The problem with first order thinking. June 21, 2024

34:17Really good ways, right? And by the way, they're not black and white as well, because I know a lot of people are pointing to the Nordic country. I think they've got some, there's really good areas which deserve to be socialized or more so. So it's a spectrum. So I'm not, I'm not, I'm not a black and white kind of person here, right? And either extreme is dangerous. But again, it's a great, it's a great example of we are now at a point in history where we can actually point to evidence and say, okay, both are plausible. Let's see which one works. You know, you're going to build a rocket. We both want to go to the moon.

34:53Yours is going to be built out of pine and I'm going to build mine out of aluminium. We can argue the toss, right? But after like 400 failed launches from you and 387 successful ones from me like this guy's right aluminium is the better material to use right like and then there's so many examples of that in modern society where we're still debating this stuff where it's like the evidence is in guys that you know the juries the juries come back right it's it's not out anymore it's come back we've got we've got the data there's still debates and finer points to sort of argue i i definitely concede that but the fact that there can still be people out there that that advocate for certain ideologies when it's been completely debunked at this point.

35:36It just boggles the mind. Yeah, no, you're absolutely right. There was also a US example of one state, it must be a close to a decade ago now, that decided it would drop taxes, the whole trickle. If we drop taxes, we'll get more activity, we'll drive more revenue. And it was like, again, it was one of those, hey, give it a go, right? And they reversed them. It didn't work. And that's okay. But then now we know, right? And so at some point, there's a great, my wife loves this Maya Angelou quote which is kind of the effect of something like you know do your best until you find a better way then be better it's not that it's better than that but that kind of view is like if you have a view and that view is based on ideology without disconfirming evidence that's okay but once the disconfirming evidence is real at some point it actually becomes and the same with investing here's so many people talking about should I day trade it's like the data is in guys it's not it's not a great way to do it can you possibly make money maybe yeah is it likely no it's back to back to investing as we try and do every now and again around um you know but that that very idea of just hey um we can you know the the if you don't know any better that's okay but once you know better then you know it is change your mind right well yeah exactly just embrace the reality it's even more let's not even not even choose a different opinion it's like when when the data disconfirms your view, you either have to live in fantasy land or stay in reality.

36:58There is no choice. Choosing to stay in fantasy land is up to you, but then don't kind of, frankly, don't want to be taken seriously, I suppose. Don't expect people to listen to you or consider your views if you simply aren't prepared to move on with the updated data. And by the way, data change, science is evolution itself, right? So you don't have to take that view forever, but until I get better data that tells me something else, that's my view. It's Maya Angelou. So do your best until you know better. Then when you know better, do better. Right? That's not that hard. Isn't that great? I've used this too many times, but I keep coming back to it because I love it.

37:34It's the JP Morgan quote. So journalists were asking, what do you think the market's going to do? He gave his opinion. And then when that opinion didn't come true, he's asked again. He came out with a different opinion. The journalist said, ah, but you said this. Why have you changed your mind? He said, sir, when the facts change, I change my mind. And then said, what do you do? That's John Mallett Cain's, by the way. Oh, sorry, John Mallett Cain's. I love this little J.P. Morgan because that is our go-to. I think you've got inside my head. So now every quote, I assume, is J.P. Morgan. Sorry, that was Cain's.

38:08Thank you. Thank you, it was Cain. I wonder what Morgan quote you're going with. You'll go with it, it will fluctuate. That's where he's going with this one. It's like, no, that's not that. I've got to remember. That's also a great quote, by the way. And that is J.P. Morgan. Yes, that one definitely is. But I love that. It puts it back on the post. Yeah, right. Exactly. So you're telling me that when the facts change, you don't change your mind? Like that is just such an absurd proposition. Or why would you not want to find the facts to help? So I was a trickle-down guy, mate, for years, right?

38:34My view was if we keep making the pie bigger, eventually the slices will get bigger. And that's free enterprise, capitalism, creation, creative destruction. And like the story of the world is we have bigger economies and better standards of living because economics, tells us the capitalism works it's in massively imperfect but it works better than everything else it's to use speaking for quotes use churchill's quote i always steal it and bastardize it but um you know democratic capitalism is the worst system except for everyone else we've tried it's like that so that's so let's do it it works really really well and my thought was okay well if you know if the pie just keeps getting bigger and bigger and the slices get larger and larger that's kind of the definition of trigger that that works that works nicely that should work until you look at the data and go oh actually yeah we're still debating that one right well That's the thing.

39:17That's what frustrates me. Ideologically, I thought, that makes sense to me. That should be true. Cool. And so that was my view. And I used that view. Particularly when I was a younger bloke, I was very clear. This obviously was what was going to happen. Except then you go, actually, no, it doesn't work. So I changed my mind. And I'm no genius. I'm not claiming credit for it. I'm not asking you for plaudits. I'm just saying that's kind of, you just have to kind of go, oh, bugger. I believe that. Oh, well. I've now got a new view. I've changed my mind to your point about JP Morgan slash John Madden-Keynes.

39:49It's like, what else can you do, right? Can I say, though, if you're ever in an argument and someone's going for the gotcha, as soon as you say, oh, gosh, I was wrong, there's nowhere to go. Where do you go? Correct. Because people, we love, I think all of us secretly love a little bit of confrontation. And people want, ha-ha, and they want to see you sort of embarrass yourself. but it's it's such a and it's a hard thing to do like for whatever evolutionary reason it is it's very hard but i've learned over the years took a long time to learn longer than it should but as soon as you go yeah i was totally wrong it's a superpower it's a superpower one it's just being more intellectually honest with yourself and you'll be a you'll be a better thinker as a result of it but there's no that it just it leaves no it leaves the uh attacker for one of a better term nowhere to go i wish politicians would do it more often when they when they go ah but you said this is a yeah i know i i changed my mind because they don't and then the journalist gonna yeah but but you said yeah yeah i was wrong but they don't they double down they argue it no yes but this and then just it it it gives you enough rope to hang yourself with and and i just anyway i think it's it's like a core principle of mine at the moment it's just one because i want to hopefully get at the truth and be a better thinker.

41:10But two, it's just like, I don't need to be wrestling with all kinds of different pigs because, you know, you both end up covered in mud, but the pig enjoys it. Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener.

41:28Economically, mate, the other piece of economic news that came out with lots of it always, but the one that kind of really stuck out to me was coming on Wednesday, I think it was, in May of this year, so last month, we had a record number of insolvencies all-time record uh business is going broke and i don't know mate i'm i'm an optimist as you well and truly know uh and i don't like these things to be true um but it's also you know again the data is the data is the data right i can look for other things i can pretend doesn't exist um i thought it was interesting for a couple of reasons i thought uh on one hand we may still be catching up from covid uh we know that a lot of government largesse both to businesses directly and indirectly via consumer handouts may have kept some of these so-called zombie companies alive.

42:11And maybe there is, and I'm going to catch up. And if there is, on one hand, I will say there's no bad thing. On the other hand, it's always a bad thing when businesses go broke because they lose money and people lose jobs. So, you know, I don't want to celebrate that or say it's okay or it's a good thing or somehow that's, you know, people who talk about immigration say, well, it's okay to have more people come in because we had less then. So there's still no houses, guys. Just because we go back to a trend line doesn't mean there's no problem or that that's a good thing.

42:37but 1245 insolvency appointments were made in may that's up 44 on last year and 122 more than 2022 and i will say as much as my brain's a bit fuzzy map the last lockdown was at 2021 i want to say it was must be there about maybe early 22 and anyway we're more than far enough away out from from lockdown periods and covid support periods to for this to have kind of uh flushed its way out now because I'm an optimist, because I do want to sort of at least contextualize it. The Australian reports, there were 3.37 million businesses registered in Australia in May. So, 1 ,245 going broke out of 3.37 million.

43:16That's not calamity, right? That's not terrible. But it is the highest on record. And so, it's not nothing. And that's probably something to be mindful of. I don't really might have a particular so what. I will, I think it's worth looking at where those are happening for what it's worth. So the number in WA actually doubled year on year. The number in SA got close to double. Now those are small numbers. We're talking about 40 to 84 in WA and 22 to 38 in South Australia. So small numbers tend to be more volatile. You've got to be a little bit careful with them. New South Wales went from 335 to 535.

43:54So an extra 200 businesses in May this year compared to last year. Vic in Queensland the growth wasn't so much. And again I don't know if it says much about anything. In ACT, number tripled, but again, from 11 to 30. So we've got to be very, very careful, particularly with small numbers and small geographic states. And I only say that in the context of you can be based in Queanbeyan and you're officially in New South Wales or you can be in Dixon in ACT. So that kind of matters as well. I think it just talks to the general weakness of the economy. And again, we kind of know that. To some degree, this is a, yeah, tell me something new, dude, because we know GDP is flat.

44:27We know that retail in particular and construction are suffering for different reasons. It just is, I think it's a marker. It's a milestone. It's something that just says, hey, this is going on out there. And any particular thoughts from you, mate? Good, the bad, the ugly, the so what's? Yeah, I mean, it is. I mean, you know that I'm the glass half empty. Sorry. The glass half full. So you've kind of stolen my thunder. Oh, sorry. No, no. I mean, look, you make... You want me to just say the good things to you? I leave the... I'm trying to think of some good things to say. I mean, I look at the same with it is, but it's probably good, right?

45:05I look at the same in terms of provisions from banks. And, you know, when I hate read the various bank annual reports and stuff, and I'm very aware of it. You look for the things that you want to see. Yes, exactly. And you say, and they say, oh, the people in 90-day arrears plus is increased. Oh, but it's a really small number. And you go, yeah, that's actually true. It's really tiny, but there is a general background or average over long swathes of time. And so relatively, I think it's still meaningful, whether it's in liquidations or loans in arrears or that kind of stuff. It's just like they might be small numbers, but there is signal in that data, I think, where I think you can objectively sort of say, well, it might still not be calamitous.

45:50And you've got to be careful with the language that you use here. But it's still worse than it usually is. That's an objective statement, right? Correct. And the potential for it to continue to get worse. What I find so perplexing about the current economy here and generally in the West is that despite all of that, we are not in recession. Yeah. Despite all of that, unemployment is at least like back in the day, 5 % unemployment was considered full unemployment. Yes, that's right. What are we at now? Three point something? No, four. Four exactly. Okay, four. I mean, it's – Right. That's amazing.

46:30Yes. That is amazing. So how do you – how is it that we get into these situations? I keep coming back to – and I've mentioned it many times on the pod. It's this bifurcation of the economy of society. It's the difference – it's that widening equality gap where depending on where you sort of sit, you know, things have never been better or they've never been worse. Who's right? Well, both of them are right. in their own context. And I think it's a worry. I really do because it's that whole thing that we've talked of before where I put one hand in a pot of boiling water, one hand in a bucket of ice, and on average, I'm okay.

47:06Actually, I'm in pain in different extremes here. And it's not a healthy scenario to be in. And I think that's the thing we must always remember when we look at this aggregate economic data is that we are actually doing exactly that. There is subtlety and nuance in all of the data. Yeah, that's a really good point. You know, I do bristle a little bit when, you know, particularly politicians, like, what are you worried about? Look at that. And it's like, well, okay, so the record food bank lines that we saw in Melbourne recently, the record number of people living in their cars, you know, the record number of children that are classed as below the poverty line in Australia, they are all, again, I'm cherry picking metrics, but to prove a point here, is when you look at those metrics or you look at insolvencies um to the to the point that you raise it's just sort of like these are these are at record levels it's not it's like going to see the doctor and saying that listen my foot's gone purple and i can't feel it anymore and i'm starting to smell rotting flesh and they go yeah but but your but your lungs are in great condition and your liver's functioning well and there's nothing really right you can't have everything and so yeah i i think i i mean my my bigger picture view is and this is purely opinion and i again it's too complicated to know decisively but i i think we are the the scourge of inflation is just so diabolical like it's it's something that is that is really damaging and i would imagine that the companies that are going insolvent now are doing it because they're facing much higher costs that they're unable to pass on.

48:50I reckon that's a huge part of it. Now, maybe I'm wrong. I'm keen on if you feel that's like a reasonable hypothesis or not. But it's why it's such a pernicious, awful kind of thing because it does have all of these ripple effects and it tends to be more damaging to certain areas than others. And I think also another phenomenon of our modern economy, at least, as well is that we're getting more to the megacorps and all of the smaller businesses are really struggling. It's very difficult. Anyone who's listening to this has tried to start their own business or is running their own business so hard.

49:30And there's just more mergers and mergers and bigger. And at the top end, it's kind of fine because you get to a point where you are systemically advantaged by access to cheaper credit and capital, more political sway, more ability to get bailed out, more of these things. And it's a tragedy because it does exacerbate the wealth divide. But also when you look at it from a numbers perspective, small businesses is by far the bigger employer, is by far the more important determinant of the aggregate economic activity. And we're sort of hollowing out that. You know, the person who's out there in their truck trying to go around and do rubbish collection every day.

50:10All of my petrol has gone up, my car price has gone up, the dumping costs have gone up. And yet when I turn up and try and pass that on, people just don't pay it anymore. And it's sort of like you kind of, but if you happen to be bingo listed on the exchange, you've got far more options available to you. So the big get bigger and more powerful and the small gets smaller and weaker. And ultimately we all suffer because we have less choice. There's less competition. Less competition allows more, gives the incumbents more pricing power. And again, it's a slow thing that plays out over a long period of time.

50:46So it's very hard to sort of notice. You're going to say slowly, but suddenly aren't you? What's that? You're going to say slowly, then suddenly, aren't you? No, but now that you say it. But it's kind of how it goes, right? That is always the case in markets and in economies. It just hits this breaking point. Listening to a thing the other day on, is it Birmingham in the UK? It's the second biggest, what's the class of, not town, city, county. I don't know. But they are bankrupt. They're pulling back on all of their service. And this is one of the richest, most prosperous countries in the world, right?

51:23And again, you've seen just that exacerbating growth between the haves and the have-nots. And I just, I think a lot of it comes back to big, big policy decisions that were made a while ago. Probably, I think most obviously some of the policy responses of the GFC and then COVID. And I think we're just, we're reaping what we sowed, frankly. Yeah, a little bit. I think, yeah, so much there to kind of unpack, mate. Sorry, mate. That was just a complete deluge of thoughts. You know what? I'm actually going to move on. I think you've done it beautifully. I don't need to add anything for the sake of it.

51:59let's um let's move on to i do want to talk about nuclear for a second because i'm just a glutton for punishment and hey why the hell not um very topical oh mate isn't it well and also very polarizing right which is so that's where i'm gonna start talk about the dunning kruger effect though right yes yes exactly particularly social media i so and again i'll mention again because actually while we're recording this actually popped up on the feed so it's definitely there now uh go to the good oil with scott phillips call that not because i have a fancy thing about having my name mentioned in dispatches but because we had to do it there were other good oil podcasts out there so it makes it easier to find so good oil with scott phillips is what it's called um the the announcement yesterday from oh yes again uh wednesday uh this week from peter dutton about the new nuclear policy for the coalition uh seven sites have been chosen around the country now i i don't really want to get into the energy debate because neither you nor i are experts at it and again i will say simon i'm of course not a heap of work on this so listen to him not me or you um but what i thought was i just i guess a couple a couple of things on this one for me mate i guess the first is that i am really this is just a general pox on both their houses comment um the the coalition's announced a policy for seven sites as someone mentioned on twitter i'd never think about this but it's probably not seven reactors it's probably two or three reactors per site to generate the amount of energy required so they've been out somewhere between 14 and 21 on reactors in all likelihood each of them costing whatever they're going to cost and that's the other thing is they kind of said well we haven't done the costings yet and it just the the the partisan politicking on one hand alp is no anti-nuclear never nuclear not going to rescind the ban nuclear can't be an option the lnp well it's got to be nuclear obviously it's nuclear here's our nuclear plan so have you costed it no no no we haven't costed it but that's what we're going to do how do you know you're going to do it if you haven't costed it well we just are i just i find the the sorts of about schoolyard you know university politics stuff it's just such useless sniping from both sides of of politics for their own partisan reasons um whether they think there's an electoral advantage whether their member base happens to be rabidly one or the other i don't even really know particularly i would actually expect it to be a vote loser really honestly i wouldn't have thought going with nuclear works but there is some thought and i did see in today's papers that there's some comment about it being popular in those areas where they're going to largely be put in the same places where coal-fired power was previously produced.

54:19So in theory, it's good for jobs in those areas, which would be true. So maybe it's to shore up support in those areas. Maybe they genuinely somehow believe it's true, despite having not done the costings. I really, I just can't work it out. And as I said, I thought it would lose votes. Maybe it won't. A couple of things for me, mate. Firstly, I'm just sick of politicians not costing stuff and just releasing thought bubbles. So pox on both their houses. The only thing that concerns me is that this is potentially adding yet more uncertainty into a grid that really can't afford the uncertainty, either from an emissions perspective or from a, frankly, from a consistency perspective.

54:53I mean, the New South Wales Liddell power stations had to be extended because there's not enough generation to replace it. Why isn't there? Because there hasn't been any government investment or policy certainty to our others to make that investment to shore up the grid reliability. and that's just kind of if there's an economic output here it's it's it's the damage to the economy and the economy is not the only thing that matters the environment matters society matters but i'll go with the economic part of it just from the consistent sniping back and forwards rather than and you know what i find what you know what's most frustrating this i only occurred to me this morning we talk about the policy debate as a thing right or the so the energy debate and i kind of figure we've actually fallen into their own trap why is it a debate isn't it isn't it a a conversation among experts to resolve the best solution that's the point i was gonna make isn't it right isn't it fact-finding isn't it isn't it kind of you know consistent uh thoughtful collaborative work to try and find the best outcomes when you call it an energy debate you're literally saying well there's two sides to this thing of arguing about to see which one wins it's like that that is and again to be arbitrary pro anti-nuclear no matter what is just as stupid but as being pro-nuclear no matter what?

56:02Because in both cases, maybe it's a better solution. Maybe it's not a better solution. How about we find out rather than saying, well, I want seven nuclear reactors. The other one said, well, I want none of them. Again, I want no reactors too. I don't want to have the risk of leaks or explosions or meltdowns or storage issues. I don't want that. But I also don't want to have no power and I don't want to have an unreliable grid and I don't want to have global warming. So actually, I'd kind of like nuclear if it's the least worst option. I would really like that, please. And I just find, so much of what we talked about already, actually, mate, the Dunning-Kruger stuff, the partisan stuff, the second order thinking stuff.

56:35There's so little of that being done right now. Oh, it's going to be such a painful election, man. Isn't it? I'm already just... And the worst part is one of them will win. I don't know anything about this, but I am dead opposed against it. I know, that's it. That's it, exactly it. Look, yes. You can't be responsibly pro or anti-nuclear. You can't be. You can be pro-considering it. You can be anti the risk if there's a better option. Sure. But if you're anti-nuclear and we're in caves with sticks, probably a bad idea. If you're pro-nuclear but it's going to cost twice as much, take twice as long, and it put twice as much carbon in the atmosphere, probably not a good idea.

57:19I just find that whole positioning so stupid. Like, if you and I or anyone wants to argue as to whether Picard or Kirk was the better captain of the Enterprise, like yes that's the bite there's no right or wrong there you can debate that like you're you can have an opinion i can have an opinion that's fine there are certain engineering things that are just you know there there is just there is fact now the reality is is that they are they they're complicated and there is there is no definitive answer in general in other words my rate of it is at least is that nuclear is absolutely the best option in certain places in other places with abundant natural resources into right geography etc etc then then renewables like you know solar and wind are the better option so it's not it's not there is not and i think that's already we're seeing that people are just making claims that uh uh don't hold up to scrutiny across the board.

58:21You know, hydro is an amazing way to store electricity. It's the best way that we know. Storing electricity is really, really hard to do. Hydro will beat batteries every day. But if you don't have the right geography, if you don't have a lake that's elevated with the right incline, you just can't do it. I can't do it. So it's not, I'm not going to build a hydro plant. In Denmark, yeah. In Denmark. It's stupid, right? But if I'm next to a mountain and it's got all of the right things that needs to be. And I'm like, absolutely, let's do it. And that is the key. I thought the Batuta advocate really nailed it.

58:56I did. And I saw you make a comment on Twitter with it. I liked it a lot, which was, you know, the guy who wouldn't vote on The Voice because there wasn't enough detail issues a one-page summary. I'm building seven nuclear power plays, like lacking any kind of detail. It's just sort of like, oh my gosh, how can you possibly not be cynical with that? So I welcome the debate. I'm open-minded to it. There is a lot of hangover from events that happened many, many, many years ago, namely Noble and the rest of it, right? So it's sort of like, it's like trying to have a debate around air safety by looking at the Wright brothers' plane, right?

59:38Like there is, the technology has evolved. I'm not saying it's perfect. Like, yeah, there's pros and cons with every technology, right? Right. But but I think a lot of the things that people are against are not based on an understanding of the modern day facts. I read a stat the other day that was something like if America had been powered entirely by nukes over the last 50 years, you could fit all of the waste into a football field. So is there waste? Yes. Is it bad? Yes. Is it long lasting? Very long lasting. Is it completely unmanageable? No, not really. You get you get a lot of. a lot of good that comes out of that and something that actually can rather effectively be stored.

1:00:24Would it be better without waste? Yes, absolutely. But your point is, well, there's two evils here we're trying to minimize. There's having the world power, well, let's keep it local, having Australia have a big part of the energy mix and then, yes, we've absolutely got some waste to deal with. or we've got all of the consequences of climate change, which might arguably be worse if we don't do something about that as well. So there's no perfect solution here. Correct. Perfect solution is fusion. Yes. Low-cost fusion plant where there's no waste and we've got limitless fuel. And, I mean, let's do that.

1:01:00Oh, we don't have the technology yet. Okay, so that's not on the table. We'll do what we went for. That's exactly it. You know, so it's, I just, I'm trying to come into this debate open-minded. I'm not against nuclear. Yep. I just wish that the voices I was listening to came from engineers and scientists who have spent years, not some ideologue in Canberra and or some idiot on talkback radio, you know, who's just not going to get at it in the right way. Yep. so yeah i'm i'm really bracing but i guess again my my um encouragement to all those listening is we're all going to have our starting point views but just go into it with an open mind there are trade-offs here yeah now there is no perfect solution until fusion gets invented um uh and and compromises are going to need to be made and i'm not i'm not saying i'm not even trying to lean in a certain direction here i dare say too here's the other thing it's not a 100 % this or a 100 % that, right?

1:02:07Like there can be a mix that's appropriate to the resources and geography and everything else that we've got. So maybe the really accurate answer, if you actually put a Manhattan project together for all the best brains in the country and the land to get together, they might actually say, yeah, the best solution that we could find was 80 % renewables, firmed up with a couple of power plants that do this, connected with some HV, what are they called, the high voltage connectors that can transmit electricity a long way, that's the best solution. In other words, there's something for everyone to be upset about, but it's the best solution.

1:02:43Yeah. And it's my biggest frustration with the politics of the whole thing, including what we started by talking about, which is it's very hard to radicalize people to the center. It's easy to be pro something or anti something rather than actually just pro good pragmatic evidence and policy. It's like that's why this won't fly, because you know again it happens to be left and right alp lmp that's the way these things work but there's the anti nope we're gonna keep a ban on nuclear why are you keeping a ban on it well because we don't like it well why don't you like it what on what basis well we don't know it's just it's just bad and i i know ball right and again i can i can i really really really recommend people listen to this good oil podcast episode i'm trying not to kind of you know quote simon homes and court lines too frequently or whatever because i want to listen to the whole thing but it's that that kind of idea of you know it's and again i look i'm in i'm in that i'm in that camp I don't want an Australian Chernobyl.

1:03:31Of course I don't. So if we could do it without the risk of that, would you do it? Of course you would. I mean, you'd be mad not to, right? But to your point, if it comes down to, well, I can't avoid that. We need to do X, Y, and Z instead. Now, which one's worse? Okay, then we're going to make a trade-off. Is it going to be perfect? No. Is something going to be a happy? Yes. That's kind of what compromise is, right? That's what's supposed to happen. That's why there's not – it shouldn't be an energy debate. It should be an energy conversation, which is designed to get to the best outcome, rather than taking a polar opposite views and just whacking each one to see who's left standing at the end i mean that's that's stupidity one thing i will say too is is when engaging in the debate or following the debate take any projections with extreme caution because there is a lot of um examples uh in the uk other very similar countries where they tried to build a plan and it took way longer and was way more expensive and way less effective than initially thought just for a whole myriad of reasons here.

1:04:27So we've got to be careful with that kind of stuff too. It's like all good and well, but is it like, how long is it going to take for these things to be built? Yes. Like they might actually be coming online by 2050, in which case we're past the tipping point and, you know, it's a little too late guys. What have you been doing? And maybe we could have done other stuff in the meantime. And what's the point of, let's say, let's put that aside. And let's say it actually comes online and it does give us a lot of good power, but it's just far more expensive than we modeled for because we didn't factor in X, Y, and Z.

1:05:01Again, these models are just models, just in investing. My evaluation of CBA could be completely wrong despite how sophisticated I try and make it and how much good faith data I try and put into all of that kind of stuff. And history would show you that particularly with something as complicated as a nuclear power plant, they are very, very expensive and costly to roll out. And they almost always take a lot longer. So again, I'm not against it, but I'm just saying we have to sort of factor that kind of stuff in. I've got to say, we're not energy experts. I'm even loathe to give it a view, but I will for the fun of it.

1:05:41But I suspect that nuclear's most attractive element is to provide baseload power that is not disruptible by weather and doesn't cost a lot of money for batteries and time to do that. I think that's, if I could go back, I can't be right too far because the efficiency numbers are different. This is where cost comes in, which I'll get to in a second. But if you could have nuclear power, especially when nuclear power are available now, I think you'd take it, right? Because it doesn't require us to roll out more solar and wind. It doesn't require us to invest in more storage or to consume more battery metals and do that sort of stuff.

1:06:16And we have zero emissions tomorrow. I mean, if you could have a zero emission economy tomorrow, by the beginning of 2025, assuming the costs weren't stupidly larger than renewables, they may still be, by the way. But that's a really, really, really attractive idea. If we get effectively make the energy generation or the grid carbon neutral tomorrow, I think you'd do it. I think you'd do it even a little bit more. And again, some people disagree, but I would take that bet. If, though, we had to wait till 2045 to have the first kilowatt hour come out of a nuclear power station, and we do nothing in the meantime, that feels like a pretty crappy outcome.

1:06:52I would suspect if I was a betting man, the reality is politicians are politicians, right? So who knows what the hell they'll do. If the experts were in charge, I would suspect we'd continue with renewables for the foreseeable future, and we'd probably then start building nuclear alongside it, and then slowly make that transition because they're 80 plus year plant life. And if you can store it reasonably well and the cost of energy creation is not too significant, I think you'd probably pay more as a country for sustainable baseload, a known quantity, a known price, not a lot of reinvestment required for decades and decades.

1:07:31It just strikes me, I think it's probably what you do, I would suggest. so I would imagine we'd get to effectively knit zero close enough to it with renewables within the next decade and a half and then subsequently we'd phase that out and replace it with nuclear because it made more sense at that point I think that'd be a perfectly fine solution for me if that's where we go to but the idea of let's not do anything until nuclear comes on seems to me pretty untenable perfect the enemy of the good I think it's got to be right absolutely can I make another couple points too I think approaching this from an austerity perspective is wrong as well.

1:08:11There is a very, very tight correlation between the wealth and comfort of a nation and a civilization and the energy it produces. We should want as much energy as we can get our hands on. Yes. People who just advocate for we should use less. No, so that's the key point here. I'm not saying everywhere has a coal-fired power plant in the back. Because that's going to have all the unintended consequences. But when I look over decades and centuries, I would like to think the human race is producing orders of magnitude more power than it is today. We want to get to a type 4 civilization and colonize the stars.

1:08:49But it's just like it is the foundation of human flourishing. We need power. I'm not saying we waste it. I'm not saying we generate it in really inappropriate ways with unintended consequences or just consequences that we don't care about. But we trying to cut our way to greatness will not work. It doesn't work in business and it will not work here. So can we get to net zero if all of a sudden all of us just decide to walk everywhere? I mean, it just doesn't work. I mean, it might work, but we're all going to be really, really, really poor. What we want here is we want a scenario where we continue to use and consume much more energy, not for the sake of it, but because that increases our productive capacity.

1:09:31It increases our well-being, our livelihoods, and everything else. So I want more power. More power! As much power as you can give me, Scotty. Like, full powers to the engine. But let's do it in a responsible way. I just want to put that out there as well because I think there'll be some people who will just be saying, no, we're just going to need to use less. And I think, no, that is a – we're devolving as a civilization. We kind of want our cake and to eat it too. And I think it's not an unrealistic goal to actually have is increasing energy. I mean, imagine what we could do with – all we do as a country – God, we're a dumb country.

1:10:12We just take raw materials and ship it overseas and then buy it back once the value has been added. Like, increased energy capacity will allow us to make the steel here rather than just shipping rocks overseas. There's so much that we could do with more power, good things that we could do with more power, good things for the environment with more power more power okay that point has been made the other point can i actually write down that other point because i want to come back to it but i wanted to i think about it exactly this morning mate there is a there's a view among conservationists environmentalists where it's like we all just need to use less we'll need to do less stuff and i think there's some argument to that around some consumerism stuff we're just wasting you know it goes from it goes from you know uh oil refinery to plastic toy to bin to landfill in you know six months and there's a real value in that but i think that idea of obviously we have to just do less stuff i think that's where i think that ideology is dangerous i think to your point right and we should use less power what if we could produce it for free with the sun we should use less of it why why would you want to why because we could use it's free right i think i think that's where we need to really be very nuanced yeah we need to be very very nuanced about what we use less of and why and what the trade-offs are right we should not screw the planet up for our kids we shouldn't use more power and then let our kids inherit a crappier world that's that's just horribly horribly horribly horribly immoral but if you can use more power that's produced you know in in whatever form in whatever way responsibly and improve our lives and the lives of our kids and leave a better world for them doing that you should know that that that that's the less i'm not i'm not a i'm not a rabid you know consumerist guy i'm not a rabid capitalist either i'm a considered capitalist i like to think um but growth is good and and and power is good particularly when and we have that's the thing we have the$6 million man said we have the technology we can do either of these we can use nuclear if we want we can use solar if we want and we can produce it responsibly and actually improve things to not do that and say well the only answer is to do less I really really struggle with that I don't think it's easy to do and energy is the foundation of civilization it always has been you know who uses less energy than us?

1:12:16Sub-Saharan Africa you know developing parts of Southeast Asia and in Latin America like there there is there's a I wish I had it at hand but there's a wonderful chart there that just plots the prosperity of nations versus its energy production and it's a straight line it's a straight line now again there's nuance around that but I think the point has been made the other point I wanted to make was um if we do go down this route the the next problem well a problem that I almost certain we will have is that some idiot will go there'll be two options right they'll be like hey France has been building these things for the last 30 years they've got plans that are ready to go they've proven they're capable they've got the engineers they've got the know-how they've got the parts they've got the manufacturing let's buy it off them and then some idiot will go no we have to build it here you know let's design our own because jobs or something and so we'll create a few hundred jobs which is not even a rounding error on the economy and we'll have to start from scratch when it's just like if there is someone where we somewhere we're we can time is of the essence here right so if and i'm not saying we should or we will but if we do go in the direction of nuclear power plants let's just go to some of our mates overseas and go can we just use yours like because because for us the people it will be far cheaper be far faster we won't have to like start from scratch and figure and make all the mistakes that they went through and just it's just gonna be it's gonna be delivered faster and in cheaper and that's what we want faster and cheaper right it's it's usually almost always always better yeah but am i wrong like someone someone will start advocating for it no we have to it has to be an australian designed nuclear power plant it has to be an australian built as if there's not going to be a huge amount of jobs anyway and even if we do get the technology and lean on a lot of the expertise that's already been there it's just it's just madness i think for pure jingoistic reasons to to try and do it all ourselves because jobs or because whatever i i I think it will end up just being a much bigger waste, much poorer outcomes.

1:14:34And while there will be certain narrow sections that benefit from that approach, in aggregate, holistically, we'll all be worse off. Yep. I think that's the right. Look, I mean, I will have to, again, kind of back end this one by saying, is this economics and finance? Kind of, yeah. I mean, it's actually the application of exactly that, right? And I will say, by the way, and again, this is where we get a bit, you know, new age and hippie, but economics is an imperfect, I was going to say science, not a science at all, it's an imperfect art. It has for years excluded the so-called externalities, things that don't get priced, like pollution, for example, water pollution, air pollution, social outcomes, all sorts of stuff, right?

1:15:16So we need to find a better way of doing that. And this debate is kind of, to my mind, almost a worked example of how mature otherwise we can be as a country by being able to say there is a, you know, remember the triple bottom line and the balanced scorecard? These ideas were, and they were good ideas, by the way. They became cliches a little bit. But the idea of actually, you shouldn't measure outcomes just in dollars. Yes, of course dollars matter because you talk regularly about opportunity costs, right? If I spend a dollar on energy, I can't spend on something else. if i'm gonna spend two dollars in energy rather than one dollar then i'm even worse off so so cost matters a lot like a lot a lot but so emissions so so so you know so so does the the implications of uh the the and by the way supply chains of battery metals aren't particularly flash um you know these things are all issues that need to be included in a business case in a social policy case right a policy case generally for any particular thing and that's why i think this is it's it's not pure economics but it's kind of old school economics it's old-fashioned economics The idea was supposed to be...

1:16:16Absolutely, economics. It's the investigation or the explanation of human interaction. That's kind of what economics literally is. It's just the swapping of needs and wants. And so as you build that out, that's kind of what's exactly at play here. So why does it matter? It matters because we're going to spend billions of dollars on whatever solution we go with as a country. And that really, really matters. And I hope our listeners are going to get themselves informed about this, whichever way you end up coming down on. um i'd rather you be informed rather than just knee-jerk and we talked about that with the you know not trusting first order stuff we've maybe that's the the uh the theme of the podcast but yeah it it deeply deeply matters because the way and by the way we talk about government debt um the the current policies the government will fund this and that's fine i have no issue with that right i don't i don't think it needs to be a commercial provider i'm very happy if it's a if it's government owned i don't have a preference either way but i don't have a again that's the idea i'm pragmatic right there's no ideology which says it must be government owned it must be privately owned you just must be done as well as possible that's that's the pragmatic middle road uh so those kind of decisions really matter and we will be tested as a society as a country when we make some decisions around this stuff and the the thought we bring to the different proposals from both sides the better we do that the better the outcome ends up being because we end up having either voting for the better one or forcing them both to be better because we're asking better questions yep absolutely that is that is really the thing and just and ask ask questions right yes and you're entitled to ask questions even if a question sounds dumb ask it it's more than that mate you're you're obliged to ask questions yes yeah in a responsible democracy where we have rights and responsibilities you are obliged to ask questions to find out more yeah even if it's a dumb question i i kind of feel it's just like if it's so dumb a question you should be able to give me a really straightforward answer on it right it's just you um yeah and and i i know you're sort of teasing apart the economics the politics and the and the engineering there but i just like to me it's they're all joined at the hip like if you want a prosperous society um if you want a better environmental outcomes if you want a stronger economy better jobs a comfortable more comfortable lifestyle for yourself and for your children and for your grandchildren i mean this is super super important stuff because i say like it is the I've repeated myself again.

1:18:31It is the founder. Energy is the foundation of society. And so this is really, really important stuff to get right. And if we get it wrong, we will all be poorer. Or even if we sort of objectively better from where we are today, there is the comparative potential of where we fall behind others in the region and in the world. Could you imagine how our star could really rise in the ASEAN region if we have more reliable and cheaper power than our neighbours? Yeah. We're exporting it to Singapore. I mean, the sun power thing, that's exactly what we're doing. We become incredibly valuable. We attract more jobs.

1:19:18We attract more investment here. everyone gets richer with a really really good energy policy you know and and and as i say bring it on ramp it up give me the shower me in kilowatts megawatts gigawatts right i want it i want it all uh let's just do it in a way where it's the evil laugh and you become dr at some point here one million terawatts terawatts that's it hyper watts uber watts we need a lot of it Naomi Watts, all the Watts. We just needed, we just needed very responsibly delivered and in the most rational way. And I just, I say all of that and it's totally not going to happen. So it's going to be a very painful six to 12 months.

1:20:02And yet this podcast is brought to you by the letter M for Megalomania. Sure is. Mate, this has been fun. Hopefully we've covered, we have covered a bit of ground. Hopefully it was interesting, informative and slightly enjoyable. Will you come back on Sunday? Yes, please. Awesome. I love to. More rants, more questions, more answers. Stay tuned. Until then, have a great weekend and fool on. Cheers. The Motley Fool and people appearing in this program may have positions in the companies mentioned. General advice only. Please speak to your financial professional to understand how it may pertain to your situation.

1:20:34Subscribe to the free newsletter at fool.com.au forward slash listener. The Motley Fool operates under Financial Services License 400691.