The best way to run a bank. May 10, 2024

25:49There's never been more people living in cars and tents. There is a lot going on underneath the surface here. Anyway, that was entirely unplanned in our schedule. As always, as always. Mate, we'll get back to that a little bit actually, but let's go to the banks for a second. We had a really interesting set of numbers out in the last couple of days actually. Commonwealth Bank's out this morning. I noticed we haven't did the talking points. I'll tell you what the numbers are so we can talk about it. But Westpac out earlier this week, profit down 16%. CBA out this morning, profit down 5%. And we've talked a little bit about the bank's problems before, and we'll talk a little bit about that later.

26:27The other thing I wanted to mention, though, in that context and why I really wanted to raise it, because bank bashing is fun, but we've done it before and it gets repetitive at some point. No, it doesn't. Not for me. All day, every day. It's not about us, dude. That's my point. That's exactly it. I'm trying to help you here. Just work with me. Says you. Says you. agree to disagree exactly um but shareholders love the results because they came with a healthy combination of dividends special dividends and share buybacks and i wanted to kind of that's kind of the thing i wanted to mention mate because i did again i i know i'm just referencing my tweets basically a tweet biography this this podcast these days um but hey jump on jump on the twitter machine and have a look at that on the way through so you you're up to date with what i'm going to talk about um machine it is yeah well everything's a machine these days um jim would love it dr jim would love it machines made in australia it's great um the uh we can't have ip anymore we've actually make stuff so i'm using machines the uh the um i just i just thought i thought it was interesting and i don't even necessarily mean it in a bad way i i am trying to approach this relatively uh fairly or at least you know in an open way because it's if if westpac's profits are down, 16%, massive chunk.

27:40There's a share buyback and a dividend and the share price rises. What's going on? Now, I'll throw a couple of thoughts out there. You can jump back up. We'll go from there. Firstly, share prices rise all the time when results are bad, if the market thought they would be worse. So there's every chance that simply, yes, Westpac's profited down, the market thought or knew they'd be down. They weren't down as much as expected or the outlook was better. generally speaking, share prices respond to the news as a function of expectation, not a function of last year's results. If you think profits are going to be up and they're down, you're in trouble.

28:12If you think profits are going to be down and they're still down, but not quite as much, you're probably doing okay. Because that's what markets do. They're forward-looking mechanisms. They're supposed to look forward and say, what do we think Westpac's going to do? What do we think CBA is going to do? It's going to be this. Okay, cool. Maybe it was simply less bad than expected. The other one mentioned the outlook. Maybe they've said, look, the half was bad, the quarter was bad. But hey, in the last couple of weeks, things have really turned around. And in fact, we're predicting this to happen in the future.

28:35And the market goes, oh, good. Well, we're, again, forward-looking. We're happy to look at that outlook, that guidance, that estimate, and say, OK, thank goodness. And the other possibility, of course, is the, and this is probably more likely, I think, the buybacks and the dividends are a bit of a salve for investors who otherwise would be disappointed with those results and may, in no particular case, certainly not in CBO Westpac's case, thank you for lawyers listening, could be just to kind of, you know, keep the faith with investors, possibly, possibly, a little cynically, possibly even genuinely.

29:06Hey, another result's bad. We've got some extra cash. You might as well have this. We're sorry about the result. We'll fix it. So I guess I wanted to just be a little bit nuanced in the thought because the initial, my initial Twitter response was investors who were just looking at the buybacks going, I'll just get some money back. I'll push the shares up and get my dividend or my buyback. That is very, very myopic. If that's the only reason you're doing it, then a 16 % profit fall and a little couple of extra cents worth of buyback or special dividend only gets you so far. The bank's still going to work out how it's going to grow or how it's going to perform in the period after that.

29:36So given that setup, mate, what do you see? What do you think? What do you hear? What are you mindful of? What do you want our listeners to know about that kind of combination of factors? I mean, again, it shows you the short-termism I think of of a lot of investors do I like more money in my pocket yes I do do I should I prefer well I mean what do I want here do if I if I'm giving shareholders more money from my treasury and my profits are down I don't have any more profits so where's the extra of money come from? It's come from my savings, essentially, from the balance sheet. It's just like, well, that's cool.

30:20But if you actually had the opportunity to lend that out and get a good return or to make an investment and get a good return, then all you're doing by giving it to me is destroying shareholder value. Now, maybe it takes two, three, five, 10 years to sort of play out. But these are the kinds of decisions where businesses, by being too concerned about near-term shareholder perceptions can actually undermine their long-term success and in some cases, viability. It's sort of like, look, it may have been, and the bank will argue, well, we've had the capacity to do it. Actually, we don't have any great investment opportunities at this point.

30:58So this is the best use of capital. And maybe that's true, right? And it's also possible, of course, these things are all true at the same time, or if things are true at the same time. That's true. Yeah. Yep. Yep. The thing that I said to you, I mean, to the man with the hammer, right? Everything looks like a nail. The thing that really strikes me, if you go back and dig up a result from the 90s for the major banks, you'll see institutions that were in all kinds of areas of the economy. They provided home loans. Absolutely, they did. But they provided a lot of business lending and stuff as well.

31:31Business lending is so important. That's ultimately where all the jobs and wealth and stuff that we make and services we provide come from. And anyone who started a business knows that capital, you need a lot of cash up front, right?

31:47And not everyone's in the capacity where there's a few million dollars lying in the bank account where you can just start a business with, right? So it's really important. If you look at the major banks today, they're all around three. They're basically home loan machines. That is it. That is it. And a little part of me dies when I think about that because, you know, as a country, we have put everything into these Easter Island statues, right? And we're just flipping them amongst each other and we're borrowing ever increasing amounts of money and building an incredibly fragile sort of system. And we're not lending to businesses in the same way that we did.

32:29And it's just, I feel as though there is going to, we are impoverishing ourselves longer term with this in so many different ways, right? And it's just, I think what we have here also is the, this fragility is something that, read Anti-Fragile by Taleb actually. That's a great book recommendation. He's a bit of an obtuse individual, but he's got some good books. That's a great way to put it actually. Read the book and then don't bother following him. Don't follow him on Twitter. The arrogance of the man.

33:07Anyway, we have a system that is perfectly fine as long as nothing too nasty happens. And one of the things, again, any lesson from history is that stuff comes out of the blue, whether it's a pandemic in some instances or just other things or a war or a natural disaster or any number of kind of things. And as we saw in COVID, you know, with just-in-time delivery and all of this stuff, we've optimized things to such a degree as though it's great when it's working. If it works, that's right. But there's zero resilience, right? So it doesn't take much to sort of knock things over. And when I look at the banks and I look at their balance sheets in particular, I'm not really, I'm honestly not predicting any imminent doom and gloom.

33:49But I think you can say objectively, it's like it only takes a slight of swobble and things get very hairy for them very, very quickly. All of the banks have increased their provisioning for bad loans. All of the banks are seeing increases in 90-day arrears and all of these things. Now, off very small bases, it's still very low levels. And they're allowing for that. So they've already provisioned for it. So they're doing it accurately. It's all still fine. Yeah, absolutely. But history doesn't go that way. It's gradually then suddenly. It's like nothing and then everything at once. There's no linear relationship here.

34:20It's the turkey, right? It's like happy and fine and then Thanksgiving comes and the farmer chops their neck off out of the blue. There was nothing that we could have predicted that in advance from the turkey's perspective, right? Yeah, yeah, yeah. And, yeah, so I just, I think it's something that is going to come back to haunt us at some stage. So, again, it's not, Andrew, I say this and everyone goes, I Andrew thinks the property market's going to crash and we're all going to go to hell in a handbasket. I'm not. But I'm saying that the probability of that is significantly increased given the structure that we currently have.

34:59And the damage that will unfold from that is significantly greater than it would otherwise be given the structure that we have. And it's sort of, again, through the game theoretical lens, it's kind of, it makes perfect sense because there's that moral hazard of we're all too big to fail. Well, everyone else is up and dancing. I guess I might as well too, because I'm going to get left behind in the meantime. if I don't and it's something that is the big short tortoise. The big short tortoise? Well, it sort of made popularly, it made it more, it popularized this idea of that when it happens, they'll all be bailed out and it'll be Main Street that kind of suffers as a result of it.

35:39So it's depressing. That is absolutely true. Sorry to put a wet blanket over all of it. No, look, I think, well, I think here's the, I think this is the big challenge for national policymaking. And I'm going to talk a little bit about, or ask you to talk about as well, Future Made in Australia, this new thing from Jim Chalmers. Because I have a very clear view on it. But the people who support the Future Made in Australia, I will go back a step in a second, but support it in part, maybe genuinely, maybe because they like their preferred team and so they want to justify that team's actions by making up excuses or reasons to like it.

36:19Either way, on national security or national resilience grounds. And I think this is where I actually agree with you about the banks matter too. And I think we are much better off with banks with high amounts of capital. We're all better off for that purpose, right? You don't want your bank to go broke. It's just bad for you. It's bad for the economy. It's bad for the country. Bad for confidence. All those things that happen when banks go broke. It's a significant national hit. And if you are regulating these things, you're going to say, well, hang on. The shareholders need to make a decent return.

36:47but there's a role for society in that to decide what's a reasonable enough return given the potential implications. And I think the flip side of that is where do you draw that line? You know, we never, you mentioned business lending before. We never have bank collapses if banks don't lend that money. If banks just keep our gold and it's safe for us and charges a fee to keep it and never lend it out, they literally, they're armor guard, right? Or they are, you know can't sell storage they take it they put it away they charge your store and then when you want it you go and get it that wouldn't work that'd be great that's actually how banks started right exactly exactly and but we know that credit as you just mentioned you know can you can you buy the fridge for the cafe to go back to earlier in the podcast um without loan well maybe you gotta save up can you buy a house can you buy a car the credit has an important role i think it's overused i've railed about buy now pay later and credit cards before but the idea of provision of credit it's important.

37:42And as a society and as an individual company, we and they have to decide how prudent is the risk I'm taking. Every time I've said a million times about margin lending, as Buffett said, leverage is the only way a smart guy can go broke. It's the only way a smart business can go broke too, really. I mean, at some point, I mean, yes, you can have costs exceeding your sales for a long time and eventually go broke. But if you're borrowing a million dollars to start a business, you're a million dollars on the hook and that's hanging over your head till you pay it off. So it's a really difficult one.

38:10I don't know the answer. I don't know what I would do to the banks in terms of the lending standards I would either imply or apply to them as a regulator or suggest if I owned one, if I owned my own bank, what would I do? How would I structure that thing so that I get a reasonable return without taking undue risk? And that is literally Banking 101. I wrote recently, both for banks and insurance companies, your job, you're a risk manager. That's literally all you are there for. How much is too much risk? How much is on enough risk, where's that line? And I don't know the answer, Matt. And again, I'm not saying you're wrong.

38:45I think you're absolutely right. I don't know the answer. There is, even to Taleb's point, you know, you can be completely any fragile and have all the gold in the vault. Does that make us better or worse as a society? Are we better with the very occasional collapse rather than no collapses but no lending? Probably. Are we better off if we have a collapse every year? Probably not. It's a really, really, again, not knowing the future. I've got an answer. It's difficult. Go on. Don't say it. Be kind. No, I wasn't going to say that. Oh, okay. Although… Tell us the other answer. Tell us the other answer.

39:19Well, I think there's a fallacy at play there that we think that someone, it is at least potentially possible for someone to know and implement. Yes, totally. And I say, no, it's impossible. Yes, great. That's the natural black swans, right, by definition. Yeah, right. But as Adam Smith taught us ages ago, is that we have this invisible hand of the free market. And I would have it such that you do whatever you want to do. You know, go nuts within certain rules, right? I'm not saying that there would be no regulation. I think it's certainly very sensible to have some basic requirements and buffers and all of this kind of stuff.

40:00But I would say that the best guard, the market will find what's appropriate to them. Each person running a bank will determine the risk that's appropriate to them. And the thing that should keep them in check is the potential for bankruptcy and them losing their job and all the depositors losing their savings and them being hung up on a lamppost somewhere. That is a very, yeah, metaphorically. Like that is going to sharpen the mind. Yeah. What we have is a system that's like, and again, we've seen this. This isn't like, oh, go back to 1832 and there's an example of this that happened. No, no, no, no.

40:41It happened like in the last decade. Well, actually now it's a little bit more. It's crazy. Yeah. It's just like there are no consequences. So why would I show any restraint whatsoever? It is too big to fail. It is moral hazard. And it's the agent principal problem. And we've said this before. Agent principal problem is largely if you have someone acting on your behalf and they have different incentives than you have, you have a fundamental disconnect. I'm not entirely sure, almost to your point, I'm not entirely sure that banks shouldn't have to be privately owned as opposed to public companies.

41:16Because for all of what you just said, and you're absolutely right, I think the biggest issue is the information asymmetry or the expertise asymmetry where mum and dads, and literally the proverbial, you know, air quotes, mom and dad, not to be condescending, but almost literally to be condescending in the sense that people aren't listening to this. People like, you know, my mom or someone else who has no idea and just go, okay, you can see I should invest. Okay, cool. Well, maybe the other question is, if I don't know enough to know whether Commonwealth Bank's good risk, what do I invest in? And you and I are different.

41:45This is different because they want to know this stuff. But what is, you know, if we have a savings system and we want people to be provided with some... The agent principal problem is a real one because in this case, the principal is the shareholder, the agent is the manager. And if the principal, and I'm using those words deliberately, but it's a bit weird and kind of jargony. But yeah, if the principal, in this case, the shareholder doesn't know enough to know where the agent is doing their job, and that's 95 % of shareholders in any Western country these days. I'm not a bank analyst. How do I know whether the bank's...

42:19I'm not a business analyst. I'm not an airline analyst. I'm not a whatever analyst. How do I know? And that's where I think there is that role of some degree of regulation. And you're right, a lot in the incentives, number one. Is that enough? Maybe it is. Maybe it's not. But there is a real question. There's a gap, an information gap or an expertise gap too often in a publicly listed company. Maybe we should go back to the Rothschilds and the Medici's owning the banks and say, if this fails, my entire wealth is gone. Maybe that's literally the solution. They're still going to be regulated well, but at least that way they'd be focused on knowing what was going on and we would have this diffuse ownership of people who don't know and frankly shouldn't have to know because, you know, we can't be bank analysts to own bank shares.

43:01But there's a very real question about the structure of society there too. Yeah. I mean, we spoke briefly off air about this. So the Berkshire Hathaway meeting was on the weekend. We'll come back to that. We will. But he had a suggestion for reigning in the fiscal deficit, which was everyone in the Senate does not get reelected if ever it exceeds a certain threshold. Yeah, yeah, yeah. And what he's really – it's kind of like funny and it's folksy and it's very Buffett-y and we all laugh. And it's like, no, that is it. That is the power of incentives because he was being serious here. Yeah, yeah.

43:41It would fix it overnight. might never underestimate the power of self-interest, right? And just sort of like, why'd I lose my job if we don't get, you know, the fiscal deficit less than 5 % of GDP? Oh, okay, we are doing that. We are 100 % doing that, right? No matter what. And we will reach consent, we will make it happen. And it's the same kind of thing you should do with banks. I would make certain, and some might regard overly onerous requirements of those key decision makers. but then I would sort of say, well, don't do it. Matt Common, you don't have to be the CEO of Commonwealth Bank, right?

44:17You've got enough money that you can live like Midas for the rest of your days, right? So don't do it. Someone will do it. And the person that does do it, the team of people that do do it, will act in a very responsible way. Okay, you can run this bank, and it's an incredibly systemically important institution within our society for all the reasons that you said and more, but all of your family's wealth has to be in this. By the way, if this happens, then there's jail term. So things are pretty serious. Now I can tell you, and it's like, oh, that's unfair. Don't do it. Don't do it. Don't take the$10 million a year salary, right?

44:53But if you want that$10 million a year salary, if you want to be at the reins of something that could potentially impact the lives of millions of people, these are the requirements. And I bet you a million trillion dollars that there'll be plenty of people who go, I will do that. And the risk audit meetings will be two days long rather than 35 minutes at the end of a board meeting because they'll be absolutely sure. They understand every risk the bank is taking and how much it is. And they'll lose sleep at night making sure the risks are appropriately priced and diversified and everything else based on that.

45:23I'll give you a good example, actually. So it is now the board is – what's the legal term? They're culpable for health and safety. so if you were running a mine for example and someone dies yeah and it is there was shown to be not proper procedures in place that you know could have been prevented there is very very serious implications for board members yeah now whenever you read take me up on this as a challenge randomly open up the investment presentation of a mining company or read the annual report see the amount of time that they dedicate to lost time injuries work sites yeah Yeah, lost time, injuries.

46:04It is measured. It is scrutinized. It is genius because what gets measured gets done, you know? And if that wasn't – this isn't because people are evil or whatever, but we all act according to our incentives. So if that requirement wasn't there, you might see a slide at the back. You know, you might see some passing comments on workplace safety and lost time due to injury and that. But it is front and center, as it should be. By the way, I'm not saying it shouldn't be. As it should be. But we decided that this is important, and then we put in something that made a hell of a – it was just a really smart way of tackling the problem.

46:41Do people tragically die and get injured on site? Yes, they do. But I would argue very strongly it's to a much lesser degree than it would be if it was otherwise the case. So just to fix the banking problem, let's apply the same thinking. Let's apply the same thinking there. You know what I love about that, mate? It's really important because I would guarantee that 99 % of executives don't care, not their actions, but their physical, emotional response, care any less about their employees because of the change. I think they would honestly believe and feel with 100 % sincerity that their views and actions haven't changed as a result because of course they care about their workers and they're not evil.

47:19No one wants to say, you know what, screw it. Take the safety harnesses off and take the gloves and just keep our cost low. Knock yourselves out. Who cares if someone gets injured? There's 5 % of people out there who would say, I don't care. i'll take the risk yeah who cares everyone else is like well no of course i care of course i want people to be safe i'm gonna go home to their families they don't care anymore but they care a lot more you know and that's what that's why i mean human brain is weird we've talked so much about that this is another psychological bias in action i guarantee you no one says i didn't i feel like i care more about our staff than i used to but i also guarantee as you said they do a lot more work to make sure of it why because they've made it personal and that's what i'm you know and it's it sounds like i'm being disingenuous or trying to give them extra credit i'm genuinely there's There's no mining exec or mining board who says, I don't care.

48:04I'm not going to put the time in. I'm not going to make every effort. They think they are. But once you change those incentives to your point, the every effort all of a sudden changes. And that's why incentives matter. That's why these sort of things are important. And that's why it makes a huge difference, as you say, and would for the banks as well. I've used this example before on the pod, but it's a good one. So I'm going to reuse it, which is the architects. I've already thrown that one in. the architects in ancient Rome had to, were required to stand underneath the archway when the, when the scaffolding was removed, so you put the keystone in, you take it.

48:37And the idea being is that, well, if you're doing your job properly, you've got nothing to worry about. If not, you, everything's going to collapse and you're going to die. Yeah. And you have archways that are there 2000 years later because of that rule, I would argue very, very firmly. Yes. And, and, or at least in large part, because of that, you know, I mean, I mean, I would apply, basically once you see this, right? And Charlie Munger gave a speech on this years ago, and it's a big part of his book. It's just the power of human incentives is just phenomenal. And I would apply it everywhere.

49:09You want to solve the spate of woeful building standards? Make it that any developer has to put their own personal funds. They're personally responsible for making investors whole. All of a sudden, building standards are going to go through the roof, right? And there's a 20-year warranty that's on that. Again, people go, oh, but it will never work. It's like, well, it won't work for you and the way that you operate, and it will add to extra costs in the near term. But the overall internal rate of return to get fancy, which is basically the – in terms of the overall cost and I guess the return, not just financially, but just the non-tangible sort of benefits of all of that, Just go through the roof and then someone will do it.

49:57Someone will do it, right? We've talked all before, like we love our R.M. William boots or these kinds of things. They're super expensive pair of boots. Yeah, cast iron pants. They're very expensive. I'd argue they're super cheap because while you're buying your 15th pair of boots because they just keep falling apart, I've still got the original ones that I've made resold once or twice. And it's the same with housing. It's the same with institutions. Japan has this phenomenon. There's an – because the Japanese have a name for everything. They're a bit like the Germans. Yeah. I wish we did. Let's not make up their names, add words together.

50:28The Germans love it. Whack it two or three words together, it's a new word. There we go. There we go. Germans got new terms. Just a word that describes this like hyper weird narrow niche kind of thing. But I love it. Schadenfreude in particular, go on. Yes, yes, exactly. So there's a term and I forget it. Someone can let us know if they remember it. But it's a term for a business that's been around for 100 years. Oh, nice. If you look on the ASX, there's a couple, right? The Solpads is more than 100 years old. AGL is more than 100 years old. And they're there, but there are exceptions. There's a significantly – there's an order of magnitude higher in Japan.

51:04And so someone looked at this and was like, what is it the Japanese are doing better? Are they more business savvy? They're more intelligent? Are they hard at working? What is it? And it came down to the fact that they were far more anti-fragile in the sense that they had businesses with just fortress-level balance sheets, lazy balance sheets, as an analyst would call it. Yes, yes, yes. But it meant that when there was a recession or when there was some kind of economic disaster or whatever it happened to be, yeah, their revenues fell, their profits collapsed, but they had a huge pot of money that they could rely on.

51:44So could have they made more money in the good years by leveraging up that? that balance sheet and by doing all kinds of clever quote unquote things. Yeah, absolutely. They could have, but, but, but, but we, we don't know how to do it here because even, even businesses that shouldn't have any debt whatsoever because they just gush cash and you know, they own all of their assets and there is, they will still leverage up and they actually being smart given the system that we operate in to do that. Right. Because that's, that's what the system kind of rewards, but it, we, we give, something away, you know.

52:18Again, the just-in-time logistics chains are another great example of that. Yeah, it's a bit better, a bit more efficient, it's a bit cheaper when everything works, but, you know, one little thing goes wrong. That's right. A port is closed in Singapore for a week and then all of a sudden there's no food in, you know, Jakarta. You know, there is something when the investing, the McKinsey consultants have just gone too far. So I'm going to fill in some gaps, mate. I'm going to say it's called Shinisei, but I could be entirely wrong. That's it. That's the one. S-H-I-N-I-S-E. My Japanese pronunciation is not particularly practiced, so Shinisei, I believe.

52:59Collectively, this is a quote from CEO Magazine. Collectively, companies more than 100 years old are called Shinisei. Beyond its age-defying implications, the term carries important connotations around trust and wealth. Yes. I'm going to keep reading for fun. This is again from CEO Magazine. Quote, In Japan, more than 52 ,000 companies are more than a century old. Wow. Of that, 1 ,938 have survived to blow out 500 candles on their birthday cake, and 21 have operated for more than 1 ,000 years. Get out of here! A millennium! In 2008, the Bank of Korea conducted an international study of 5 ,586 companies that were more than 200 years old and found over half were in Japan.

53:47That is... Yep. Talk about standard deviations and whatever else. That is special. Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener.

54:03I kind of interrupted you halfway before, mate, and my apologies, but I wanted to reference Perpetual, which is taking a deal as we speak. 138 years old perpetual they blown themselves up after 138 years they got too clever they try to make i said blow not going broke i just want to be clear about that um they got too clever they took on too much debt they tried to expand they did all these fancy empire building things and guess what the whole thing blew up in their face it is being basically uh split up part of the business being sold to kkr the private equity mob that's going to keep the perpetual name but is it really perpetual with private equity owner what's that anyone who's ever known the story like what's that name worth it it's actually like a yeah it's it's like a an anti-asset well it must be something kk i want it and the business is going to remain on the stock exchange has to rebrand itself uh because basically kk i've said well if we're going to do this we want the name please and pedra probably said no thank you and they said no no we're taking the name to do the deal but but no no no we're taking the name you'll have to rebrand yourself uh actually maybe it is an anti-brand maybe they're happy to get rid of it i don't know but yeah 138 is on they still managed to blow it up and i think that's to your point longevity is longevity in and of itself isn't the success because perpetual was 137 years old and wonderful a year ago now 130 are all eight years old and will never be the same yep uh but it's the way you consider running these things the anti-fragility you've talked about this is where the this again the quotes lazy balance sheet or the suboptimal whatever whatever it's like sometimes you're saying business your point about the arch and i want to come back to that from the the ancient was it greeks or romans i romans That's it, Romans.

55:34Thank you. Let's say it's 2 ,000 years old, right? When it was built, it was 10 times the price of the one that was going to last for 100 years. Oh, yeah. And still worth it, right? Or maybe it was double. Maybe it was triple. Making up numbers. My point is, and this is, by the way, humans get this wrong all the time. Think about EVs. I don't have an EV. I have a couple of diesel four-wheel drives. But I like some Prado, if you're wondering. But what humans do a very good job of is the total cost of ownership. it is you know an ev is is dramatically dramatically cheaper to run but the sticker price is still the sticker price you know if if we only rented or leased cars don't don't lease a car but if we did if there was no if we weren't able to buy them if it's just illegal to buy them outright all you do is say well hang on what's the yearly cost of that car and that'd be a very very different conversation i would suspect ev sales would be a good two three times the current level they're not the solution for everybody for everything don't get me wrong um but you know So that total cost of ownership thing is just what, I'm paying 10 grand more for that car rather than the Camry.

56:36I'm not doing that. Well, you'll save 20 grand over five years in running costs. I don't care, I'm not doing it. It's that kind of idea. And that is the reality of the way we, as humans, think about this sort of stuff and why you and I have talked forever about long-term investing. And we want to have, not necessarily want, we don't actually want to have lazy balance sheets, but we'd much prefer businesses that have the ability to have that second or third go rather than all or nothing, death or glory on one approach. Such a great example with perpetual. You know what? I mean, there's no ramifications really for those that made these decisions.

57:09Again, we're back to incentives. And to go back to banks, right? Like this is my original point where we sort of filled that out a little bit here, but I'll just underscore it with the benefit of all of that other additional information. Is that are the banks about to collapse into a heap? No, but they are structured today in a way that makes that more likely and damaging if something were to go wrong. Yeah. And, yes, the banking lobby will argue, oh, we're not profitable enough. No one will do this and that. We're already winding back some of the recommendations after the Banking Royal Commission.

57:49We're doing it. My God, they were put in place for a reason. I'm not saying they're the best designed things, but if we don't do that, it's because we can't be competitive and we go like, you know what? I'll put it out there. CBA aren't lasting 1 ,000 years, 500 years. I'll put that out there right now. It could. It could. It has the potential to if it was run better, but it won't be. Did we talk about the CBA incentives last week, speaking of all of that? What? So you just see the news. After the Royal Commission, the Banking Association, CBA, and all the banks agreed they would cap incentives for people writing home loans at 50 % of the base salary.

58:33And it was last week before they increased that from 50 % to 80%. And as I said, we're a bit disappointed. It was their phrase. And when a regulator says they're disappointed, you know they mean more than disappointed. But to your point, that's exactly right, right? Who wears the pants in that relationship anyway? Is this like the regulator or the banks? I'm convinced seven years is our maximum length of economic and business history. Once you go past that level, it's all the same mistakes come back in. It's about all we get in the Royal Commission seven years ago. So seven years, we kind of waited, waited, waited.

59:02Oh, guess what? We should do this now. Same with the GFC. And you mentioned the US regulation of their banks. Silicon Valley Bank collapsed largely because they rolled back some legislation, not because it may have been saved by the regulators in advance of the collapse if the regulation remained in place. that was rolled back because it was too hard to do business. Yep. And you kind of wonder what we're doing. I think we buried the lead here a bit, but before we move on from banks, we have to talk very quickly about this loss in profit because we're very used to every year. It's like, oh, it's another record profit.

59:35It's another record profit. X billion dollars and these big numbers get thrown around and we all shake our fists. Yep. For probably the wrong reasons. Lots to shake your fists. Not that one. No. Profits fell. Yep. Now, here's a bit of context here as well. Now, we haven't really had a recession. We haven't had any – again, GDP is going up, unemployment is super low. If Westpac – I'll pick on Westpac because that's the results that I actually bothered to look at in any detail. They have not seen their sales on a per share basis change in about 10 years' time, their revenue. In fact, it was$6.42 a share in 2015, and now it's$6.10 in the last financial year.

1:00:17It's actually gone down. That's not even inflation adjusted, right? So I'm like, oh my gosh, you're doing that in that environment? Good luck when things get tough because it might be tomorrow, it might be 10 years, but something's going to happen at some point. And when it does, it's just like, gosh, if you can't – during a property boom where property is doubling every seven years, that's what you're doing? So anyway, why did the profit go down? They all said it. increased competition for home loans, which is just a fancy way of saying is just like we're all tripping over each other to lend money to the brickie who's already got his eight investment properties and to win his business, we're offering better and better terms for him, worse and worse terms for us.

1:01:05So now you've got an irrational potentially, an irrational dynamic where it's like we need to be bigger, even if being bigger means we're less profitable. And that's what's happened. That's true to some degree. Well, can I give you a counterpoint? The counterpoint just being Macquarie has been excellent at gaining market share. And they have done it profitably because Macquarie, the millionaires' factory, said, well, there's a lot of money to be made here. We're missing out on it. I'm really apologizing to any brickies. It was the first example that came to mind. But, you know, rather than lending the money to the - We've been bricky so far today.

1:01:45Oh, gosh, I'm digging a hole, aren't I? But, you know, they're lending to the investment banker and the surgeon. You know, they are lending to the very, very high quality, again, in inverted commas, in reference to what they consider quality for their business perspective. And they've done exceptionally well, where you've got the others that are just like, yeah, we're writing more loans. Look at this. It's like, yeah, but you're making less money. And to me, I think it's idiotic. And outside of banking, there are too many businesses that love to get bigger, even if it actually means being less profitable and creating less value for shareholders.

1:02:25It happens all the time. So I think that's right. I'm going to, again, just for sake of balance, and maybe I think it's partly true. At an individual level, you're right. I've said many, many, many times one of my favorite cliches is you're only as profitable as your least rational competitor allows you to be. So you're right about, I'm getting bigger by writing less profitable loans. That's true. And at least one of the banks is trying to do that. Maybe all of them, maybe one of them. The other is like, well, hang on. This is the new price for loans. Either write the loans or I don't. And if I don't write the loans, I've got the same cost base.

1:02:58So there is an element of kind of, not necessarily mutually assured destruction for those who remember that in the 80s from the nuclear Cold War stuff. but there is some element of one of the banks and this happens in airlines all the time one of them starts a capacity war and prices go down and then you as a response you say well hang on i can make a higher margin on no business or a lower margin on on more business and neither of those outcomes is good but i don't have a third option there is no third option which says i'm going to sell high price tickets to people who don't want to fly because the other guy is doing that same with banks if interest rates are you know and these guys by the way for all of the grief we give them and by the way, this is also why they're fragile, their margins are less than 2%.

1:03:35And so when their margin falls by one-tenth of 1%, 0.1%, that's a 5 % drop in profit by 0.1 of a percent. Now think about home loans. Are you paying 6.3 or 6.4 or 6.5? Well, if your competitor says, actually, I'm going to offer them at 6.3, you either don't write the loan, you write the loan at a higher price, hope your customer is loyal enough that they won't go somewhere else, and that'll happen to some degree. um that's a it's a huge huge deal i will say too um i want to just mention that mccarrie example is a great one this is the other challenge for if you're speaking of 100 year old companies you've also got to innovate you've also got to grow you've got to find ways of doing things differently because why is mccarrie winning well a whole lot of reasons including what you said the other thing is they announced this week or last week they're not taking cash anymore across their branches yep they have simply chosen and this is the beauty of being brilliant decision right i do the same or the new arrival it's not only that but it's partly that is they've said hang on we're going to set up a retail banking business but we're not going to have branches and we're not going to take cash and we're not going to have we're not going to offer these other products and we're not going to have pass books and we're not going to offer our products to customers pass books whatever we're not going to offer services I'm just laughing because it's 2024 and that's still a thing yes I was going to start in anecdote land but I'm not going to nostalgia land but you know they've literally said And Aldi's the same.

1:04:58Which part of the grocery business do we want? Well, we're going to be a certain size by just doing this. We're going to try to be everything to everybody, except that's been done. We're going to pick the eyes out of this thing. So you're right, mate, about choosing your customers, but it's also choosing your services, choosing your offices, choosing your cost base. They've got to stand this up. And you're Macquarie, so you've got all the money in the world to fund it with. You get to stand up a brand new banking business and only taking on the costs you want. It's like Quantasite or Jetstar for exactly the same business.

1:05:26I was like, hang on, well, if we're starting today, we wouldn't do this. We're stuck with what we've got. But if we started a new airline, what would we do? And they said, well, hang on, it'd be low cost. It'd be cheaper planes and cheaper pilots and one type of aircraft because it's easy to train people on. It is the challenge for the incumbent for all things we talked about with the 1 ,000-year-old businesses. And by the way, part of that's diversification. There's probably some business lines that were in 1 ,000 years ago that don't do anymore. But the rest of it is just that. It's like, what do you want to do?

1:05:52Who do you want to focus on? And so I'm not going to feel sorry for Westpac or CB80 times soon, but there is part of it which is, well, we've kind of built this business and it's calcified around us. And now we're being sniped at by the Apple Pays and the Google Pays, by the Macquarie's, by the Neo banks, by the move to cashless payments, by - Soon to be something else that starts with B. But seriously, I mean, that's the reality, right? So you saw - I'm being serious. Bitcoin is different. You can't really innovate around - If Bitcoin is the huge thing, you think it will be around. I don't know.

1:06:26Banks, it's very hard to innovate around to take advantage of that. No, but they will adopt. In the same way that countries adopted gunpowder, it wasn't a choice. Exactly. But, you know, so I just want to make that point that, you know, it's good to be the gorilla, except when you suddenly need to start dancing, right? And then it's like, but I'm not built for that. It's like, well, guess what? Music just changed. This is what success looks like now. We're going to eat your lunch unless and until you come and do it. It's why CBA offers a buy now, pay later function in terms inside their savings accounts.

1:06:56Why? Because they don't want to lose customers to afterpay. I mean, sometimes you've just got to say, I have to play this game. This is the rules of the game now. Macquarie have said this is what we're doing. It's why CBA, speaking of which, Bankwest has now closed every single branch. Bankwest is now a digital-only bank. Why? Because they kind of went, well, A, Bankwest isn't big enough to compete. B, as CBA, we don't have a low-cost, super low-cost opportunity or business. How do we fix that? well let's go and do this thing and that's smart of them to try uh but it's a reminder of you know the the incumbency is wonderful until it's not it's it's a it's a pedestal stand on and then it becomes a millstone around your neck a hundred percent yes i mean did i touch on this last week tell me if i did because i'll be repeating myself otherwise um michael porter uh wrote this really great article ages ago called what is strategy and he's really started getting at some of the issues that you were there.

1:07:47He says, I'll quote my own article here. You're quoting your Twitter, I'm going to quote my own article. We're just derivative is what we have here. Welcome to our week last week. Porter contends that the pursuit of growth often leads companies to compromise their strategic positioning. In an effort to expand, companies attempted to broaden their product offerings, imitate competitors, features and services and chase every possible customer segment. But in doing so, they risk blurring their uniqueness, reducing the fit among their activities, and ultimately eroding their competitive advantage.

1:08:21He dubs this phenomenon the growth trap. He argues that when companies stray too far from their core strategic position in pursuit of growth, they often find themselves stuck in the middle, trying to compete on multiple fronts without a real competitive advantage in any of them. They may achieve short-term gains in revenue or market share, but at the cost of long-term profitability and sustainability. And it happens, yeah, end quote. It happens all the time, right? And I think it comes down to the desire to build empires, which boards and senior management do for a lot of these big companies. You know, it should notionally be about creating a maximum shareholder value.

1:09:06And in a lot of cases, that means staying a smaller company. but I'd much rather be at the helm of a market cap of$10 billion company than a$1 billion company, even if my shareholders are worse off. So anyway, I see it. Once you see it, you recognize that you see it everywhere. I'll give you a quick example just to, I mean, we are notionally about the ASX here. So let's talk about a company. um uh i own this uh company uh called envirisware i have for years it's been a dog of an investment i've done anyway let's not go into the details um um they have this core uh uh now part of their industrial segment it's this like um software that basically will measure environmental noise dust, sound, all of this kind of stuff.

1:09:59And it was developed internally. And the business, that segment of the business is pretty much grown at 20 % per year, every year on a revenue line basis. And it's done exactly as I would expect. Why hasn't it been the greatest of investment for me? Well, they decided to incubate a startup with some water technology along the way. They decided to do a reverse takeover of these giant aviation business. And they're a much bigger company in terms of market cap than when I first bought them. But my shares are about the same price. Profitless prosperity. What did you do? Yeah, that's right. Why are you doing this for?

1:10:43Now, it's different if you're cash flow positive and you've got these good, okay, well, maybe let's go into this segment here. there's some really good opportunities that we can leverage our strengths and know-how and our unique competitive and they did nothing like that so it's kind of been and and i bet you people listening you'll think of a lot of examples of companies that have just gone in that direction for all of the quote-unquote right reasons because it's going to make us all this money but it's like you've got no business in doing that because it doesn't play to your strengths and you're now just weakening yourself and and you're you're forcing yourself to fight in a in an arena that that there are other people that are scrappier and better and more experienced at, or maybe they're just dumber than you and they're just going to place, to your earlier point, they're just going to be super irrational and make your life a living hell.

1:11:28And all it's going to do is torture a bunch of shareholder money. And it's something that we need to push back on as shareholders more, I think, just to sort of say, hey, you've got something good here. Stay with that. Don't distract yourself with any of these other things. Let's bring it full circle, mate, and finish off. this is going to sound like I've gone mad for a second but I'll come back it's why this growth fetish is so destructive you talk about building empires we want growth for each of our companies we want to see them grow right how do you grow when you grow by being better than the opposition or better than competition you grow by satisfying consumer needs and wants or business needs and wants your customers are king and why I'm saying go back to the circle it's like GDP when we're growing isn't that good aren't we supposed to grow GDP we're thinking now that's good right Exactly.

1:12:15It's the same thing. I love the force of democratic capitalism, right? And you kept in check and well-regulated, all that kind of stuff I've said a million times. But the fact it exists and the fact that it's there and we can use it to get better outcomes, it's just brilliant in a way that socialism, communism, for all their theoretical perfection, just will never, ever, ever, ever do, despite how uncomfortable and unhappy you might be with capitalism. Trust me, it is the least worst system, as Churchill said about democracy. It's the worst system except for everything else that's been tried. But so I'm saying on one hand, you know, this growth fetish is ridiculous.

1:12:49On the other hand, I'm saying, come back, it was great. What's the difference? The difference is that growing for its own sake is a stupid idea. Whether you're an economy, whether you're a country, whether it's about population or GDP or whatever, it's not the – if you're a company, don't just grow for the sake of it. As you mentioned, the company you own. Is it bigger? Yes. Is it a bigger market? Yes. Has it added any value? No. And so what was the point, right? What was the point? And sometimes it's cynical. CEOs want to build empires and get more money. Sometimes it's even in the best of intentions.

1:13:19Well, we have to grow. If we don't grow, we're dying. So let's grow. Let's find a way to grow. Again, the sentiment is real. There is a real, and back to that, again, let's keep this whole thing full circle. Back to your point about the 100-year-old, 1 ,000-year-old Japanese companies. Do they want to grow? Yes. Do they want to stay relevant? Of course they do. Do they want to pass things down to their kids and their kids and their kids? Yes. They have a responsibility to stay in business, stay relevant, all that kind of stuff. but how do they do that they do that by being sensible and being conservative is the wrong word um sensible is the right yeah thank you smart yeah right smart is the right word yeah that combination of wanting to grow but not not dying in the altar of growth the the just just slow you know i don't try to think the right way i can't get to it but you know be sensible yeah try and grow but try and grow slowly and sensibly yeah do it do it the right way if it's not there don't do it don't don't do it just because you want to do it because the opportunity presents itself and it's sensible and makes business sense, makes profitable shareholder returns.

1:14:18That's what most companies get wrong. It's what countries get wrong all the time. I promise we're going to talk about Jim Chalmers' Future Made in Australia. And because we've talked forever, you've been saved from my rant on that one. But it's the same thing of, we want to do this thing because we think it's good. Well, what are the side effects? What are the implications? What are the opportunity costs? What's the comparative advantage? Don't worry that we just want to do stuff it's like well yeah i get it but just just a little bit of sensible thoughtful um you know stewardship is actually the word i wasn't looking for but it's the right one yes yes being a steward of a country or shareholders capital or a family business it's about shepherding it through it's about it's almost that kind of you know i'm no expert in in aboriginal culture but that idea of being the custodian of the land of being you know living it for the next generation, looking after it, rather than taking full advantage of it, stripping it down for parts.

1:15:08That's how more CEOs and more managers should think. And by the way, to your point, mate, yes, we should hold management accountable as shareholders. The other thing as a shareholder, if you could find someone who's got that approach, who is trying to run a business that way, and you mentioned Solpats, I'll mention them again. I think Rob Miller's done a spectacular job stewarding that company for the last, was it 25, 30 years? Yep. And could it fall over at some point with a future family member? Yeah, absolutely. It's why the values are so important. Buffett at Berkshire, exactly the same thing.

1:15:35Run it for 60 years, has created a business that is largely in his own image. Got$190 billion worth of cash, by the way, and it hasn't found anything to buy yet. If you're trying to grow for its own sake, you would have thrown all that money at stuff. It's a very, very different thing. I was going to make that point. You beat me to it. Go on, you go. I'll just reiterate it. Please. What you're talking about there with should a company want to grow? Yes. But if there isn't a sensible opportunity, then you just have to wait. Opportunities will come, but they just won't be there all the time. And Buffett is the exact example of this.

1:16:11Like in the lead up to the GFC, he had all this cash. He just said, there's nothing I can buy. Nothing makes sense. In the late 90s and the tech burn, I was like, I'm not buying anything. Did Buffett decide that he didn't want to grow Berkshire? No, he would love to grow it. It was It's like there's nothing available. When there are no opportunities, we sit on our hands. When opportunities are bound, we are hyper-aggressive. And so that is the way that you need to do it. The desire will always be there, but it needs to be driven by the available opportunity set. And again, to bring it back to the personal level here, this will be your challenge as an investor on the market.

1:16:47Because usually what happens to all of us, we discover the share market, we get bitten by the bug, and we're ready to go. right like i've got some money and let's i want to invest it right and it's pretty when you think about it it's pretty naive to assume that the moment that you have capital at your disposal is the moment that the market will give you a bunch of opportunities and there is nothing more difficult than sitting there with money burning up a hole in your pocket particularly when inflation is running hot it's like i want to put this to work i want to i want to buy something uh at other times there'll be like so much to buy i don't even know where to sort of start but you you need to you, people like Drucker Miller, I mentioned him before, another classic example of this, and Buffett and all the great investing greats.

1:17:31If there isn't a good investment, they'll sit on cash. Do they like cash? They hate cash. Do they dislike growth? No, they love growth. But if it's not there, it's not there. And nothing I'm saying here should be, I don't know why. It's not a hot take, right? Like there's nothing I would imagine controversial social about this. And yet, and yet, and I think it's because again, you come back to incentives. These people are putting in charge of businesses. You've got a lot of people saying, I want growth. I want growth. I want growth. Oh, I've got to do something. Um, um, we're going to do this.

1:18:04Yay. Is it going to be good? Yeah. I promise you it's going to be good. Yay. We love you. You know, and it's, it's sort of when the ducks quack, you feed them. And, and that's probably what's sort of driving all of this stuff. The business leader that can turn around to the ultimate owners of the business and say, back in your box, not doing a damn thing, is a very rare individual indeed. And it's a bit of a catch-tween too because the manager's job is to do what the shareholders tell him or her to do. So it's also the view of long-term businesses, the likes of Solpats. You know, Solpats was perpetual, funnily enough, and Mark Carnegie tried to break up Solpats sort of break across shareholding, right?

1:18:43Because they didn't like it. And the manager didn't want that to happen. Now, the mill was on a lot of the shares, so that helps. But you also, again, I'll mention Berkshire in the same breath. You know, Solpads is pretty good. I won't say it's Berkshire-esque just yet, but it's on that same trajectory. What happened? People want to buff Berkshire to pay a dividend. And Buff said, I don't think so, but, you know, you guys voted on it. And most people went, it's Warren Buffett. Why would I vote against him? Same with Solpads. You end up with a shareholder base who say, thanks, Perpetual. Thanks, Mark.

1:19:11I get you think there might be some short-term benefit here, but we're actually here for the right reasons. And that's where you have this beautiful shareholder-manager kind of symbiosis. The idea of, as a manager, you get the shareholders you deserve. As shareholders, you get the manager you deserve. And that can be hard if you've got a business that you don't have the right manager or the right shareholders and you kind of desperately want that to be true. It doesn't happen very often at all. There's probably, I don't know, a handful of companies on the ASX, maybe more in the small cap world.

1:19:38You might know many more of them, Ram, But I can't think of more than half a dozen who I would say are genuinely Berkshire-esque, Solpats-esque, long-term value creation businesses that are multi-generation or at least long-term are all about just, you know, we will run this the right way. They've got the shareholders they deserve. It becomes its own culture. I mean, we talk about company culture. Shareholder culture is as important, probably more important, frankly. If Buffett didn't have good shareholders, he would have been out in his year in 1973 when the market fell 20 % and he fell 25%. I mean, you know, Berkshire's fallen 50 % three or four times since Buffett's running it.

1:20:14In any other company, the fundies are on the phone saying, what are you doing to fix the share price? Get out there and spook the shares and all that kind of stuff. It is a – that shareholder and manager culture, if you can get it, that is just gold. You want to hang on to that. Oh, absolutely. And the reason that the market, the analysts, the fundies have so much control is because a lot of these businesses, again, because of their structure, you know, it's just like, well, we need to be in your good books because we probably will need to raise money at some point. Now, the company that has a very, very strong balance sheet, who is completely adequately funded for all of its operations and ideally, you know, cash flow positive because of the operations, you know, at least through the cycle on average.

1:21:05You can go tell the fundies to stick it where the sun don't shine. I don't need you, dude. I do not need you. And you know what? But the people who – I'm not going to get the hot money idiot investors. I'm going to get the people who get the value of it. And get this, right? If and when, for whatever reason, I do need a bit of capital, you're still going to come to the table because you like fees, right? And these shareholders are probably going to do it anyway because they're there for the right reasons. You're going to say to the shareholders, I've been running this thing well. You like me. I like you.

1:21:35You know what I'm trying to do. I'm going to try and do a bit more of that. Can I have some money, please? They're going to fall over themselves to throw money at you. Yep. They will. They'll trust you. They'll believe in the vision, you know, and that's the irony is I always find is that those that sort of try to pander to the market and buy the market, like the worst actors in the market, the cowboys money grabbing short term. I won't swear. Thank you. It doesn't work anyway. It doesn't work anyway because these grifters get out what they want out of it. Shareholders don't. And they're fair weather friends anyway.

1:22:10Like the moment that they can't milk you for a little bit more cash or deal flow, then they're out the door anyway. So it's sort of like I kind of like feel as though I need to play your game and you're a little bit nicer to me and I feel everything's good until it's not. It's just sort of like, no, no, no, no. You have got to remember that you're in control. You're setting the agenda here with the board and putting someone in place who is actually going to articulate the strategy in the way that makes sense to you. And as long as you are clear in your communication, it's fine. Because those that don't like that won't invest.

1:22:48And those that do will. So I've always thought in business, you get the customers you deserve. You do. And I think in listed business, you get the shareholders you deserve. And the kind of management team that will sort of cry a little bit foul, you know, is, oh, the shareholders want this and they don't get it. It's like, well, you attracted those kinds of people by the things that you said and the things that you promised. You've painted yourself into a corner and it's entirely your fault because there is no one – like Buffett can underperform the market next year by a wide margin. Yep. and almost all of the long-term shareholders aren't going to go anywhere.

1:23:25That's correct. You know, you've built that trust. Anyway, I'm flogging this horse to death here, and we're well past our - We've gone - Yeah, the people have stopped listening by now. It's just you and I. No, mate, it's a really, really good point. I think I'm only going to finish by just saying you've talked a bit about - You said Buffett was folksy or that Magnus thing about incentives. I kind of, you know, I think it's exactly that idea of just the old things work. Not the old technology, not nostalgia, not rose-colored glasses, is not changing because you don't want to, you can't be bothered, or because this is always what we've done.

1:23:56But kind of principles are principles. I've said that a million times. There's been nothing new invented in investing in the best part of 100 years now, probably 75 years, right? New companies, sure. New sectors, sure. New revenue streams, yeah. But if you'd done nothing up until 1945, and if you'd never heard a single thing about investing, you stopped all your reading, anything published before 1945, you would do spectacularly well. the idea of the idea of these i've got to keep up with a new thing or whatever makes a lot of money for those people selling it doesn't make a lot of money for for investors and i think i'm reading jack bogel's book enough and he talks about some bloke who i don't remember his name uh he wrote it early 2007 or something like that um it's about 18th century values and that sounds really bad the 18th century's got a lot of crap you just mentioned the fact that you know you don't you don't live in an 18th century anywhere right some of those values that they're kind of values for a reason.

1:24:48I think sometimes just slowing down a bit, try not to be too clever or fancy and kind of going, what actually matters and how do I do it? Sometimes that's just all you need to do. It really is, you know, create value for someone and do it in a means where, actually, I can just probably stop at that point. You create value for someone, whether individually, yourself or as a business, and you can do it in a viable fashion. And you can - And whether it respects your customers and suppliers. It's hard. And you can build a buffer for the inevitable bumps along the way. More or less, you'll do pretty well over time.

1:25:30It's like we always say, well, it's quite buffered again. Investing is simple but not easy, or is it easy but not simple? Simple but not easy. Thank you. Simple but not easy. Buy a good business at a sensible price. Period. Full stop. That's it. Super simple. Easy? What do you mean by a good business? Well, what's a good price? Okay, the technicalities get a little bit hard, but the North Star here will never change. I don't care what year we're in. Is it a good business? Is the price sensible relative to its likely future cash flows? If I can do that, whether I'm buying like robots or quantum computers or like a printing press or a horseshoe company, blacksmith company, you know, it's the same thing.

1:26:10So I'll just totally reiterate your sentiment there. That will forever be the truth. And on that note of truthfulness, not truthiness, we'll leave that to other people, we are going to give your ears a little bit of a break until at least Sunday morning at about 8am once Andrew has done three or four triathlons and a couple of mountain climbs and whatever else he does on a Sunday morning these days. We will come back and we will answer some of your questions in the Motley Fool Money Mailbag until Sunday morning. Enjoy the first half of your weekend and full on. Cheers. The Motley Fool and people appearing in this program may have positions in the companies mentioned.

1:26:46General 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.