Ask Us Anything: How do you explain average grades? + Should workers own more of the businesses they help build?

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

0:09And we are back, episode 220, Ask Us Anything. We love getting your questions. We get so many amazing questions. Clearly the smartest audience in Australia, possibly the world. Over to Mike with the first of our three unbelievable questions. Thanks so much, Adam. Welcome back, everyone. First question comes in from an anonymous listener. I'm in my late 20s. This is not you, Mike, is it? This is Mike pretending it's an anonymous listener. I wish I was in my late 20s. To be anonymous? There's somebody in their late 20s who is a podcast producer and is quite insecure about whether the two people on the podcast actually like him.

0:46What advice would you give him on how to approach the issue? No, no, I will read the actual question from Not Me. I'm in my late 20s and have had a successful career in finance. over the past five years with multiple promotions along the way. I've always backed my ability to outwork others and learn quickly. That said, I've carried a quiet insecurity about my employability, specifically around my academic record. My results weren't poor, but they were average. I was recently diagnosed with ADHD, which has helped me make sense of why VCE and university never fully engaged me. During those years, I channeled my energy into sport, work experience, and the things that genuinely held my attention.

1:30As an employer, how would you receive that explanation from a candidate? Is referencing the ADHD diagnosis a legitimate part of the story or is it a cop-out? I am sure there are many people in similar situations, so it would be great to get your view on how to navigate this. Over to you guys. As an employer in the finance industry, my only concern is called show me the money. And so if you're really good at making money and ethical, ethical is probably optional, but for me it would be important, and you're ethical, then what the hell do I care how you did at school? Don't be insecure about how you did at school.

2:10Who cares how you did at school, especially now that you've already got a working history. As for ADHD, this is how I feel about ADHD. My guess is, I'll say this very seriously, my guess is some massive percentage of the population fits the characteristics of adhd i don't know if it's 30 50 20 is some enormous number is probably at its less intensive fringe let's call it it's probably a variation of normal and then it gets into probably neurodiversity after that and my view on adhd is largely it's a superpower if you can learn how to utilize it I think we live in an age where you can be totally transparent about it.

2:53No one's going to judge you for saying you're ADHD. And the superpower is. And, again, I just hesitate because I also think that over time all of these diagnoses are going to change dramatically and a whole lot of them are going to be divided into subcategories. Because this is just a bit of a catch-all era we're living in now. And so there are people with ADHD that find it very difficult to function. I appreciate that. put that to the side for a second. People like this particular anonymous listener, the superpower is the ability when you're interested in something to just deliver undivided attention and focus to that thing and also to have a bundle of energy.

3:36I think it's a positive, not a negative, and I don't think you need to be shy about it. And I think that there are so many things for all of us to be insecure about. I'm insecure about a million different things you can have your few as well but i'm not sure this should be one of them like your work history sounds good and the adhd sounds like a non-starter really for something to worry about so that's my view on it yeah i think it's a great question for a non i can't stress this more more so strongly what you got what you did at school and to an extent university is completely and utterly irrelevant once you've had your first job you kind of they're all stepping stones so your school mark gets you into the university degree you want which gets you into the job you need for your first job.

4:17And then from that point, like we would never ask for a school or university transcript when we're hiring somebody, even for our grad program, I don't think we ask for it. So we look at the person. Certainly if you've done stuff like started your own business is fantastic. Have been promoted a lot is really good. So it sounds like you're an outstanding candidate. I can't stress this strongly enough. Ignore what happened at school. School is not the right environment for a lot of people. University is not the right environment for a lot of people. university in school, university especially exists, was created essentially by corporations to give people a massive debt so they're beholden to the corporations.

4:52And Ron Buffett's talked about this for many years. So I think you know my views on many university courses. Like some are really essential. Like you can't become a doctor without doing a medicine degree. You can't become an engineer without doing an engineering degree. So that's really important. But if you're working in finance, if you're working in business for a company like us or ideas, many businesses, I suspect that ideas got to be more technical businesses. But if you work for Lutcher Escapes, I don't give a stuff what you did at school. If you're an incredible talent, that's far more important.

5:17And as we actually, I tend to agree, like there's so many people in your own diverse these days that it's almost like your exception of not being neurodiverse. So I don't think you even need to bring it up. I think the other one, people are really self-conscious about dyslexia because the school system is so biased against you. But we've since seen Steve Jobs, Richard Branson, the best entrepreneurs ever are dyslexic. David Boyd is one of the greatest lawyers in the US. He's got some issues ethically, but in terms of he's one of the best lawyers ever. There's so many incredible entrepreneurs and founders who are dyslexic, but it's a superpower.

5:53So I think a lot of the sort of historical norms, you can't have autism, you can't have ADHD, you can't have dyslexia. I think that's clearly wrong. And smart employers see, this is a, remember the money ball thing with baseball and football and you're looking for advantages. And this is a great way to get into, advantage is having as an employer we can look past these stigmatized irrelevant issues and to the person themselves and smart employers will look past this and and see the great person you are and clearly you've done an incredible job being promoted multiple times and that's what me as an employer is looking for not what you got in year 10 history that's completely irrelevant every time i read one of these um neurodiversity conditions when i was in medical school or subsequently.

6:39I just always thought, oh God, I tick a lot of those boxes. That's how I felt every time I read one of them. So like, you know, I mean, I think like a lot of people feel that way and I'm not diminishing it at all. Like I said to you, some people are really neurodiverse in a way that they need to take medication and it really helps them. I'm not minimizing that. I do want to say this at the end about high school stuff or school or university. You know, I often get involved in businesses or I bring someone in who to run something and they're young like maybe mid to late 20s and I have never ever once even asked them about how they went in any of their academic scores on anything like I haven't even asked them before giving them the job of running a business that I'm doing so I couldn't care less about that you know I would ask them about like maybe what they studied because I'm interested to know what they know.

7:34Like, for example, if you studied like industrial design, you know how to design stuff, right? If you studied accounting. Well, actually, I was going to say if you studied accounting, you know how to do numbers, but I've met plenty of people that did pretty well in accounting that can't count to three or add one plus two. So, like, I think that's less relevant, but, yeah, I mean, who cares how you did at school? We'd love to know your name because clearly you shouldn't be self-conscious, by the way, about that sort of stuff because you've done incredibly well and will clearly do well in the future.

8:04So, Mike, on to question number two. Thanks, guys. Question number two from Andy Farquharson. You discussed search funds as a solution to the silver tsunami of retiring SME owners, but there's an emerging alternative, employee ownership transitions. The US and UK have implemented policies enabling workers to acquire stakes in their companies rather than selling to PE-backed single owners. Similar to the search fund model you discussed with Scott last week, EOTs and ESOPs are outperforming peers while aligning incentives across the business. Given Australia's wealth inequality and the challenge facing assetless younger generations, should Australia adopt broader-based employee ownership models to capture this growth opportunity?

8:50That is a great question and a good point. We should talked about it last week. And I think the notion of employee ownership is a great thing. I think the challenge you might have is in a search fund or search firm, you've got a natural leader, a natural CEO, the person who's effectively running the search firm, the search fund, versus in the employee situation, do you have a natural CEO who steps up and effectively runs the business? That would be my main question. Do you have come across this? Yeah, I've done quite a bit of research into this. It's a very much an emerging asset, not asset class, but approach to generational transition.

9:31In the US, like there's a whole podcast that I've listened to in the past that deals with nothing but this topic. And, you know, there are some, I mean, I love the idea of it, notwithstanding the point that you made, which is very good. I tell you a related point that really speaks to I think the emergence of these kind of ideas over the course of the last five years the number of people in the 20 to 30 age group that have said in the next year I'm thinking about starting my own enterprise might be a side hustle might be serious has gone from like 23 percent to like 60 something percent and so everyone is but I think it's social media has got a lot to do with this everyone's looking on social media and all of these people that i read an article in the wall street journal about this some guy is like um made a very large lint brush to brush the hair off dogs that guy is doing like half a million dollars a year of sales or something like that no maybe profit whatever it is like and he by the way he doesn't want to go and make this a huge business He just wants to work like two days a week and live a nice life.

10:43But the point is, I think the idea, we can call it capitalism, not a popular term in some quarters. The idea of capitalism is the largest body of people are employees and the bargain they have with the company is that they work and in return they get a fixed salary or something akin to a fixed salary. It might have a bit of variation, but they're not exposed to the vagaries of equity returns. Do you make dividends? Do you not? Is the business losing money, making money? That's how historically capitalism has worked. And I think that that is going through a massive and probably generational transition where young people are not really up for that bargain so much anymore.

11:30And in part, I said, it's because of what they see on social media. and so what you have is this confluence of factors where I think young people are keener to own some of their own endeavor let's call it and you have older people who need to retire that might be a match made in heaven because you now have a situation where the bulk of the employees if they want to could go and buy a piece of the business that they've worked in and contributed to for some period of time. The challenges are one, what you said about leadership, but generally these businesses a lot of the time are either already under management with an older founder that's transitioned to a chair type role, for example, or there is like a natural leader in the organization, but definitely a risk.

12:18Another risk is this. So it's not easy to pay the founder for their business because mostly employees don't have the money. So let's say there were like 50 employees and they all wanted to buy 2%, there might be more money than they have. So usually there's some kind of sophisticated arrangement going on about how the founder actually gets paid out. But I've seen it, not I've seen it, like I've watched and read about examples of this that have worked really well. The flip side, of course, is that if it doesn't work, people need to realise that it's an investment that carries a chunk of risk, and they might lose all their money and their job if it goes badly.

12:57But yeah, I really think that this is super interesting. The obvious way to do it is there's two ways. There's vendor financing, which effectively means you pay the founder who's selling down out of profits. So as you're making profits, you're not taking dividends, you're paying down the amount that was paid. And the other thing, and this is a concept really started in the 70s with Bear Stearns and then KKR, something called the LBO, the MBO, the management buyout, which happened with bigger companies. And remember Barbarians of the Gate, which we talk about, which was the classic MBO in not 89 but what mbos or lbos are is leveraged buyouts is using private equity so probably we will have some equity and a lot of debt and they'll partner with management to buy out existing shareholders or can be buying out founders so the mba the mbo concept is certainly not a new one i think it's a great one and it certainly solves the mbo solves the issue of succession and leadership as you talked about so i think it's a great idea i think having as much ownership amongst uh team is fantastic we talk about how much we love employee ownership so this is just another version of that.

13:55I think it's a great point from Andy and a really great alternative. And for founders looking to sell down, if you can sell to your staff, that's really a win-win. I think a lot of founders would love to give the business to that staff because not only does the business keep going, but you get your much-loved staff who have supported you and been a huge part of the growth of the business get the benefit in equity terms. It creates that great win-win. Yeah, I mean, the last thing I'd say is, I don't know what the podcast is called, not because I'm hiding it, so I don't want people to listen to it, But I binge listen to like five episodes and I'm like, yeah, I get it.

14:25But the company who runs the podcast is actually a company that does exactly what you just said. They specifically facilitate these kind of smaller type of management buyouts where the existing employees end up to be the shareholders in the business and acquire it off the founder. There's going to be a whole lot of interesting solutions to generational wealth transitioning. questioning and this will be one of them. I think this is really interesting. We'll go to a super quick break, back with our last question just in a moment.

15:08And we're back, Mike, question number three. Final question this week comes in on LinkedIn from Lockie. Hey Adam and Adir, what do you think is Australia's greatest ever invention? What is the most important invention to ever come out of Australia for global impact or global good? That is a great question. I've got a couple that jumped to mind. Adir, do you have any other scientists? You should say them because one Friday night dinner at my parents' house, my son pulled out his phone and had this list of Australian inventions that like you had to try and guess. And I went through it and unfortunately, I basically can't remember any of them.

15:50But there were some pretty unbelievable ones there. And so this is a horrible question for me because I feel like I have the potential to give a great answer, but I'm just going to dud it totally and not be able to give any kind of good answer. Wi-Fi is a good place to start. I mean, Australia was pretty central with Wi-Fi. My brother-in-law's mother was instrumental. Her mother-in-law, Ray, his mum was instrumental in one of the university sort of academics who came up with Wi-Fi. What was Alan Finkel's business? I think it was called Radiata. He went on and became – he was a single – Chief scientist.

16:23He became the chief scientist. That business, because of its IP was developed in the CSIRO or something, it was the single biggest payday the CSIRO has ever had from IP. So, like, that's a pretty good one in the modern era. The two big ones are Cochlear. Obviously, that's an Australian invention. We talked about Cochlear about a month ago on the show. And that's done more for people's hearing around the world than any business ever. That's an incredible invention. The ResMed device, the Australian device, which is great for obviously sleep apnea cure. They're the two big scientific ones that jump to mind.

16:54Clearly, there's been lots of others. The Hills Hoist in terms of the washing line, that's one that comes to mind in terms of more physical goods. But really, we've sort of those two scientific inventions, the three if you count Alan's business, which was it Axiom or something like that? I can't remember the exact name. Penicillin was discovered, I think, by an Australian. Oh, was it Howard Florey, I think, who did penicillin? Yes, that's correct. So there's been a number of – we've definitely batted above our weight in terms of that sort of science. So I think across technology, we're probably a little bit further back, but science-wise, we do pretty well.

17:29And CSIRO is an amazing institution. Obviously, CSL came out of CSIRO. I don't think Cochlear did directly, but we've punched above our weight in terms of scientific breakthroughs in Australia for sure. So I tell you two that I do remember that are on the list. One you'll be shocked about and one you'll say, oh, yeah. So the oh, yeah one is we don't really use cash anymore, but what cash technology did Australia invent? We invented an amazing bit of tech with cash. Obviously, the ATM is not cash. No. With actual cash, physical cash. No. Oh, this is the plastic notes, right? Yeah, polymer. So the polymer banknotes were invented in Australia.

18:11That's right. And were subsequently sold all over the world. and are very difficult to counterfeit. Now we've moved away from a cash economy, you know, they're kind of fading a bit, but that's pretty amazing. So I thought you'd maybe be familiar with that. But there's one other one that Australia claims, I think it's true, like everybody would have heard of, and that is the black box flight recorder. Oh, really? That's Australian? Oh, no idea. So I think it's hard to say what's the most dramatic invention that's come out of Australia, because different things do, like there's a doctor who invented, I forgot her name, but she was a burns doctor or she is a burns doctor and effectively invented this kind of spray on skin for burns victims and that is a dramatic improvement in the treatment of burns victims.

19:02And so I don't know how to rank these things, but my maybe overarching view on this topic would be that Australia is astonishingly good at health sciences in particular, and we do not have the right ecosystem and structure to maximise the magic that we have. Like we have actually, I know, Adam, you're a huge fan of universities in Australia, but actually we do have the right tertiary structure to maximise health sciences and life sciences, but the commercialisation of them in Australia is quite immature and quite poor, and we miss a pretty tremendous opportunity to do much more on the IP side of health and life sciences.

19:48On that, you can also have Bluey, which was also a commercial failure by the ABC. But just going through, I've just done a quick Gemini search and you've actually named a lot. Wi-Fi was led by John O'Sullivan from the CSIRO in the 90s. Google Maps, whilst it was a couple of Danish guys working from Sydney in the where-to technologies business was bought by Google. Well, I know. Well, I've got issues with that. Like I hear that touted as an Australian invention. There's an American company that employs two Danish guys based in Sydney. Is that an Australian invention? Is that an Australian invention?

20:20We're going to claim it. We're going to claim what we can get here. The electric drill. Electric drill was an Australian invention. I don't believe it. The notepad apparently. No, I don't believe it. I find the notepad a bit of a stretch. The electronic pacemaker. Oh, that's true. The cochlear implant we talked about, Graham Clark. The ultrasound, David Robinson and George Kossoff. health and life sciences, Australia is really strong at these. Absolutely. Spray on skin. Of course, Dr. Fiona Wood, Australian of the Year, invented that, which is a - I said spray on skin. That was while you were Gemini-ing.

20:51I was talking about spray on skin. I was. I was. Black box, you said. The inflatable escape slide and raft from a Qantas employee called Jack Grant. You believe that? The refrigerator. Hang on, hang on. Yeah, I believe that. You believe the slide or you don't believe their slide? Yeah, no, I definitely believe the slide. The slide, I've heard the slide before. Yeah, I believe that. The refrigerator, I'm not sure about that. The ute, I'd probably take that. A couple of our best ever, our best of it, the boxed wine cask or the goon bag, that very much is an Australian invention. Yes, that's true.

21:21That is an invention that nobody is going to want to copy. Who's going to want to copy that? Cask wine. How can you get the lowest quality wine, put it in a ridiculous package and basically after 42 drinks, pull the lever so it goes directly into your mouth. That's cask wine. Who's going to replicate that? Some people can't afford the fancy, the Grange and the Rothschilds that you drink on an evening. Some people just can only afford the – and the final one is the boomerang. Of course, our Indigenous First Nations friends who invented the boomerang. So certainly I think you're right that we really do outstanding well in life sciences and health.

22:02We're that well above our weight and probably below our weight in tech, which is obviously compared to what Israel and the US and Japan and Korea have been able to do in tech. We're well behind. And yet we just do not commercialise it effectively. Have you, at least we can finish this episode with this question. Have you ever thrown a boomerang? I have. Did it come back or not? Did not. Yeah. Mike? Yeah, I have. It came back. It came back? I don't believe that. This thing does not come back without 25 years of practice or something. Well, I don't know. Are you sure you were throwing a boomerang?

22:36When I say it came back, I mean I could see it arc back. I don't know if it came directly back to me. What you mean is you threw it, it went straight, and then the guy picked it up and threw it back at you and that's how it came back. I went to Paradise Country. So, you know, you'd see World Movie World, Wet n Wild. There's a fourth theme park that village run called Paradise Country and there's some farm animals and other stuff. They had an Indigenous First Nations sort of type thing and there were people throwing boomerangs. They were unbelievable. They threw it like 200 metres and it was coming back.

23:11And they're like, obviously it was done originally to effectively kill birds for food. And I think that they were able to do, like, it was just incredible that the skill of these First Nations boomerang experts, that is a different level. It's one of the few times where you get rewarded more for missing your objective than hitting it. Like if you miss, it comes back. No problem. If you hit it, you're like, oh, God, that is a long walk. I've got to find the boomerang. Yeah. Exactly. Great questions again. Our audience continues to pleasantly surprise us. We should see how smart they are. And thank you again, Mike.

23:43Thank you, I dear. We'll, of course, be back on Tuesday for our fabulous full, big episode. We'll see everyone then.