The AI revolution continues. September 11, 2026

25:07Literally no sense did I say, please investigate, dive deeper, understand where there are anomalies or issues, look for this stuff, don't look for that stuff, use this approach. Now, this approach might be wrong. The result might be terrible. Okay, so I'm not saying this is a solution. What I am saying is the work it's doing to get two and three layers deep off its own back because it's done the work and understood these sorts of things are things that might need to be done, and so I will do them for you and then I'll show you what I've come up with. without me having to prompt it at all other than help me unsay my investing style and then find some companies that match it.

25:40That was all that required. And it was just, I'm over-egging it probably. I'm probably going too overboard, but I just thought it was incredibly, incredibly impressive. A, would I have thought of those things? I'd like to think so because I've been doing this for a while. So I probably would have gone through and gone, I should make sure I allow for that. All of them? I don't know. I'm not arrogant enough to believe I've caught everything. And again, it'll get it wrong and I'll put my eyes over it. And I'm like, this is, by the way, it's not a work job. I'm not doing this for stock picking for monthly full.

26:04It was done using a private account with the thing. It was just for the fun of it, but just to see what it could or would bring back. Yeah, but there'll come a point where it's like people will be saying, why aren't you? I am not paying for it. Correct. You're not using AI. Like, okay, I'm not resubscribing. Like that is, you're an idiot. Imagine an analyst coming out today saying, yeah, we don't believe in using the internet. We don't use calculus. All right. I use an abacus. Well, abacus is how my granddad did it. And I'm like, okay. And that was accurate. Yeah. Druckenmiller got a bunch of stuff for his op-ed in the Wall Street Journal a couple weeks ago using AI.

26:38And I just thought it was like, what do you mean by using AI? Did it just like, hey, write me an article for the Wall Street Journal. Okay. Let's throw some shade at the dude. But it's like, I've got a whole bunch of thoughts here. I'm going to put them together. I'm going to use this as a little bit of a copywriter just to sort of polish that up, make sure I've got things. Maybe do a bit of back and forth, just help me think things through a little bit and then draft it all up. I mean, it's like, what's wrong with that? I'm trying to express what's inside my skull to other people so it goes inside their skull.

27:10And it's like there are a series of symbols that I can put out there in the right order, in just the right place, that'll be more effective than another set of symbols. And it's like, what's the goal here? Am I trying to convey an idea that is my idea, that my genuine sentiment, you know? And I think, yeah, for all of that kind of stuff, I think, and just on what you're talking about, what's really good about that kind of stuff is rather than I am going to engage with this because I have a specific task looking for a specific outcome. I'm using it increasingly more because I just kind of want someone to talk it through with and what don't I know?

27:46I know those things I don't know. What, you know, what's the thing I don't know that I should know? What am I not thinking? What are some other considerations? Open-ended questions are really powerful. Not because they always yield good results. More often than not, they don't yield any good results. It's not interesting to me. But just that process is so, so super valuable. My son is in year 11. He's got a chemistry test this morning. Last night, the apple doesn't fall far from the tree, is what I'll say. And last night he was cramming because he left it all in the last minute. And it's like, I just don't get this thing.

28:22Now, his mom's a chemistry teacher. and I've got a science degree. It was like, hey, I think I know a thing or two about bonding, you know, let me at it. And it was like, of course, 30 years. No, that is well over my head. But it was like, should you say AI? That combined would say, what would you know from any kid, right? Same with investors. I wrote a book where I was like, I don't care, Dad. But I know this stuff. Yeah, whatever. But I was like, of course, because it's my answer to everything. It's like, use AI. It's like, what do you mean? It's like not, I mean, it's a test, right? So he was not going to write it and then hand it in.

28:54But I mean, you're having trouble understanding covalent bonds or the outer electron shell of whatever it happens to be. And it's like, ask the AI. And the great thing about it is you can ask lots and lots of dumb questions and it's never going to judge you. I think too often humans, I see this all the time in the professional realm. I mean, how many times are you sitting there in that meeting, nodding and writing something in your little bag? I have no effing idea what everyone's, everyone seems to get it. I must have a subpointer. And as I tell you what, I'm not an idiot. so I'm going to just nod and smile and like yeah well it makes perfect sense because that we are so we are so deathly scared of being like an idiot you don't have that with the machine what do you mean by that I don't understand that can you explain that to me about like I'm 12 actually that didn't land and you're back and forth and he did it and it's just sort of like I don't know if he's going to ace the test or anything like that but it's just like I guarantee you that you've come out of that understanding it a lot, but you've got a very patient, infinitely wise tutor.

29:55And just to bring it back to what you're saying here, it's not, I think people think with investing is like, what stock should I buy? And that's the prompt. And I was like, maybe, maybe we'll get to that kind of point. But if you're out there and you're a casual investor or you're starting on your investing journey, or even if you're 30 years into it, It's sort of like use it in that way. It's like, oh, I saw this company on a forum and I don't, what do they actually do? Oh, they help synergize back-end infrastructure for, you know, blah, blah, blah. Like I do not get that. Like what's the actual problem?

30:31Yeah, explain and just go around and around and around. It's like, well, how come this is, the profit's gone up but this hasn't gone up. I don't understand. oh, there's an accounting treatment called this. And like, yeah, I don't understand that. And just back and forth and back and forth. And you cannot come out of that interaction less informed and less deep of understanding. And it's just sort of like, there's two people using this. I've said this last week, two people using the exact same model, getting completely different outcomes because the way that they interact with it. And I think too many people, and this is where there is such incredible edge.

31:05There is too many people just at that stupid, first level kind of tell me what to buy. Whereas the real flex here is just like, just it's an, you're a cyborg now. That's where you are. You need to just use, use it to augment the wetware inside your skull to help you think things through, to help form a coherence of thought, to, to stress test the ideas, to, to have a super patient, super knowledgeable, you know, a junior analyst at your side, or in fact, a thousand junior analysts at your side who never sleep. It's like, how is this not a thing? How is this not a thing? And anyone listening to this is just like, you've got, I think, a little bit of time to prosecute this edge before it just becomes so good that maybe even what I'm talking about is no longer relevant.

31:57But I would encourage people to use it in that regard, I guess is what I'm saying. Oh, and one more point. Sorry, man, I'm all over the shop. No, go for it, mate. I'm so excited. Yeah, yeah. So anyone hasn't gathered. I think when I speak to a lot of people about this stuff, particularly older people, like our age and up, it's sort of like, oh, it's too hard. I don't get it. How do I do this? And you want that. Gosh, slap me in the face if this ever happens to me. But I think that's, you are old not by the number on, you know, whatever it says on your birth certificate. You are old when you just stop trying.

32:34And I think the kids are so, people always go, oh, kids just get technology. You know why they get technology? Because they're not afraid of what goes wrong. They just play with it. And so I was like, yeah, I don't get it either. It's really confusing. It's really new. It's literally new. Like we've now got brains in a box, right? It's like my advice, play with it. Open it up and just start prompting, you know, and just keep going. And just keep going. And you will get better at it. I look at the things that I was struggling with in May, right? I don't even think about it now. It's second nature.

33:08And I didn't take a course. I'm not a smart man, right? I just was persistent at it and you're just stuck at it. And I think anyone out there who is curious about this stuff and you really should be, that would be the one thing I want you to take away from this podcast is just get out there and start playing. Get a subscription and just go for it. You know what I mean, dude? I'm very big on asymmetry. Downside, I don't know, you waste 80 bucks on some subscriptions that you never come back to. So upside is you level up your game to a degree that was just previously inconceivable. Like that seems like a pretty good bet.

33:43It's how we entail, so I don't really lose that much at all. So roll your sleeves up. Get your hands dirty. Don't be afraid of pressing the wrong button or asking the wrong question. You know, you can't go too wrong. Mate, let's pivot this a little bit because I tweeted about this during the week And it increasingly occurs to me that there is a really interesting pivot point between, for companies in particular, and all companies, from single-person companies through to megacorps, a really interesting pivot point between agility and security when it comes to AI tools. I will say the Multifull has authorised some tools, not others.

34:21Other companies will be the same. Others will don't use anything. Others will use everything you want. and then you've got people out there who are potential and actual competitors who've made their own decisions in different directions on different angles and I absolutely understand a company which says we have a reputation to uphold we have some sensitive customer data we have a sensitive internal data and the last thing we want is that to find its way somehow onto the web or for people to misuse AI using that data and end up with bad results and so make haste slowly is kind of sensible. I can also understand those who say, well, we're in a brave new world.

34:56If you're not making mistakes, you're not trying hard enough, let's just go for it. And in that matrix, there is going to be circumstances where going too hard, you know, with a massive, you know, you headlong into a brick wall. Others where you go too slowly and all of a sudden you look up and you realize your competitors are now a lap and a half ahead of you because you were so busy dotting I's and crossing T's that you got lapped. Yeah. And I don't pretend I have an answer to that, mate, because there are genuine implications in both. This is one of those decisions that companies have to make.

35:27It's like how far, how fast, how much risk do we take, A, to get ahead, B, to not fall behind. And I think there's a really significant challenge here. I suspect that some companies will end up materially – you mentioned Nike making some missteps in a whole other area. It's not obviously, but in the past. I suspect in, I don't know, three years, we're talking about a well-known company or six that got lapped because they just didn't keep up with what was going on. Guaranteed. It echoes of Amazon, you know, with the old story about they sent the Kindle team across the other side of the country so that the traditional bookselling business didn't say, well, that will hurt us.

36:04We shouldn't do that. Versus the Kodak who says, let's put the digital camera plans in the bottom drawer because it might hurt our film sales. Those, and they're very hackneyed, but again, Clichés are clichés because they're real, right? The clichés become true because people use them over and over again because they see the sense of them. So I don't apologize for using them other than I probably should come up with some fresh ones. But the broad idea is trying to work out when do you be Amazon and when do you be Kodak? Not every company can respond to every risk and every threat and otherwise you'd never do anything else and you'd be split horribly enough for many different personalities and no coherence in your strategy.

36:38We waste your money all over the joint. But also if you sit in your hands and say, hopefully this isn't too bad, you're going to get Kodak'd at some point. I don't know. I suspect, knowing what we've just talked about, and you and I are pretty excited about this stuff, that leaning towards agility over too much internal process is probably the right move, particularly if there are chances of being lapped by someone else using it. You kind of have to keep up and recognise the competitive environment you're working within. So I suspect, in my mind, that's probably the best response. But I'm also very, very mindful.

37:10It's not an easy decision or a simple decision to say, well, throw all the usual IT rules out and let's hope nothing goes wrong. It's an issue, but it's also, I suspect, going to be material to outcomes when we look back in a few years' time. I mean, it's always been thus. I mean, the technology is different. You know, the disruption wave is different, but it has always been thus. What's Harvey Norman saying, we're not going to go online. People want to come into shops to buy furniture. And eventually they had to go, all right, okay, we'll go online. I don't know how much they gave up on holding back while JB Hi-Fi ran ahead of them, but that's a similar-ish kind of potential.

37:45JB Hi-Fi had no right to exist if there was a farsighted, you know, board and management team at Harvey Norman. Yeah. I'm sorry. No, it's fair. Yeah, yeah. I mean, again, I'm equipped with hindsight. So, okay, things are never clear at the time. But that will absolutely repeat itself. It so will. Yeah, what do I say? It's something about this dilemma stuff, mate, isn't it? I mean, you think about, you know, the companies that say, I'm going to protect what I've got rather than go into the future. Yeah. That, you know, maybe you're right. I said, I made the point before, I used to work for Heinz years ago, and there'd be new baby food competitors that turn up every four or five years, and Heinz just kind of, you know, wait them out and then get on with it.

38:29Now, if you go to a shop now and look for Heinz Baby Food, it's a tiny little segment. I don't know how big it is. I haven't looked at the company data in, oh, God, 20 years. But, you know, when I was there, baby food was all Heinz, and a couple of tiny little competitors off to the side. And they just got lapped. They got lapped on, in this case, it was packaging and recipes. It doesn't matter why. My point is, if you don't disrupt your own business, if you're trying to margin support, if you're trying to pretend that we're going to maximise the now and not invest in the future, that's why JB Hi-Fi takes a march because they go, well, let's not just in case or let's not because it might hurt or I don't think.

39:04And sometimes you're right, right? I've used the example, Lazy Disc versus CD versus Blu-ray versus I. And then I was streaming for all that, right? The high-definition wars, it's an afterthought now because the answer was actually, well, it's streaming, dude. DVDs, who cares what format? But it's just a reminder you have to continue to not kill your own business necessarily, but you have to go to where the customers, you have to go to where the competition is. You can't sit and say, I'm going to circle the wagons and hope no one comes in because it's just not going to work. I mean, the good thing is from a consumer standpoint, from a society, civilizational standpoint, point progress will happen anyway because because they're i mean so many so many businesses come from someone who works in an industry for a big megacorp who's dominant and why are we doing it this way this doesn't make any sense like i'm just gonna do it right and i'll do it myself and now it's the the barriers to entry are so much lower in this kind so it'll happen it'll happen one way or the other and that right that's really the lesson of the innovators dilemma it's why it's called the dilemma.

40:04It's kind of like, you guys, this sucks. It would be great to sell high margin film for forever. I get it. But it's like, this, this isn't like an option that we can wait it out or we can just, like, it's, it's going to get out there. And so what do you do about it? And if you like, you, you either do it or someone else will do it for you. And, and I think, I think we are going to see an explosion of competition. And I think it's going to be, it's going to be great for prices. It's going to be great for consumers. I mean, the variety and the cost and the quality of things done well, hopefully it's not too much funny business intervention outside, but like has the potential to make everything incredibly good for all of us.

40:48And that's what we've got to remember. I think being in this sort of business space is like, it's not that I would cheer. I'll pick on Jerry, right? Like if Harvey, sorry, you've got shares. That's a bad example. but you mentioned it. Go on, do it anyway. Well, I mean - Do it anyway. If Harvey Norman goes bust and a lot of people lose their jobs, that's a tragedy. I wouldn't celebrate that. But if the reason for that was because Scott came up with a better way to merchandise and sell homewares and electronics and that, wait a second. 99.999 % of us are far better off and the 0.001 % are worse off.

41:25And they're worse off because they just sat on their hands and didn't do it. Like this is a good, it's that creative destruction that we always sort of mention here. I mean, this is going to be the, this is the worry, I suppose, is that because it's going to be so transformational and because it's going to be so disruptive, the knee-jerk reaction is going to be, well, we need to do subsidies or no, we need to put regulatory barriers in place, no, we need to do this and no, we need to. So there'll be all kinds of distortions that interrupt that process to the great advantage of incumbents who may or may not be good political donors, but I won't get too tinfoil at Mary here.

42:03But it's sort of like I can see a lot of people having the wrong take, focusing on a small amount of negativity that surrounds this stuff, forgetting what the promise is on the other side of that for a much, much, much greater sum of people. Does that make me sound like a bastard? It probably does. I don't mean it.

42:32No, not at all. Of course not. And I think, well, yes, but also no. The reality is we could have saved the buggy makers, right? We could have saved the farriers and the coopers. And it's a tragedy if the coopers lose their jobs. If barrels are metal rather than wood, what are the coopers going to do? Well, actually, the rest of us have got better food. It doesn't spoil as quickly. The farriers don't put horseshoes on horses, but the cars are pretty good and they get us around the place and we can go on holidays and we can... By definition, everything that was replaced in the past, I'll say everything, in sum, the things that were replaced in the past, were worth losing because our living standards are phenomenally higher now than they were before they were done.

43:14Did tractors put farm workers out of work? Of course they did. Does the car put farriers out of work? Yes, it does. You know, et cetera, et cetera. Choose your profession, you know. frankly just foundries that actually produce metal work rather than iron mongers and what are the bloody iron workers called anyway blacksmiths that you know you can have it by hand still and they'll put out of work because of automation are we better or worse off well here's the thing you could have the horse and the horseshoes and you'd have no disposable income you'd eat poorly you'd have no recreation time because life wouldn't have improved because the productivity we rely on for all the things that we enjoy in life wouldn't have been possible because we had people stuck in lower value jobs doing things manually.

43:55So, yes, you sound like a bastard. If people are like, what about that one guy over there, that one girl over there, they might lose their jobs, you bastard. Yes, you sound like a bastard if that's people's perspective. But perspective is the right word because if they don't recognise this is what progress is, everything you like about your life today is because farriers will put out of work when cars replaced horses. I mean, metaphorically and figuratively, not just that one thing. But that's the point, right? That is the point. You're listening to this on a podcast machine that is made possible because 85 % of us aren't in farms picking wheat by hand.

44:28It is just uncontrovertibly true, mate. So, yes, I think you're absolutely right. Yeah, yeah. But it'll be something to watch. I mean, here's the other dimension to it as well. It's not just the one company that sort of drags its heels and gets overtaken. It's that happening at scale across almost every industry. that you sometimes you get, I mean, the internet is a good example, right? So we've now got sort of Google and the big tech companies, but they displaced the other giants of the bygone era, you know, the news corps of the world. And that was disruptive. Obviously that was disruptive. We know, we know how that story sort of went, but that was sort of, that was pretty narrow in scope compared to what's coming.

45:10We're talking about a tech that will disrupt finance, accounting, uh, law manufacturing. Like I can't think, I can't think of a single thing that this and someone will go, Oh, but you know, hairdressers and plumbers and that usual thing. It's like, no, absolutely disrupt that space now because now, now you can run those businesses with a, a bookkeeper and a lawyer and you know, um, all of the, all of the ancillary services that these kinds of things require. Yeah. Someone flesh and bones has to go out and actually do the thing, But it's like, you're not telling me that these businesses can't improve their marketing and their search ranking and they can't reduce their back end administrative costs.

45:52And this is going to hit everything, everything to greater and lesser degrees. But in that case, and that is going to lead to, so it's not just the job losses are something not to wave your hands away at. You know, it'll be great. Even though I genuinely, actually, it will be worth the very, very painful transition. But I think that is also going to compound a very, it's going to stimulate a political reaction. And usually political reactions are not well considered. and are very populist. And so I can see, I mean, again, the technology will win because it always does. But I can see ourselves as a nation and not just Australia but a lot around the world just doing everything.

46:39We will be dragged as a species kicking and screaming into this new world. And a lot of those things, in all of that tantrum that we'll have, I think we will probably end up making the transition worse rather than better is my honest view of the situation. The journey back in the bottle, any effort and energy spent trying to do it is just a waste of time you're spinning your wheel. Yep. Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener.

47:09Mate, can we talk about populism for a second? I'm going to spring this on you because we hadn't thought about it and I remember it halfway through your conversation before. I've whacked it in the agenda. So get ready to be surprised. Dude, in case it isn't not apparent, I'm as surprised as anyone. is the next words that come out of my mouth. We'll find out together. Really, you're the larger language model, mate. Just one word comes after the next one. One token at a time. What's the next most likely word? We've bagged these guys a lot, and I'm going to do it again, and people are going to assume I'm being partisan, and I'm going to ask you to park it.

47:41If you can't park it, then skip through this. One Nation was out earlier in the week with their new superannuation policy, and they took super for houses a week or two ago. and we talked about that at the time. This time they want us to grab some of our super contributions and use that for take-home pay to try to boost the standard of living, help people with the cost of living crisis, help us pay our bills. So the plan at the moment as slated, as announced, is that your employer puts 12 % of your super, or your salary, sorry, in your super fund. And One Nation is saying we'll actually let you, if you want, take three percentage points of that 12 % and have it paid by your super fund to you in cash.

48:22Help you pay the bills. Someone on 90 grand a year, it's about 40 bucks a week, I think is the number, roughly something like that. And for a couple on 160 grand, it's like 80 bucks a week. Numbers vary, but you get the idea. And now, a lot of people have hijacked this. The anti-superannuation people, there's a whole lot of people who don't like compulsory super hijack this one because they kind of, it's the end of the wedge. Yeah, we shouldn't be compulsory, we'll get the money, blah, blah, blah. So that's its own thing. I'm going to ask people to put that aside because it's not the issue or the topic or it doesn't justify what's being proposed, in my opinion anyway.

48:55But I wrote during the week and I did a little video about it and then the bloody Batuta Advocate guys did a funnier one, which is much better than mine, which I was annoyed by today. But it's really important. We've talked about this before, mate, but the three most important words in economics are and then what. So something happens, what's the response? What's the reaction? What happens after that? Now, let me – this is my view. We haven't talked about this at all, so you may have a different view, and I'd love it if you do, or feel free to agree with me. Let's play through what happens when you give – and this is only apparently for mortgage payers and renters, so about 60 % of us, 66%, whatever it is.

49:33They can access the money. Now, firstly, the government says – one nation says, only if they want to. They don't have to. And I will tell you that 3.05 million people during COVID accessed their super. And if you think 3.05 million people needed to do it, as opposed to just wanting to buy the jet ski, the TV, go on the holiday, replace the sofa, whatever, whatever, I will send you a bridge. So they say only if they want to. So, of course, almost everyone's going to, unfortunately. So that's the first thing. Second thing is what happens? And I actually put this on social media, mate, and I already had someone share your coconut metaphor back at me.

50:08So I know they're listening, which is lovely. What happens when everyone in that bracket has 3 % more income? First thought is, well, they can pay the bills, can't they? Yeah, they can. What happens to prices? What happens to the 100 coconuts on the island? Well, instead of having$100 to buy the coconuts, you've got$103 to buy the coconuts. And we know the answer. You've been aware there's so much that our listeners know the answer, but just to flesh it out, the price of coconuts will increase. Why? Because there's only so many coconuts, and as long as coconuts are in demand, and they will be because everyone wants to eat, the price of coconuts goes up.

50:39So you give people money to, quote, help, unquote, pay the bills, and the bills just go up. And then what happens? Well, then you get inflation. So despite Andrew's disgust for the whole idea, whatever the reserve bank still exists, they look at that and go, huh, inflation's gone up. I guess we better do something about it. So what happens? And then what? They say either, let's put rates up or we're going to drop them. We can't afford to now. We'll hold them higher for longer. So now the money you've taken out of your super not only has to pay for more expensive stuff, you're also paying more on the mortgage because the RBA is trying to stop you paying more for the stuff that you paid more for because you took your money out of super.

51:19So you've got a situation where maybe you're slightly better off. No one's going to be particularly better off. And rates have gone up and inflation's higher. Now, they said this policy would be for three years. So, and then what? Well, at the end of three years, the extra pay goes away. Okay. So you've now got higher rates, higher prices, and less money. Congratulations. You've been screwed three separate ways in three years because of someone trying to, quote, help you. Now I've got to say, I have a lot of time and sympathy for people who are like, and we talk about this with house price all the time, like cognitive dissonance of first-time buyers grants, right?

52:01On Twitter this week, there's the usual One Nation, I was going to say nutbags, I'll say supporters because it's more polite, who are like, yeah, well, you would say that you're rich, and you're listening to that. It's like, no, no, but anyway. And then there's the, well, they've got to do something. It's like, well, at least they're helping. No, they're not. And that's the end then. Well, I get the impulse, right? And I get the people are like, well, at least it's something, right? Like they're giving us money. There's got to be better, right? And I just, I get it. I completely get it because, again, I've said millions of times, you know what I've already said, people aren't economists.

52:30They're not supposed to necessarily know this stuff off the top of their heads. That's why there's expertise in different areas, right? And you and I, for all of our faults, have a little bit of expertise in economics and investing. and when you explain it the people then say yeah but they should do it anyway it's like you didn't listen at all you don't really care do you just want the money or you just want want to like one nation you do whatever it is but i just thought it was worth the the and then what this is an example of that we've talked a lot about second order thinking third order thinking this is just a really really really clear example and yeah mate you might disagree entirely by the way so feel free to disagree but to my mind when you play this through it's just and by the way i haven't talked about the fact that in 40 years you've got a whole lot less super that's the other part of it right so and by the way normally my issue with super people dabbling is the the retirement savings lost and that is kind of my view here i think it's even more significant now because even even if if you could justify saying less retirement savings but at least i can pay the bills today i'd be like well okay for some people that might sound like a reasonable trade-off it's not even true that's true so yeah it's not yes it absolutely is a diminution of of retirement savings but it's more that's the very first, well, I say first order, second order rather than, you know, 40th order, not really a phrase, but you know it is now, of just like, the money is going to make things, if no better and probably worse because you're not going to have that money in three years time when the prices are up for bananas and fuel and everything else are higher and rates are higher because you had the money.

53:53I don't know, mate. It just, it blows my mind a little bit and the only that blows my mind more is people who will slavishly defend it regardless because they just want to believe it's true, but that's a whole other concept. It's just more of that reminder of being given more money. It's like first-time buyers, right? Oh, they got more money. You got, you know, first-time buyers guarantee. We've said before, Steve Keen called it the first-time seller's bonus, right? The seller gets the money. It's just a total, total economic madness. They're either not listening or they don't care or they're playing populist politics.

54:20And whichever one of those you want, it is bad in all three areas. Oh, I mean, yeah. I mean, okay, for starters, I've been calling this for forever and get used to it, right? Like this is a piggy bank that will be raided. I will bet insanely large amounts of money on that phenomenon over the next decade or two. It's just too big a honeypot. Whether it's One Nation or another party, we'll dip into it. So it sucks, it's stupid, but it's going to happen. Despite all of your protestations, which I 100 % agree with, it doesn't matter. I'll give you another example outside of One Nation. I mean, remember the fuel subsidy?

54:55Yes. Remember this really short, like, Iran war we were going to have? that was just going to... Anyway, that's still going, apparently. Now, how much money did we... Now, it all comes back to a fundamental misunderstanding of basic economics is what it comes... Oh, actually, just a disregard probably. It's more cynical than that. It's both, right? Either you don't understand it and you didn't ask anybody or you asked somebody and you ignored it. And I'm not sure which is worse. You asked the wrong person. Yeah, that's right. Never asked the barber if he had a haircut, right? Well, look at this.

55:25Look at the fuel subsidy. Now, that's gone. fuel price i drove past the petrol station the other day it was two dollars and seven cents a liter and i was like what did that actually achieve now what people go oh but we saved money during that period but again you know but that money still came from somewhere what is the net effect impact looking at the whole picture there yeah nothing how many ungodly tens of The billions were spent on something that was a blip, really didn't reduce the pain that much. And increased the national debt and increased the interest bill forever on that. Increased the debt, stimulated inflation.

56:04This is the thing that I think more people need to understand. So you're right, but it's going to happen anyway, is where I come down to.

56:15I think the thing is, too, is that we, it's a little bit off what you're talking about, but it is the topic of our time, which is inflation. And I think you're right that the Reserve Bank will at least attempt to try and do what it feels like it needs to do. But we've got a wrong mental model of where we are at the moment. It's not that there is so much inflation because the RBA's policy settings are inappropriate, although they always are by definition. It's a whole separate thing. It's because of unrestrained growing and sustained deficit spending. So what the economists call fiscal dominance here.

56:58And I talked before about generals fighting the last war. Everyone looks at the 70s and Volcker and they go, well, that's what we had a problem then and look how he fixed it. And this is what we'll do again now. And it's like, yeah, it doesn't work. At this level of debt, when most of the new money creation has come out from deficit spending and bond issuance and these kinds of things. It's sort of like interest rates are just muted. It's a wet lettuce kind of impact. So what I think you're going to see here is you're going to see as a broader theme and thematic, and this is what One Nation's doing is just the taste of it.

57:33It's just like there's a cost of living pressure, first order thinking, if we give people more money, that will solve the problem, which is dumb in like 50 ,000 different ways, but it's not unique to one nation. So maybe we can do things with interest rates to deaden that inflationary sort of impulse that is inevitable from a consequence of that. And yes, it might have a little bit of an impact on the margin, but it's kind of like weeing into the wind when the government's spending however many hundreds of billions of dollars more than they have each year. Again, where does that money come from?

58:06Got to ask that question, right? Where's it come from? And in that kind of scenario here, you're going to find that these kinds of things feed on themselves more and more because that added deficit spending creates more inflation, requires more costs for services, which means that you need to take on more debt, which means then the interest goes up because the RBA tries to fight it. And this is where you have this perverse impact here. It's like, actually, you make the situation worse by applying the wrong kind of remedy. The remedy being is stop spending money that you don't have. But we're going, no, the remedy is just putting interest rates up and that'll fix everything.

58:39It's like, well, not while ever there is all this extra money being tipped into the, tipped into the economy. And even if it's not in that direct sense, if it's just like by miss or reallocating or misallocating, it was the right word, existing money from superannuation, this is going to be the story of the next decade, I think. So I don't know. It's a little bit off topic from what you're talking about there, but you're right. That policy is dumb, but it's going to happen in one way, shape or form. And it's you and I screaming about how dumb it is. I just, I think we're up against forces that are too strong or not forces, impulses.

59:22You've got people who are desperate and hurting who haven't spent decades studying economics, who thinks it sounds like a good idea. And that is, you know, no matter of calm, level-headed discussion is going to change that. And that's why I think it's sort of like, it's unavoidable, frankly. Yeah, the problem, I've said this before, Matt, but I think the lesson from Trump version one, which has carried on since, is that the polies used to self-regulate. We kind of thought it was the electorate and the media keeping them accountable. But I think increasingly, I've said this before, but I very strongly believe it's increasingly a case of they kept themselves to a standard.

59:57They thought they should. And so they pulled punches, populist punches that otherwise were bad policy or they didn't do it. It's like, well, we can't do that. That'd be stupid. People will see through that. Well, no, I think we shouldn't because we don't think that's right. We'll fight around the edges, and I'll try and beat you on that policy or that policy, but I'm not going to think it's destructive and bad because I just don't think we should. I don't think they thought people would see through it. Maybe they did. I suspect it was self-governing rather than anything else, and I think the lesson of Trump is never apologise, never acknowledge, move on, wait for the next 24-hour news cycle and just keep pushing forward and keep your usual populist stuff going.

1:00:28Whether you love Trump or not, I don't really care. It's not about his politics necessarily. It's about the populism that came with it, and then throw that to Scott Morrison here, throw that to both sides of the aisle in terms of what they're doing now. You're Kamala Harris, you're Bernie Sanders, I don't care what your political preference is, but the message seems to be it doesn't need to make sense. It doesn't need to be right. It just needs to win you some votes and we can get away with it. 100%. That's what's going on. Add in incentives on top of that. I opened the bin this morning and there's the head of Westpac saying that the government really needs to start subsidising construction.

1:01:05Oh, really? Really? Would that benefit you in some kind of... No, you're just saying it for the good of the country. Oh, what a noble gesture. And thank you for contributing to the thoughtful debate. It's like, no, it's complete nonsense. He knows it's nonsense. Are they going to do it anyway? I just, you know, I'm going to bang the table here again. And it's just like we can't be surprised when this kind of stuff happens. And we can't just denigrate it by just saying, oh, it's cynicism. And it's not. I think there's rational cynicism that comes here. When you see with your own eyes the same patterns bowing out again and again and again and again here and abroad and to kind of say, gosh, there's a really strong incentive for that kind of silly buggery behavior to continue to happen and it probably will happen.

1:01:51And it's in the interest of a select few that will happen. It's like, well, it'll probably happen. it'll it'll it'll probably happen so

1:02:28I don't know, man. things are pretty dark on a whole bunch of different ranges now. I was like, yeah, not really. Just another century in the story of humanity. You know, we tend to face these things and we tend to get past them. And we had a very similar fiscal situation back in the 40s. Now, we know what happened during that decade. You know, that wasn't, you know, late 30s, early 40s. There was a whole bunch of, well, I don't know, open history book. It was an interesting time. but but that is probably again it's the whole history doesn't repeat but it does rhyme kind of thing and and let's just put that in context because it sort of feels very unreal to us today although it was less than a hundred years ago i mean literally hundreds of thousands of people slaughtered um you know uh rampant money printing wheelbarrows all of that kind of stuff so what i'm trying to say is it was a dark time but but the broader point is we got through it.

1:03:25And, and, and I'm very, as everyone knows, like negative on, on all of this stuff. And I always sort of, you know, go, go to the, go to the usual sort of talking points, but it is important from as much as myself as to anyone else to remember that as difficult as those periods were, and they were extraordinarily like almost incomprehensibly just challenging to, to, to our way of life today, we will get through it. And it's not an even pain. That's, that's the thing I always come back to. It's like, absolutely, we should advocate for the right thing and we should try and debate and discuss and steer things in the best direction that we can.

1:04:03But I always just come back to do that, but also learn the lessons of that. And I think for me, it comes back to nothing stops this train, borrow a Lynn Alden phrase. We're going to see more of this stuff kind of play out and we should bang the table on it. But I would be very, very, I think you as an investor can on a relative basis be okay. And it feels selfish to sort of say, it's like, well, the world's going to hell, but at least I'll be okay. I'm not saying that. I'm like, the world might be going to hell, but the world's been through hell many times and we always get through it. And actually some people really prosper or if not prosper, really weather that storm a lot better than others.

1:04:43And I'm not saying give up and be defeatist and just to look after yourself. I'm saying do what you can, but also look after yourself as best you can here. And it's an important point you make, mate, because I think we always need to be very careful with, hey, the Holocaust happened, we got through it, it can sound glib. And so it's not what you mean. Yes, I don't mean to sound glib. No, no, you're not. That's why I want to reinforce the point because it can be so people take out a context, which is a little bit like climate change. Like the world will be fine. It'll change. We'll be dead. Other people will be dead.

1:05:14The world, the global exists, right? it'll do whatever it does as it has for millions of years. It responds to the circumstance and it adapts and evolves and it might not look anything like it does now, but the world will still be here. It's like, that's not, you know, so both are true, right? And that's kind of your point, which is let's minimize the harm, but also set yourself up so you are not unduly harmed to the extent you can, because if it happens, you know, try and stop happening, but also if it happens, be prepared for how you're going to deal with it when it does. And those two things do absolutely sit side by side without being selfish.

1:05:46I hope it doesn't happen if it does. I hope it doesn't rain, but if it does, it's got to run an umbrella, is really what we're saying, right? It's a too glib an example, but to kind of bring it away from some of that kind of more serious history and really tragic history is the world did manage your way through that for all of the horror of it. And it will again, which is your point, but also minimize it where you can and also be prepared to weather it as best you can. And holding those thoughts in your head at the same time, I think is really what you're saying, which is stop it if you can, if you can't be prepared for it.

1:06:18And whether those things sit side by side very comfortably, as long as you think about them in that way. It dovetails nicely with what we were talking about before with, again, generals fighting the last war and trying to sort of be more of a first principles thinker. Let's bring this back to a more salient investing kind of lens here. And without doing any predictions, I can just look backwards in terms of facts here. And this is a nice little segue to the other talking point we had on our little list was bonds and whatever. I don't know if you saw the news throughout the week, but 15 plus year treasuries have returned negative 2 % per year on average over the last 10 years.

1:06:55It's their worst performance in history. Let me frame this up a little bit better. This is the preeminent asset on the global stage. It's the largest asset class. It's considered the best. It even has terms like risk-free. And we'll talk about, we'll unpack that a little bit more later. And the reason I sort of bring it up now in the context of our current discussion is that again, regardless of what the future may bring right now, if you held, if you bought 10 years ago, um, before COVID, before all these, any other things, the lowest, the lowest risk asset on the planet, the most liquid asset on the planet, the highest rated asset on the planet, you lost money.

1:07:37Not, not 2%. I underscore this 2 % per year. for a decade. So compound that out. You've got 26%, 27 % loss in real terms on that. And again, just to, I guess, put a bow on my previous rant there. It's like, this is what I'm saying. Like, I feel as though a lot of people will fight the last word. Oh, things are getting scary. Oh, valuations are stretched. Oh, recession, I'm going to buy bonds. If there's one message I can get across on this podcast for any investor, and particularly the conservative investor that will have this stuff pitched to them increasingly, I just wouldn't go anywhere near it.

1:08:21And it's like, I don't even have to forecast a future that may or may not come. It's like, it's true now. It's true now. And the situation that led to that 10-year performance, like things have not improved since 2016 on the fiscal and the monetary front at all. And now you've got broad industry disruption on top of that. You talk about climate change, that's getting worse. Like there's a whole range of things and it's just like a trust me, bro, I owe you from a profligate spender. It's just, I don't know. I'm making that point every opportunity I get. I saw my opening and I went for it. Sorry, mate.

1:08:54I know it makes your eyes roll. That's the way my eyes roll at all. I'm only an ever continued. Just the hardest part for us is to work out what you need to say about it. And so that's what we are going to go to next, which is not the miser rolling, but the concept of the risk-free rate, I think, is a really interesting... Now, this gets a bit investing nerdy, right? But stick with this because it's important. The general approach for investing is that you want to get a return that is firstly discounted for time. So, the longer you have to wait, the more you want because waiting is, you know, rather a dollar, another dollar in five years' time.

1:09:28How much do I want in five years' time to give up the dollar today. $1, no. $5, no. $1,$10,$1.25,$2 in five years. Okay, yeah, I'll give you my dollar, you'll give me$2 back in five years time. So the time value of money works. And implicit in that calculation of how much do I want are really two things. And again, without getting too nerdy, generally they're broken up into two pieces. You can get, and don't laugh and roll your eyes yet, Ram, we'll do that in a minute. You can get the risk-free rate. You nominal rather than real terms, which is kind of where Ram's getting to a little bit, by saying, well, hang on.

1:10:04I think if I believe the government is good for it, I can get that without having to worry about it. I can sleep soundly at night. I'm going to call it 5%, mate, just because it makes my life easier. I know that I'm just different, but just to make it easier. I get 5 % in bonds today. That's a walk-up start. I take zero risk in theory, and again, we'll come back to it, but why it's called risk-free rate is so I can get that anyway. But you'll get paid. I mean, they've got a money printer. You're going to get paid. Don't worry about that. So if I can get that cash anyway, why would I invest in anything else?

1:10:34I'm going to get five cents back in my dollar in a year's time. That's easy. It's a lock. It's a lock. It's just that your dollar only buys 80 cents. Let's come back to that. Let's come back to that. I want to do the risk premium and we'll come back to the risk premium. Yeah, yeah, yeah. So you say, well, I'm going to get my five cents. Of course I would. Why wouldn't I? And then someone says, well, I've got a great investment for you. You can invest in Scott's sneaker company and I'll give you a 4 % return. you're like well i get five percent over there that's a stupid idea i'll take the five thanks very much and then okay well okay you've actually got sneak up you can get a six percent return or you might get you go well i know you're saying you're targeting six but it might be four or three i might lose everything do i want one percent more than the risk-free rate to take that risk no no not at all so okay how much more do you need to aim for to make it worth your while and we call that the risk premium now i say we i'm not a massive um uh i don't use a lot of dcfs a lot of the time but the concepts are still really valid right so basically what you're saying is how much more return do you need to to chase or to think is justified for the risk you're taking and for most people it tends to be about give or take about five percent above the risk free rate and again it doesn't need to it doesn't matter why just and you pick your own number right and we'll get to in a second.

1:11:50So if I can get five in the government, I will only invest if I think I'm going to get sort of maybe nine or 10, something like that. Why? Because I may not get the nine or 10. I might lose it all or I might lose some of it or on my basket of companies, hopefully I'm diversified. I might get 12 on one, eight on another, minus five on another. But either way, I want to make sure I'm getting paid to take risk because I don't have to take the risk. I get a perfectly guaranteed return if I don't. And so the risk-free rate is the base of all of that calculation of what do I get without taking a chance.

1:12:21Now, here's what gets interesting for investors, I think, mate. And even aside from the real, because the inflation number will impact your total return on shares as well as bonds. So it's going to drag on both to the same degree, because literally the inflation rate is the impact on the money, the purchasing power, however you want to describe it. But it kind of raises the question of if the risk-free rate isn't risk-free, what does that mean for the rest of your investing or how to think about that in the context of your investing? Then, again, as you said, mate, you're guaranteed to get the money, all but guaranteed because they're going to print the money.

1:12:56So, I mean, maybe they don't. Maybe they default in actual default at some point. It happened before. It might happen again. But let's assume that doesn't happen because that's the least likely outcome. You have to consider what does the risk-free rate actually mean. And on one hand, you say, well, it doesn't really matter because if both the risk-free rate and the risk premium are nominal numbers, as long as you're getting something above the risk-free rate, you're fine. Okay? But it also means that to the extent that the risk-free rate is eaten up by inflation, the actual return you're getting...

1:13:32So I'll try and put in numbers for fun of it. Again, excuse my averages and just random numbers. If inflation is three and the risk-free rate is five, you're going to get 2 % real return. The 5 %-ish points you want above the risk-free rate for the risk premium, now all of a sudden is 7 % above inflation. So the gap between the two is, yes, still 5 %-ish points, but a 2 % real return, a 7 % real return, is actually meaningfully different compounded than between 5 % and 10%. Now, if that feels weird, that's the very basis of compounding, right? So 5 %-ish return, 10 % return, you don't get double your money because the 10 % compound's harder.

1:14:06But if you're going to get 2 % real or a 7 % real, that number is really, really important and really significant. And so there are very real questions for investors. Well, I will pose them, mate, because you're smarter than me. There's a very real question for investors about what you assume the real returns will be, not on bonds necessarily, because I'm not buying bonds, you're not buying bonds, you make the point very nicely, mate. So people can understand buy bonds, but when you think about the risk premium versus a higher inflation rate, that gap of compounding at 5 versus 10 or compounding at 2 versus 7, that's a really, really big gap.

1:14:39It's a much bigger gap because the number, the absolute nominal difference of five percentage points operates very differently. If you don't believe me, think about compounding it 105 % versus 110%. Not much difference. Compounding one versus six or zero versus five, obviously enormous difference. And so the relativity of that gap is more important when inflation is higher if the real return on the risk-free rate is much smaller. Unpack that and explain it better for me.

1:15:10um you can't do it how do i unscribble that x god am i right am i wrong is it what no you're right you're right i think i think what i what i want to dissuade people of is that it it feels in the and it's always presented to us this way that that everything you said was right but it's just like well can't we just change the interest rate. Yeah. You know, in fact, that's exactly what we do, but that's how we quote unquote manage the, I can't even say it with a straight face, manage the economy. Right. But, but this is why I keep coming back to the bond market. And it's, it's just, I always come back to that Bain meme from Batman, you know, it's like, I'm in control here.

1:15:54And Bain puts his hand on the other guy like, you're not in control. And the one is the RBA and one is the bond market. I'll let you figure out who. And this is exactly what's happening in the US at the moment, right? Percent out there going, well, I don't know if you saw overnight, they've now tripled the buyback of long-term bonds. Did you see that? Yeah. So it was on Thursday morning just to put this in context, but you could go. Because they want to buy their paper. So I was like, wait, because the market's not stupid, right? Like at a point, bond traders were like, I do not want to buy that given what I think inflation is going to do.

1:16:26At that price. At that price. So very rationally, I will pay a lower price, which means I get a better yield. And at a point, I will happily do that. Now, the government goes, no, no, no, we can't have higher interest rates because that'll bankrupt us. It's already our second largest line item on the budget. We can't even pay our interest now without borrowing more money. And you want to put interest rates up? No, no, no, no, we cannot have that. And it's like, yes, well, that's nice of you to say, but the reality is, is that that's going to happen anyway. And so what you're, the only, I'm not changing anything you said, but just a layer on an extra consideration on top of this.

1:17:03This is the impossible situation that the major Western central banks, oh my gosh, France, oh, it's a whole other thing. You know, the UK, just former global superpowers, just, you know, in the final stages of their imperial decline. um you you are going to this you're going to have you're going to have these risk-free spreads really being reimagined in in ways that go well beyond a uh boardroom table of a few bureaucrats you have got a global bond market that is going to blink that well sorry not blink that they're going they're going to call your bluff they're going to call bs on that and this is how soros and truck and miller made a whole bunch of money when they bankrupt the bank of england which i I don't know.

1:17:48Look into that. These things, these bond vigilantes, Nixon called them over the time, which is really - That's a phrase that's stuck for a long time, actually. It's funny that's still one of those phrases that - Isn't it great? It's just like demonizing. It's just investors allocating capital. And people are self-interested in the best kind of way. And honestly, again, people tend to misunderstand me when I say that, but it's like there are people managing your super, your insurance, bonds, your pension. Most of the money that is held in bonds are by these kinds of entities. So when I say don't buy bonds, I'm sorry to tell you, me included.

1:18:25I'm packed up to the eyeballs with the damn thing. And when they start mandating more of that, it's only going to get worse. But I guess where I'm going with all of this is that what you're going to do as an investor is you who are going to say, well, if I can get 3 % in a bond, I need to get at least 8 % in an equity to compensate me for the risk. That is true. But what if I'm actually getting 3 % in a bond nominal terms, but in real terms, I'm getting negative 2 %? Yes, I know that the inflation thing is consistent across all of that, but I think you're going to see this distortion ripple through all of this kind of stuff where you have econocrats pushing on a piece of string to try and affect an outcome that they have no control over.

1:19:11And it's going to, there's a certain financial gravity with these things that just cannot be distorted forever because at a point you need someone to carry the bag. And usually the person who's left carrying the bag is the forced buyer. And by forced buyer, I usually mean things like the pension seam superannuation, and your insurance company is mandated. And I know it sounds wild, but it just, it's actually more common than not across the world, even today. So where am I going with all of this kind of stuff? The risk-free rate is not risk-free, is where I'm going with all of this kind of stuff.

1:19:44And I would say as an investor, some of this sort of rigid, academically sort of influenced thinking is actually really sound and useful to think of. But from a practical standpoint, I'd throw it all out the window. As an investor, I would be saying, what's the kind of return that I want relative to, I mean, let me just dumb it right down. Actually, I could have just said this at the beginning. Forget about what the risk-free rate of return is. Just what is the rate of return that you need to compensate you for the risk that you're taking? And how does that stack up relative to the other options that are on the table?

1:20:16It's the only question that matters. And I will tell you right now that it's like, if I looked across the entire equities market and didn't think I can get more than 5%, I would go and buy some bonds and just find everything that I just said. Right. Because inflation is going to be inflation either way. That's why it's important to think about in the context of, you know, your job is to get the best return you can. And I would say best real return, but it's exactly the same thing because you can't control the inflation rate. So whatever denominator you want to choose, whether inflation is 1, 5, 10, or minus 4, you still want to get the best return you can.

1:20:50Now, I'll say risk-adjusted, then I'll walk it back because I hate the phrase the way it's used in academia. But effectively, you know, going for the moonshot, you know, has the best return you'll ever get if you win a lotto. So, you know, we're saying, obviously, it's the realistic return. But yes, whether the inflation rate is minus one, plus five, or plus ten, your job is still – and if the best you get at eight and inflation is at ten, then you should go backwards to 2%. But you're better off of that than not investing going backwards by ten. So, on one level, it's entirely academic. But on the other level, it's really important as a concept to really think through what the implications are.

1:21:21And also, too, it's just – I go a level deeper where it's sort of like – You're right, there's sort of a consistent error, for want of a better term, across all of it. But it's more looking at the characteristics of the asset itself and asking which is more debasement resistant. And a good simple example here would be Woolies or Goals. They are very inflation resistant. Why? Because they'll put the prices up. And again, we'll have all these commissions on price gouging and all the rest of it. Will there actually be a very rational response to increased cost pressures and the rest of it. So when you're holding a 10-year bit of paper with an IRU, there's no protection in there.

1:22:00There's zero protection in there, other than a trust me, bro, that don't worry, we'll stop being silly and we'll stop debasing your currency on you. At least with equities, yes, you want the premium on top of it, but it's also the qualitative nature of not just the premium itself, but the ability to have yourself afforded some protection against this kind of stuff. And yes, inflation will be real and all of that kind of stuff, and it'll be consistent across the board. But there are some companies and some enterprises and some operations that are far more resilient within that framework. And so it's something that I'm increasingly looking at.

1:22:36It's just like, do you have pricing power? Do you have an ability to pass on cost? What is the better proposition? Because it is all relative here. What's more likely in 10 years time that Australians will still require food and prefer to shop at a big supermarket chain, which wonderful scale advantages and, you know, basically charge you a 5 % markup on what it costs them to do all of this stuff. Or do you want a group of people in Canberra who care about the next three year election cycle, who are going to throw money at you like, you know, nobody's business. What's the better proposition that's there.

1:23:16You know, it's like, I actually think, and again, history is full of examples here. What did people do in Weimar Germany? They bought things like gold and really high quality businesses and good quality land, you know, like because, because that can't be debased. Right. And so it's sort of like there becomes a qualitative layer, a qualitative layer on top of that that goes beyond the rigid sort of, oh, this is the risk-free rate. I should want more because it's, it's, it's, um, there's more risk involved and blah, blah, blah. And all the things you said that are true, but I would also go to a more sort of qualitative layer because there will be equities within all of this that actually not only are you very susceptible to inflationary pressures, but you're also very susceptible to disruption from AI and all these other kinds of things.

1:24:00So it's sort of all good and well if your spreadsheet tells you you're going to get a 10 % rate of return and that's going to be at a nice 5 % premium to what you can get in bonds. It's all very neat and elegant. I've got a wonderful spreadsheet and I've rationalized it all. I was like, yeah, but are you really going to get that? Because you've missed the connect, right? You're thinking in the right way, but there is one advantage that I'll give to bonds that equities don't have is that there is a mandated return. Yes, you'll be paid back in funny money, but you will be paid back. There's no guesswork.

1:24:29Hold that thing to maturity, you'll get your principal back and you'll get the coupon payments along the way, barring the breakdown of civilization that is guaranteed. Your estimated return on a equity is a guess. So the framework you say is correct, but just as an investor, make sure that that estimated return that you're working with is actually cognizant of this broader macro picture, if I can put it that way. No, I love that. Does that make sense? Yeah, it does, mate. You know what I like about it too is it doesn't require you do anything differently to what was otherwise good investor. That's what I always come back to, yeah.

1:25:04Well, and it sounds like I'm saying, you know, you made no good points there. The key point here is the good businesses are good but less remarkable in the really great times, and they're good and remarkable in the bad times, and that distinction matters. And it's kind of – I mentioned umbrellas before. It's buying umbrellas in summer. Do you need it? No, but if it rains unexpectedly, you've got it. And if it's in winter, you better buy a bloody umbrella because you're definitely going to – not that it rains more in winter. I'm mixing my metaphors. You know what I'm saying. The broad concept of – straw hats is a better one.

1:25:34The broad idea here is pricing power doesn't matter when you don't need it, but you've got it. And price of power matters when you need it and you better have it. And so to that point, I love the point you made. And I guess the key thing here is, maybe the action for me is, if you've let the good times, and I don't, again, good times are relative, people across the living and other things. But if you've let the good times for your companies, allow your approach to investing to drift a little bit. Just to kind of, you know, everything's growing and they're getting a good return over there and maybe I want to get in on that one.

1:26:10And I thought pricing pay used to be important, but maybe it's not as important because this company is winning and my company is actually falling behind a little bit and, and, and, and. It's just, it's always, always worth just coming back to, you know, the things that over the cycle, over time, over the long term will put you in the best stead, even when they underperform. So this is the hard thing about investing, right? You can, insurance is too glib an example, but insurance premiums, money out, money out, money out, money out, money out. this insurance is terrible until the claim comes like oh thank god i had the insurance now it's not quite that marked with with investing a great company you mentioned woolies mate and it's also too expensive for the reasons but in relative terms even if it wasn't overly expensive even if it was fair value let's assume it's fair value its profits are not going to grow as faster as a whole lot of other companies who are go-go companies who are taking advantage of for example we talked about this before but the easy money when you know when there was a million one hour grocery delivery companies because venture capital was effectively free willys was falling behind falling behind in quotes right it wasn't growing as quickly you know all the things and then all of a sudden the tap gets turned off and willys just keeps punching it's the tortoise in the hair it is it is i know i say it all the time it is literally the tortoise in the hair by the tortoise you might be behind but you know your tortoise is going to keep walking and even when the hare falls asleep the tortoise is going to walk straight past him and that's it feels it feels negligent and it feels unimpressive and underwhelming and like you're missing out when when the go-go years are on but the things that you need when you need them you need to have them there otherwise ever anything time zero is zero well it's necessarily going to be zero but maybe it is but having those things that matter when you need to call on them thank god they're there the first aid kit in the car right it's a waste time waste time waste time eventually you need it's like you know what it was worth it was worth having and it's that kind of approach i think which is what you're really highlighting here mate none of that none of what you said is like oh my god there's a new revolutionary way to invest.

1:27:57It's like, these are the ways you already should have been investing and here is why. So if you let your portfolio drift based on the macro as you see it, maybe time to kind of just trim the sales a little bit. Just bring the elbows in. Just kind of, you know, make sure you're set for, maybe you don't need it. Maybe the world is a better place than we expect it might be and things are wonderful. In which case, you own great companies with pricing power. And if you need them, you own great companies with pricing power. Yeah, yeah, yeah. Just, all true. Just bear in mind what we said before. There was a time when classifieds were called rivers of gold.

1:28:34I mean, you can name your price. You can name your price. You want to put an ad in the Sydney Morning Herald? It's going to cost a fortune, right? Now it's cheap. I actually still got free to air. We've got really bad TV reception where we live. And so when we bought the house, they had a satellite. We get really weird TV stations from like Northern territory. Like I'm really not having a go at all of our Northern friends here as well. But, you know, there's a lot of cattle ads, right? I love the bullseye ads. That's my favorite thing about growing up holidays. And the stud sales. It's a good time you're here for it too, apparently.

1:29:12It's just a different world. But then again, every now and again, you get on this thing and it's essentially like it's the smallest business. Like it's a corner shop. And they got an ad on the TV. Could you imagine, like when we were kids, the local corner shop having a TV ad, like you're priced out of that kind of stuff. And so my point is, is that there were these entities that had all the pricing power in the world and then nope, it's all gone. Now it's Google AdSense has all the pricing power in the world, right? And so when you're trying to make that determination on pricing power, on an ability to weather inflationary sort of impacts, Make sure that you're looking at the world as it will be and not as it perhaps was last decade because those protections may not be there.

1:29:55I'm pretty confident to say it about things like food because it's hard to see how that gets disrupted in a digital kind of sense. You know, maybe. But, yeah, so we're just repeating ourselves. It's going to be interesting. As I said at the very beginning, huge amount of risk, huge amount of opportunity, and the only way that you can really – I mean, you can't guarantee anything, but I can guarantee you that if you're very rigid in your thinking and you're fighting the last war's battles, you're probably not going to be in good stead. And as I said before too, I think there's a whole bunch of sacred chaos that need to be slaughtered because it's like the 60-40 portfolio.

1:30:33That was pretty good advice actually for many, many decades. It's terrible. Ask anyone with a 60-40 portfolio over the last 10 years how that's worked out for them. Just first principles thinking, yeah, and make sure that there is enough of a return there, that one, that you can be, well, one, that you're confident enough of that, and two, that it's going to be enough to offset some of these inflationary pressures because they're only going to get worse. On that happy note, we might finish up for this afternoon and maybe let our listeners take a deep breath, enjoy their Friday afternoons. it's not all Dermocland but just be mindful of some clouds.

1:31:14Until we chat on Sunday morning enjoy your Saturday in 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 license 400691.