Ask Us Anything: Buying through Ali Express? + Should AirBnB be banned?

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

0:09And we're back. Episode 156. Mike is making an annoying tapping noise and Adir is furious at that. We'll go to the tapper in chief right now. And we've just had what can only be described as the record for worst tech set up on the show ever. No way is this the record. He's been days before. This is outrageous. You know what I love about this? Mike is not an aggressive person, but he does have a passive aggressive streak. And so you've basically hit him on the tapping stuff first off after you trying to smokescreen your 30 minutes of tech incompetence. And so he has just retorted with the passive aggressive takedown of the year so well done mike i congratulate you just to clarify you were 10 minutes to 12 minutes late so i've had 18 minutes of tech issues because my microphone decided to stop working don't fire in every direction to try and bring everybody down with you just let mike ask the question the only reason i bring it up is because i actually think the listeners really like a peek behind the curtain and a fourth wall break you You know, that just showcases our personalities.

1:18So anyway, let's get into the question. Oh, this pig behind the curtain, it would be like the Wizard of Oz, except instead of paying no attention to the man behind the curtain, when you pull back the curtain, the guy will have his pants down, sitting on the toilet. Just to clarify, I'm in an office. There's no toilet around. I just have a malfunction in the microphone. First question for this week came in via the pod page, and it's from Anthony. Hey guys, my wife and I are expecting a baby next month. When searching for a baby monitor, a Reddit thread indicated that I could purchase a white label product from Alibaba for about a third of the price of the local product.

1:57The local product is approximately$350. The Alibaba product was$120. It arrived last month. We have tested it and it's identical to the local product in quality. My question, why is the purchase of white label products from offshore not more common? First, well, let me start by saying this. Firstly, I think a lot of people don't know about Alibaba and AliExpress in Australia. So it's not well known. But there is, but Timu is well known and that's effectively the same thing. But Timu would make people feel like it's not white label products. People feel like it's Timu products. So I think they wrap their brand around that.

2:32And for whatever reason, AliExpress hasn't been as good at wrapping their brand around the white label products. I'm not sure I agree with that, but let's take it as rare. I think Timu, you don't call it Timu podcast or a Timu Jane for nothing. It's known as an inferior product. It was believed to be. Yeah, well, that's true. That's a good point. And so what I would say is so far the baby monitor seems to be identical to the Australian one, and it may well turn out to be identical to the Australian one. But I think the way people feel is you're just playing the odds. And if an Australian company sells you a product, then they're governed under Australian consumer law.

3:14And also, you know, there's kind of, it feels like there's somewhere to go and something to chase up. And I think ultimately it might feel differently if you're buying a white label product from China, even if it's actually the same product that's been imported by the Australian retailer. and I think this comes down to the triad of consumer choice which I think most people many people will be familiar with which is there are three elements price in this case will be price quality and speed so you want this thing relatively quickly you're ordering it now and you want it to be a certain quality and so the thing that you're going to have to do is pay you can't also have price as your achievement and what you've tried to do here in buying this from offshore as a white label is to say, presuming that you get it in the same delivery time, actually, I'll get the best of all worlds.

4:05I'll be one of the first people on planet Earth that can tick the boxes of price, quality, speed all at once in buying a purchase. And I think people are generally just cynical about whether it actually is possible to tick all of those three boxes. But just to conclude that, many of the products that are sold in Australia are simply imports from China and you could probably buy the same stuff from the same supplier at a third of the price if you buy via one of these platforms. Just the probability of buying something that's a dud would be higher than buying off an Australian merchant. I think your point on regulations is right, but what that actually, if you take it one step further, is we're talking about one of Hamilton Helmer's powers, which is of course the power of brand.

4:50And that is a classic case that if you have a brand that people try and we're talking in terms of the specific question which was a baby monitor that's a very high risk purchase that's almost the highest risk purchase you can make because there's nothing more important than the health of a baby so like that's an extreme example but let's just take a maybe take a less extreme example and let's take the example of a chair which is if you get a chair wrong there's not ramifications well why do people buy a branded chair versus a non-branded chair it's because they see value in what that brand has been at the equity that brand has been able to build over marketing.

5:26I think in your case, when you're talking about a baby monitor, there's real downside to getting this wrong. So that's probably a really nuanced product. But if you're talking a generic A2 milk versus a Woolworths milk or sort of much more commoditized product, then that's the power of brand. People are able to get a higher margin because they've invested in brand and make you think that the product's better, when in many cases it's exactly the same. You're right. So one of the things brand offers is peace of mind or you could call it trust, and that is what gives pricing power. And effectively, if I import the same product from China and I sell it under a trusted brand, I can probably charge three times the price for it.

6:02There will be some better service presumably layered on top of that. I totally agree with your assessment, though. That's the answer. For the record, I wouldn't have been, let's say, courageous enough, to be polite, to go and buy that baby monitor directly from an AliExpress vendor in the US. In China, I would definitely have bought an Australian brand. Or a US brand. Or a US brand. Exactly. Like a known brand. Something that I researched and people in the reviews said, yeah, this is a big brand. It performs well, et cetera, et cetera. But, you know, this is one of the reasons that companies with strong brand equity have much healthier margins and more profit because often it is the same product, just sold for more money.

6:45And of course, when you start hitting luxury brands, the Hermes, the Ferraris, the Porsches, et cetera, what brand gives you is status. So you're paying for status. You're clearly not paying for any real difference in quality. Between a premium brand and a luxury brand is very little difference. You can argue Hermes is a better product than a Louis Vuitton, but really, we're talking to minimus difference. What the real difference is, it's a better status. If I can get an Hermes, if I can get an Hermes Birkenberg, that's a different status to a your bag or to a Gucci bag. I've got no doubt if Louis Vuitton put their brand on that baby monitor.

7:21They could sell it for$3 ,000. Yeah, or Hermes for$10 ,000. Yeah. Yeah, I was just – Hermes might be a bit more like discerning about what they put their brand on, but I don't think Louis Vuitton is. Yeah. It's a great question though. I mean, it's a perfect – we talk a lot about seven powers. We talk a lot about brand, and I think that question was the perfect exemplification of how important brand is. Over to you, Mike, question number two. Question two this week is from Sienna. This came in on LinkedIn. Sienna asks, with more councils across Australia cracking down on short-stay rentals, is it time we admit Airbnb is doing more harm than good to the housing market, or is it unfair to punish property owners who are just trying to make an income?

8:08Well, this is a very topical question around the world, as it has been for the last five years. I think these are my views. There is no doubt that short-stay rentals distort the rental market to some degree. But blaming the, in Australia, blaming the terrible rental market in a short of supply, faster than societal inflation, blaming that on Airbnb is a complete smokescreen. Essentially, we have rental problems and housing problems in Australia because of policy flaws, supply and demand issue predominantly. Adam, you'll say it's also to do with lending and leverage, also true. But I think Airbnb is like the icing on top of the cake of the housing crisis disaster.

8:57And the consequence of banning Airbnb in New York City is that it's made very little difference to housing rental price, affordability and availability. But it has jacked hotel prices insanely. And I'm not sure anywhere in the world could say it's been tremendously successful for the rental market to prohibit short-term rentals. You know this space better than me, Adam. Is that your take? Am I right with what I've just said? Yes. I think blaming Airbnb is equivalent to, so you're walking past somebody who's already dead and you shoot them in the head and say, oh, I shot them. Well, you did shoot them, but they're long dead.

9:32Airbnb is complete, and technically they're competitive of ours, so far better for me to defend them. but it's a complete and utter irrelevance. And the other great sort of mistake in this whole thing is that rents are expensive. Now, I don't want to sound an elitist, but compared to buying a house, renting's far, far cheaper. Like you can rent for a fraction of the imputed cost of buying a house. So the rentals, certainly if people are struggling and in poverty, then of course rentals is expensive. But for the average person, it's far cheaper to rent than buy, like probably 50 % plus cheaper to rent than buy in many cases.

10:06But rental availability would be more of the challenge than pricing per se. No, but I actually disagree because if rental availability was such an issue, then the price of rentals will be higher. Well, that's true, but the price is elastic, right? There's limits to what people can pay for rentals. And so there's not an unlimited ability to raise prices based on constrained supply. Definitely in Australia, There is a – in the range that most people are looking to rent, there are supply constraints. I don't know if like – I don't know if you know people that rent, Mike, or whatever. But like my take on people, like they say to me, you have to wait in long lines and it's quite hard to get a rental within like the reasonable price band.

10:48Let me do a quick comparison for you. So I'm renting a house now while we renovate. And the house next door sold for like seven point something million dollars. Our house is a bit less good, but not much less good. So I call it the house I'm renting is worth about$7 million, which is similar to what the landlord paid for it. My rent is about$3 ,000 a week. So there's a fair bit of maintenance and depreciation and that kind of stuff. So let's say the landlord's getting a net of, call it, $156 less whatever they're paying. Let's say they're getting net of$130 ,000 on the house as rental. If you took that$7 million and put it in the bank, could get 5%.

11:27I'm not assuming I'm doing a U. I'm taking to the lowest possible sort of risk-free almost rather than the market and all that kind of stuff. But let's say you've got 5%, that's 360 grand. 360 grand versus 130 grand. So technically, I'm being subsidized$230 ,000 a year by my landlord. So to say rentals are expensive versus buying is a complete misnomer. Rentals are a fraction. I'm getting a 67 % discount compared to what the landlord would be paying. Like you've persuaded me on a point that I've agreed with. So I continue to agree with you. on that point. I think it's great. You said rentals were cheap.

11:59I think they're extremely cheap versus buying. No. So I don't think the price is the core problem. What I will say is this about the story that you just told. The number of people that are renting$3 ,000 a week and above is like 50 people in Australia or maybe 500. No, but heaps. Nah. That's not what. There's not heaps. It's a lot. They're paying$20 ,000 a week. So back on planet Earth where most people live in Australia, people pay$500 a week for a rental maybe or$750. So that's what people pay for rentals. Not for a family. If you're a single person, sure. But if you've got a four-bedroom house, you're not paying$500 in a decent suburb.

12:39So no one's paying$3 ,000 a week. I mean there are a very small number of people. And so in the bulk of – we think about it like this. $3 ,000 a week is$150 ,000 a year. you don't get any, that has to be after tax payment. That's$300 ,000 a year solely on paying rent. Most people earn, the average Australian income is slightly over$100 ,000 a year. So your cost of rent is roughly three times the average Australian wage. That should tell you where it fits on the normal distribution curve. I'm just using mine as an example. I could find equal examples of$500 a week. So the proportion just changes.

13:17Yes, but I'm not disagreeing with you on it's much cheaper than owning. Like, we agree on that point. But what I'm saying is the point is more of a constrained supply issue. And because price is elastic, it doesn't just move up because there's constrained supply. Because most people, if I had a rental property and I put the price up from$800 a week to$3 ,000 a week because of constrained supply, it would probably just stay vacant. because you would rather rent that house for$3 ,000 a week and no one who wants this house can afford$3 ,000 a week. You're trying to – but what you're claiming is the market's broken.

13:51I'm not suggesting – I don't think it is. Yeah, the market is broken. I am saying the market is broken. I don't think it's broken to that. I don't think it's perfectly efficient, but I don't think it's broken is more my point. I think it's largely efficient. There's lots of available apartments. If you do a search on real estate.com, there's hundreds or thousands of available apartments. It's not as if there's – and there's people looking. So I think my point is on a relative basis, and you can only compare it to purchasing a house, renting is extremely cheap. So you can actually – Yes, we agree with that.

14:21But we disagree with whether the supply and demand curve is broken or not. And I'm talking specifically about, let's say, I don't know,$500 to$1 ,500 a week properties. Like I think that's where the problem is. And that is where most Airbnb short rental properties would be playing. A lot of them would be. And so I think that even despite all of that, and it always sounds like we disagree on more than we do because you can't accept me agreeing with you unless you've persuaded me to agree with you. But if I start off agreeing, that's problematic for yourself to persuade me. And so you got me. You persuaded me.

14:59And so we agree on most things on this. And we certainly agree that short-term rentals is not a very relevant factor, if at all relevant, to the current rental market problems that exist. And the reason for that is because it's actually a really small market. There might be a few thousand Airbnbs or whatever, but it's not meaningful enough. There have to be like hundreds of thousands of short-term rentals and using Airbnbs as an umbrella term. So I think the question is a really interesting one. It's one that often gets up. And the reason why we've got, inverted commas, high house prices or shortages is because, as I've said 100 times, banks lend too much money.

15:34And did you see last week there was – I think it was APRA. We were all over the banks on trying to get them to effectively lend less money based on income. So banks effectively lend a multiple of income. So if you earn 100 grand, they'll lend you 400 grand or whatever it is. And that's all good and well. But the problem with banks isn't the percentage of income because ultimately people can lose their jobs really quickly. The problem with the bank lending is the LVR issue made even worse, as we talked about a month ago, by the government allowing 95 % LVR. Like what percentage of the value of the property can you borrow?

16:07So if that was 50%, that would fix it. If it's 80%, it's a problem. So people can barely get to – like, yes, exactly. So people think the problem is getting to a 20 % deposit, and that is a problem. But the rest of the problem is servicing the 80 % of the mortgage. Yeah. And now they solve that problem by saying, don't worry, you only have to get to 5 % of the deposit. Oh, that's great. You can buy the house. Good luck servicing 95 % of the mortgage now, especially because that 95 % is more than what the 95 % was previous to the introduction of this. So, yeah, I just want to finish the Airbnb on this and say, like, the beauty about all of these questions is that even though the world that we live in today seems not particularly interested with facts and facts and expertise have been pushed to the side for the time being, it is still handy that there are facts and we don't have to just speculate on this stuff.

16:59And so when we talk about rent control, we can look overseas to like Stockholm and see how rent control worked there, for example. Like spoiler, disaster. And we can look at cancelling Airbnbs or short-term rentals in general and see how that worked on the rental market like in New York, for example. And the data is all there. Like we don't need to speculate on this. But unfortunately, the theatre of government means that the announcement is more important than the policy for winning the next election. And so that's what we should be fearful of with the democratic government, basically. Agree on that.

17:33We'll go to a super quick break. Be back with our last question. No time at all.

17:47And we're back. Michael, question number three. All right, guys. This is the third question today from Daniel Freeman in our LinkedIn comments. and I'm going to leave this open to you both for interpretation. He asks simply, the chicken or the fish? Over to you guys. Oh, I can answer for Adam. It's easy to answer for Adam. Neither. He'll just have a glass of water. I think he's asking what would you order at the restaurant, isn't he, or when they come around at a function and offer you the chicken or the fish. Isn't that the question? I think that's the question. So, Adam, you have to take a pass on this question, don't you?

18:23What do you do in that situation? Before I became vegetarian, I just always hated fish. So I was always the chicken and now I'm neither. Now I'm asking for them to kindly change my meal. You chew on the napkin or something, I guess. I would generally go for the fish because I'm very keen on the omega-3 fatty acids for long-term brain health. And so that's why I would skew towards the fish. What about the plastics and the mercury you're consuming with that? So I don't know if you've noticed, but you also live in the developed world. and in a Western society. And, you know, it's hard for you to discern that sometimes because you don't eat or drink anything and you run barefoot, but you actually are in the developed world.

19:03And as a consequence of that, you know, you try to be very healthy. And I think it's impressive that you don't eat a whole lot of stuff that you're concerned about. But it is very, very hard to avoid the consequences of living in the developed world because one of the reasons we have this huge, maybe you could say, oversupply of food quantity and food variety is because of the way things are cultivated and harvested, et cetera. So yes, I'm not a huge fan of ingesting microplastics. If it makes you feel better, I would be almost certain that the fish that I'm eating come from some harvested farm and not open in the sea or a river.

19:42But it is, yes, that is problematic. Well, you've got that versus chicken, which are kept in battery cages and obviously have been artificially engineered to have larger breasts and all sorts of things. So the lifestyle of chickens and fish, neither is great. So yeah, I think the question is actually a much more interesting one than I thought when I heard it. But ethically speaking, forget the taste and the health, ethically speaking, what would you opt for, fish or chicken? So I think it's very difficult to ethically opt for animals. Like I'm in your boat on that, but if I had to – and remember I told you – That's not why I'm vegetarian.

20:23I'm not that good a person. That's why I was vegetarian for like – I was pescatarian. So there you go, obviously. My theory with fish – I mean I know this is not going to be maybe popular, but my theory is the reason there are pescatarians is because you can't hear fish and so it's very hard to relate to them. They don't make any sounds. and so it's hard to like whereas like all of these other animals mostly they're mammals and so they're pretty close to us evolutionarily and so we feel a connection to them although a lot of people seem to not feel the same connection to bacon so but i think if i had to choose between those i remember i said to you even if you just try and be a vegetarian then like when you eat bread like you can go and google what happens to the rodents that are inside the fields right like you're basically human beings we're in it for ourselves that's all right like all animals are they just didn't nail the opposable thumb and tools right so we won out but um yeah but i think between chicken and fish i generally if i really wanted to make a decision from an ethical point of view i would try to source um fish that were like wild caught fish that would probably be the most ethically sourced way of eating choosing between those options what about free range chicken you You know, I looked into free-range eggs quite a bit, and not everything is as it seems.

21:36So definitely there are some chickens that are treated very well in the world of free-range eggs, but there's no – calling it free-range, there's a very, very wide – It's loose, right? Yeah, it's very loose, and now you see written on the eggs like 10 ,000 hectares per chicken or something or 100 chickens per – I don't know what the metrics are, but now they go a bit – they try to tell you like you know this is how great a life the chickens are living i suspect none of them is being treated like julius caesar so we can like you know relax about how great we think they're being treated i so i think ultimately almost every um agri business is running for yield to maximize yield and that means that the life of an animal is not very good like if you had to be a cow or a pig especially at any point in the last 10 ,000 years.

22:27I suspect now would be the worst time in history to be one of those two animals. And just since I'm ranting on this theme, the other issue is obviously like male chickens in an egg farm are not useful. Male chicks, and so they are all killed. And so I don't think any of it is ethical. I think that if you're going to eat meat, you have to engage in cognitive dissonance and basically say, a steak tastes awesome. And I'm all right with that. Like, I think, you know, I'm one of the most tolerant people with hypocrisy about these kinds of things, because everybody has to make their own choices of what they're comfortable with.

23:06And I don't think it was, it's for us to judge people in this regard. Like, if people want to eat meat, I'm very comfortable with them eating meat. There are some things I think are maybe a step too far. Like, what's that thing where they force feed the goose or something. Fogra. So I'm not, you know, I think that's taking it a step too far to actually torture the animal. But, and Mike, what's your chicken or fish? Where are you seeing this? Oh, I find it so hard to choose because I love both, which I know isn't, which I know kind of ignores every aspect of the conversation you've just had. But, yeah.

23:42I'm a big fan of raw fish, to be honest. Like I love sashimi, nigiri. Oh, that's a good comment. I really love that stuff. Really? If we're talking cooked, I'd love a bit of chicken drumstick, chicken breast. Speaking of eggs, my father-in-law, my mother-in-law, my father-in-law has, they basically get rescue chickens. So it's effectively free or close to free. And they feed them essentially scraps, so food that would otherwise be thrown out. And they get basically an egg, a really big egg per chicken per day through a lot of the year. So they got five or six chickens. they can get sort of a dozen eggs some days, which is pretty incredible.

24:21Oh my gosh, that's amazing. Oh, that's a great story. Much to your chagrin, Adam, Mike is the youngest of the three of us by a significant margin, I suspect. Immaterially, yeah. Yeah, and so, you know, we live in this world of stereotypes where like millennials are all, you know, protect the animal, and like, you know, hug your steak and stuff like that. But like, and I'm sitting here saying, well, I feel so bad about eating meat. And in fairness, you said it's not ethical the reason you don't eat it. But like you're totally a vegetarian. And Mike's like, you know what I'd really like? I'd like the chicken wrapped in the fish.

24:55That's what I'd really like. In the foie gras. Yeah, that's why I think all these stereotypes are rubbish, right? I was going to say like we talk about obviously we're in a cost of living crisis and all that kind of stuff to the last question on rentals. Like getting something like chickens in your house, you don't need a huge amount of space. you save a fortune on how much – because eggs are now sort of$7, $8,$9,$10. I pay$12 for the free-range ones. So you can save a fortune by having chicken, and you save on getting rid of waste. So there's actually lots of ways to save money that people don't always think of.

25:27Are you allowed to have a chicken in your backyard in Suburbia? Yeah, I'm pretty sure. I'm pretty sure you can. I mean, they're pretty noisy in the morning. I mean, I guess that's a rooster. But, like, that is a – I don't know if you've ever lived anywhere where there's roosters. Sounds like a Seinfeld skit. Yeah. I'm telling you, like, it all sounds like fun and games until you have to live next to a rooster. Well, is it any worse than a barking dog? Well, the thing is, a barking dog is not a sunrise clock, but a rooster is. It's an alarm clock with sunrise. Well, roosters don't like – I'm no expert on chickens, but I'm pretty sure roosters don't like eggs.