Ask Us Anything: Are electric trucks the future? + What if the State of Victoria was a company?

0:00I'm Adam Schwab. I'm Adir Shifflin. And this is The Contrarians with Adam and Adir.

0:09And we're back, episode 186, where you ask us the questions and we answer them in our Ask Us Anything format. Business, big tech, growth, personal questions, whatever you want, we all have a crack. My question number one. This week's first question comes in from Nicholas who asks, Australia's biggest freight corridor, Sydney to Melbourne, is about 900 kilometers by road and long haul heavy trucks burn fuel at around$1 to$1.50 per one kilometer driven, depending on the fuel cost. Heavy electric trucks cost around 30 cents to 50 cents per one kilometer driven. Australia imports over 90 % of its liquid fuels.

0:49Given the lower OPEX, but higher capex of electric trucks and national security issues of importing fuel. Do you expect serious private or public investment in electric trucking in Australia? Why or why not? My view on EVs is extremely positive. I've got two EVs. We've got a Tesla and a BMW EV. I don't know why every car is an EV. The charging infrastructure is now quite strong. They are so much better to drive. They're faster and they're so much cheaper to run. Like it cost me$10 to effectively fill up the car. And now we're in a period where there's obviously real issues with oil prices and petrol prices.

1:28And we don't have to ever line up for petrol. There's no worries about petrol running out. It's, at least you can charge it at home or at work overnight or during the day. And if you've got solar at home, it's basically free to charge the car. I don't get why people don't have EVs. And I certainly don't get why this switch to trucking EVs hasn't happened more quickly. It's such a better way to do it. We've seen in the US there's several companies tackling the trucking autonomous vehicle challenge. Obviously, there's Waymo and there's Zoox and there's Tesla who are doing the consumer EV. There's a couple of businesses doing the trucking EVs and actually having a lot of success.

1:59And think about it. It makes a lot of sense because you go, hey, it's very dangerous driving a truck. It's very costly. You've got to pay a truck driver. And it's far more efficient to have an autonomous vehicle that can run 24 hours straight, no need to sleep. So they're making pretty good progress on autonomous trucking. And I think within the next – I always call this a bit quicker than it happens. But next three to four years, I think a lot of truck drivers won't have jobs and there'll be EV autonomous trucks and it's a far better situation. So I just want to say some things that are good and bad about using electricity exclusively for haulage.

2:32Because I looked at this a long time ago. Things might have changed. I doubt – you'll see what I'm saying. I doubt much has changed. So I originally went in with a misconception, which is I thought, I doubt that these electric trucks can haul as much as a diesel truck in terms of weight. So it turns out that's totally wrong. They definitely can. And actually uphill, an electric truck is probably much better because of the torque at going up the hill. So that's not the problem. That's not the problem. Really, the fundamental problem is going to be all down to range as the starting point. And so range is already a bit of a problem for cars, but then you can, for driving Melbourne to Sydney, Sydney to Melbourne.

3:13But then you can say, we'll put charging stations in. That's fine. But the challenge with a truck is that the heavier that load is, the faster that battery is going to drain because it's using up more energy to pull. And that means you're going to have more frequent stops to recharge that battery. And so firstly, you don't have the infrastructure, but let's say you do have the infrastructure. that leads you to the next problem which is it takes a long time there's going to be big big batteries for this truck and like where are you going to charge up all this battery quickly like this is not what the infrastructure is built for and time is the biggest enemy of this industry like they crazy things sometimes happen that truck drivers will report in order to make their deadlines and long charging times on multiple occasions between Melbourne and Sydney would be deeply problematic and then another separate problem because leave cost to the side i don't have really a comment on cost but like then the next problem is this there's a limit to how much load you can carry on a lot of roads especially once you get into the cities because remember you're going into city but then you're going into the city so there's a limit like because if you're too heavy you start breaking the roads right you're wearing to on the roads and that's why i don't know if you've noticed but when you drive on a lot of highways in the country like there's weigh bridges at various points in time to weigh to make sure you're not over the weight and batteries they are heavy and I've just told you you need a lot of them for this truck because it takes up a lot of energy to haul and so you're going to lose a lot of your carrying capacity that might be reserved for the haulage you're going to lose that to battery weight and so that will make the haulage less efficient in terms of the tons that it can carry and so I don't know I'm very happy for because I'm not an expert on this I did some research this is where I landed and that's separate to autonomous, right?

5:02You can do autonomous on diesel as well. But I think on balance at the moment, those challenges are probably the reason why people are not investing in an electric truck fleet to take over from diesel. But I said, like, I'm very happy for, you know, someone to correct me and Eitan Lenko, who runs a big chunk of Mike Hannon Brooks's empire and he's all over this electric stuff and electrification and was before anybody else I've known. He's welcome to correct me privately as well, and I'm happy to be corrected. But those were the problems I found with electric trucks when I originally was researching it.

5:37I think it is dependent. There's some really good fast charging tech coming out, especially out of China, where you basically charge a consumer vehicle in five minutes to 80%. Obviously, I think it takes about five times as long to charge a truck, but I think we're not far off having – your point is right. We can't have trucks sitting there for six hours being charged. That's not going to work. But I think if it can take an hour, especially if you've got – and you tell you you don't need to be autonomous to be – you don't need to be electric to be autonomous. But almost every autonomous vehicle happens to be electric.

6:08So I think the two sort of go hand in hand. But I think certainly autonomous is coming for trucks. And I think electric is coming as well. I think once that charging issue is sorted, there's a lot of people trying to solve this problem because it's a big problem to solve and an important problem to solve. But if you can get that charging time down to sub an hour – thinking about my tesla i i've i've had it for now for almost four years i've had it serviced once but imagine this the service cost reduction especially on a truck which is copying a huge wear and tear if you're only servicing that truck a quarter of a time that's a lot less time a lot more time the truck's on the road as well so yeah you might be sort of spending a bit more time refueling it inverted commas with with the charge but you're spending less time off the road with things and think a combustion engine is literally exploding every second and that's how the pistons move.

6:55When you've got an EV, you've just got much less moving parts. It's a much more logical way to have a vehicle. Some of the very first vehicles in the 1800s were electric. There was obviously issues with the grid and charging them, but the original cars were meant to be electric. We just did this petrol thing, this petrol foley for 120 years, but it's an unnatural way to drive a vehicle. It's a hugely inefficient way to have a vehicle. Once you have big solar panel charging, big solar panel powered charging stations on the way between Melbourne and Sydney, It makes a lot more sense to have effectively free charging and quick charging and chuck on autonomous.

7:26It's going to be a revolution in how we transport things. On a separate but related topic, does it shock you that in the last 50 years, we've gone from, I don't know, like maybe half of the freight between Melbourne and Sydney being on the back of like rolling stock on trains. Now it's negligible. It's like a few percent. But basically almost everything that goes between Melbourne and Sydney and presumably then up to Brisbane, up the East Coast, it's almost all on the roads. It's quite astonishing. Is that because the rail is inefficient? Yeah, because the rail is no good. It's too slow and it just, like, you know, you'll often hear politicians talking about inland rail, like we've just got problems.

8:11and so we can add that to the latest discussion on high-speed rail between Melbourne and Sydney. Well, I think the problem with rail between Melbourne and Sydney is that the mountains make it impossibly expensive. So I think unfortunately geography continually kills that dream. Well, I don't know enough about that stuff, but I do know that like all of this transport and logistics, like I'm very far from an expert on this stuff, but I find it quite fascinating because it's like the pipes of industry. Like nothing happens without stuff moving. And in Australia, lots of things move long distances.

8:46And like, for example, if I have a business that sells bulky goods, furniture, and I bring that into port into Melbourne and I want to sell it in Sydney, it is an absolute nightmare to fulfill out of Melbourne up into Sydney. It's really expensive. and if I go and do that with a smaller product that's cheaper, maybe like a$500 product, it becomes essentially uneconomic to do it and so you have to have separate warehouses in Melbourne and Sydney, like the ability to move stuff between cities as a retailer, it's like as a last, well, it's not last mile, but like it's the getting to the customer's door, like yeah, it's really bad in Australia.

9:31Great question. Move on to question number two, please, Mike. Question number two this week from Brent Westwick. Hi, Adam and Adir. So with more and more people losing faith in banks and governments, what do you think the future is for the banking system and fiat currency? I've read the creature from Jekyll Island twice, and it's mind-blowing how corrupt the central banks and governments are. Do you think decentralized currency is the future? Brent, who's not only a fantastic golf coach, also a very learned expert on one of my favourite topics, fiat currency. I'll throw to you first. Well, I think we might have different views on this.

10:10Like I know this argument, the arguments that he makes, I think they're good arguments. I mean, people are losing faith in government, but they're also losing faith in the way that the government manages fiat currency. I should say fiat currency is basically like the country's currency that they issue and you can exchange it for goods and services versus you know i don't know like gold is a non-fiat currency i guess people will accept it for payment crypto decentralized and so i understand like all of these concerns and i understand the negative sentiment towards banks but i feel strongly about these factors and like people lots of people are talking about this narrative at the moment which is um like everything has gone down over the last 10 years or 20 years if you price it compared to gold.

10:57And I understand that, except we're pricing it at a gold high point. So like you just pick your points and then anything can be true. And so whilst I think this whole narrative is true, I also think that in like, I don't know what we call it, the developed world, the Western world, like banks are still robust. In Australia, they've got some concentration risk with residential property, which some people say AI job displacement might create havoc with the ability to make repayments. But generally, banks in Australia are heavily regulated and robust and trustworthy. And I don't think that there's an imminent fall of the banking system in Australia.

11:38And the government, by the broadest standards, they are also safe and reliable and trustworthy. Now, there's lots of things about this government I think is not safe, reliable or trustworthy. But as a government, like we live in a country, we're very lucky that we have these two things and a lot of the Western world, the developed world has those things. And so I don't think the question is ridiculous. And I could definitely be wrong about this. Like I don't feel anywhere near a hundred percent confident, but it feels to me that we are not as close to the apocalypse. I'm not suggesting Brent is saying that we're close to the apocalypse, but I've certainly heard people saying like the end is nice, smart people.

12:15I just am not seeing it and I'm not feeling it. I think Brent talked about the fabulous book, The Creature from Jekyll Island. It was written by G.E. Griffin. It's actually a nonfiction book talking about the history of the US Fed. Essentially, there was a meeting in 1910 at Jekyll Island. I think it was off the coast of Georgia, and it was tended by the world's most powerful bankers, J.P. Morgan, Rockefeller, Rothschild. The goal was to create a central bank, which happened by the Federal Reserve Act of 1913. The participants travelled under aliases by private rail car to avoid public scrutiny.

12:48There was deep distrust of the money trust in the time. This was the start of the Federal Reserve. The Federal Reserve obviously played a role somewhat in, obviously, the 1929 great crash and subsequent depression. In 1945, the Bretton Woods global system was created, which still used gold essentially as an underpinning of currencies. And then Richard Nixon famously in 1971 cut the link between gold and US dollars. And that was the time where US fair currency started getting out of control. We've seen effectively the value of a US dollar drop 99 % since then. So, here's what Brent's saying I totally agree with.

13:20We've seen this, and this is a boiling frog situation, and that the value of a currency doesn't drop overnight. The value of, especially the US dollar, which is still heavily relied upon, and we talk about having this great brand, people still trust the US dollar, even though its value's been destroyed lately. So in terms of centralized currency, Bitcoin essentially is probably the closest thing we've come to this. It's the column we call digital gold. Obviously, Bitcoin's got some real issues, though, and we've seen the problem with Bitcoin is its volatility is extraordinary and as a store of value, it's really untrustworthy versus gold, which we've talked about gold on the show before.

13:57Gold has for thousands of years been a store of value. There's multiple reasons for that. There's chemical reasons for that. There's trust reasons for that. There's historical reasons for that. We've seen gold increase significantly in recent years, but ultimately I think what the issue I've got, the issue I've had is most assets, while there have been this huge boom, have underperformed gold, property underperformed gold, shares of underperformed gold, crypto has underperformed gold in the last eight years. So I think in many ways, the question's right. I think the challenge is these systems, these banking systems, these fiat currencies tend to last a lot longer than we'll give a credit for.

14:32It could last 50 years longer. So it's a question of timing. It's hard to argue that a currency that depreciates as much as fiat currency has, be it US dollar, be it Australian dollar, be it Euro, can possibly last forever. but the question is how long they last. I will say something interesting about decentralized currency, which is a theory I heard very recently. It is that all of these big casinos that are struggling so desperately at the moment are struggling because all of the money laundering has migrated away from casinos and into crypto. Now, I can't verify if that's true or not because I don't know that well at all, but it seems pretty interesting and potentially plausible to me.

15:15So one of the problems of decentralized currencies is that there is a, you know, this like anti-money laundering requirements that all of these financial institutions and betting companies have, like you can't apply these anti-money laundering requirements to decentralized currency. And so I think that's another big negative in the broader acceptance of a decentralized currency. But as I said, I feel wholly unable and completely inadequate in terms of my ability to predict the way that this is going to play out? It's a really great question, one that we're probably not qualified to answer, as Adia said, but it's hard.

15:54If you look at history, you look at the last 50 years, and a big reason for the growth of Bitcoin is people simply stop trusting governments. And Bitcoin must mean that sort of small counterculture to being largely mainstream, and neither me nor Adia, I don't think you, Mike, own Bitcoin, but certainly the notion of digital gold, I think makes a huge amount of sense. I'm not sure Bitcoin is the winner eventually, but I think what the Bitcoin network built, what the F network's built, I think there's a lot of sense behind them. Santoshi's original white paper makes a lot of sense. I think a lot of stuff about what Bitcoin has become and what gold has become in recent times and silver to an extent as well is people simply lost faith in governments to maintain balanced budgets.

16:34And the problem is, and look at the Australian governments and US governments and many European governments is when you run these massive budget deficits and build up this massive debt so there's only two ways two things that can happen either you inflate the debt away or you go bust and effectively the company defaults on its debt which will happen so inflation is kind of the the slow quiet way of doing it but essentially achieve the same thing inflation just slowly slowly destroys the middle class and lower class versus a sort of a government simply defaulting on state which what Argentina has done many times and what lots of countries done many times, which is problematic as well.

17:08But ultimately, one of those two things eventually has to happen. We'll go to a super quick break and back with question three soon.

17:21And we're back. Final question, Mike. Final question this week from Conrad who asks, if you strip the party colors away and treat Victoria like a corporation, the question becomes simple. If this were a listed company with rising debt, slowing revenue growth, high wage costs, and mounting interest payments, what would a board do? Well, declare insolvency because nobody would lend a company any more money if they had this profile. The only reason Victoria can keep getting more money is because it's a sovereign state and people have got confidence that one way or another, they will take the taxpaying population of Victoria to the cleaners in order to pay back the debt or at least pay the interest.

18:08So I think the analogy to a company, I hear this a lot and I understand the direction of the question. Nobody would ever let the leadership of a company get away with running anything like this and this company would be insolvent. And I think it's impossible to compare this to a company. Yeah, I think you're right. I think there's no way Dan Andrews or St. Alan would last as CEO of a company. But they've both done very well as premiers of a state because ultimately voters vote in their own ultimate self-interest. And what somebody really smart told me a few years ago is Dan Andrews realized many years ago that 20 % of Victoria's population pays taxes and 80 % benefit from those taxes.

18:47You've got basically 50 % of the working population being employed by the government in some way, be it education, be it health, be it whatever, either directly or indirectly. Then you've got a bunch of people who are effectively students who are getting subsidised education by the government. Plus you've got retirees who are being paid by the government. So you've got such a tiny number of people actually supporting the economy and so many people welching off it. And Dan Andrews realised this and what great statesmen and great politicians do is realise that you can't simply bleed the population that's supporting, the small amount that's supporting.

19:17You've got to work with the population that are actually creating value. And Dan Andrews realised, actually, you know what? I get more personal benefit from squeezing this 20 % and getting votes and buying votes with the 80 % and that's what he did and that's what Jacinta Allen's done through that ridiculous wanton public spending and now we have a bankrupt state and this is what happens when you've got such terrible leaders and if this was a company, they'd be fired in minutes. Well, I'll compare this to a company since that's the question. So in order to have an analogy to a company, we would have to say this.

19:48there's a CEO, I guess we could say the shareholders have appointed the CEO. And then the way the CEO, and then the CEO does all of these crazy things that severely damage the company and spend all of this money and lose a fortune, but the CEO doesn't want to get fired. And so the way the CEO avoids getting fired is they say to the board and to shareholders, shareholders, I know that I'm doing this like terrible job and I'm running the company into the ground. But how about this? How about I just give you really good stuff? And what I'm going to do is I'm going to give you really good stuff with the company's money, even though the company doesn't have any money.

20:29So I'm going to go and borrow money into the company. And then I'm going to go and buy you really nice things and holidays and pay you dividends, but it can't be dividends because there's no profits and essentially give shareholders and directors personally a whole lot of benefit using money that's been borrowed by the company in order to convince them that this CEO should remain in power and continue to do what they've been doing previously and being profligate with spending and making terrible decisions that imperil the company long term. That would be the analogy because essentially that is what's happened.

21:09I think your analogy is a little bit – it's close but flawed. The better analogy, and the reason why I think it's flawed is because in a company, all shareholders need to be treated equally, assuming it's the same class of shares. So let's say I've got a company and Adi, you're a shareholder and Mike, you're the other shareholder. You've got 50 % of the shares and I'm the CEO. I can't say, Mike, you're going to get a dividend, Adi, you're not going to get a dividend. Everybody has to be equal. The difference in this situation is let's assume it's a company and this doesn't exist. But this is Dan Andrews, the CEO of this company.

21:38And Dan Andrews is saying 60 % of the shareholders who vote me in, I'm going to give you a dividend. And the other 40%, you can put capital in this business. I'm going to get that capital. I'm going to give it to these 60%. So I'm going to steal the capital from the 40 % or take the capital from the 40 % in the case of the government taxing them. And I'm going to give it to the 60 % who are going to keep voting for me. Only 51 % to be voted in. So that's exactly what Dan Andrews has done. and just into how it was done. And unfortunately in the company, fortunately in the company, you can't do that.

22:06You can't treat one set of shareholders differently. Oh, you're right. You're right. You're absolutely right. It's like they've created different classes of shares based on whether or not your vote is going to matter to them staying on as CEO. And then they give you stuff to convince you slash bribe you, but we can't call it bribing in the public sector. That's just called political promises in order for you to keep supporting them as the CEO. Yes, that's exactly what would happen. And you know what the response to that would be. One is totally unethical, which by the way, I think it also is politically.

22:41Two, illegal in the corporate world. That is illegal. And unfortunately, this is the way things work with some governments in the political sphere. Yeah, I think it's dreadful. Well, I think it's probably most, if not all governments, but I think the Victorian governments have turned into, and they're the Olympic champions of this. So I think while most governments do this to some extent or all governments do it to some extent, we've got this word called pork barrelling, which essentially is I'm going to give money to certain constituents because the way that the seats are aligned, for example, but the Victorian government is taking it to all new levels and they're effectively pork barrelling with a bankrupt state.

23:17So maybe we can say what's happened is there's always been pork barrelling, whatever, let's just call it bribing voters, okay? and so there's always been bribing voters but people have kind of had limits to how much crazy stuff they're willing to do to imperil a country or a state in order to facilitate those bribes to uh to voters and there's always been selective bribing of voters for the reasons that you just discussed so none of that's new i think what is seems to be new and maybe we say it's not new, because it's happened in Victoria, what, 20 or 30 years ago as well, is what's not new, so what seems to be new is that people have said, but why should there be limits on what we're prepared to do?

24:03Like, this limit is not going to help me get elected. So if we have to go and run Victoria, slash, it can be other states in Australia, Victoria is just the worst example right now. If we have to run Victoria into like credit downgrades in order to pay for these things that we think are going to make people vote for us, that seems okay because we're still going to get elected and, like, we don't have to worry about these credit downgrades. That's going to affect things after we're not in power anymore. And I think that's what's shifted. But the bottom line is this, and I think it's important to say this, they haven't held a gun to anyone's head.

24:38They've done some dodgy stuff around the edges of democracy. There's no doubt about that. But they haven't fundamentally overturned democracy. Ultimately, the voter has voted for what's going on and they've voted overwhelmingly for what's going on. And the weakness of democracy is the strength of democracy and vice versa, which is if people choose it, they can't complain about getting it. And that's the way it works. Thank you, I dear. Thank you, Mike. Some great questions, as always, from the world's smartest listeners. We'll see everybody for our big episode on Tuesday. Thanks again for listening in.