Ask Us Anything: How much money is too much? + Boomers with Wealth + Seaweed Start Up

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

0:08And we are back, episode 149, hitting close to the big 150. We've got the chief question asker ready to go. Over to you, Mike. Hey, everyone. And welcome to another Q &A. First question this week comes in from Stefan, who asks, with Elon Musk reportedly on track to become the world's first trillionaire, it raises the question, how much money is actually enough? Is there a point where wealth stops being about security or freedom and just becomes ego? Your thoughts? I think the question, the answer is definitely yes. The question is at what point? I've certainly heard that at 300 million, we're getting obviously pretty high here, that you don't need any more than that.

0:55That's sort of the absolute upper limit to what you could ever sort of need. I think the Google guys, I think it's Larry or Serge, I think it was Larry who said you can't spend more than a billion dollars in your lifetime even if you tried because eventually you start sort of buying assets which you appreciate so you can't actually spend more than that. That's the Brewster's millions problem. He had to spend the money without buying assets. Yeah, great movie. So I think – so$300 ,000 for me sounds like a high watermark. I think the question is at what point is enough? And I think Scott Galloway says this really well and he simply says you're rich if you spend less than you earn.

1:32So if you earn$50 ,000 and you spend$30 ,000, you're rich. So I'm not sure – you need to get to that sort of$100 ,000 to$300 ,000 ,000 mark. Like I think it's more about what are you happy with from a spend perspective and what can you live with from a spend perspective? And this can be very, very little at times and it's less about, I think we just default to the income line. I think that's probably the wrong way to look at it. But I'd love to hear your views. Well, with respect, I'm hesitant to say this, but with respect, I disagree on this point with your Messiah, Prof G, because I think he might be putting the cart before the horse.

2:12Like I think what most people do in my experience is they earn X, they spend X plus a bit. Then they earn more money. They earn Y, which is some number bigger than X, and then they spend Y plus a bit. That's generally how it goes. So I think for most people, their expenditure follows their income, and so that's my issue with that particular way of thinking about that. I'm not sure that what you're saying is different to that. I think what he's saying is don't be like that. Yeah. And you don't have to. There's a lot of people who aren't like that. But if you have to curtail your spending, I don't think that would be considered rich and I don't think you'd feel rich.

2:54So the first question is, I mean, there are so many questions within this question. One question is what does it mean to be rich? I think rich to me is more subjective than objective. It's about a state of mind. And so that's kind of what he's saying with if you earn more than you spend. But what I would more say is I think people feel rich when they say all of the stuff I would want to buy or that I start off with that I need to buy, I don't have to worry about the cost of that. And so it might be enough for someone to be able to go out for lunch and not worry about what the cost of anything on the menu is.

3:31And so I think rich, like rich is very much a state of mind. and then the question is what is the point of money i'll come back to that question but another way to think about this is i think so just just before you go on i think that's a really good point you make but i think one really big determiner is relative wealth so your wealth relative to your brother-in-law relative to your neighbor to the jones so it's obviously not your wealth relative to elon musk because elon musk operates in a different stratosphere to all your wealth your wealth relative or your wealth relative to somebody who lived on this planet at a different time like basically you are on this planet coincidentally at the same time as the people around you and for some reason we take that coincidence as if it's destiny and all that matters is comparing ourselves to those people but who the hell are these people they just plopped on this planet at the same time we did.

4:28So it is a bizarre concept. I mean, I talk about this as if, you know, I'm an anthropologist on Mars, which I'm not in this. Like we're all victims of this, right? But it is a strange concept. Can we agree with this? It seems like there are not many happy billionaires. Do we agree with that? I think that's largely correct. I think that, remember that book, Rich Dad, Poor Dad, by Robert Kiyosaki, which is a great book and a great read. I think he basically says something along the lines of, well, money itself doesn't guarantee happiness. A lack of money will almost certainly cause unhappiness. So I think we can very easily conflate the two, but actually two very different things.

5:09Like you don't want to have no money, but the real skill is being able to make the most with whatever you have. So I think that is the skill. And it's almost Buddhist in many ways. How do you have a happy life without having millions and millions of dollars? And it can clearly be done. Well, there is another quote. I don't know who said it. it's pretty funny. It is money doesn't buy you happiness, but it does buy you a much nicer form of sadness. And so it's probably a Mark Twain quote or something like that. So if we think billionaires don't seem to be happy, then we can say being poor, that there are things about being poor that make you sad, especially if you can't satisfy like the bottom parts of Maslow's hierarchy.

5:49Yeah. And so that's problematic. And so I've thought a lot about why people that have tons of money don't seem to be happy. And I think one of the reasons is because at the moment, if people ask me a question about you or about Mike, I'll talk about attributes about you that define you. For you, for example, it might be something to do with luxury escapes, but there'd also be other characteristics, barefoot running. In fact, just today I was explaining to somebody that they shouldn't buy you alcohol as a gift. So there's lots of characteristics about you. once you become a billionaire what's the first thing that people say about you you're a billionaire it's totally become defined by your wealth and so now you're just yeah you are all you are about is a rich person and i think that is very problematic because it fundamentally changes the relationships that you have with all of the people around you like for example yeah when you go out for lunch with a billionaire like do you who pays and like isn't it it's kind ridiculous that you pay but you can't just let them pay every time and so like yeah and also you start doing things that detach you from what the people around you do like a private jet would be the classic example but there's much earlier examples than that and so i would say the whole idea of money is pretty crazy when you think about it it's like i often compare it to you know my son liam he loves anything to do with nintendo and especially platformers like super nintendo Bros or something like that.

7:18And so you're running through and you're playing this game and the game is really fun. And as part of the game, you can collect gold coins or you're playing Mario Kart, Super Mario Kart, Super Mario Kart 8. Is that what the last one is called? And, and you know, you're playing this whole fun game and there are also gold coins there and they just make you go a bit faster. Imagine if you played both of those games and your sole objective was just to collect as many of those coins as you possibly could. And you didn't bother with any of the fun of the games whatsoever. I think that's the problem with trying to accumulate as much money as possible, that everything that's fun in life that you have an opportunity to enjoy is overlooked or overshadowed by just trying to collect as many of these gold coins as possible.

8:02And so I don't have a definitive number. I think it's much less than 300 mil, like way less. 300 mil, you're buying things that you shouldn't be buying. You're buying things you don't need. You're buying things you're scared of losing or damaging. I think$300 million is the point where it starts getting bad, is what I said. I'm not saying that's the optimal point. That's the point where people have said that above$300 million, you have a point about unhappy billionaires. I think the point is, like anything, the extremes are bad. Extremely wealthy or extremely poor, both bad in their own way. Yeah, that's right.

8:33I agree. But I think – so my general disposition is you shouldn't buy anything that you're scared to lose or damage. and like so i have basically no possessions because i don't want to buy anything that ticks those two boxes so people that collect things that collect i don't know what do people collect now like coin no one cooks coins or stamps i don't even know what people come on watch pokemon cards pokemon cards all right so you collect pokemon cards you're very proud of your pokemon card thing you insure it you put it wherever i mean you're totally like how you're going to feel if one of your nicest cards you lose it or you tear it or it gets damaged i mean And it's like I think that possession has gone from something that just gives you joy to the potential of really damaging your happiness in life.

9:18And so I don't have a number, but I definitely think that most of life is in playing the game and especially playing the game with other people whose company you enjoy, people you love, care about. and the minute that collecting coins or being known for having lots of coins becomes the dominant theme of your life, I think it's all a one-way downhill ride to sadness. That's my personal view on that. And$1 trillion, I often think that Trump and Musk have got this thing in common, which is probably something happened early in their lives that makes them very insecure. I think Trump, it was maybe some lack of love or praise from his dad or something.

10:03Well, both had very – well, Marx's father was allegedly abusive and Trump's father, I don't think was abusive, but he was certainly a very dominant, emotionally abusive man. So both had very dominant fathers that treated them quite badly. My, you know, I haven't done a psychology degree, but I find psychology almost the most interesting thing, bit of knowledge, is I think like you look at people like that and you think they're just trying to impress probably the dad that's dead that they're never going to be able to impress. And I think Trump, Trump could become the president of the universe and it would still not be enough for him to feel like, yep, he's made it and impressed, you know, his dad.

10:46And so I think maybe the biggest danger in all of this is to think about why you're trying to strive for this money. And if there was a nuclear bomb or many nuclear bombs that were going to wipe out the world in six months time, would you still be trying to strive to make as much money as possible? And then think about the fact that that is what your life is. It might not be in six months and it won't be nuclear bombs, but the outcome for you is going to be the same. And so should you really be spending your time trying to collect as many coins as possible? It's a bit of a philosophical answer to that question.

11:18Very almost Dalai Lama-like. We'll go on to question two. Thank you for that very detailed answer, Michael. Discredited every word that just came in. All right. Question from LinkedIn from Lachlan Smith. Lachlan asks, Adia was talking on the last podcast, and this is actually a few weeks ago, about people spending more on luxury experiences, i.e. business class, flights, luxury travel, etc. I think a big driver of this is the baby boomer generation retiring with a full career of super plus other investments and realize it's probably the wealthiest they have ever been and trying to spend it. wondering if adam has any data on this through luxury escapes or are there any other industries you think are benefiting heavily from this demographic is that who buys your expensive luxury trips baby boomers well historically call it boomers have been our biggest customers but that's probably less about wealth because ultimately we're a really affordable option in many ways so we take 30 40 off the cost of travel so if you've got lots and lots of money and money is not an object.

12:27You probably just buy full price. You won't bother with us. So we were able to give you - But having said that, a lot of people might find, this question is, a lot of people might find themselves feeling wealthier than they've ever felt before. They still want a great deal, but maybe instead of buying a$3 ,000 holiday, they buy a$10 ,000 holiday. And so is that who's buying your$10 ,000 and$15 ,000 holidays? I think you're right, but I was fishing the point in the terms of the reason why sort of people 60 plus historically we're big buyers of ours is we're very much a product that you can call it an impulsive purchase that you can go whenever you want so if you can take two or three trips a year if you're not bound by school holidays that like we're actually we sell a lot to families obviously but we it's just harder because you got to work around holidays you got to work around kids you got to get two bedrooms blah blah where if you're just sort of two adults be it uh married couple or two friends or whatever it is you can sort of go whenever you want you've got no constraints and you've got money to the question asker's point.

13:25We have seen a slight increase in average order value, essentially, AOV or basket size. So we've seen some inflation there, but that's just because the price of sort of accommodation, luxury and non-luxury has increased across the board. We're doing some quite expensive packages now. So we're doing a 25-night private charter through Europe next year, which is an expensive product for us, but relatively inexpensive compared to what else you sort of the other our competitors that's about 60 000 minimum uh but for 25 nights for two adults so uh it's great value compared to what sort of Abercrombie and Kent might sell it for or four seasons would sell it for but it's it's still an expensive purchase so we definitely have seen a move towards more expensive products and a higher basket size and of course more people find business class and all like that sort of tilt to luxury which you pointed out a couple of weeks ago.

14:21So do I have specific data? I could probably find. I don't have it on me. But anecdotally, we definitely have seen people willing to spend more. And to your point, yeah, we provide great value. So people will be able to stretch that dollar further. Not only – I was on your site literally yesterday buying something. Not only could I pick the dates and stuff, but your cancellation terms were unbelievably good. Like you've evolved so much from like, you know, where I remember you 10 years ago. Anyway, that's a conversation from another day, but very impressive. So this is my rebuttal of it being boomer driven.

14:58By the way, did you see that Qantas is removing business class seats from some of its international flights due to lack of demand? I saw that thing. Yeah, yeah. We'll talk more about that on a long episode, I reckon. Yeah, I was shocked. So this is my rebuttal to boomers, not to boomers, about boomers being the drivers of spend. Go into a mall, go and stand outside an Hermes store or any of LVMH's brands, go have a look who's in line and who's in the store. It's not boomers. That's not who it is. And so I don't think it's just boomers. Like I think the point is a good one. No, so I agree with you.

15:32I'm just saying I'm talking about luxury escape, which is a slightly unusual case. No, not your point. I always think your point is a good one, except when you disagree with me. But like, I definitely think, I definitely think the question is a good one. Like, as in, is this driven by boomers feeling rich? Cause you know, superannuation, like it's for a significant proportion of boomers that we would know it's been tremendously good. But I do think that there is a broader, there's a broader phenomenon that's playing out, not dissimilar to the last question that we just answered. and this phenomenon is mass luxury consumerism.

16:11Maybe I often call it like money as the new religion and so people just want to be rich. Like the highest, the pinnacle of society now is basically being rich and famous. The richer you are, the more virtue you have in most Western liberal democracies. Has that not been the case for millennia? No, I don't think so. I think that if you went back even 50 years, maybe even less than that, the sole focus of people's lives was not trying to be as rich as possible almost at any cost. And definitely it was not conspicuous consumerism. So whilst conspicuous consumerism is a term from the 50s, like it really only rose with the – it started with the mall culture of the US, the shopping mall culture.

16:59And I think in the last 15 years, you know, we've watched the rise of these brands that I just mentioned, the sales volumes of Hermes. All right, China's been a heavy driver as well. But the West is a huge consumer of these luxury brands now. You know, Porsche is virtually ubiquitous. Porsche, Mercedes, BMW, expensive European cars. I think that there is this fixation with trying to demonstrate that you're a winner because you've made money. and again like we just come back to the same point making money does not make you a winner there's lots of people who are winners that have not much money and there's lots of losers with a lot of money losers as people i mean that need to find a better decisions to make in life and so i think really what's driving just on that yep as well the other place where it really gets exhibited and this is probably for people sort of our ages the schools they send their kids to and the amount of money that's spent on private schooling from a lot of people who probably shouldn't be spending that kind of level of money on private schooling.

17:59And to an extent where you live, they're probably the two things that disgustingly in Australia, it's as if you haven't succeeded. If you don't own your house and you haven't sent your kids to private school, there's this ridiculous meme that you haven't been in success, which is nothing further from the truth. And it's almost one of the worst things about this country. I would, but I would rather a person on 200K a year sends their kid to a private school and struggles to pay that. I mean, then buys a$300 ,000 Porsche SUV because that's what's going on, right? And so you and I are both very much, you know, not at the top end of buying expensive cars, but like people do, like I look around the roads and my overwhelming thought is how the hell can all of these people afford these cars?

18:47And obviously they're going into debt, they're spending. And I think we have this situation today, which will become like a historical phenomenon that will characterize this era, which is huge amounts of debt driving conspicuous consumption of luxury brands. And I think fundamentally that is what is going on right now with all of this purchasing. Yeah. And it's definitely not just older people. It's generations from really, from sort of almost from millennials up or even younger potentially. So it's – you know, certainly boomers definitely do have a lot of wealth, but I don't think they spend it in the same manner as some younger people.

19:25I think you've actually got that. You go into Roblox. You go into that game Roblox and you will see, literally you will see, 10-year-old girls and they will be decking out their character in luxury brands that have paid to sponsor the game. That is fundamentally the driver of what we're seeing in society, the ubiquity of very expensive luxury brands. I'll just add one thing as well from maybe a millennial slash Gen Z perspective. Piggybacking off what you said, Adir, I think that social media is the biggest cause of that behavior because I think it's the first time in history that people have constantly been able to see what everyone else is doing and how other people live and I think that really encourages people to live outside of their means to show off.

20:22Oh I totally agree that's a great point it's not that they get to see how other people live it's that they constantly get to consume the fictitious lifestyle that other people are seeking to project how many videos have i seen on youtube shorts of people saying this is what emirates first class is like this is how singapore this is like and you look at it and all right maybe they're using points to pay for it or whatever my point is less about how they're buying it. The point is, if you want to be a winner in this social media age, you're right, Mike, the way that you're a winner is you say, look what expensive stuff I am able to buy.

21:05That is problematic. It'll be interesting to see how this plays out once the social media ban kicks in for under 16-year-olds. I mean, maybe that will be the end of 6-7 going berserk for a start, as my daughter said to me today. I think she's right about that. But it might change consumerism amongst kids, hopefully, as part of that as well. On that note, we've got a super quick break, back with question number three, just in a moment. And we're back. Michael, question number three. Okay. Final question today comes from Courtney Askew. Thank you, Courtney. She says, question for the pod. Seaforest is a seaweed-based feed that helps cut methane emissions from cattle and sheep.

21:48The startup is planning to list on the ASX in November with a$20 million IPO round completed through Ordminet. The company cited 20 % revenue growth equating to$6.1 million of revenue in FY25, making a$9.1 million loss. The company aims to be profitable in 2027. What are your views on how the IPO will perform and whether this is a good strategy for this company? A mini deep dive in our Ask Us Anything episode. Yeah, so this is a business, this is interesting. So obviously, it's a business in what you'd think is a fast-growing area, an area that a high-tech area of sorts. My view is if you're doing$6 million in revenue and losing money, this probably isn't a business that should be listing.

22:42I presume that listing is trying to get access to capital and easier access to capital from the public markets. And we are in, I would say, somewhat of an IPO window at the moment. not the sort of biggest window, not like 2021, but it feels like the window is somewhat ajar. To me, Andy, you're the public markets guy, but I'm not sure being a micro cap is a place you want to be. You don't get coverage. You're kind of very small fish in a big pond. So I think a business of this scale is better off staying private, but I'll hand over to the executive chairman of the staff. Well, I can be brutal about this in a sense, because I don't know why they'd be doing this, but we can speculate.

23:23I mean, basically, this is a low revenue company, $6 million or whatever it was, growing slowly for a company of that revenue size, 20%. That's slow growth at a six mil base. And spending$15 million on that$6 million, plus probably some more money that's capitalized into R &D. And so why would you do this to yourself? It's not going to be enjoyable unless something true. because like basically you have to, at this end of the market, which is like ultra micro cap, let's call it, like big funds can't invest in you because if they take a position, they have to buy 100 % of your company. So you're getting small funds, individual investors, and like everyone, they need a narrative to believe in about why this is going to 2x, 5x, 10x over time.

24:17And generally the narratives are, look at the way this thing is growing like a rocket it's early it's burning cash but it's revolutionary and it's growing 50 100 200 percent a year and we're making a bet that like it hits a point relatively soon where it passes break even and the incremental profitability on the revenue is super high and so maybe that this 20 was anomalous or whatever it is but um but i think my guess is if they could raise relatively cheap capital some other way, by cheap I mean the valuation is high and there's not too many terms that come with the capital, then I suspect they wouldn't IPO because there's a lot of headaches running a public company and they have to be worthwhile.

25:08And the main benefit you get from a public company is that you can raise capital relatively easily to keep growing, which obviously they need to do. And they might argue there's another benefit of PR. But historically, small tech businesses, especially ones that are not growing very fast, they haven't done terribly well on the ASX. And if I was speaking to these founders, not knowing anything about this business, let's assume their tech is good. I think my quick glance at this is that the seaweed they produce is designed to reduce methane production in cattle, basically. It's got some enzyme that reduces methane, which is good for climate, trying to counteract climate change.

25:51And so I don't know anything about it, but my starting point, if I met these founders or whoever's running it would be, tell me why you want to IPO rather than continuing to raise private capital, because my starting point would be, this is not the right road to go down. Yeah, this feels like at this kind of level, I imagine that they're probably trying to raise, I don't know, a$20,$25 million valuation, maybe$30 max. This feels like a Series A or Series B. This doesn't feel like a publicly listed business. The only conceivable reason I can think they'd be listing is they can't access money in the private markets, which maybe or maybe not is the case.

26:27But I just don't see why you've listed this scale. It doesn't make sense. I just had a quick look. I think they might be seven years old. They're going to raise – I don't know if you mentioned this. They're going to raise$20 million. That's their plan. I don't know what the valuation is for that$20 million. I suspect they might have been offered a pretty hefty valuation. But maybe if it took you, like this feels like, you know, once again, we talk about how hard it is to do things that involve atoms rather than things that just involve the bits of software. This feels like a hard problem to solve, which takes time and money.

27:06But if you nail it, you create a very deep competitive moat, stopping other people doing it. That's the hope with physical products. And so maybe given that it took them seven years or whatever it is to get to$7 million of revenue growing at 20 % and losing 9 mil, yeah, they might be out of time with their investors. I don't know. But my natural inclination, as you've said, Adam, would be it doesn't feel like the ideal candidate for public markets. Thanks for that. That was a solid answer from you, I dear. Thank you, Mike, for your great questions as always. Thank you to the askers for taking the time to send us your questions.

27:42We always appreciate it. Please keep them coming. We love having lots of questions to choose from, and we do have the smartest listeners in the world. So your questions are very much valued. Thank you, everyone. We'll see everybody on our big episode next Tuesday.