The downside of monopolies. December 19, 2025

23:56And so the question, again, let's go back to one of Andrew's favourite trademarks, terms of opportunity cost, not asymmetry this time. opportunity cost. It's not a question of like, oh, at least there are more EVs on the road. Yeah, probably. Now, how many would there have been anyway? Probably a truckload because some really great. If you just see the number of BYU sharks around the place, I live in sort of a regional area, so do you a bit, and we've kind of got plenty of Utes driving around. The number of BYU sharks is huge. Tesla's everywhere. Most of those probably would have been bought anyway.

24:20A decent proportion would have been bought anyway. So we paid for something that would have happened, and we spent$15 billion maybe, if you're right about doubling the cost. what else could we have done with that money? And yes, purely financially, fiscally, we could have just paid some debt down. That would have been nice. Do we really, really, really, really think that is the best environmental benefit we could have got for$15 billion? Now, maybe we're lucky that it's true. While approving 15 different new coal and gas projects. Correct, correct. There is that too. We're doing this with the one hand.

24:53Look at us. It's all greenwashing, you know, I think. So that's the thing, right? But if you got it, but if you even, I mean, that aside, and we shouldn't put that aside, but even that aside, if you're going to spend$15 billion for some sort of positive outcome, was this really EVs people to bought anyway? Or batteries that either make sense or don't on their own basis? I just, I find the, I find the, it's a good, it's a good positive objective or outcome. Therefore, it's justified no matter how much it costs. I just find that maths, that rationale, just so incredibly mentally bankrupt. it's just pure economic illiteracy as soon as you say no matter what it costs it's just I can't take you seriously my point is just if you've got a limited pool of cash and you put that cash towards an outcome a very very justifiable worthy outcome your only job is to say what's the best outcome I can get with the limited money I've got you've got a billion, two billion, five billion and the other thing by the way is they've added six odd billion in total just because I was like, oh, it's costing a billion more.

25:58Oh, it's what it is. And just that lack of any sort of discipline or responsibility just blows me. I mean, am I surprised? Unfortunately not. Is it still absolutely growing, you bet? Yeah, I don't know. I know what to say. Like when you've got a money printer, you'll use it. I would. Would you not use it if you had one? I would. Like they're going to use it. People always laugh and roll eye their eye when I say let's remove money and state. Like it's the most obvious, easy thing you could possibly do. It doesn't mean we can't have nice things or we can't do big, bold projects. It just means that we enforce a fiscal discipline.

26:30But I don't need to because I can just print money. So I will print money in a roundabout indirect kind of way. But essentially, the bottom line is what I'm doing. So, yeah, for me, it's not even the money per se. It's the return on the money. It's like if you were to say to me without this that we have an issue of priming the pump, you know, it's just sort of like. Correct. And this is where government should step in, where it's like this thing cannot, you know, muster enough activation energy to get over this hump and therefore it will never happen. So it's like in areas of legitimate market failure or there's a certain economic impasse, it's like that actually, We can do the calculus on that and we can figure out that actually maybe it's worth priming the pump a little bit here, get it up and running and then stand back as the plates are able to sort of spin themselves.

27:27But we don't do that though, right? It's sort of like to your end, it's like, well, a lot of this I think would have happened anyway, given the kinds of vehicles and the prices that were out there. The difference in subsidy didn't make it sort of like all of a sudden accessible to the everyman that never would have happened anyway. and, yeah, opportunity costs, yeah? There's a real, we could have spent that, I know it's a hackneyed example, but hospitals or schools or roads or whatever, or just paying down the debt or just giving people a tax break or whatever it is. Even environmental outcomes.

27:58You've got a dollar. What is the best environmental outcome you can get for a buck? Is it genuinely going to be getting people to buy your visa a little bit anyway? And your point about priming the pump, it doesn't bring anything, it doesn't prime the pump at all. These cars are all made overseas. Obviously, the markets are always much bigger than ours. Car manufacturers don't need an incentive to find an Australian customer for their car because they're going to make money if they sell it, so why the hell wouldn't they? There is no – we're not changing the overall scale. To your point about pump prime, if there was an EV maker in Australia and there were no EVs anywhere else in the world and they said, look, Priam, we want to start this factory up, but we've got to have an initial order of 100 ,000 cars to make this worth it, otherwise we can't get it started.

28:35You look around and go, okay, I think it's worth doing. It's worth priming this particular pump. All right, we'll commit to that for you. So you can get this thing started. That's exactly what, I will suggest exactly what you're saying. That's exactly what you're saying, which is priming the pump, which is getting them over that hump of we just can't afford the capital expenditure until we get that order. Okay, here's the order. Okay, now let's go and do it. Great, perfect. It's corporate welfare. I mean, I'm always saying, I'll say it again, this is not capitalism, right? This is corporate welfare.

29:01It's basically, here's a business, and let's face it, up until recently it was all about Tesla. So here is a Silicon Valley megacorp, you know, His share price is at record high. His CEO is worth a trillion dollars or whatever it is. It's just like they're the beneficiary here. Let's be real about who wins from this. It feels as though the environment is a winner. It feels like the person who bought the EV is a winner. Right, exactly. In some ways there's some truth to that. But no, Tesla's the winner. Let's give them a bunch of money. And it just ignores what money is, right? And it's too often the immediate knee-jerk reaction to any problem, insert societal problem here, and the response is the government should do something about it, which is just another way of saying the government should throw a bunch of money at it.

29:50And it's just sort of as if there's just an unlimited pot of money there. It's like, no, that money comes from the taxpayer. In fact, it doesn't. There's not enough money from the taxpayer, so we borrow it and there's not enough private sector demand for all of that debt, So we invariably at a point monetize the debt. So we just, we print the difference. And it's like, it's not like some economic ideological standard. I'm just against it because it's not an elegant economic model. It's just like, no, there are real world costs. I'll come back to the initial point here. It's like, we're all lamenting, oh, a cost of living crisis and young people can't buy a home.

30:24Hmm. That's because of this stuff. That's the real world end of day impact of spending, living beyond your means. It's not because the spreadsheet isn't elegant or I don't like that particular. There are very real consequences to ordinary Australians as a consequence of this. So Elon can make a bit more money. And so the household on$400 ,000 a year can get a slight discount on the Tesla that they were going to buy anyway. It's like it is pure madness. Now, if it was a different scenario, it's like we are gushing with cash. They've got such a ridiculous surplus. We've got no debt. What do we spend the money on?

31:04Let's do, let's splash this around. Let's make everyone's lives a little bit better. But it's not. We're doing it in a situation where it's dire and it's getting worse. And it's like, it's absolute pure madness. And that's just one of a million different areas in which the government is splashing money around. And it has lost its, I think we've lost the idea of what government is and what it should do. When it starts becoming, everyone sees it as the one thing that is necessary for the economy to function and that that is their role. It just misses the point. It ignores all of the lessons from history.

31:45And we all get, and again, as I say, except for a select few closer to the spigot, we all get poorer as a result of this. That's what's so egregious about it. It's the real world consequences. consequences. It's just they're very displaced in time and they're very, the mechanism is very convoluted. There's a real lag that's there, you know, there's 50 hops between sort of cause and effect. So it's very, very, very difficult to kind of see. But it's just, we are not headed into a good place. Here's a problem. The government should soon do something about it. What do you mean? I should throw more money at it.

32:20Okay. And then that's just, Whatever the issue is, that is our response to it, you know? And unfortunately you can't, whenever you push back, it's just this myopic shallow argument of, oh, so you're against the environment. I'm like, what? No, I'm very much in favour of the environment. Oh, so, you know, you're against this. No, no, no, no, no, no, no. I'm saying that there are very thorny, difficult problems that we as a society and a civilisation are having to deal with and we must recognise that there are always, this is the study of economics, right? There are trade-offs in everything. And all I'm saying is not that, you know, trade-offs need to be made, but let's not pretend that there aren't trade-offs.

33:02Let's not pretend that there aren't consequences. Yeah, it's costless. That is the mistake of our, probably one of the core mistakes of our time is to think that these issues are costless because, quote, unquote, the government can just do something about it. And even then, even then you might have me a little bit if it's sort of like, well, at least they did X and that improved the, you know, the scenario. But the current example is like, did it? Do we have more EVs as a result of this program than the otherwise would? I mean, the answer is almost certainly yes, but not to any material degree, I would argue.

33:38So it's sort of like, so a ton of money spent that we didn't have, it's going to have real world implications down the track and barely move the needle anyway. It's like, and yes, I'm pushing it back against that. I am pushing back against the idea that Arnott's and its private equity partner or owner should be paid out all this or that. It's just, it's so frustrating and particularly so when it's so inconsistent, the earlier point is like, okay, you're all about the environment. That's really cool. Okay, yeah, I guess I can get behind it. Just don't look over here where everything else we're doing, which is absolutely the antithesis of that.

34:14That's right. So what are you doing? It's like, oh, we're great for the environment because we gave everyone a slight discount on their Tesla. Cool, that's really great. Don't look over here with what we're doing, all of the new mines and stuff that we're opening up. They're taking us for idiots, frankly, and maybe they're right because it works. and it just got me bashing my head against the wall and everyone looks at me like I'm a crazy person, but I just, you know, am I wrong? Like what's, I don't know. It is absolutely only ever that. And I said it twice, I said it one more time, it's opportunity cost because there is no choice without a consequence.

34:58And so you're choosing your consequences and money spent here can't be spent there. And, yes, it can be printed, but that money isn't printed without consequence. So, again, there is always going to be a cost to... No, printing money is just an indirect form of theft. I'll call it for whatever. I think people understand it more directly that way. It's just sort of like, hey, all the money that you've got, I'm just going to dilute you. Yeah. Let's call a spade a shovel, as you said. That's what it is. It's not this costless. Don't worry. You talk about money printing as if it's sort of like some sort sort of quirky economic sort of lens to sort of look through.

35:33You know, your savings and your time is being stolen. You know, it's not hyperbole, not, you know, not semantics. Like literally that's what's happening. And again, we understand, I always make the point because I think people get it for some reason more when we talk about shares. You've got shares in a company, the CEO just issued 20 % more equity and they gave it to themselves and their mate. Now, what shareholder wouldn't be with a pitchfork and a torch marching down the street, you know, bang for blood under those? Because, yes, because you clearly are stealing from me. My ownership in the company has been diluted.

36:08Well, your ownership in the monetary network is being diluted when this happens. And maybe that can even be explained if that dilution leads to an incredible productivity boom. That's correct. But where's the productivity boom for all of this kind of stuff? It's not there. So it's just theft. You made the shareholder thing. I just laughed. I'm not sure I got caught in the audio, but I was laughing because you say, what shareholder would you be walking down the march down the street with a pitchfork? The answer to that question is Tesla shareholders. When Musk gets 25 % of the company, everyone goes, oh, that's good.

36:38We should give him more. Which is a whole different cult problem. Even that, not to change topic, but even that was completely misreported and blunt. I'm not going to stand up for Elon. He doesn't need me to stand up for it, but he only gets that if he makes incredible value for other shareholders, right? Like that's the one thing that it's kind of like it feels important and it's like I often say people get very mad with executive remuneration. It's like, well, don't, are you just mad because it's more than you or is it, I'll get mad when it's just like we're going to pay this, whether it's a bureaucrat, a public servant or a corporate titan in the private sector, if you're getting money for destroying or not creating value, that's completely egregious.

37:21If there's someone, you know, there's a new CEO and she multiplies the per share earnings of the company by tenfold and makes all the shareholders incredibly wealthy and then she gets a big pay packet. I'm okay with that. I'm okay with it. Again, it's not the money, it's the value, it's the return on that kind of investment. It's the same kind of thing here. Sorry, Matt, I cut you off. No, it's good. Feeling feisty today. You are, aren't you? I think theft is the wrong way. I think tax is the right word for the record and then some people say tax is theft and then we get a rabbit hole. But I think for me at least, I think it's slightly different.

37:54Well, at least tax is transparent, right? Like, okay, this is coming out of my paycheck each week. This is, there is something more pernicious and sneaky about it because. It's redistributive, I guess, is my point, right? Because theft is a, I mean, I agree with theft is redistributive. It goes from the person who was stolen from the person who stole it, I suppose. But I think money printing is more, same as debt. It's a form of redistribution rather than direct removal. I guess that's why I would choose the word theft rather than, sorry, tax rather than theft to describe it, the impact. It's probably not meaningfully different.

38:28Oh, let's call it a tax then. But they don't, though. It's viewed as a costless, victimless crime. I agree with that. I agree with that entirely. And it's not a victimless crime. That's exactly right. And it's more often the people that are purported to be looking to be helped that suffer the most. It's so egregious. I um let's try to take a harmless segue from here and see where we go I thought it was fascinating this week that ASX is being whacked by ASIC the corporate cop and I and basically ASIC have said you guys cared more about your current shareholders profits than about the long term preparedness security robustness of your trading platform.

39:18And as a result, we're going to whack you with the capital charge, as they call it these days. Basically, money ASIC's got to put aside, it's not a direct fine. But effectively, what they're saying is, you guys didn't do the job you should have done as the market operator. And I thought it was interesting in the context of, so we've talked about it a bit from time to time, but that idea of what makes an attractive business. and we often talk about these things in positive terms and they are until as i've said before the the moat becomes the millstone so if you are the only provider of market services in australia well effectively there's the um sebo australia which kind of there are thereabouts but realistically you're effectively a monopoly provider of trading service you are a monopoly provider of settlement services uh you can you that's a very very nice place to be you are protected from competitors you are making margins that effectively tell you exactly that's where it's going because you can.

40:12You can charge whatever effectively you want. 44.5 % net margin as of the last financial year. That'll make Google weep. That is double a very, very, very good software business. Woolies is what, 5 % net margin? And that's actually high by international standards. And again, remember what net margins are. So ASX keeps 44 cents from every dollar of sales that goes through. After tax. Right. After everything. Right. Even after non-cash things, like just after every single thing, that's what's, you know. And so if you're a shareholder, normally you're thinking, hey, I've got a monopoly, great. I've got a high margin business, great.

40:54Those are two things that we would say as investors we often look for. And for exactly those reasons, right? If you're a monopoly provider, and again, they often go hand in hand, you end up with that sort of circumstance. I would love to have a monopoly business that could print cash. Why would you not? If you want to do business in my area, you have to use me. And when I make you use me, because you really want to do that business because there's actually value in it for you, I get to clip the ticket and keep a lot of it because you probably won't notice too much. And if I make an extra dollar or two per trade, it doesn't feel like a big deal for you.

41:25In aggregate, there's lots of them, but you don't really notice that. Speaking of fund managers. You don't really notice it. It feels like a smallest amount of money to you. Thanks for your extra buck. I'll put that in the back pocket. No cost comes with it. So my margins go up. My sales go up. I look like I'm a genius. I'm doing a great job. And from an investing perspective, that is a fantastic business to at least look really hard at because what are some of the risks? Well, competition. Well, there isn't any monopoly. Okay. If I've got a big balance sheet and I've got lots of high profit margin, well, that's obviously a high quality business.

41:56I like that as well. All those things are really, really good things. So when I said before about the moat becoming the millstone, the moat around the proverbial castle, that's Warren Buffett's example of competitive advantage, all of a sudden, and I've used this example before, like Singapore with the guns cemented facing the wrong direction, you go from I'm incredibly protected to, oh, my goodness, I've left my flank wide open. And the flank wide open is in this case, in the A6's case, but it's plenty of other examples. A combination of Jeff Bezos's quote, your margin is my opportunity. In other words, you're making so much money, you make it really attractive for a competitor to come and play.

42:31And if your monopoly gets fat and lazy because you stop trying, why would I bother serving my customers? They have to use me. Why would I bother upgrading my systems? They go down, I'll just fix it, but no one's going to go anywhere else. So what's the problem? ASIC made the point they paid 95 % of their profits out to shareholders. Again, really good thing if you're a shareholder for a while, if you're under-investing your business, all of a sudden you go from and use your Blockbuster, your Kodak, or choose whatever you want, when you simply say, I've got it too good, you lose that competitive edge.

43:01You lose the competitive drive. You lose that competitive fitness, right? You can't or can no longer compete. You stop trying to make your business bulletproof. You stop trying to please your customers. And again, for a while, that makes perfect sense. Short term, sure. Don't upgrade the machines. Why would I bother? I can make some more profit if I don't do that. I'll give Charles more dividends. I'll get a bonus. I look good. They feel happy. Everyone's happy. Until that fateful day when it's like we just realized the guns were in the wrong spot. We weren't aware enough of the circumstances.

43:29We weren't preparing for alternatives. We weren't making sure we were. The best part of monopoly is an earned monopoly, right, where it's like these guys do such a good job, why would a customer ever leave for the alternative? That's how you maintain a monopoly. They're great monopolies. Exactly. What's the problem there? The problem with the monopoly is when there is an artificial, like, barrier to entry, one that has been imposed like a regulatory mode or something. And there's the other dimension to it as well. There is something that is distinctly different when the company in question is providing a good or a service which is critical to the proper functioning of a public good.

44:07I would say the public markets are a public good. You are there serving the Australian population to give people clear, easy access to participate in this great capitalistic experiment, right? not that it's capitalism in any way, shape or form, but you know what I mean? At least, you know, that Ted from Broken Hill can save up$500 and take a part ownership in CBA or something like that. And then the other dimension to it, there are just certain industries and practices which are just naturally monopolistic. Yeah. I'm not going to have a, I'll be a bit local here, but like M4 is a big motorway here in Sydney.

44:46It doesn't make sense for someone to say, I'm going to build a road next door to it so I can compete. It's like, no, we've got a road. It doesn't make any sense. I'm not going to put a second set of power lines down the road, you know. You can be with the NBN by rolling a second cable right down the street next to the cable that's already there. These are natural monopolies, okay? And when there is a natural monopoly and when it is one that serves the public good, well, we need them, so let's not ban them because then we don't have power or roads or anything like that. But then very, very strict rules are imparted.

45:19Correct. It must be. And that is where, this is the exact case in point of where government needs to step in, right, is when there are sort of failures of the system. Not where they sort of step in when there's absolutely no fail, we're just going to step in anyway because it sounds good. Here's a classic example. I mean, the ASX is fat, lazy, bloated, incompetent as an organisation. I'll say it, mate. This is on me, not on you. I mean, like, how can you have a monopoly in this area, in a market that, like, over the last 10 years is boom, we're at record highs here. They've grown their revenue at nearly 60 % over that period, but per share earnings have only gone up about 14%.

45:59Yeah. The share price is basically where it was 10 years ago, a little bit higher, not much. It's like, where's the money? Where's the money gone? I'll tell you exactly where it's gone. It's gone to very fat paychecks on the inside. It's gone somewhere, right? Yeah, shareholders have gotten a big chunk of it as well, but not nearly to the extent that they would have if this was genuinely run for the interests of small shareholders, you know? This is a, there are a lot of people that work there that do a lot of stupid, boring, nonsense jobs that don't need to be done, you know, and very, very large pay packets for directors and senior executives for doing a job that you can just mail it in.

46:36That's all computer systems at the end of the day. And then when you try and build a better computer system, you blow up hundreds of millions of dollars and then throw it in the bin and write it down. I mean, there is, it is one of the biggest corporate stories I think that's sort of out there that just doesn't get talked about is just how terribly run as an organisation it is and how it fails to deliver the services for ordinary Australians. And if you want to, I've got a particular dog in the fight because my business relies on data from the public markets and they gatekeep that and they, everyone's getting angry at Woolies, you know, for price gouging.

47:14Look at bloody, you want a price gouging? You know, if you want to display ASX announcements, public companies making public announcements, they've got it on their website for free, but if you want to build an app and put it on your, you need something like a 30 grand a year licence, not for the actual ASX announcement, you've got to go somewhere else and pay for that. This is a PDF. These are zeros and ones, right? There's no physical cost to this. But the license itself on an annual basis will cost you around$30 ,000 per year. And we wonder why it's like, why isn't anyone building any decent apps?

47:48Why are all the financial organizations like consented around the megacorps? Because they're the only ones that can do it. They love it, of course. They love all of this kind of stuff. And so, mate, I can't put enough scorn on this as an organization. and it's not just because, you know, it annoys me and my vested self-interest. Anyone out here listening is obviously interested in the markets. You wouldn't be listening to us if you weren't. You're the ones who are ultimately suffering here, you know? And so to your point, if you're going to be a monopoly and you're unavoidably going to be a monopoly, why have we given them such licence to be such poor deliverers of this service?

48:26And at least you would go, well, I guess at least shareholders made out like bandits. No. Someone won, surely. Someone's making out like a bandit, but not really the shareholders and it's certainly not the people that rely on this as a service. It's criminal, man. It really is criminal. And I just think what you do in a scenario like this when there is such an unavoidable concentration of power, you just have very, very, very strict rules. Someone will do it. It's got to be viable. Of course it does, right? Well, here's the other thing, right? So this is partly a natural monopoly of sorts, less so because it's not a physical business.

49:04The second row, the second cable costs a lot of money. Second exchange, yes, it costs some capex to get a computer system. That's a lot of money. It's not nothing. But it's easier to do. And, in fact, that's why I said CBOE, C-B-O-E, or Chicago Board of Exchange it used to be called, is an alternative market provider. But at the moment, at least, people are like, well, I could, but most of the – we're talking about network effects before. Network effects. It's a great network effect, right? Yeah. And so the challenge for the ASX, this is the real issue, is partly it's regulatory support that allows them to do it for as long as they do the job.

49:36And so that natural monopoly, I mean, one of the tools ASX got is basically saying to the ASX, we will take from you the legalised monopoly and let someone else play the game. And there's a really big challenge for the regulator. I think this is really interesting as a policy decision. On one hand, we say let competition do its thing and maybe someone else comes in and does the job. Or you say, to your point, if you're going to have the monopoly, say, all right, it's always up to you, but we're going to regulate the hell out of you to make sure you are doing the job to serve the people you should be serving.

50:04And this is, I completely agree with you. There is no justification for a business that's protected by regulation to make that sort of margin. Not that they can't make it. It's a legitimised cartel of sort or it's extractive and under the cover of a legal... It's almost a protection racket. It's a protection racket. I mean, it is. It's not because they're seeking getting the money from it. So ironically, the property goes to the person being protected, which is also just weird, right? But that's to your point about the regulation thing. I've said for a long time I don't have any ideological preference between public and private ownership for the sake of a big asset, like Telstra or MBN or whatever.

50:42I genuinely don't care. If you're going to keep it public, run it well. If you're going to send it private, regulate it well. Because those are the two problems with each of those two systems is when you let a private business make these sort of margins, obviously not serving people as well as otherwise might, you are providing them protection from competition. There should be some expectation that either the services provided or the cost provided with the money made is reasonable. And I will say to some degree, governments have got this more right over time. There are pricing tribunals that hopefully keep a reasonably short leash on gas pipeline charges or water charges where they cost a capital and they let you make a bit of a margin.

51:22That's how the ASX should be run. What's a reasonable margin for a software-based business that does these things? Maybe it's 15%. Okay, well, we will set the price according to that. If you're going to regulate a monopoly, you have to regulate the monopoly. Just saying, well, I'll make sure that you guys do what you're supposed to do. By the way, to ASIC's credit, they're absolutely following up on the failures of operation. What's missing here, and I don't even know it's ASIC's. I'm not sure ASIC's been tasked with or even has the mandate to do it, But to allow a protected monopoly to make these sort of margins, and if you're an ASIC shareholder, my apologies if you're feeling attacked, but also not my apologies for saying what I'm saying.

51:58You're a shareholder. You should be as angry as anyone. Well, you probably don't want 30%, 20 % margin set of 44 % right now with the same sort of business management being wrong. The fact that you have not had that and you have not done well, or you've not done terribly, but you could have done far, far better given the state of play. Well, with one exception. I am going to disagree at least conceptually with the absoluteness of that comment, which is a long way of saying I'm not sure you're right. Only in the sense that if you're a monopoly provider, you're already making 44 % margins and you've got the entire market wrapped up.

52:30There is some sort of what else do you expect from me? Maybe if they weren't paid a lot internally, the margin would be 50 % or 55%. But it wouldn't be like there's some sort of, I don't know, and the share price will follow whatever the market thinks it's worth. I just don't know if you're already a monopoly provider and you've already got 45 % margins, what more growth can you reasonably deliver to your shareholders? I think there's probably some at least kind of factual argument to how much better could it have actually been without doing all the things we've just talked about, which is grabbing, is it 65 % margin, 60 % margin, 70 % margin?

53:03Can you grow twice as fast? Well, if you make more people trade, they're doing their best to get people to hypertrade already. I don't know whether the financial performance could have been meaningfully better than a 44 % margin in a monopoly business given they've got the entire trade of every ASX investor wrapped up. And maybe that's too generous or maybe I'm missing the point, but I don't know that I would... They haven't grown just because they were a monopoly then too and they already make a lot of money. Yeah, but revenues have grown 60%. So what they're charging people has gone up significantly.

53:36Profits haven't. Yeah. So despite the margin being it was even better in the past, right? So it's kind of like where is it going? Follow the money. You will answer so much in life and politics and everything. Just follow the damn money, right? And it's like I haven't done the work but I know where it's not going, right? Yeah, yeah. It's not going through the shareholders. And, you know, just little things. Like the margin is not about what you may or may not be able to pass on to shareholders. It's more the question of how are you... Why are you charging so much to get these? For example... But as a shareholder, that's not...

54:15I mean, they're different constituents here is all I'm saying. I don't know. Right, okay. I'm not entirely sure shareholders have been badly treated given the maths of the ASX over that time. Maybe... I don't know where the costs are going. Maybe you're entirely right. Maybe there's some sort of something going on. But also, if there were 60 % margins, would it have got to this point at 60 % margins? Maybe if the regulator's asleep. The counterfactual is not, to my mind, not just there was obvious and inescapable upside that you've been robbed of because of bad management, that's all. Because you've already got the monopoly, you've already got the entire market, you can't grow any faster than you're growing unless you charge more, which is what we've railed against.

54:51I don't know, I could be wrong. I'm allowing for a counterfactual which is how much more would they have been able to wring out of this, you know, monopoly? And maybe a lot more. Maybe there's other action in the meantime, maybe another exchange turns up. The counterfactual is harder to know for sure without that allowing room for. Yeah. Which I'm not saying wrong because I'm not sure you're right, if you can get that grey area there. Well, the other thing is so this charge, let's call it, this capital charge,$150 million, like that's 15 weeks' worth of net profit, dude, and they've got until 2027 to come up with it.

55:29Like it's just, it's offensive, right? It's sort of like. I'm not going to defend ASX. It's a big number because we go, oh, it's a big number for me. It's a big number for you. It's a big number for everyone listening. It's like we made half a billion dollars in net profit last year. What? We have to put, okay, right. I thought you net profit's on nothing though, right? I mean, like. It's not nothing, but it's just like who, the people who are making the decisions aren't impact. Their pay has not gone down. They're not going to lose their bonus. None of that's going to happen. The shareholders might have a little less to distribute amongst themselves.

56:02So even then, not a huge amount. Yeah, yeah. Yeah, but, you know, it's just sort of like if you are going to be punitive, at least make it hurt, right? If the fine for pickpocketing is a naughty boy slap on the wrist, I'm going to be more inclined to pickpocket. You sold a hundred bucks, you've got to pay a fine of$5. Hang on. Yeah, like what's my calculus, what's my rational calculus if I go into Bunnings and walk out with as much stuff shoved into my trench coat as possible and if I get caught, I have to pay$10. I will be up there every day of the week getting away with where I get. Oh, you got me.

56:34There's the$10. Don't do it again. You do it every week, right? Get caught once a week, twice a week, three times a week. I'm still doing it. When you're talking about petty crime, everyone's quick. Oh, we've got to make a certain example and we've got to do this. When it comes to corporate malfeasance, it's a joke. It's an absolute joke. And I'm not saying it's nothing, but I'm saying it's certainly, it's not enough that's really going to, no one's going to lose their job over this. No one's not going to get their bonus as a result of this. No one's even going to think about this or talk about this in three weeks' time, right?

57:05So I was just sort of like, show me the incentive and I'll show you the outcome here. It's like, I just really, you're not giving me, you know, we can talk about carrots versus stick, but the stick is, you know, it's one of those pool noodles. It's not going to hurt, right? Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener.

57:30I've mentioned the Council of Elders before. I would love... We saw this with the ratings agencies during the GFC in the US, right? The smart people are all on one side of the trade. I don't mean that to be critical of the people at the ratings agencies, but the reality is the money is so large that unless you are absolutely in it for the public good, the best people are going to be already working at those businesses being rated, not the ratings agencies. Yeah. And I do wonder... How do we take them seriously, by the way? It's a whole other thing. I do want... Well, the market still does because interest rates are...

58:04Yeah, we won't go that path. I would love to see... Literally blew up the world economy and they're still... Like, it's just... Ask them again how much we should pay for our debt, yeah. Yeah. Just the people who are making the rules, I don't know the machinations, and I'm sure it's deep and awful, the Machiavellian and all sorts of stuff, of the way policy and regulations are set, not necessarily enforced. And so I'm allowing for the combination of the regulator, the politician, the lobby groups and the, what do they call it, expressions of interest or whatever they call it, call for submissions into how we should regulate it.

58:38Of course, the banks say, you shouldn't do anything to us because we're really good people. So I don't really know where it's set. Or if you did, well, economy will be in trouble, jobs will be lost or what. Yeah, so you better keep us on the side. That's what I wonder. And I don't know the motivations. I don't know whether they're being snowed, whether they don't care, whether they're looking for another job, whether they believe the bad news, whether the bad news is actually real, whatever combination of that stuff is. So the fine for ASX or the charge for ASX is largely it's because they didn't do enough of some really vague things.

59:14You know, you didn't keep your computer systems up well enough. From my reading, I haven't looked at any of the legal information. I don't know if it's publicly released. From my reading of it, this is one of those things where you kind of have to negotiate a settlement because I suspect ASIC knows it doesn't have that many legs to stand on here. Not because ASIC is not objectively pub test doing the wrong thing, but because unless the regulations are written such that here is the service level. If the exchange goes down for more than 0.01 % of the time, you'll be fined$150 million or an X percent of your profit or whatever the actual rules are.

59:48My understanding, well, again, I'm inferring, so none of this is actual statement. Someone feel free to correct me or just ignore what I'm saying next, either way. My sense is they basically just had to kind of do a deal with the ASX. Okay, you've been naughty. We can't really hurt you. We've got to do something. If you don't do something here, we'll make it worse for you later. All right, let's just grant$150 million and be done with it. And in the sense that that's not, maybe it's entirely the regulator's fault. That's not making me feel better, man. Well, no, I'm not trying to. This is hardly him giving me confidence in the system here.

1:00:18That's what I'm saying. So the Council of Elders thing, that's what I'm talking about. I'd like a version of that for actual regulation and legislation. You know, the really pointy-headed boffins who are actually smart people who actually have the money or don't need it or maybe the occasional poacher-turned-gamekeeper who comes inside and says, all right, I made a squillion dollars working for the ASX. Now I'm going to come and work for ASIC because I actually want to do the right thing for a change. I just, I...

1:01:10why are there so many lawyers? We find some sort of deal in between. And I suspect it's like that because the things they've done wrong, you know, ASIC said, oh, you didn't invest enough in keeping the systems running. Well, how much is enough? I guarantee, well, I shouldn't take guarantee. I almost guarantee there is nothing in the market operating rules which determine how much money needs to be spent keeping systems up and running. So if that's the case, I would say there's no legal grounds at all to find$150 million other than they've kind of agreed that there's something that we can kind of do and make go away so at least there is some punishment where to the black letter of the law, have they done things that are actually against the formal written rules?

1:01:49That's kind of my point back to what I was saying about the Council of Elders for regulation, which is as boring as it sounds. I think that's where the failing is. I said before, public ownership, you've got to run it properly. Private ownership, you've got to regulate it properly. there is so much poor regulation where regulated businesses get away with the stuff because the rules don't exist to keep them accountable I guess that's what I'm saying and whether that's it's really the regulators fault because they take the legislation and they do the thing the legislation says they have to or they do what the treasurer or the finance minister says they have to do rather than the black letter law says if your computers are down for this period of time I will fine you this much in which case open a shut case here's the money great done And, you know, was it up?

1:02:34No, great, you owe me the cash. If that was the case, this would have been settled months and months ago, I suspect. And I just... So we're clarifying the rules. Is that what we're doing? Yeah, right. But we're not doing that though, right? That's what I'm saying. So that's why, that's the Council of Elders bit for regulation, which I know is a horrible phrase. But we need some serious people to actually be looking at this stuff and going, hey, Treasurer, hey, Finance Minister, and it's not Labor, it's just, it's not Liberal, it's just whoever's in charge. Hey, did you realise there's actually no rules about how long the ASX must be up for or how much reinvestment they must do in their computer systems or what redundancy they must have in place.

1:03:07Really? Well, let's fix that then. Okay, good, let's fix it today. Good, we're fixed. It's not, you know, the ASX will complain about it, Shells will complain about it. There's always, you know, there'll be lobbyists and all sorts of crap going on. You know what I'm saying? I'm kind of, you know what I'm trying to say? I suspect there is insufficient, incomplete and not very commercially minded regulation in place. Oh, yeah, for sure. I suspect. Yeah, yeah. But we're not doing anything to address that, though. Right. That's all I'm saying. No, I agree with you. 100 % agree. Yeah, yeah. But I guess I'm saying...

1:03:38But here's a nothing fine and we can feel better and just go back to doing what you normally do, which is terrible. And by the way, here you go, CEO, $3 million for this year's work. Yeah. I'm just holding up... I'm not making that number up. Look it up. I'm just holding up the... I guess I'm trying to work out where we did it, what needs to be fixed and where. And it's really easy for people to say, oh, I see you can't do it in their job. And I guess I'm just holding out a view that it's easy to blame ASIC. I doubt it's a lack of enforcement, effort, interest, keenness. You know, I think it's probably more you've given us these tools.

1:04:11You've given me a hacksaw and a spade and told me to hammer a nail. Well, I'll do my best to try and do that, but usually if you give me a hammer, Prime Minister. You know, that kind of thing, that's what I'm trying to get at. Yeah, yeah, no, that's fair. But we're not, so. No, correct. But we should, and that's the point. Sinicism remains. Yeah, totally. But if things are going to improve, I think that's where we need improvement. I think asking us to do a better job without giving the tools to do the better job is a fool's errand. Look, we could fix so much in terms of corporate shortcomings or just public shortcomings in general just by having a good understanding.

1:04:44We have the science. We have the insight, you know, in understanding incentive mechanisms and just putting proper incentive mechanisms in there. I'll make this up without thinking it through and it's going to be more complicated than this. But if it was just sort of like, look, you've got a monopoly here. I would keep it very, very broad. But basically, you know, you've got to make sure that the markets are available. I don't care how you invest or don't invest in your systems. I don't care. All I know is it's got to go, it's got to be up and running. And every now and again, you do get unknown things that happen.

1:05:13It's no one's fault. It's just the nature of complex systems. But for whatever the threshold is, if you don't adhere to that, you get fired. Yeah. And the senior executive team is gone. Yep. Like, that'll sharpen the pencils. And that's got to be in the regulation so that it can do those things. Yes, yes, yes. That's my argument. But is that like me, I'm the CEO, I've completely been derelict in my duty. Yes. I don't personally bear any penalty as a result. Maybe the organisation I do, maybe on some weird bespoke podcast, they're a little bit mean to me. But other than that, it just completely washes over and it's forgotten.

1:05:52and it's like I'm just not going to try that much unless there I am personally, there is a personal consequence to me, you know, and it just comes with the territory. I love it. The counterargument is, well, if we do that, no one will take the job. I'll do the job for$3 million. I'll get a red hot go. I'm not saying I'll guarantee success at it, but I will really try and if I walk away after a year or two having failed with many millions of dollars in my pocket, I'll take the risk, you know. That's what you do. And your shareholders want it because they're all short-term as well. And, again, we go back to if it's a monopoly and a regulated monopoly by definition, then I think the burden is on the regulation, not the regulators, the regulation, so there is something to do.

1:06:37It's kind of, you know, even the... Here's the first... We'll get off this in a minute. In the AFR, it's the AFR's words, not anyone else's, but there's after... The corporate regulator, Dr. Dot, after delivering a scathing report of the share market operating strategy, culture and governance. And it's kind of one of those things where it's like, that's the last thing I want ASIC doing. I don't want government departments working out whether corporations have the right culture, governance or strategy. And that's the basis for the$150 million charge to be put in place, right? And so you kind of, that's kind of where I go from that idea of this isn't even a fine.

1:07:15The tools they have is, I don't think you guys are doing good things. uh please please please do good things until you do good things we'll keep the money as opposed to here are the criteria you gotta do this 5 15 148 things and every time you don't do one of those things i will find you it's in the law you know exactly what's required of you show me the scorecard and the scorecard comes you know the the copper fines me for speeding not for driving uh i look at your driving i really report about the way you drive and i don't really think your hand's in the right position on the steering wheel and you didn't check your mirror of three times and that's like you spent the rules are don't go faster than this you went too fast you know what i mean i think that's well whatever you're asking a regulator to review strategy and comments seriously government review strategy culture and governance i mean it's ludicrous right and i don't mean anything about asic i think asic do a really tough job as well as they can now it could be better probably but you know we blame asic because the outcomes are what we want and I just think that's the, a bit like the RBA.

1:08:15We blame the RBA when the government doesn't stop spending. We say interest should be X, right? Well, you don't, but other people do. Interest should be X and the Treasurer keeps on spending. It's like, well, what do you want the RBA to do? And I kind of feel like that with ASIC. It's like, what do you expect them to do? You've given them no tools. They've got to do some sort of report about this and then use the report with this really mushy, oh, its strategy isn't as good as it should be or governance should be better. It's like, it just, it makes no sense to me that we're asking regulators to make subjective decisions on this sort of stuff when the rules should be...

1:08:47If the policies and those writing the regulations are fair dinkum, it's a really simple one, as you said. Was the system available or not? Was there fraud or not? Did you... Were your money-loving standards appropriate or not? Right. Ten million for that, ten million for that, ten million for that. Good. Job done. Do it again next week and I'll fine you again. And we'll keep doing it until you get things better. Except find the individual. Maybe that'd chuff in the pencils, right? It would certainly help. It would certainly help. And let's put their entire bonus at risk, if nothing else. Oh, I do spend a bit of time reading remuneration, I can't even talk, remuneration reports.

1:09:20Not because I want to shake my fist at the sky with corporate pay, but because it shows you what they will be rewarded for. And if you want to know what are they going to, you don't know what anyone's going to do, but you don't know what they're going to try to do. It's like, wow, it turns out if they do this, then they will get a big, fab bonus. You know, the classic one here is things like EBITDA growth or something. Sounds good from a shareholder perspective. It just means I'm just going to go make a bunch of acquisitions because I'm guaranteed to get, I'm guaranteed to meet that KPI and therefore I'm guaranteed to get my kind of bonus.

1:09:50And at least I know where the North Star is set for these kinds of things. But one thing, anyway, that's beside the point. The point is that when you look at these reports, the thing that really irks me more than anything is it's not bonuses and big pay packets. it's more the fuzzy nature of them. It's kind of like it sounds good, but it's kind of like almost impossible not to get. There are some things that's like, you know, there are exceptions to the rules and really good ones, which will say we expect earnings per share to be above this threshold at this point in time. You can't, it either is or it isn't, right?

1:10:25Just like you've got to instill a culture of accountability and blah, blah, blah. It's just a word salad of feel-good corporate nonsense. It's like, well, how do I know if you did meet that? Who decides whether you meet that? Oh, it's all your mates on the board or on the remuneration committee who meet once a month and just going to wave it through. It's just like, turns out that that has always been granted and that has always been achieved. It's like either you're not setting the bar high enough or this stuff is just being waved through. And, you know, it's just these are the easiest stuff in the world to fix.

1:10:58But people don't demand it, so why would you? It's like life is good. My opinion would be very different if I was on the board for the ASX, right? But I'm not. Most people aren't. I don't blame them for trying to feather their own nest, but I blame the rest of us and those that should be more responsible and who have some kind of power over sort of these kinds of things, just allowing it to go through and giving the occasional tut-tut and talk tough and then move on, right? Yeah. Yeah, again, that's why the regulation is so important here because it's a regulated monopoly. there is no alternative choice for customers, suppliers.

1:11:34The way the market would normally sort this stuff out is you go to a better, cheaper, more efficient, more effective, whatever supplier and get the work done there where it can't happen when there's that natural monopoly as you started by talking about. That's the key. One more little factoid here just because I get my AIMA to prosecute the most recent annual report. Between 2021 and 2025, the staff headcount at the ASX went from 850 to 1 ,330. Oh, bloody hell. They spend a quarter of a billion dollars a year on fixed remuneration in total. Now, you can't run it on three people. Right. 1 ,300 people for largely an IT company, which isn't actually doing any R &D here.

1:12:21You've got legacy systems that were built. Yonks are like, what are you doing? I'm all ears. What are you actually doing? That's where the money's going, right? Are there new compliance regulations? I'm trying to work out. I mean, are they just growing for the sake of it? I'm trying to remember whether, I can't do this in my head quickly enough, but I'm trying to work out where or when the ASX was tasked with additional oversight or market management or anything else, but I can't think of any meaning, maybe some money laundering stuff. Well, okay, so you've got an extra, you've increased the staff count by 60 % over five years.

1:12:52And there's all on regulatory and compliance. I guess there's a lot of people looking at that problem. I guess there is no regulatory issue. Oh, wait a second. We've just spent the last 15 minutes talking about a massive regulatory failure. So it's like you've spent all this money and hired all these people and you still can't do the job right. Like it's just you don't, you know, God, it's hard not to be cynical. You do it very well though. I do it well. The weight of the world has crushed my spirit a long time ago. Can we finish quickly speaking of regulation on woolies and coals? Yes. And the price gouging stuff.

1:13:26Yes, we can. This is, I want to, part of me is glad this is the last episode for the year because we've done some ever-growing stuff that isn't just really naive and cynical and horrible and that makes me feel better. So this is about a slog. Things get better from this weekend onwards.

1:13:46So that's all for what I'm going to say, which is this is entirely and totally political, right? It's entirely and totally political because the government wants to be seen to be doing something, almost in quotes, It almost should be a bumper sticker. Seem to be doing something on the cost of living, right? Why? Because it's everyone's biggest issue. And you've talked about some ways they are making it worse rather than better. Some ways, yeah. But the wallpaper here, the papering over the cracks, is the whole, well, look, maybe Willis and Coles maybe possibly have been price gouging and maybe possibly might do it in the future.

1:14:17So we, the government, are going to set up for you, the little guy, and we're going to stop those big, bad supermarkets from price gouging and profiteering and doing all those bad things to you because that really fundamentally is the problem. It's nothing else. It's not the billions of dollars we spend on EVs or batteries. It's not the money we spend across the economy everywhere else. It's not the way we're running the economy. It's not general inflation. It's actually just supermarket shelf prices, and that's the real issue. And so what we're going to do is regulate all super... No, no, I'm not going to regulate all supermarkets.

1:14:44We're just going to regulate willies and coals. So if other people are price-gaging, that's fine. Just willies and coals can't. Okay. And we're going to give them some rules. We haven't announced the rules yet. The rules will be in place before this takes effect in July 1, 2026. Okay, so there's nothing actually happening to announce. No, no, but just know that we're going to do a thing. Now, we don't know. And here's the other thing, by the way. When you don't give detail, it's impossible to be criticised because what am I going to say about the announcement? Is it good or bad? I don't know. They're just going to check action on press coaching.

1:15:17Is it going to be draconian or not? Is it going to be toothless tiger or not? I don't know. They didn't say anything. They just said they're going to do it. So they get the press. Treasurer says, promise me to crack down on price gouging from supermarkets. And 95 % of people go, yay, Treasurer, thank you for helping us. Oh, I feel so much better now. You're a really nice guy. You're really trying to help me and trying to help make sure I pay less at the supermarket unless I shop at Aldi or unless I shop at one of the IGA stores or unless I shop at Costco. You're not going to help me in any of those places.

1:15:42You don't care about me being price gouged there, right, just at Woolies and Coles. And so the whole thing just gets absolutely stupid. And then in the same breath, by the way, this is not overly relevant other than it goes to the political thing. And by the way, if you love labour, I don't care. I'd say this about bloody... Is it Ted O 'Brien, the Shadow Treasurer? I don't know who the Shadow Treasurer is. Not sure. They've been radio silence for months. I'd say this before it's the Liberal Party. I don't... You know, by now I don't give a stuff. They also said, oh, and by the way, we're going to make sure you can use cash to pay for essentials at servos and supermarkets, except only just the two supermarkets we talked about, only a few servos, just the big ones.

1:16:14If you go to small... Well, severely limiting your ability to actually withdraw cash without being questioned. Right. So, and again, what's it doing? It's pandering to people who want to keep using cash. And there's real arguments for it, but it's only for essentials and it's only in the big supermarkets. So you tell me there's like 15 places I can use my cash. But if it's important, it should be mandated everywhere. No, no, it's not that important. We just want to say we're doing a thing. And the big guys will probably keep taking cash anyway. Now who's being cynical? Well, it's the politics of it that get me in this one, right?

1:16:44It's not the, well, me, yes. But it's just so frustrating because the policies are useless. They are worse than useless because they give the impression of actually fixing a problem without actually doing anything to fix the problem. They'll play well in the electorate because people believe and I don't blame that we use nurses at Fireys all the time. We should choose different professions at some point. I don't blame the nurse for shopping always going my god that cheese was$5. I think I remember it being$5. Now I'm paying$8 for that cheese. Now$5 might have been$19.93 but you just kind of have this.

1:17:17I've said before, you still work in a grog shop. I still can't believe I've got to pay more than$25 for a case of beer, right? Because I used to sell cases of beer on special for$25. Or a schooner. It used to be$3, right? Again, I'm old. So you go to – it's like$10 for a schooner? God, that's gone up a lot. $10? Where are you buying a schooner for$10? I'll go there. There you go. I went somewhere in the city the other day. I paid$18. It was a pint, admittedly, but still. If you put a beer in the city, mate, come on. I'm drinking local. And I'm not drinking the fancy craft beers. It's why I don't go in.

1:17:44It's a bad day if I've got to leave the mountains. Hot tip. I'm screwed up two years old, mate, is my go-to. Nice. I've been having a couple of days over Christmas. So the idea that – so people – we talked about this a little bit before. I won't do too much on it. We anchor to prices that we're familiar with. So I know the price of beer has gone up. I don't really know how much over the last five years. It feels like a lot. So maybe I'm right. Or maybe I just remember the price we used to pay in 1998 or 1995, whatever year it was. And I'm like, it feels like it's gone up a lot. And that kind of sucks.

1:18:18And maybe the pub's screwing me here. The cheese I mentioned before, the nurse goes, well, these cheese now, I thought it was five bucks, now it's eight. That's a lot. I mean, now, was it five bucks in 2020 or was it five bucks in 1994? I don't know. It doesn't really matter. But also, where am I being charged that higher price at the supermarket? Well, then the supermarkets are putting the prices up too much. I mean, it must be them, right? Because who else would it be? They're the ones setting the prices. That's the price I pay. Therefore, it's bad. And that's the... And again, the nurse doesn't have to understand economics and supply chains.

1:18:46They're saving lives. They're looking after patients, they're changing bedpans. They're doing just their... They're living their lives, right? I don't want them to have... I don't have to understand medical issues because I've got someone to do that for me. Nurses, doctors and coppers and fireys shouldn't have to think about, you know, which level of the supply chain price they're going up on. For a government to say, we're not just going... You're right, I'm cynical. We're not just going to say, look over there, it's those bad people who made inflation. We've got to stop them hurting you. I'm going to make the bad man stop.

1:19:14Like I said, I'm with Michelle Bullock all the time. Jim Chalmers says... Because it's definitely them. It's not us. Right? It's not us with our magic money printer. It's definitely the supermarket. But it's also anywhere else in the supply chains. Imported food costs as much more as locally produced food. It's not even just the money printing thing. It's just fundamentally prices are up. Yeah, but it's all downstream of the money printing. Some of the money printing in some of the areas. Let's look into that one. The prices are up. And so, you know, the – what's the word? I don't know. The lack of – the willingness to simply pander to that and pretend you're solving the problem, that's the thing I'm annoyed about.

1:19:52And I've got to say, I don't own Woolies and Coal shares. My son owns a fraction of a Woolies share. I think his shares is. I can't remember what – I think he does. Woolies, I think.

1:20:02To then only say – and I'm not going to be nationalistic rah-rah about this or even on behalf of shareholders. But Costco and Aldi and IGA can do whatever they want and Willys and Coles are the only bad guys in the room. It's a nonsense solution for a non-existent problem. Performative nonsense. Of course it is. Performative nonsense. The difference is here is we've actually, there are rules that they must produce financial statements every year and they're audited and we can look at them. Willys profit about 17 % last year, by the way. If their price cash is not doing a very good job of it. Yeah, I mean, I've looked at it.

1:20:31Other people have looked at it. Anyone listening can go onto the ASX's incredibly great website and look at it. and if you can figure out how to navigate there and it doesn't crash all the way, but you go there and you'll figure it out and you'll look at it. And margins are about the same. So in other words, they could be accused of passing costs on. And again, before you get too outraged by that, we all do it. Like in response to the cost of living crisis, we all ask for a higher pay rate. In other words, we're trying to pass the cost on, right? It's all the same. So, I mean, I actually did a bit of analysis on this recently.

1:21:14There's a rule against research on this podcast. You know that. Well, I did a little bit anyway, just for another pet project. Okay. And over the last 20 years, Woolies has delivered for its shareholders, let's round it up, it's not quite, it's 9.2 % per annum or something. Let's call it 10%. Okay. It's pretty good. So profit growth, share price growth? No, profit on a per share basis. in real terms adjusted for inflation, especially flat. So what was the 9.2 %? Just to give us the, what was the 9.2 %? 0.9%. Sorry. So you mentioned an annual gain. You said, was it 9.2 %? Oh, sorry. A compound annual growth rate of 9.2 % for shares.

1:21:58So you bought shares exactly 20 years ago. You've compounded your money at, let's call it 10 % per hour. Sorry. It's really good. What's wrong with that? It's like, well, again, what matters? The nominal or the real terms? Like, okay, so knock a little bit off for that. The other thing that's very interesting is a big part of the gain has been caused by multiple expansion. So the market now in an era of, again, I won't go down there, but an era of easier money, higher premiums are being paid for each dollar of earnings. But when you strip it out, let's forget all of that. Let's just look at the business.

1:22:32all of its growth has come from population growth and a little bit of productivity gains. I'm not saying that's a bad thing. That's what you would expect. You're an incredibly mature business. In fact, if you didn't do Endeavor and Masters and all the other kind of stuff, you just looked at the, you just looked, actually, all of those outside of the supermarket business has been a net detractor from shareholder returns. Wow, there you go. Okay? So I said I'm like. Stop trying, people. It's worshipping at the altar of growth for growth. So we've got to grow. It's like, yeah, but how's that worked out for you?

1:23:05And they're not idiots and they're very well funded and they've got all kinds of advantages over access to credit and all the rest of it and they still couldn't make a go of it. But at the core of it all is an incredibly, incredibly well-run supermarket business. One that has meant that anywhere in Australia, more or less, for 98%, 99 % of the population, within a five-minute drive, you can have a range of goods that just is unheard of. Right. You know, like 30 years ago, it's like I'm buying cheese from the south of France and then I'm buying, you know, whatever. And they do all of that and they take 6%, 5%, 6 % in net profit at the result of it and it has been consistent.

1:23:47So they are not gouging. If they were gouging, you would see these net margins increasing. I'm not trying to even defend them. Screw them. I don't care. But my point is it's just such an obviously false target for all of this kind of stuff. And that of all the productivity gains, again, you strip out inflation, you strip out multiple expands, you strip out all of this kind of stuff, and it's kind of like just treaded water for the last few years with most of those productivity gains being passed onto, you guessed it, the consumer in a lot of ways. So it's sort of like it's a complex picture. And it's just this idea that people get angry whenever a business is seen to be making money or seen to be putting prices up, they would put their prices down if their costs went down because if they didn't, their competitors would and then they would lose market share and then they would be forced into competing in that kind of dynamic.

1:24:38And that's why I say it's all downstream of the money. Why is it that everything is more expensive? And yet at the same time, our farming techniques have gotten radically more efficient. So we're better at making food, right? We're better at transporting food around. We're better at everything and price has gone up. And this is why it's so cynical of the government, of all people, to sort of turn around and then blame these organisations. And again, screw them. I'm not trying to stand up for them. They can stand up for themselves. But it's just so obviously a false target. And it's just smoke and mirrors kind of things.

1:25:13Like everyone don't look at what is actually happening. Look at the very visual surface level impacts So if you're a grocery shopping cart and when you put fuel into the tank and it's all, ah, and it's bad and it's business and it's profits and it's all of this kind of stuff, it's definitely not us spending well more than we're collecting and then printing the difference, you know, and just running those money printers hot. Like it's, once you see it, it's very hard to unsee. Yeah, I don't know. I whipped that horse to death. But you either see it or you die. I don't even know. I'm at a point where I tie myself in knots because you kind of, You try different ways to explain it and it's just, all I can do is come back to a Monopoly board analogy and if you don't get it, you don't get it, I suppose.

1:25:58But, you know, I'm not happy. I went to the grocery shop. I did a grocery shop on the weekend. I spent 500 bucks. Yeah, it's huge. A family of four. We weren't buying lobster, man. I can tell you that. Like we hadn't done one for a while, but it was just, it's probably like seven, eight bags of those green bags. That's what gets you. How many bags have I got? And it was a little bit of a Christmas show. Anyway, it's just so insane. but the margin that Woolies was making on that was the same as it was 20 years ago. Nice. I want to pick up the 5 % to 6 % profit you talked about and I want to recast that because what effectively, so what is 5 % profit?

1:26:365 % is$0.05 in every dollar of sales is left over for the owners of the business, right? Put another way, that is all you are paying above the cost of the provision of that service for the value that you get. Yeah. If you were able to somehow source all of this stuff wholesale for your weekly shop and you had to do all the work, you had to find it, you had to negotiate a price and you had to get it transported to your door and you had to do it for whatever you decided you wanted that particular week. Yep. Could you do that for 5 % above cost? And not only that, mate, but scale matters, right? And this is where people say we should break up all this in coals.

1:27:15Now, maybe we should. I don't have a really strong view on it. What I would argue, I think I have on this podcast before, really clearly is if you were to, let's say you break wool and coals into another three pieces in total. So there's now six supermarkets rather than two, right? There's six CEOs. There's six trucks. There's six stores. There's six lots of staff. And there is one sixth or one third actually because it's two beams cut into six pieces. so there is a third as much volume in each of those. So the trucks are more often going there half full. The people are still at the checkouts but they're not processing as much stuff so you need more people overall.

1:27:56The CEOs still get their pay. The HR people have got to do what they've got to do. The reality is I have long, given the margins are so incredibly tiny, I used to work both for Woolies and for grocery suppliers so I've been on both sides of this fence. I would put a very meaningful amount of money on the line to say that if you broke them up, the margins would be lower in percentage terms, but the prices would be higher because they've got much, much higher costs. You've just tripled the cost base. You would find that more money, where it would be a good thing, you would probably see more of...

1:28:34Whenever you look at supply chains, there is value accrues generally in one or two kind of areas. So the people who do get screwed are the suppliers, right? You speak to anyone who sells directly to Coles and Woolies, they're not fans of that. So in a more competitive environment, they might have more options to sell their wares and they would probably be able to capture more margin as a result of that. And you can have a view on that and I would say, yeah, that's probably better for them. But remember, again, back to our earlier conversation, there are trade-offs always. And you've always got to say, well, well, okay, what is it?

1:29:12Oh, you'd be paying more for your groceries under that scenario. Okay. Then I'm not saying good or bad, then just statement of fact. It's like the whole buy Australian kind of thing. Yeah, I understand. You know, it's just like, okay, we should stop buying all of our stuff from China. Okay, cool. Just understand that the price is going to be high. I'm not putting a value judgment. I'm just making a statement of fact. That's what it is. Let's not pretend that there's a free lunch, that I can only support Australian industry and still pay the same amount. Let's not pretend that we can have 20 different supermarket supplies and I can still pay the same amount.

1:29:44Like these are conversations to be had, but there is no secret, you know, there's no way to thread the needle here that doesn't result in you paying more. And maybe we go, okay, that's the price that we need to pay. And that's cool. We can have that conversation. So I'm not putting a value judgment on it, but there's no other way around this kind of stuff. And your point is just really, look, the way it is, again, It's not perfect and they do land banking. There's a whole bunch of egregious stuff that these guys do. So screw them. As I said, I'm not trying to sort of defend them all. But a lot of these actions are going to have unintended consequences.

1:30:20They don't really address the problem and either way you're paying more for it. Yep, 100%. Would that happen, don't you? It's been a bit of a downer episode today. Oh, it's just so hard to be positive. We need some good news. That would be nice. Let's try and... I'm not going to be able to promise this. Let's try and find more good news in 2026. Okay. Every now and again, just occasionally. We might try and actually highlight some stuff that is good and worth talking about. It's funny, you know, we've done some pre-records already, so I kind of know what we're talking about in some of the upcoming episodes, but it is really tempting...

1:30:55It's entirely natural to talk about the stuff that needs to be changed because things are working. It's not worth... We should acknowledge it, but, you know, Hey, how good are cars? Yeah, cars are great. I like cars too. Anything else? No. Okay, so what about this thing? Oh, that's bad. Oh, really? Tell me more about that. People, humans, spend more time talking about this stuff. And we should, right, because why not? If you've got a limited amount of time, opportunity cost, we waste on the stuff that's working really well. We say, actually, let's just focus on stuff we could fix. That would be a good use of time, right?

1:31:27And so what that ends up meaning is that most of our discourse, and again, not just the podcast at all, just in life, is spent on either disagreement or things that need fixing or could do with some addressing. I think that's natural. But, yeah, we'll try and be a little bit positive in 2026. I think it's worthwhile. That promises. We'll try. Oh, dear, I'm a happy note. Will you come back soon? I am very hopeful for the future, honestly. I really am. And it's something inspirational in the fact that despite the systematic or systemic failings that we do tend to move ahead. I mean, humanity's been through some dark periods.

1:32:05You go back long enough. Like we've bubonic plagues, all kinds of world wars, you know, and we do, we progress underneath a system with all kinds of failings. So that's something to be hopeful for. But it's not too much to also at the same time say things could still be better and there is something worthwhile worthwhile in pursuing a better path forward. And if it comes across as craven cynicism, then, okay, it's a bit of fun at the same time. I bet that too. Will you come back on Sunday? Yeah, yeah, mate, yeah, I will. All right, until then, have a great first half of your weekend. And full on.

1:32:43Cheers. The Motley Fool and people appearing in this program may have positions in the companies mentioned. General advice only. Please speak to your financial professional to understand how it may pertain to your situation. Subscribe to the free newsletter at fool.com.au forward slash listener. The Motley Fool operates under Financial Services Licence 400691.