Mailbag, incl: What should we do with the surplus? November 2, 2025

26:16But what a gift to our progeny and our heirs, right? 100%. I wish we would do it. That's exactly what it is. I will say to be fair to the states, and there's a reason why it's not as clear as I'm going to make out, but they actually hold themselves to a tougher standard than we do when it comes to accounting for future pensions. Only in the sense that they have said we will effectively, it's not sovereign welfare, but they've said we will put money aside to pay future social security bills, Medicare, Medicaid, pensions, right? We don't. We never actually make that promise. So we have the same obligation, or at least in a relative sense, same obligations.

26:52but for us it's not a debt because we never promised to put a fund together and have a gap to do it right we we explicitly say we'll fund it out of current year revenues to pay current year pensions and so there is no gap if we'd said 1950 we'll put money aside to pay for pensions for the pensioners in 2025 and we put some money aside we might have a debt there and so i only make that point ram to you're a million percent right and and i'll get to why it's actually as bad as you say it is in a second but just if someone's listening and going well hang on we've got the same obligation we just don't call it a debt an off balance sheet debt because we don't ever say So we don't ever pretend we saved for it.

27:24The future obligation in cash is the same. In fact, the Yanks are probably better off because they've at least saved some of that. We're going to pay the whole lot out of current year revenue. So we've got a bigger problem coming. But that's absolutely true. It's a million percent true. We could absolutely say, we know how many people are going to retire or be retired in 2035. We know what that's going to cost. We have no money for those people yet for the pension. So if we get this unfunded off balance sheet debt of this much money, because we have to pay something in 2035. And that would absolutely be true.

27:51and we would have a bigger off-balance sheet national debt because of that future obligation. The difference is the way it's accounted for. We say it's not a debt because we're going to pay it out of current year revenues. The Yanks say it is a debt because we said we'd save for it, we didn't, so therefore it needs to be paid. And they're the same thing. The difference I will say, though, is the Yanks have a bigger budget deficit than us and that future growing obligation. We have the same future growing obligation but a lower debt to start with. So the issue you highlight is a million percent true, mate, and I didn't want to, I'm not disagreeing with you in the slightest, but just for those people who are wondering, hang on, they only have a debt because they call it a future liability they're saving for versus we say, well, we're not going to save it for it at all.

28:30And so, yeah, if you know you're going to buy a car in 10 years' time, you start saving for the car and you say, well, I'm not going to have enough money. I've got this debt to myself I've got to pay in 10 years' time and I want to buy the car. Versus someone says, oh, don't worry about it, I'll find the money in that year. The cash flows are the same, the obligations are the same, the accounting is different, but the difference is twofold. One is, as I said, we account for current year spending in our budget structure. So we're effectively, we're saving for it. Or what do I save for it? We're planning to pay it.

28:55The Yanks have no plan to pay for it in their budget deficit. So they have an issue. The second is we've created super in part for exactly that problem. I gave Costello credit for the future fund, give Keating credit for the superannuation system, which is brilliant. That exists to your point, mate, which is exactly that. There'll be a lower pension burden because of the fact super exists. And therefore, at that point, we won't have the same amount to pay as we would have otherwise. us uh who saves up to buy a car dude what what era are you living in i'm thinking i'm nodding along going yep good hang on hang on wait a second i remember i've told this story before on the pod last time we bought a car was probably eight years ago or something now uh it was a handi santa fe um you know and we walked in we'd we'd done that we saved up some money yeah and And when the dealer was like, right, so we've got some really attractive financing options.

29:47Oh, no, I've got the money. He's like, what? No. No, no, no, you don't want to do it. Because I realized later that there are commissions and incentives and et cetera, et cetera, and kickbacks and disgusting fiat games that we love to play. But it's just sort of like, in hindsight, I kind of think, actually, I probably should have given the opportunity cost of what I could have spent the 35 grand on in terms of investments and the rest of it. But anyway, it's more a commentary on our modern system. But bring it back to point here. This stuff gets very real. So there are certain things about the future that you can just say, I think, as fact.

30:25So the US will default on their pension obligations. And again, I'm not going to go back to like 1842 to find you an example. I mean, Greece did it in 2012, right? So remember when the EU bailed them out? Yes. That, I mean, I don't like the term bailout. They socialized the losses amongst all euro holders is what they did. And more to the point, they came with strings attached. And the long and the short of it is that pension payments were cut by, in half, essentially. So people right up to that point, I'm 62, I'm about to retire. It's like, yeah, you know how your whole life you were working towards expecting this level of payout?

31:06Now it's only half. Right. This isn't some failing Latin American dictatorship. I mean, I know Greece has got its problems, but I mean, this is why I get so passionate about all of these things. This isn't some wonkish niche kind of economic financial sort of discussion. It impacts millions of people and the most vulnerable of people and the people who have suffered a massive injustice and breach of trust, who their whole lives work towards a certain goal under a certain set of assumptions. and their government let them down and robbed them. And it's like, sorry. But, yeah, sorry, it's gone. And Greece is one thing, the US is another.

31:54And, well, France is actually on that path. So it's just really scary stuff. And, again, it's not easily solved, but we can at least mitigate the damage by changing direction and starting to put some of these things in place just to avoid. I don't know, if you're like me and you like to try and at least minimise human suffering, probably a good thing to do. Yeah, I agree. Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener.

32:26Matt follows up the question saying, the Future Fund was originally set up to cover public sector super liabilities, we've talked about that, but it's now worth north of$270 billion, more than those liabilities themselves. If it's overshot its original purpose, what should we be doing with the surplus? Should we leave it compounding quietly as a national nest egg or start using part of it for things like infrastructure, housing or debt reduction? Would love your take. Kind regards, Matt. It's a bit of a controversial one, Matt. Most estimates say we have sufficient funding in the future fund to meet that purpose that we talked about.

33:05And so there arguably is a surplus. Now, actuaries can have their arguments, but I think our imbalance is reasonable to say it probably is sufficiently funded, overfunded by how much they're probably actuarial guesstimates. But I'm not trying to avoid the question. I guess there will be people with different views. So I'm going to park the statement of fact. I'm going to turn it into a slight hypothetical, which is if that is the case, what should we do with the surplus? and it's a really difficult one because there are and there are always competing needs I was tweeting about national parks this week and people say oh we should let let camp campsites private camp organisations tourism operations come and take parts of national parks and lease those out to high rolls that money can help fund the national parks and that's not my view my view is the opposite and someone said on Twitter yeah well at least we could use money to relieve poverty I said well yes That is always the excuse, by the way.

34:04And it's a very, very, very reasonable thing to want to do. But we could have sold Centennial Park in Sydney in 1822 to do that. To help the poor. And we have no Centennial Park. Only to help the poor. Not to lie in the pockets of any vested interest. No. But even if it was used exactly for that, it's my point, it would mean there was no asset left, a bit like the Future Fund itself, nothing left for future generations. So, yes, should we have addressed poverty in 1822? Yes, of course we should have. Does it justify any action and any inheritance or lack thereof? No, I don't think it does because there are different ways of skinning the cat.

34:41So saying I want to do this because the objective is noble, you know, it's the old false binary, right? It's this or poverty. Well, which one do you want? So anyway, long story short. I love that too. I love that too because it's like it presumes that actually there's no poverty. Everything's perfect right now. Right, exactly. But we need to do this to stop it from happening. And he's like, look out the window. We've got this and had this problem for a long time. And it's getting worse because of a lot of these policies. Right. And the one-off kind of, you know, selling of an inherited asset for good, which is what we do with minerals anyway, hasn't solved that problem yet.

35:15I mean, we've been collecting rents on natural resource for 150 years. We haven't solved poverty. Let's not pretend to keep doing that. It's going to change the actual structural studies. That was exactly the argument when they talk about the resource rent checks. Your super is going to be eviscerated. It's for you. It's not for any other reason. It's for you, the hardworking Aussie. And, you know, cue the stock image of the farmer with the, you know, strand of wheat in their mouth and the sweat on their brow or the hardworking coal miners. We've got to help these true blue Aussies. And our corporate mates who love a bit of a handout.

35:48Like, you know, it's just so egregious. No, no, mate. The miners just care about the workers, mate, in the community. They only care about the poor people. That's the only reason they do this. That's all they care about. Back to Max's question. No, you're right. So the problem is that they're all worthy objectives, right?

36:11My personal view is that you put the money towards the highest return available. And it's not all financial return, but let me start there. While preserving the capital for future generations. for all the reasons we just talked about with your first grade, sovereign wealth fund. So for me, so the debt thing, I think we should pay down a national debt as quickly as we can. Well, relatively as quickly as we can. My thought there though, is that should be done through responsible budgeting, not through windfall gains. Because unless you change the structural balance, you might get me over like you said - I've got$100 ,000 on my credit card.

36:50Rich uncle Bob died. I paid it off, but my lifestyle has not changed. And so five years later, oh my gosh, I've scored$100 ,000 on my credit card. Nothing. It just delays it a little bit. And you've wasted Uncle Bob's inheritance in the meantime. And it's all gone. Yeah. And not just the money, the opportunity cost of the decades and decades and decades of compounding. Like, it's far more than$100 ,000 on your credit card. You have probably, from a four-dimensional standpoint, have probably torched billions of dollars. Correct. And even aside from that, well, no aside from that, As a simple illustration of that, if you can earn 9 % a year and you're paying 2.5 % a year in your debt, paying off the debt from the capital is a suboptimal decision.

37:34So I would pay off our debt from just simply not living beyond our means. Honestly, Matt, I could be persuaded if we had structurally balanced budgets and weren't going to go back to the overspending after Uncle Bob's inheritance has been fritted away, Maybe you might get me over the line to pay some more part of that as a way of getting back to the newly rediscovered religion. Maybe. The chances that we screw it up at some future point, though, suggest to me that that's probably not the best option because it just gives pollies a freedom. And we saw this, right? The budget deficit fell from a predicted$28 billion to$10 billion, right?

38:12And then predictably, the headlines were lobby groups call for increased cost of living relief as a result of the better position of the budget. It's like, we still spent$10 billion more than we earned, guys. Like, we still – the credit card balance got worse, and the kids are saying, Dad, it's not as bad as you thought it was going to be, because I have the new car. So, stupidity matters. So, frankly, because we know that politicians are politicians, and, by the way, the electorate's the electorate, I wouldn't use the pay-to-net for those two reasons, Matt, but I can get the point. People say, well, you could use the money for infrastructure, and that's got slightly more justification because infrastructure has positive economic and social benefits.

38:50The new bridge, the new school, the new hospital, the new whatever, if they are constructive spending that actually do make things better for people, then that's got some benefit. My general, again, from a multigenerational perspective view, is a bridge might last 50 or 70 years. Maybe it lasts longer, but it has to be maintained over that period of time. The idea that infrastructure spending is permanent somehow, I think, is a folly and a mistake. And so it's tempting to want to, and not you're saying this, Matt, but people say to me, oh, well, don't do sovereign wealth fund. Put it in infrastructure.

39:22That'll improve the economy. And it will, but for a finite period of time before the bridge has to be replaced or repaired or torn down and whatever. And so I wouldn't spend on infrastructure either for those reasons. Better reason, better option than paying down debt because it does leave us with a legacy asset. But because those legacy assets aren't eternal, but a future fund could be, it's still a suboptimal result. Housing, exactly the same thing, Matt. Now, for those listening, I'll go back to my point about the poverty thing. If you're saying, yes, but we have to take action on housing, we need to take action on infrastructure, I don't disagree.

39:53I just don't think it's justified to use any resource or any opportunity to do that. Otherwise, we say, well, let's charge it, let's tax everyone 65 % because we need hospitals, we need houses. We can choose that as well. But say we've got this not sovereign wealth, there's this kind of lotto win, what do we use it on? There's things that we could use it on, so why don't we? That's a very, very reasonable question. but I think we have to walk and chew gum you have to be able to solve today's problems and prepare for tomorrow's so honestly mate it's a very simple one for me yes I wouldn't leave it compounding quietly in a nationalistic I would move it specifically out of the current future fund structure I would right size the future fund as it currently exists which is public service super and I would create something else I've in email article very easy I call it the Australia fund doesn't really matter what the name is but I would I would literally do it somewhere else I So right, this is the future fund for public service, super.

40:44This is the general purpose Australia sovereign wealth fund. And its entire position, idea, role is to receive proceeds of either budget surpluses, which would be lovely, but probably won't happen, or at the very least, increase rents and royalties from resource extraction. And the purpose of that is to compound away. And half of the real gain in any given year goes to consolidated revenue. The other half of the real gain goes to compound the fund. over time and therefore there is a growing stream of income from the fund to the federal budget from here until Saturday. Euron? Yeah, I mean, look, it's one of those things where the devil's in the detail.

41:24As broadly outlined, I have absolutely zero problem with it all. Mine's more of a philosophical point, I guess, is that I think for whatever reason, historical or otherwise, whenever we see problems out there and lord knows we've got a lot of problems that are happening right there our knee-jerk reaction is the government needs to solve it and so i don't want to get too distracted in the discussion here but it's sort of like yeah that's fair well if there is no other mechanism to solve it then yeah obviously right let's let's do it that way but we we've we've so strayed from that where the government is involved in in every kind of industry that it's sort of like what market failure is being addressed here?

42:13And in fact, it's more pernicious than that because it's sort of like, in fact, there was no market failure and now it's just a massive distortion and reallocation of resources. And let's face it, more often than not to those that are politically connected, look at childcare, right? Or the NDIS, right? Classic examples. Was there a need for more childcare? Yeah. Was there a demand from society? Yeah, absolutely there was. It's like, I don't know, it sounds like a pretty good business. If there's a lot of people with kids who would happily pay you to look after their kids while they go off and be productive members and it's all, quote, unquote, for the economy, which I don't even think anyone knows what that means anymore when people are like, it's good for the economy.

42:57What is the economy? What do you mean it's good for the economy? It's good for the people you're spending the money on. That's who it's good for. I don't know beyond that how deliberate or definite you can be in your statements. But I would say, yeah, absolutely, let's do something about it. But let's just foster the conditions such that people who like making money, I don't know, everyone on the planet, give them the opportunity to serve that role, make sure appropriate conditions and stuff in place. And then people will do it, right? And if it gets to the stage where it's like, that just cannot economically be done for a price that is reasonable, then that itself is also signaling something that's super valuable.

43:36Think about this from a society-wide standpoint. We go, it's really good to get people back in the workforce. And it's better though. And therefore, we don't, I don't mean to be so gendered, but you know, the numbers are the numbers. We're mainly talking about mums here, right? So it's like, we need mum to get back into the workforce. Why? Because it's good for the economy. Yes, 100%. Okay. Okay. That's true. Now, if mum is going into the economy and generating enough - That's true, by the way, but that's okay. Keep going. Well, this is where I'm going. Keep going. Yeah, right. Let's say that I go back into the workforce.

44:13I stay at home, dad. I go back into the workforce and I earn 50 grand a year. Now, if the government, and by the government, we just mean tax or debt, is spending 60 grand a year to subsidize my childcare, How can we say that that is, quote, unquote, good for the economy? Like, it's counterproductive. We are spending more to free up a resource, a human capital in this instance, to generate less. You go, oh, but people need to be in the workforce. Like, well, do they? I mean, there's a bunch of people out there that would love to be back in the workforce. Absolutely. Fill your book. There's also a bunch, and I'm just speaking in my own immediate circles here.

44:57I know a bunch of people is just like, oh, yeah, we're both working. We don't want to. Like we have, we can't afford our mortgage. We can't possibly get on this quote unquote property ladder. Mom and dad both need to work to do that. Given our druthers, one of us would happily stay home and spend time with the kids and be the ones that are raised. Look at the, I don't even want to, it's such a dark area. I don't want to go there, but look at some of the stuff that's happening in childcare centers right now. You know, and I'm just saying there are certain things that get thrown out there, statement of fact, when, and it's all virtue signaling nonsense, when at the root of it, we, in many cases, in the name of redressing a societal evil, we are actually just counterproductively, counterintuitively.

45:53making it worse. And it's just like, well, again, oh, and then like fast forward five to ten years, we realise that things have gotten worse. I'm like, oh, gosh, the government should do something about that. It's like, oh, no, no, no, no, no. Careful what you say. And I'm not saying the government doesn't have it. A bridge is a classic example, right? We can't have 12 Sydney Harbour bridges as every company competes to build a bridge over the harbour and then let the free market. And obviously there's certain monopolistic endeavors where it's just never going to be a market reaction to that. The government must be involved.

46:26And that's just us collectively saying, hey, we need to work out what we want to do here and let's enact it in the best possible way. But every time that there is a problem in my life, the government needs to do it. It's really what you're saying is you either have to take money off someone else, either now in the present or in the future, more likely, our children and our children's children, to do something that will impact me now, me, in this individual circumstance, but in many cases at a far greater cost to society, in a net negative way to society. And it's hard to look at things holistically because we'll look and go, this is what the ABC or Channel 7 will do.

47:06They'll go out, they'll find someone on Facebook, they'll shove a camera and a microphone, and they're like, oh, Tamara couldn't work, but now because of this she can. Oh, yes, this is really wonderful that the government allows me to do this. Like, yeah, but at what cost, you know? And I know I'm probably going to be misunderstood here, but maybe you can save me a little bit here. Why would I do that? I'm going to walk away. I just have to leave you swinging, man. That's okay. I'm just saying that there are real trade-offs and opportunity costs with all of this stuff. So I'm not saying maybe as a society, we all agree that this is great.

47:38We want everyone to work. Why? Because they find it a fulfilling, worthwhile thing and that's what they want to do. Okay. Or because they have no other choice to do it and we're going to make them do it because otherwise they'll never have somewhere to live. And in the meantime, we're going to spend far more money than is ever productively generated with them going back into the workforce. So in other words, we're actually in aggregate over time, getting more in debt and more more in deficit spending to get less productive output and in doing so, incentivizing people to do stuff they don't even want to do in the first place.

48:16Now, you can say, oh, but I know someone who really wanted to and otherwise they couldn't. Okay, that's fine. That's fine. But I'll find specific examples that will prove any kind of point, right? When we're talking about civilizational wide things, we must look at it in aggregate and we must understand that there is no solutions that fix it for everyone at all times in all places and that there are always trade-offs. And I'm just sorry for the rant, but it's just this, this, it's just the common knee jerk reaction, problem, government, problem, government. And it's like the pendulum's swung too far is what I'm saying.

48:49Sorry. Not sorry. You never lie. You never lie more strongly when you say sorry for the rant. That's all I'm saying. That's a bald-faced lie. We all know it. I mean, can you flesh that out for me a little more? No, no. At least point. So I think there's a lot in what you said. We've said before, and I'll say again, quality of life is better than standard of living. Standard of living is better than GDP per capita. GDP per capita is better than GDP. So taking it right back to the very beginning of what would Australians want, given their druthers, which is a phrase I love that you used, what would they choose?

49:23Now, some would say, I would love to go and do a job that's fulfilling. Great, let's try and facilitate that. And when you say government's not the answer to everything, you're right. I also think, though, the government's primary responsibility is, as much as we have it, to do what it can to allow people to maximise their enjoyment of life. Economists call it utility, right? So if you're going to have a group of people who represent us to make decisions on our behalf, the incumbency should be, please make decisions that maximise our quality of life. Because why would it be otherwise? So you start from where.

49:56One caveat on, I totally agree, 100 % totally agree. but only in areas where there is no other likely and better solution. Sure. And that's how they improve it, right? Because otherwise it would be better than it could be. If they can't improve it, they should get out of the way. So the job is to improve it over what it would be. Maybe the counterfactual is the right phrase to add. Objectively, not through your narrowly – not you, but not through their narrowly defined self-interested lens. But yes, genuinely, objectively and in aggregate improve, yes. So if that was the role of government, that's what you would do.

50:23And quality of life is, well, what would you Australians like? And this comes to all the things, right? Do I want to work? Yes. Can you work? No. Okay, I will help you. Do you want to work? No. Do you have to work? Yes. Well, okay, I will help you, which is exactly your point. So I'm a million percent agreed. We highlight the workforce participation rate, which is what you've just referred to, going up as some sort of moral victory, right? In every conceivable, through every conceivable lens, it is good. we must produce and consume more because that is good no matter what. That is the economic framework in which we operate.

51:01Workforce percentage falling is bad. Workplace percentage increasing is good. Regardless of whether people went to work because they wanted to and they found a job they liked and they love it or they are wage slaves who had no other option, we just say, oh, it's up. That's good. More women in the workforce. That's good. They've got opportunity now. That's great. Now, women should have every opportunity in the world, as should men, but every obligation in the world? No. And that's exactly the point you were making about those second incomes. That's what I'm trying to think to you. You did it much better than I did.

51:24No, not at all. It's always easier to kind of, you know, dance around the gaps in someone else's comments rather than try and come up with it from scratch. So you absolutely nailed it. And just not to need you, you know, it's like, oh, so you're against women in the workforce. Or you're like, no, not. It's really easily misunderstood. Like, I just, I feel anyone. I think you'll play, but yeah. Yeah, I hope so. No, no, it's good to make the point because it's really, really important. I think I've said this before on Twitter. I tweeted ages ago, and it was one of those – it wasn't a revelation necessarily, but sometimes people are saying black and white, it's like, huh.

51:56And I don't want to get you started on house prices, but I have no option. I was talking with – it was a couple of economists. Stephen Kacoulos and somebody else. Might be Alex Joyner, I think. Anyway, I apologize if it wasn't you, Alex, or if someone else was. I've forgotten who you were. But it was the thought experiment of what if house prices as a proportion of income were the same today as they were 20 or 30 years ago? Now, I think there's very understandable market-based actually reasons for prices of increase in part. Partly it's money and partly it's population. But, you know, the combination is there.

52:31Part of it is just frankly that once you have – if you and me and John all have one income ram and our wives all stay home, and let's pronounce the unenlightened 1960s. And we all go to auction. We can only bid multiples of our income. And all of a sudden, my wife goes to work. And we go, we can outbid Andrew or John because you're working, sweetie. So let's go and outbid the auction. And you guys go, bugger. All right, well, next auction is you and John. And you say, oh, sweetie, Ruth went to work and that worked my wife. If your wife goes to work, then we can outbid John. And so you do. And John's going to his wife, well, we can't get a house unless you work as well.

53:06And so there's this natural ratcheting, which is purely economically, I'll say rational in quotes. By the way, I know you wanted to have, we as a couple wanted to have four kids, but we can really only afford one, maybe two as well. And this is where, and this is the, and it's not even government's fault in that context. We're employed, GDP's up. But it's not even government's fault in that context because we simply chose to do it, right? Once you add a second income to a household, they're going to beat the one income household auction every time. And so at some point, the natural forces of markets do this, right?

53:37So that's a whole other conversation. There is government policy, which is absolutely true. There's just that reality of if I can be outbid and you can be outbid, you naturally use that mechanism of if I can earn a bit more, I can bid a bit more. And I really want the house, so let's go and do it. And then we look back 30 years later and go, well, bugger. Look what we've just created. And then you've got to try and unpick that knot. And that's stupidly hard, right? And that's a whole – we should have that conversation another time. Yeah, I'd love to. It's stupidly hard to unpick because it's the natural competitive forces, right?

54:11We've said a million times, when you go to the bank, you don't say, could I please borrow this much? You say, how much can I borrow? And you know roughly what the other houses are selling for. And if you're the only – and we know this with people who are buying houses. You cannot buy a house in most of Australia on a single income. Why? Because they're expensive, yes. Even if you're a brain surgeon. Right? But why are they as expensive? Well, because everyone else is bidding with two incomes. And so you have this natural, the natural reality of the market deciding effectively what we value. And the economy is called superior goods.

54:44The things we're prepared to pay overs for, housing is one of those. And again, should we know, should we change policy? Yes, all of that. My point broadly though, is just that idea of we've taken optionality and created obligation with it. And that is, I think broadly, what I'm hearing is a point you're getting at. It's a point I've made before. And getting out of that is a massive problem, but it should start with what do people want rather than arbitrarily what do the economists want. And, you know, we've said before, the inventor of the GDP said, please don't use this to be a bill and end all.

55:15So what do we do? We said, it's all about GDP, fellas. Oh, bugger. You know, the thing, workplace participation you asked about, it will do the same thing. It's all about that, right? It's a nonsense, but we measure it and it's what we do. And it's the old what gets measured gets done, right? So squishy otherwise. How well are we going? Oh, broadly, I think we're pretty okay because it seems like it's all right. No, no, no. Here's the GDP number. Oh, thank God you gave me something specific. We talk about uncertainty on Friday. I got rid of the uncertainty, the uncomfort, and someone gave me a number.

55:46I was like, oh, I can manage that then. That's okay. I can fix that number. That's the problem. That's the core problem. Yep. The core problem is the arrogance and the hubris to think that the economy, which I just hate the more I say it, is something that can be understood and managed. And it can't. It can be influenced, but it can't be managed. Yeah, and it shouldn't try to be managed because it's impossible to manage. And, again, I take the Austrian lens on this. It's just like what the hell are you guys talking about? What is the economy? The economy is me. It's you. It's everyone listening.

56:22It's just like, you know, exchanging our time and labor for money and then spending it on the things we want. How on earth does someone in Martin Place know the aggregated personal subjective decisions of 25 million people from now until eternity and think that by changing the rate of interest or the amount of money in the system is going to steer that in a way that can even be conceived, let alone accurately directed, is just nonsense, right? And so it's sort of like, I mean, the way I would answer some of the very, you know, difficult things to address here is that it is in the attempt to manage it that we err.

57:03And it's sort of like we get caught up in, well, it's only because we didn't do it the right way. If we did it the right way, we were, oh, that's right. Well, that team over there is, they're advocating for that, but we would do it this. It's like both of you take your hands away from the controls because you are measuring or you are you are trying to measure something which can't be measured. You are trying to steer something which can't be said. Mathematicians have a term for this. These are chaotic, complex, dynamic systems full of feedback loops with billions, if not trillions of individual decisions made by irrational, scared, emotional monkeys without full information.

57:43You have no idea of the complexity that goes into the pen that you are holding in your hand right now and the number of people that were involved in producing from the fossil fuels that were drilled out of the ground, that were refined into plastic, that were done. Leave it alone. And that will correct so many of these issues. And where you step in is really just to say, let's establish the rules of the game and let's address clear and obvious areas of market failure. And other than that, what do we do? Nothing. And it's a very hard message for people to hear because you look out the window, you see people suffering, you see society not at its best.

58:32And it's a very, very natural human tendency to go, we should do something. and I just think the perversity and the irony of all of this is that it is in the doing of the something and the way in which we do it of the something that causes the problems in the first place. Very weird analogy here and maybe this isn't going to work but I think there's something to be said with a lot of the breakthroughs that we've seen in machine learning and artificial intelligence. And what they did with these computer programs, These deterministic computer programs, ones and zeros, it's all it is. No one programmed it.

59:12Just said, here's a bunch of data. Just figure out what works. The way you train these models is it's done through an organic way that no one who built the thing understands how it works. They allowed what's called an emergent property to come up, to be discovered through the process itself, and that's what the economy is. The economy is forever in a state of flux and change. It is a dynamic entity. We're all discovering stuff. Scott thinks, I reckon if I put a banana stand up in downtown Barrow, I'll make a million dollars. I don't know. Maybe you're right. Maybe you're wrong. You'll do the experiment and the market being the economy, being just the people who live around you, deciding whether or not they want to spend their money on it.

59:55And it turns out, yes, he makes a great pancake. Yes, people love it. He's fulfilled his desire and he has been rewarded for that. Oh, no one likes it. okay, he wasted some capital, but he's going to stop doing that. Not because there was any bureaucrat that oversaw this and decided, I wonder how many banana pancakes the people of Barrow should have. Well, it turns out that this single mom over here, she's not getting enough banana pancakes. So we need to put a fund together, which will do this. And what we're going to do is we're going to instantiate a bunch of government-run banana pancake stands to ensure that everyone and it all comes from a good place but it's all a nonsense and it's just it's a it's a it's a very foundational uh philosophical shift in how you view the things and i'm just i'm ranting and raving into the bike and making the point here is just to try and stop this natural reaction of problem government problem government and it's just sort of like no i think we really need to be very careful in how we direct our collective actions through that mechanism So I agree, but not as significantly as you were making the point.

1:01:04I absolutely 100 % agree that we have gone too far down the path of government must fix the problems. And that has been 30 years of, frankly, governments or potential governments promising to fix the problems. and we choose to believe they can to the extent that there's a disaster payment for everyone and there's a government program for everyone. Everything, something goes wrong, it's a, well, what's government going to do about that then? And I completely agree with that, mate. I think it is a retrograde step to expect, well, governments hold themselves out as the solution. Oppositions hold themselves out.

1:01:40And this is, funny when we talk about the market, right? At some point, if politics is a market, maybe it's the least well-functioning market in the world, I don't know. But they say, this is my option. And we say, that's my option. Then we choose one. I mean, at some point, elections are markets, right? It's people voting with their proverbials, not necessarily with the wallets, but with the little lead pencils. Same flavours of the bad philosophy. That's the problem, though, right? No one gets up there and goes, the solution is for me just to step back. But that's the market, mate. Someone should come and do that if we believe in markets.

1:02:11Anyway, it's a distraction. My point broadly is that government's offices have promised for years to fix it better than the other guy. How's that going? And, well, I agree with that. More debt than we've ever had, more societal favour, more cost of living pressures. But I've got a good feeling about it this time. If only we could print up another trillion dollars, that'll fix it. For the poor people, of course. Only in service of the poor people. The feedback loop has created the problems that we – created the idea of government's office should promise it and we vote for it and then we expect it.

1:02:45And so they promise more and then we vote for it and they expect it. And my point is that culturally, that's where we've got to more of the government is the answer. Partly because we wanted it. Partly because parties have promised it for so long. We've kind of got conditioned in some sort of mutually dependent, interdependent, whatever, you know, relationship where it's like, well, I just kind of need them to fix it. And they say, well, if I offer to fix it, you'll vote for me. And then we kind of, it gets worse and worse. So I 100 % agree with you. It's Stockholm syndrome, isn't it? Almost, yeah, right.

1:03:14But the area where we disagree in terms of the degree is I hear you, I don't want to put words in your mouth. I think central banks, governments, whatever, can't influence the outcomes to the target that they want to achieve. And that is the folly of trying, to your point. But I am of the view that governments can influence directionally towards or away from, hopefully. nationally, societally desired outcomes. I don't think we disagree. I'm with you there. And I think that is the danger of when I do go on these rants because the normal reaction from friends and family who tolerate this is like there's no subtlety, right?

1:04:01So it's like, oh, so you're like anti-government? No, I'm not anti-government. And I'm definitely not anti-government. Like long live democracy, long live government. I'm just trying to say, as much as I am a, look, let's flip it around. I'm a big fan of free markets and capitalism, right? I think it's done wonders to lift us out of the dirt, and I don't think anyone who argues otherwise just doesn't understand the facts properly. Otherwise, I'm right and everyone else is wrong, right? But I don't think that we should have a private corporation running the military, right? So it's the same thing.

1:04:36I mean, it's just about understanding that we have different institutions, We have different forms of human cooperation and organization that are better suited for different things. So my point isn't black or white. We're on the same page here, dude, as we often are. And so, no, not anti-government. Anti-government doing everything, i.e. anti-communism. Yes, okay, if you want to paint me as an anti-communist, I am an anti-communist. Sign me up. I don't think the government should be doing everything out there. And I don't think that for very obvious historical factual reasons, but that doesn't mean that it's laissez-faire free money.

1:05:14Like anything goes like anarcho capitalism. No, it's not that, but, but, but, but we, we, it's just that, that, that idea of the pendulum again, it's just sort of like, I, I don't think anyone can accurately and specifically define exactly the right settings, but I can say that, I can say that when the government is running everything, think they've gone too far and when the government has absolutely nothing then it's gone too far there is a middle ground the zens the zen buddhists you know like there's a middle path here but my rant is more directed at the fact that i think i mean again just look at the numbers we're spending more than budgets of deficits have never been so big right um spent government spending has never been so big government size has never been so big you know um etc etc etc etc government The programs, government ideas, the government.

1:06:05It's like, well, does anyone think that life on aggregate is better? Like have people got more free time, more prosperity, more wealth? Some people do. But on average, definitely not. So it's just a question of saying, well, there's also a degree of this which is just like when you're in a hole, stop digging. Like when people go, oh, but, but, but, but, but. it comes from a position of like assuming that what we've got now is working really well. And it's, it's, it's patently not working really well. Just again, on the way back from a drive up to the, dropping the kids off where I do my best rants.

1:06:46If you stop driving, mate, you'd probably be happier is all I'm saying. If you, if the kids took the radio out of your car, you might be a happier man. 20 years, it's 20 years. My kids are going to be on a couch with a psychiatrist and they're going to I'm dreaming of being in the car with dad. This is the radio. And he's going to say, I traced it. I think I know the root cause of all of your problems. Talk back radio. What was my - I'm sorry, man. I'm sorry. You're in the car. All the way back with the kids. This is the radio. It was just talking about - Oh, yeah. It was cost of living because it's kind of - It's been the topic du jour, right?

1:07:25For a long time now. And that's right. It was a Smith family was being interviewed by Hamish on 702. And it was like, and it's fascinating, right? Where if you are someone with assets, you've noticed the inflation, but you've also noticed your wealth rise very rapidly. It's a K-shaped economy. So those people, we've all suffered inflation. You just don't really feel it or care that much. The guy at the Smith family is going, we've done surveys every year since 19 dickity do, right? And it's never been this bad. This isn't a political organization, I don't think. Yeah, right. You know, this is just someone from an institution whose overt and specific focus is in helping the disadvantage.

1:08:12And they are telling you in no uncertain terms that it is really, really, really hard out there for the largest number of people ever. And that's why I just get my blood boils when some bank economist comes in, well, actually, you know, things have never been better. Look at GDP, look at the unemployment rate. And these aggregate figures cannot capture this kind of stuff. It just, it's beyond, it's beyond what those numbers are ever able to do. But to your earlier point, if that's all you're focused on doing, and moreover, if you know that you can juice those numbers by doing things that are long-term harmful, but short-term beneficial, stop doing it.

1:08:55We talk about it all the time when it comes to listed companies, like cut your R &D, get rid of your marketing team, fire half your staff, sell off your assets and lease them back. The list is a mile long in the things that a CEO can do to significantly boost their earnings over the next few years. And you and I rail consistently about like, yeah, it does, but it makes a very fragile company that absolutely guts the strength and capital base of this enterprise and probably is going to eviscerate shareholder wealth a few years down the track when the consequences of this become apparent. And it's black and white.

1:09:31Like, we obviously get it. I'm just taking that idea and I'm putting it more towards the public lens. It's like that's effectively what we are doing. We are going for short-term, feel-good, sound-good sugar hits, which just make the problem worse. And ironically, an irony of irony is the people who it makes it worse for are the very people that you're trying to make it better for. And it's like, can we stop? Can we stop doing this, please? I think that's true. There's nothing wrong with your rant. My only – and it's really, I think, like with everything, it's the nuance that proves the broader story, right?

1:10:13So when we say government should stop trying to help, I think that's where we kind of lean into the generic or the broad, nothing they can do from here is good, as opposed to they should do the thing. And I don't want to suggest that. Right. And so they should absolutely keep helping where the help is actually helpful. Totally. And stop doing things that make no sense. And rather saying, you know, you are the problem, don't do it, which is frankly generically true because more often than not, they are causing more problems than they're solving. I just don't want it to come across as – that was my kind of nuance.

1:10:41No, I'm glad you caught me up on that. It was just that element of please stop screwing things up. But also, if you can help, please help. And just be wise with the way you choose to do that and understand the impact, all the stuff. And again, we're saying the same thing as you said. A thousand times, yes. And I'm so glad that you're there to put a more reasonable handle on some of these rants because I'm just so hyper Super aware of how it sounds. But again, there is, there's context, there's nuance. We always like to say that. And anyway, I've made the point. You have. You have done it very, very well.

1:11:13There you go. Feel better? I do, actually. Well, I don't because when we finish this, I'll go for a walk or something. I go, I really, you know what happened there? Actually, the other day, we got a bit of nice feedback on Twitter on some of the. Yeah, we did. It was one of the things we were ranting about. and I thought, yeah, I did feel as like, it doesn't happen very often, but I thought, actually, I think I articulated that more or less the way I wanted it to. And so I tried to, I never make it more than five minutes because it's just, I can't stand the sound of my voice. But in this particular instance, it's like, that was an incoherent rambling mess.

1:11:50You didn't even finish a sentence, let alone a thought. Like, and it's just like, so when you say, do I feel better? I feel better because in my mind in the present moment, I feel as though I just laid that down as a royal flush. In reality, when you like objectively listen back to it, it's like that didn't make any sense. And you sound like a crazy person. So I don't know what to do about that. Other than to say, dear listeners, I'm aware of the problem. I'm aware of it. And they give us plenty of latitude. And actually, frankly, thank you, listeners, because you do give us the good faith. for all the times when we you and i say oh that's going to sound bad or what i need to what i need to make sure people realize xyz we very rarely get anyone who actually does come back and say you bastards you did this and did that they our listeners know and understand and actually are there for the nuance i think and so thank you if you're still here at this point in the podcast you're obviously probably falling asleep uh and that's that's okay too but um yeah thank you for thank you for living thank you for living through the nuance with us and and you know good faith is really rare that's too jaundiced.

1:12:56Good faith is not frequently expressed as it should be. Assuming the best in people, all that kind of stuff that our mother's kind of told us to do, I think that's at least it'll do that for us and I think it allows us to do what we do because if it was there's so much bloody call out rubbish, bloody social media stuff these days. If you want them to get their books in on us, they can do it reasonably easily because you can misinterpret anything anyone says if you really try hard enough. So yeah, we're in a pretty good place I reckon. And isn't it interesting too? It's funny because at a surface level, some of these discussions we get into it sort of as like, well, Scott and Andrew really disagree.

1:13:29And then the conversation evolves and then like it ends up with like, yeah, kind of basically agree. There's like two circles and the Venn diagram is like 90 % shaded in. And there's like, okay, there's like there's points at which we disagree. I just I make that point not to flatter you and I, but I think that's generally true of everyone. Like I think if you act like let's take a weird example. Let's say you've got some hardcore Trump supporter and some hardcore, you know, Democrat. Taking away a lot of the labels and a lot of the speaking, talking points. And you went from first principle and say, hey, who thinks that this is a good idea in general?

1:14:11And you actually went through it. I think you would find that the overlap would be massive. But we just talk past each other and we stay in the hyper-specific. and we assume the worst of our adversary and we assume they are an adversary. And we're truly busy trying to win rather than actually improve. Yeah. When you've got your shirt on, they've got their shirt on and it's like my team, your team, you're looking for disagreement, you're looking for areas of dissidents or weak points rather than saying, hey, let's get to the best. You're right. You put, even in Australian Parliament, you've got 150 parliamentarians together who are representative of their electorate and say, right guys leave your team jackets take your team jerseys leave them at the door let's walk in here now look let's talk about housing what can we do let's talk about employment what can we do don't tell me what your team wants don't tell me how you win the election just talk to me about you know what are your best ideas for firstly what are the problems and and and then how can we overcome them i suspect we get a lot further if we you know stop trying to play partisan rubbish but and i think too it's because we are in such a complex society and we are because the technology i mean you can go back even a hundred years and you know there there were people who could be genuine polymaths across any specialty you know whether it was economics or engineering or physics you could really get your head around the main that's such a good point those days are gone you can never hope to do that anymore because the world is so so so so complex and so when we start having these discussions i think too often we get we start and end and never leave the the hyper specific whereas a lot of the time I think it's really valuable to go way back to first principles and I think you know politics is great it's like hey do we all agree that minimizing poverty is a good idea now you can be a die-hard liberal supporter or a you know a hardcore lefty with the with the labor part whatever and I think both people will go oh yeah right okay cool agreement now let's go up a level let's build on that yeah what's the best way to do and it's like I think when you come at it from those angles, it's good.

1:16:19I think when you hear particularly politicians debating, they've already established their philosophical foundations, which are so discordant with each other that there is no amount of talking or debate that you will ever agree because the level of disagreement, yeah, it feels like peripherally it's at the surface, where it's actually a fundamental philosophical misalignment and there's no amount of debate that will ever resolve this until you go back to that base level and go, well, actually, we need to have a very serious conversation on this. And that's the shame of, I think, sorry, mate, I know you've got to go in a minute.

1:16:53This is the shame of modern economics, I think, in the sense that it's like, you know, 100 years, actually, even in the early part of the 20th century, there were ongoing and really interesting and constructive debates on economics, whereas now you're not even allowed to discuss it. It's like, no, these are facts. These are like, talk to the 800 different economists that work at the reserve. They all read from the same song sheet. I don't even want to say it's wrong. It's totally wrong. But you can't even entertain the group think and the philosophies of it. Anyway, I'm going off on another tangent.

1:17:26I'll shut up. I will finish. We need to wrap this up. But I will say I tweeted during the week. I was on hold for 2CC camera doing a finance report and they had to delay me because David Pocock was around and they had to bring him forward and bump me back. is like, yeah, talk to the senator, don't talk to me. That would completely agree. Don't they know who I am? Right. Get him off. I can see what the ASX has done today. He's voting for national policy, but, you know. But to exactly that point, mate, and I am a massive David Pocock fan, will happily wear that badge, plenty of other great independents as well, and some good people in major parties who actually, if they could leave the party system alone, would actually be useful as well.

1:18:08Yep, I agree. but broadly POCO is just you listen to him it's like why is that not the conversation for all of the the chess beating and the winning the argument rather than actually trying to understand the awarding of posthumous war medals and what's the other one oh the lobbying rules it's like well oh my gosh the lobbying rules right and we don't we don't want to open it up but it was more just the common sense of that just makes perfect sense and but for the give me the other side of that argument oh that's really It's a good idea that we have all of this because I'm listening. Oh, it's madness.

1:18:44Anyway, there you go. Hey, I'm glad you feel better. I hope you still feel better on Friday when we do the next episode of Motley Fool Money. Until then, have a great week and full on. Cheers. The Motley Fool and people appearing in this program may have positions in the companies mentioned. General advice only. Please speak to your financial professional to understand how it may pertain to your situation. Subscribe to the free newsletter at fool.com.au forward slash listener. The Motley Fool operates under Financial Services Licence 400691.