SpaceX ready for launch. June 12, 2026

22:28That's the point. If you're not going to throw it on the horses, if you've got to do that. If that's the only approach you're taking, knock yourself out. Throw it on the horses. If you say, I wouldn't do that, why not? Well, because I don't know. Exactly, right? That's gambling. Yeah, it is. Anyway, that's a little aside, mate. Over to you on SpaceX. So much to say. So you've got to remember too that there's always two ways of looking at success for an IPO. Thank you. It feels like I'm making a case for investment bankers. And I'm really not. But perspectives matter. And there are people, private investors in the company, who want to get as much of value as they can.

23:08A successful IPO, from their perspective, is getting a fully subscribed IPO offer at a 100-time revenue valuation. That's success. What would you want if you owned shares in your local corner shop and it said, hey, we're listing on the ASX and go, oh, see if you can get away for the lowest price possible. No, you want the highest price possible. So even if it crashes and burns afterwards and the shares drop 80%, that's actually arguably an even more successful IPO because you managed to convince enough people for a long enough time that this was actually worth it. It sounds a little bit negative, but it is really negative, I suppose.

23:46nasty is probably the best. Oh, it's all those things. But yeah, yeah, yeah. That's true. I just make that point, right? And you can, oh, that's outrageous. Well, don't buy the shares. Here's the thing. Is it the right price? I would say as a free market enthusiast that if they offered it to the public and the public said, yes, please, we'll take as much as you can, then the price was fair. because people, you know, of their own volition and free will decided to do it. Fair is a load of word, though, as we've talked about before and probably I think I'm going to talk about soon in our upcoming podcast as well.

24:25It's a market price. Yes. Well, exactly. But that's the market. That's all we mean with the market, you know. It's just like that point at which people who own something and those who would like to own something agree. That's what a market is. And I'm also, my draw is on the floor when I look at those valuations. Nevertheless, I'm a little older and wiser than I have been. And I am not going to go, oh, that's so silly. Because I did that in the past. You'll remember, mate, 2012. I think we talked about this on a recent pod as well. I made the same mistake anyway. Go on, yeah, please. So Facebook listed at 32 bucks a share in 2012.

25:06Yes. That was also 100 times. Actually, that might have been a PE of 100 times, not even a price to sales. I'll get you to look that up while I chat. Either way, when you consider that the average PE on the market is usually around 15, 16, 17, something like that, it was sort of up there. PE of 85, mate. PE of 85, there you go. At$38 a share, and the company was valued at over$100 billion, which sounds quite now, I think about it. In the modern era, it's kind of like, yeah, that's what's wrong with PE of 85. That's perfectly normal. But trust me, kids, that was very unusual for a very long period of time.

25:41And I would dare say probably even at this period of time. But what happened? They floated. They listed. The share price crashed. Yeah, it did. People like you and me went, oh, we're so clever. I knew that was going to happen. I told you. I told you. It was so obvious to someone with such, you know, such wise, deep understanding of how capital markets work. Like it was Blind Freddy could have seen it, you know, high fives all around. It's like, oh, God. Can I tell you the story just to flesh it out? It's up 10 million, trillion percent since then. Even if you bought on the float, right? $38 at float was the IPO price.

26:19It closed at that price,$38.23. That was in May of 2012. Three months later at$19.05 in August 2012. 50%. It halved. Went from$19 to, if you sit down,$571 now. The$100 billion market cap,$1.45 trillion today. And that wasn't a story of just multiple expense. In other words, the market paying a higher and higher multiple of earnings. Earnings grew like the clap is. In fact, the P is now 20. The P has fallen by a quarter and the share price is still up 14 times. it's you know it is a remarkable story and the question was can they commercialize this can they turn a turn eyeballs into revenue revenue into profits the answer is an astoundingly obvious and positive yes it absolutely has can will and still is um and that was that was kind of the the huge story i made you're right the point the other day about that and someone said oh yeah but i wouldn't buy it now it's like irrelevant irrelevant the point the point stands like Like this is 14 years later.

27:27Who knows? I'm not saying it is or isn't. I don't have a dog in the fight when it comes to Meta and Facebook. But I can say definitively as an empirical fact of history that that was an incredible IPO to buy in on when all of the headline figures looked, you know, nonsensical. And that is touching the stove is a really good thing to do. You know, you kind of need to burn your fingers. Because you always say it with the kids, it's like with my wife, it's like, let them touch the stove. Like, not literally, but it's like, there's no amount of commentary from mom and dad that's going to stop you wanting to do that thing.

28:06And obviously there are limits, but certain things is like, all right, go and do that and see how that works out for you. It was like, oh, that's a learning experience, right? And that was a learning experience for me. and what these kinds of companies you have to be careful of. And again, it sounds like I've got to be careful here. You've kind of sounded like, oh, it's negative. And now I'm sounding like, oh, now it's positive. And neither of us, we're trying to sort of flesh out the full argument here. But this is a business that has a lot of irons in the fire. And we just started, coincidentally enough.

28:44And different fires too, right? That's the other thing. It's like there's multiple things going on. And we didn't plan it, but now that I think about it, it's actually a lovely lead into the podcast, was that idea of lots of experimentation, lots of different things. And that's what Elon is good at. It might well be that you buy shares in SpaceX thinking I love rockets. Yes. But in 10 years time, it's like, oh, yeah, it was all about the AI. Yeah. It was all about the 16 ,000 Bitcoin on their balance sheet or whatever it happens to be, right? And it's kind of like I'm not arguing that it is a fait accompli, that it is done and it is written in the stars and destined to be, but it's possible.

29:24And it's not even like impossibly possible. Yes, it could easily happen. It could not. It could not. And therein lies the bet. But you've got to be careful of these very, very large numbers and large multiples. when you are looking at a company that whose total addressable market is literally 9 billion people. And these are the other mistake analysts make. They go, the size of the market is this. It's a tiny market, even if they captured 80 % of it. It's like me going, you know, when Henry Ford rolled off the Model T and said, well, you know, the automobile market is tiny. It turns out that only a few aristocrats have these damned contraptions.

30:06It's a tiny market. Whoop-dee-doo, you're going to get the top 2 % of society wealth-wise might be your customer. Even if they 10X will still be small. Even if they 10X, it's like, yeah, but what if everyone has a car, right? What if everyone is using an AI assistant in some form? These are the things that really sort of break your brain. Now, I'll shut up in a minute and just sort of say, this is to your, just to, I guess, double down on your point here is that no harm, no fair, I'm the last person to criticize anyone who wants to buy in this. But just know that as you've nicely laid out, there is a bit of expectation in the price.

30:48You want to have a little bit of a view as to how likely that is and know that even if they are as successful as the market deems them to be, you will get an average return. Because that's kind of what it means. That's right. Right? Like in the sense that to get a decent return on such a high multiple means they just grew very, very fast. If you want an outsized return, it needs to grow even higher than or faster and bigger and larger than what the market is already expecting, which is possible. Absolutely possible. But at least have a thesis, right? I call it vibe investing. It's like you said, it's gambling, right?

31:28Have fun if you want to do it, but it's not really proper investing. That's right. Or at least be able to explain to no one else because you're only accountable to yourself. Explain to your future self why I did the thing. Even if you were wrong, if you had a reasonable rationalization, it was like that's perfectly decent. If it was just like, as you say, I like rockets. Rockets are cool. Then it's like, oh, my goodness. Even if you're successful, I will still throw shade at you. That was just dumb luck. Yeah, exactly. Just for context, we talk about Facebook. I do like it. I'm not buying SpaceX shares.

32:03I'll put it out there. I think the risk is way too big and the potential return is way too small, relatively. Probabilistically, doesn't mean it can't happen. I'm just saying if you range of outcomes, asymmetry to your point, mate, I'm not buying them. That being said, it is worth talking about. So we talk about Meta or Facebook, right? It now has revenues of$201 billion a year, okay? And that's worth pointing out only because you look at SpaceX and say, well,$18 billion of revenue feels like a big number, right? So how much bigger could it get? And the answer is truckloads bigger. Now, Meta and SpaceX are absolutely not comparable at all in any way, shape or form in terms of the companies they are or the things they do.

32:44Their market caps are not going to be that far apart, potentially. The market capitalization, the market value, as you rightly explained earlier, mate. And so that's – it's worth just thinking about if you were able to – if SpaceX is able to capture, your point mate, some of the 9 billion people, and they get anywhere close to Meta's revenue, and if they get anything close to margins that they might be able to get as a single player – I mean, there's them and there's a Boeing, someone else doing rockets, but it's pretty much SpaceX doing most of NASA's rocket work now, right? Plus a whole lot of independent satellites being launched.

33:16Do you want an interesting factoid? Please. Of all of the satellites orbiting planet Earth, from the Russians, from the Chinese, the European Space Agency, everyone, anyone who's ever put anything up there, SpaceX owns two-thirds of them. There you go. Right? Here's the other little interesting factoid. 2 ,000 satellites drop out of orbit every year. It's crazy. Yeah, like, you know, there is a tiny amount of drag up there. Anyway, so they have, just to maintain the network that they have, they have to launch five satellites a day. That's crazy. They've got a lot of takeoffs to do. Yeah, exactly.

33:56They're going to be busy. And so you kind of think about that. So I'm not buying shares. I don't, you know, but I think it's just worth, it feels like, you know, hang on,$2 trillion valuation, $5 billion loss, you know, 100 times sales, what the hell's going on? Now, I will say at the time, this is fascinating, right? So just speaking of past opportunity, mate, when Facebook listed, it was 24 times sales. When Google listed, it was five times sales. When Apple listed, it was three times sales. And they were all considered excessive. Now, my point, though, is that a lot of the mistaken, in air quotes, valuation that was done at the time, how big could Google possibly be, how big could Apple possibly be, how big could Facebook possibly be, with each sequential listing, that's been learned.

34:42In other words, the upside from Apple from three times cheap, wasn't it? Yeah, it was. Five times for Google, that's cheap. Facebook, 24 times, that was cheap. At some point, you realize the market's caught up and the opportunity is no longer there. And I think one of the things that have been amazing for tech investors over the past 30, 40, 40 years, has been the guess or forecast or luck or smarts behind this thing could be massive. It's only really small right now. I'm going to pay up for the future growth I see. That's the Amazon story we've talked about a million times. At some point, though, if Amazon lists today, it doesn't list at the same price it listed in$997, right?

35:20Because people go, hang on, I get what it does. I get what it can do. I know what the internet's capable of now. I'm going to ask for a lot more from that. And so the story of Amazon, if it listed today, would be far, far, far less value created for IPO investors and for ongoing share investors than was delivered over the past 30 years because we know. We know how this plays out. Not that we know what Amazon's going to do. We are more cognizant of the business model, of the immense ability to scale, of the amazing opportunity of a capital-like business that can just grow like Topsy, of network effects.

35:53Some of the things that we've learned over that period of time, we say it regularly, there's nothing new under the sun, and there really isn't, but the scale, the capacity for tech to scale in terms of just the sheer size and pace of that was something we had to learn maybe anew or maybe just recognise that some things scale fast, some don't, and this was one that scales incredibly quickly. But either way, I'm not going to say there's a limit to it, mate, because the end of history has been forecast way too many times. I will say, though, that each of those sequential listings, the market's gone, I will pay more for this because I see a brighter future.

36:26And at some point, in theory, you should be able to say, we will get clever enough to pay a fair price, to your point about fair, at listing, which doesn't leave much for the future of, wow, this could go faster than I thought it could. Because effectively, that's already in the price. The price says this thing will grow super fast because it has to, So otherwise, the listing price is going to be horribly, horribly, horribly overvalued. So at some point, we just catch up with that. And I think there is, I don't know where it is. It might not be now. It might not be for 20 years or it might have been three years ago.

36:53But at some point, we learn that lesson. And the opportunity for, quote, tech investors to make money from effectively just recognizing that growth can happen as fast as other people realize, that opportunity shrinks, I think, pretty meaningfully. Yeah, it is a fascinating observation. I was actually talking about that with someone the other day. And they said, welcome to late stage capital. I don't say they're all I think it's that I just think it's I think we just recognised it like when when classified businesses were invented someone went hey hang on this is a thing and we didn't call them network effects at the time but it was obviously the case that more readers meant more advertisers we kind of got the idea right and so I just and at some point someone paid more for this like hang on this could actually be really big and or Coke right Coke growing internationally the globalisation was the last version so I reckon the last big kind of aha moment was probably in the 70s and 80s when coke went to europe and just took it's like oh this can be bigger than just america what if this could grow this you know this broadly i think the sass slash internet businesses are kind of like global audience capital light massive scale you know uh when it takes most i just some way we know that i don't i mean you may have a different view i don't think it is late-stage capitalism necessarily i don't think it's i wouldn't say this is evidence of that if it is other than I think we just learned.

38:10We just learned that there's not – the first steel mill that was built, someone went, what if this could be whatever? Oh, I missed that. By the fifth steel mill, I was like, oh, I get it. Now, I understand the economics. I'll pay a fair price for the steel mill. And that's why you don't get blockbuster manufacturing businesses IPO-ing, right? Because we can value them pretty well. I don't know. I could be wrong. I'm not saying this is it or we've passed it, but I think at some point, what has seemed to be amazing wealth creation by tech investors was just the learning curve the rest of the market was on.

38:39And once you're through that learning curve, that simple, I was there earlier, recognized it for anybody else, opportunity disappeared because everyone else recognizes at the same time. I mean, I think part of the problem is as a human, like the wet way we're running, it's just, it's hard to wrap your head around the numbers. You know, it's just like, I'm going to be the biggest business in Sydney, you know, like, well, it's a really big business, like Australia or the Southern hemisphere or the, like at every step you go up, like, it's just what even is a nine billion people what does that look like you know i'm saying it and there are people going well dude just get a calculator you can do it but i mean to conceive of it and to as you say to conceive of how those things scale um in the sense that you can add yeah facebook could add a billion users tomorrow and their fixed costs don't go up that much exactly it's a bit bit of extra provisioning from the servers and whatever but it's all it's all much and much.

39:34So yeah, we had to, we had to sort of learn that lesson. Look, I'm not, I'm not buying it either. But it's not because I'm negative on it. I'm really, I've made the point many times, there's most of the things that come across my desk, just go into the too hard basket. I'm just not a smart man. I just can't. I'm really on the fence with this. And I haven't actually given it the look it deserves. I'm always, as an individual, I'm naturally cautious of things that everyone likes. There's an inner contrarian to my own detriment. It's like, well, if everyone likes it, I don't. If no one likes it, I do.

40:13Like almost instinctively. And it's sometimes serves me well, oftentimes doesn't serve me well. But there is an element of that because it is such a thing, you know, it's all pervasive in the zeitgeist. I just like, I just that's a little bit too hot but but it's more than that it's really just I can't handicap it I I we could be having a chat in five years time and this has just been like everyone who bought in on the float is is up a thousand percent and I honestly wouldn't go oh my god I could never have envisaged like yeah totally could see that happening but but I could also totally see it being down 80 percent in five years time so and this is so it's just like you don't have to force the position.

40:54These are the beautiful, what does Buffett call it? It's a no strike game in referring to baseball. There's not three strikes in your app. No cold strikes. You just sit there and just wait until the pitch is nice and slow and right in the middle of your swing. And then you go for it. And this one to me is coming in hot. It's spinning. It's curving. I was like, I'll let that one go to the catcher. I don't need to risk it. And here's the other beautiful thing. You're giving the comparison with the uh horse racing you've got to play place your bets before they're out of the gate right with this yeah we can be halfway around the track yeah and then oh i'm gonna bet now you get the get the chance to bet at every part of the race yeah i can get on and off the pony at any point and and and so there might come a point like again there's multiple realities but there's one reality that that that where it's like it comes out and then it just massively flops maybe there's a recession, there's other ancillary factors, something sort of happens and the share price crashes 80%.

41:55It's like, oh, okay, maybe now I'll buy, right? And also a bit more water under the bridge, got a bit more of an idea of the revenues and the opportunities and all the rest of it. So yeah, I guess my urging is for anyone who's excited about this and how is it, it's hard not to be excited about the world's richest man launching an It's very Tony Stark. Come on, man. Come on. I get it. I get it. But there is a middle path here of just like, I don't know, shrug shoulders, I'll wait and see. And that is perfectly legitimate. It'll obviously seem obvious in hindsight, but that's not the world. We're not there yet, so we'll see.

42:39And I do want Elon to succeed, not as an individual, but maybe. But as, well, I don't want him to fail either. I really don't care either way. But I do want SpaceX as a business to succeed for the sake of humanity. And this is going to sound a little chubristic and hyperbolic, but if it wasn't for Elon and Tesla, there wouldn't be EVs everywhere today. There was too much inertia from the legacy industry. It took someone a little bit crazy to go see, I will come in and disrupt you all, and I will be able to raise ungodly sums of money and run it at a ridiculous loss for many, many, many years. If you were to get in your time machine, go back and take Tesla out of the picture, EVs would be a curiosity today.

43:34I mean, I think their time was always going to come. Like, what do I like to say? Nothing more powerful than an idea whose time has come. The technology was advancing to a point where it just became a no-brainer. But it wouldn't have happened as quickly and it wouldn't have happened as soon without it. And in the same way, I think that doing bold things like this, I think it – this is going to sound really dumb. I'm going to say it anyway. Go on. It inspires. Yeah, totally. It inspires. Guys, I mean, there's a 30-year-old girl watching this, you know, going, oh, wow, we can do that? We can do it.

44:10I want to do that. That's my passion. I want to do that. And it lights the way. It shows the path. It dares us to dream. It shows you what is at least possible. I cringe as I'm saying this because it's like, what are you talking about? But I genuinely believe it. But I think humanity is worse off if Starling completely crashes and burns. Because what it does is it says, oh, I'm not doing that. You're going to need someone else who's a little bit crazy to come along and do it. Because like, well, I'm not doing that. And it's like, oh, I think that would be a miss for humanity. It would set us back a little bit.

44:49How's that for hyperbolic? No, I like it, mate. I mean, I think there'll be other innovations if it's not these ones. But you're right. They might be 30 years away, right? Rather than like now. Or they're having other things. so it doesn't need to just be this stuff but I'm agreeing with you I'm agreeing 100 % I don't think it's there is there's a parallel universe where we talk about other things uh and if these things don't happen or other things had happened you know but but the broad idea of inspiration I think is a really really important one I really like that um it's like Kennedy putting man on the moon right it was it was kind of one of those times in the zeitgeist where uh you know for America and for the west it was like you know here we are we did a thing right and that's if those are like Clarkson's farm which I'm now enjoying the fifth season of I literally watched it last night I did a thing.

45:29But it is. It is that idea of, yes, I can do that too. I think that's really, really huge. That speech gets played today. Do you think Rudd's speech from what on some platform is ever going to get played for future generations? Don't beg, Kevi. Fair sake of the sauce. The apology is probably the exception there. I should say that. But other than that, I'm not even picking on a particular political party, but those things are... We need inspiration. So I just hope it works. I really hope it works. works. I think that's true. But again, by the way, and I know you're not saying this, it will work even if shareholders lose money.

46:05Oh, true. And so that's kind of, I know you're not saying anything other than, if it works, it'll work and it's shareholders could still lose money is what I meant. You're right, if it works. And that's also true. I will say one thing really quickly. Our listeners hopefully have been around for a long time and know us by now. If you're new to the podcast, when I'm talking about what I think about SpaceX, I'm not saying the share price can't jump on IPO. It may well be $300 a share by the time it closes on day one. Very easily could happen. Or, by the way, the insiders could all bail out at the same point, go, oh, this is a stupid price, and the share price could be$90.

46:34Or it could be either of both those things, and then half or double that price in three months like Facebook. So it's really, really important when we're thinking about this, just to be really clear with our listeners. When I'm talking about this, we're not saying this is what will happen on APO Day. And if it's doubled or halved, as we like to say, don't at me. I have no idea what day one's going to do. I have no idea what year one's going to do. I have no idea what year three's going to do. So I don't think – I don't have – you're putting it too hard, Basco. I have sufficient confidence to believe I'm a long-term investor.

47:01In five years' time, is SpaceX more valuable than it is now? I don't know. The business is more valuable, but will the share – will it be worth – will it be sufficiently valuable to justify the current and some sort of future share price? I don't know. It looks very – by the way, we haven't even mentioned competition. I've mentioned you off-air. Amazon, I'm an Amazon shareholder, so I'm probably biased. But I was reading in the fin this morning that the NBN is partnering with Amazon's new satellite internet, which is exactly the same as Starlink's in concept, low-Earth orbit satellites. Amazon's calling their service Leo, Amazon Leo, which I quite like because it's low-Earth orbit, so it's a nice little name.

47:33But what happens when they turn up? What happens to Starlink's margins at that point? Now, maybe Amazon loses money and closes down. Or maybe it stays around for 50 years and margins in the industry fall to the floor because there's two providers, and frankly, the internet's internet, right? It's a commodity as long as the speeds are comparable, and at some point you presume they would be because the tech's probably much of a much less. Or if it's different, it's probably not different enough to be that important and maybe it comes down to price. So maybe the whole thing, you know, another rocket maker, another AI, in some version of the future, we all use AI, but the AI companies aren't that profitable.

48:03Low-Earth orbit satellites are a dime a dozen and you're buying them for cost plus 10%. You're paying that for the service. And there's 15 companies doing rockets. And SpaceX, I remember when they were the innovator and they were the first one there. Or maybe it's the reverse. Maybe it puts Amazon out of business. Maybe it's the only rocket company for the next 50 years of any size and maybe Twitter's AI is the AI that takes the world by storm. Any of those are possible. This is why the range of outcomes is so massive. But just to say I don't know what happens in the short term, I don't know what happens in the medium term, and even if it is successful as a business, and maybe it's astonishingly successful, maybe sales double and double again and double again after that.

48:40And maybe it goes from a loss of$5 billion to a regular profit of, I don't know,$10 billion or$50 billion. That may not be enough to justify the current price. And that's the question we're having to answer. And you can say, I like the business. I like the technology. That's both true. I don't like Elon, but I'm a happy, silent customer. It doesn't mean I'm going to buy the shares. I just don't know whether they'll be worth the current price. Very little aside here. I don't like Elon thing is such a thing now. And I'm certainly not going to defend the guy, but I always find it funny how we all do it, right?

49:12I don't shop at Harvey Norman and I'll just let that hang there. And there's that rational, but it goes against the point that I'm making, which is I often say to people, it's like, I would not because Elon. But you don't, do you know the CEO of Johnson & Johnson or the top C-suite executive? Do you know what they're like as an individual? I'm not having a go at the good people of Johnson. They could be fine upstanding. You don't know. I'm sure they are. You don't know. Guess what? There's a lot of humans that are just really, you know, and they're out there and there are a lot of them. And once you start making decisions on moral grounds, it's sort of like, it's kind of like, I won't do that because I don't like that person.

49:52It's like, okay, but you buy that thing over there. Well, I don't know that they're a bad person. I don't know what it is. I feel like for me, I tend to be more pragmatic. And you obviously are too, because you're a Starlink customer. Do I like the product or the service? And look, I just said that there's a line that I won't, you know, certain things, I get it. We're all flawed humans. It just is irrational, I guess. And I'm as irrational as anyone. It's a thing with Elon, though. The amount of Teslas I see with the sticker on the back saying, I bought this before Elon went crazy or whatever the sticker is.

50:28It's funny, but it's kind of – anyway. You ask a very funny philosophical question, actually, about what you know about someone. Because I'm like you. I completely agree and I completely disagree, right? I'm in both those camps. I would – I mean, Amazon shareholders. I probably would prefer Amazon because I'm just Amazon shareholder. I see it off air. if Amazon Leo is as good as Starlink, I'll happily change because it doesn't matter. What if it came out that Bezos was, I don't know. A lot of people already think that. Well, here's the thing. That's what's going to say. What's fascinating is at one point it's irrelevant.

50:59On the other hand, if there's two shops and one's run by the mafia and one's not, and they're off the same product at the same price, where do you shop? And I think it's an easy decision for us to all go, well, of course I'd do that. And I'm not saying Elon's mafia, let me be very clear, Elon. Love you, don't sue me. but the reality is we are making decisions at some point which is just what is better for my it goes back to ethical investing all this stuff is so wrapped up in that flawed humanity of where do I draw my lines and what do I like and don't like I will say my wife is very keen to get an EV as our next car and at the moment we say we won't get a Tesla because of Elon and is that rational?

51:33No, not necessarily but equally we put our money where our mouth is and a whole lot of stuff and a whole lot of parts of our lives and I'm not defending it for exactly the reason you said. It's like, does it matter? No. If the car's good, what do you care? Why, you know, if you're going to buy an inferior product instead just to stick it up, Elon's know. It's like, he doesn't know and you're driving a worse car. Right, right. So who's the idiot? It's also, you know, people just think that there's a big factory somewhere with Elon sitting in the middle. There's literally tens of thousands of hardworking people, you know, like are they all bad?

52:06It's just, I don't know, I'm just telling you it's interesting. It's interesting. And even as a participant in that irrationality, it's just like, gosh, we are an interesting creature. And that's it, right? And that's, I mean, that's 101. Back to investing. That's why investing is so bloody hard because we're all flawed humans. We just desperately try and make our way through it. We're hopefully partially we have our own biases, but there's a truckload we're not. The research says that most of our rational ideas are emotional, instinctive responses that we rationalize by putting some, you know, logical foundations around.

52:38Oh, I did this for that reason. No, you didn't. you like the colour blue no no no and people listening right now will be like no I'm not that it's like the reset says you are and I am and Ram is we are horribly flawed and the best we can do is be as less flawed as possible but that's as good as it gets right and maybe there's I mean not to be overly philosophical again but you know maybe there's a there's a plenty of room to give each other a bit of a break knowing that we're all horribly flawed and desperately trying to swim through the evolutionary soup that we were served up and you know trying to be as rational and reasonable as possible but swimming against the tide and that's just And, you know, maybe we can probably afford to be a little kinder to each other where we know that we're all that person just in different flavours.

53:14Yeah, well said, well said. Hey, one of the other things I wanted to – I just back on the optionality with SpaceX.

53:23The thing that was – well, there was a gazillion things that was interesting about the internet and still are, but there was interesting things about all sort of foundational tech, if I could use that word, whether it's electricity grid or radio networks or all of these things, is it's kind of they start and that's the business model. I'm going to pump electricity into every house. I'm going to put some wires up. I'm going to connect it to one end to a generator at the other end to someone's house. So that's the business. And it's actually, when you look at those things in hindsight, it's actually, nah, that was just the plumbing that made everything else possible.

53:58Like it was the platform to use the modern sort of expression of it. So what was interesting about the internet, does anyone really give us stuff about the ISPs that are out there? No one talks about ISPs. I mean, Starlink, the one exception, I suppose now. But that's only because it's in space. Who cares? It's the most boring business in the world. We're very capital intensive. Oh, actually, well, it depends. But, you know, you're basically putting a bunch of wires out there and then billing people on it. That's not what's interesting about the internet. The interesting thing about the internet is Google and Amazon and Netflix and all of those kinds of things and the other things on top of that.

54:32I very much expect in the long arc of time, whether or not it's SpaceX directly involved in that, it's the platform of space travel that is super interesting. When you start to really bring down the cost to put a ton of anything in orbit, when that cost curve falls, and cost curves always fall as you build up the capital around it, like the tools, the equipment, the know-how, you've got a foundation of stuff that you can then leverage. You know, the 100th rocket is a lot cheaper to launch than the first one. It enables other things. And so that's what I'm really grabbing the popcorn for. And I hope I live long enough to kind of see it.

55:13It's sort of like, you know, people talk about a moon base, right? It's like my inner child is like, yes, please. I will back that. Or going to Mars, right? All of these things. I mean, why don't we do that? People, why we should do that? It's like, because it's really, really, really hard. Not only is it hard, it's expensive. There was an interview I caught with Elon not too long ago, and he said, what's the cost? He said, it's infinite. We just can't do it at a stage. But it won't be infinite forever. And it'll go from infinite to like, you know, ridiculously expensive to less ridiculously expensive to, yeah, let's do that.

55:48And when you get to a stage where a small medium enterprise in downtown Perth can think about putting a microsat in low-earth orbit to do some interesting stuff that they're doing. It's sort of like SpaceX is the least interesting thing in all of that. Yeah, we put the rockets, we build the rockets to put the stuff up there, but then it's the stuff that's up there that becomes really interesting. And, oh, actually, now we can build infrastructure on the moon. Oh, actually, there's hardly any gravity on the moon. Actually, that becomes a really good launching point for outer solar system exploration.

56:22Oh, like things that are laughable today, like mining asteroids, actually become very tenable, very tenable with a very, very low cost lift to orbit. And look, I'm talking probably 50, 100 years, who knows, off into the future. But directionally, yeah. I think when we look back in time, assuming we don't blow ourselves up first, that that will be the more interesting thing with this era is the building the foundation of that platform that allows for a much, much broader space industry. And an industry that's offering things that I don't even, I can't even imagine what it would be. We can't really go beyond, well, we put satellites up there and maybe a bit of space tourism for the billionaires.

57:09Like, I don't know. I don't know. It could even be something as really weird as like, it's actually really helpful to run experiments in low microgravity. And so a bunch of university labs from around the planet will now be routinely doing very cutting edge science in space, which was once the purview of only NASA. And it took 20 years to plan and build and design and get up there. And we only had three hours to do the thing. It's like, ah, 10 grand. It turns out we can run this experiment here. Oh, turns out that we've now got room temperature superconductors and hoverboards, you know, whatever it happens to be.

57:46So as I say, I want SpaceX to succeed, even if it ultimately failed just to shine the way and inspire others to do the same because there's a whole big solar system out there and it'd be very depressing for me and my 12-year-old self to think that this is as good as it gets. I would love to see us go to the stars and this is one of the steps along the way. Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener.

58:20Let's try and merge a bit of macro and a bit of investing. um three things this week on jobs which i thought were really interesting and they kind of are joined only because their jobs job job losses but also because they talk to maybe the economy maybe the way investors should think about these things and i just i want to get your thoughts so i'll throw three very different ideas at you but coming from from similar places in terms of jobs the first was a deloitte report published on i think it must have been sunday or monday just gone and the report from now i always say predictions are worth exactly what you pay for them which is nothing and no one knows and everyone's guessing and they're doing it largely for a bit of pr and get themselves in the paper so well done deloitte you've managed it uh but news.com.au reported there are 81 different occupations that deloitte reckon are at risk because of ai and i reckon if i'd asked people you would start with well technology jobs obviously and then maybe some other stuff from there.

59:17And that may well be the case. But the list from Deloitte, and it's really interesting, is a very different list. Now, tech turns up at number 23 is where it starts. But if we start with what they've done, again, I'm not saying they're right at all. It's grist for the mill. It's interesting to think about. Their top eight, nine, 10, 11 different occupations, I think, are at risk, all have the word manager at the end. So let's go with corporate services manager number one, then HR managers two, engineering managers, production managers, supplier distribution and procurement managers, commissioned officers and management, licensed club managers, other accommodation and hospitality managers, retail managers, amusement, fitness and sports centre managers, and call contact centre and customer service managers.

1:00:06And I thought that was fascinating for its own sake. And I won't do on that. You can feel free to. Other than that, just run the list randomly. Number 14, accountants. Number 17, librarians. Number 19, ICT, which is Information, Communications and Technology. Wait, there are still librarians? Yeah, sales professionals. Graphic and web designers and illustrators, maybe no surprise there. And then you get to 23, 24, 25 and 26 are IT, you know, systems analysts, web developers, applications programmers. So there's that stuff. Further down the list, excuse me, betting clerks. Speaking of being at the races, switchboard operators, transport and dispatch clerks, court and legal clerks or clerks?

1:00:44I'm going to say clerks. debt collectors human resource clerks library assistants insurance agents sales reps uh pharmacy sales assistants retail supervisors service station attendants models and sales demonstrators ticket sellers uh and it's just a really interesting list mate and i don't know that necessarily anything new in that but it's an interesting list to kind of talk about um so there's that one second one this week was woolies is apparently going to outsource possibly hundreds of jobs overseas and taking those out of their head offices and saying, you know what, we've got a job to do here, but that job can be done as easily overseas as here and can be overseas at a cheaper price than here.

1:01:23And you kind of think, okay, banks do that, consulting companies do that, call centers do that, but supermarket operators, that's kind of a thing. And then the last one I'll just throw at you, and I know it's going all over the reservation, Southern Cross Media, which is the business that was the old Southern Cross Austereo. By the way, they, a listener, are part of the Southern Cross business. They produced this podcast. It had nothing to do with us talking about it other than just to recognize it. If there's a conflict there, I don't care. They don't care, but just for the sake of entirely transparent conversation.

1:01:51So Southern Cross Austereo doesn't put his foot in his mouth potentially. No, that wasn't the point actually, but hey, if it helps. It was supposed to be a disclosure rather than a warning, but you take it as you need to. So Southern Cross Media was Southern Cross Austereo, which is the radio and podcast business, and the Seven News business, now part of that conglomerate, they're going to lay off 300 people from that business. Now, very, very, very different things going on. Advertising revenue on one of them, just simply cost-cutting on the other, maybe competition, maybe profit maximisation, maybe IT allowing those jobs to be done remotely, and then AI just being AI and just potentially a sway across everything.

1:02:29And I guess there's a couple of things, mate. There's the issue of what it does for the jobs market. Spoiler alert, coming up in a couple of weeks' time, we're doing an episode on the universal basic income. So listen to that one. We've already recorded it. So it was done before we knew this stuff. But it's interesting because we did talk about it a little bit in that prerecord. So look out for that one. But yeah, I just think it's interesting at an economic level. It's interesting at an investor level, at a company level. How do we think about companies that do this sort of stuff? Is it good when someone lays off some stuff, outsources some stuff?

1:02:59Is it bad? Are we indifferent to it? Again, I know it's a random selection, mate, but all jobs related. I'll just throw to you and say, what do you think? What comes to mind? I mean, I'm always very sceptical of Deloitte reports or reports from any of these big four firms. Please don't sue him, not me. No, look, I mean, I think there's the, what's it called, the truth defence. So I'm only, I'm not, predicting the future is hard, so I'm really not trying to be too critical. No, no. But, I mean, it's the same reason why I'm critical of various central banking predictions. predictions. It's just like, you know, after you, when you, there's a certain track record that's there and it just behooves us to kind of acknowledge it.

1:03:39It's like if you and I were catching up for a drink at the pub and you've gone, Oh, Hey, Jerry just predicted that everyone's doing this. Like what the dude who is like literally wrong on everything. I mean like go, you know, I don't, I don't care. Whereas like, Oh, Sally said this. Oh yeah. Well, actually she's been on the money for most of the time. You know, I pay attention. So it's, it's, it's great. It's great. But it's, but they do it for a reason, right? So, okay. There's my cynical take out of the way. They also tend to lean very heavily into sort of directional trends that are self-evidently true and undeniable.

1:04:11So, yeah, AI is a thing. It's getting bigger. It's going to have an impact. Well done. How much did that report cost? But they do what we all do, which is that they overestimate the timeline and they overestimate the specifics. So it's just happening. Or underestimate potentially, right? Yeah, potentially, yeah. Yeah, yeah. But usually it's sort of like, you know, the flying car by 20, you know, 2003. We're all that flying car. No, not yet. Yeah. Not to me, we won't. I'm still salty about that, by the way. I still want my flying car. Yeah, yeah. Don't get me started. So I think for a lot of – who was it?

1:04:53Someone said it recently. Was it Mark Andreessen or one of them? It's just an excuse. For a lot of these companies, particularly in the – he was, I think, talking in the startup world, it's like you overhired. You overhired and now you've got an excuse to fire a bunch of people. I've spoken – I've mentioned it on the pod before. I've spoken to several CEOs now who aren't getting rid of a damn person. Yeah. And that is because – and not because they're not using AI, because they're using AI and now they can do 100 times more than what they did with the existing staff. Yeah. So it's sort of like AI.

1:05:24I mean, we all use it. I'm as big a fan as anyone else, but it's not as good as a human being in a lot of areas yet. I feel as though it's an excuse for some of these big, slow institutions that are just not agile and not creative. They are very stodgy old enterprises that move very, very slowly. Please, please, please. Not that they're not doing it. I don't remember an organisation needing to have a valid excuse for making people redundant in the past. Oh, they shouldn't. And I think it's up to you. It's your call if you want to get rid of it. But that's my point. I don't – I find the – But they feel as though they do need an excuse.

1:06:03Yeah, but were they not going to do it anyway though? I mean were they – companies are far – Yeah, they were totally going to do it anyway. Right. But this is a – like there's a meeting somewhere going, we've got to get – oh my gosh, the costs are out of control. Revenue's like going, oh yeah. And then the PR people get their hands on it. It's like we've got to sugarcoat. Sugar helps the medicine go down. Sure, sure, sure. I just want to make the point I don't for a second believe that they are only doing the layoff because AI as a thing. The time it lets them do the layoff, they do it anyway.

1:06:31Maybe it's a nice cover story. I agree with that. I don't think it was needed to be, well, thank God we've got an excuse now. We can lay these people off. So we can do it anyway, but we can explain it away. No, I honestly think it's up to the business to decide what workforce they need. Slippery slope there, Andrew, shut up. So people have very strong opinions until it's their business.

1:06:59Job losses. Yes, it will, but it will also create a bunch of jobs. Here's a thought experiment. It's a little bit on what you're asking, but I was walking along a fire trail the other day and I was pondering this exact thing. And let's go with it. So what I said? Yeah, that's right.

1:07:23Let's do a thought experiment, right? Let's say that this age of abundance is on our doorstep. We, through a combination of AI, robotics, and that we are just going to find everything becomes insanely cheap. And that means, so, Andrew, that sounds great. I agree. I think it sounds bloody brilliant. but you get a lot of pushback on that because people will go, well, if people are spending less, then there's less income for jobs. If there's less jobs, there'll be more unemployment. Now you go, oh, okay, that's a bit harder now. Well, now what do I think of it? And I think we've got to try a bit more first principles thinking with all of this stuff.

1:08:08And again, remembering, let's go back to our little island analogy, right? You, me, and a hundred other people out there slaving away, catching fish, chopping down firewood, all the usual good stuff, you know, knitting baskets out of reeds and whatever, whatever you do on an island when you don't have all the cool tech and capital that we take for granted today. But then someone comes along and says, actually, we're just like one of the bots from iRobot just lands on the shore. It's like, yep, I can charge up. I'm solar powered. I'm good to go. I can replicate myself. I'll do whatever you want.

1:08:38Now, what's going to happen to all of the jobs? The jobs are all gone. It's not a bad thing. Is that why is it about like, yeah, but you've got nothing to do. Yeah, Well, I've got plenty to do. I just don't have to work for it anymore. I used to spend eight hours a day desperately trying to catch a fish. Now I'm lying on the beach working on my tan and having a beautiful fish delivered to me, steamed and covered with a little bit of garlic and ginger. It was very lovely. You know, and it's like, it's not a bad thing. So prices, there's two sides to this coin. Yes, it means a loss of jobs, but it also means a lower requirement for a job in the first place.

1:09:16What if you could sustain all your material desires working one hour a week? Now, call me crazy. I'm probably missing something here. But I call me crazy, but why is that a bad thing? I don't get why that's a bad thing. Yes, but you used to work 40 hours a week. Now you only work one hour. I'm like, go on. I'm not seeing the problem here. Oh, you mean that I used to work 40 hours a week and now I work one hour a week and now I can't get all the nice stuff that I used to buy? Oh, no, you can still have it all. uh okay what am i missing mate what am i missing i don't know you're missing anything mate um because i don't think i don't have a i don't have a strong view on the future i if i was to but as a thought experiment let's just say let's not ponder the likely it happens it happens like we've got robots and ai and they're just brilliant oh no there's nothing wrong with that if the utopia is as you paint it that it's utopious that that works right the question is well maybe it's not utopia but if it's not why is it like you know there's a wealth divide aspect to it which the ownership of capital is absolutely the key well a couple things i suspect i suspect i don't get too ideological or philosophical or ethical or moral or religious the protest work ethic i think means something deeper down we call it that it's not just protest but you know that that kind of hackney thing i think purpose is important and i don't know i don't know what that looks like in a world where there is no effort required to sustain yourself or to be in some way useful.

1:10:44I think we know a lot of people don't have those. A lot of people lose, not hope, a lot of people when they retire lose all sense of who they are and what they're trying to achieve because they're so close associated with their thing. And I don't know how much of that is cultural. I don't know how much of that is personal. I don't know how much of that is just deep in our DNA. We just have forever foraged for food and got enough food and done the things. Most of us are having a week or have a ball after six weeks like, oh, my God, I've just got to find something to do. I don't know. So, again, devil's advocate, right?

1:11:18I'm not disagreeing with you. Devil's advocate. I'd want to answer that question. I'd want to answer the – Just on that before you move on, though. But the purpose – but I agree. Purpose is everything. You've got to – I think that of all the studies on happiness, it's people with purpose that are the happiest people on earth. I guess where I push back is just like if you're telling me the only way I can find purpose is sitting in a two by four cubicle staring at a spreadsheet all day, that's what I challenge. It's like I agree purpose is important, but digging a ditch in the hot midday sun is the only way for me to find purpose.

1:11:50Kill me now. This is depressing. I think so. But again, we're not talking about every job or at least those jobs. and even for those who matter, I don't necessarily agree with the characterisation. I don't know that everyone wants to dig ditch in the midday sun, but I also think that being productive in those ways is still to some degree, I'll say life affirming sounds like a bit woo-woo at the moment, but that kind of idea. I think there are low-paid hard jobs that at least in our nostalgia and rose-coloured glasses, and at the time we convince ourselves maybe it's just because we have to believe it so we can get through.

1:12:29That's that idea. Or if you know, I might not be doing a lot of things, but I'm doing this little thing well. And I take pride in the work that I do. And I'd rather be digging a ditch than some, but man, I dig a good ditch. And I like the people that I work with. And it gives me somewhere to go and something to do. Again, I'm not saying I don't, I'm not anywhere near qualified or educated enough in psychology to know how that plays out. But I would say that's something to think about. Not everyone wants to be an artist. Some will go, great, I'll go and dig a veggie garden. Some will go and paint something.

1:12:56I just don't know what people say. I don't know what the hell I'm going to do. the best kids possible i'm going to spend time with them i'm going to do that that's my thing that's my purpose sure sure but there's a thousand different varieties i it's not that i 100 % agree with you it's just it's just that when people use that as an excuse as to why drudgery must exist for purpose i just think well purpose can be found in a whole bunch of different ways i've never met agabo i've never met i was gonna say who's won powerball and continued to do it for purpose right Like it's, you know what I mean?

1:13:27Yeah, but I don't think it's nothing. I think we should discard it. I don't think we can say there is no one out there who would feel less satisfied with their lives without a productive occupation to have. So I'm not saying everyone does it. I'm not saying we should make people do it. I'm just saying, you know, what would, you asked me what the downsides would be? For some people, I suspect, maybe it's five people, maybe it's a million people, maybe it's 5 % of us, maybe it's 95 % of us. At some point, it's like the thing that I do is the thing that I do and without it, But I'm not – this is – You'll find new things to do, I think.

1:13:56I'm going to say it because – Just as none of us are making horseshoes today and no one goes, oh, we don't have any purpose in the modern age because there's no barrel makers and blacksmiths. No, but they do something, mate. They're not – Exactly. They do something. Yeah, but no, a professional is what I'm talking about. The barrel makers and blacksmiths didn't – I weren't given, you know, one hour of work, one hour a day, a week jobs, been paid the same amount they were doing as barrel makers. They did a different occupation. I think it's too easy to do this. I think it's each to their own. I think if you want to go and dig a hole because it fulfills you, then you should go ahead and live your best life.

1:14:28If you feel as though you prefer to travel and engage with family and friends or be an artist or whatever it happens to be, then that is your choice too. This is a great journey we're all on to figure it all out and find purpose in life. But I just – I think dismissing it is too true. I think you can say – people would obviously find another purpose without work, so work is necessary. I think that's as blank a statement as everyone needs to work. I think we do recognise for some people that is purposeful and that's what they do and that's what they like doing, that's how they do it. And, you know, whatever those things are, there will be people who I suspect.

1:15:06You're limiting your own humanity, I think. It's a tragedy in a way. I know. Look, it's in job. I guess my heart bleeds. What's the word for it? it's like, it makes me sad that you can only find purpose in doing that thing. And not that that thing isn't important and that you shouldn't take pride in it, but there is a whole world of experience to be had out there. And it's like, okay, one door closes. I think this technology means another million doors open, you know? So it's like, oh, I don't get to do, I don't get to be a HR manager anymore to go back to your initial list. But now I can do the thing I always wanted to do you know whatever whatever it happens to be each of us will find our own fulfillment i just it's usually someone at uh glass tower somewhere or a high-ranking politician or bureaucrat who makes the go well no you have to work because you'll be unfulfilled if you don't so keep doing that thing like i think you're on this too mate i think bugger off do you don't know anyone who actually gets finds value in doing what they're doing as a job most people a lot of people yeah Yeah, yeah, totally.

1:16:08But I'm just saying that if that wasn't there. Yeah. So my first point is that I don't know that all the jobs go. I'm pretty sure that a whole bunch of other interesting things reveal themselves. But you asked about one hour a week. If no one worked, would that be a bad thing? That was the premise of the question. But that doesn't automatically presuppose that you're just watching Netflix all day, right? Like you now have free time to do other things and those other things could be fulfilling, productive, whatever it is. I'm just making the point. I don't think we can say work is not that for people and there would be no loss of purpose without work at a good scale.

1:16:48Makes to be worth it. I'm just asking you what could go wrong. Yeah, yeah. Next point. I think wealth distribution is huge. And again, we talk about it at UBI. We'd actually talk about it in the context of AI much. We've alluded to it a couple of times in the pre-recorded what we've done. But yeah, who owns the stuff matters a heap in terms of that environment, right? So if everyone can work one hour a week and have the things that we have now, then no dramas. If the one hour a week comes because the value accrues to the owners of capital rather than the current providers of labor, then it's a very, very different world.

1:17:19And I think that's a question mark. And again, devil's advocate. I'm not predicting it, just saying it. Yeah, that's what I'm saying. I don't know. I think that's the other one. The other one I had was in the back of my mind. Yeah, do. So, the one I had in the back of my mind was, oh, yeah. While you think of it. The only thing I would say is, and you and I talked about living standard before, I know it's a difficult ground, but we talk about house price. What we agree on is house prices are extraordinary. And if you said, now, when you buy a house, it goes somewhere else's their income, so you can't just remove that from the economy and pretend that just lowering house prices, nothing else changes.

1:17:55but imagine a scenario in which we have everything we have today but houses were X dollars cheaper. We could work probably half, maybe less, the average person. If houses were four times income rather than 11 times income, almost by definition, you could work half the amount. We could have 20-hour work weeks. And you could also start a business with a much lower threshold for profit as well. Sure. Think about it. Yeah, I'm sorry about workouts. I just don't. Yeah, yeah, sure, sure. You're right. You're right. I'm just thinking about more of the tangent here. So my point of that is, so what did we do?

1:18:34When we got richer, we put it into other things. We find things to spend the money on. And I don't, I can't, AI may entirely upend our entire human history experience, right? But at any point during our period since the Industrial Revolution started, We've managed to find enough stuff to buy, so we choose to continue to work full-time. When I say choose to, there's a feedback loop around property price. No one chooses to pay a million dollars for a dog box, but you have to because that's the price everyone else is paying. So it's not an individual choice, but the kind of – it's part tragedy of the commons, frankly, and part aggregated choices in the market.

1:19:08You ate the point about fair prices for SpaceX. In that case, the fair price is the current price for a house, right? Yeah. And so it's kind of like, what did we do? We said, I earn some more money. I'm going to go and capitalise that into our house, or I'm going to go and buy the second car, second TV, take the international holiday. Our living standards improved as they should, they absolutely should. But we could have as a society chosen a very different path where we are working, we have a 90s living standards and working 20 hours a week. And we didn't individually choose to all go one, we didn't have a vote and nor did I do it in the absence of everybody else.

1:19:38But the reality of the way that has netted out is we capitalized and consumerized that extra income into more stuff. So I would say not – you said assume it's going to happen, what will be the downside? So I'm not – maybe I'm breaking the question a little bit. I didn't mean to, but I think about now I might have taken you on a tangent. I guess I'm a little bit sceptical of unless I am so good no one can work and add value with more than one hour a week because there's not enough jobs to be done, which is possible. I suspect every bit of incremental living standard we're offered we take with two hands and continue to work and earn more and spend more on the stuff.

1:20:15We never get more stuff for it necessarily. Maybe it just inflates away. But either way, I think it's history. It definitely inflates away under the current system. Yeah, but history says that's what we've done. Every time we've had the opportunity to work less or consume more, we've chosen to consume more. So there's something there. Sorry, you jump in. No, you've made the point before, and I know it's a good point because it has spurred many a shower thought or a fire trail thought. It's just like, yeah. I take what you say very seriously, mate. I very much do. I knew someone would. Yeah. Eventually.

1:20:49You know, my whole deal is I just, what am I missing? And if someone's got a different point on things, it's like if I can't articulate it or if I can't rebut it, then they're probably right. And you've made that point. Well, not just you. A lot of people have made that point before. Here's where I push back on it, though. And, again, I do say it with full expectation that you go, yeah, but you forgot about this. And then I go, oh, yeah, that's a good point. I'm completely wrong. I think the argument that you make there, we need to separate away what our productivity has afforded us. So we have got global supply chains and manufacturing and production capacities that just make things super, super, super, super, super cheap.

1:21:36And you sort of say, yeah, but as soon as they get cheap, we just buy more of it. It's like, I actually don't know that's true. I think what has happened is there's two paths here. There are the things that all of that technology and process has enabled. Let's just be derogatory and just call it plastic crap from China, right? Yep. So, yeah, I can now get – oh, he's talking about Ferris. I got a new laptop the other day, really cheap. It's just like a miracle in a box. It's like, oh, I got my old laptop around. You know, it's just this brick, four gigs around. It's useless, you know. And in inflation-adjusted terms, it was like five times more expensive.

1:22:17Right, right. I haven't bought more laptops. Have you bought more? No, I'm buying the same amount of laptops. They're just much better and cheaper. And you say, but where's the money gone? Now, this is the interesting thing. The money has gone into things that do not avail themselves of these processes, namely property and land, right? And this is where the AI thing is really interesting. Let's go with the abundance thought experiment. Yep, robots everywhere, AI everywhere, whatever you want. Doesn't matter how good it gets. There's only sort of, there's only, McMahon's point only has so many mansions on it, right?

1:22:49Yeah. They will always, scarcity is valuable, right? And there are some things that production can't increase more of. This is not going in the direction you probably assume that it is. We'll get there. But we'll get there. It'll come. It'll all rise lead back to it, right? Exactly. But putting it aside for now. So things like healthcare. So when we look at prices and where we look at our spending, you're right. We're working as hard as we ever can, but it's like it just less and less and less towards the plastic trinkets and the consumer goods and more and more and more towards the important stuff.

1:23:29The housing and healthcare and fuel and these kinds of things. And I don't think any kind of technological miracle changes the fact that if I had the ability to, I would live somewhere really, really nice. I just would. That's a fair point. That's where the money goes. And that's partly why prices have gone so exploded, mainly because we decided to multiply the money supply by an ungodly amount. But why did we do that? Because of jobs. Because of this. And here's the irony of ironies. It doesn't actually work because that stuff is absolutely scarce. It's just been deadened and nullified to a good degree, not nearly enough to offset all the silly buggerness because we're all dealing with the cost of living crisis, but nevertheless still very much nullified by the fact that while all housing and all these other things are going to the moon, I can satisfy certain base wants very, very easily now.

1:24:34So you've got these different things pushing in different directions. On one hand, back to our island analogy, it's just like it should be really, really good except that all we did is in the effort to make sure that people keep working because working is just inherently good for its own sake and we've pumped all this extra money and it's just gone to the things that the robots on our island can't make more of. I've still got the best hut at the top of the hill that overlooks the harbor, the lagoon, right? Like, it's just like, I've got it. Yeah. But, but the robot can catch fish like, eh, I'm going to, I got the land.

1:25:05Right. Like, and, and that will always be true. So I think even if you get, there is a definitely a wealth distribution kind of thing, but it's all arbitrary at a point. It's just like, I, whatever the numbers are, whatever the technology is, the richest person is going to have the nicest house. And that's just, that's just, that's just the way it is. Whether, the nominal value of that house is, that relativity will always exist. But even then, it's just like, is it necessarily a bad thing if the bottom 3 % still live like Midas? Like, I don't know. I don't know. I guess that's what I'm saying.

1:25:39I think if you think about the benefits of AI, it assumes the stuff is cheaper and the stuff is cheaper because the owners of AI slash the users of AI are prepared to turn that into cheaper stuff. Short of some sort of AI. Because what's the value of the capital if you can't sell the stuff? I've got a thing. I've got a robot that can do anything. Yeah. All right, I'm going to charge a gazillion dollars for it. Well, no one's going to buy it. All right? So I need to offer. Which is the current price, right? Absolutely. But as that trend plays forward, that what the market can bear will reduce and reduce and reduce.

1:26:13As long as it's still profitable for me to do it, I will do it. And that's the history of everything. That's why in real inflation-adjusted terms, things like a car is just like so ridiculously cheap these days because of all of that. But it hasn't. So I think two thoughts. I think you make a good point about the land and property is where the money goes. I think that's fair. I do wonder, though. The scarcity. It's also the access to the brain surgeon, for example. Anything that's limited in supply is where the value goes. Well, the value is – not the value doesn't even go, because it's a nominal thing.

1:26:51It's more as where the price goes because it must be revealed there, but on a relative basis it's more complex. What? If that – I'm trying to think through the – It's hard, right? I'm not saying – I get tripped up on it too. But all I can tell you is it's a lot more complicated than what the talking heads make out. So two things. I think, firstly, I don't agree with you that we have the same things as we always did in the differences accruing to land. And I think only at land. If you look at the things that I have, and this is a hackneyed example, right? When I was growing up, we moved into a newly built house that had no carpet on the floor and flannelette sheets in the windows.

1:27:37We had a push-button colour TV in the lounge room. and about five years later we bought a second black and white, small tiny little TV for the family room so that I could watch the Kingswood Country while my sister was watching whatever she was watching in the other room. We had one car. We didn't take a single international holiday as a family other than my aunt who worked at Qantas could get us cheap tickets to go and see my other auntie who lived in the US. I think so if we right-sized, not right-sized, that's a bad word, But if we same-sized, like-sized, common-sized these, common-sized financial statements, if we common-sized our current lifestyles back to whatever period we want to choose, there would be an enormous amount of money left over.

1:28:20Now, I could either save that or I could spend that somewhere else. And we know from generations of humanity, post-industrial revolution, our savings rates rarely change much. Now, they should. We can get the value of saving and all that kind of stuff, get a bit kind, but let's leave that aside. But it's gone to housing. That's where it's gone. It's gone to the scarce thing. That's why we're saving. We're not saving less because we're... But it hasn't. You've still got... It literally has gone to consumption because I'm not just having a single cathode ray tube colour TV in the... I could tomorrow personally, me personally, and you could and everyone could, buy, live a 1980s lifestyle and have money left over.

1:28:56And that would make no difference to the housing prices. Now, if we all did it, we'd ask where the money went. But my point is it hasn't because we have chosen to do those things. So a lot of it has gone to hell. I completely agree with you, but nowhere near the whole amount. Otherwise, we would only have one cathode ray TV tube and one second-hand car and no overseas holidays. You're saying if I only – I've got two TVs in my house. You're saying if I only had one TV that I wouldn't be living in an affordability crisis? No, I'm saying the money will either be spent or saved. Yeah, but it's not – whether I buy a second TV or not is the difference between me getting ahead in life.

1:29:33Like maybe it's a frivolous – You're framing it wrongly. I'm not saying that at all. I'm not making any argument or any value judgment at all. I'm saying if I lived my life the way my parents lived their lives, I would have money left over. I would either save that money or I'd find somewhere else to spend it. And we know from history that the answer at a community level is, it's an and, not an or. We've absolutely done it. I have two cars. I have three TVs. I have a laptop. I didn't have a laptop. You didn't have a laptop. Our parents didn't have laptops and computers. We've chosen to make those consumer choices as well as, again, we is a – sorry, chosen is a difficult one because part of it is choice and part of it is keeping up with the Joneses and part of it is that's the price of housing.

1:30:14I'm saying it's more than just that. We have objectively better stuff and more stuff than we did 10, 20, 30, 40, 100, 200 years ago. So that is objectively – Yeah, but it's a rounding error relative to the big ticket items, right? That's my point. Let me – Stop, stop, stop. Because this is important, right? Because I'm not saying it's not. What I'm saying is we haven't – we have also done these things. So when we've had more money available to us, we've chosen not to work less. I could – in some sort of fictional world, I could live the life of my parents and work for the Motley Fool for – pick a number, 20, 30, 38, whatever number of hours a week and simply say, honey, I've decided, we've decided as a family, we're going to live that life and work fewer hours.

1:31:00We could. And we all could do it. And I'm not saying it's not around the emirates. I'm not making any value judgment. I'm not making it relative to housing at all. I'm just saying objectively true. If I said, I don't want the laptop, I don't want Netflix, I don't want the computer, I don't want my Starlink, I don't want the second car, I don't want to whatever, whatever. I mean, rego on the car, insurance on the car, that saves me a couple of grand a year. Starlink costs me$150 a year. I'm saving$800 a year. That money would either pile up my bank account and go, hey, look how much money we've saved, or I'd find some more else to spend it.

1:31:28I'm just saying that is just. So we have chosen to, well, we could have chosen to work less. We've chosen to spend more. Now, the choice as well as house prices go up and requiring more spending because that's the market price of a house. So I'm not disagreeing with that bit of it. I'm just saying it is just simply true that we've all, and we just say the household savings rate all the time. We have chosen to have more things than we could choose to have and we could have more savings or spend money elsewhere if we wanted to. But we just chose not to. But it's a question, it's not that you're wrong.

1:31:55It's a question of degrees there. So let's do the maths on some of those things. get rid of the Netflix subscription, don't have a laptop at all, only have one TV. And again, I'm sure anyone under the age of 35 right now, it's more resonating with them than the people who own a house, right? They're going, I mean, it's the classic avocado on toast argument. It's like you could have all these nice things, but you have avocado on toast. And it's like it's spurious, it's reasoning. You're right that it does make a difference. It's just not the difference that people make out to be. It is a - I think you're verbling me a little bit because I'm not saying that.

1:32:32You're talking about other people who say the same things, right? If you're okay, I'm saying that. That's okay, but I'm not. You're talking about the one hour of work. My argument is we don't ever choose to work less and spend less. We choose to work more and spend more. Humans have for 200 years worked more and spent more at every time. That's exactly what I'm saying. We're going to go around and around here. This is exactly what I'm saying because I don't think anyone is choosing to spend more. Of course they are. I think people are spending - I think everyone will make a choice. You're saying you can either work less or you can buy the thing.

1:32:59That choice is obviously – I don't know how it's not. Back to my original point because there's two tracks here. There's the cheap stuff that we get better and better at making and there's the scarce stuff that we can't really push it. Every single thing that – again, the 32-year-old is not choosing to spend more on housing. I agree. They have to, right? I agree. So it's sort of like, you know, if you wanted to live in a dog box in the middle of the desert, you could be fine. And it's like, it's just, you know, to the other problem with the argument too, is that it assumes that this increasing living standard was all a function of the system that we designed.

1:33:42Where I would say it's absolutely nothing to do. It's actually entirely the technology advancements that we made as a species. That's why we've got a laptop. That's why I'm watching Netflix. It's not because of some central banker or finance minister. I think that's what I'm saying. I think you're saying with other people's views. I'm not saying that at all. I have nothing to do with the system. I didn't say it was the system who did it. I'm not talking about how it got here, what it's worth, what value judgment I make on anyone who does it doesn't do it. I'm just making the very simple mathematical observation that at any point any of us could choose to work less or work a less stressful job, have less stuff, and we don't.

1:34:15That's all. I don't care who bought it, who made it happen, why it happened. If we're choosing to have not a house, then yes, I guess you're right. No, no, no, with a house. Absolutely with a house. We're not going to agree on this one. How can it not be true? If you buy less stuff, you've got more money left over. That is evidently true, right? And so how many people are saving enough? They're not. They're all out of spending and buying the extra things they want to have. And that's fine. There's no value judgment. I'm making the point of the reality of humanity is when you've got an extra dollar in your pocket, you spend it.

1:34:46Look at household savings rates for the last 50, 60 years. They've been effectively not unchanged. Even though incomes have gone through the roof, even allowing for housing. it's just it i'm i'm not disagreeing the housing i think completely you're 100 right i'm saying the other stuff is just a voluntary choice and the entire time we make that choice we say i want the thing more than i want to work less that's all i'm saying and that's that's where we go to the one hour week of we could be working less now had we chosen to even with higher housing i'm not saying we couldn't i'm not saying we work one hour a week i'm just saying maybe it's four days a week maybe four and a half days it doesn't really matter what the number is or i could work a less stressful job.

1:35:22Honey, I've decided I want to take a job at Woolies packing shelves. It's going to mean we have fewer cars, less TV. It's like, oh, Scott, I'd really rather you stay at the Motley Field if you don't mind, please, because I really like the things we have. And that's what my wife could turn around. She works in education. She's smarter than I am. Honey, I'd like to pack shelves. Well, you can, but we then can't do this stuff. We should pay the house, so it's going to happen either way. But we could make lifestyle choices tomorrow. Lifestyle inflation is just, it is, right? Think about everything you've bought as your income went up over the last 40 years I did with when I was working, 30 years.

1:35:54I've said to me before, I couldn't spend my first full-time paycheck. I could not spend it. And all of a sudden now I'm on multiples of that and I'm like, oh, I can't really, I'm not saving as much as I should be. So why is that? Well, because I bought a better house and a better car and a laptop and a computer and I bought Netflix and I pay for that and I buy a bottle of wine or a bottle of whiskey and I do those things. I'm just saying it's objectively a choice. I'm not saying it's a system. I'm not making any value judgment in the slightest. just saying when you say people work less, the evidence is we don't choose to do that.

1:36:22We always choose to say rather than spend less on these things, that we can choose, discretionary stuff, I'm not talking about housing, you need a ticket on housing. It just objectively is true. I don't know how it can't mathematically be that. It is true. It's just not needle moving when there's a massive 4 ,000-pound gorilla over there called housing which is sucking up every single spare ounce of capacity and spending. where you don't really, while there's a theoretical choice to be made, it's just the avocado and toast. Like, yeah, you would actually get to a house faster if you did have less avocado and toast.

1:36:56But it's such a small factor as to be like it's insulting almost, I find. It's kind of like, yeah, that is a factor because it is a factor because it's mathematically a factor. But in the same way that, you know, smoking is bad for you, but it's like, yeah, I had a puff when I was 16 versus I'm a two-pack-a-day smoke. I mean, you know, they're technically true and there's actually, there's more like, so yeah. So it depends on what you want to, on how you want to frame it. All I'm saying is, so let's go back to the, so we can finish off this episode. We'll go back to the original thing here is like, if all of these jobs go because of AI and because of increasing productivity, I would say, A, that people will find other stuff to do and that's just the march of progress and that's always been the case.

1:37:45And B, if it wasn't as a thought experiment, even if we decided that we didn't want to do that, that we could have a better lifestyle because of this sheer abundance. There's actually been loads. I mean, it just, anytime people do the numbers on this, it's just, it's just really hard to take housing out of it. And it's hard to take housing out of it because of scarcity. And even when they do the, like, you know, people talk about the reason for it. And I'll point to like money creation, people will talk towards immigration, other people will talk towards other things. But one of the things that comes up in all of the studies that have been done is actually the red tape and the bureaucracy.

1:38:23the classic example of Australia's got a ton of land. We've got a ton of land. And you know what, when it comes to building a house, we've actually gotten so much more efficient and better at it, but the cost is all in the regulation and all the other stuff. So I am saying that there is in a, there is, you've got to talk about the system to some degree, because there is a, in a world of, again, everyone's got a robot and a genius in a box. It's sort of like, we really could have a ton of really high quality housing all up and down everywhere. And again, that's a whole other separate debate, but we could, right?

1:39:01And if we were to do this, we would have, and it's a choice, right? You're absolutely right. But we would be able to have not only better, more enriching lives, more fulfilling lives, not even just more material lives with less labor worked. And it's one of those things that only reveals itself when you, Again, the brain has trouble with scale, but back on a hundred person island, it just becomes so obvious because how else would it work, right? How else could it go other than everyone either just deciding to do something else entirely or not doing the thing that they were doing before? Because you don't need to do it because of all of these technological advancements.

1:39:40Like it just has to be, like you say, maths, like mathematically, like that's the mathematics of the situation. It won't go that way. I'll very quickly hasten the way. Because anytime there's a problem, we'll print up a bunch of money, we'll throw it at it, and that's why we get these incredible productivity enhancements, and yet the price just keeps going up. Bought a pack of Tim Tams the other day. Remember when there used to be 12 Tim Tams in a packet? There was eight in there, and they were spaced twice as far apart. That's inflation. It's a different type of inflation, but that's inflation, right?

1:40:10It's inflation, yeah. You know, it's sort of – anyway, I guess what I'm saying is I, my broader point is I, I am questioning, not necessarily, I'm at the verge of rejecting, but I'm, I'm very seriously rejecting the proposition that with a, an increasing productivity explosion and age of abundance, that that's a bad thing. That's what I'm, that's where I'm really coming down because, because that's how, whenever I come across it in the mainstream, that's how it's being framed. And it's kind of like, you've got to slap yourself in the face and go, what are we talking about here? We're talking about being able to do so much more with so much less.

1:40:53And that's a bad thing because the blacksmith doesn't have anything to do. You know, like it just, I think it's, I think it's narrow in, in scope and I think it's short-sighted in, in vision in, in the sense that where if I was to explain that to a group of 12-year-olds, they would go, yes, please, I'll have that. Give me the things. Do you know what I mean? Yeah, totally.

1:41:18I'm, yeah. The thing is, it's a beautiful, it's free to choose, right? You go, no, I want to work and I feel free. Feel your moods, do what you want to do. Yeah, I'm just not, I'm not as convinced as you are that AI won't make wealth or income inequality worse. I'm not sure it will, but I'm not convinced it won't. Oh, it will. It will, but that's because it's housed within an inflationary money story system. If we take that away, then things would get insanely cheap. I'm not sure. Equally, though?

1:41:56Yeah. Yeah, well, fairly. I suspect the owners of the capital end up better off in that world. than the providers of labour. Okay, we're into weeds now. Settle in, everyone. Not with huge amounts of confidence, but I'm very happy to talk me out of it. I'm not sure.

1:42:18Maybe AI is entirely paradigm-breaking, but broadly speaking, we know over the past whatever period of time the returns to capital have exceeded the returns to labour. I'm no raving communist, by the way. You know that well. But I do worry about the owners of the productive means, particularly in a labour-free world. You know, if I can work one hour a week and get enough money to fund my current lifestyle, trust me, I'm there. Do I think that's likely to be delivered to each person in the context and the proportion of their current lifestyle? I find that unlikely, almost by definition. Yeah, I find it extremely unlikely.

1:43:00Which we'll talk about later, but that's just me. You go, sorry. So I invent something that's just incredibly great and everyone buys it and I become insanely rich. I'm the richest person in the world. Now, the current world that we inhabit, it's just like I have a huge amount of capital to borrow against. I borrow against, I create freshly created shekels. Those shekels, I go out and I acquire more. I have an unfair intrinsic systemic advantage over those without. And that is going to compound in my favor in a very aggressive way, in a way which is almost hard to sort of stop, right? And I don't mean to bring it back to a hard money system, but I kind of have to because the money is how we judge value and we measure value and we distribute value.

1:43:47So all I'm saying is you take that away. And let's say I can't do that. We're back. We're on an island and we've just got the 100 coconuts that we started with and that we're trading, right? Now, each coconut's buying me more and more and more because there's just more stuff to buy. Here's the stuff and here's the stuff that represents the stuff. There's 100 coconuts that represents every single thing on this island. When we landed on the island, there was nothing there. So the 100 coconuts didn't really buy you much. After 20 years of our AI buddy and robot running around building huts and catching fish and doing all the great things, there is all kinds of incredible things on this island there's still only 100 coconuts so each coconut proportionally buys me a crap load more so that in that world right i've got that i've created an insane amount of air and i've got all these sort of coconuts like okay now i've got a i've got a what are we going to do with it i can't eat the coconut i can't actually do anything with the coconut all i can do is just use it as some kind of way to store my wealth and then and then exchange it for other things.

1:44:43And so I don't get that ability to use this as a magic ticket to make more of the stuff that I want, right? That's the pernicious, evil, crappy thing that keeps the common man under the foot of the owners of capital. If now it's just like I've created this thing, I'm just the richest man on the island, all the coconuts is like, okay, I'm sitting in my hut on the top of the hill with my coconuts. It's absolutely pointless to me. I probably want to spend some of my wealth. You know what? I wouldn't mind someone to clean the hut for me. Someone go and do this or get, you know, so I'll probably have to spend it.

1:45:15In other words, I'll redistribute that wealth. I will exchange something I have created in the past for something that you will give me now in the present. And my point is, is that I only got there because everyone who has loved what I did. And now that I've got it, the only way I can expend it is by giving back what I received from you voluntarily. I will now give to you voluntarily. And we'll have more and more and more and more stuff and things get cheaper and cheaper and cheaper and cheaper and if I happen to be the lazy bum at the end of the island who never really did anything and not because I couldn't not because I was disadvantaged I just couldn't be bothered I chose to sat under the palm tree when Scott was building the hut and Sally was out there catching the fish before the robot came along you know and I just I just don't have much I was like yeah it's going to be unequal because you didn't do anything but let's say you decide I'm going to change my ways I want to I want to now contribute now i'm going to go and um shine andrew's shoes every morning for half a coconut because i need some money it's like you'll very quickly get it and you are never disadvantaged you're not you're the only reason you're going backwards and backwards and backwards and backwards in the current system is because you're we talked about share dilution the other day and buybacks and why buybacks are so wonderfully accretive here's the future again just the record just Well, keep an eye out for that because that's the argument.

1:46:36In a world where you're only doing buybacks and you're not doing share issuance, those shares just get more and more and more and more valuable. So it's just like, well, maybe I'm only working for a tenth of a coconut, whereas in the past I may have worked for half a coconut. It just turns out that the tenth of the coconut buys twice as much as the half of the coconut did before, if you know what I'm sort of saying. And if I just choose to put my coconut and bury it somewhere on the island and then come and spend it 10 years later. It's actually increased in value for any productivity gains that have been had in between.

1:47:04It's so beautiful. It's so fair. It's so consistent. Will there be wealth disparity? 100%. There will always be wealth disparity. There's two types of wealth disparity there, those that are unfair and those that are absolutely fair. And I think people get their knickers in a knot because, oh, it's going to be unfair. It's like it's already brutally unfair, right? It's like let's make it less unfair to people. and let's stop giving intrinsic... How does that happen? Let's put hard money aside because we... That's the point that cracks up, though, right? We have to, otherwise you can't discuss AI.

1:47:38The AI question then can't be answered without being hard money. Put it aside. And let's say there is no money, we just barter. All I know is that there's a lot more stuff. A lot more stuff with a lot more effort. Therefore, we are richer. We are far richer as a society. Yes, as so, but the distribution matters, though, right? So I don't mind your example except where the money isn't spent and it's just hoarded. So you say, well, now I have any value. I disagree with that. There's no such thing as hoarding money. It's a silly notion. You've created more value for society than you've extracted and you've chosen not to redeem your gift card.

1:48:13Sure. And that's hoarding? That's selfish? It's selfish, if anything. I was saying that was selfish. You're throwing a lot of... But hoarding has connotations, dude. Hoarding is sort of like a selfish... You choose not to spend it. I said no let's use a different word right Gina's not spending everything she earns okay she's saving so whatever so in that version of the world you're not you're not getting the job to shine her shoes because she's choosing not to have her shoes shined and the coconuts and also she doesn't have her shoes shined either but that doesn't she doesn't care because she's got enough stuff and she's happy with the lot she's got but she's still got the extra coconuts that aren't in the economy so there is a there is a wealth but is there still stuff in the economy?

1:48:51yeah but the distribution And there's less coconuts in circulation because she's just buried hers and she's never going to spend it. So what happens to the rest of the value of the coconuts? The distribution of... Poor man Bill under the bridge who only managed to scrape together one hundredth of a coconut there. Poor old Gina hoarding all her coconuts actually made his coconut store a little bit more valuable. Yeah, but if he doesn't have any coconuts... She goes out in the economy and spends it all. If he doesn't have any coconuts, then he's got to try and earn another coconut, which he can't get.

1:49:19Yeah. I think if your version was, in my opinion, if your version was the reality, we wouldn't have growing income inequality. It would be impossible for it to be possible to have wealth inequality.

1:49:35Because that model would play out such that it couldn't happen because Bill would have more money and be fine. No, I just said there's always be inequality. There'll definitely be inequality. Right, but there won't be an unfair inequality. The only way, the only mathematical, practical, just possible way to have more money is to have created more value. Where's the crime there? Scott's really rich, that bugger. What did he do? Oh, he went around and he mowed everyone's lawns for like 10 years. It's like, oh, that bastard. And did he take all the money for that? It's not a value judgment. It's not a value judgment.

1:50:15I know you keep going back to it. It's not that. is literally if inequality gets worse, I would say that's a bad societal outcome. And if inequality could get worse, it will, could get worse in an AI world where the returns are magnified to the owners of capital because labour is less valuable. And so proportionally, if you think about what happens in an AI whatever world, I mean, we're seeing people lose their jobs, right? Now, whether it's genuinely bad AI or not, we talked about earlier, maybe that's the case. But in a world where you're saying, There's not enough productive work to be done by enough people because the machines are doing it all.

1:50:50Those who own the machines will, I don't know how it wouldn't be the case. No, not thinking it through. I hear where you're coming from. So let's play that through. Henry Ford made the observation 100 years ago when he, before there were minimum wage laws, he paid his workers incredibly well. And it was like, why? It's because they're my customers. So let's play your example for, I own the cost of capital. I own all the capital. I can make all of the things. Everyone's unemployed. So I've got a productive fleet of robots or factories or whatever capital I think it is that can turn out a gazillion units for a cent and no one can afford them.

1:51:29So it's actually circular, right? Actually, that capital is definitionally worth a lot less because it's just not creating any cash flows. It's not creating any. No one's buying the stuff. I need consumers to do it. So what will I do? As a rational business person, I will do whatever I can do to provide value for others as long as I can wash my own hands. As long as I can deliver value to you at a price that covers my cost and allows for the risk to be worth taking in the first place. There is huge risk. I might not work. I might build a robot and it collapse and I just wasted all my savings. So I need to cover my costs and I need to get a respectable return on capital.

1:52:14Otherwise, I'm not going to do it. I'm not even making a value judgment. It's just a statement of fact and logic and reason that it won't do it. So what we've got to remember, again, is this reflexive nature of economies and just human beings interacting is that we assume that the owners of capital can charge whatever they like and that people must pay it. Well, if they can't, they won't. And if they won't, then I don't have, then the capital, I've overbuilt the capital. The capital's not worth that much. Therefore, I'll probably scale down on my capital. And we will reach a new equilibrium until it gets to the point where I actually now I can afford it because Scott, who has owned all the capital and built all the space stations and the rockets and everything, sent himself broke by overbuilding all of this stuff.

1:52:57He couldn't pay his dues. The capital came back onto the market. Someone else picked it up and now is able to do it in a different form. It corrects, it adapts, it's fluid, it's elegant, it's beautiful, if I can use that word. It's not a static thing. It's not a static thing that I can just charge. I mean, Elon can be the biggest bugger in the world. He can't launch a satellite and say it's$2 ,000. Well, he can. It's$2 ,000 a month to get on Starlink. It's like, okay, great. You don't have any customers and the IPO is not going forward and you're not the richest man in the world anymore. In fact, the accountants are going to come in and write down the value of all your assets That's because they're not producing any cash.

1:53:38So do you see the corrective mechanism that's in it? Except that if that was true, it would already be happening and there would be no world in which there was growing inequality for all the reasons. Yeah, that's back to the hard money. That's back to the hard money. Not necessarily because it's still in the owners of capital's interest to make more stuff and maximise more profit and sell more cheaply to sell more things. If businesses are truly profit maximising and there needs to be more production to make them wealthy or better off, then we wouldn't have growing inequality. So what happens when people can't afford stuff?

1:54:08We give it to them. We print it up and we give it to them, and then we add more money into the economy, and that's where it comes from. Oh, now I've got more nominal values, not real values. I've got more nominal values. What do I do with that? I put it in the bank. I buy more stock. I buy more land. I buy the things that are actually genuinely valuable. I buy those kinds of things, and now I've got collateral for more, even more money creation. That's the pernicious nature of this whole affair. But there would still be an interest to do more stuff with it, mate. My point is it's like we can't point to productivity as a bad thing.

1:54:35Productivity is a wonderful thing. We should obviously, obviously want and do it. And to go, no, we can't do that because someone will lose their job and there'll be wealth inequality is sort of like it actually misdirects the problem, misdiagnoses the problem. The problem isn't the productivity. Doing more for less is always in everywhere, in all circumstances possible, a good thing. Obviously it is, right? Right. But then to say, well, it's not now. It's like, yeah, but you're looking at through the lens of what we have at the moment, which is every time something goes bad, it's like, there you go.

1:55:09There's another trillion dollars to spend. As if that fixes anything, it actually makes the problem even worse. I don't mean to bring it back to that same argument, but it's like, I don't know how to talk about the sky being blue without talking about ozone. Right. Like it just it needs it needs to it is so central to the conversation. and to the calculus that it's just so hard to see because it's like oxygen or it's like water to a fish. It's just sort of the fish is there going, why is all this sort of happening? And it's like, it's the water, bro. It's right there. It's all around you. And that's what's, you know.

1:55:44And... But in that money printing world, why is the mechanic not the same? Because there's still every incentive to go and sell more stuff, to have more customers, to make more money. Like that, I don't even disagree with the methodology methodology or outlining other than even in that world, the same incentive in the hard money world would apply, which is go and make more stuff, find more customers so you can sell more stuff. That same idea should still play out. Yes, with increasing amounts of funny money, but overall that should still play out. There's no benefit in hoarding, saving, keeping, investing, whatever you want to call that extra money I don't spend.

1:56:18Saving is the word. Saving, yes. Lots of words for it. Whatever you call that thing, there's still no value in it because you're not spending it. I understand the model of the world you're working in. I don't know that it describes the world that we're in because it's objectively not true that people are then going and saying, hang on, I've got too much money. I'm not having enough fun. I don't even want to spend a lot of money. At some point you get to a point where it's like, I've got enough money and I'm having enough fun and I'm making my life choices and that savings pool is growing. Good for you.

1:56:44Yeah. But it's creating growing inequality. Objectively, you look at the Gini. It is. It's actually giving more to the people without. So why is the Gini coefficient getting worse over the last – I've looked up numbers from the World Bank, right? So 1981, it was 31. 2008, it was 34. It's back to 33 in Australia now, right? So that is direction. And the direction, podcast, you can't see it. The line of best fit is up and to the right. Okay, so up and down different years. Kind of matches something else that's going up and to the right. But what I'm saying to you is why would that doesn't follow?

1:57:17Well, I'm not saying it won't. I don't understand how that's different in a money printing world. Because the incentive is still true to spend the money, do the things, get the customers, no matter what the denominator is, in theory the idea should still be the same and the outcome should still be the same. And in that world there should be no growing inequality. There will always be inequality to your point. I'm not saying we should all be equal or want to be equal. There's no reason for it to grow unless there's a feedback. We should all be equal but it's impossible so it's a pointless debate.

1:57:43But the feedback mechanism should still be the same such that inequality exists but doesn't get worse. Yes, exactly. The idea that it gets worse is my challenge. if unless I'm misunderstanding you the level of inequality should be largely unchanged over time because the mechanics of the going back in the economy spending the money getting the shoes shined the guys on the bridge with the tenth of a coconut that I I like the model of that I just don't know whether the evidence backs up that idea it feels like it strongly backs it up yeah so so so so you're you're you're assuming you're you're assuming that the only way that that any that any inequality is purely downstream of an entrenched unfairness or a, what's the word for it?

1:58:29You know, that the only way you can get ahead is by almost nefarious means in a way. No, no, no, no. Please don't. Please don't. It's not that at all. Not you, but I'll paraphrase the common talking points here. People, very good, beautiful people with well-meaning intent look around and go, the world is horribly uneven and unfair. I've got these buggered billionaires out there living the life of Riley. And in the modern world, with all of our advantages, more and more people are living in cars. Like something is fundamentally wrong here, okay. But it is not because someone was able to work hard and create a bunch of value for everyone else and then save some money.

1:59:07That is not the reason for the inequality. The reason for the inequality is that someone did all the things to your point because they wanted to get ahead. They convinced other people of the value that they created, just because they bought the thing that I was offering. or whoever who was offering. And then I now use that as an advantage because that's the way it's constructed. I use that to further multiply my gains. I can make money in two ways under the current system. I can work hard and do all the good things which we should want to do. Or I can use my collateral to create more money indirectly and with the help of various parties and then go off and acquire the other scarce things that are in the world.

1:59:50Now, Is that growing inequality? Yep. Is inequality bad if those at the top have only got there by humble service to the rest of humanity? or is it an evil to be undone if they have got there by playing a system that is rigged for the rich and the owners of capital? That's where I'm coming from. So you're right in everything you say, but you can't deny it, dude. You can't deny it. If all of a sudden I float straw man for$100 billion. Now, because I know how the system works, what do I do with that, man? I tell you what I do. I go on, I don't sell my shares. I borrow against my shares. new money comes into existence and I buy hard assets or I buy productive assets and I buy other things that make more money.

2:00:40I take that money. I put that in. I've now got more collateral to land. And now I'm now the division of wealth is magnifying from financial engineering, not from value creation. That's the difference. That's the nub of the problem. Inequality. Yeah. Okay. That's just the state of that's the state of the world on one world though. It's just sort of like, I can't begrudge your success. On the other, it's like you're just playing a system that's rigged and designed for you. And it sounds like, I cringe when I say the system because you kind of sound like every tinfoil hat wearing kind of person. But prove me wrong.

2:01:18I mean, this is always the point you've got to ask yourself, why does someone like Mark Zuckerberg have debt? Why does Coca-Cola have debt. They don't need it. They've got all the capital and cash in the world. They do it because they're not idiots and they've got very, very competent financial planners and accountants that go, dude, you know what you can do here? And it's not even, they're not even coming at it from a conspiratorial angle. It's just like, this is the, in far as they're concerned, this is how, this is the, you have a much cheaper source of capital, freshly printed out of nothingness capital.

2:01:51You, not Sarah the nurse or Bob the hairdresser, You, the owner of the car, you have, you want to, oh, if you're a nurse in Blacktown, you want to borrow money, go see Cash Converters and they might lend you something at 22%. You're Jeff Bezos and you want to borrow some money, he's 2%. And we'll give you a free cake when you come and see us at the bank. Like, that's unfair. That is unfair. And that's just the point I'm making. And I think the thing I'm railing about is that that gets muddied with legitimate value creation and productivity gains. And I'm just saying in a sane world and in a fair world, and albeit a world that still has the vision of wealth, that's far less of a worrying thing, right?

2:02:40Right. It's sort of like you'd almost celebrate the richest people in the world because it's sort of like, A, the only way to get rich is to create insane amounts of value without any financial engineering. And then second to that, the flip side of the coin is the only way to benefit from your wealth is to redistribute it back into the economy. Not borrow against it and use free money to borrow or spend back into the economy. Do you see the difference? It's hard to see. It's very hard to see. No, I do. I just think there's not – that's in a world where the money is spent into the economy rather than saved in effective perpetuity.

2:03:14I think that's where the models are. No, you're wrong on that too. You're wrong on that too, man. Let's – again, thought experiment. I'm going to do it. That's the world, right? So am I a hard money world or am I not? Hard money? Can I get hard money? Well, I'm trying to think about the context of the response. The only reason I say that is not from an ideological perspective because it makes the thought experiment so much cleaner Because as soon as I start messing with the price and the volume of it, it distorts everything. So let me go with that. I think I'm happy to do that, but all I would say is I think we need to discuss the issues in the world in which they are most likely to exist.

2:03:50And so it's either both or the current version. Well, that's a separate conversation, but yes. But if I say what's going to happen with AI, there's AI. I want to get back to the hoarding. Let's say I've done that. It matters though because you can hoard, save, whatever. I don't want to load the words. In a hard money or non-hard money standard world and there will be different or the same outcomes, in which case, you know what I mean? If you assume one, it doesn't end. Like every economic conversation, all else be equal. Under these assumptions, this is going to happen. It's like, okay, what if the assumptions aren't right?

2:04:23Well, then something else happens. So I'm not trying to, both is probably the answer in some form where they're different. If everyone works the same, that's okay too. But it kind of matters in the sense that if we're saying, what happens if everyone works one hour a day under AI. I know we're talking about money, but I'm just making that point of where does the money get saved, who saves the money. If we're in a hard money world, there's one answer. If we're not in a hard money world, there might be a different answer, but either way it's relevant to the – we can't assume the AI bit without assuming the other stuff that goes with it and then say, AI is great as long as we have a hard money world, or AI is great as long as we have a non-hard money world, or maybe it's both, in which case that's great too, but you know what I mean.

2:04:55If it matters, then it matters. No, I agree. I mean, in the current system, AI and massive productivity gains very much risk accruing incredible unfair advantage to the owners of capital. So we're on the same page there. We're wrong. And I'm just – but the reason I'm trying to sort of work into a world that will never exist, sadly, or at least not in my lifetime, because it separates – it's important for the discussion to separate the financial engineering component from the productivity component. I totally agree. So that's all I'm saying. Except that we have to put it back together. If AI comes before hard money, then we have to recognize that's the order in which it would happen.

2:05:31And that then is – maybe it is an issue, which would be solved by your solution. But if your solution is implemented, then we're still dealing with the consequences of that world. It'll be implemented, not because it's my solution. It's just people will gravitate towards – I don't mean – People adopted gunpowder because you're in trouble if you didn't, right? I didn't mean it that way, by the way. I was just saying if AI gets there before hard money, we have to deal with AI in that world. If eventually we have a hard money standard, that maybe things get fixed at some point, but the implications of AI still are real in the world in which they exist at the time they exist, that's all I'm saying.

2:06:03So we've got to close it out, but I was going to make the point. Go please, please, I'll let you go. Because I do bristle against the idea, because everyone says it, that saving is almost an immoral act and because of terms like hoarding, and then I'm being a little bit sensitive to the term because it does have connotations, but it's like, again, And let's play the thought experiment out. It's just like if I've hoarded all of that money, then who's the victim? It's me. Because I've created all these coupons that I could redeem for actual things that provide value, real things, and I'm choosing not to.

2:06:46Here, society, I create for you immense value. and then in return I ask for nothing and then we're going to turn around and go oh that oh that's bad you need to you you're hoarding it if you need to spend it you need to spend it in the economy it's like now we just get to like this is where we're at we get to this hedonistic consumerism culture we just got to spend spend spend spend for the sake of it's bad for the environment it's bad for the economy it's bad for the soul it's bad in every number of other ways I don't want to sit in my, I want to scrooge McDuck the hell out of this thing and just sit in my vault with my money.

2:07:23It's like I am, again, it's very hard thing to comprehend. But if I am sitting in my vault with my gold coins, it's like I've got a bunch of shiny little metal coins. I have definitionally given more than I have taken. I don't know how else I can make the point. I just don't know how it's a bad thing to save. Right. And then if I don't save, I am now giving someone else an income. And it's like the only way for me to not enjoy my wealth is to shoot myself in the fort. And if someone wants to choose it, let's say I do that, actually. Let's say I scrooge McDuckett and I put it all in my vault. And then I just happen to build my vault on a sinkhole and the earth swallows it whole and I and my vault of money is gone forever, forever, never to return to circulation.

2:08:13Rest of society, again, remember, the stuff is the stuff, is the real stuff. The money is just the ledger. The money is very, you know, actually secondary to everything. The stuff that exists in the world except for me and my vault is still there. Now there's just a whole lot less money to go around. So, again, mathematics being mathematics would say of the remaining money that didn't get swallowed up in the sinkhole, including, you know, poor man Bill who lives under the bridge, his purchasing power just went up.

2:08:45we are two hours and ten minutes of eight minutes into this podcast so we're probably done I don't want to mic drop you so I won't but I will say that the Merriam-Webster dictionary says hoarding is the practice of collecting or accumulating something so I'm claiming technically right is the best form of right I'm claiming hoarding I'll play that but I take your point there are pejorative meanings to it I didn't mean it that way at all it's always used in a pejorative way fair enough no one says Ted the plumber is hoarding when he saves. It's only when the billionaire saves that they're hoarding.

2:09:16I think that's kind of the point, right? It's the degree to which it's accumulated. There's definitely a size element to it, whether it's in terms of pejorative or more than you will ever need. You're right. It's probably a pejorative at that point. It's probably parts of the same thing, but anyway. Mate, this has been a fun couple of hours. Let's run over to another one anytime soon, shall we? Thank you for listening. We will come back on Sunday. If you're still... Oh, no one's here. It occurs to me after two hours of talking, I can say something really obnoxious and funny and probably swearing.

2:09:50So we're going to... One of you who's listening, not going to. You've got a free pass. The transcut will surface in 25 years and I'll be in trouble. So I will simply say thanks for listening 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.