Responding to the SaaSpocalypse. March 6, 2026

29:43Yeah. I'll pay a quarter of the price. Yeah. And that's, and that's kind of my point is like, that's, that's despite that, exactly how it felt, which is just, you know, yeah, it's its own thing. Um, where do we go from here? Oh, I don't know. Other than, other than to, to, I guess I'll wrap up that section by sort of saying as a more general observation in these big investing market narratives is that there's usually a grain of truth to them. And I think there's more than a grain of truth to the current AI narrative, but a generalized view towards it is not going to serve you well. The alpha, as they like to say, is in the nuance.

30:25And you out there, dear listener, trying to sort of pick through the you know the sasspocalypse and see where the opportunity lies i mean i would encourage you to to the north star here should be what is their competitive edge in a world where their software could be replicated yes that's exactly right um and it won't even be a clear black and white answer but there are just there'll be some that are just sort of like there is no competition i just why am i using this for i just do not need to use this anymore versus, wow, even if anyone can spin this all up, I think it's okay. I spoke to El City and the CEO this week, actually.

31:08And AI obviously came up and they're obviously using, they do hospital software. And that was really interesting because what you have there is that they are plugging into existing infrastructure and the data itself is the medical records, is owned by the government or by the hospitals. You know, they've got legacy systems that are all white. I can write the best medical administrative software in the world, but until I get access to that, I'm not making a case I don't own shares for the record. I'm just making the point there that there's an example of, well, yeah, obviously, and Kate said, you know, the CEO, she was like, well, yeah, obviously we're using it.

31:50We're using it in two ways. We're using it internally because it just makes, and to the earlier point, we're not firing anyone. We're just doing 10 times more than we were doing. Right. Which is like, oh, that's interesting. And the other way we're doing it is actually embedding it in our products. And we're not doing it because it's the new hot thing. It's just because it actually makes the software incredibly more valuable. This isn't diagnose what's wrong with this patient. Make every doctor have a heart attack right then and there listening to it. Don't worry, I'm not having a go. You're still very special.

32:21But it is going to make a lot of the administrative tasks. and just information handling in general a lot easier. And so that's where the opportunity lies, I think, in trying to sort of take a more sophisticated view at what all of this means. Does that make sense? It does totally make sense. I think, going back to things, I think your point about the pie becoming much bigger is absolutely the far most likely outcome because that's what productivity does. In the long run, for sure. Right, so that's what I want to come back to. Now, is it going to be cake shops? I don't know, to use your example, Maybe, maybe not.

32:58And that was just a generic point of like, hey, people will do – why? Because if stuff costs less, you've got more money to spend somewhere else. What we learned – we don't have baristas and physios and give me something else that we don't otherwise use, whatever, because we needed them, because they naturally were like – they didn't force anyone else out of business. Cafes became a thing because we had extra discretionary income. And we literally went, well, hang on. We could be – we were spending – we did the numbers last week or the week before. 27 % of our income on food and drink, just kind of keeping ourselves alive.

33:31Now it's 10%. Okay, well, that extra money, it's got no housing, let's not go there again. And we've got some extra money. So with that bit left over, I'm going to buy a Netflix subscription. Or I'm going to go and get a coffee. Or I'm going to go and get my, I'll say hair done because I don't have any. And those things, they just weren't a thing. And so we've generated those jobs because of the surplus income, because we could meet our current, then current needs with less money. And that's exactly what productivity does. So I'm 100 % with you, mate, long term. How do you square that though? I agree.

34:02I'm nodding furiously here, but then any mainstream economist will say, yeah, but Scott, that makes prices go down. I was only driving up to get some takeaway on Friday night and had the radio on. Here's a radio story for you. If you didn't listen to the radio when you were in the car, you'd be a happier man is all I'm going to say. There's a lot of spittle on the inside of the windscreen, let me say as I shout. And the host, I forget her name, she was lovely. And she was just basically saying, I guess, what's inflation? I don't get it. Oh, we've got a professor blah-de-blah on to explain it to him.

34:30Just like, I'm in the car going, wrong, wrong. And because the host, I'm sorry, I don't remember her name, but she was basically going, wait, why are lower prices bad? He's tying himself in knots to do it. I'm not trying to segue the conversation. I'm just, I'm furiously agreeing. Like, yeah, productivity makes things cheaper. Everyone wins. And yet somehow I've got to hold that thought in my head at the same time as, oh no this would be disastrous for the economy if prices are lower like so so which which one and i think i think you know without being gaslight but gaslit by some ivory towered academic economist i think the very obvious answer is yes more productivity please i like more for less that's that's a wonderful thing sorry i had to i couldn't help myself i had to interject with that annoying point no that's all good annoying but correct point so back to the back to the AI thing so I think it's almost there's two areas where this potentially falls down right one is the pace and I read what was it called Narrative Economics by Schiller Schiller thank you and I was disappointed they're not surprised to hear him say we use narrative economics to try and predict things it's like we've been here before no you can't but other than that the story was pretty cool it just talks about the impact of stories on it could have been a pamphlet instead of a book I thought it was overly long, but yes.

35:54But one of the things, he mentioned the recession of the 1950s, which he's never talked about. And I've probably mentioned this before, I'm sure I have. He's never talked about because that's the baby boom. We kind of absorbed that into the broader, longer-term baby boom. Which, by the way, might have some echoes in the AI boom with any luck. But his point was, at that point, the point of the book was, at that point, most many, I don't remember what word he used, Economists agree that it was a recession caused by a sudden upsurge of automation. And we're talking about, you know, machines in factories, not computerization, not AI, but just – and they were absorbed within a couple of years after that.

36:31But it's that little blip of like, oh, bugger. Whole lots of people were either put out of work or not hired in the first place because we didn't need them because we were using machines, not even robots, just straight-up machines to do things that were done by hand previously. And that wave of automation cost some jobs. and I just quickly isn't that always the story of any growth and not just like economic just development and as a is an individual as a family as a like it's always involves pain and dislocation it's it's not to sort of relish in that or celebrate it in any way it's just very painful for a bit but it is it's sort of like yeah hey do we want to get to the promised land yes there might be a bit of pain on the way oh let's not do it to me has always been a very unreasonable logic and it feels like you advocating oh it's okay as long as i don't lose my job you all need to lose your job because it's going to be so much better for and i'm definitely not saying that but i am saying that that's just it's just i wish the world was different but but but these are often used as argument oh we can't we can't do that because such as you know people will lose their job it's like yeah but do we really want to be having an economy built on barrel making and horseshoe blacksmiths you know yeah i think that's right matt but i do think i think the issue is the pace of that change so the 20th century was a period of of massive change incredible but very rarely during that period was there a meaningful spike in unemployment caused by that productivity improvement yes it recovered very quickly or simply or or happened slowly enough that we absorbed each change was incremental enough that it absorbed the workers displaced relatively quickly so unemployment didn't kind of spike and drop and spike and drop for that reason other reasons economically generally sure the 1950s recession was arguably in their view and i i have no reason to doubt it but i don't i can't prove it either probably because of the pace it was a dislocational change i mean you're right there's always progress is always dislocation but if it's slow enough or never i mean slow is the wrong word if it's incremental enough i.e even if it's fast the kind of bits are yeah right yeah and the 50s was a time where we couldn't adapt fast enough and it took a few years to kind of go okay now we can adapt now we can grow the economy now we can absorb those people I suspect that not while your pie will be bigger argument is valid it may not happen it may happen too quickly to absorb those but the the 4 ,000 at Block and the 2 ,000 at WiseTech they're not walking on another job this morning no they're looking for another gig right and I think that's the reason good point the other thing I would say I don't have a really good view of this i haven't spent too much time thinking about it i should the bigger pi thing will happen regardless there is a there is a relatively pessimistic slash dystopian view which is the pi gets bigger but the pi is made bigger because of more computerization rather than less and the extra jobs that are created aren't enough to offset what we lose in total over a very long period of time rather than just pure dislocation because we don't need there's not enough stuff for humans to do that computers can't and at some point you do get to the back to the universal basic income question we've talked about before in distant past which is just what if in the future you only need 85 of the current workforce to do the work because you simply we can't create enough stuff that we need for the other people to do because every time you have a new idea let's do a thing yeah let's do it oh we can say oh for that okay well let's say another business do that oh i can do that too okay and so the idea that it creates enough value to absorb enough workers what do you call them?

40:00Meat skins or something? What's your phrase? Your cookwits talk about? Meat world? What do you call it? Oh, meat space. Meat space, there you go. Maybe there's not enough need for humans to do things that we need to have done. That's very dystopian. I'm not making the argument. I am holding open the possibility. I think it's very utopian. It depends how you frame it. It depends on the income spread though. That's why I'm not with UI.

40:24I think, and this is one of the many complaints I have with modern economic thinking, is that we go jobs are really important. Everyone needs a job. And I think, I reckon if I polled 100 people on the street and said, do you like going to work? I mean, some people will and there's some good aspects to it. I'm not trying to be too blunt, but it's sort of like, do we want jobs or do we want quality of life? now i would say if if we all lose our jobs but we all i mean this is a stupid example but just really make the point we all lose our jobs but we're all all our material wants and desires are satisfied like better in the house does everything we need to do okay like i'm gonna have someone from you know the westpac economics team going unemployment's at 40 it's a desire like yeah dude i'm at the beach and then i'm gonna go hang out with some friends and we're gonna go have a really cheap but delicious meal and then we're going to and again i'm painting a very utopian kind of picture but that that really is what we should be striving for when we talk of productivity gains when we talk of economic growth it's not because i want to create more jobs necessarily it's not because i want gdp to go up it's not because of any i just want a better quality of life i want to be able to spend more time doing the things i want and less time doing the things I don't want to do.

41:44And I think we have the mainstream economic profession has lost sight of that. It's come so tangled up in their own obsession that they forget that there is all of this is a means to an end. Now, you will rightly say it's like, well, OK, everything's still cheap, but I still need to pay for it somehow. And absolutely, there are definitely very important and difficult questions around all of that. I'm just sort of saying that whenever things are framed purely in the lens of jobs, which has always been our criticism with why Alice Steele works and Arnott's and all this, but jobs, but jobs that are producing something really uneconomically that the market clearly doesn't want to want.

42:27Like what is the problem here? So it's a pedantic point. But I just throw that in there. the key point that you're making though i think is really right which is not only is it a lot of change it's a lot of change potentially very quickly and it's it's kind of it's and even i just i just hope we don't shy away from that oh yeah actually i don't have to hope we won't like the incentives are too strong someone somewhere will gain an advantage by him this is what humans have done since we crawled out of the swamp right wait there is a tool a process an insight that i have that's going to give me an edge over other people i will use it i don't have to sort of go geez i hope someone will do that like no someone will definitely do that and if they're good at it they'll be rewarded for it and they'll be rewarded at it because of all the value that they're creating and people are happy to participate in in what they've done so you know two thoughts um i can't help but see the optimism you have for that example of uh our centralized all improve uh when normally you'd be like well what's going to happen if ai takes over, are the owners of capital win or the owners of labour win and how does that kind of net out socially?

43:35So I think there's a very, it's a much bigger conversation but I suspect without meaningful intervention that version of 40 % unemployment is far more dystopian than utopian unless and until the systems respond to allow that at a societal level as opposed to an economic level. So if 40 % of people are unemployed and there are more trillionaires than ever and more poor people than ever and we go hey the economy is bigger, to your point we wouldn't and we shouldn't do that. I think that's the way it's likely to... My economy, we just spent more. We didn't actually necessarily build productive capacity or build resilience or things that actually matter.

44:13Who does the value accrue to? Yeah, yeah, yeah, yeah. I think that's the question. I think that's worth... It's not going to stop by the way. But it's worth thinking about that idea of, you know, it'll be better because we'll do more stuff and it'll be more productive. Yeah, but as always, it depends who it accrues to. We'll get to GDP in a second. The other thought for me really quickly was just you mentioned trying to stop it. And it just reminds me again of Why Nations Fail, one of the best books I've read in a very, very long time. You know, I've talked about this before. They talk about, you know, countries that simply banned railroads because they didn't want goods and service to be transported through the country around the country more quickly because it would be bad for the short-term economic health of the country.

44:51This is my worry with the argument of like, well, there's going to be problems so we should manage it. It's like, yeah, but the history of managing these things. That's my point. It's like, you know, the batting average is just like, it's not like, well, we usually get it right. It's not even we sometimes get it right. It's like almost always we get it really badly wrong. So I think you're right. I think we will, politicians will try and manage it and they will make it worse. Particularly if it's done at a country by country level. That was the one nation's fail thing. It's like, you know, if, let's pretend at some level we said that globally AI is off the table and we just stopped doing it.

45:28That would be bad, but be okay. I mean, we'd muddle through. If Australia says, actually, and the politicians are doing this stupid stuff with the ACTU and others, I'm not against the union movement. They've done a wonderful job for a whole lot of things. When you say, no, no, no, we want to sit at the table in terms of how AI is used. It's like, okay, but let's be honest here. Anything that you're involved in that is what they call trade exposed, in other words, have international competitors. The second you say, can we please make Australian businesses less productive to save some jobs? What you're really saying is, can we make Australian businesses less competitive globally?

45:57To save some jobs in the short term. Can we make everyone poorer? Well, it'll save jobs in the short term and it'll cost jobs in the long term because those businesses cease to be a thing at some point. We go, oh, remember we used to do that thing? Why don't we do that anymore? Well, we said that they are going to be used this way and China slash US slash Vietnam slash New Zealand doesn't, so they've got the business. It's just the reality of trade-exposed industries. You just can't fight against it. You can't push the tide back. I mean, you've got to be clear with this. It's not like you can understand the why, right?

46:26You can understand the urge and the impetus. I wish. These aren't evil people. I've got to be really clear on that. It's just like, I don't think the tide should come up this far. We'll stand at the beach and whatever you have to do, you can shout at those waves. It's just going to happen. That's the reality of it. And yes, it will be painful, but it's sort of like, the point is it's more painful in aggregate and on a net basis if you don't. You spoke about recession that no one ever talks about. There was actually more of a recession, kind of a depression in the early 1920s as well. In terms of not longevity, in fact, this is my point, but in severity, it was very brutal.

47:06But the administration in the US at the time just did nothing. Right, okay. But the so what is, like two years later, everything was roaring, and then we had the roaring 20s. Like, there is a lesson in that. I'm not sure, actually. It depends on what you want to argue. They may have created the 29 crash. I don't know. It goes both ways, maybe. The way I view it is I think when economic problems become apparent, we feel as though, oh, we can fix them. We don't accept the fact. No, the damage is done. What we are seeing is the manifestation of poor capital allocation decisions previously. It's happened.

47:44People made investments in either business or whatever they did, and it didn't work. They took out loans that they can't repay. That's the reality. You can do whatever you like. You can do whatever you like. It's like, it's happened. Short of time travel, you can't fix it. So you can do two things. You can let the market clear, in which case prices will fall because there's a bunch of extra stuff. And they did massively, by the way. And they fell. But it was just sort of like, again, who's it bad for when prices fall? Largely for very indebted organizations. Everyone else is brilliant, right? So there is something, I guess I don't want to get too far off track, Like other than just to make the point that sometimes the best course of action is to do nothing or to do little.

48:30There is a lot of, I would, I made the point before, I think a lot of the issues that we are dealing with now in 2026 stem back to COVID, which stem back to the European debt crisis. We stem back to the GFC, which stem back to the tech boom and bust. Like it's one damn thing after another because we just, we have a social contract now where it's just, we just don't let things fail. And we live under this mass delusion that it's sort of like, oh, we can always just wave a wand and we can make this problem go away. And it's like, well, how's that working out? Now I'm not saying, I'm not saying the other path is going to be rainbows and unicorns, but it's going to be short, sharp, and we'll get on with it with lessons learned and a firmer foundation.

49:14built other than a slow moving train wreck where, where, where poor decisions are socialized and, and, and, and individual profit and stuff is maximized. It's like, you know, there's no lot of people are pissed off at, at capitalism. It's like, wait, so you get all the upside when it goes good and we bail you out when it goes bad. Like that, that's kind of, that's sort of the point I'm making. So I'm just arguing to be difficult more than anything else, but it's not that I disagree with your point. It's like - What's in this podcast? That's what we do. I just always want to tap the brakes a little bit when we see a potential problem and the knee-jerk, not you were doing this, but this is just how society is.

49:55Knee-jerk reaction is, well, we need to manage that. It's like, but we don't. We don't need, we can be very targeted and clever in how we manage it. That's always the key, right? It's like, it's very rarely one or the other, it's kind of just better. Just do it better. In all the ways, it's a very simple word for all things you're talking about. Yes, absolutely. I mean, there's so many. I mean, I was just the other day speaking to my son's friends and that. It's like, they're all like, they're all... Oh, Dad, please don't do that. Oh, no, not the economics conference. Oh, Dad. How do you kids know about Bitcoin?

50:32Gather round. Gather round. Mr. Page? No, actually, Mr. Page. What generation am I living in? i'm not treated i'm not treated with nearly that kind of respect but the point is they're all using their phones all throughout school they've all got the apps it's like and i i you know cheekily kind of said it's like i thought there was a social media ban like they just laughed at me they laughed at me now it's a classic example of there is a problem with digital addiction that absolutely should have something been done yeah potentially how did that work out disastrously How much money and time was wasted in something that absolutely had no effect?

51:11I bet you any single person out there listening right now who's got kids of that age will go, oh, yeah, it's completely fine. Not like kind of worked most of the night. No, fail, fail, fail. And it's that kind. And with negative outcomes too, by the way. Yes. And that's the other thing. I have no issue. And there's some really high profile people. Like Whipper from Radio, he's been leading this charge. And I get it. I get the urge to want to do something. Doing nothing feels negligent. Doing something feels like we're at least trying and I feel better for trying and maybe it'll work and so we should do it.

51:45And just that intent of - Yeah, it's a noble intent. It is. And so on at a human level, which is just the whole, I can't sit back and watch what happens. I need to involve myself and do the things. And you kind of go, well, hang on, the kids are doing it now under cover of darkness. So it's harder to see what they're doing, how they're doing it. The kids who are using it for good now can't do it, at least in public, for good. And so you kind of go, what did we actually achieve? Well, you know, we stopped the good people doing the wrong thing. The bad people were doing the wrong thing because they always were going to.

52:13And it's just, yeah, I think your point is very well made. Yeah. Anyway, not to, here's something funny behind the curtain. Scott off air, he said, there's some actually interesting good news. Let's try and be a bit positive today. I didn't start with that. And you went, let's talk about a block instead. It's like, oh, come on. I just realized what I've done. I'm so sorry. Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener.

52:43Let's keep that curtain pulled back. I said to Andrew, Listener said we've been negative recently. GDP was actually really good. So it's a nice chance. I mean, it was genuinely good. We're not just, you know, we're not sucking up to our listeners, but that's actually some good stuff. So it'd be good. People will appreciate that. And you said, I'll try and be positive. I can't promise anything. so let's do it because i i am there is a there is a so what which has a negative angle to it but i struggle to find any bad news at least in the in the narrow band of economic growth from the numbers that were out this week so gross domestic product uh for the gdp uh for the new people coming to the podcast we've both said before many times gdp is an awful metric there are many many many better metrics you should be using and in consultation with each other um the one big number is not as useful as 10 small numbers that help you kind of contextualize stuff but but but but that's what we've got and we'll start there because that's what happened GDP economic growth was 2.6 percent for the year ending December 2025 and 0.8 percent for the quarter and those were both unusually good uh and unexpected numbers and I don't want to I'm gonna I'm gonna share some economic orthodoxy here and i will i'll trust rand not to blow up if he doesn't agree for reasons i can't quite imagine in advance but it's very very possibly going to um so uh gdp so yeah 0.8 percent 2.6 generally speaking most economists would say much less than two to two and a half and you're not growing as fast as you probably could or wanted to more than three you tend to create the sort of short-term pressures that can lead to over investment in 1980s style just you know too much debt all the stuff that leads to a collapse so 2.2 and a half to 3 kind of for most people some might say three to three and a half is about the goldilocks zone not too slow not too fast about right so 2.6 is good 0.8 for the quarter by the way you can't annualize it just by multiplying it by four but if you did have you said that 3.2 and you'll say that's a pretty good number uh gdp per capita grew 0.9 that's a really good number we talked a lot over the past 12 months, 18 months about GDP per capita.

54:49That's basically our share of it going backwards. So even though the pie was growing, our slices were getting smaller, which is obviously not what you want. So it's growing again. That's really good. And productivity measured as GDP per hours worked also increased by 1%. So if you'd asked for a Goldilocks scenario, especially given where we've been, I reckon you would have said, if I got this, I would be stoked. And that's kind of where we fell out. So I don't know if you've got any particular thoughts. We'll get to the implications for inflation of rates in a second. But just at a GDP number, notwithstanding the fact that it's a horribly generic and average measure, which doesn't allow for averages and distributions and things that aren't measured by numbers.

55:30So for all of that said, for the narrow use to which it should be put, and it's not, I thought it was just, again, not because of anything other than just the net result of what we're doing, but it does suggest an economy that's kind of healthy at least from that perspective in terms of output and probably explains why retail sales are up and unemployment's low. Yeah. Go on, stay positive. Just do it. Just say yes, I agree, Scott. In fact, this was even better. And let's move on. It is good. You don't want to see it the other way. I just, what am I trying to say? One swallow is not a summer, mate.

56:06I agree with that too. And you sort of say that, it's like, oh, so. So it's like the classic pessimist retort. Oh, yeah, it's good, but overall it's bad. And I'm not trying to say that. Or it could be bad next time. Or it's only one good thing. Yeah, no, I go. Definitely not. And it's kind of like, did this go in the right direction? Yes. Is it encouraging? Yes, it is. But as to your point, like the broader history is not great. And we've kind of seen a little bit of a tick up. And it's kind of like, great. But I will be more enthusiastic once we see a bit of it. Once the broader directionality is clearer, so I'm not saying, oh, it's not that good and this is why.

56:46I'm just saying it's a start. But what any observer of financial, corporate or economic data understands is that it's very – there's a lot of noise in the signal. There's a lot of noise in the signal. And so – or it's hard to find the signal in the noise more correctly put. And so you get, there's a volatility in a lot of these readings. It's the same with share prices, right? On the way from$1 to$100 shares, it's like we talk about it all the time. There's like umpteen 30 % drops along the way. And it's the same with economic data. As we head into a more mired, long-term structural depression, there's lots of quarters where we have upticks and vice versa.

57:27So it's really just to kind of not be negative, but just to be cautious, which is great. Let's see where this goes. That's 100 % right. And so positively, two of the last three quarters have been great 0.8%, or 0.5 % in the meantime, and the previous ones were 0.3 % and 0.4%. So directionally, we are kind of moving in the right direction, but you're a million percent right, man. I couldn't agree more. It is one I literally said on radio this morning. It may well be a rogue number in hindsight. If it drops back in or what it was, you go, oh, okay, that was a shame. It was good for a bit, but reasons or not, whatever else is going on, maybe there's something going on there.

58:02It's hard to know. But just overall, really good. I will then say, though, mate, I think it probably, and again, notwithstanding your views on central banks, it does ramp up the pressure on the Reserve Bank when they meet in a couple of weeks' time, week and a half's time. They have an inflation number that's too high. They have an employment number that's low, very low in historical standards other than the past four years. Anytime the last half century would have killed for this sort of unemployment number. So you go, hang on, spending's up, unemployment's low, the economy's growing pretty well.

58:31what is the likelihood inflation falls as a result of all that stuff anytime soon and if the answer is well none you kind of go well okay I said again on radio this week I reckon Michelle Bullock might have flinched at 11.30 on Wednesday when the numbers came out it's like oh man yeah just that idea because I've said before I reckon they want to put rates up again you have a different view on whether they should exist at all but in the context of she knows what happens when she puts rates up and she's only going to do it if she feels like she has no other choice at least in terms of least worst outcomes and they know the pain is going to cause.

59:01So I suspect they would rather not. I think that's actually part of, you mentioned some of the - Everyone likes to be popular. Right, but even - You don't want to be public enemy number one. No, it likes to cause pain if it's not necessary either though, right? Sure. You'd be hoping. Look, I hope I don't have to. I hope the numbers are good enough that I don't have to because then it's better for everybody. Yeah, I'd rather come out and say, hey, I'm going to make all of your mortgage payments cheaper. I was like, yay, we love you. Of course, yeah, yeah. So yeah, I think that's true. I just think it just means, I don't know.

59:26I think I've said on this podcast, I haven't already. If I was on the RBA table Tuesday week, I would put rates up. I don't know under what set of circumstances you look at this and say, this doesn't get worse unless I do something. And again, I know I feel like I'm red ragged in front of the bull here because I know your views on it. But if you're told you must use monetary policy to have an impact on inflation and unemployment. Yeah, I guess I would do. If I had no choice to operate within that framework. Right? Yeah, I guess. You've got to. I don't know how you look at that and go, well, especially at two and a half, we're not.

59:56Unemployment's probably at full employment. Economy's growing hot. We're worried about capacity constraints already. And then you give me these numbers and say, here's your job. The algebra is Y equals MX plus B, for those who remember the trigonometry. I plug the numbers in. Y's got to be higher than it was. It just has to be because, again, I'm not saying they will. I have no idea what they'll do. I don't do predictions. But if I was there, I'd be just like, on what basis? Given the goal and given the tool and given the mandate, slash responsibility, how do you not? What is the justification for not raising rates with those numbers?

1:00:30At best you say, I think slash hope it gets better. But you said hope's not an investment strategy. Hope's definitely not a way to run a central bank either. I don't know what else you do. Yeah, I don't know what else you do either.

1:00:47It's, yeah, I've got no answer. It's really hard because it's just like when you reject the entire premise of it, But it's just sort of like... It's hard to ask you to talk about or at least, you know, upon given the circumstances. It's just so objective. The more I've pondered it, the more it's just sort of like it is... I think if you're an empiricist, it's just very hard to sort of make the assertions that these institutions do with a straight face. It's like, well, if half of what you said was true, then we wouldn't be seeing all of these other sort of things. But okay. So it's like, well, assume that this is the only way to do things and assume that you just have to and what would you do?

1:01:31It's like, well, I guess I would do it this way. But it's just sort of like I would actually do it an entirely different way altogether, you know. So anyway, I don't mean to be difficult. No, that's what I'd load it with. I know I'm asking you questions that make it difficult to kind of engage with the conversation. But in terms of what will, could, is likely to, should happen given the world we live in rather than what we would choose. I think that's kind of where we're at. I guess my mission is more to at least spread awareness of there are other ways of thinking about it, you know. I think that there is a very, very material part of society, of the electorate, that is just sort of like pretty fed up with being gaslit by people about how great things are.

1:02:15It's like, what? Like nominal wages grew less than inflation just last year. I mean, I'm just, I'm working harder than I ever have. And life is as hard as it's ever been. But all right, Jim Chalmers and Michelle Bullock telling me that things are great. And that, in fact, they need to punish me a little bit for, you know, it just, I think it's like with any, we can be talking about quantum mechanics, man, or inference engines with AI. And it's just sort of like if you can't explain simply what the so what is and the why, you just don't understand it. And this has always been my issue with this is because whenever you start pushing on some of these assertions, they get made as if they're just fact.

1:02:58It's sort of like the only response is to mumble back a bunch of mumbo jumbo. There's no way of cleanly explaining. And that was really one of the lessons that was reiterated when I was in the car last Friday listening to this guy try and tie himself in knots to justify it. It's like, and you can see the host going, okay. And it's like what we all do, right? It's like, I really want to say that that doesn't make sense. But if I say that, am I an idiot? Because everyone else seems to get this except for me. And so if you're out there listening to any of this kind of stuff and just, you know, it's just like just think a little more broadly.

1:03:35because it doesn't... Fair. Anyway. Totally fair. I'm fighting a losing battle on that one. Oh, yeah. You're a pessimist, so it's a hard one, right? It's not even a pessimist. No, I mean, I'm fighting a losing battle, that's all I mean. Yeah, it's like... I mean, it's the definition of insanity. If you keep doing something and expecting a different result, right? Like, it's like, how many times do we have to bang our head on the wall and go, it doesn't work? It doesn't work. But I've got a good feeling about next time. Right. Should we move on? You move on. Let's finish off with, we kind of negated not to touch on is it a war in Iran?

1:04:13You know what? I always, the media. Conflict I heard. That's right. It's funny how that kind of happens. Is it US versus Iran? Is it US and Israel versus Iran? Is it a war? Is it a conflict? Is it a, what do you call it? Geopolitical tensions. Right, yes, exactly, exactly. Whatever that is. Scamish. Yes, there are a lot of rockets and bombs being aimed at Iran and a few being aimed out around other places. And that's – I say every time I talk about this because I know people kind of should expect it and understand it, but I say it anyway. The price of oil is in context to the number of people killed during the regime and subsequently is kind of – Well, it wasn't just one side who's killing people.

1:04:55Let's just be clear as well. That's my point. During the regime and then the kind of overthrow of the regime, tens and tens of thousands of people have been killed. and so I think you know we want to acknowledge that and not just go hey so what about the oil price and you know kind of gloss over that stuff but yeah this is a this is not a politics or a societal humanitarian podcast despite what we do get into relatively often the impact has been a meaningful jump in the oil price and so I don't want to go too deep in it because we don't I'm sure people who are injured already know the answer to this but essentially Iran largely I'll say controls did control until the u.s sank most of its military uh navy uh but controls the state of humus and the state of humus is basically a narrow strip of sea ocean straight is a sea there water water um thank you uh basically between most of the middle east ports and the rest of the world that the shipping that's a shipping line and when oil can't go through there it can't get out generally speaking and that has potentially really really big ramifications and i first thing i want it's so matters the reporting on this and the analysis on this by people who should know better has been atrocious so of course what gets what gets said and what gets quoted is oh this could mean that oil goes to 200 a barrel and that would mean that petrol goes to three dollars a liter and that could mean and they're big headlines and they get people's attention and i get it i get and by the way it's possible it's absolutely within the range of outcomes so i'm not saying they're wrong to entertain the possibility when your starting point is your headline is economist says oil could go$200 a barrel.

1:06:28It's like, well, yeah, and my mother could fly, but she's probably not going to because she doesn't have wings. And so it's kind of one of those, it's written for the headline, written for the thing, which again is kind of, you know, you would make the point where we should stop listening to economists given how wrong they've been regularly, and that's true, but they get reported. And now we've got bloody lines at petrol stations where people are worried about what might happen. And I just think it's, so my first thought is no one knows what's going to happen. I've been really boring on radio because people start with, okay, I need to do predictions, but when we see$2 petrol, I don't know.

1:06:57I just don't know. I don't know. I don't know doesn't get you invited back. It doesn't. It doesn't. And most people are pretty good about it, but you can't hear the exasperation of some of the host's voices sometimes like, all right, I know, I know. Why can't you just be an all-knowing soothsayer that tells you the future? Or give me a headline that's wrong anyway, and just so I can say, I can talk about$2 oil or$2 petrol or whatever it is. Yeah, yeah. So, yeah, I mean, that's notable and worth thinking about. I am reminded of Buffett's comment about people who, they like share prices going up, same as if you like a petrol scope because you've got a full tank of gas without realizing you're actually going to use it again and have to refill at some higher price.

1:07:32Like, go and fill your tank, sure. Add another 40 litres to your tank. It'll save you maybe two bucks in total. Yeah, amateurish that over the next, yeah, 36 months. And then in two weeks, I'm going to have to fill up whatever the price is then anyway. Why not? Free money. Go and fill your tank up. Sure, knock yourself out. But let's not get carried away. The other thing I think is far more important, mate, is just the... And again, listeners are smart people. They probably know this. but it's incredible how finely balanced the global supply and demand of oil is. It's why during the worst of COVID we had, I can't really exact, I'm pretty sure I'm right.

1:08:03Oil was selling for minus$17 a barrel at one point. And it was simply because there was a supply chain which is optimized to produce a certain amount of oil and we weren't using it and we couldn't store it anywhere. So oil producers were literally saying, this thing's coming out of the thing. Take it. I either spray it on the ground. I'll pay you to, yes. Or I'll pay you just so we don't have to store it somewhere. Find a way to use it. And that was, I mean, it was a reasonable shock. And it wasn't negative for long. But just an indication of how finely balanced it is. Why is it negative for? The price?

1:08:37No. Oh, sorry. It wasn't negative for long. Sorry. It was negative for long. I'm like, I'm failing to see the problem here, dude. So it wasn't negative for long. You mean I get to fill up my car and they, I mean, not oversimplifying it, and they get paid to do it? Well, funnily enough, yeah, the petrol wasn't going negative, just the oil price. But that's a whole different story. I raise that as a real-world illustration of the other side of the coin, which is if we get a meaningful supply impact. What does that mean? I don't even mean big. I just mean it's probably like single percentage points, I suspect.

1:09:05Yep. If you can't get it, we talk about prices being set on the margins. That's kind of what we're looking for. And so that's why a, I don't know what the number will be, 2%, 3%, 4%, 5%, 7%, 12 % reduction in the supply could lead to a 30%, 40%, 50%, 60 % increase in price because the pricing is all set on the margin. The world needs the oil, whether it's the tankers bringing freight to the country, the planes flying in, the trucks at the ports and the airports, the trading getting to work, the insert use of energy here. For all of the move towards electrification, we run on oil. We just globally and domestically run on oil.

1:09:36And that's why it is a concern, not much for the petrol price, but that matters a lot directly. And that's the one we feel. Speaking of price gouging, the more shelf price is the same as the petrol price of the pump, right? And what we miss is the stuff behind that. Because if we do have sustained higher oil prices, one of the things I do think is, it wasn't a prediction as far as I know, but someone kind of made the line that if oil price was to go up meaningfully and for a prolonged period, it probably means a global recession. Just because of the feedback loops and the reality of how finally balanced this stuff is.

1:10:07Energy is the base of the economy. Right. Even if you're talking about human energy. Yes. It's kind of physics all the way down, really. Yeah. I know it sounds like a bit highfalutin, but no, you're right. Absolutely. go well that doesn't i i i make furbies so it doesn't make any difference like well yeah how's the factory powered how do you ship it around you know there's there's petrochemicals aren't just fuel yes it's plastic it's fibers it's a gazillion things there i remember once seeing a list of all of the products that gets when you look at one barrel of crude and what comes from that yeah Just, you know, a myriad of different products.

1:10:46We are so dependent on it. I mean, so my view on it is this. And again, I'm going to sound, this is going to sound like a harsh take on it. But the price of oil is doing exactly what it should be. Yeah, it's a market work. You're not saying otherwise, but it's just like people like the shock jocks or the, you know, oh, it's bad. And it's like, yeah, I'm not saying you have to like it. But pick any product in the world and make it harder to get without changing the demand and the price goes up. You don't change the demand because it's absolutely necessary. It's not quite breathing, but it's not quite water, but it's not miles off that.

1:11:23It's not thermies and it's not yo-yos and it's not eating at a restaurant. It's like I've got to get to work. I want the thing at the shop that's going to be bought in by someone in some supply chain full of oil-laden vehicles of different descriptions. Yep, it's wonderful. And I always talk about how this sort of helps coordinate things and maximize efficiency. So think about this. In a world of structurally higher oil prices, and this probably isn't that because at some point it'll resolve and it'll go back to normal. But let's say that that is the case. Jeez, renewables are looking a hell of a lot more competitive than they were.

1:11:59Is that a good thing for driving that kind of change? Yep, absolutely it is. is the Middle East the only place in the world that has oil? No, it's not actually. And the US proved that with the coal seam gas sort of revolution that they had, what, 10 years or something ago. So these prices signal to the market, it's kind of like, hey, we need more of this stuff. And so people will go out, they'll find other sources. And by the way, alternate forms of power generation become a lot more attractive and therefore people use that a lot more. And this silent hand guides us towards something that is far better on the other side of it, which I know is nothing completely beside the point that you're making.

1:12:43But I just say it and I put it out there again as part of my ongoing campaign, because the reaction is from the poll, we should do something about it. We should, you know, it's like, well, you can try and suppress prices as much as you can try and shout the tide back, but it's actually going to not work and it's going to lead to these second and third order consequences that are absolutely necessary. So, you know, it will work itself out. It generally will, right? We saw the same with toilet paper in COVID. Prices went up. What did that tell you? You know, it's just things, things have a way of working themselves out here.

1:13:21And, and, and it doesn't mean it means that you should be smiling when you're filling up your, your car, but all of a sudden that hybrid that you were considering or that Tesla that you're considering is a lot more attractive, right? Maybe that discretion, that 200th discretionary item you were thinking about buying, but now can't afford, you're not going to, which is going to send a signal as well. These are definitely interesting things worth commenting on. I just want to draw the line at saying, what should we do? Because that is always, is always the next question. Oh, that's bad. What do we do?

1:13:53Nothing. You're not tartalic and straw man, are you, Andrew? I didn't ask that question. No, you're not. But that is, do you not agree that that is? I feel like you respond to questions not answered sometimes because you're in other conversations. I don't think you're wrong, but I don't. I guess you just see, maybe I'm wrong on that, but has that been your experience on the radio? It's like, hey, this is bad, isn't it, Scott? It's going to get really bad. What should we do about it? And it's just like it just takes us in a very, two things. It takes us in an unproductive direction and it reveals a fundamental misunderstanding of how the world works.

1:14:32And it's not just being angry because you don't think the way I do it. It's just like when we are operating under false premises, we make ill-informed bad decisions. and there's pain at the other side of it. So it's just, you know, I'm in a very, very small minority of a particular economic school and we've got to make the case whenever we can. So that's just me pushing my barrow. I think, look, yeah, I think we're, and it's not a conversation to start now, but I suspect there are ideological and philosophical differences around when to intervene for what purpose. I think that's really all we're talking about.

1:15:12there is a, for example, in the oil or petrol price, there is a very real question as to, we have a fluctuating oil price. We also have meaningful government taxation of fuel. And so there is a question about what is the impact of higher petrol prices and should there be a government response to the level of those prices to the extent that's possible to have in the sense that we already have, there's already a thumb on the scale from the tax. I'm not saying it's bad. We should tax something somewhere to get revenue for something. And there are also environmental benefits. We tax externalities to some degree, even if not intentionally, when we tax fuel.

1:15:49But I don't think it's as simple as the market. And I'm not saying this, by the way, either. All the time, it's a question of, you know, understand the market mechanism. I think we kind of said before about the word better. Intervene sensibly, carefully, thoughtfully, with both eyes open in terms of the second and third order impacts. I think it's probably, to my mind, just a, it's a little bit more nuanced in the, I'll say the real one, I don't mean that as a criticism, but there's the pure economy bit or economics bit and then there is the and so what bit. I know you're not saying this either, but the simplest example is always taxing pollution or regulating pollution.

1:16:27Would the markets sort it out eventually? Maybe. I don't know how much pain to be in the Parramatta River before we did, but maybe it would or maybe it never did. And so I think there is the right mechanism. is I don't necessarily disagree with the economics, by the way. It's just a matter of what should we do, I think, is a social question as much as an economic one. And I think there's interplay there that is broader than just the theory or the reality. No matter where you are, whether you're an Austrian, whether you're a Keynesian, I get how the market works. Socially, are we prepared to allow that to happen or should we moderate that for other reasons that don't fit in the equations neatly enough?

1:17:05That's probably – I'm probably just arguing for the sake of it, but I think there's – to me, I'm – I mean, that's the discussion. I mean, you don't even have to put the cards on the table as to what – Right, right. Yeah, that is 100 % the conversation. I guess, look, just on it is like, yeah, it sucks. I don't like paying more for petrol and everything else that is derived from petrol and relies on – At least everything, right? Yeah. I am not thrilled about that, but that is – I guess my only point was is that we should be annoyed but not surprised. Yes. That's a very nice summary, actually. I probably should have just said that when you asked.

1:17:40It's like, yeah, it's really annoying, but we shouldn't be surprised. That's a nice idea. I think that's dead right. It will resolve itself, though, in the sense that even if this is a very, very long-winded conflict, economies route around these kinds of things because it's in people's self-interest to do. People find a way because the person who does figure out, how to sort of go somewhere else and get, you know, if I'm landing oil a little bit cheaper than my competitors who are deciding to take the risk and go through that straight and, you know, lose a few ships and, you know, is that I mean, it's a little like things, things will percolate out the other end, but it is a, it is a process.

1:18:19And, and that process has to, has to, we just have to go through it, unfortunately. Yes. And we will. And that's to your point. That's the other thing is we could do like the AI thing. how do we wish the world worked? X what's going to happen? Oh, Y okay and I mean you can't try to make the world to X but there's I mean you I mean other people saying we should stop or do something about it it's like well what are you going to do or sort of stopping the war or banning the use of petrol you and I are old enough mate I don't know if it was happening in the country I assume it must have I know you grew up in the regions did you have petrol rationing in the early 80s?

1:18:54Do you remember the odds of leaving this number plates? I'm sure we did I don't remember it would have been national I suspect so when I was a kid it was petrol strikes so back in the you know it was kind of petrol delivery days and they'd go on strike in my head semi-regularly I've read about it I don't I just don't remember you are the same age don't try and do that to me no I was there I was just you know I know focused on my Game Boy or whatever the hell I was doing I just remember the odds and evens you'd go you can only fill your so the last number of your license plate would determine whether you could fill up on petrol so Monday was the odds and Tuesday was the evens and I don't know why they thought it actually mattered because we all filled up every second day anyway.

1:19:29So I don't know if it's purely psychological or law. The illusion of saying we're doing something. I assume so. But it was just a real thing. You couldn't fill up on those other days. You'd go out and the old man would go up to the servo and we had jerry cans in the garage. And not because of price, because of absolute, just genuine shortages. It was rationed. I vividly remember him pouring a jerry can of super back in the day into the Kingswood station wagon just because there wasn't any petrol around. It was a funny old time. Great invention, the jerrycan. I won't get started on that, though, but that is a fascinating bit of technology.

1:20:03And yes, it is technology. And yes, it helped win battles. Anyway, I'm going to, can I just one little rant? One little rant before we tie it up here. I've only seen this a couple times mentioned, but just speaking of the war, I've heard a few comments like, well, it's negative, but at least it'll be good for the economy. Can I just make the case? It's not good. It's never good. It's 100 % bad. There is no way of looking at it. If you want to say it's good because it means that we spend a bunch of money on tanks and bullets and missiles and GDP goes up, then you're an idiot. Because what's also happening is that we are destroying infrastructure.

1:20:41We're diverting capital to absolutely, by definition, nonproductive things. Or this one bit of production, which is killing people and destroying assets and that kind of stuff. But I just want to really just massacre that idea, lest anyone run with it and go, well, there's a silver lining on this. It never is. People are dying. if you want to feel better about an extra point or two of GDP growth because we wiped out a school of 160 girls in Iran like it just sort of like I just I really bristle at when when people put that out there because it it one shows a complete lack of humanity and a complete misunderstanding of of economics and and what it means to be prosperous and the rest of it and and there is there is just no way to sugarcoat it it is it is bad in in all way shapes or form unless unless the very narrow self-interest interest groups and yes it can be good for you but i'm talking about a society it is a very very big net negative and i'm sure most people get that but i'm putting it out there just in case no i think it's right it's um yeah people mention world war ii right it's like oh but it brought them out of the depression like no it didn't like it was just no it didn't and that's a whole other podcast it is it's um it's back to the GDP conversation we had before it's very good for GDP it's great for GDP it's a broken window fellas yeah yeah yeah alright I think we're done here mate will you come back on Sunday yeah yeah yeah for sure man and I might even I'll try harder to be positive you won't I won't say I will be but I'll try harder I think you're I think you're less negative than normal, I think, today.

1:22:25On balance. Okay. It was highs and lows. It was rollercoaster, but we got there. We got there. That was awful, mate. Realism, as always, mate, and passion coming with it. That's all we can ask for. Until Sunday, enjoy your weekend. And full on. Cheers. The Motley Fool and people appearing in this program may have positions in the companies mentioned. General advice only. Please speak to your financial professional to understand how it may pertain to your situation. Subscribe to the free newsletter at fool.com.au forward slash listener. The Motley Fool operates under Financial Services Licence 400691.