but does that mean we're a bad investment? Let's say that now that we've got far fewer capex requirements, capital expenditure requirements, we don't have all this growth expenditure. We don't have all these investment requirements. We've spent the last couple of decades building up infrastructure, processes, people, systems, and we're just going to let this thing run.

52:05We've got nowhere to reinvest the money, so we're going to gush free cash flow like you wouldn't believe. And you know what, shareholders? We're going to put it in your pockets. Yep, the PE might come down a little bit, but you're going to make out like bandits. You can either reinvest the dividends in the shares and compound that way, you can take your dividends and you can reinvest it elsewhere in an investment property or another share or whatever you want to do. And this is, I know I use this example all the time, but it's just such a good one. That's what Altria did, the tobacco company. We're not going to grow.

52:35Smoking rates are plummeting, plummeting, particularly in the Western world. We are a sunset industry. There will not be a viable cigarette market in the year 2050 or only an extremely fringe one. Now, they could have denied that and they could have done everything that they would have otherwise done. And they did a lot of bad and evil and dumb things. I'm certainly not being an apologist for them. But that recognition meant that they didn't upgrade their capacity. They only did maintenance CAPEX. So we've got these machines that were built in the 60s. Let's just make sure that we keep them working.

53:07But I'm certainly not going to invest in robotics or anything fancy. and the cash flows that they threw, even though the multiple fell, even though the growth rate fell, it didn't even fall, it started going backwards. Shareholders, it was one of the better performing companies on the New York Stock Exchange over, this is data for it's probably 10 years old, but over that 20 year frame, it was one of the best performing companies. It was the best one over 50 years from memory, something stupid. Again, go back in time. Hey, in 50 years, your revenues are going to be well down. Do you want to invest?

53:42No way. And yet had you done it? And the reason is because they recognized the limitations to their growth and they applied it appropriately. I'll share, I'll overshare because that's what I do. Strawman's not growing. We haven't grown for years. We're a steady state business. And when we had VC backing and when we had, you know, other shareholders involved, it was like, grow, grow, grow, grow. And it's just like, yeah, but these are really risky bets. I don't think that that's going to pay off. Also, to test that potential, I need to increase my cost base by three or four or five. I am highly confident that if I had listened to all these experts, that I would have a business that has a much bigger revenue top line.

54:27And I'd feel really special because we'd have this fancy office and I'd have all these staff that report to me and that we would be bleeding cash like you wouldn't believe. Yeah. And it would have been absolutely the wrong thing. Maybe we're a tiny little niche, you know, basically lifestyle business that's not growing, but it stands on its own two feet. It lives by its own rules. I'm really not boasting. I can't remember. From a financial perspective, it's not what I think any of the vision was when we set out. But it's in recognizing the limitations of the business. Who's going to pay a thousand bucks to join an online forum?

55:02Like, it's insane. Like, only a very special kind of person is going to do that. So you recognize that fact, play to your strengths, religiously focus on the value proposition to those people. And it's like, and make money and be viable. Like, is that a bad thing? Like, I don't think it is. And again, I'm probably just trying to make my ego feel a little bit better here. But the broader point is just as true when it comes to listed companies. And so I articulate the case, I think, a little bit better in those articles that I mentioned. go read them because I think it really just tries to just underline this point that the blind myopic pursuit of growth and growth at all costs has done more to damage shareholder returns than anything else, in my humble opinion.

55:50I like that, mate. I think it's important. I mean, again, you've also seen businesses have grown and grown incredibly well and become incredibly large. So it's horses for courses. But can I just on that, though, they did that. Let's go with ARB. Great example, right? Yep. What did they do? It's like, well, their growth came from just focusing on the thing that they did better than everyone else. It didn't grow because they said, you know what? We do all these parts before. Maybe we should make our own four-wheel drive and be vertically integrated. You know what? We should probably buy a rubber plantation because cars need rubber.

56:18They didn't do any of that stuff. And so I really want to haste. I'm sorry to interrupt, but I'm not saying growth is bad. I'm not saying businesses shouldn't pursue growth, but it should be a very measured pursuit of growth in recognition of the risks. And whenever you have the, and this is genius of Buffett in recognizing that this is the key conundrum of the businesses within his conglomerate. So what he does is say, if you've got any high confidence return on capital potential, not only do you, I want you to keep your free cash flows, but I will direct free cash flows from my other businesses to help you grow.

56:52So if you do not have that, give it to me and I will direct it elsewhere. That probably more than any, well, maybe not, but it's certainly in the top three of the things that are the secret source of Berkshire and soulpats, frankly, for that matter as well. And that's a really good point, man. And it's the, not every company can do it. We've talked about this before. I really, really, really struggle with businesses that diversify themselves. Because on one hand, it's like, if I'm buying shares in a miner, I want to buy shares in a miner because I like gold mining. If you decide you want to go into...

57:24Childcare. Childcare. Great example, right? On one hand, it's like, well, if you're a great capital allocation, you're using the money well, that's great. On the other hand, I can buy shares in the childcare operator myself. I don't need you to do it. I own the shares. And there's no single answer, right? Where's your experience? What is it that you're... What makes you think that a business and an industry you have no experience and you can do better than the people who have been doing it for decades? Now, by the way, maybe they can. I mean, the Soapats and the Buffett example are exactly that, where they've gone, you know, I will buy a textile mill and I'll use the process to buy an insurance company and I'll use the float to buy some shares in Coke and I'll use the dividends from Coke to buy an aerospace parts manufacturer.

58:01So what are you doing? And I guess I'm holding both those things in tension at the same time, which on one hand I'm like, if I buy shares of textile mill, this is Berkshire by the way, that's what it started as, that's what I'm buying. Saying we've got to diversify, I say no, I don't need you to be, miners are a great example actually. Sometimes I think iron on miner, man, that's super concentrated. If you had some other stuff in your business, then at least you have some diversification, right? Which makes some sense. The other hand, I'm like, well, hang on. South32 is seven or eight different minerals.

58:28I don't need you to do that for me. I can diversify my own portfolio. I want you to be as small and focused as – not small as you can be, but as focused as you can be. And let me work out how to diversify. And there is no – you can't solve it. You can't square that circle to use one of your favorites. Because in some cases, it's right. And you make the example of Buffett and Solpats who've done the – Solpats was a couple of chemist shops, right? they now they now you know own a brick business they own shares in a coal miner they own shares in TPG Telecom a robotic brick builder right exactly exactly by the way if you want the another ad because I just can't help myself I spoke to Rob Milner on The Good Oil I think I've said this before oh yeah I've got to listen to that one yes yeah he told the story about SP Telemedia which was Solpac's Telemedia which became a share in the TPG at one point so really just a fun they bought a television station in Newcastle and I asked him about it I was like you know How do you make that decision?

59:20He's like, well, we're looking for good cash flows and good people. And that was their secret of diversification. It's so obvious when you say it out loud, isn't it? Exactly, right? Well, it's always done well. That's kind of part of the challenge. The point I would make too is I don't think you were holding two separate thoughts in your head there in the sense that Buffett doesn't pretend to have any special insight on some of the industries he's allocating capital towards. but he has extreme confidence in faith in the people that work for him in those areas. That's a good point. In other words, what's the furniture shop called that he owns?

59:57Nebraska Furniture Mart. Yeah. Right. Okay. So he's like, he knows. And who's the lady that ran it? Rose Lumpkin, I want to say. Yes. That sounds right. Yeah. I mean, what a brilliant business woman. Yes. What does she know about insurance underwriting? Nothing. You know, I mean, you go at her, like I don't either. Right. Like it just, but, But what he asks of his managers is it's like, if you've got growth plans or aspirations, come to me and make the case. And he and Charlie, you know, rest in peace, always made this point is that we – how is it that two 90-year-olds can run this entire empire?

1:00:39It's like, well, it's because we delegate. I don't need to know anything about all of these things and Henry Ford was the same frankly we just need to have incredible confidence in the people that run our things they make the case to us if we think they've made a good case we will give them money and if they don't we won't and then it's on them they make all the key decisions it's a wonderful, elegant, simple, beautiful business model as you say good people running good businesses with an eye towards long term return on invested capital you don't get it right every time, but you let that playbook run long enough and you're going to make it rain, right?

1:01:21Whereas you contrast that with the modern financialized view of running a corporation. It's just sort of like, we're going to do buybacks at silly prices. We're going to extend debt. We're going to vertically integrate. We're going to geographically expand. We're going to get into different, you know, blah, blah, blah. And it's just sort of, it makes no sense until you realize that it makes perfect sense because what they're really doing is trying to short-term pump a share price rather than create long-term value. And, you know, is it any surprise that most companies just are woefully underperforming and taught shareholder capital?

1:01:53Oh, very true. Mate, a related question from Alex to finish off. I've seen some fundies start to talk about Domino's as a value play now. So I was wondering what your preferred valuation metric is and how the balance sheet of a company impacts that metric. For example, a simple PE ratio, price-earnings ratio, ignores cash or debt on the balance sheet. An EBIT to EV ratio, that's earnings before interest and taxes, compared to enterprise value ratio, shows the value of the underlying business, but still doesn't quite show the true impact of the debt that needs to be repaid. Capital agnostic, as they call it.

1:02:29Say again? Capital agnostic. Capital agnostic, I like it. I mean, it's a great ratio because it says I don't care about the capital structure. Right. I'm just trying to look at, you know, yeah, anyway. Enterprise value is the company's equity plus cash less debt, effectively is the way it's designed. Less cash plus debt. In the context of a Domino's 13 PE seems cheap, but when you add the truckload of debt that still needs to be repaid, is it actually that cheap? Thank you in advance for your REM's amazing insights. Full on, Alex. It's a really, I mean, look, we can spend an hour just on this alone, I suspect, Alex, and it's a really good question.

1:03:04I, there was famously, maybe not famously, it might be over to me, Meyer and David Jones were both publicly listed companies at one point and they had the same PEs. Meyer had almost no assets to speak of, certainly no property. David Jones owned, I think it was Melbourne and Sydney CBD stores alongside the business. Now they traded on the same PE and it's a really nice kind of way to unpack it a little bit because you might say, well, hang on, that means David Jones is obviously the better business because it's got the P plus all this assets, right? That must be great. Kind of true. Except that Meyer in its E was paying all that rent.

1:03:43And so to your point about capital agnostic, Ram, and to Alex, your question about the way you think about debt, the two businesses on one hand, Harvey Norman's another great example. I own shares in Harvey Norman. It's got$2.9 billion worth of assets. And so you can kind of go, hang on, well, okay, you back that out of the market cap. Man, the operating business is worth heaps because it's only whatever the difference is in market cap. And therefore, the P is much, much lower than it looks because the E, or sorry, the P, is the value of all the assets plus all the earnings. Wow, that's cheap.

1:04:12And then I said, well, hang on. But if Harvey and I had to pay rent on all those buildings, it would make less earnings. So yes, the market value would be different, but so would the earnings. And you've kind of got it. This is where EBITDA is actually a nice one. I said EBITDA. The other one, you could do EBIT is earnings for interest and taxes divided by EV, enterprise value. You also use EBITDA, which most people use rather than EBIT. And DA is depreciation and amortization. They're non-cash adjustments for the decreasing value of an asset or an amortized, normally an intangible asset. So you might buy a customer list, for example, that gets amortized.

1:04:49A machine gets depreciated because it's simply worth less. It's going to wear out. So, yeah, it's difficult, Alex. You're right to ask the question. It's just you've got to make both adjustments. So you talk about the amount of debt, that's true. But then again, you've kind of highlighted the fact that interest is also payable on that debt. So it does reduce the earnings at the same time. It juices the returns, at least at a growth level, and Ram just mentioned growth. So it's really, really difficult. There is no single metric, which is, I think, what you probably expected us to say, and Ram will now say it depends at some point.

1:05:22So my general approach in any of these things is to value the company independent of its debt, but add the debt as a risk when I think about my margin of safety. And when I say debt, I don't even really mean debt. What I really tend to use is, they call it interest cover. So much jargon in our industry, it's annoying. Basically, how well covered, in other words, how much profit are they earning compared to the interest they've got to pay? And effectively, how risky is that? If you are paying the interest with a dollar left over, that's pretty risky. If you've got$100 worth of interest, you've got a million dollars worth of earnings, you're probably okay.

1:06:00So interest cover is a great way to use it. So I don't put debt in the valuation itself because I don't think, I mean, you can, I suppose. It's just hard to do. Bear in mind too, the debt doesn't have to be repaid. It can be rolled over forever as long as the bank's prepared to continue to extend the debt. So it's risky if it's got debt, but Telstra's run with debt for the last 28 years, I think as a public company. Hasn't been repaid yet. It's not going to be repaid anytime the next half century either. So it does have to be repaid? No. Is it a risk if the bank calls it in or won't extend the debt?

1:06:30You bet. So that's an issue. It's a risk if they break the conditions under which the debt is provided. So it's definitely riskier. But I would do that personally. I look at the debt in the context of my margin of safety, not in terms of valuation itself. So if I said Domino's was a PE of 13, is it cheap? Yes, I think relatively. But if it's got a lot of debt and it can't, there's a risk of not meeting those repayments, I might want a PE of 10 just because I want even more safety than I'm getting at 13 times. So that's kind of how I look at it. I'd value it first, and then I would effectively adjust, and not even perfectly, Matt.

1:07:02There's no process for it. Just a finger in the air, allowing for the increased risk of a company with a lot of debt if it's getting close to that interest cover where the profits may or may not cover the bill. Ram? Yeah. I mean, it was Alex, right? Yep. I mean, you touch on something that investors often ask, and very rationally so. It's like, what should I look at? And the frustrating answer is everything. You know? And it's because we so want, we want, if not one, a small handful of things that we can look at. And it would be really cool if actually a computer could scan the market for me, find the right set of conditions, and then buy.

1:07:41Yeah. But again, think about it for a second, because if that were true, hedge funds would be doing it. In fact, there's a lot of money spent with proprietary heuristics and trading systems and the rest of it that look exactly for that to exploit. It's kind of like factory investing, you know. It's like we have noticed over very large data sets, over very large periods of time, that if we buy a company with a debt equity below 80%, a PE below this and that, it tends to work out 63.8 % of the time. And so we do it. And it's like, yeah, okay. But you know, are you at home by yourself on your smartphone investing across 20 different markets and 4 ,000 security?

1:08:22Like you just, it's not, it's not practically feasible. And even if it were practically feasible for you to do that at home, like are you going to out-compete the people who have got a supercomputer and eight different mathematic PhDs working for this? Is it literally who you are competing against? Right. So it's sort of like it just doesn't exist. And so those are arenas you don't want to step in because you're not going to win that fight. You might get lucky occasionally, but generally you're just – you don't step into the ring with Mike Tyson, right? It's just a dumb move. It's the height of hubris.

1:08:58And so I'm not – it sounds like – Great point. It sounds like, well, for experts like me and Scott, obviously, we can know what we're doing. I'm not doing that either. It's ridiculous. So I'm not trying to be condescending and like, oh, you know, little old Alex, you shouldn't try. No, definitely, Alex, don't do it, right? Like unless you've got 30 years experience in the industry and all of the capital backing and resource, it's just an unwinnable kind of game. doesn't mean you can't win because what you can do is you can do the thing that none of those other people do, which is look beyond three weeks and actually worry about longer-term business success and actually try and employ a lot of qualitative reasoning and factors that can't or doesn't lend itself to an easy distillation into a spreadsheet cell, you know.

1:09:47And everything, yeah, you nailed it, Scott. You said I was going to say it. I'm going to say it. It depends, right? Now, I would say Telstra should not pay its debt back. My God, don't pay your debt back. Exactly. Or if you're a shareholder saying they should pay their debt back, careful what you think because your return on equity is going to go way down. Right? Yep. I spoke recently to the CEO of Dalrymple Bay Infrastructure. They own the port up in – Dalrymple Bay? Yes. Queensland, is it Queensland? It's Queensland. North Queensland somewhere. Oh, where? Mackay. Mackay, I think. Oh, well done.

1:10:27Extraordinarily asset-heavy business. And they've got a mountain of debt. But it's really, it's like, I've got no problem with that. I tell you why I've got no problem with that. One, the debt is backed by a lot of assets. Two, they've got contractual agreements with the government and with their suppliers. There's a minimum. Even if every single one of their customers stops shipping through that port, they won't. But if they did, they're still on the hook for paying it. So same with Transurban, same with Sydney Airport back in the day. That's very different to just genes having a bunch of debt.

1:10:58Highly variable, cyclical business that's operating on razor-thin margins in an industry that is replete with, you know, fast-moving consumer trends. Like, it's just like, that's dumb. So not all debt is created equal, you know? And it's just sort of, I think what you need to do, these ratios and these metrics are helpful heuristics when they are properly contextualized. So I don't ever, oh, maybe I notice a PE and that spurs me to look further. But, oh, well, let's actually take the, I haven't looked at dominoes in a million years and now I've just checked it as USP. It's like, oh yeah, it is on a PE of like 11.

1:11:38Like, my God, that's actually pretty cheap, right? And that's by the way, depressed earnings if they managed to actually stop losing money elsewhere. This is the investment case. And that's what's about Jack Cowan. If he can actually say, kill off, fix, do whatever, stop losing money somewhere else, the lack of a loss somewhere means you actually grow your profit just by not actually throwing money away. And that changes things randomly. If it happens, that's why I've said I'm still a buyer for now, he may not be able to do it or it may not be done, don't take too long. I'm not making the case no one should buy the shares based on this conversation.

1:12:07But why I still think exactly right, it's cheap. and it's relatively, I think it's relatively cheap, even with the money they're losing. They stop losing money for a bit. That'd be kind of nice and makes a difference. So, yeah, it's like an inducement to dig a little bit deeper. But, I mean, the real nub of it for me would be, you know, honestly, if they came out and sort of said, actually, to my earlier point, we're just giving up on any expansionary plans. We're just going to sell pizza. We're going to do it really well. Because I tell you what, when you're in a PE of 11 and a fully frank dividend of 4.7%.

1:12:42It's like, if your only growth is like basic inflation, sort of system level kind of growth, and you tell me that, look, we're not going to grow much, but we will grow 3%, 4%, 5 % on average over the next 50 years, and you only have to pay 11 times earnings for it, and our stated objective is to pay out virtually every ounce of free cash flow back to you as a dividend, then I would absolutely do it. But if, I don't know, I haven't looked at the business, so maybe you would know better than me. But if they said, well, we got it wrong here, but we still think that Afghanistan is underpenetrated in the fast pizza market and we're going to move into that, I'd be like, ooh, all of a sudden that PE doesn't look so cheap.

1:13:22So I'm just trying to make the point, to use Domino's as an example, is like, is a PE of 11 cheap? It depends. Depends, yeah, 100%. It's dirt cheap if they just focus on their hyper-profitable Australian business, right? And you can still grow here. You just open a store where it makes sense to do so. in a really low risk way. You've got a store over here, 5K is another store over there. Both stores are super busy and you put one in between and keep going at a reasonable rate. That's a pretty good bet. That's a great - Say, if you have a new country trying to create, you know, as you say, trying to convince Afghanis to start eating Domino's Pizza, that's a longer part, you know?

1:13:53Yep. It's just, it's really just recognizing where other returns, where a board, we've got this machine that's throwing off all this cash. Our fiduciary duty should be to keep that cash wherever we have a high conviction of getting a better than – the cost of capital, I would argue, is the average market rate of return. So let's call it 10%. And I say it's the cost of capital because that's the opportunity cost because they could – actually, the laws don't permit them to – but they could just buy an ETF and get 10 % return on that. But I can do that as well. So don't do that. But if you're super high confidence that you can get a 15%, 20 % return, my goodness, don't give me the dividend because that's really hard for me to achieve.

1:14:36and you can do it within your realm of a position of complete competitive strength and expertise and without having to take much risk or invest much extra capital, please keep that money because the 15%, 20 % return that you get is indirectly coming back to me anyway. So keep doing that. Sorry for the rambling answer. I hope that made sense. That's great. Really, really exciting. That's exactly right. So, Alex, you're right about the questions, mate. Debt is riskier than no debt, by definition. Literally just is. Whether it gets repaid, to Ram's point, Telstra should never repay their debt as long as you've got the cash flows that can cover it.

1:15:18You're better off using someone else's money. Here's why, by the way. If you can borrow at six and earn at 10, you should do it every day of the week. Yeah. And so as long as Telstra can use that capital and earn a return in excess of the cost of that capital, which is, again, we don't... You know what's funny I was saying? it's obvious right we don't think about it that way and frankly people don't talk about it that way why would you have debt because I can borrow a dollar pay 6 % earn 10 % that's why would you not you know draw a line of credit against your home and buy an ETF there's actually we've talked about this before that's not as crazy as it might sound and that's kind of what most companies are doing now if they if they're going to get a 5 % return then yeah you're going to have to pay the money back guys if it's only 6.5 % well that's still bloody knife edge I don't want to and by the way that means if you don't stop earning it, you have to pay it back.

1:16:06If you can't pay it back because the interest bill is now all of a sudden larger than your earnings, that's a short... Yeah, if you've got a variable interest rate or something like that. All of a sudden you're in a long, maybe a short road to being very, very, very, very, you know, a significant risk of just frankly going broke. Because if the debt keeps building and your earnings can't pay it, at some point that's insolvency, right? So, yeah, be very careful with debt. and you're right, Alex asked the question. I just don't think it's a valuation question. It's one of business success and business model structure.

1:16:41You made the point right about fashion. The other one for me is services companies. Oh my gosh, yes. If you're an IC services company, you're borrowing money and you want me to buy another one. It's like, what are you doing? You're borrowing money. You're not buying any fixed assets. You're buying a custom list and if you're never going to pay that debt back, that's a dangerous one. And not that you only have to buy hard assets necessarily. You want to buy earnings, but at least hard assets or some sort of intangible asset. If you buy the Sydney Moniker or Masthead, assuming that you think it's going to make some money, there's value in that.

1:17:10But buying just a group of people who happen to work for company A and come to work for company B and borrowing money to do that, that gets expensive pretty fast. It's a little bit off topic, but not really. I liked a tweet of yours. I think it was in the last week. You made the point years ago and then you retweeted it, which is exactly what you do when you're proven right. I actually looked it up first. I thought, as in better, go keep going. Otherwise, let's not revisit that. You made the point that the Australian government had an opportunity to borrow money for 30 years at 2%. And they didn't do it.

1:17:47Now, you and I regularly, frequently rant and rave about, you know, government getting in too much debt and the rest of it. But there is an opportunity that you guys – I mean, this just shows you how financially illiterate they are. It's just like it's different for someone on a variable rate home line. It's like you don't know the future. Or even your job's uncertain. Or your job's uncertain, right, you know. Anything could happen. When you're a government and you borrow money for 30 years and you can print your own money, there was literally – And let me get as much tax as you want. And like you should have – and the market.

1:18:25And there was willing buyers in the private market for your debt. You should have said, we're going to raise$40 trillion gazillion and we're going to – no. This is the hard part, right, because it is government. You know, not do dumb things with it. But if you were just to – Give it to the future fund. Give it to the future fund. Yep. That's all I had to do. Money for a jam. We're borrowing 2%, risk-free. Interest rate is never going up. We are never going to default on this. Yes. And all the only bet is, is can the Australian market grow at a rate of greater than 2 % on average over the next few decades?

1:19:02Now, if it can't, we've got all kinds of troubles, the least of which is not. I mean, this is really, this isn't going to be the biggest one. But I think that you and I and history would suggest that that's actually a very low bar. Even if they only get, even if long-term market returns have, you're still getting an incredible leveraged no risk return on that. You idiots, why didn't you do that? No, you talked about the market growing at 2%. Didn't you have to do that? At 2%, you only did a 2 % dividend yield. Yes. You could have bought Telstra shares yielding 4.5 % and gone fishing. Yep. And you've got to make 2.5 % of your$40 trillion you borrowed for nothing.

1:19:38For nothing. Unbelievable. I made the point in the tweet, and it's partly in the conversation about the Sovereign Wealth Fund, but I said buy the miners. Yeah. This was 2019, I was the original tweet. The miners were cheap. so since I mentioned BHP by example BHP shares back then were actually I can't find it I'll find it they were I should find it anyway since then they've paid out $17 in dividends and now the current share price is$44 yeah yeah and you could have borrowed at 2 % and you know now people by the way ideologically people get really unhappy about that idea oh government shouldn't be running companies they can't run companies they shouldn't even be minority investors I agree with that I mean but they didn't have to though You just give it to the future fund, be a passive investor.

1:20:25But here's the other thing. And it was a thought experiment, not really a suggestion, but I wouldn't have been against it. You could have brought BHP outright. Yep. We run Australia Post as a government corporation. Now, do you want the government running BHP? I don't know. But let's shoot for a second. You put exactly the same management team in there, exactly the same board of directors with exactly the same assets. Why does the golden ticket shareholder matter? Now, if the government start to throw their weight around, I get people that illogically say, well, I want BHP to start doing wind farms.

1:20:54Right, right. Yeah, yeah. But even still, it's like, well. They would have to be passive. And I would be against it myself if they started calling the shots because all of a sudden they're going to allocate Gapol very badly. But if they were to sort of say, listen, we just want to be a silent investor. Yep. You do you. Correct. You do whatever. I mean, there are conflict of interest. Like, does BHP get permission to do things that otherwise it wouldn't get permission to do because of now the government has a vested interest in it? Well, maybe we are going to let you, you know, blow up some more native sites and, you know.

1:21:30That was Rio for the record. Sorry, yeah. That's okay. I was just, yeah. You know, I hear that. You know what I say? I could have had that on Twitter. You know my response? I wish that was the problem. Right. Yeah. Right? because it was like governments went you know what I care so much about the national interest I'm going to screw over Rio Tinto because we own BHP shares and I want the Australian shareholders so well in 15 years time I'm going to give BHP all these advantages I mean honestly if that was our worst problem rather than saying I'm going to make BHP sell still cheaper so Australians have lower inflation so I get re-elected that's the bigger risk right it's like they're not people say it will harm their competitors if the competitors got to commit with the government company they'll be worse off because the parliament advantage of the publicly owned company.

1:22:12It's like, when was the last time they actually cared enough for the national interest to do that? It's all about the votes. It's not about the bloody, they don't care. They wouldn't give a staff whether BHP was worth more than 15 years' time. If they did that, they'd be a nice problem to have. Still probably want to take your point, but if that's the worst problem we have with it, I'll take it because that's a pretty good result. We care so much about the public and the national interest. We're going to give BHP a leg up over a foreign owned steel company. Yeah. Okay. Okay. Okay. Yeah. Is it a problem?

1:22:42Maybe. But if that's the class of problems we're dealing with, we're in a very, very, very good position at that point. I mean, don't take us too literally on what we're saying here. But I think it does. I think it does. I only bring it up because it really emphasizes the point that we're trying to make here. You know, and, you know, debt's not a four-letter word. It really is a wonderful thing. If you're going to take a bunch of debt on it, 23 % to buy a jet ski, you're an idiot. I'm sorry. I just don't need to sugarcoat that. But if you're going to take very low cost, non-recourse debt to buy a very high quality asset that's compounding at an attractive rate, like why the hell wouldn't you do that?

1:23:18Yes, I think that's absolutely right. I think for me, I want to be clear to you, I was talking about borrowing for productive reasons, right? Governments already have a lot of debt. Now you complain about that. Yes, because they use that debt to fund one-off recurring spending. The debt is forever. The spending is this year. That's very different. It's like a tumor spending, right? take out a loan to buy a house. Don't use Afterpay. You know what I mean? Yeah. Use a minor loan. I don't want to use a minor loan to buy shares. But you know, if you're borrowing, heck, great debt to have, right? If it increases your earning power, you don't like it.

1:23:52I get it. But if I could take a$100 ,000 debt and earn a million dollars more over my lifetime, that's a really, really good deal. I'll do that every day of the week. Yeah. But I wouldn't take a$100 ,000 debt to buy a car that's going to depreciate and I'm going to replace it in four years' time. So it's that. The use of the debt matters. But yeah, in that case, it was a pretty simple one. If you borrow a certain rate, earn more than that. It's a no-runner for your government. Honestly. You know what I hated? New South Wales, Dom Perrottet was the Premier and Matt Keane was his Treasurer. I think maybe Dom was Treasurer and Gladys was the Premier.

1:24:22Anyway. Otherwise, Dom was involved. They actually talked about doing exactly that. Martin, you said I was going to actually borrow money to invest. I was like, that's a perfect... And of course, it fell over because... I don't actually know why. I suspect they shouldn't have the interest or capacity to do it. But yeah, it would have been a wonderful thing. The value of making the case, I think that is often the point here. It's very, it's almost politically risky. Even if you know in your heart of hearts, this is the right thing. And we have so much good data and rationale behind this. It's just hard to explain.

1:24:53I don't think that should be enough reason not to do it. If you were intentionally doing the cynical populist thing, knowing full well it's not in the interest. But if you don't probe it too deeply, it will convince enough people to vote for you. That's where it just gets really kind of depressing. And I feel as though maybe we're kidding ourselves here, but I feel as though someone who genuinely gets it, especially if you've got, you know, 12 highly paid PR experts working for you, you should be able to craft a message that says, listen. Let me explain this. It's that madman meme, you know, where he's standing in front of the whiteboard and it's the pitch.

1:25:34He's like, hear me out, right? Okay, this is what we're going to do. We're going to borrow$100 billion. I'm listening. And I do always despair when we have this appeal to the lowest common denominator. Oh, yeah, totally. We go, people are dumb, so we're not going to bother trying to explain it. We're just going to pander to the least informed and intelligent people of our society. It's like, what? Now, that's silly. Let's set a higher standard here. Like, if the argument is a good one, let's advocate for that and let's lift people up rather than talking down. You know, it's just depressing. But I get the political incentive.

1:26:18It's just far easier to go, what? Immigrants are causing everything? Yeah. Exactly. It's definitely not this. Yeah, yeah, yeah. And he's at Ronnie Chang who does that stand-up bit. I really like him as a comic. And he's talking about the Trump movement. And he does this big spiel on, look it up, Ronnie Chang. Okay. What would be a good keyword? You'll find it on YouTube. And he's talking about sort of like fractional reserve banking and like, you know, central. He gives this big, long, detailed explanation as to all the ills of society, which for me, it was just like, yeah, you nailed it. but then he goes yeah but that's too hard so we just go you know yay Brenda and it's very good and he just he makes the point far more eloquently and funny than what we're doing and that is the modern political dilemma in a nutshell probably well that bright yeah that's all we got thanks for listening we will be back next Friday with more well let's be honest more rants more information more Q &A more good motley fool money stuff.

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