Mailbag: The threat from AI. June 22, 2025

26:31Like just anything that might be needed, anything that's non-perishable, I think we should have a strategic... Let me qualify that. Anything non-perishable and super important in certain situations, I don't know why we wouldn't have a strategic stockpile of that kind of stuff. And if in 50 years time I'm dying and someone goes, ha, we never used it, I'm perfectly cool with that. Exactly. You know, it's just like, yeah, but what about the economics? That was a terrible return on investment. Well, that's not the, not everything is through that lens. I tell you, it's like insurance. You always say it's the most biggest waste of money until you need it.

27:08Just as a warehouse full of PPE is a complete waste of time until you need it. And then it's like, you know, I'll admit, this is embarrassing. I'll admit it. I'll admit it. We buy more toilet paper than we used to, right? Like I have toilet paper anxiety. Like in the sense, it's so stupid, I know. but like we've got we've we've got more than what we need like we we usually do a shot once a week right but i reckon i can go three weeks yeah right but every time i'm at the supermarket better get someone isn't it dumb it's so crazy but then i think at the same time it's sort of like well i'm i'm gonna use it at some point right like we haven't we haven't solved that problem yet so and it's not gonna go off so there are some things that are just i think I think, yeah, sort of go under that kind of umbrella.

27:58So I don't agree with you, Jono, but it's just sort of like people on both sides of the argument take it to stupid degrees. It's like, we should produce everything here. It's like, careful what you wish for, or we should just get everything from wherever it's cheapest. I was like, that's got problems too. So nuance, context, all of that kind of good stuff. Yeah, I'd probably ease back on the defense componentry, frankly. but yeah yes I don't know what else to say yeah that's fair question John I just don't outside that strategic stuff that you can't get by the way if you can't get it somewhere else that's the problem rather than getting it from China currently that's the other thing it's like you know you buy panels this year from China next year from Vietnam the year after from New Zealand just there's no there's no in my view anyway benefit in in making some sort of mandatory divestment from China for its own sake we're not going to change anything particularly recurrent stuff right it's like that's now if there is stuff that you as you say no one else provides then we should either provide it or make our peace with china doing it yeah but other than that it's like that's anyway yep and if you're gonna do it do it properly don't have a strategic oil reserve and then put it in boston like that's wherever it is i don't know where it is it's dumb that is dumb yeah don't don't store all your gold in london like it's sort of like it's kindly not i mean think about it with the oil it's sort of like why would you need a strategic oil stockpile because poo got real that's why you need it right and at that point in time do you think the yanks friends or foe or you know are gonna go oh yeah totally we're gonna ship it over to you now because you need it like just like no it's an emergency sorry yeah sorry bro you know and that is there's a whole bunch of dumb dumb things like that so if you're gonna do it do it properly it's i'll just add that good call good call it's nice but thanks I appreciate it.

29:48Adam says, Hello, Adam here with a question for the pod machine. Thank you. But first, the required groveling. I don't know how this became a thing, Ram. I think I mentioned it once. Apparently a lot. All hail the preeminent pontificators of the pod machine. I'm liking it, by the way. Let's not dissuade this. There's some good alliteration here, Matt. So I'm going to start again because Adam deserves it. Oh, sorry. All hail the preeminent pontificators of the pod machine. those melodious masters of meandering monologues. With dulcet diction and dazzling discourses, these loquacious luminaries lavish us with their luxuriant lessons and ludicrous lore, leaving listeners lustfully longing for each new auditory adventure.

30:30Oh, that is good. How good was that? Reminds me of the start of that movie V. Another movie I haven't seen. Who does the V? No, dude, you're... You're beyond help. I am beyond help. Assuming that meets the threshold, says Adam, here is my question. In my day job, I help small to medium enterprises implement AI. We should be talking to you. The more work I do in this space, the more research I consume, the more I cannot escape the sinking feeling that we are rapidly approaching a massive dislocation in our economies. Given that more than 70 % of jobs in Australia are service-based and Sam Altman from ChatGPT claims the company can already do 1 % of all economically viable work, something I witness daily, how should we be preparing our economies for the scale of Luddite-esque disruption AI will bring?

31:18And what should we as individuals be doing to prepare ourselves and our investments for what I see is the inevitable future? Thanks for your insights and what I hope will be some Phillips optimists. What do you reckon, mate? If you're in charge, if you're the government minister for AI, all of a sudden, Albo calls you up and says, mate, I need you in Canberra. And he says, look, this is going to be a big deal. firstly how big a deal is it going to be how dislocating is it going to be and how what should we do to prepare the economy for it and then as individuals yeah oh it's a huge question okay this is it we're done for the rest of the pod and next week and next week block out your carless people oh i mean we don't know because it it may be that we just hit a stumbling block a lot sooner than people like sam altman think i mean he's not an idiot right yeah but but also he's got vested interests, he's going to talk up the prospects of it, right?

32:11So I'm not saying he's wrong. No, he believes it by definition is why he's doing it. So it's a bit of a self-reinforcing circle. Yeah, it is. And there's always proponents, you know, people at the vanguard of new technological changes are often the most optimistic, starry-eyed kind of people. So I'm not saying he's wrong. I actually think he's probably right. So I'd hasten to add that, but let's not take it as red. And then it's a question of how far you go. Like, is it something we kind of get to sort of almost human level and then it plateaus out? Or do we get to super intelligence? Like, just like what they call the singularity, which is godlike intelligence, like, you know, IQs in the thousands.

32:50They're being actively discussed. I mean, there's a very different world just between those two sort of points. So I don't know. And this is, I always cringe whenever I hear the term, this time it's different. But this kind of, this is a good contender for this time it's different, right? It really is in the sense that we've had automation before in terms of what the Industrial Revolution provided. And certainly in more later years in terms of IT communications and the rest of it. But when you can actually replace thought and you can augment that with some of the robotic stuff that's happening at the moment, it's it's hard to it's hard to know where we find refuge it was always oh we'll all just be artists and musicians because the ai will never do that i can tell you i've listened to ai generated music that is just like put shakespeare to shakespeare puts mozart well and shakespeare dude like you you name the creative endeavor and it's fantastic it's really good and just how it's improved over the last year i know purists will say oh but it was never done with soul or whatever because you know it was done by a computer.

34:00If I said I made it, you'd think I was a genius. So I just don't know what you do. I think what you try and do is be alert to the – because it won't be like – well, depending on how quick the singularity arrives, it won't be like you wake up one day and it's here. There will be some industries that are far more disrupted and more quickly disrupted than others, and you work in the industry, mate, you'll know it far better than me as to what those kinds of areas will be. I think you pay a lot of attention to that kind of stuff. Other than that, I just think you try and accumulate real assets as best you can, right?

34:45Because when it all comes down to it, you want something that is going to have value in that new world. and scarcity in a world of abundance yeah scarcity becomes increasingly valuable and i'll just shut up at that point no mate you don't know that um it's really hard it's really really hard i my optimism is that throughout history there's not yet been a time when the supposed revolution end up with mass mass unemployment to extraordinary levels whether it was the at 1.95 % of us worked on farms and the machines were invented. When the computers were invented, we had a whole lot of accounts clerks and typists and whatever who just didn't have jobs anymore.

35:35The internet display, I mean, we're seeing the end of effectively postage, right? And that sucks for people who were otherwise delivering mail, but they get absorbed into other roles, either in those companies or other companies. To imagine, the real risk of AI is not its arrival, but its speed. and whether it happens so quickly as to be dislocating. There's an argument that was made in a book I read whose name I can't recall. It might have been the Bitcoin standard. It might have been narrative economics. I can't remember. I'm pretty sure it was one of those two. Talking about the fact that technological innovation probably was responsible for a bump up in unemployment in I think it was the 50s.

36:11I don't know if you can correlate that for me, confirm that for you around. Where it brought on a bit of a recession just because it happened relatively quickly. and it kind of, you know, the sudden adoption of some more of that kind of manufacturing technology put a whole lot of people out of work all of a sudden. We say a whole lot, I'm talking, you know, a couple of percentage points, but enough to cause a recession and a bump in unemployment. So is it possible? Yes, absolutely. It's always possible. Is it going to happen? I don't know. I don't know. The question for us really is, and this is the thing, we need technological improvement because that's what we call productivity.

36:48Ram, you and I have talked about this a lot in the past few years. that makes it all wealthier. Does it make individuals, every individual wealthier? No. Some lose their jobs. The reality is just when manufacturing of, we're talking about Chinese manufacturing, when that manufacturing goes offshore, you lose some jobs. Now, despite that, Australia still got a 4.1 % unemployment rate at the time of recording. Now, that's pretty good, right? Because we're not buying cheaper stuff and we've got lower unemployment. That's as good as it gets. So the Phillips optimism you reference is kind of the only thing that, the only issue we need to be mindful of over the long term, and in the long term we're all dead, as Keynes famously said, but the only way to be worried about the long term is the distribution of the wealth between capital and labour.

37:32We'll get to the investment peak, you asked about that too. Because if the proportion stays the same, then more people get more jobs, get paid more money to do those jobs, the jobs get created because people have got the money to spend. That's what the economy is and does. I mean, it's not a predetermined, predefined thing, but it's kind of what happens. It's the way these things net out. They end up creating that sort of value as we go. It's almost the story of economics is my income is my spending. My spending is your income. Your spending is my income, and around it goes. So I'm not particularly, easy to say, I'm not particularly worried about it from that perspective.

38:08I don't think it's going to be a huge problem. with the two exceptions of if it happens at pace it may cause a dislocation and second if it changes the mix between labor and capital now as a shareholder i'm happy to get more money from my capital as a citizen i don't love that we you know end up with the big the rich getting richer and the poor getting poorer um so if the distribution changes because of that i.e the owners of capital make more money than than labor and i'm talking about labor as in physical labor not labor party obviously then that that could change the wealth of the average person and potentially cause social and economic unrest so those are those are the possibles um i would suspect it's an enabling technology um 70 percent of our stuff is services based that's probably actually a support rather than rather than a problem honestly um in the sense that particularly personal services we've talked before about how many nurses can you have on a hospital ward maybe ai means you can have one nurse to five patients rather than four but you're not going to have an AI robot, you know, addressing your wounds and asking how you're feeling and checking your pulse or whatever.

39:11Aren't you? No, not exclusive. It's already been done. The machines already exist. That's kind of what I mean. Have you seen the latest Optimist videos? No. Like, it's like your first thought is that's not real. It's like, oh my God, that's real. Like they're dancing. Like if a human can do it, they can do it. So that's why I do worry that it is like, even if you take, I forget the exact, that but even if you take the number of jobs that are involved in driving yeah truck drivers train drivers uber drivers amazon delivery like so i think it's something like 12 of the workforce it's a very high number it's like i'm not saying you drive to work your job is to drive a vehicle i'm a four click operator or i drive a train or something like they're all gone yep okay and that's just one segment right and then you take anything that that that involves like i know you're in the legal discovery process.

40:06It gets rid of all of them. So my point is that jobs aren't going to go. My point is that others will be created. Because we've got to set the united to. That's the... Hypothetically, so I'm not saying you're wrong, by the way, but just as a thought exercise, it's fun because in past technological revolutions, there was refuge for us monkeys. It's like, well, we can always do that. Because, you know, you're never going to get a steam engine to... I'm trying to think of an example now. you know give you a haircut right you're just not going to yeah but when they can yeah and they seem it's like it's right on the cusp figures another robotics company it's just incredible and it pairs with the ai stuff and it all these these are supporting technologies that all dovetail into each other when it's so pervasive i just don't know how many youtube influences we can sustain economically you're right there'll be there'll be there'll be jobs that we can't even conceive of today but it's like can we all do that well the reason we're 70 services is because all the other stuff got automated away but like when the services themselves can be done by ai robots just i smoke when i say it feels like the future but it's here genuinely is it's genuinely knocking on the door.

41:27I just think that that is, that is, it's not that I disagree with you, but I would love, because when I've thought about it, I kind of think, well, where? I can't think of, I can't think of anything. Yeah. Unless we're all, no, I'm not even going to say it. It's a bit rude. And even then, that's going to be disrupted too, right? I'm not as a gotcha, but as a genuine question,

41:56Have you seen Blade Runner? Please tell me you've seen Blade Runner. Not for a very long time. God's sake, man. I couldn't talk to you. Anyway. But where? What refuge do we have left in that world? See, here's the thing. I think that's right. I think that's 100 % right. But I also think we ask the same question at every point during history over that period of time. and that's my that's my key um that's my key challenge here is if you think about how do we you know when when the machines when the stump jump plow was invented when the tractor was invented we're sitting here going well not literally on a on a tin can and a couple of pieces of string and we're saying to each other where can the jobs be created what can possibly be done i mean what what do we need what can't be done by these machines now um so i don't think you're wrong i just i think as it when the machines do the things for us the question for me is where does the value then get accreted if it all goes to capital then yes it's a pretty dystopian future if it come it ends up being people end up doing other jobs because they're paying you less for this it's the story of history right the where do the accounts clerks go where the typists go where do the where do the um the factory workers go when the assembly line arrived you mentioned the forklifts amazon and woolies and what it calls a large amount of warehouses already i mean those jobs are already gone i guess that's why i'm kind of it's it's a pace thing because the people who were doing those jobs are doing something else why because 4.1 percent of us are unemployed 95.9 percent of australians who want a job have got one and that's been that's lower than it's been in 40 years and you kind of go well okay so you know 40 pick it pick the last time employment was 4.1 percent in 1980 whatever or 70 whatever it was and say where could we possibly who could they couldn't imagine computers or the internet or ai i mean imagine sci-fi yes um electric vehicles what's that you know physiotherapists uh hairdressers um what and again my answer is i don't know the answer but i find it hard to believe this is the first time in history where we kind of go new technology no value was created and that value wasn't then spent on other other jobs because other people had spending they wanted you know the money goes around let's get locked up a vault scrooge mcduck style gets spent and if and when it gets spent gets spent on someone who's doing a thing and that's yeah i don't i don't know the answer but i i would be very surprised if if we didn't have massive employment if every every evolution or revolution since the industrial revolution caused unemployment we'd have two percent employment right now because everything else would be done by a machine that no one could imagine imagine seeing an 1815 and saying right what's going to happen is and you describe the technological events of the following 200 and something years you go well obviously no one's going to work at that point because we've got all the things we can do all of everything we can do now is being done by a machine what's left for me to do i'm not going to harvest the weed i'm not going to mill the weed i'm not going to take the week to market i'm you know uh my horse is not going to have a job and you kind of i don't know i just i think it's the answer was always something that required human thought there's a broad category so like i can't what i what i used to do with a horse a plow in my hands yeah now i don't need to do that yeah so i have to do something even if it's something unimagined it's something that requires a brain yes but we've but now we've potentially got brains so it's kind of like what else do we have to offer so you might say we haven't thought of it yet but whatever it is will require thought yeah or maybe you want to call it creativity yeah but again as i say that's that's what they do that's what that's why i do wonder not not not posit but wonder is it is it different this time when it is when it is the the cerebral dimension that is being disrupted because whatever we can and again that's where you have to start with what where does the technology go but if you say it gets to the level of human intelligence and human creativity and people out there going oh it never will maybe it doesn't i don't know even the last three years have blown my hair right back in terms of what can actually be possible.

45:55If it is, it's just sort of like, where? What do we do other than, I don't know, are we just a zoo for the AIs to look at? Like just a biological curiosity at a certain point. Like, and just imagine it like at this point in time, if you don't have capital and most of the world doesn't have capital, the only thing you've got to sell is your labor. Now, who's going to pay me$25 an hour when I can get a robot to do it for the cost of electricity and parts? On mass-produced scale, I'm probably going to buy a pretty decent robot for$10 ,000. And it'll cook, it'll wash, it'll mow the lawn. If it requires hands and a brain, it can do it, which is kind of like, oh, okay.

46:48and again that's why I said the answer was always art because they can never do art it's like well it turns out they can bring you to art fantastic art I'm 100 % with you I don't think that's the answer I really don't think that's you know to believe so I guess just to finish the thought I take your point that there are things that we can't imagine but what I can imagine is whatever it is has to originate in a brain like what I offer of the world is my sentience, my consciousness, you know, my spark, whatever you want to sort of, my soul, I don't know, whatever you want to call it. But if that can be perfectly emulated and improved and done faster, it's kind of like Scott's a hardworking guy.

47:29He's got his, you know, he's got a good moral compass. He's a lot of value you can add for the world. But now I can just spin up 50 ,000 versions of him that have got an extra 200 points of IQ and never sleep. but but but i can i can i can what like what yeah i don't that's that's where i stumble and that's why it might be different this time if if and if like if those technology if if that's the point we get to and maybe we don't maybe we cap out and we never get beyond you know basic high school kind of level intelligence and there's lots of stuff to do for those but even then it's kind of like well it still replaces 45 of us like we'll find out we'll find out we'll definitely find out nothing nothing more certain than that yeah so we can't answer your question adam um just to finish off to adam's question i know your point mate um so so economically there's a very significant public policy question individually and frankly selfishly because that's just that is what it is being an owner of capital is the answer and and that's a that's a really if you want to look at the social element of that that's a really really unsatisfying answer because it basically says you know be be less bad than others less worse off than others is and is that human nature yes i expect everything to be equal or 100 fair and you know communist socialist no um it feels a bit crap to say well at least i can climb over some other people and you know get get above the rising water line then at least i'll survive um but selfishly given the uncertainty your best your best defense is to have capital.

49:01That's unquestionably true. Because if labor is in less demand, then having an alternative source of income, i.e. capital, is part of the solution. And even then, can you just humor me for like literally two minutes? Go on. Sorry, I'm sorry. I apologize in a minute. No, go for it. But it's like even then you've got to think about the type of capital. It's just like in a world of hyperabundance because I can have as much labor. as I possibly need. There's certain like, you know, like manual looms, for example, that's capital. That's probably not a good one. A tractor that's not automated, that's capital, but it's probably not a good one, right?

49:44And I'm just saying if, so people will disagree if this statement shut up, just ignore everything else I say after this point. But if we do see the continued ascent of AIs, I mean, they're going to need to somehow transfer value amongst themselves. Like, I'm dead serious about, like, what are they? They're not opening up an ANZ bank account with Australian dollars. Like, they're not, right? They're going to do a million transactions per second cross-border. The concept of a border won't even make sense to these entities, right? Like, buy some bloody Bitcoin is what I'm saying here. Like, just as an insurance policy, right?

50:21Because when you really think through this kind of stuff, it's sort of like, that's the ultimate scarcity. That's the ultimate capital in a AI, hyper AI enabled world. Now, if you disagree with that scenario playing out, then fine, then don't buy it. But it's kind of like, you might want to get some just in case is all I'm saying. I'll shut up now. I've gone over my three minute quota. You've been warned, people. You've been warned. Of all the reasons to buy Bitcoin, I don't think AI is the strongest one, but I may well. It's just one of many, many reasons. Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener.

50:59G'day Scott and Rampage, says someone who's chosen to be anonymous. I love listening to the Machine Pod every week. I don't mind the change around, but it's the Pod Machine, we all know that. And have decided to go from passive listener to active participant by submitting my first question. This one is on DEI. Dividends, equities and investments. I'm 36, says our correspondent. And over the past few years, I've been steadily building a simple, no-frills portfolio made up of ETFs and blue-chip stocks with the goal of growing it between now and retirement. Growing up in a family-run small business, money was often a source of stress.

51:37A good month could quickly turn into a bad one and vice versa. Now, I don't want to paint myself as Tiny Tim. my family has done well overall. But early financial anxiety shaped my desire for greater stability in my own career and finances. That's what led me to create what I call the Rotisserie Chicken Portfolio. I currently have two ETFs, the Vanguard Australia ETF and the iShares SP500 ETF, as well as a decent holding of Washington H. Sol Pattinson. I've noticed the two ETFs pay dividends four times a year in January, April, July and October, while Sol Pattinson pays twice yearly in May and December.

52:14I'm thinking of adding another blue chip stock to my portfolio, Procter & Gamble, which, like Solpats, is also a dividend aristocrat. You can probably see where I'm going with this. Procter & Gamble pays dividends four times a year, but on different dates than the ETFs, distributing in February, May, August, and November. This means that, like a rotisserie chook dripping with oil, my portfolio would be dripping with dividends almost every month of the year. If I'm looking to build a slow and steady portfolio with a long-term time horizon and I'm happy to achieve market returns, would this be a good idea?

52:47I'm missing a beat by overly focusing on the dividend payments too much. I know you can't offer personal advice, so any general feedback on this so-called strategy would be greatly appreciated. Fool on. Rotisserie chicken, what do you reckon, mate? I love the naming of it. It's great. That's good. That's awesome. The question is how good you are with your spending and saving, if you're the kind of person that the second you have money in your hot little hands, you spend it, it's brilliant. But if you can resist that temptation, it's really just an issue of timing. So let's talk more about yields than timing.

53:25Let's say that over across all of those blue chips, you're going to average something like 4%, which is probably about right within the historical context. On average, I know some are more, some are less, but it's kind of a a reasonable median kind of figure. Whether I get that paid, that 4 % of my capital on January 1, or I get it spread out over 365 days of the year, it's still the same amount. There's a time value of money consideration, et cetera, et cetera. But they're not big factors over a one-year timeframe. So I don't know if it matters that much. It matters a lot less than the actual investments themselves.

54:04So in an idealized world where all of those investments are equally of high quality, yeah, you might as well, right? Because then you get a more regular payment, it's going to feel nicer, sort of that kind of emotional stuff. But I wouldn't, and I know you're not saying this, but I wouldn't buy an investment purely because it just happens to have a dividend schedule that's slightly out of sync with the others and will provide for that more steady sort of payment there. So I'll choose high quality, high return potential first. And then if I can find a whole different menu of stocks that fit that to the same degree and pay over a different schedule, yeah, cool, why not?

54:47But I don't think, I mean, that's a pretty idealized kind of scenario. I feel like I'm being unnecessarily main. I love the idea. I love the idea. I think it makes a lot of sense because we do love consistency of returns. But I just don't know how you practically achieve that. I mean, all the stocks you mentioned are all great quality stocks, right? So it's hard to go too wrong with all of that. But again, does it really matter? If you can't help yourself but spend money when you get it, then yes, definitely do it. If otherwise, eh, I don't know. Too harsh? No, I think it's perfectly fine. I will say hopefully dear correspondent you are you're 36 right you're still working and assuming that money is going the dividends are being paid into an investment account not your personal transaction account there's really no need in my opinion to worry about when the time when the transactions come in here's the thing you've kind of said again we can't give you advice as you already said you've set it up by basically saying financial stability and that sort of that the lack of stress is of a concern for you.

56:00It may well be the case that you are someone who's looking at this and saying, I need, want, like, feel better about having regular cash coming in because it makes my stress levels lower. Because I'm getting paid regularly and that regularity of income makes me feel better, makes me more comfortable, makes me feel like I am in charge of what I'm doing, that life is good and I don't have to worry about money. If that's the case, you've answered your own question. And it's not actually a financial question at that point, it's an emotional lifestyle question. I don't mean that in any sort of negative way.

56:26the emotional stability and comfort is more important than the financial one, frankly. Perfectly valid. So it's a higher cause. So if that's something that's important to you, yes, go for it. Do what you want to do. Would I pick a company just because of when it pays dividends? No. If you want to buy a property in a gamble because you like it and it happens to have a separate dividend, it's fine. Otherwise, here's the thing. If I offer you$100 twice a year or$10 once a month, I hope you take the$100 twice a year, right? So, you know, pick your investments first, then worry about the timings later.

56:57If you need to have them in that timing to make you feel better, then go for it. If you are, hopefully, your investments are in a brokerage account and your dividends are coming in and being put into a separate bank account, you're not touching them, and you've got another 30 years till retirement, I do think you're probably necessarily focused on when the money comes in. It's nice to have. If it makes you feel better, do it, but it shouldn't make any difference, particularly now. Even in retirement, we run a service. I mentioned it before. I mentioned it again only because it's context. Context?

57:25Contextual? Context. Whatever, both. That we run everlasting income and we don't worry about the dividend payments. We tell our members or we model this portfolio for our members who take out money every single month. So what we do is we hold a cash balance and we just simply say, all right, well, the money comes in irregularly but goes out regularly. And as long as the totals are the same, the timing is irrelevant. So we literally say to people, take out money every single month. I said it out every month. Take it out of the portfolio in retirement. Sometimes it'll be really good dividend months.

57:54You've already highlighted some of those, anonymous questioner. So those times we say, yeah, it comes in then. Big lumps, big chunky lumps. Some months, nothing. Some months, a lot. But you're taking out the same smaller amount every single month. So you cover it over the year. And that's, to my mind, a better way to do it. But again, if it suits you, makes you feel better to do it, then go for it. I do think you shouldn't put the cart before the horse. I would particularly at 36. Maximize your investment returns, not the breadth and spread of dividends. but again it's not that big a deal if you want to do it differently it's whatever makes you feel better yeah

58:28so Dave has an answer for you not a question an answer okay g'day gents not a finance thing or even a question I was listening to a recent pod and Andrew said there were disability schooling transport issues for a friend's child as they lived outside the line to be picked up and Ram said there was no higher power to take the issue to I'm just writing as I am a disability advocate far away from Sydney and Ram's friend can indeed take the issue to a higher power. Education is a human right under the UN Charter of Human Rights. Each child has the right to education whether they have a disability or not.

59:02If the bus line or school won't pick up the child and the school attendant is fit for service, so to speak, the issue can be raised with the New South Wales Department of Education, the local minister, the Minister for Education or the Human Rights Commission. These sorts of injustices are the issues I deal with every day and there will be a disability advocate that can help in your area. The service is federally funded and covers pretty much all of Australia. They can go to individual circumstances and provide tailored advice. If you need help finding one, please give me a call and Dave leaves his phone number.

59:32Cheers, Dave. That's really good to Dave. Thanks, Dave. Yeah, I mean, I'll pass it on. It was actually the Department of Ed that these friends of ours were trying to deal with. They were the computer says no people. it's like it's like any bureaucracy there is it's why people like dave are so valuable because they know how to navigate the labyrinth yes if anyone's ever seen i'm doing lots of movie references if anyone's seen the incredibles uh you know and the little old lady comes in and he tells her how to navigate the insurance like yes to make sure she gets it so you've got to do this and fill out that and the boss is like how do all our customers figure out how they navigate through our systems so so so dave's right right like there are things in in place it's just if you're on the outside and you're not familiar with this yeah and you're just going through the usual general channels like if you don't know the right words to say forms to fill out places to go to you just keep hitting up against these walls which is the really frustrating part of it right is and yet someone else can have a totally different experience more often than not because they just had someone in a better mood and a different person picked up the phone in the call center judging the morning in the afternoon type stuff exactly yeah it's it's so i mean that's crazy so it's it's not that those things aren't there it's just that how difficult that they can be to access and how frustrating it is and how arbitrary it is it was just anyway i don't want to bring it back i really do appreciate that day that's fantastic and thank god there are people out there like yourself advocating for those that can't advocate for themselves because it's hard it's and and they don't make it easy a lot of these places no you're absolutely right mate you're absolutely right hey um this is um from michael dear scott and andrew first let me sing your required praise to make sure my question is answered properly thank you i've heard half i've heard the half answers give it to those who don't do enough ego boosting that's a little harsh michael a little harsh well you know i don't make the rules oh yes i do yes i do i make the rules that's That's the rules.

1:01:40God damn it. My wife and I, says Michael, both listen to your insightful audio waves coming through the pod machine. Thank you both. We love the viewpoints you both provide and I find the tangents really insightful. Take a good hard look at yourself, Michael. I have a question for your wise minds, he says. What do you do when you have a company in your portfolio that is a top performer and continues to grow but is now overweight? To the order of 20 % of the portfolio, he says. We have confidence that will continue to perform well in the long term, but are conscious that it's now a major part of the portfolio.

1:02:12So we're heavily impacted if there are negative price movements. Should we be selling some gains off the top to be redistributed elsewhere? Or do we back ourselves and keep it as it is? Thanks, Michael. P.S. You can use my name. Nobody knows who I am anyway. It's like having a name like Andrew or Scott as well. We're not that unique or rare. Oh, so hard, Michael. so hard and I speak with a deep knowing in the core of my being that I have faced and continue to face this to this very day I am wrestling with that exact problem. As far as investment problems go, it's right at the top of the list. It's like having a tax problem, like they're the best problems to have, right?

1:02:56Something's gone very right when you've got a tax problem and something's gone very right when you've got an overweighting, generally speaking. I guess nine of your 10 stocks could all drop 90 % and that could also engineer an overweighting, but more often than not, it's because something just gets knocked out of the park and it's great. And I've had situations where it's been the worst decision of my life, like in hindsight, in hindsight, which is always 2020, but I actually tried to work it out one day, how much money I've left on the table by selling ProMedica's shares early. and I sold, like the last portion I sold was like 140 bucks from 85 cents.

1:03:37You know, like I, you know, but I sold some at a dollar and I sold something and then there's some at five and, you know, and just, it'll do your head in, right? Now it feels, so you've got to be careful though with singular examples because there are other examples where I, where things did just go to the, like Pointero is a great example, right? Like I got some of those at like four or five cents, It went to 90 cents at one point in time. And again, was selling up all the way. Thank goodness I did, because there's nowhere near the highs that it was. So it's kind of like, I always come back to, it's going to be a function of your conviction and how you look at the value.

1:04:15If it is super high conviction, like you just, and it's beyond just any sort of emotional, warm, fuzzy that you have. And it's just like, I have looked at this. I have thought deeply about this. I just can't think of anything that I have higher conviction of. And I still think even though something's gone up a million fold doesn't mean there's not good value. It could still be. In fact, mathematically, it could actually be cheaper even having gone up 10x in price because the earnings have just backfilled it so quickly and the growth potential has just exploded. So if the value is there and if the conviction is there, I wouldn't say never, ever do anything because at some point it'll be 99 % and maybe at that point you need to.

1:04:56but I definitely would urge you not to overthink it because every time, imagine if you do, and it depends on the style of investor you are. I've mentioned plenty of times, even recently, where I'm the kind of investor that has a low strike rate, but when they work, they work out really well. Well, if I'm going to re-weight as soon as it gets to 10%, I'm never getting the upside that I need to counteract the ones that don't work out. So you kind of almost need to let them run a little bit. Not in objection to conviction or value, but if you're going to go, oh, I said 5 % weighting was appropriate at 7%, so I'm selling down 2%, I'm just going to do that every single time.

1:05:40You're just going to be very mediocre in your returns. At the same time, if you go, no, never going to touch it, I don't really care, and then the unexpected does happen, and you've got a 90 % position that drops 50%, you're really going to feel that. And I don't mean like a fluctuation that's a temporary cyclical kind of thing. I just mean there's something really gone wrong with the business and it's permanently hobbled. So I'm going to give that really frustrating answer of it depends. But I'll summarize it up and throw it back to you, mate, just by saying if it's got high conviction and you still see value, just don't overthink it too much.

1:06:17Yes, I agree with that directionally.

1:06:22depends on the company depends on your style as you say depends on I mean 5 to 7 is one thing once you're over 20 it's like okay now that's you know you are really meaningfully exposed and if you take your I'm sure you don't have as much confidence in Pontero as Catapult but equally if you reverse those scenarios you're down meaningfully and you're cursing you're ever holding more than 20 % either of the two companies because the upside of Pontero is X and the next Catapult is Y and it's like man how much money did I lose so it's a it's a stupidly difficult one I say that by the way full of the knowledge that I have owned in the past Salt Pats and Brickworks now we're recording this episode quite a I can't wait to talk to you about this on Thursday by the way right well by Thursday it'll actually be like four weeks ago so it's why I'm only framing that because I don't know what happened since safe to say those two when combined will be more than 20 % of my portfolio and I'm going to have to have a serious think about it now I from a quality perspective from a heft from a diversification from a whatever I feel okay about that if it was an individual company that was different and I didn't have as much confidence in I really would think twice about it now I mean it's funny right because it's kind of that way now yes except for an arbitrary corporate structure you're in that position right now but it does make it a sharper thing to focus on and that's that's why the conglomerate structure is really interesting if pick two companies pick CSL and ResMed I don't know either of them.

1:07:48Let's say I had 7 % each. They combine. Now, all of a sudden, I've got the same exposure to the same underlying businesses, but in a bigger percentage. I'm like, well, hang on now. Is that a problem or not? And I think this is where there's a difference between and this is where the internal structure matters. I can conglomerate with lots of different business pieces. I am a large man of Berkshire too, proportionally in my portfolio. And that's got 100 businesses under it, right? So there's a difference between if you had two kilometers, one with 50 business, other with 50 business, they merged one with 100 businesses.

1:08:16you still can own the same thing. If you were in the mining business, for example, though, and you had one iron ore miner merge with another iron ore miner, yes, there's more individual mines, but you're even more increasingly exposed to that level of risk and concentration. So this is where I talked about quality before. That's part of those things you need to think about is what do the businesses do? So this business that our correspondent is particularly keen on, if you say you feel confident in it, I think that's fair. I always ask myself, so when I ask you, I'm not being critical. I always ask myself, what am I, what am I, is my confidence well placed?

1:08:54What am I basing that confidence on? So do I feel confident because the share price has gone up? Do I feel confident because the performance has been okay so far? Versus how exposed is it to one of those potential risks that is meaningful? You know, saltpacks and brickworks combined, what risks is it exposed to? I mean, capital markets generally, I guess, but it's got bricks, it's got telecommunications, it's got coal, it's got private equity, it's got property, it's got funds management, it's got cash, it's got an equities portfolio. It's about as diversified as you get in a single investment.

1:09:21And if I owned, let's say, let's say, I don't want the numbers to end up being, let's say it's 25 % between those two businesses. Let's say I break that apart. So, well, actually I want the two now with 12 and a half percent each. That's a very different story. If they're in the same industry and combining them adds more concentration versus I own them individually as separate parts. And that's probably where I think about it and think about how exposed you are. If it was a business in a single industry that was 25%, I own corporate travel management, I've said a million times. Let's say that got 25%.

1:09:51Again, nice problem to have, as you say, Ram, but that's one business, one industry with one management team with one set of competitors. That's a very, very, very different thing. So yeah, no easy answer. I probably won't sell down any of my saltpats and brickworks for two reasons. One, I don't feel I need to. Secondly, the trading rules wouldn't allow for it. So I could ask for dispensation, but I probably won't. So yeah, it's a bit of a, it's a bit of a, it depends answer. If I had a single company in a single industry doing a single thing, I feel really uncomfortable with 25 % of my portfolio.

1:10:23Even if I love the company, just because at some point, at some point you're risking stuff, you're taking more risk than you need to, right? And at that point, I probably would think about it. If it was corporate travel, again, I'm blocked by our trading rules, but outside that, I had Fortescue, there you go. It's not a formal recommendation I've made at the Motley Fool. So I could sell. If I got 25%, would I sell down? Yes, absolutely yes, 100%. Not because I don't like it, not because I don't think Quiggy's great, not because I don't think Iron Ore, whatever, just because I would find that irresponsibly concentrated.

1:10:52Maybe it goes well, maybe it doesn't, but I'm taking increased bets with, yes, the upside's the same proportionally as the downside, but if Fortiscue goes badly, it's a material bit of damage to my portfolio that I don't need to risk. If it's Solpats, I'm less worried because if one of their businesses sucks, you may not even notice it. If five do, maybe it falls a little bit. It's just a nicer, perversive diversification to have and to not need to worry so much about. Because as I said, if you break those into individual pieces, if they're five business units, a 5 % each, and they're all in different areas, yes, you've got to worry about fraud, you've got to worry about management quality, capital allocation at a headquarters level.

1:11:28But I feel very good about the diversification internally with that investment. And that means I can afford to hold more of it. It's like ETFs. How much is 25 % in a Vanguard ASX 300 ETF? or an S &P 500 ETF too much? No. Is 40 % too much? No. Is 50 % too much? No. Because you're getting that diversification internally. Yeah. I mean, I'll say this. If you really want to smash it out of the park, you have to be concentrated. Yes. Let me be very careful in how I say that. I'm not saying you must be very concentrated, otherwise it's not worth it. I'm just saying, if you, and you've got to be, have realistic expectations.

1:12:11But if you're right, you say, I want to get 20 % per annum and I'm going to do that with 50 stocks, no more than 2 % each, like it's not going to happen. It's almost impossible for that to kind of happen. You know, the best performing portfolio is the one that is a single stock portfolio of the best performing stock. I don't know, you bought MicroStrategy stock a year ago or something like that. That is going to be the best performing portfolio. It's also going to be the most risky portfolio. So you've got to, everything is a trade-off in life and in certainly in investing. And that's the trade.

1:12:44It's just, I'm not trying to suggest anyone do anything other than just make a point of that. Like extreme diversification guarantees mediocrity. And I don't, mediocrity has got connotation, negative connotation, but I mean, the market has given, you know, what the market puts forward as an average, it's pretty average. Yeah, that's right. It's a good average. Use language that way. Yeah, yeah, yeah. Yeah, so you've got to be careful what you mean by it. But if you buy a very broad-based ETF or a selection of those ETFs, I mean, you're just not getting 20 % per year on average over any long, not 15%.

1:13:22Probably lucky to get 12%, frankly, right? And there's nothing wrong with that. There's nothing wrong with that. Just, you know, those risk and reward are very tightly related. Yes. Yeah. Yep, I think that's perfect, mate. But that's what we do, as I reckon. I think we've probably had a pretty broad array of questions. Also, some unnecessary ego stroking. But if you feel like you want to do that, feel free. You can email us. Look, if you want to get your question answered. That is absolutely not the fact. I will disclose. I skipped over one question today. And it was only... Jason, I will say g'day.

1:14:01He was asking about Bitcoin, wasn't he? Yes, no, I'm kidding. so I will tell you that in Jason's question he included the algebra of FV equals P brackets 1 plus R divided by N close bracket the power of NT plus sigma C open bracket 1 plus R over N close bracket open bracket N open bracket T minus I slash N close bracket close bracket and at that point Jason I love the maths it's not going to work on the podcast so I appreciate the comment I appreciate the question my point is we skip over very very very very very few questions if they're really specific or just don't lend themselves to audio. And Jason, he's smelt it out beautifully.

1:14:38He's put all the details in there. He's listed all the stuff. I absolutely appreciate you taking the time and effort, mate. I don't want to undervalue that it's just, it's just not a podcast question. I do apologize. It sounds like a valuation formula. Yes. Is it present value? Yeah. He's trying to use a super as a mortgage lender, how much would be earned, all that kind of stuff. There's some stuff in there, which is great. It's not bad, Jason, at all. It's just one of those things where it's just not, doesn't lend itself to a podcast, unfortunately. And not enough flattery at the start of it.

1:15:06Otherwise, you might have made the exception. Yeah, zero flattery, actually. Subconsciously, maybe that's what it was. No one knows. But we do try to answer every question. Even if you don't use flattery, then why wouldn't you? We are attractive and funny and smart and interesting. All the good things. All the good things. My mum tells me all the time, so it's definitely true. Mine doesn't. Anyway, get over my phone if you listen. She's not. We will finish up there. If you want to send us an email, if you've got a question or a comment, even a mild criticism we had today, feel free to do that.

1:15:36Or a harsh one. Or a harsh one. I didn't take it. Yeah, get that, mate. Get that. No, I'm kidding. Yes, harsh ones are fine as long as they're directed at Andrew. Info at fool.com.au. We're on the socials. Follow Andrew at sage underscore simeon on Twitter or at strawmaninvest. Jump on the Twitter machine. See me at, sorry, tmfscottp. Also the same handle on Insta and on Blue Sky. And I'm on Facebook. facebook.com forward slash scottphillipsmoney. Until we speak again, enjoy the rest of your weekend and full on. Cheers. The Motley Fool and people appearing in this program may have positions in the companies mentioned.

1:16:13General 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 License 400691.