Mailbag: Property vs. equities is the wrong debate. July 6, 2025

23:02Which is exactly that, which is, hey, let's not index the tax credit. to$200. Let's increase the tax take, then give them some money back. We get to give out the goodies. Everyone's happy. I think you're right, mate. I think you're right. The other thing I think, by the way, about indexation of, and this is the, I don't know how we resolve this, right? I won't go down too much of a rabbit hole because it's a long one. But we need to decide as a country what we want governments to provide and not provide. And you've got everything from the kind of quasi-socialist kind of Nordic countries. You've got probably the US, I imagine, some of the lower taxed of the major developed countries.

23:37And we've got to kind of work out as a country what we want to have subsidised. I've said many times, I'm not a small government guy or a big government guy. I'm the right-sized government guy. And that's partly about efficiency, absolutely. But it's just about what do we want the government to pay for? The Yanks don't want universal healthcare. We do. Do we want universal education? Do we want safety nets? Do we want parks and roads? And how much of those do we want? How good do we want them to be? That's kind of the question. I mean, we never had that conversation because it gets hijacked by the, oh, government's wasting money or, you know, maybe people should pay more tax, which are both stupid, I guess, in and of themselves.

24:08There's two questions we need to answer. One is simply what things do we want government to provide? And then secondly, in a proportional sense, who should contribute what? That's all there is, right? And we're just not mature enough to have that conversation either as a polity or as an electorate, and so that's where we end up in this situation. The other problem, unfortunately, well, so here's the other thing, Henry, at the moment. We're not giving tax cuts as much as we are raising more revenue because we're wanting more stuff. So we want, I say we, again, people are yelling at the pod machine right now, we want NDIS.

24:36We want universal early childhood education, childcare. We voted for those things. Some of us, some of us didn't, but you know. And so we said we want government to be more involved. We want government to fund more things. We want to use tax revenue to do that. And if you do that, then you've got to do it. Think about health inflation. Health inflation is about double or triple the average inflation rate. So if we're going to keep people alive for longer in more expensive hospitals with more expensive drugs, that's going to be paid for. And so there's that overlaying that, Henry, which is just right now.

25:06We're not even giving the tax cuts to the extent of racket creep. We're giving less because we're finding more things to spend money on. Now, some people hate that. Some people love it. Some people are in between. Some people it depends. That's the other reality of if we indexed – here's the reality, right, political reality. If we indexed the tax thresholds, they wouldn't give tax cuts, which is not a big deal, but they'd actually have to put taxes up or we'd be actually having less services right now. Well, more debt because they're idiots. But, you know, in the real world, in a responsible world, we are choosing to fund more things than we are raising.

25:37We're letting bracket creep fund those things. If we didn't have bracket creep, we would have to either say to people, your tax rate is going up or you can't have the thing. And, again, neither of those is a bad option if we choose it. But that's the other part of the story, I think, that maybe wasn't included in your question, Henry. Yeah, I'm a little bit concerned by the trajectory, right? The absolute figures, you know, we can debate, but one in six jobs are non-market-based. You know, that's just a fancy way of saying one in six jobs are in the public service. And again, please don't misunderstand me.

26:10Like, you know, all public sector jobs are wasteful. No, they're absolute miracle workers. And we have some really excellent public services and I'm really glad for them and I'll defend their right to exist. But, you know, as a trend, that's about, I think, as high as it's ever been in Australia. It is, yeah. And it's accelerating. In fact, if you look at all the job creations post-COVID, it's pretty much been, there's been none in the private sector. It's about 85 % or something ridiculous. Yeah, I'm exaggerating, but it's like it's all public sector jobs. Now, you might go, well, what's inherently wrong with that?

26:42Well, nothing on the face of it, provided that we are getting a real return on that investment or a return that at least in comparison to what we would get in the private sector is superior. And it's not, and again, I had this argument with my brother over the long weekend, actually, because like, well, not everything's about profit. It's like, no, it's not. But it is the way that we measure things, right? It's a ruler in which we sort of, we use to allocate very scarce resources amongst competing interests. It's not about just making profit for profit's sake, but it is an economic coordination mechanism and is one that helps drive efficiency and productivity, which is just fancy ways of saying, as our little island, wouldn't it be great if we could all work less and have more?

27:23That's really, when you get rid of the economic gobbling kook, it's like, that's what we're about. I don't know about you, and I don't think that's an ideological statement. I don't think that's left of centre or right of centre. It's just sort of like, I call me selfish, call me lazy, call me whatever you want. I think as a country, we should endeavour to have the most comfortable lifestyle possible for the least amount of work. That is the world I want to live in. And I want that to be even easier for my children and even easier still for my grandchildren. And the way we are, it's not enough to sort of say, well, here is a government department that provides a service and isn't this a good service?

28:03It's like, that's only the beginning of the analysis. The more thorough analysis is, well, could we get the same outcomes with less input? And if we could, shouldn't we do that? And if you disagree, then why don't you just volunteer to work an extra 10 hours a week for the boss? Because that's essentially what you're advocating. No, I think I should work harder for the same amount. No. And these are very, very difficult things to determine from the outside, right? And even when people commission studies, they pretty much get the answer that they ask to get. So even when people look at it really closely, they're hard to answer.

28:43But as a principle, it's a very, very good principle. And, again, I think the other big misapprehension that people have is the government should pay for it. It's some entity that exists beyond us all. Those people over there should pay for it, yeah, yeah. You still pay for it. Correct. Dude, like it's still coming out of your working and you're giving some of your reward, your pay, to the government who then pays for this. So whether you're paying in the private, you're still paying is my point. And it's not left or right or anything. It's just like I think that you as a citizen should reasonably say I would like to pay as little as possible to get the best services possible.

29:24And we are demonstrably not getting that in all different manner of things. And, you know, I don't know, again, I don't know where I would set the exact slider. So the specifics are hard and you get into these stupid asinine arguments when you really drill down. But as a general rule, like, so when is it appropriate? When it's like one in five jobs, can we start having a conversation about whether this is appropriate? One in four jobs are in the public sector. I mean, when it's one in one jobs, it's just outright communism. That's right. And I don't want to go there. And again, only because I've opened a textbook before and looked at history and it's an absolute dog's breakfast.

30:01You don't want that. And anyway, sorry, I'm well off topic at this point. No, I like it, mate. I'm going to play the devil's over just a little bit on the side, which is the same is true in reverse as well. In other words, the job you don't want government to do, that you then have to say, health is a great example, right? I don't want to pay higher taxes. The government should provide healthcare. Okay. So when you go to hospital, who's paying? I am. Instead of paying taxes, yeah. You're going to say healthcare, yeah. But at least I'm paying taxes. Like, well, now again, maybe it's more efficient to do it that way.

30:37Very true. There's efficiency questions. Yeah, it goes both ways, right? Which is, you know, government should do the things that private sector can't or won't do. The only thing I will add, Matt, to your point other than that was just that, and we've said this before, but there is a social good which is not measured in productivity numbers that we also could choose to make our peace with if we wanted, which is we want more people, we want more nurses. Now, is there a slight productivity benefit if people go back to work rather than dying? Sure. For the most part, if we're looking after 85-year-olds for another three years of life, they weren't working in the first place, they're still not working.

31:07If it's a useful thing to do, a responsible caring thing to do, and we choose to say we will do that, we will be less productive as a result, and that's the quality of life thing rather than just the kind of narrower standard of living measured in dollars, which I know you know, but I'm just throwing out there for... Yeah, 100%. There was a very real decision where, you've said this before, if I choose to work less, I'm less productive. But if I'm happy at working less and I can afford to work less, I want to be less productive because that's actually a good thing for my quality of life. I like that.

31:34So there's all those moving parts. But yeah, absolutely, 100 % agree with you other than that. The challenge for us is to work out as a way, what service we want government to provide, both in terms of potential competition to private sector, but also just the things that wouldn't otherwise be done at all, like more hospital care that's not profitable but we do it because it's the right thing to do. Again, primary education, right, or preschool, whatever those things are, there's just stuff that gets done because it gets done because we want to do it. We think it's a useful thing to do. Safety nets.

32:00Yeah. But the thing is we would do it even, I totally hear your point and I don't disagree at all actually, but it's just sort of like if we valued it, we collected it, we would do it, public or private, we would just do it. I want Granny to have a comfortable life in her 90s. You know, it's like, so it's sort of like, yeah, profit doesn't even come into it there. Whether I'm coming at it from the private angle or the public, I want her to have a comfortable life. I want her to be treated with dignity. Now, some people then say, yes, but that's an easy, you know, you might be able to sort of say that's fine if you've got the option to do that privately.

32:38A lot of people don't have the option to do it privately because they don't have the means. And I 100 % get that. That is excellent. But it's not just funding. I mean, remember, there's multiple ways always in economics to skin this cat. So you might just sort of say, well, there's a lot of people who can't afford decent aged care, so the government has to provide us. Well, no, no, no, let me pull you back there a little bit. You could do it just through a cash handout. It's like, here you go, there's a welfare payment, now you've got extra money, you spend it how you want. You want to spend it on giving granny a more comfortable life?

33:13Brilliant. you? Want to go buy a car with it? Do it. Your choice, right, at the end of the day. But you're still giving people that ability to make that determination themselves. It still comes back to my point, though. Who's delivering it more? What is the more reliable, effective way to do it? And I honestly think just to really make sure that people are clear where I'm coming from here, I think a lot of these public services could be better provided by the private sector. And that if there is any concerns for inequity there, then that's what we should address through the welfare system. That's a whole other conversation.

33:49But just to think that the only way to provide it is, well, I guess we have to spin up a department. I guess we have to hire people. I guess we have to directly do all of this kind of stuff. I don't know. I think you could be dirt poor and still be entitled to put, you know, granny or grandpa in the nursing home and have the means to do that. There's just more than one way to do it. I completely agree. Completely agree. Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener.

34:22Hey, let's go to a question from Mark. The old page refresh almost got me there. Hello, Scott and Andrew. I've been dwelling on this contemplation for quite some time. Dwelling on contemplation is a good thing, particularly on the weekend. Then I heard you were looking to accumulate some listener questions to tide you through Scott's upcoming time off. So here we go. The age-old equity versus property debate rages on. I'm not sure Andrew's got a view. We'll have to find out. With big factors like the presence or absence of leverage rightly bubbling to the top as one of several major considerations.

34:54However, I've never heard the following comparison and position debated, despite my wide listening across many property and investment podcasts for many years. Mark, I just will stop here at this point. Firstly, you didn't say nice things about us. Secondly, your suggestion there are other investing podcasts is clearly false and I won't have it be said. There's only one investment podcast. My contention is that to the skilled investor, there is a much bigger opportunity to outperform the median or average in property investment than in equities. In the equities market, there are a much smaller number of options to choose from, about 2 ,000 listed companies on the ASX and 3 ,700 in the US.

35:31In comparison, there are somewhere around half a million residential properties traded in Australia each year with tens of thousands more commercial properties. There are orders of magnitude more options to pick through and choose from when it comes to property versus equities. Once you've bought something, the question is, what can you do with it? With equities, I think the options are pretty simple. Hold or sell. With property, as says Mark, and I'll just stick to residential, you can hold or sell too, but you also have a multitude of further options, such as renovate, redevelop, subdivide, amalgamate, shift between short and long-term rental, shift your principal place of residence, and the list goes on.

36:06As I ponder these fundamental differences in choice and optionality available in the property versus shares story, I can't help but think two things. One, the measures of midpoint, such as median and average, are far less meaningful and useful measures in comparison to the property market versus the equities market. Case in point, the stated national average gross rental yield in property is woefully low. But no active property investor with half a brain is out chasing such a property. It makes no sense to state this statistic in a debate of shares versus property. Two, the experienced, educated and skilled property investor has a much better chance of outperforming the average of the property investment market than comparable equities investor has of outperforming the average in the equities market.

36:53Anecdotal as it may be, I hear many more stories in the property investment community of significant outperformance and wealth creation than I hear in the equities market community. I think there's enough fodder there to trigger some discussion, debate and perhaps rants. I would be devastated if you had to cancel the Sunday mailbag due to lack of content. So I'm pleased to have hopefully helped avert such a crisis. Hope your holiday goes, is going or went well, Scotty. Sorry, new to the world of speaking multiple tenses like you two. And full on, Mark. Well, there's a lot there. There's a lot.

37:26And there's some pretty big assertions. I, but I think that actually you might be surprised to hear. I don't think Mark's entirely wrong. I mean, I would, I do balk a little bit at the difference in choices. You can't just count up the number of properties and then compare that to the number of shares. I mean, is a two-bedroom unit in Burwood that much different to a two-bedroom unit elsewhere in Burwood? You know what I mean? They might even be in the same building. Yep, correct. You know? So, yeah, they're different, but are they? Are they, though? I don't know. So there's that point. Yeah, leverage is really the thing that changes it for the average person here.

38:12You just, to having what is, for whatever reason, considered much more reliable collateral and less likely, you know, one of a better word, margin call, Or it just makes debt a far less riskier proposition on property as it does to shares, particularly when the thing isn't valued very often as well. So, yep, 100%. Yeah, I don't disagree with that. Does the, you know, if you're smart, you'll do better. That's a difficult assertion. I know plenty of people have done really well in the equity market. And I would say they're all really smart. Some of them are lucky, probably me included.

38:59But it's hard to debate a point when it's very general and not data. And I'm not saying you're wrong. I mean, the way it's framed, it has to be right self-referentially. Being a smart investor kind of suggests that you do get good results. If you don't get good results, you're not a smart investor. It's a circular kind of logic that's involved in it all. So, look, I'm not going to have a go of it. And I do, I do. I mean, think about this though, Mark, your point that the gross rental yields are woefully low on average or median terms, but there's really good ones out there. It's like, well, what does that say about how do you get such a low median or average if there are actually, you know, a reasonable number of high yielding options out there?

39:43It must mean that there's also an equivalent reasonable number of extraordinarily low or negatively yielding assets out there to give you that low average, right? I mean, yeah. Look, I get misunderstood all the time, but I've got nothing against property. I really don't. I've got something against over-leveraged, overvalued assets that have a moral hazard attached to it. That's what I'm against, right? And the assumption that people not like Mark are buying, the people out there buying the low-yielding stuff, getting no gains for it because the accountant said it was a good idea to save some money on tax.

40:21That's the - And don't worry, it'll always go up, bro. Number go up all the time. Why? Just because it does. I mean, it's investing on blind faith, extrapolation of relatively short history and totally devolves from fundamental. That's just my view. But if I could, if you could show me a property that didn't, you know, require huge amounts of capital investment because it's just crumbling or full of white ants or, you know, lead or asbestos or something like that. So in other words, I could buy it without having this big hidden bill that's around the corner. And if I can get like a net yield after expenses of something in the order of 4%, I'd be very interested.

41:01I would probably liquidate a lot of my other assets and buy said property. I don't think they're as common as you assert. I mean, and that's only, I can say that because I'm reasonably confident that while markets are pretty inefficient and sometimes wildly inefficient. They're not that inefficient. If the property I just outlined existed, someone would snatch it up, right? These things just don't exist unnoticed. And the moment they are noticed, the very act of buying them is what helps normalize everything that's there. So such properties, I'm sure they do exist. I'm absolutely sure they do exist, but I don't think they'd be that common.

41:42And if they are out there, people like yourself, self-marked who know what they're doing will bid them up. And you're not on an island by yourself there. You might be a smart property investor, but you're not the only one. And there'll be a competition between you. We go, well, okay, 4%. Wow, I'll take that. And someone else will go, well, 3.9 is still pretty good. I'll take that. Well, I'll take 3.8 because the average or the median is like 1.4. So anything above that to a meaningful degree is a good investment and so on and so forth. And what we always talk about on this pod is that, you know, these things get arbitraged away.

42:17If there's a$100 note sitting on the ground, someone will pick it up every time, you know, maybe not immediately, maybe it lasts longer than you think is possible, but it's always the case. So, yeah, I don't know what my point is here. Other than to sort of say, I've got no barrow to push here whatsoever. I am a very big advocate for people making prudent, sensible investments, knowing what they own and why they own it, with a reasonable degree of a reasonable return expectation that's grounded in reason and fact. I mean, goodness me, my largest asset's magic internet tokens, for God's sake. I mean, how do you square that?

42:56I'll go on a rant at one point and explain it. But you know what I mean? And I only bring that up as to say that it's like each of us, me, Scott, everyone listening, yourself, Mark, we have to make our own determination. I just do get a little bit annoyed when it becomes such an ingrained part of the culture and society that it is really nothing other than just blind faith. I'm just doing this because it's the only thing that I do. Everyone else I know is doing it. Everyone's getting rich. No one's really got a good explanation as to why that's the case or why that should continue. But shoulder shrug, I guess it will.

43:30and the accountant reckons I'll save some tax on it, I'm going to do it. And that, to me, feels like the height of recklessness. No one else is going to tell you that that's a risky investment. I will tell you it's a risky investment. Any investment is risky. Any investment is risky if you're going into it without your eyes wide open. Yes. NFT token or block of gold or really nice, attractive investment property. They're all crazy if you don't really know what it is that you own and don't have some reasonable rational basis as to be able to point towards value. That's just how it is. Yeah, I think that's right.

44:05I'm going to add a couple of thoughts.

44:11You're right about averages, Mark. You're 100 % right about averages. The question really is where we're drawing the lines. Are we saying no property investor can beat the equities average? No. Will the average equity investor beat the property average? I think so. But that doesn't exclude any combination of those alternatives. And so you're right. Averages matter. So you say we shouldn't talk about averages and midpoints and medias and stuff. I don't think they are not useful. I think they are very meaningful because they tell you the average return that's being achieved. Well, just to interrupt very briefly, I can then say, well, I bought Stealth Global at$0.10.

44:51It's$0.80 now. It's an eightfold increase. Therefore, small cap ASX unprofitable businesses are the best investment. Right, exactly. There's the proof. That's the proof. And you go, well, hang on. That's an example of one. And yes, you're dead right. You can't do that. It's spurious reasoning. Yeah. So I think my general take is the average is the average received. It's the average of the asset class. It's what we're measuring. So it's kind of to say we don't worry about it defeats the purpose. the average property investor, the average equities investor has achieved returns X and Y. That is just the reality, that there are outliers at both ends.

45:28The average equities investor, sorry, the worst equity investor out there lost all their money, right? The best one is Warren Buffett who's made, I can't remember how many, 200 and something million, 2 million and something percent gains, right, over 60 years. The average is somewhere between those. Do we ignore the average because someone lost all their money and Buffett made a squillion dollars? No. Nor should we in property. That being said, your point is absolutely right, that the average doesn't necessarily give you the size of the opportunity for a smart, well-intentioned, well-credentialed, thoughtful investor who goes to put their money to work at the best place that works for them.

46:01Again, if equities had lost a property, Buffett would still be Buffett, right? So the averages matters and the outliers matter. The distribution matters, as we say. The reality is those people getting there as low... You say... You say... What's the phrase? No, actually, probably this is half a brain. Okay, well, active is key here and half a brain is probably a little bit harsh. It's a big one. It's a big one. But, you know, I want to think, Mark, and I don't want to twist your point beyond recognition. I think, to me, an active property investor, in the way you describe it, is actually more akin to a small business person.

46:38You know, someone who buys shares is the same person as someone who buys a rental property and lets it do its thing. Andrew built Strawman from scratch, not as a passive investor. So I think, you know, business does X. Andrew's built a multi-billion dollar business at Strawman. Sorry. You know, is that the average result for small business people? No, there's a range. But if you're going to say, I'm going to buy an asset and do something with that asset, you are more akin to the person who buys a cafe to, you know, change the menu, hire new staff, redo everything and try and make some money out of that cafe.

47:12It's an active investment in the way you're working on the asset. It's not even active like in shares where you're buying and selling. I mean actively running the asset, you know, creating value from the asset. So, you know, and I'm not trying to torture, I'm not trying to make an argument out of the way. I've said before, money's money to me. I'll invest in the best opportunity I can find. I don't care where it is. I do shares for a living, but I'll tell you what, if Magic Internet tokens actually were valuable, I might have to buy some. But, you know, even though I don't, I do that as a quid.

47:38But, you know, same with property. I've said before I would happily buy an investment property if I got one that I thought was going to be a better option than shares. Why? Because I like money. one thing I'm not as an ideologue can I tell you like you know I could make more money over a property but I have a shares so I'm not going to try trust me I'm much more mercenary than that I'll take the money so yes I take your point the other thing about the anecdote though I will say Mark you say anecdotals it may be I would kind of probably stop there many more stories I don't know how many people tell you how much money they lost at the track versus the fact they got the first place winner in race three on the weekend.

48:16I think I'm not saying your feedback isn't genuine, just that we all hear those stories. And so it's kind of it is one of those things. But active property investor, like an active business owner, I think that's a much more appropriate analogy. And if you can do it and do it well, then great. I'm not here to say it can't be done or shouldn't be done or whatever. Do I think the average person has the ability to do that? If we're talking about which asset class should I invest in, I suspect the average non-active investor slash active business person does better in shares on average than property on average for exactly the reason you've effectively identified mark which is you know some of that stuff that is rubbish okay well what proportion of that is rubbish the average equity market investor is going to get you know nine ish percent if history is any guide will the average property investor get that i don't know so should everyone try and be an active property investor maybe i don't have the skills i i'm sure i could learn them maybe i hope well maybe i'm not that smart but you know i'd like to think i could learn them but i don't know where to start so i'm not going to be the guy who says I'm going to go and what examples did you give?

49:15We're going to aggregate, renovate, redevelop, subdivide, amalgamate, shift between short and long-term rental, shift principal place of residence. I mean, I kind of get those things, but do I think I have the skills to do it well? No. As the average investor, probably not. It's also not a – you've got to delineate between what's more passive and what's more active. Correct. At that extreme, you are essentially – it's a business. Yeah. That's what I'm saying. That's what I'm saying. Yes. And it's not – I mean, anyone – you watch those property-flipping shows. They work hard. They often don't get a good result either, by the way, on a net basis.

49:46But I would also push back on that you as a shareholder can only sell or hold. That's true. That's true. But don't forget your elected representatives, i.e. the board, employ a management team that have far more optionality. They could research and development into hearing implants or they could go discover and develop a lithium. Like when it comes to enterprise, what can you do with the property? As you say, you can subdivide it, you can renovate it, you can go Airbnb or long-term rental. You've rattled off all of the options. What can you do in the field of enterprise? Literally anything that you can think of, including property development.

50:30In fact, when you look at the 2000 stocks on the ASX, you've got everything there from mining to retail to, you know, everything. everything and so it's like yeah you yourself don't have that but you are you have representatives there who are doing that and if you don't like what they're doing you can give it to some other team that's going to do more stuff the best value investments i've ever had it because there's there's and i've always said this like that that is the key job of management is capital allocation here's my here's well you know here's some money invest it in any way that you can get a good return and there's a lot of different options that are out there.

51:07Look at SoulPats. We talked about that recently. Started off as a chemist. Yes. Now they've got a finger in almost any, they own part of a robot that makes houses. And no chemists. And no chemists. Like, what? If that's not optionality, I don't know what. Now, again, I'm probably, you know, supporting my own sort of preference here, but it is, I think it's a little bit more nuanced than you imagine. But I will say, Mark, it actually feels like we're piling on here. I'm really not disagreeing a lot with what you're sort of saying. I genuinely think for someone who feels like I – and we've all got our own wheelhouses, right?

51:44It's like property is in my wheelhouse. I get it. I've got experience. I've got form. I'm confident. I think I've got the time, the skills, the capacity, the capital. I think I'll just do better than that. And I'm like, I am the last person on God's green earth to say, no, you shouldn't do that. Buy an ETF. It's like, no, you're good at that. Keep doing that. And I would even go further along that as an ideologue and say, you're actually creating value for society by doing that. The person who creates, who does up a property, who improves the value. If you make a profit on that, that is just society telling you that you actually created something more valuable than the input costs.

52:22I am assuming a free and open market, free of distortion and crony capitalism and all the other nonsense that we put up with today. But generally speaking, profit is a moral imperative. And again, I love to trot that one out over a few beers with my mates and it ends up in a good bit of fun. It's like, oh, really, is it, Mr. Capitalist? And I'm like, it is. And I genuinely believe that in a free and open market because unless you're forcing people to buy your stuff, people are telling you that, wow, thank you. Thank you, Scott, for creating this thing. I really love it. But the fact that you're making a profit just shows that you're doing it efficiently, right?

53:00And the fact that you can continue to do it is you're doing it more efficiently than most other people as well. It's like, so wait a second. Here is a person or a group of people that are taking certain inputs and they're taking one plus one and they're making three. And that profit at the end of the day just enables, continues their viability, allows them to keep doing, provides the necessary incentive for them to do it in the first place. and recognises the reward of creating value in service to society. Yep. Sorry. Bit of a rant there, but it's true. Yep. Yeah. The individual property investor has more opportunities to do better than average as the equity investor does.

53:38I think, Mark, your key point is it depends. Averages are a guide to what the market as a whole is doing. Doesn't mean people can't do better. Yep. Hey, one for Philip, mate. You got your thinking cap on? Yeah. Dear Scott and Andrew, Andrew has observed that throughout the last few thousand years, humans have continued to increase their energy consumption, and that's likely to continue. The climate and life on Earth... I hope it does continue, by the way. I would want as much energy consumed as is possible, just to throw that bomb amongst the pigeons. Here's why Philip's asking the question. The climate and life on Earth are now suffering from this.

54:14I would appreciate your thoughts on the possibility of reducing energy use whilst still improving living standards. It's a bit like the quest for an ever-increasing GDP. What could go wrong? I hope to continue enjoying your show. Philip, I hope to continue enjoying your show. I suspect he's – I'm not sure if that's hopeful or that's – I probably won't, but I hope I do. Anyway, I hope I continue enjoying your show, Philip. It is a good challenge, mate. Energy consumption has been correlated with environmental damage. I think that's – when I say correlated, I think we pretty much say it's caused.

54:45Yeah, 100 % it is, yeah. So if we keep using more energy, how do we do that without condemning the planet? Yeah. So, okay, take a step back. First of all, there is an objective observation that when you look at standards of living, there is a very tight correlation between energy consumption and standard of living. So deepest, darkest Africa, per capita energy consumption is nothing, and people live in mud huts. You go to downtown Manhattan, the energy consumption per capita is off the roof, but people live in air-conditioned palaces and eat, you know, lobster. And it's sort of like, so that's just the observation.

55:22And that's one that you can go back, even if you go to ancient times, you know, like the elite in Rome consumed more energy directly or indirectly than the workers, than the slaves kind of did. So that's why I say it's a good thing. And if I look into the distant future and we've got Dyson spheres and all kinds of, you know, God knows what sort of technologies. If we want to reach the full human potential, and I'm talking really grand scale, really long term here, if we're capping out now, this is it. This is a good, we're at peak civilization. And that to me is so depressing. You know, I know it feels good now, but I'm sure the peak of civilization in 1882 seemed really good relative to 1782, relative to 1682.

56:07But I would imagine that people in the year 25200, or 2520, we'd be going, oh, my gosh, we're still consuming the same amount of energy. Now, you might say, well, but, but, but, but what if you could get more for the same? In other words, we take the energy that we've got. Well, then you get into a very interesting debate about the laws of thermodynamics, right? And there is an arrow of time. It is a thing. And there is a maximum efficiency that can be achieved. So even if, and we're actually already on this journey, We're already moving up the curve. We have been up for decades now. We are getting the internal combustion engine is the classic example here.

56:46The Model T was so ridiculously inefficient, it was laughable. The modern internal combustion engine is just an elegant ballet of form and function and so damn efficient. But you know what? If you look at the curve, it's, I'm forgetting my maths now, but it's asymptoting at a point. There is a maximum threshold set by nature. And I can say, I don't care, you could be an advanced alien civilization that's like had 10 ,000 years to work on this thing. You're never going past it because you can't break the laws of physics, right? I know that from Star Trek. See, Star Trek's very educational. So I'm not saying we don't do it.

57:26I'm saying we are trying to get more for less. But even if we somehow magically jump to the endgame here, well, then that's the end point, right? So to the other observation is, yes, but Andrew, you can't deny that all of this energy use has absolutely wreaked havoc on the environment. I'm a huge environmentalist. People might be surprised to hear, but I care very deeply about the environment. I love the environment. and it really sickens me that there are industries out there polluting it and damaging it and it's something of cost that we all bear. But that doesn't mean that, oh, well, I guess the only way to get energy is to burn all these dead dinosaurs and we should stop doing that and we should just be happy at this level of prosperity.

58:15No, no, it's ridiculous. There is the amount of energy that hits the earth just from sunlight alone and that we, like, if you could, if you could cap, I forget the stats here, so I'm going to make it up. I'm going to totally make it up. Go for it. Go for it. But directionally, it's correct. It's something like if you could capture all of the sun that landed on, you know, let's call it Sydney, like 100 % pure efficient capture, like, that would be enough to empower Australia for 10 years or something, you know. I'm being hyperbolic here. But that is, for all intents and purposes, is practically limitless, right?

58:54And we're not using it. And so could we do that? Well, you know, that makes sense. Fusion is often touted as just around the corner and maybe it is. And if we ever crack that technology, you would have no idea of how, what we are able to do as a species. And it will have no environmental impact, right? Because the fuel is water. There's no waste product. There's no risk of meltdown. I mean, that is really what we should be aiming for as a society is fusion. That's what the sun uses, right? Perfectly natural. Kind of works. Kind of works extraordinarily well. So I will say I am definitely not an advocate for let's just drill baby drill, as Trump is like.

59:43Drill, that is just dumb. That is ignoring advances in technology. It's doubling down on old tech. And it was different in the 50s, right? We knew not what we did. Now we know what we're doing. So to do that in full awareness of the consequences of that and entirely ignoring the other alternatives that we have out there is just pure recklessness. And I'm 100 % with you there, Philip. Like that's stupid and let's stop doing that. And I think if that were our only option, yeah, I think I'd probably begrudgingly come down on the side of, yeah, we probably just need to make peace of the fact that this is as good as life and civilisation gets.

1:00:23But I don't think that because we have other options. And hopefully that kind of, does that let me have my cake and eat it too, do you think, mate? Like in other words, I want humans to have access to vast amounts of energy. I just want them to do it in a very responsible, environmentally friendly way. Yep, that's exactly the answer, Philip. Yeah, I would absolutely say if we don't find, And climate-friendly ways of doing it, we shouldn't increase our energy consumption. But we have the technology, as they say in the$6 million man. We have the tech. $6 million man. Yeah, we can rebuild him. The question, I know you know this, obviously, Philip, while you asked the question, but the answer is doing more of the same is terrible.

1:01:06Doing more better is even better. And so that's kind of, you know, it's Andrew's point. Let's make it non-polluting, whether it's nuclear, whether it's renewables. I'm not an engineer. I'm sick of the argument. both ways whatever we end up coming up with whichever is the least worst option we should go with um and we should get out of carbon as quickly as possible at that point if we can use all this energy without environmental consequence why wouldn't we so the answer philip is is the move towards carbon neutral non-carbon emitting call it whatever phrase you want energy consumption um and i'm happy to let the experts not the politicians by the way the experts decide what what what's best and what we can do and when we can do it and what how we how that changes over time.

1:01:45These aren't political questions. They shouldn't be ideological questions. I think we should accept that not polluting the planet is a good thing. And let's find the energy source that we can use as efficiently, as effectively as possible, which doesn't do that. And then to that point, then you have at it, right? If we've got nuclear and or renewables on tap, and we can produce more than we can use, great. Let's find ways of using the extra, to Andrew's point, because that will improve living stance for us and, by the way, for the developing world. So there's there's wins right across the board.

1:02:14And, and yeah, even within existing technological approaches, it's a bit of Googling here. Bell Labs first developed the first practical silicon solar cell in 1954. It had 6 % efficiency. In other words, 94 % of the power that hit it, it was wasted. It was never captured. We are now nudging up against 24 % efficiency. Right. And again, there'll be thermodynamic reasons why we never get to a hundred percent, but there's a lot of improvement that can be happening. And there's just pure scale as well. The other thing that, you know, people make these arguments. Better storage, by the way, too. Go on.

1:02:51Better storage, you know. It's sort of like at the moment, you remember, actually, it's more laughable now. It was laughable at the time, but it was less, people took it more seriously, was this idea that electric vehicles will never take off because we don't have the infrastructure. At least with a petrol car, I can drive anywhere and there's a petrol station in every corner. It's like, yeah, because we built the infrastructure. Like there's a sunk cost that's there. So to say that, well, to compare it, we're going to ignore the sunk costs of all of this stuff, all the refineries, all the wells, all the petrol stations, all the trucks that drive around.

1:03:27We're going to ignore all of that and I'm just going to compare it. It costs me muggins to rock up, put some petrol in the car versus find a charging station somewhere and do it that way. And wouldn't it, I mean, it's just not an even Stephen comparison kind of thing there is that there are some technologies where they have this sort of this hurdle rate that they've got to get over. It's sort of like initially it's just not at scale, so it's not going to be viable. But we've already seen how rapidly that can change. I'm old enough to remember it. I'm not that old. I'm old enough to remember that household solar will never be a thing.

1:03:59We had to throw everything at it to make it worthwhile. Guess what? We threw so much at it that now it's like everyone's like the national energy operator is like, whoa, too much. We've got too much. Stop doing this. The grid cannot handle it. No one saw that coming, right? Imagine if we could store that effectively. Right. So we've got all the capacity. We've got too much capacity. Cool. I know nothing about engineering, mate, but I am reasonably confident, somewhat reasonably very confident, one generation of battery technology and it's game over. Yeah. Whatever the next technology is allows it to be either, you know, I'm talking about order of magnitude.

1:04:35So when it falls to a quarter of the price or four times as much storage or whatever combination of that is, all of a sudden that's game over. Like you think about the – I've looked at batteries for home and I'd like to for environmental reasons. I can't make it pay. It doesn't make sense. It just doesn't at the moment. But next generation of technology, it's all it's going to take. It's not miles away. So you think about the time when it can halve the – effectively, I think halve it would be enough, halve the per kilowatt cost of batteries and every house can afford it because it's going to be better than buying it from the grid.

1:05:01It becomes an absolute no-brainer at that point. Anyway. We've spoken to a company on the ASX who is doing solar cells embedded into glass, which is glass that you put on your house, or it's not as efficient. I mean, there's just all these cool things. And I don't know. Look, I'm the kind of guy who gets super excited about tech. And I know from experience that, like, a lot of really promising things fall flat, you know, when they're explored further. But that's not a reason not to try, right? And because there is also a lot of tech that we've tried and works really well. That's history. That's history.

1:05:36Everything we've tried, something's worked, something's flame out, something's worked really well, something's been improved on. Yeah. Not trying. Let's not try and invent a car because the first couple might not work. Yeah. Oh, it's dangerous. There's that in their airbags. Exactly. You know, it's so defeatist. You know, and look, the reality is that we have to go through a transition. as much as I would love to get rid of all that disgusting, black, polluting nonsense that we drill out of the ground, if we were to get rid of it today, well, maybe we want to as a side, but we'd just be very honest with ourselves as to what that life would look like.

1:06:09Of course, you're correct. Exactly. You know, we would all have a very, very bad quality of life. So there's going to be a transition. But just because it's hard doesn't mean we shouldn't do it. We should definitely try because the rewards are so vast, right? Anyway, I think I've made the point. You're 100 % right, Philip, but there is a middle way, as the Buddhists like to say. I think what's important too, Philip, is, and I'm not going to make this accusation at you, I'm sure you're not this person, but there is a, we've got to break the link between energy consumption or use and the environmental damage.

1:06:46I mean, that's what we just talked about, right? And there is a group of people who are, we should just consume less and use less because we should. and it almost becomes its own cult at some point. Conserve our way to abundance is an oxymoronic statement. It's well intentioned but just insanity. Correct. And it makes some sense because you start with that mindset and kind of, you alluded to this a little bit, Philip, you start with the mindset of what we're doing is bad. The more of it we do, the worse things get. So we should do less of it. Perfect, absolutely perfect sense. Yeah, I get it. You've got to just break down, again, I said earlier in the pod, you know, the wrong solution to the right problem is still the wrong solution.

1:07:18You've got to break those apart and say, no, no, no, It's not energy consumption that's causing us. I mean, it is because up until recently there were no other options. So, yes, it was, absolutely. But it's not energy itself. It was the output of the way we produce the energy that was the issue. So if we could get fusion, would we simply say, yeah, we should use less because less is better and somehow that's not good because we shouldn't? By the way, I also get the anti-consumerism thing as a general rule. I think we are too consumerist as a society. I'd like less of that because I think it messes with our values and all that sort of stuff.

1:07:48Yeah, GDP growth, you know my thoughts on that. Right? And those are very different things. So what we're saying is, you know, if we were able to improve quality of life by using more energy that isn't polluting, should we do it? I hope that is a rhetorical question. And so that's where people get a little bit, and I get it, right? I get there's also a loss of hope in some level around, which is just kind of like for all of the renewables we've had and all the conversation about nuclear and everything else, we're still polluting up the wazoo and China's still opening X number of coal mines a year and, you know, we just have to stop doing the bad stuff.

1:08:22And the easiest way to stop doing the bad stuff is stop consuming until we find a better solution. I kind of get that thinking as well. And that may even be part of the way to your point. Maybe we do have to say we're as good as we get for a while. We're going to sit on the back burner, wait till renewable slash nuclear slash carbon free is at a level. Then we can start growing again. That wouldn't be a terrible idea if that was the least worst option. It won't happen because we can't get ourselves a consensus on that. I'm not even sure it should. But, you know, I could make an argument for it.

1:08:47If it was, this is the only way. Okay, well, let's do that for a period of time so we can get ourselves ready. But either way, it's not about the energy consumption. It's about the externalities, as the economists say, of that consumption. So it's the externalities that are the issue, not the energy consumption itself. In 1950, if we had this conversation, you would have been 100 % right because there weren't other options. Could we use, you mentioned 1959 was the first solar panel. So 1950, are there wind farms? No, there's windmills in the Netherlands. Is there solar? No. Can we catch tidal energy?

1:09:16No. Is nuclear ready for prime time? Frankly, in hindsight, we know the answer. Between Three Mile Island and Chernobyl, that would have been, you know, a lot of nuclear actors at that point probably taking risks we didn't want to take. At some point, and again, I make no claims on the energy stuff. I just don't know enough about it. I'm open to whatever the engineers say is best. But we have, again, we have the technology. We have the ability. It's only a matter, it's literally a matter of choice at this point. I mean, yeah, let's not go to the energy debate. We have the opportunity. We can do it.

1:09:46We can do it now. We could put enough panels, enough batteries, enough turbines, enough nuclear plants, enough time. We could do those things. Now, we may not choose to because it costs too much. But again, that's the trade-off you're talking about, Philip, and this is where I 100 % agree with you. But, yeah, we have to separate the assumption that energy, greater energy consumption equals greater pollution. If it does, we should stop doing it. But if we can do it without it, we shouldn't retard the growth in energy consumption. Yep. Yep. Mate, I reckon we are pretty much done here. I am still reeling a little bit from your resistance to my gag.

1:10:19I feel a bit. It's only because I couldn't think of anything. Take him first. I will try and come up with something else. I always wondered what straw man was. No, let's not go back there. Let's not go back there. Talk about things that were in their course. All right. I will go for my thinking cap on. At least I have my holidays. This is a pre-recorded one, so I'm somewhere in the Northern Territory right now. I will think about it while I'm watching the sunset and having a beer and see what I come up with. Until then, we have got more pre-recorded podcasts, so I know for a fact you will come back this Friday, mate, because we've already done it.

1:10:53I've already done it. There you go. Well done. Thank you. And until we speak again, fool 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.