AI Fund Explodes, Alan Joyce is Back, Victoria’s Labor Reset, Fauci’s COVID Reckoning and Credit Card Chaos

21:40I think they're equally important. So as stakeholders, I don't think you can buy a spot. Okay, well, we don't have to argue that point, but definitely I would not go into any – I'll say this. When Will came into Catapult, he did a few things that I thought were great. Obviously, yes, he met the team, but he basically went out and just had all these conversations with these customers in an industry that he had no idea about, frankly. And he hadn't really even done B2B before that. He hadn't done B2B and he didn't know sport. And he just went out and started meeting all these customers and asking them how they use the product and what they don't like and what we could do better.

22:12And then he got his head around the product. And there has not been a logo change. As it happens, there was a logo change before he came on. And the person that did that logo change, who wasn't the overall CEO, and it is a nice logo, That person didn't succeed as the CEO of that part of the business. Yeah. But they built a nice logo. And so that is my – that's my blueprint for how CEOs succeed. Yeah. Our logo was done by like our content guys. So it was something I wanted to update, refresh the brand. What the internal? Yeah. Because I noticed that Public Transport Victoria, they've got a new logo.

22:46Did you know that? That the logo changed in Victoria. So you know what the old PTV logo was? it was a P and the V was sideways and whatever it was. Oh, yes, yes. And now it's not even called Public Transport Victoria. It's called some other – Free taxpayer fund. Well, you're supportive of that. Don't turn on it now. And so it's called something – Transport Victoria, I'm going to say it's called. I don't know what it's called because I remember there's a T now, okay, a big T. Now there's a total logo change. You think about the cost of that logo change. This is a public service, okay. You're running trams and trains and buses.

23:20the logo does not make them more fuel efficient or go any faster or increase the capacity or come on time or doesn't do anything. What do you think the cost of, I don't know the answer to this, redesigning a logo, for sure outsourced. For them? Yeah. Three mil? More probably. Yeah. And now replacing all of the livery on all of the public transport. It's millions, right? Millions. Totally unnecessary. You should defend why you changed our logo, Will. Why did you change our logo? So first of all, I'd just say that the marketing science and research on this is incredibly consistent. There's a lot of work from a marketing scientist called Byron Sharp.

23:53There's another guy called Mark Ritson, both of whom talk extensively and have got numerous examples of when fast-moving consumer goods change their logo. What you are doing is you're significantly reducing the likelihood that someone walks down the aisle, sees your product and goes, oh, yes, I've seen that before. I'll buy it. So changing logos, reducing the awareness for your brand is almost always a bad idea. there are sometimes chances at the beginning of a business where there's a logo or some sort of design asset that lacks a certain amount of hygiene factor. No, I don't want to imply that Adam and his faces did not have a degree of power that we think they do.

24:32But I think I think when you're when you're really at sort of day one of a business, you want to make sure all of those things are in place. but absolutely like the role of a new CEO is to come in and meet customers, meet the team, make sure there's money in the bank, not make subjective decisions about things. And especially so if they're going to spend millions of dollars on subjective decisions, cause they want to kind of wipe the slate clean. And you did, I mean, you did get across the commercial side of this business. Sure. Let's say like before it started. Yeah. I didn't know how to put that, but you know, for a lot of time before you even started.

25:08And why are you changing your logo? Tell me why you're changing it. By the way, Sleeping Duck changed their logo. I don't often talk about that business. But that goes into my bucket of not good decisions. I think the guys thought our logo – our first logo was done internally by one of our designers. It wasn't – we didn't spend a huge amount of time on it. And they thought this logo was just a more appropriate logo for us. It's a pretty minor change. Okay. Because, you know, Qantas changed their logo at one point. I don't recall that, actually. They changed the tail on the kangaroo. Yeah. And I think a bit of the other stuff.

25:41And you know, it was a huge job to go and redo all of the tails of the planes. Like it's, I don't know. Do you know the most famous logo change in recent years? The Jaguar logo change? No. Pepsi? No. Why is that not? Why do you say no to my answer? Because I'm giving you a more famous logo. No, I think mine is the most famous. Well, the most controversial, I should say. Jaguar. Are you talking about when it went pink? When they changed the whole logo and like it just didn't reflect the brand at all. That was just a complete debacle. I think it was similar to that really similar to that Meta or when it went to the had the vagina thing no when it went from when it went from Facebook to Meta that was the change that was because because Facebook was dying and it had changed a year ago it was really controversial in the US do you remember this story Cracker Barrel do you remember that oh yeah well they changed everything about their brand they changed they basically had redesigned swapped the man leaning against the barrel for plain text customers and political figures obviously mostly on the right so I went absolutely nuts a week later it scrapped the logo change so how is this for a reverse variant and the ceo julie massino was forced to step down as a result of this make people think so that's a dud logo i mean we don't know much about that brand in australia we think it's a cheese yeah but um it's a big chain of restaurants that has this old school vibe to it i mean we're not going to go into it now because this is mostly australian stuff but i mean that is a massive change and maybe an example of you sometimes have to push through the hate and all right they modified the direction they reversed it so they reversed the logo but they largely like they largely went down the road of redoing the stores and in the end they found a middle ground but you know like sometimes that business needs to be reinvigorated i've got more sympathy for like again the logo is ridiculous but at least but i've got a lot of sympathy if you think a brand needs to be reinvigorated Start with the actual product that you're selling and reinvigorate that.

27:34Logo's the last thing you do, Josh. I totally agree. Can I just give you a couple of quick, what I think the worst, talk about bad customers here in WMI, but who do you reckon is the worst customer experience in the world of any industry? According to what? According to me. You, okay. Yeah. So I'll just reframe the question. Who do you think that I think is the worst customer experience in the world? Well, you're not going to say anything. Well, you might say rental cars. I was going to say you weren't going to say anything. Oh, rental cars is definitely up. No, it is in travel, actually. I know, but I was going to say, you're not going to say travel because, you know, you can't totally destroy your own business.

28:07I actually reckon – I haven't had that many bad touchwood rental car experiences. Yeah. So who else could I think of? What are the worst ones? Pretty obvious one. Government. Governments do own a lot of this often, but that's not exactly – Like a utility business? Well, in a way, it's not really utility. It's in travel. Fairly obvious, I would have thought. Airport? Getting close. Airlines? Airlines. You think airlines? As always. I thought you were no chance of saying airlines. Well, not every airline. You think airlines are the worst customer experience? This example of two – in the last, like, three days I've had.

28:38So I had a flight. I booked this flight, Doha to London. To get points, you need to book it literally the minute it opens. So I booked it the minute it opens. This was, like, six months ago on BA, who I hate. Qatar just never opened point seats. Hang on. BA flies? Doha to London. Do they? Both BA and Qatar do. Two separate flights. What plane are they flying? Fly a shocking 787, I think. Or it's a bad plane, whatever. They've really fallen behind BA. Which plane is newer, a 777 or a 787? Usually 777s. A newer plane. It depends. They still make both. Yeah. But most 787s are like 2010 to 15. Which is a nicer plane to fly on.

29:16I prefer a 777. Some people prefer a 787. They caught the dream line. It was a great bit of branding from Boeing. But the 777 goes longer now, I think. I get very confused between those two. They're pretty similar. They're both double-on. Emirates flies 777s. Yep, Emirates flies 777s. I don't think Singapore flies 787 and 350s. Anyway, they're pretty similar aircraft. So I booked this flight ages ago. So my Qatar flight was landing at 5am and I got a BA flight for 7am. So pretty good connection. I couldn't get a Qatar car flying every hour but just weren't giving point seats. And then they have another flight at 1.45am.

29:52Shocking flight that doesn't really connect at any. I get this random message from BA saying, your flight's been cancelled I thought what the hell they've cancelled the entire schedule not just my flight they've cancelled they just aren't flying that route at all six months out of the book dude oh my gosh your option is stay at the airport for 12 hours and have another red eye like what a disaster for a customer but if BA is not flying it so now I've got to either wait and take another red eye so you've got to red eye red eye whose red eye like BA BA's got one flight left now they went from two to one but the one they kept was the bad one not the good one they got a great flight and a terrible flight why do you think they did that I mean they're not idiots I presume there's demand issues, so they need to cancel a flight.

30:29And they kept whatever the cheapest slot was. Why would they keep the worst slot? Well, that's why, because they kept the cheapest slot. Because they've got demand issues, they're trying to cut costs, and a 1.45am flight has got to be a much cheaper slot. Always. Sometimes night flights… 1.45? And I don't think the price differs that much from slots. Like, I don't think it's huge. Like, I don't think it's huge variance. When we were negotiating our slot, I don't think the passenger movement cost changed much based on slot time. Like, it's just hard to get the slot you wanted. they had a good slot why they gave up that slot but to cancel there is a deal with an airline which is called we can change whatever we want whenever we want that was ghost flights ghost flights thing right and you can do nothing that's the deal that's just i don't can you think of any other business in the world that can like if we sold a hotel to somebody and said half actually and sometimes this will happen because like a hotel corporate books and we'll we'll we'll do everything they can to find you at least something better like or something equal the airlines go, we've canceled flight.

31:27Do you know, if you're a mere mortal, you wouldn't know about this. And you book a flight on a plane that is a seat that forms the majority of that flight, then the plane will often just overbook you. My nephew had that issue with Air Canada a few months ago. And bump you off the flight. Yeah. And so that is a more, I mean, at least this has got a real operational thing. They canceled the whole thing. I'll give you compensation for that. Yeah, but that is – I think you should start with that about can you believe this goes on with airlines. Yeah, they're both that. Like, I book – you should say – Well, I complained about this a few months ago.

31:59What else – what other industry do you buy a product and then they say, oh, we sold more than we have so you're just not going to be getting it? Rental carts is that other example. But, like, I thought the cancelling the flight completely – well, they're both that. Well, that's a very interesting outcome. Then I had Air Canada – this is – we're going skiing with a bunch of mates next year. There's two airlines in Canada, right? WestJet. There used to be Canadian airlines in Air Canada, but Canadian went bankrupt like 20 years ago and Air Canada took them over. So there's only one. There's like a Qantas.

32:29There's a Qantas, but with no Virgin. Oh, there's a WestJet, which is a pretty good airline. And are they nice to fly or not? Okay. Like a United kind of okay? Probably. Okay. Yeah. Coming back, remember I had a broken leg? They were nice to you, but is there – They were amazing then. Is there like fit out on the plane good? Okay. It's okay. Much better than B.O. But anyway, so I had a bunch of internal flights. We're going heli-skeying and all that stuff. And they changed the flight significantly from 5.40 to 2.40. This is material. There was a five o 'clock. For some reason, they didn't put me on the five o 'clock.

33:01They put me on one three hours. And it was full. I doubt it's full. This is still seven months out, wouldn't be full. But again, they changed it. They didn't even tell me. I only found out because another guy told me, oh, the flight's changed. Because he was looking at the book of life. Why the industry cancels flights on you, changes flights, doesn't tell you? No one can get away with it. Like airlines are a complete law unto themselves, these rogues. They do not care about a customer at all. Can you imagine how everyone else feels? Because you've got these relationships with airlines where you give them tens of millions of dollars or more and this is how you feel.

33:30Yeah, I get rid of it. Can you imagine what the regular people feel? I totally agree with you about all of this. We've seen Alan Joyce had a bit in the news when he released his book. Oh, I can't believe we get to talk about Alan Joyce. Well, I'm actually not going to talk about Joyce. Oh, that's a shame. But people give Qantas a heap of crap for being not – Qantas is now the most on-time airline in the world. they've really turned full circle and Qantas I've found I've had and touch with it again I've had great experiences for the last really last 18 months with Qantas and they've got BA cancelling flights you've got Air Canada changing flights not telling you Qantas don't do this they've actually really become really good airline again I want to tell you what I think Alan Joyce's theme song should be when he walks onto a stage do you remember that song I don't know when it was from 2000s, 90s by Brian Adams remember that guy?

34:15Summer of 69? No Everything I do, I do it for you. Yes. That should be Alan Joyce's song, Everything I do, I do it for you. Are you talking about shareholders or customers? Well, everyone except himself. He basically continues to insist that everything he did was completely selfless and it was all for Qantas or the brand or the customers. And like the$110 million he took off the table, that didn't benefit him. That was all for you. I did this all for you. I said to Joe last week, I said he should give a carry and rampart to Alan Joyce because part of the value of that business, which is getting more valuable by the day, He's Peter Joyce.

34:47Like he gets the – he can just write such incredible stuff. It's always worth subscribing to Rampart just for – and he did a great AF article too just for his Joyce commentary because it's just so good. Well, Alan Joyce said something. He said one thing that I really strongly did not like, which had nothing to do with Qantas actually. When he was questioned – you saw that there was an interview with him in – The Australian? Probably The Australian. Caroline Overington? Yes. That's what it was a great piece. He didn't cover himself in glory. Let's just say that. Not when he said – when she said, why do you have a PR person here?

35:16And he goes, have you ever interviewed a CEO before? Yes, have you ever interviewed a CEO? It's like that level of arrogance is not great. Anyway, but he did say this. When he was questioned about the$110 million that he pocketed, presumably he paid half of it to the ATO would be my guess. But he said – Depends on how it's structured. He could pay a couple of games. He said, I'm not here to defend capitalism, but that's how capitalism works. And I feel like this. I feel like you should be here to defend capitalism. Like, why are you pretending? I don't know. I'm not saying capitalism's good, but we're in capitalism.

35:47That's how it works. Like, it is good. Like, it's got some problems, e.g. we pay CEOs that take no personal risk,$110 million. That's a problem with capitalism. What he should have said is capitalism is - That's not real capitalism, I'd argue. Well, that is part of capitalism. Too much agency cost in this to be real capitalism. He should say, well, I'm a big fan of capitalism. It's better than anything else. But unfortunately, there are some bugs in capitalism, and that's how I managed to get$110 million. It's a huge billion dollars. Bug for everyone else. Yeah, well, it is a bug, right? And so I thought that was quite despicable to say I'm not here to defend capitalism.

36:20If a guy who is running one of the biggest companies in Australia is not prepared to stand up and say, we're in a time where there's a lot of arguments about socialism, like, that's bad. We should defend capitalism. Like, he stands for nothing except himself. I think the tragedy of Joyce, there's a couple of tragedies of Joyce. One is that he could have retired in 2019, a hero of Australian commerce. With how much money? Whoa, whoa, whoa. How much money? Similar money to E2? No. Maybe 60 mil. No, I don't think he made that much. All the money came in the back end. Because they've got all these benefits in the back end.

36:53I think that he gets – but he was there for 20 years before that. I'm not sure. He didn't have full control in the way he did. I was controlling Goida who was – Well, of the boardroom, let's say. Which was Goida who ran the board. And so I think he would have left with a lot less money. I think there's an aspect. I think he, maybe 20. I don't think the difference is, but either way, he was a royalty guy. But I think the tragedy, and for him, he would have left, he would have had a choice of boards in Australia. He would have, I sat on a plane with him once before he was super popular and people loved this guy.

37:25And I went to a function with him in 2000. I was at a function, he was speaking at 2018. People loved him. I loved him when he shut down the airline. That was 2011, I think. I had tickets. I couldn't fly. Yeah. I thought, thankfully there's a guy that's prepared not to get pushed around. So I think he had – and I think some people didn't like him for that, but I think overall he came out of that really well. The tragedy was – it's a great lesson for – I don't know exactly how you take this lesson, but for people who are at the top who don't pick their exit time and stay too long. It's such an art – and obviously Ginger Allen's a classic example.

37:56Jerry Seinfeld, he picked a peak, right? He got out at the peak. Yeah, and we talked about it last week with Mike getting that answer right. It was a – it's so few and far between CEOs and leaders in general who – presidents etc who are able to call that shot and and not stay on too long and and alan george is a classic example of somebody who stayed on way too long and decisions he made in the last 18 months were just so ridiculous like he just made bad decision after bad decision the ghost flights for me was the absolute worst where they were that's a bit like my ba thing where they were charging for flights they'd cancel they wouldn't tell the customer and why it was so bad is customer they'd have to pay double to rebook the flight so they had this huge existential cost because Qantas just stuffed up.

38:34That, to me, was the absolute worst. I wasn't as critical of the baggage handler sackings as Joe Assen's been. I thought that was badly handled, but he was trying to cut costs and be on an even playing field with his competitors. So to me, that was far more excusable. The ghost flights was completely inexcusable. Well, Jerry Seinfeld, I mean, I listened to a lot of interviews with comedians, and Jerry Seinfeld said he was offered this insane amount of money to keep going. Like actually, it's talking about hundreds of millions of dollars for a season. And he declined it because he said, where we're at, there is no way that I can keep this up.

39:12Like basically the only way is down and I don't want to go down. And Seinfeld probably had peaked about three years earlier. So it was a slow. It wasn't a great ending, obviously. When Larry David left after I think Series 7. Larry David wrote the ending. Yeah, he came back for that. It wasn't great. Yeah, but I thought that last episode was fine. But to me, the last two or three seasons really fell away. He tried to – like he could have made more money is my point. And he decided not to. Well, short term, long term would have damaged syndication probably because they had all these crappy episodes.

39:39I think he's made billions of syndication since then. So there's an argument that he was long term greedy and not short term. So let's talk also about this idea of personal brand. Now, Ellen Joyce, he gets interviewed. I'll say this. You know Lara Carey. If Ellen Joyce would have engaged Lara Carey – I don't know her personally, but I was in – Yeah, well, you know, she's like advisor to the stars, right? She's the crisis expert, right? And so she, lovely person. And so she – Wasn't she called in for Anthony Catalano and then they parted way soon after? I think everyone calls her in basically. And so if she – what's advising Joyce?

40:14I'm pretty sure a guy that took$110 million off the table and was getting a lot of hate would not have done an interview sitting in a gazillion-dollar apartment with a grand piano and some kind of little pool, probably the little fish that eat your skin off your toes, you know? Like that is not – What the hell is he doing the interview there for? It is such bad judgment, right? He should have gone to a Macca's or something. Do you see that there was an interview with Kyle Sanderlands and he drove his Rolls Royce through a McDonald's drive-thru? So, Kyle. Yeah, yeah. I thought that was like, you know, at least it's on brand, right?

40:46Yeah, totally. But like maybe Ellen Joyce is on brand as well. Maybe that is Ellen Joyce. Maybe the guy that came from – It never used to be his brand. His brand used to be a hard-ass CEO but did it for the right reasons. and not rich former CEO. I've met a lot of people that came from nothing and one of the most emotionally important things for them is to have all of the trappings of wealth because they were so poor when they were young. Ellen Joyce obviously had a tough upbringing. It's possible that this is just his psychological mechanism for trying to deal with his childhood. It goes one of two ways.

41:21You either become – usually the thing – you usually become like a Warren Buffett style where you have all his money and don't want to spend it because you're psychologically incapable of spending money because you're going to run out of money. I don't believe that story about Warren Buffett, though. Warren Buffett's an exchange. He's not a private jet. He's just like, oh, yeah, I don't fly on a private jet, but I bought net – is it called net jets? I buy net jets, so I'm just flying on my own business. He does live in the same house he bought in the 60s. Yeah, but then how long – I don't know.

41:45I'm not such a believer in the Warren Buffett myth on – like, what's it called? Parsimony. Let me tell you about something that's changing, I think on the 10th of August in Australia. which probably affects a significant number of listeners. So do you know what an LRBA is? No. I also didn't know what this is, but many listeners will know. It's a limited recourse borrowing agreement. I think that's what it stands for. Bank of mum and dad or something? Not bank of mum and dad. That is also a limited recourse borrowing agreement, although they might disown you if you don't pay them back. When you give employer shares and you have a non-recourse loan?

42:22So I also, I didn't know what this is. So this is how you borrow money. in a self-managed superannuation fund. And traditionally, by traditionally I mean until the 10th of August, this is what you could do. You could get your self-managed super fund money and you could buy a residential property and rent it out. But because of how quarantined superannuation funds are, I mean they're so quarantined that if you go bankrupt, I think your super is not accessible to anyone. Really? Yeah. Oh, as in you can't – People can't take your superannuation. Yeah. So it's really quarantined. So in order to borrow money to buy a resident - I'm not sure how I feel about that, by the way, but anyway.

43:01Well, I think they just basically decided we don't want to have to pay the pension to people so you can't take their super. On the flip side, you can invest the super. And so the way that it works for the next few days is that you can buy a residential property, take out a loan, and because the loan, you can't let the bank have recourse over your superannuation money if you default on the loan. So the property goes into like a bear trust or something, and the loan is only in that vehicle and it's limited recourse. And that is how people would buy - It must make it harder to borrow then. Probably the borrowing costs are higher would be my guess, right?

43:33Anyway, so that was what people did. Well, guess what? From the 10th of August, you can no longer do that for residential property. You can't borrow at all. You can only do it for business property. And what business property means is not commercial property. It means property where one or more businesses are leasing the property in its entirety. That means they don't have to lease on a property, but you can't have anything that's non-business. It can't be mixed use, like have some resi. You can't borrow at all. Is that what you're saying? Except to buy these properties. You can't borrow to buy resi properties.

44:03It's over. Resi's over. I thought historically you couldn't actually borrow. You couldn't and they brought this thing in and then they get rid of it. Yeah. And so let me just tell you what you can borrow for and then what the challenge is about not buying for residential. You can only borrow for stuff that's got businesses renting it. Yep. So you can run your own business. Like a sandwich shop. Yeah. You can run your own business and buy your own property that you operate out of through your self-managed super fund as long as you're paying rent to it. So that's a common use of this. One challenge is this.

44:31If you have a business property and it's tenanted by one business and it goes broke and stops leasing your property, it is possible you're in default of the superannuation law until you find a new tenant. And the ATO doesn't take this well. And so that's a bit of an issue. They've probably got an answer to that. But I definitely know if you buy a vacant property, like you can't buy that and borrow against it waiting to rent it out. Like it has to be rented. But I just want to say – so that's one part of it. You can do it outside super. You can, but I'm talking about inside super. But this is the other – I've got no great – I'm not complaining.

45:11No, I'm not complaining about it. I just think it's complicated. I don't like complicated things. For all the things they've done, this is the least impactful. Well, this is the flip side though. Think about this. So the residential property market today, like it's tanking. Which is the goal of the whole policy. Which is the goal. But what we know and what we've spoken about extensively is it's going to be a bad time for renters. We're about to go into a very bad time for renters. And now we've got a new removal of the demand side for having rental properties, which is you can't do it out of self-managed superannuation anymore.

45:44As in more the supply side? Yeah, well what I mean is - The demand side is the renters, the supply side is the people - No, you're right. On the supply side. Which is a bigger problem. Yeah, I should say it like this. So now a property comes up for auction, if it does. I mean, it doesn't at the moment, but let's say it did. And the thing is, there are going to be some portion of renters in the market that just don't want to buy or they don't have a deposit big enough to buy. You can't just say, if we get rid of all of the investors, then everyone will end up to be a homeowner because some big percentage needs to rent.

46:11There's no 100 % homeowner. You say, of course, but I don't think that's well understood at all by the government. like there is going to be a very large pool of renters at all times no matter how cheap you make property unless it's free people move cities like yeah but also even if you want to buy a five hundred thousand dollar apartment like you still need to go and find well now twenty five thousand dollars if you use the government's backstop yeah but tens of thousands of dollars yeah to go and people don't have it right and so what you have now is a situation where a property comes up for auction.

46:45And in the past, there was a group of people that wanted to buy that in order to rent it out to people. Now, it was probably unfairly skewed. In fact, I would say it was unfairly skewed because of negative gearing. It was too generous. But you had all these investors using negative gearing. And then you had these investors that were using their self-managed super funds with this limited recourse loan. Now you've gotten rid of negative gearing buyers. And now you've gotten rid of these buyers in super. Of course, what do you think happens to all the existing people that are already using this vehicle.

47:14Have a guess. If I've got an existing limited... They sell their properties, presumably. No, they get their grandfathered. Oh, grandfathered, of course. All grandfathered. Everyone that's got it gets grandfathered. Only new... So only the 25-year-old wants to buy a super can't get it. Yeah. This 55-year-old... What about the 40-year-old who's looking to buy a super... Maybe. 25-year-old can't afford to buy a super... Maybe. All grandfathered. All grandfathered. But the point is this. This is another bit of, yeah, the supply side that's been removed. Yeah. Chipped away. It's just going to get harder and harder for people to find affordable rental properties in Australian cities.

47:44That's my guess. We'll see how that plays out. Really quick story. You said the Wall Street Journal article on US bars and nightclubs giving up on Gen Z. I did see that. They've got a new favourite customer, Gen X's. The Wall Street Journal noted that drinking amongst younger Americans hit historic lows in 2024. Those born between 65 and 1980, however, maintain their drinking habits and bars are programming their calendars accordingly with nostalgia, theme nights and parties that end way before midnight. But Gen Z and millennials have entered adulthood and mounting evidence of alcohol's negative impact on the body following a series of studies through the 2010s that largely debunked the French paradox, which obviously was drinking wine is healthy for you.

48:21Various health organisations, including WHO, have issued guidance suggesting that the healthiest option at all is not to drink, full stop. Did this surprise you? Well, firstly, the guidance changes every 10 minutes about what's good for you, bad for you, red wine. It's not just that. It's chocolate. Like, you know, I mean, caffeine. Yeah. Like it flops backwards, flip-flops backwards and forwards. Not sure caffeine doesn't mean thought of as great for you. No, caffeine, like a certain dose of caffeine is good for you. Really? Yeah, for sure. That's cafe's research. As of today. Yeah. It's tomorrow, right?

48:52And so I'm not shocked by this. I find this, you know, you hear about all of these Gen Z not drinking and don't want to do drugs and they want to wake up early and go surfing, which is fine and that definitely exists in all these cafes. We see the run clubs in Bondi at 6am. People just like, it's like a nightclub at 6am. I know on the Gold Coast at five, for cafes opening at 5.30. I love the Gold Coast. It's my spiritual home. I go for a run at 5.30 and there's like a hundred people out there. I know. I mean, I don't notice that. Let's say that. But I will say that there's also this other group that I noticed as well, which is Jen said, people getting absolutely smashed and taking drugs and whatever.

49:27So I think. Where are you noticing this? Yeah. Like, uh, well also in the Gold Coast. Like, like. You're not, you're probably not like cocktails and dreams hanging with these guys. Well, but I'm up at that time, right? Because I'm maybe walking the streets at like midnight or 11 o 'clock. And they're all full, okay? And so it's all young people. And so what I think has happened is fewer people in this generation are drinking. It hasn't disappeared. But you do see it in the data from all of these alcohol companies as well. So, yeah. You've been smashed alcohol companies. Yeah, of course. Because it has diminished, right?

49:59Mike, do you drink? Not really, no. I would have asked Joel. But hang on. I also don't really drink and you don't drink at all. And so. Yeah, me and Mike are the two. I'd say a lot of people. This is the case in point. A lot of people in my age group, our age group do. I haven't noticed much of a drop. I've never really been a drinker. Will you drink last year? I had my first drink in four years last weekend. There you go. So definitely alcohol consumption has fallen. It is bigger in certain parts of the culture. Like we're not really in the go to the pub and have beer as part of the culture, but it's still a big part of the culture still.

50:36And I think these bars, I don't know, what do I think about that story? I think that story is interesting and they interviewed three bars and like I didn't really put much stock in it. I think the biggest story is what can turn around the decline of alcohol businesses if anything. In the past, like 20 years ago, the way they supercharged their earnings is they just made everything taste like a kid's drink. And then that's how they released alcohol And that rocketed, right? And we don't see that in alcohol now, but we do see that in smoking. So all these vapes, they all have bubblegum flavours and stuff to try and get underage kids or slightly overage smoking vapes.

51:15I think we've just seen a migration from alcohol to vaping, basically. And so smoking's gone down. Smoking is a bit coming back, by the way. I don't know if you know that. Absolutely coming back. Yeah, it's coming back. It's just not a great thing. Well, that's the singly worst thing for you. Yeah. And so I'm not sure that one drink is bad for you with alcohol, but one cigarette is bad for you for sure. And so I think what we're just seeing is vices, let's call them, like social lubricants, they just shift backwards and forwards between different modalities is how I would describe it. I once was out and I saw a woman smoking a cigarette during the vape craze and I said to her, I haven't seen anyone smoking a cigarette in a long time.

51:55And she said, yeah, I'm trying to quit vaping. And I just thought it was really ironic. Well, I mean, that is how the world goes. That's right. Things just go around in circles. We'll go to a super quick break, back with some more stories in a moment.

52:09Anyway, back and I think you've got a good Aussie story for us. Well, so, you know, occasionally we talk about private businesses, but most of them are big startups. But there was a business I came across in the media, I think in the Fin Review. And I think it's interesting because like no one's really put the pieces together on this. And I find it a bit bizarre. So it's a company called OSW. I'm sure you haven't heard of them. I've not heard of them. They basically sell stuff for the electrification boom. So solar panels, mostly batteries. It's a private business. It's a private business. 65 % to 70 % of their revenue comes from selling batteries.

52:45The government subsidy probably has helped them a lot. I'm sure it has. And so I want to tell you what their numbers were in 2023. And I want to tell you what - And these guys, because all batteries are pretty much manufactured in China, so these guys import the batteries. That's right. That's right. So they're not - They're a retailer or a wholesaler. They're a wholesaler. And they also built a software layer to make something easier for solar, blah, blah, blah, whatever, right? You're going to be surprised about these numbers, okay? So in 2023, they were generating$560 million of revenue. Yeah.

53:20There's two founders. Yeah. But the gross profit was only$29 million. So they're only at a 5 % gross profit margin. tight margins. It's a commoditized product largely. They're bringing this commodity from China. Yeah, it's a commoditized product. And they lost$5.5 million at the net profit line. Okay. And so they went and raised$8.5 million. So that feels like a bit of a shitty business, but like they need to, you know, when you're raising - Depends on what their growth rate is. Like if they're growing really fast. We're going to get to that. But$8.5 million raise implies a pretty low valuation, right?

53:54Point 70 mil. At most, you would think, right? Yeah. And it might be less, right? Yeah. Okay. And so, and obviously - What do you say the top one was? 560 mil in 2023. Yeah. So one to 10 price of sales multiple. And so, but you would say an eight and a half million dollar raise implies they needed that money to keep surviving. Lights on. Okay. Now we fast forward to what the financial review has just reported. Revenue, $2 billion. They claim an EBITDA, but we don't know what EBITDA means, of$83 million. Now, I found it very – and Mollus, I think, or whoever it was, is trying to sell – find a strategic investor, presumably for a secondary sell-down.

54:38And I wonder if that$83 million of EBITDA includes any positive free cash. It might not. But if you think about it like this – They're a stock business. They're probably having to buy stock in advance. Well, they're margin – they're gross – like this has got everything working against it except the tailwind of electrification and government subsidy. That's why the revenue – And that's coming off. But the subsidy is reduced. And this is why the revenue has grown so strongly, obviously. But – Obviously, the product itself, not what these guys do, but the battery product combined with solar is game-changing.

55:04Yeah, but it's expensive to install that into your house. Yeah, and getting cheaper every day. Okay. But so do you think their gross profit margin, their gross margin, could have risen materially in those last three years? With scale, potentially. Gross margin. With scale, you can get a higher gross margin. 5 % to what? 10? No way. Maybe higher? Higher than 10? I think, I mean, well, if you think it's higher than 10, then even if we take 10. You're 4X to scale this business. Yeah. It's not hard to increase prices when you're scaling up to that level. I don't know what the competitive landscape is for this business.

55:41Well, presumably it's very competitive because – Well, these guys are 4X. Clearly there's a degree of strength in this business. Yeah, well, you've got tailwinds of electrification and tailwinds of government subsidies. Government subsidies generally invite lots of competitors. Their only potential power I can see is, well, You just gave them scale. Yeah, well, scale, but also potentially some corner resource if they have like an agreement with cattle or something like that. Exclusive agreement. They have exclusive like mega style. You might know this. Do you know who the big battery providers are in Australia?

56:13Well, is CATL do it here? I'm actually getting a battery in my new house, but I don't know who the battery is, to be honest. So how do you buy it for your house? You go to some retailer, right? I've got a project manager who then does the work to find the suppliers and with the builder as well, and they say, here's the different options. But there's a long supply chain. Like China makes the battery, and then presumably these guys import it, and then they sell it to an installer, and then your project manager will find it. Not that they sell it to the installer. I reckon the installer just installs it, and I don't know how you tell it to work.

56:44You might be right, because they say they've got 19 ,000 installers. Yeah. So do you think that your project manager might go directly to this company and say, can we get some batteries off you? Eventually. Okay, that would be interesting. I don't know. So that's not exactly wholesale, if that's the case. So do you think they might now have increased their gross profit from 29 mil on 560 mil? Well, they have to if they're making 83 mil. Well, I know, but the sentence is still continuing. So do you think they might have increased it to 100 mil on 200 mil? On two bill of revenue? Do you think they're gross?

57:16More. Really? Well, they're going to have more than 17 million bucks in costs, presumably, above the EBITDA line. No, no, but on their gross – I'm just talking about gross profit. Yeah. So their gross profit – You said they make 83 million in EBITDA. So they've got staff, they've got marketing. But let's just think about what their gross margin is. So their gross margin was 5%, and you think it might be now past 10 % as a gross margin. Absolutely. So you think they would be making more than 100 mil of gross profit. Easily. I reckon like 200 mil if they're making 83 EBITDA. Yeah. They've got staff to pay.

57:46They've got marketing to do. They've got general administrative expenses. Like easily. So if you think they're making – so you think they're gross – yeah. I think they're 10 % to 15%. Yeah, sorry. I said the wrong thing. So to Bill, you think they're making more than 200 at the gross line. 10 % to 15%. They could make 300. Yeah. So you think this business has transformed in the last few years because of scale and not only have they got some leverage on their fixed costs, but you think their gross margin might have rocketed. Also, the other reason is government subsidising. Whenever you've got government subsidy, who benefits?

58:16It's the vendors. For sure. It's the same as the first home buyer thing. And so let's say you've got this business doing 83 mil of EBITDA on two bill of revenue with these tailwinds. So electrification is going to be a continuing tailwind. Government subsidies is not. How do you value a business like this? Really hard. You're getting my multiples on this because it's so dependent on government subsidies. Yeah, but it's 4X from 23 to 25. I'd be giving it like maybe a three or four EBITDA multiple. Really? Okay. You? So, yeah, it's hard to know. I mean, I think – Well, it's probably hard to know.

58:50That's why you still give a guess. Yeah. So you're saying it could be a$300 million business. And three years ago, it was – 50. 50, yeah. I think I am scared about what happens when the government subsidy unwinds. Yeah. And I definitely think I wouldn't pay more than that multiple. There's always a chance the government something goes on because it is – like batteries are super critical. Like the million-dollar question with batteries and something I'm pondering myself with my house is you've got these solid state batteries coming in electric cars. Why aren't these going to be applicable for houses?

59:21And you can have a huge amount more storage in these batteries. So it could be transformation. Solar plus battery is the most transformational energy combination we've seen in our lifetime. So what are you doing with your – So this is what I looked into. You tell me what you're doing with your house. So what I looked into is you put solar on the roof. Yep. Then you go and put two batteries, let's say, in your garage. I actually used – I'm using one, not two, because I'm waiting for the battery technology to improve for the second one in. And you go and get – Because it's like an extra 50 grand.

59:47And you go and get an electricity plan where you've got$0 costs at certain times of the day when you can charge your car, for example. During the day, essentially. Yeah. And then maybe you can have a zero net cost for electricity. You need two batteries for that. You have two batteries, it's about$100 ,000. You can have close to, well, it's still a bit of cost, but you start getting close to zero. And that will cost you$100 ,000. You're charging the battery during the day and you're using the batteries at night, essentially. So does that cost you$100 ,000? That's very expensive. Yeah. And how much is an electricity bill?

1:00:19I think the payback period on that's like, when I do the sums, the payback period on the one battery was far quicker than the two batteries. You don't usually get that much benefit from the two. I see. I think it's like a sub-10-year payback. It's like a seven-year payback. All right. And presumably there's debt financing to let you put this battery in. You don't need it, but like a regular human. I'm sure there is. The other advantage is - In fact, isn't that that business Bright was providing those loans? Yeah, it was Buy Now Book Later. I think it was something like that. Wasn't it a buy now book later for solar or something like that?

1:00:47What does that mean, buy now book later? Like after pay. Ah, yes, I think you're right. They had that model. Didn't one of the Atlassian guys or both of them invest in that business? I think both may have. Yeah. So I definitely wouldn't pay more than four times EBITDA just based on it. The other benefit of batteries, just to round that out, is if you have a blackout, the batteries obviously act as – so your freezer doesn't get ruined. So it's really handy to have this stuff in addition to the dollar savings. Dollar savings, they just adjust to the point is that as batteries are getting more efficient, you can also, they become more, you're saving more money.

1:01:18Yeah. These companies also charge more because your customer's saving more. So they just tax the customer as much as they can. Well, hang on. Who charges more? The battery company? The battery company. it's interesting that you say that because I think that batteries are a commodity and I don't think you get to do market-based pricing in a commodity. I think they all do though. I think all the batteries are going, I'm going to price it based on a seven or six or seven or eight year payback. As batteries become better, the payback should go down It's like two or three years. I'm going to charge more.

1:01:44What would Jeff Bezos say? Your margin is my opportunity. And so eventually the prices are going to come down if that's the case, right? We haven't yet, though. We haven't yet, but not much. And so is anyone using Elon's batteries or not? I think so. Yeah. I think they're quite popular. Powerwall. Yeah. Anyway, so I agree with you on the valuation. I think they're not going to take 300 mil as a valuation would be my guess. And I think that someone, if they get a buyer, it will be double that price. That's my guess. for a minority position. I think you'd be a fool to buy that business. I agree.

1:02:16If I'm an owner of this business, I'm probably not crystallizing a tax event and selling. I'm just going to hope it's going to last for more than four years, essentially. It's very different being a buyer and a seller here. That's why I think it'd be hard to sell this business, the short term anyway. If I was the owner of this business, I would be going to a business valuer and saying, get me a valuation of$1 billion on this business so that my CGT event, when I sell it in two years' time under this government, is not going to kill me. Can I move on to the story from last week? And probably one of the biggest fall from graces I've seen in my lifetime.

1:02:49One of the so-called heroes of the pandemic. Who do you think I'm talking about? Fauci. Anthony Fauci. I was very much wondering how to talk about this topic on the podcast without sounding like a raving lunatic. But we – I'm very hesitant to say this, but I think we have been proven to be absolutely 100 % correct for the deep cynicism we had about everything to do with this pandemic lockdown and the information it was based on. I was actually not cynical enough. There were people who were more cynical than me, certainly the David Shafers and Ben Freund, they were on to it within days. It took me probably two months.

1:03:27I wrote some horrendous articles saying lockdowns were a good idea for the first couple of weeks. Well, interestingly, you should say that. It's my eternal shame. Well, now we're going to... Flog myself. So I was talking to Schaefer recently, and this is what I said about you. I said you are one of the very few people that I've ever met that um is completely honest and transparent about I said the totally wrong thing and then I changed my view and um I think you know that's very laudable I try to be like that as well but it's very unusual I mean like we're in the era of don't give an inch and um I was in I wrote it down so I can hardly disavow my views that were like and Schaefer got it right to his credit straight away like he knew straight away and There were other people who knew as well, but they were definitely very much the minority.

1:04:11But Anthony Fauci was actually compelled to hear – do you know why he was compelled to appear before Rand Paul's congressional? No, why? Because Joe Biden gave him this massive pardon. Oh, yeah, yeah, that's right. He gave him a preemptive pardon. He basically said anything that happened between 2019 and 2024, I'm going to pardon you for. As a result of that, he had to appear before the congressional committee. And what happened was he just basically took the fifth, which is a privilege against self-incrimination from the Constitution more than 100 times. I said, what's the weather like? He refused to answer it.

1:04:41So he just didn't want to – because he was so scared of being caught up. And the reason why this hearing – obviously, Rand Paul and him don't get along that well, but they found his diary. So Anthony Fauci – And I saw that. What does that mean, they found his diary? Like he left it on the train? This guy's a moron. He put it on government service. He literally left it on government service. Yeah, yeah, yeah. This is how arrogant this guy was. He's writing a dear diary. Today I'm the best of – You know how revered this guy was before the pandemic? Yeah. Like he wrote the book that everyone who does the physician exam reads.

1:05:14Yeah. He wrote that book. Yeah. Like in Australia, people read that book. Incredible. So he was like really a revered guy. And it turns out he's maybe a terrible guy. So the Wall Street Journal claimed that the scene marked a staggering shift for a man who at the height of the pandemic marvelled at his own unimaginable fame. Americans sported socks and bobbleheads with Fauci's face. Time magazine even put him on the cover. Kim Kardashian facilitated a Zoom call with Fauci in 2020 that drew celebrities from Ariana Grande to Ashton Kutcher to Chris Rock. During COVID, Fauci once claimed, I am the science and is not hyperbole to say that I'm the most famous and talked about person in the country.

1:05:54In 2021, even after sort of peak sort of Fauci mania, 71 % of Americans had confidence in him to provide trustworthy public health information. That number is down to 54%. Which is still a very high percentage. Because probably they didn't watch this thing. Yeah, exactly. He was forced to appear as a result of the pardon. Fauci kept this 1 ,000-page diary during COVID, which was left on government servers, in which he revealed his close tracking of his own media performances and what he described as his explosive, his words, growing fame. The diaries even referred to Fauci, asking colleagues to refer him for million-dollar prizes.

1:06:30Fauci condemned the diary release as an invasion of privacy, apparently forgetting he actually saved it on government servers. I thought, interestingly, as Adam Creighton noted, the word press appeared in his diary 641 times, award 80 times, hero, presumably referring to himself, 49 times, while peer review, meta-analysis, risk-benefit, learning loss, or mental health didn't get mentioned at all. I mean, it's disgraceful, right? And one of the most, probably the most damning things is one thing that I wrote a lot about during COVID, I'm not going to dig up the old articles, but a lot of the controversies, what is the case fatality rate?

1:07:02If you catch it, what are the chances of dying? And what Fauci claimed publicly was it was 2 % chance. This is what every mainstream media is saying. I was looking at the numbers and saying, this is like 0.1, massive, maximum 0.2, but probably less. We saw this - Partly because you knew that the number of cases was being massively underreported. Because it was asymptomatic, so we didn't know. So, and what the data we did have, and I reckon I wrote an article in like May about this, May of 2020, was we had the princess ship in Japan. So we had our own little mini, and these are old people with a much higher chance of dying.

1:07:33Yeah, that's true. You could see exactly what the teller was. It was like 0.4, 0.45 on that ship. And that's old people. Fauci was saying it was 2%. He was one of the leaders of this 2 % bullshit. In his private diary, he was saying it was 0.2. So he was lying to the whole entire world about this. So if you think about what, So some people thought I was crazy during COVID. I'm sure you had the same experience. I was obviously not one of those people. You didn't think I was crazy, but people thought you were crazy. I think people more hated you. They thought you were crazy. They just had this vitriolic hate.

1:08:05They thought that you were killing them with your policy, which is just scientifically wrong. And I would say this, in all honesty, I think, speaking for myself, like I did go a bit crazy during the lockdowns. Like it had a very negative effect on my mental health, but I don't think it affected my ability to reason through the issue. And what were the main things? I mean, I was very hesitant to talk about this because, you know, like we're digging up old stuff. But also I feel like you've got to learn some lessons from this, right? Yeah, if you get the past, you're doomed to repeat it. So what did we say?

1:08:33One is what the lockdowns are based on is not science, it's politics. I don't think anything has more conclusively come out now than how right that view was. Like you got a little insight into it when you had the curfews in Melbourne and eventually Daniel Andrews said, no, I just made it up. And the five plumber thing he just made up. Yeah, it's all made up, right? The six foot distance thing was made up by Fauci. The mask thing was made up. Everything was made up. And so the thing I was most scared about during that period was how easy it is to make human beings scared and then to do whatever you want to them, right?

1:09:11And like I say, the guy that would be sitting and watching Fauci's testimony and saying, I tried to warn you from his grave, would be Thurgood Marshall, the former Supreme Court justice in the US, first black Supreme Court justice, who basically warned over and over and over and over again, like, be careful of scared people and what politicians do to them to take away their own liberties. So that's one thing. We said the science is fake and not fake. The lockdowns are based not on science but on politics. And there were actual – there was Jay Batachisha. There was great epidemiologists who were silenced and criticised and humiliated and they were right all along.

1:09:49Well, Fauci's... Fauci selling his soul for fame, I would say, was what Brett Sutton did as well. Absolutely. And I think that this... Got a very cushy job. Andrews gave him a great job at CSIRO. What another disgrace. There were problems where epidemiologists who are meant to be dispassionate scientists, they were seduced with the allure of fame and they basically sold out themselves and their profession and it was very unpopular to say that that i did get a lot of hate the other thing you would say it wasn't just epidermal it was other there was i found there was about i think specialists probably erred more towards you and being more rational about it but certainly a lot of in the medical profession who you you go to for rational like do no harm like that's their job they did as much harm as anyone they hated on me for sure but there was probably 60 percent of the medical profession who disgraced themselves 40 who were heroes and put you in that category but there were 60 who just disgraced the medical profession disgraced their oath disgraced everything they meant to serve for because they were paranoid lunatics who didn't understand the science and now we can also say um that one of the things both of us were saying uh was that these lockdowns were going to cause a very long-term damage now we can see the health and mental health damage they've caused it's irrefutable now go and talk to any pediatrician about what's happened as a consequence of the pandemic.

1:11:15They'll tell you about the lockdowns. Like, it's terrible. Mental health is the obvious one. The less obvious one is the economic damage it's caused, which leads to death. We know that inflation and lower economic growth ultimately kills people who are really poor because they can't afford to go to hospital. They can't afford lots of stuff. They can't afford proper food. We've had 40 % inflation since COVID, if not more. 40 % understating it. that's a direct attack on the poorest people in society rich people are fine because our assets go up like no issue here it's the poor people who have been absolutely smashed more than anything then layer on top the mental health catastrophe that's occurred so it's that's exactly we we knew this from day one and everybody just people are dying we can't let people die let's smash the economy let's create this inflation let's print money to try and overcome a short-term issue it's the classic canetone effect well we should also say as well it ruined the economy and the thing that people don't speak about much is what it did to society.

1:12:14So you had this moment where the entire populations of Western liberal democracies were persuaded to just give up their liberties on the basis of very little evidence. And if you fast forward to today, societies have never really recovered from that moment. Like it's really degraded society. And I think a lot of the crazy politics that we're seeing today, that craziness was legitimised during the pandemic and like the cult of personality that really rose. It means Trump was elected in 2016 first. I'm not really even putting, I mean, like everyone always wants to talk about Trump. But I'm saying he was the ultimate cult of personality.

1:12:50Yeah, but like we saw like the rise of cult of personality, the trust, like this. It went further. Yeah, and this idea of just trusting government, that is an unhealthy attitude in a democracy. Well, I think trusting government's actually been reduced massively as a result of the pandemic for, like it took three years. Yeah, because people saw how to – Three years, we got there in the end. And I want to tell you this story and then we can move on to the next thing. I haven't really spoken about this at all. So I don't know if you remember, but during the pandemic in Victoria, there was an effort to pass what I called thought police legislation, where police could arrest you on suspicion that you were considering breaking the rules.

1:13:26I found that terrifying. Like, that is straight out of 1984. And so I don't want to talk about this, but like – so I reached out to Michael Borsky. I can say this because he publicly wrote articles about this. and we kind of got together and did a whole lot of stuff behind the scenes. Patrick Durkin at the Finn, like, kind of was writing articles about it. I wrote to, like, all of the MPs, all of the ones that were swinging. We kind of pushed this whole thing through the media and together with lots of other people that were doing similar things that was aborted, if you remember, and they didn't pass the worst of the legislation.

1:13:59And interestingly, the Greens… This was that angiagy, really. Yeah, the Greens guy in the lower house was actually very… I wrote this whole document of what you're actually voting for. He was one of the few people that read cover to cover. Yeah, which was pre-2023. But I think what we've seen now is the ultimate bookend to this, which is the guy that was most trusted in the world, because this is the bit you didn't mention, it seems very likely now, it's hard to know because he took the fifth 100 times, but it's very likely that this virus was concocted in Wuhan. Oh, I think that's common knowledge now.

1:14:36In a lab. Gain of function research. Gain of function research that he was funding with the Chinese. And gain of function is when they enhance viruses to test them, essentially, on bats they were doing. And it got out and it spread. And this whole cover-up that says it had nothing to do with the coincidental research lab located next door to the market where it spread. like that was all a massive lie perpetuated by people in power to me like I would have thought it's worse that it came from wet market than a lab in some ways because wet markets don't think it should be allowed but the lie is the problem it was such a necessary lie like why lie about this and like it wasn't it was a lie it was it was ridiculous it was a conspiracy yeah I mean you put this in the conspiracy basket like all of these everything that people suggested was labelled you were crazy like people who criticise the vaccine it's not a real vaccine but the thing they claimed was a vaccine, which has now damaged real vaccines and completely – people are dying of all sorts of stuff in the States because of the way they're pushing the COVID Inverticomers vaccine.

1:15:35That was a complete fraud. So everything about this virus from day one was a fraud copying the policies of the Chinese Communist Party. And so the back – so I'm trying to think, like, what can you learn from all of this? Number one, don't give up your liberties. Yeah. That would be number one that I would say to take out of this. Like, liberties were hard fought. We were not born with these at the beginning of human civilization. Yeah, don't give them up. That's number one. Number two, like, if you're an expert, behave like an expert. Because the result of all of this has been the degrading of a belief in experts.

1:16:08And now, like, expertise is very unpopular now. But that said, the people who benefited, like, Brett Sutton's got lots of money in a job. All these people who, the charlatans who are the inverted commas experts, they've actually done well for them. So for them, it's actually fine. They've done, like Fauci still made lots of money. Like none of these guys had any problems. But that would be my main takeaway. They had two years of being heroes in every newspaper and every TV show and they rode off into the sunset and now people are dying of suicide and malnutrition because of these morons. Think for yourself.

1:16:36That would be my advice. Think for yourself and don't give up liberties. Well, I want to get our last story. A week ago, Leopold Ashenbrenner was preparing for his wedding. That plan was for a multi-day celebration in Carmel, a seaside town in Northern California with a ceremony in a Tuscan Sol villa and a send-off at a spa in the forest. Sadly, things have been a great week for old Leo. Well, I think he can still afford that because he would have taken a ton of performance fees off the table. A week later, and Leo's$45 billion fund, of course, called Situational Awareness, ironically, has been sold to Ken Griffith Citadel as Leo raced to gather cash to cover margin calls from lenders.

1:17:14The fund was down in July by 67%. But despite the absolute carnage, and this is actually remarkable, still up 80 % for the year. Admittedly, it had also been up 270 % after fees until May, which is pretty remarkable. This entire story is wild. So Ashen Brenner grew up in Berlin, moved to New York to go to Columbia. He graduated in 2020 on the age of only 19, which is itself pretty remarkable. Do you know where he worked at early? Make a guess. Anthropic? His wife works there. You're close. Jane's? Oh, I'm close. Open AI? You're knocking on the door. Well, he did work at OpenAI. That wasn't his first job.

1:17:51Do you know where his first job was? I was going to say OpenAI. I did read where his first job is. Google? Take a guess. I think his fund just blew up. What was an analogy? Oh, he worked with Sam Franklin Freud. FTX, yeah. FTX, of course he did. He was actually in the charitable arm. So he worked for SBF, crypto exchange. He then joined OpenAI, as you guys said, and he worked in the niche field of AI super alignment focused on technology that didn't go rogue and destroy humanity. He then got fired from OpenAI for leaking stuff to a guy called Holden Karnowski, who was the husband of the Anthropic executive.

1:18:21Obviously, Anthropic came from OpenAI, so a whole bunch of people left to start Anthropic. After Sam Altman fired him, Leo published a 165-page essay called Situational Awareness, The Decade Ahead, Where He Foresaw the Path of AI's Development and Went Viral. Ashen Brenner is, of course, marrying the chief of staff of Dario Amodai. He lives in San Fran, not far from OpenAI CEO Sam Altman. He's investors. This is wild. His investors in this fund, you think that this is like fast money coming, which it would have been in the end. Top AI executives from Meta, Patrick and John Colson, the good guys from Stripe, the people everybody love, and legendary head fund Jane Street investors.

1:19:00These aren't idiots. But it's not surprising because – like he wrote this whole situational awareness, but he's not – we should just draw a big line separating two things. Directionally, he's largely right about where the world is heading. Everything but one thing, which we'll get to. But he's not trying to make long-term bets on the future. He's running ultra-leveraged short-term bets on a bubble. I'm not sure how they're all – they're definitely leveraged. I'm not sure how short-term they were. When they're leveraged that high, they're going to be short-term. Because the minute it unwinds, you're dead, right?

1:19:34That's what happened. Obviously, the manifesto he wrote spawned the Situational Awareness Fund, which, of course, used three to four times leverage to amplify gains. You notice the fund is not called self-awareness. the fund one really important note the fund has only been partially liquidated so leo was able to hold on to his private stakes including what's the us five billion dollar stake in uh and topic this isn't leo's money specifically funds money uh so the bets appeared to a high degree of paid off so the original stake was originally was 200 million dollar fund that's now worth still 10 billion so still 50 bagger uh and it's probably possible his recent investors got wiped in the early guys and himself has done all right obviously his wife's probably worth a billion dollars from her anthropic stake as well so for all the criticism leo's got and a lot of it justified because clearly he was a complete fool for using so much leverage he got a lot right and probably he's gonna probably remain a billionaire so i think the last laugh is probably leo but if you say it's worth 10 bill half of that might be leveraged to one yeah profit we had to pay back a lot of leverage when he sold down i expect the sell down came back to closing out of leverage.

1:20:36Listen, you know, this is gambling. We can only call this. If you really believe in the long-term future of AI, sure, you might use leverage because you might say 200 mil, let's use that as a basis for 600 million. So a lot of leverage, right? 600 mil of investments. And so you'll grow and you'll make a lot of money over time. And if you kind of pick the right companies because who knows what the washout's going to be that's called like believing in a thesis and to his credit jeff bezos running amazon he believed in a thesis right he would played the long game with it totally this is saying i think this is the future and i think i can take advantage of this in the short term and like i don't really have much time for this and a lot of the stuff he bought i think is terrible stuff like i think it's stuff with short lifespans there's a guy michael elardham do you know michael he's like a financial advisor he's a very good guy and he like um you know is very it sounds to me like he's very big on sharon ai based on my interactions with him on linkedin i've got a lot of time for michael and so he might be right like maybe i'm wrong about sharon ai but the point is like i think when we talk about situational awareness and long-term bets that is not who you'd be betting on if you believed in long-term bets right this was when you lose that much leverage you're going to explode because the market never goes straight up it always goes so you can be right on the long term but because you when you when you lever so much you only need to like and we saw i think sk hynix which is a big investment of his like those chip manufacturers have like 45 50 pullbacks in july and when you leverage forex you just can't cover that to his credit if he's maintained 10 billion and an anthropic sake he's actually got away with it almost scot-free here that this is like obviously there's still details to come out but i reckon he's i reckon old leo's done a lot better than as investors.

1:22:24Yeah, I agree with you. But I also, I don't know, I also think that like, have you seen what's happened since? So basically - The rebound of the day after. Yeah, he went broke and then everyone was scared of this huge overhang of stock. And then who took it? Citadel took all his stock. Yep. And so now people are like, oh, well, what's the Citadel guy called again? Ken Griffin. Ken Griffin. Well, he knows what he's doing. I mean, I heard that in the dot-com boom. So he knows - It was actually a shootout between him and Izzy Eggland or another famous hedge fund guy. And so people are like, oh, yeah, these guys know what they're doing.

1:22:55So that means – and then everything goes and jumps 25%, right? We're back to the same ridiculous boom bubble we had two weeks ago. And I just want to emphasize, in the dot-com boom, smart people bought stuff and people said, yeah, they know what they're doing. It must be good. Yeah, I did that. I told you, and you tell that story. I got rid of most things, but there's one thing I kept because smart people were buying – and they are smart people, but smart people make mistakes. Smart people are also human and have emotions. Yeah. And also, if you're a multi-billionaire, you can afford to lose 10, 20, 100 million bucks.

1:23:26This is only 14 billion, right? And also, I'll tell you what smart rich people - And this is just that, this was a loss. Don't forget, this is a loss of gains. This wasn't a loss of, well, somebody might have lost capital, but he started with 200 million. He's still got 10 billion. It's not as if he went from 200 million to zero. This isn't Bernie Madoff. But I'll tell you what's smart. Rich people that have made their money investing have what human emotion they definitely have. Greed. It's called greed. and so like that is not the greatest emotion to be rational so we'll see how this plays out i just think we can just put this down as a little blip to say more evidence of a bubble yeah and then we'll wrap up this great great episode we're back on saturday with another fantastic episode so don't miss out for that one