The Met Gala and the curse of arrogance. May 8, 2026

27:25Even with the framing of the budget coming up next week, it is about the two-speed economy and intergenerational wealth divides and all of that. So on that theme, let's just pick a little bit below this as well. So the factoid that most people are probably aware of is that a third of people rent, a third of people have a mortgage and own their home, and a third of people own their home outright. So when you get to above, and this isn't an anti-Boomer kind of thing, it's nothing like that. But we've got to remember that when the RBA does these things in the name of helping us, well, they really are helping some people more than others.

28:05Correct. If you're a – so this is – there's about 10, 12 million households in the country. So, you know, because we don't all live by ourselves. So there's the 28 million of us or whatever. But I think – I want to say there's 10, 11 million, something like that at home. So there's like 3, 4 million households that are completely mortgage-free. The people are in that kind of – 11 million. 10.9, mate. Well done. Oh, there you go. Okay. Pretty accurate. Yeah. The majority of those people tend to be at an age where, and good on them, I hope to be at this point sooner rather than later, where the vast bulk of their spending is discretionary.

28:48Right? Think about this to anyone who's sort of like 45 and under. Imagine this. Imagine me. I take away your mortgage repayment. I take away your rent. What does that do to your capacity to spend? It is everything. It is everything, right? And so for these people, the RBA has just said, we're going to give you more money. Not only are you the richest cohort in the country, and on average, these households are worth about$2.3 million, according to Gemini. and they spend a much higher proportion of their income on discretionary things, you know, playing golf, going to cafes, travelling around Australia.

29:32Again, I'm not really saying that. It sounds like I'm denigrating. It's like live your best life. Absolutely. But, again, the coverage is so myopic and narrow. And we're not talking about 8 % of the population. It's a really big number. It's like we're going to give you, you know, all that money in your term deposit? it, you're going to get even more money now. Fantastic. Right. And like, so it's always like what we're really saying is like, Hey, we're a bit of tough love. Sorry guys, we have to do it, but it's all for your good. It's sort of like, actually we're really putting the pain on the younger people who are already barely keeping their head above water.

30:09And at the same time, and this isn't any great insight from me, where is all the spending coming from? It's coming from the people who have the capacity to spend. Now I ask you, if you're in this one third of the country, after this rate decision, are you going to cut back? Are you thinking twice about your trip up the coast or around Australia? Are you going to spend less on petrol? Like, no. Not only are you not going to be influenced by it, if anything, you've now been given a greater capacity to spend. Now, I know it's a blunt tool. It just, it is what it is. So, you know, they don't have, the government has incredible capacity to do a lot of things, which we can get to later.

30:46But the central bank doesn't have that kind of thing. But I just want to highlight just how unfair it is. And if I hear another 59-year-old economist tell me why it's good and we've all got a band together, and I know that you don't have bugger all of a mortgage, you know, it's like it's so easy to say we have to, you know, tighten our belts. But not you, though, bro. Not you. We do, but you're making them instead. But not you do. And to your point, literally some of us need to lose our job. Not you because you don't have a job because you're retired and living the life of Riley. But I have to lose my job.

31:25So I've taken one for the team and I find it so egregious and so unfair. Here's some other stats for you as well. Roy Morgan put out a report, I guess, earlier in the year. And they're talking about the mortgage stress and just how big that is. So it's interestingly, the IMF, I think, defines it as, I can't say it with a straight face. if you spend more than 25 % or 30 % of your after-tax income on servicing your mortgage, you're in mortgage stress. In Australia, everybody's going, what I would give to spend 30 % of my after-tax pay? What? Who's doing that? And it's something like, oh, God, I've lost the tab or I've closed it down now.

32:1230 % of mortgages are in mortgage stress. This was done in February. One of the questions they asked was,

32:28how easily are you able to wear higher interest costs? And of those people, so at 9%, about 300 ,000 people. Again, these aren't edge cases. There's always some edge case you can point to to make any point. But when the numbers get this big, it's kind of relevant. They said if rates went up once or twice, and it's actually gone up twice since then, something like 29 % that they would default. Now, that's what people say. Maybe they can find a way to do it to make it work. But here's the other thing. The RBA is at a point. And this is my lot. Anyone who's been listening to this podcast for years knows this is my standpoint.

33:09They will talk a tough game. Let's not forget, we're talking about that. Like the sky is falling and we've gone up like 75 basis points from very low levels historically, right? And the sky is sort of falling in. Given those stats, how much do you – and let's say that in my base case is inflation is here, it's higher, and it is for longer for a whole bunch of reasons that I'm more than happy to go into, but for not this point. They cannot increase it much more. Let's say that they said, that's it. We're actually forgetting about unemployment. We're only going to kill inflation. And they can kill inflation by making everyone lose their job and absolutely cratering the economy, but they will.

33:49And that is the trade-off. And they're not going to do that. The political pressure is way too great. And, frankly, they have a dual mandate. It isn't just above inflation. So I am still sticking. My flag is firmly planted on the same hill it's been planted on for a while. You know, it's just sort of like they are not materially lifting interest rates from here. They are not because they cannot. Or if they do, they are doing it with full knowledge of the fact that they are sending us into a very, very, very deep recession. And so your jawbone, you talk it up, you say all of these kinds of things, and you pray and you hope to God that inflation comes a little bit down.

34:28because if it doesn't, we're actually heading towards a world where stagflation isn't off the cards, man. It is not to be a doomer in any way, shape or form, but it's kind of like we can hope that, okay, we'll cop much higher inflation than we'd like, but at least we might be able to keep up with it. You know, at least we might be able to sort of stay on the treadmill and have a bit of a red queen effect. So we're not going, we're running faster to stay in the same port, but at least we're not going backwards. But if that doesn't happen, then it's sort of like we get the worst of it. We get rising unemployment, we get stagnating economy, and we're all copping, you know, 4 % inflation or something like that.

35:07And I feel as though if this doesn't work, and how can it work in and of itself? I'll throw back to you in a second, and you can make a very good point about what the government should be doing, which we've made many, many, many, many times before. But if it doesn't work, that's it. There's no more tricks in the hat to pull out. I mean, I genuinely put it to you. If you're, boom, you're king of money, I mean, the Reserve Bank governor, and you get to make the choice, what would you do in the face of persistent inflation? And so kind of this is the point I've – and this is what I was talking about before about kind of the mature conversations, right?

35:45Because we have got it solved. We, the RBA, the government, the society, we can have our views. The question is not which solution solves all the problems. The question is which trade-off are you prepared to accept or make, right? There is no solution that solves all the problems. Right. And so in the short to medium term, and again, long-term questions about the rate of inflation and sound money and other stuff, we've gone into plenty of times. We can go back. But I'm delineating the two in terms of those two contexts. In the short to medium term, the powers that be are having to – I mean, they could choose to do nothing, which is still a choice, right?

36:26So I will say they're having to. We can argue about whether that should exist. But they're having to decide between higher inflation or higher unemployment. And it just is, right? And so even to your point, you kind of said – And one always wins in that. When the push comes to shove, one always wins. But we have to make that choice either way, is all I'm saying. So there is no scenario. The choice that they make is, and they're both bad choices, but given the choice, it's like I would rather inflation run hot and everyone have a job than everyone lose their job and inflation come back two hours higher.

36:57Because one is, they both suck. They're both terrible. But one's far more immediate and directly painful and politically poisoned than the other. And yet I'm not sure that's always the best choice, which makes me sound like a real bastard, right? And so let me be a bastard for a second and say nationally, it's like the road toll, right? We choose a set of road policies that allows 300 people a year to die on the roads. That is unquestionably a fact. Do we want that to happen? Of course not. Would it not happen? Of course we would prefer it not happen. Are we prepared to make everyone drive 20 kilometres an hour to get there?

37:29Hell no. We make that choice. We do. We don't put it in these many words. We never put it in these many words. And no one's going to put it in that many words because it makes them seem like heartless bastards. But the reality is there is always going to be that trade-off. And apply it to any part of the world. We could have 15 lifeguards at every public swimming pool and no kid would ever drown in a public swimming pool. We could put lifeguards in rivers. We could do that. We could stop drownings tomorrow. Are we going to do it? No, because it costs a lot of money. So we're accepting that trade-off.

37:56And go through every part of life. We could make every cafe have a health inspector to test every pie that comes out of the oven just in case one's got some sort of dodgy bacteria in it. We could stop food poisoning tomorrow, but we don't because it's too expensive. And we can't do all the things because we can't afford all the things Otherwise, we'd all be health inspectors and lifeguards, and no one would be actually earning the money that pays for those things. And so we have to admit to ourselves, and we don't. This is the worst part of public debate at the moment, writ large, is the inability to have serious conversations because the soundbites win and cry everything else out.

38:28So when we talk about the economy, there is a world in which we should have had a recession already, and unemployment would have gone to 8 % and now be back down to 5.5 by now, and inflation would have been 10 % rather than 30 % compound since 2020. Now, we have been told for decades that a recession is the very worst thing that can happen to an economy. It should be avoided at all costs. And you've talked about why, mate. That's the political reality. And that is the electoral reality. That's the other thing. It's the electoral reality. I'm not blaming the polis in this instance. The prime minister who presides over a recession loses his or her job.

39:00They just do. Because we are going to say that bad man - And recessions do suck. Let's be real about it. They absolutely suck. And that's what I'm saying. They're bad choices. But we're not even having that conflict. We've been told recessions have to be avoided at all costs. They are the worst that could happen. Now, they suck, as you say. Are they worse than 30 % compound inflation? I'm not sure they are. Now, I'm not sure they're not either. But let's at least acknowledge there's a level. Is a recession better than 50 % inflation, 100 % inflation, 400 % inflation? At some point, you say, yes, I'd rather have a recession.

39:29And that's okay. And that's not to say I don't care about people who are put out of jobs or the businesses that fold. We're saying at a national view, you mentioned 11 million households, 28 million people. At some point, the national well-being, as ugly and average and badly distributed as it is, needs to be determined based on net-net what is the best result. Do we want 14 % inflection to have zero unemployment? We can have that tomorrow. We can literally do it tomorrow. Do you want to do it tomorrow? Let's do it. Okay. We could build a railway to parks and then stop it halfway through. Exactly.

40:01After spending$42 billion. That created some jobs. You made the point about digging up the desert with teaspoons or whatever your analogy is. We could do that tomorrow. It would create stupid amounts of unemployment. That's Maynard Keynes' example, actually. And we could do it. And so the reality is we are choosing – we don't always confront the reality of what the choices are because we've got about our lives blithely, and fair enough. Just we've got to remember those choices are within our grasp. So am I sure that a shallow recession wouldn't be better than ongoing inflation? No, I'm not sure that wouldn't be better.

40:34But it's an option. but because we've been told that everything is always the worst case our politicians, our central bankers our politics, our electoral choices are going to be framed that way because we've allowed that to be the dominant conversation rather than, here's two bad choices neither is good, but one is not evil and the other is not acceptable just because we're used to thinking that way, here is the cost of inflation, here is the cost of, even interest rates mate, you made the point we both agree, government should do more so the RBA could do less, but even with rates, rates go up and they go back down, right?

41:08Prices go up and then they go up and then they go up and then they go up, right? And so that's the other thing that if there's anything worse than too much inflation, it's deflation. Oh, you want to send chivers down a central banker's fine. Use the D word, the end of the world. What? Life is going to get easier for you? No, no, that whole thing would collapse in a pile if that happened. Paradox of thrift, Haven't you heard about it? So the point is we – no, it's a good point. But that's all – I'm ranting just to say that when we allow the soundbite of we should have avoided a recession at all costs, that's the worst thing that can happen, we are badly short-changing the national conversation because there are circumstances in which it must be true that inflation is worse than a recession at some level of inflation.

41:55It's just pure logic and reason. They're both bad, in which case where the lines cross. And that'll be a subjective view for different people. But I think the point you're making is at some point for each and every one of us, there is the tradeoff, which is like, actually. I would actually go back a step further and I would frame it differently. I wouldn't even frame it as a choice. Like, you know, that someone has to make the choice that there is a recession. We and central bankers tend to look at the recession as the anomaly. Something is wrong. We need to fix it. And I would deframe that entirely.

42:34And I would say, no, the recession is the consequence of the previous mistake. Right, right. The recession is the economy trying to heal itself, not by direction, not by control, just because it turns out that a whole bunch of people borrowed a whole bunch of money. They started, they put it to uses that didn't have enough of a return to compensate for the debt. Debt started to fail. Businesses closed. Jobs were lost. Does it suck? Yes, it did. But it's like, but the reason this is happening is not just out of the blue. It's happening because we made mistakes. Now, this is always, even if you take a, take my Nirvana world of hard money, you're still getting recessions.

43:19You're still getting economic cycles. It's not, it's the economic. It's human nature. Yeah, exactly. We all get a little bit overexcited every now and again, and then we get all super, there will always be cycles, right? And so what do you do? You can say, well, I would like lots of little cycles. Things get a little bit overheated and then they get a little bit, you know, and then we have a little bit of a correction and we can do it that way. Or every time there's a crack, we can like print ungodly sums of money and throw all kinds of deficit spending at the problem, paper it over, and then face a bigger problem down the track.

43:57Like, in fact, actually create the conditions for a bigger problem down the track. And when that problem happens, what do we do? Let's do the same thing again. So we're still going to have a recession. I don't know when or how, and I'm not trying to make any prediction other than at some point. I don't think anyone would be bold enough to, Gordon Brown said it famously once, but any right-thinking person is ever going to go up there and say, we will never have a recession again. So the choice is that. And again, it shouldn't be framed as something with some person with a hand on a lever here as well.

44:32It's like when bad decisions are made, there are consequences. You drink too much to get a hangover. You teach this to your nine-year-old. It's like if you drink too much of that bottle of Coke, you're going to feel really sick. Your teeth are going to rot and you're going to be pinging off the walls. It's not a good thing to do. But okay, rather than let that – it's the classic alcohol hangover. kind of analogy i've really got to come up with a better one but it's so perfect right it's like we we live in this society where it's just like we would rather just remain drunk forever than ever have to deal with a bit of a hangover and and get healthy again and and oh man i i i i we are the the trouble with it is and and you've read broken money and you've you've probably read or at least know Ray Dalio's thesis and his sort of big debt cycle thing.

45:25It's great YouTube videos on both of those things, actually. Really well done. And they all make the same point is that actually you can do the latter. The thing that I'm criticizing, you can actually do it because it does actually quote unquote work for a very long time in human experience. Like I'm talking decades. These things will last. They've done it before, right? And arguably, we kind of started going down this path really around the dot-com kind of year. Maybe even the 90s recession was like, that was the last time we had a proper recession, right? 35 years ago. So you've got to be a realist here and acknowledge that, well, yeah, but Andrew, it kind of clearly does work.

46:09There is a counterfactual out there where nothing sort of happened, but look what we've done in the meantime. And that usually tends to be the argument that people go with. But it's just like it's not a free lunch because free lunches don't exist. And while it quote unquote worked, when you look at a lot of these aggregate kind of figures, it also leads to massive wealth inequality and intergenerational wealth divide or cost of living crisis. Like name the issue of the day. Like these are all stuff that we made because we didn't want to allow the economy to heal itself, not allow someone to manage it like Jim might like to have visions of doing or anyone like manage it.

46:48It's just people realizing that this thing doesn't work. And I guess I'm going to stop doing the thing that doesn't work. If I don't know that it doesn't work or I'm not going to be if I'm going to be bailed out every time something doesn't work, guess what? I'm just going to keep doing the thing because I'm going to make out like a bandit in the meantime. And yeah, everything poor are going to get poor and asset prices are going to do all kinds of stupid thing. And it's going to, quote unquote, work at high level aggregate figures and very much for those people on the right side of things as well, which is a significant number of people.

47:19So you can make these sort of arguments that we had to do it. And from people in certain positions, and I'm not talking, quote unquote, elite. I'm just talking about middle to upper middle class kind of people who are, you know, fortunate enough to get on the quote unquote property ladder early enough and, you know, do all of these kinds of things. You've been very much a benefit of a lot of these policies, but you must acknowledge that benefit has very much come at the expense of other people. And my broader point is, is that even though it quote unquote works in that sort of topsy turvy kind of way, even then it will eventually run out of puff because the math just don't math no more after a certain point.

47:59You get to a point where the US is getting into now, you get to the point where the interest bill is bigger than almost any other bill. And it's a classic debt spiral. It's just, it's the person with the credit card who takes on another credit card to pay off the other one. You know what? You can do that. You can totally do that. But you can't do it forever. Yeah, exactly. That's the mirage that we like to pretend. So I don't think you're saying, oh, we should have a recession and it's just not me. It's just like you have to recognise that the recession itself is not the anomaly. It is the correction of the anomaly.

48:40And the road to hell is paved with good intention. But by helping, quote unquote, you're actually only helping some people at the great disadvantage of others. Usually the people who have made, you know, all the things that people are angry about. You know, business class, like, well, yeah, they're the people we're bailing out here. These are the capitalists on the way up and the socialists on the way down. These are the people that we are helping at the expense of the have nots. And while fostering conditions for even bigger issues and ultimately unsolvable issues down the track. And unfortunately, we won't do anything differently because of the political reality of it.

49:18Which is the treasure of the whole thing. So it's, I mean, I don't know. I wouldn't be silly enough to short it. I certainly wouldn't try and put a date on it, all this stuff. But we'll talk about the budget in a minute. What are they going to do? They're going to spend like drunken sailors. They're going to borrow money to do it. And we're going to do it all over again. And you and I will be talking about this for years and years and years to come. Plenty of fodder for the podcast. You know, and in the meantime, we're veering more and more towards populism and discontent and a two-speed, a K-shaped economy, whatever you want to call it.

49:51And it's going to get worse for a lot of people. It's also going to get not that bad for other people too, which is why I always end on these sort of rances like it sucks and it makes me angry and it makes my blood boil. I was like, well, we can certainly shout to the clouds about it, but if anyone who is listening here is in a position, there are lessons to be had out of this in terms of how you might allocate capital. Yeah, fair. I want to go back just quickly to something too, mate, because inflation and rates, it's also the rhetoric among some in popular media ends up being, and you're saying this might be off the same reason, so I'm going to say what you just said but say it's wrong and then let me finish it because I'll explain why.

50:40Yeah, yeah, great. You know, oh, those poor households are getting whacked with higher interest rates. That's terrible. Shouldn't we stop increasing rates on them? Now, you and I know we should for other reasons which is government deal with inflation, right? Yeah. And that's why I try and explain because the thinking is if we just stop increasing interest rates for people, that'd be better, right? It's like, kind of, but if the government doesn't do anything and you don't put rates up, you get more inflation. And so what happens is the people who you're trying to, quote, unquote, help by not raising rates get smashed with higher inflation instead.

51:09And those prices will go up and now come back down again. Whereas at least rates, if they go up, inflation comes down, the rates come back down. There is something from it. And I'm not arguing for one or the other necessarily. You and I are both arguing for more government action and other things. My point is just it's too myopic to believe that you can stop, you can divorce rates from inflation and believe that if you just stop increasing rates, you could fix problems for people who, they're the ones who, as you say, are already getting smashed by inflation anyway, right? And so yes, in the short term, you're saying higher prices and now you're putting my rates up?

51:39It's like, yeah, because the alternative is higher prices now and then higher prices later and even higher prices after that. The maths eventually is going to catch up with you in either way. So it's not a case of, if only the RBA was nicer and didn't put rates up, then working people's lives would be easier. It's like, no, no, no. Inflation goes to 5.5 % rather than 4.5%. That's what happens. So which one do you want? And there's maths that at some point there's a crossover about which is better and which is worse. The point is just you can't say, if only rates stop going up, my life would be better.

52:06Because if prices go up as a result or anyway, then you're shifting where the pain comes from. You're not stopping the pain happening. And that's the only thing that's worth calling. And it's a slower – such a good point. It's a boiling frog. It's harder to know. It's like I said to you last week. It's like I could come and steal all the petrol from your tank or I could just siphon off 10 litres every day. And you never know, right? That's right. You're still being screwed over here. I go back, mate, I think you made an excellent point. I'm going to go back even to a more fundamental level because I think when you do it from a first principles perspective, the logic is just undeniable, right?

52:40And it's something that this is what I'm about to say is completely uncontroversial in every way, shape or form with every other economic good in the entire world except money. And that is that we recognize money as a signal, right? When prices go up, it represents that there is a scarcity relative to demand. We should probably produce more and vice versa. It's just how we coordinate things. And back to that iPencil essay classic from the 60s or whenever it was written. I was like, that is how everything kind of works. Prices are super important. Now, money is just really the most saleable good in any market.

53:13It itself has a price. Now, we set that price. Now, I'm not going to get into the hard money round. We totally shouldn't. We should totally let the market set the price because what would happen is when there's a lot of savings, there's a lot of capacity to lend. There's a lot of competition to sort of find borrowers. Interest rates go down. That's really beautiful. Oh, we're actually everyone's spending a lot and investing a lot. There's not a lot of savings here. Gosh, that would probably mean interest rates are higher, right? Like supply and demand. Yeah, that seems like a really wonderfully organic corrective kind of mechanism that naturally and organically works to just absolutely perfectly set the price of money.

53:49But what we do by artificially changing it, and for good intent stated kind of reasons, when you put the price of money down because vibes, right? I'm putting the price of money down. What you're saying, you're actually sending a false signal out there. You're saying, hey, there's more savings. There's more seed in the silo than there actually is. And so people will take that as a signal because they're not thinking at deep economic levels. It's like, gosh, there's a lot of money available. Money is very cheap at the moment. I'm going to take that money and I'm going to do things with it that otherwise I wouldn't ordinarily do.

54:29There's a business proposition over here or there's an investment. I think I can get a 6 % return on it. That really doesn't make a hell of a lot of sense when interest rates are at sort of 4%, 5%, 6%, 7%. You know, it's very sort of marginal. you put it down and all of a sudden I'm going to pursue that investment, that business opportunity. Why? Because it's the rational thing to do. There's a positive spread there. I can borrow for 4 % and I can get it. Let's make it more stark. I can borrow at 3 % and I can get a 6 % yield. I'm going to do that all day long. But I'm investing under a world that doesn't rep under a set of circumstances that doesn't represent reality.

55:08That's why it's a problem. That's why you get inflation and what you call misallocation of resources and the Austrians would call malinvestment. It's not that these people are dumb or self-obsessed and stupid, although that's the human condition. And that's true for all of us to varying degrees. It's that we are making them make economic calculations using false information. We're giving the builder a ruler that changes length all of the time. And then we wonder why the roof doesn't join together. That's why it's such a problem. And even if you're like, I am, no, no, no, no, I have to do it for this.

55:48And I'm going to make this compromise and I'm going to do it. And it's all very good. But it's just like, there is, you are false signaling the availability of money and the likely returns that people are going to get. And why that, many reasons as to why that's really pernicious, But why it's really bad is that when reality does assert itself, and reality does tend to assert itself at a certain point in time, you know, the tide goes out and you realize, oh, my God, we're all swimming naked. It's like, what? I didn't know. And you didn't know because you were given false information. We distorted it.

56:24And if it sounds like I'm talking gibberish, imagine if we, again, we had a reserve bakery authority and they set the price of bread. That's what exactly happens. is like, oh, we're going to artificially push the price of bread lower because more people need bread. Wonderful, wonderful idea to do it. Except what we're really saying is there's more bread available than there really is. So people are going to consume more because that's what the price is telling us. Actually, it's really cheap to make bread. It's like, no, it's actually this expensive to make bread. I'm telling you because I'm the baker and I make the bloody stuff and that's how expensive it is.

56:57And now you're forcing me to sell it this way. It's just not going to work. So I'm going to stop doing it. And all of a sudden supply disappears and everything collapses It's like, but wait, we were just trying to help people by giving them cheaper bread. It's like, yeah, but you completely distorted the signal that was out there. And everyone made all of these terrible decisions, not because they're idiots necessarily, just because how could you make a proper, accurate, reasonable decision when the data that you're trying to base off is wrong? I'm not making the point clearly probably. You make the point very clearly.

57:29And again, you and I have a slight disagreement on the role of that, but the mechanism is absolutely spot on. And the reality is the challenge of trying to manage an outcome. This is back to the manage word. Manage an outcome rather than direction. So my take, honestly, is that element of you would be more absolute than I would, but directionally we're in the same boat, which is just simply a case of there are going to be outcomes in the economy. If you want to try and provide guardrails or buffers or mitigate, ameliorate the best and worst, the overs and unders, then fine. Pretending, a la Gordon Brown, that the rules of economics have been suspended is madness.

58:13The best you can do is say, this is going to, directionally, this is going to happen. Can we, should we put things in place to mitigate the impact, stop things getting too overheated, and then when things crash, stop things getting too bad? I would say probably. I don't know how you would sit across the board monetarily. You've got a very clear view. Fiscally, I think we're both in the case of running deficits and surpluses are balanced out over the cycle. So it's a question of understanding what tools to use. And it's kind of back to the point, mate. I mean, it's going to feel like a big tangent, and it kind of is, but I'll get back to it.

58:42I've been debating on social media this week about the gas tax, right? I think the gas tax is a bad idea, but I think higher royalties are a great idea. Yeah, I'm with you. And people will say to me, but if we do that, they won't drill as much gas. I'm okay with that, because when they want it, it's still there. And people can't, it's the time preference thing that we talk about. That's a bit of a jargony kind of phrase. But the idea that, like, well, if you don't do it now, that'd be bad. As if there's no future value to some of these things. As if we can't say, actually, you know what? That is the entire raison d 'etre of monetary policy, by the way.

59:14And the paradox of theory. If it doesn't, oh, you won't spend and nothing will ever happen. That's how insane it is. Yeah. And it makes no sense. And so I just want to bring it back to that idea of we're all – our policy – it's chicken and egg, right? the reality is our police want us to believe they can fix the problems and by taking away the current pain worry about the rest later that's the very definition that's it that's the very basis of kicking the can down the road and our police promise it and frankly we want it and every time someone on twitter says to me yeah but if they don't mind they're gonna drill the gas now otherwise we won't have that we won't have that money now as if as if it's like it's like saying if you don't tell your house now at at five star prices you won't be worth anything you won't have the money this year it's like no i know but i'll still have the house and excel next year at a higher price The idea that we can delay some of these things.

1:00:02And by the way, you took the first conversation back to investing. I'll take it back to investing again an hour into the podcast, which is that the people who get it are investors because you get the idea of deferred consumption. You get the idea of maximizing price. You get the idea of price and value being different things. And I don't think everyone in government should be an investor, but I do suspect that if we had more people with an investor's mindset, not that we're perfect, and it's not all about money at all, by the way, in any part of life taking the difference out and saying what some of the things we've i think we learn from investing i've called it applied psychology a lot i think exactly what it is if you really take that to heart and say what are we telling ourselves what we're really saying is i want it now because i want it now because i want it now and i can't contemplate even you said to people like that they've never thought that maybe if we left it on the ground we'd get out next year at a higher price just doesn't seem to doesn't seem to have even occurred to them oh yeah but what about this all about that it's like why i've used the example so if part of the family farm or granny silver i know we've done the conversation before this isn't even about sovereign welfare necessarily that's where i put the money but it's just about saying you've got a limited amount of irreplaceable assets only sell them when you get a good price that that i i blows my mind there's even a controversial topic right there's people say oh if you put a floor on the royalty then drillers won't drill if it's under a certain price like yes yes exactly that i don't want them to drill i don't want a piddly little royalty i don't want 10 percent of nothing I'll take 10 % of something and something higher.

1:01:25What you're saying is price signals matter, right? And when you distort those signals, it's like you're actually saying that with a more rational kind of taxation mechanism, there would be a clearer price signal for people then to then, whether they want to or not, make a rational but informed economic decision as to whether that project makes sense. If it doesn't make sense, they won't do it. That's not a crime. if it's accurate. It's like me saying, hey, Australia should have a rocket program. Artemis has just gone to the moon. We should go to the moon too. We don't actually have the kind of tech to do it.

1:02:01What if I change gravity from 9.8 meters per second squared to 8.3? It's like, oh, actually the maths works now. We can do it. Brilliant. Let's go and do it. That's how dumb it is, right? You might wave your wand and describe gravity as that, but again, when reality sort of goes, hey I'm still here your little monkey brains can say and do what you like and you can make little rules and policies but the earth's gravity is the earth's gravity is like you're wrong I ain't getting you ain't getting into orbit bro you just you just ain't gonna do it and that's what that is what is happening with with all of these kinds of things and I think too often it's sort of framed in this kind of idea of uh as I always say greedy capitalist I think people really misunderstand a standard here because when we're talking about things, like when the next crisis is, whenever that is, you know, at some point they're going to slash interest rates.

1:02:54It'll make your head spin when they do that. And they will do it, quote unquote, for the economy and for jobs. Think about what it's doing there. It's actually providing protections for the very capitalists who borrowed a ton of money and invested it very, very poorly. So you want to get angry at billionaires and corporations you know it's like stop enabling them i mean just you know me anyone who's listened to i'm i'm a i am an ardent card carrying free market entrepreneur capital i think it is the engine of human prosperity has lifted us out of the dirt it has never really been there's it's always been bastardized in plenty of ways and there's very poor implementations of it and there's a lot of angles to it they sort of get bundled up to it that you know that are very you know, egregious and that I don't like.

1:03:42But, you know, underneath it all, there is a beautiful elegance to it. But when we start selectively applying it, such as, hey, everyone, we're going to make money really cheap for you, even though it's not really that abundant and even though we don't really have a need to. It's like, great, I'm going to go out and I'm going to invest. Oh, I did a really dumb thing. Don't worry. Don't worry. We don't overtly bail you out. Hello, current Labor government. will inadvertently, indirectly bail you out by slashing interest rates. But in any sane world, it's sort of like, wouldn't you imagine in a very difficult set of economic climate that people would be less willing to?

1:04:21I mean, imagine if it was your money. Scott, you've been, you have, and there's an order and there's a path dependence to these things. If someone's got something in their heart, if you've got a Tesla in your hand, or Tesla, let's not get contracts. It's almost political to say that these days. You got a can of Coke. That's all.

1:04:42Brick. It's because someone made that. There was a person who rocked up to work and there's someone who worked in a factory. The fact that that happened was because someone invested it and put the capital to work to make that happen. The fact that that happened was because someone had savings. The fact that they had savings was because they didn't consume the product of their former work. So someone has worked. They have generated a nexus. They have not consumed it. They have put it at risk. They have crystallized it into a non-liquid form of capital to get technical. And then they have used that to make production, right?

1:05:18There is a beautiful thing. And that is why it's like, yes, we should absolutely celebrate success when done properly, because the only way that ever works is if at the other end of it, you've actually done all of that stuff. and your fellow human beings, not via committee, just by their own individual, yeah, I really like that. It's a really good idea. Thank you. I will buy that kind of stuff. But what we do is we kind of say, no, actually, you should do all of that under false pretenses. And the second that it blows up because you made all, but one, you just made bad decisions and we gave you bad information to sort of make those decisions, rather than like sort of make there be any comeuppance, we'll actually slash interest rates very, very aggressively to make sure that you can actually survive out the other end of it.

1:05:59And it's like, well, so who are you protecting? It's like, ain't anyone helping the nurse who hasn't done all of these kinds of things? Right? It's just, I don't know. I've gone well off of the original point now. It's way in the revision mirror now, mate. Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener. I want to go back to AI. AI is incredibly polarising, I'm finding at the moment. And there are people who think this is the best thing since the lifespan is going to revolutionise the world. And there are those who think the whole thing is overhyped and nonsense and makes mistakes and does all that kind of stuff.

1:06:40And I honestly can't help but see the detractors as, it sounds too critical or more critical than I intended it to be, but I can't see any difference with the Luddites of the Industrial Revolution. The idea that you can possibly find some things that are wrong with AI is not a difficult argument to make. And I don't have a problem with the sympathy those people have for the jobs that will be lost because of AI. I get it, right? And I understand it. Those people, though, tend to say, well, they're making it up. It's just an excuse for laying people off. By the way, it wasn't an excuse to lay people off.

1:07:18I don't know why people think that. They don't have to tick a box. Why do you lay them off? Because I want to save some money. you don't need to have something to blame you just say because i want to and that's enough um because i'll take i was laying off because they've hired too many people they probably have but i don't blame i always did the layoffs dudes um they want to believe that the mistakes that i makes and continues to make are somehow evidence that it doesn't work is not not a thing and i think that's a real shame um not because i don't have some sympathy for the nostalgia of i wish we still had farriers and coopers and blacksmiths and i got i got a real i got a real thing for that Like, you know, we like handmade stuff.

1:07:53I really like that. And part of me wants to believe there's a world in which that's useful and true. But the reality, the real me knows it's not. And so those people, I have the sympathy for their views. I think they're wrongheaded. And you don't have to believe that AI is going to be everything to everybody all of a sudden, all at once and soon, to believe that A, it has positives and B, it's going to cost jobs and probably increasing on both those counts for the future. And I raise that specifically as a bit of a scene set, mate, for Richard White of WiseTech. He's been in the news for all the wrong reasons over the past few years.

1:08:30But he was speaking at a conference just this week. And I'm going to read from the Finn. I'll read the Finn article a bit and then a couple of quotes from White directly and we'll come back to it. Here's the article. In comments that will cause concern for tech workers, by the way, listen to the stats here, White said that an AI agent could be trained in as little as 15 minutes to follow instructions that many human workers took weeks to understand. He cited the example of upgrades on one of its products called BorderWise, which he said previously took a team of 8 to 10 people, 244 hours to complete.

1:09:08But its last upgrade using AI agents took a single senior engineer just 15 hours. So I'll recap those numbers and I'll finish the quote. Eight to 10 people, 244 hours. Now one bloke, AI and 15 hours or one lady. Quote from Richard White. Quote, you are programming these agents in plain English and then tweak it so that within two or three hours, you've cleared an agent which is at least as good as that staff member. White said, quote, in the next six months, you might tweak it a few more times, but that agent is now fully trained and doing the work. It never goes to sleep, never complains, never asks for a pay rise, doesn't have holidays and works 24-7 without complaining, end quote.

1:09:49Now, White's a little fruity there in terms of his reflection on staff, but frankly, if you're a boss and you're hearing that and going, well, you know, even if I accept that people are going to complain and don't like work and need time off or whatever, if you could do without that, would you? Most anyone's going to say, of course I would. If I could do all the things my dog did and the dog didn't bite me, I'd probably go with that too, right? so that's kind of the that's the quote mate I just think it's I just it just struck me and it's going to and I'm a I'm a big believer in the we use AI all over the joint all over the joint the Motley Fool from writing to editing to analysis to idea generation to proofreading to image design to whatever else right and it just is I mean and when people say oh it's not going to be that and I kind of say well we've got fewer people now we're doing the same stuff it's trust me it's a thing it's different when you see it and experience it yeah I understand where these people are coming from and there is a very significant degree of just willful ignorance wanting to believe it's not true and for noble reasons there's people saying I'm worried about jobs being lost I'm worried about computers taking over I get the fear and the concern I get the sympathy for the job losses I just think those numbers from Richard White in particular I mean either he's lying or it's true they're your choices and if it's true This is not new, but it's also in the first innings of a very, very long game still to come.

1:11:18WiseTech's not an island either. There's plenty of big companies that are doing the same thing. I mean, I think people are very – we look at a technology and we go, oh, this is what it is, and then that's it. This is as good as it will get. And you've got to remember this is as bad as it will ever be. And I am of a generation that grew up as the internet was birthed. Yes, yes. And I just quickly Googled some stuff here. So there's so many great quotes here. And this isn't to sort of poke fun, but a little bit to poke fun. But these are all very well-respected people. There's a guy called Paul Krugman, who's a Nobel Prize-winning economist, who famously compared the internet to the fax machine and said that it's - That's right.

1:11:59You know? Yeah. There's another great one. Where is it down here? Metcalf. The guy who invented Ethernet. Metcalf Law. Okay. And I predict the internet will soon go spectacularly supernova and catastrophically collapse, right? Newsweek, editorial start. Visionaries see a future of people telecommuting workers. I bet my entire month's salary will never see that. Here you are, I am, talking over Zoom, and like half the bloody workforce is telecommuting, you know? That's funny. And the reality is that, again, because I remember it and it's very easy to forget, but the internet, when it first came.

1:12:39It was expensive to get it installed. You'd have the little dial-up modem would take forever and everything was crashed. There wasn't actually a lot online to begin with and it was very reasonable. You sort of look at that thing and go, oh, the internet's crap. And it was. By today, you couldn't imagine how crap the internet was back then. It was just awful. Yeah. But the people who are now the richest people in the world running the biggest companies in the world recognize that it wasn't what it was. It was what it would become. And you've got to distinguish between the zero to one moment and then the long road of incremental improvements.

1:13:22I can pick a million technologies, but another favorite of mine is the automobile. The first ones were very dangerous. They were very dirty. They broke down all of the time. They were horrible. Like they were the playthings of the mega rich because no sensible person that's practically minded, well, one, you couldn't afford one. And two, it was just like, I'll have a horse because it's a much more reliable and effective. And so everyone at the time was like, this is ridiculous. This is never going to be a thing. But the reality was is that we've actually, we now understand the chemistry and the engineering and we can make it better, you know.

1:14:00And cloud computing was another one. Smartphones was another one. Electricity, radio, you name it. And it's like the thing to understand with AI is that we could hit another winter. We could hit another plateau. There's every chance that that might happen. But if you're looking at, oh, there was a whole bunch of hype about that a couple years ago. And I played around with the free version of chat GPT. And I asked her this really ridiculous prompt. And it gave me an answer that was slightly less than perfect. therefore it's ridiculous. I'm being a little bit hyperbolic, but not that much when I come across critic.

1:14:35And I'm always trying to try and, you know, I feel like it's just a brand at this point, but I honestly do believe. Like, maybe they're right. Like, what do you think about it? But the only argument is, is it look at this thing here that is slightly less than perfect. Therefore, this is never going anywhere. And if you can remember back to 2022, to. It's not that long ago, man. It really wasn't that long ago. And then you look at today, you pay a subscription, you get the higher end models, you get some of the agentic stuff where these things are tooled up and integrated and networked together.

1:15:10It blows your mind. And remember, this is as bad as it will ever be. Now, sometimes people run way too far with, oh, it's going to do this. And they're like, the great saying that I really love is that technologies tend to be overestimated in the short term and underestimated in the long term. So even like this is the other side of the bell curve here is where it's like, oh, it's going to be everything. And they're like, and that's almost just as silly. And like a lot of things in life and particularly in investing, like the truth is somewhere between those two points. And while none of us can predict the future, we can absolutely look backwards and see where we've come from, you know, and the trajectory that we are on.

1:15:51And even with some very conservative extrapolation before hitting some kind of plateau, you still kind of think, oh, yeah, this totally changes a lot, right? It's a real thing. The genie's out of the bottle. We have to adapt. Otherwise, you know what? Otherwise, we're building barns and growing long beards and rejecting technology and riding buggies around with the Amish. And I can be critical of the Amish because they're not listening to this podcast. but you know i respect your your your life choice but you you you live in effective poverty right and and so that is the choice like well we're not going to do it because of x y's like all right and i'm not even saying as a nation i'm saying as a business and i've i've come across a couple of we wouldn't do that it's like like see you later you don't exist in a future you're only going to have a come to jesus kind of moment where you realize it's like oh we it's just as silly these days is a company saying, you know, we don't use email.

1:16:47We don't use email internally. You don't? No, we don't have a company website. It is stupid in the extreme. If it was on the yellow page, we don't need more than that. I've always been able to look up someone's phone number, you know. Anyway, it's just, I'm with you, man. I don't want to overhype it. I think there's a lot of danger in overhype. These things will take longer, but that genie's out of the bottle and it's going to change things. It's only a question of how fast and how significant. Can I read you a tweet? Yeah, yeah. This is from May 2023. I'm not an AI expert so fire at will. But for all the excitement, what we essentially have is a search engine that can synthesise results into relatively natural speech, which is cool, but don't get carried away.

1:17:34Yeah, no more than a fax machine, right? You know who that was? Paul Krugman? Me. Hey, that's a nice That's a nice little bookend to what we started talking about, right? That was May 2023, three years ago. Now, I will drag back a slight amount of credibility. I said, don't get carried away. And I said, yes, at least. And I have absolutely changed my view on that. And I was wrong. Look, dude, when the facts change, you change your mind, right? What other sensible position can you take? And it was your point that at the time, I underestimated it the long term. That's what it was. I was factually correct, right?

1:18:16Yeah, at that point in time. But the ignorance, and I'm not saying that's a defence, by the way. I'm saying the point was I focused way too much on what it does now and way too little on what it could do in the three years and then the next three years. I mean, imagine the next three years from here. If we don't get some sort of exponential growth from here, I'd be staggered, right? And so that kind of idea, and that was why I kind of threw myself under the buses, I made exactly that mistake. I know better. I should have known better then. Not that it couldn't have flamed out. It might have been the LaserDisc.

1:18:43but the idea of like you know my point was i said everyone settle down this is this might not be a big deal it's not it's it's both true and and a dramatic underestimation of the potential for growth from there and i said it could have been about laziness i'm not saying i was always wrong or always right and it's not you know i was wrong in hindsight and probably wrong at the time to not have recognized and at least balance better the potential for the upside which i kind of poo-pooed a little bit in the in the tweet and that yeah that was the point of sharing because i've always left it there.

1:19:10I refer back to it semi-regular to remind myself that what we know now maybe goes nowhere and you said maybe there's another winter and maybe whatever, whatever. But the potential is astonishing. So yeah, we'll see. I think, look, yeah, I would do the same except we don't have enough length in the show to talk about all the bad takes I've had over the years. But yeah, I think it's strong opinions weakly held, you know, as we always say there's there's two look facts of the way that the the world has unfolded is yeah we can say at this point that that you were wrong okay two paths forward bury your head in the sand put your fingers in your ears go la la la no i was right no i was right or go yeah i read that wrong now i think this i changed my mind like what there's only one logical thing here this very relevant to investing you know it's like i bought this company because of this this this this oh it didn't happen.

1:20:06It's like, no, no, no, it's going to come good. Like we all do it, right? Or as a successful investor goes, no, made a mistake, moving on, changed my mind. And it is all you can do. So well done. Absolutely well done. Well, I was wrong, but yes. And yeah, so. Oh, well, I've got nothing but respect. I mean, like show me again, show me someone who's never been wrong and I'll show you a liar, you know, and show me someone who's never changed their mind and I'll show you an idiot, right? Like it's as simple as that. Exactly, mate. and I feel sorry for those people who are wrong sometimes. It never happened to me, but I'm sure one day it will.

1:20:40I've heard it's bad. Yeah, exactly. All right. I reckon that's probably done us for this particular podcast. Thanks for listening. Mate, I'm going to ask if you're going to be here on Sunday. I'm going to demand you return on Sunday and listen. I shall comply. Goodness, for sure. Until then, enjoy the first half of your weekend. It's a full one. Cheers. The Motley Fool and people appearing in this program may have positions in the companies mentioned. General advice only. Please speak to your financial professional to understand how it may pertain to your situation. Subscribe to the free newsletter at fool.com.au forward slash listener.

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