ChatGPT Jumps the Shark, VC Troubles, Xero Pay Fight, Nike Stores Gone, NRMA Uncovered and Waymo Expands

19:50She couldn't quite reach. But who's catching them another? Another guy. So these guys are unbelievable. So it's basically his son and his son's friend. I said to the son, while I was up there, I said, oh, what tricks can you do? He goes, oh, I stand on the – so I was holding. Obviously, I can't wait to hold on. He stands on it and does a flip off the thing with no straps. You were on it, but I didn't feel like you were holding on for dear life. You're actually pretty good. I couldn't believe how relaxed you were on that thing. Yeah, the only bit I was nervous about was getting my leg over. Once I did that, I did it three times.

20:20I got my leg over each time, but that was the third time. Can you imagine what the insurance bill is for this thing? It's got to be high. It's much less dangerous than bounce. Yes, it probably is less dangerous than bounce. I agree. But, you know, a bad landing. There's a net there. So you'd be pretty unlucky to miss the net. Well, Joel didn't say this, but when Adam sent it first, like the landing was cut off the video. And I just wrote to him and I said, did you not send me the landing? Because you snapped your neck when you landed. And he's like, no, he sent me the landing, which I thought was pretty good, by the way.

20:49You didn't think it was perfect. but like there is some risk of a snap neck on landing isn't there oh it's a pretty soft net like when we did i did an activity of bounce an elt activity or so elt slt activity about 30 of us there and one of my great product managers who's actually left us now but he lasted about three jumps broke his ankle so after that i'm in a lot of i think i'm in a lot of bounce always shocks me that there's no snap necks going on there i think there's a lot of people getting injured there yeah but it's obviously great bounces a fantastic business as well but we're not dissuading people What a great idea for a kid's party, especially girls or boys.

21:21You know what's crazy? I recommend it. Basically, you have these things like bounce and the trapeze business that you just mentioned. Yeah. The kids are allowed to do that, right? Yeah, absolutely. But then if you go to the local park, half the monkey bars are taken away because they're scared of falling down and breaking their arm. This is private versus public, isn't it? Yeah, the area under the monkey bars or whatever, which if they're there, which used to be tan bark or whatever, is now some kind of crash-matter kind of material. Like everything is like super, super overly safe. It wouldn't be easy to break your arm in a park anymore, right?

21:49No, ridiculous. But on the flip side, you can do all these things. It's just so incongruous, right? Yeah, this is public versus public. I'll give you my quick flight review. Yes. I know how we love flights. What airline is this? Cathay Pacific. Oh, yeah. Have you been flying Cathay lately? I used to fly them as my primary airline before COVID. They go to Israel, right? Do they still fly to Israel? Why don't anybody fly to Israel other than El Al and fly to Dubai? No, there are some others that are flying. Back flying. Yeah. So I used to fly them all the time. I think I said this to you. Like, I felt like the most luxurious feeling lounge that I'd been in was their – No, it's the – which is the underground lounge.

22:27Oh, the wing, I think it's that. Whatever it's called. The pier is their first class lounge. Well, they've got – the amazing thing is they've got multiple first class lounges in Hong Kong airport, right? Two first class and three business, I think, yeah. I went to the pier, which is the main first class, the flagship first class lounge. Which has a business class lounge in it on the other side. Other side. Yeah, so there's another – I don't know what it's like now, but there was another first-class lounge, which was only a first-class lounge. It's underground. Yes. And it felt extremely luxurious.

22:52The pier is considered better than the window, I think. Right. So I thought that was a good experience. I always really liked Cathay. I thought the seats were nice. Like I just want to say I almost exclusively flew business class, so I thought the seats were nice. And first. And I think – honestly, I only flew first on upgrades on Cathay. Yeah. And so – I think they've got rid of all that first. Have they? Certainly the flight I was on had no first. Did you fly straight back into Melbourne? So I flew from Bangkok to Hong Kong, which is a pretty old, terrible plane. It was only three hours. And then Hong Kong to Melbourne.

23:21Then Hong Kong to Melbourne. So the Melbourne flights, I don't think they really ever had first class. Yeah, it was on a triple seven. Yeah, like they fly, you know, different, I'm sure you know this much better than I do, but different airlines, like it's not very common for them to fly first class to Melbourne. Even Qantas barely. You need a 380 really. But even Qantas barely flies first class to Melbourne. They don't fly? They do. There's one flight a week to Melbourne or something like that. They mostly fly first class to Sydney. Emirates flies like they're first class to Melbourne. They fly the same planes.

23:50The 380. Or the 777. The Emirates 777 also has first class. Oh, does it? Yeah, they've got those game changer suites on them. Oh, the 777, the game changer. Yeah, that's right. So I flew in what's called the Aria, which is their version of the game changer in a way. Except it's business class. It's business. But as a business class seat, this is pretty much as good. You know how I think Qatar is the best business class seat, the Q suites. But you don't care about doors. That's your problem. This one had a door. All right. Well, that's great. So you would love it. So it's hard to split that from first class, to be honest.

24:16Well, I think a Tar Q suite's got a door. That's right. But you told me you don't care about doors. I don't care. I don't care for the door. Yeah. But this had a door. But what I loved about it is, you know, I think often you don't get a great doona. This had a proper full, like a really good, like usually I can barely cover your toes on these things. Yeah. This had a great. I think those days are coming to an end. The bed was really good. Yeah. This is a news. Was there a mattress on the bed? No. Oh, no, there was. But you did it yourself, but it was fine. But you weren't lying directly on the seat.

24:43No, there's a mattress. Okay, that's impressive. But it was as good a sleeping experience. We talk about how sleeping is the most important food, whatever. Yeah. This was the best sleeping experience I've had, as good as Qatar, I reckon. If not better than Qatar. Interesting. So, highly big tick for Cathay. Obviously, make sure you've got to get the new Aries, where you can't use the old ones. Well, Cathay had some big problems for a while, because when the whole China-Hong Kong thing was going on, basically people stopped flying. Do you know what the holding company is called? Of Cathay. And do you know the Australian who used to run Cathay?

25:10I don't know his name, but I know an Australian who used to run Cathay. Keflon Rod Eddington. Oh, is that who? Oh, maybe I didn't know that. Yeah. Okay. I know an Aussie pilot, actually, that flies for Cathay. And what was your other question? What the holding company is? I certainly don't know that. Swire. Is it? And they own a bunch of stuff. And all that stuff in Hong Kong. So that's risen to the top of your business class? Up there with Qatar. Okay. I find Cathay, in terms of getting points, is the most hit and miss. They have heaps of availability or no availability. It's bizarre. And do you send the points to Qantas?

25:44No. I have points in Qantas, but I send points to all the airlines, separate from Amex. If you are always flying with points, are all of your points from credit cards? Yeah. You don't accumulate any? No. Because I'm only ever flying on points. Yeah, yeah. Interesting. You can't get points when you're flying on points. Because the reason I used to like Cathay, one of the reasons, other than it was very good and very convenient, It was way better than it used to be. You'll love it now. Well, I just used to send all of my status credits and points to Qantas. And so that is how I just sat in platinum on Qantas.

26:11I never flew a Qantas plane. I was like I sat in Qantas on cafe planes. Yeah. No, it's a big tick for cafe. So you want to go into some business? I feel like you're on a roll. Is that your last of your – Well, you know what? I'll segue to travel, something that has something to do with travel since you talked about that. So I don't know if the answer to this – I genuinely don't know how you're going to answer this. So if like on a 10 point scale, 10 is the most, like 10 is the best. I love, I'm so interested. And one is I care as much as I cared about the apple slash pear thing you just did. How much do you care about NRMA?

26:50Talking about NRMA. So how Rowan Lund is moving on. Well, yeah. So how much do you, like how much like. Well, because it's a New South Wales based. You didn't really care. But I think we work with NRMA in a way. They own a lot of hotels. So no, I care about them. So maybe a six, let's say. All right. So I would have been a two. Obviously our Sydney listeners and your South Wales listeners would be a nine or a ten. Well, I reckon they might be a four. Because how much do you care about the RACV in Victoria? You know, RACV is one of the best, biggest businesses in the country. I know. It's like a$20 billion business.

27:21We're going to get to that, okay? But so I don't really care about it. Like I used to work with them and I cared about it then. When did you work with them? Like when I was in global reviews. Like we did a lot of consulting for them. and they were actually, you know what, they were actually smart and nice and pushing against quite a big bureaucracy. I have to say that was my feel for them. I feel like they've been quite successful. Yes, I agree. So NRMA, you're right, it caught my eye. It's a big insurance business, right? Right, so Rowan Lund, who was the CEO for 10 years. Yahoo 7 previously.

27:48Yahoo 7, and do you know what else he was involved in? I think he was the CEO of Foxtel. I don't know. Maybe. I'm not aware of that. Yeah, so he's like a seasoned, high-quality executive. Yeah. And I was like - Ran Yahoo! 7 during his absolute glory days. Yes, that's right. That's right. And I was kind of thinking to myself, because that's what I knew him from. Yeah. And I'd met him once before and he was a really nice guy to interact with. Yeah. He was very nice and smart to interact with. And I was like, well, I couldn't really work out why he went to NRMA. And then - Oh, big role. Well, I didn't really think about it.

28:19Yeah. And then all of a sudden he has departed. Yeah. And did you see how - Well, no, he was there for 10 years. I know. So it's not all of a sudden in terms of tenure, but it's all of a sudden in terms of exit. So I don't know if you saw this, but effectively he is departing immediately with somebody taking over in an interim role, like the COO taking over in an interim CEO role. And so I started thinking about that, and the two thoughts I had about that were, one, how do you have a CO for 10 years and not have any succession planning? You should be in another role somewhere. That's what it sounds like.

28:55Well, it's a bit weird, but don't you think that is weird? Like if you had a CEO for 10 years, isn't the primary job of the chairman to try to make sure that this is the only job. And I'm always worried about succession planning. And in Catapult, we've had a CEO for six years. Oh, he's been six years already. Yeah, he's doing like, you know, he's doing terrifically. Yeah. I'm always thinking about succession planning. By the way, he's involved in thinking about succession planning from day one. Yeah. It's harder for us because we grow so much. Like it's harder to promote from the inside. But NRMA should be able to promote from the inside, I would have thought.

29:27And so one is I thought that is not a great reflection on the board. Who is on the board? Who's the chairman of NMA? So we'll come to the chairman. But Tim Trumper was the – you know Tim Trumper? Is that not Quantium? Yeah, he was involved in – he might have been the chairman of Quantium. I think I met him before. And I think he was involved in – I've sat with him a couple of times. Again, like these are astute individuals, right? I absolutely agree. I think he would have been X9 before. Yeah, he was in the ACP world, very senior, like right up there with Kerry Packer, kind of working with Kerry Packer.

29:56So he retired after eight years or something as chairman, like seven months ago. And somebody else took over who I hadn't heard of. And so that was a surprise to me. And I think, without being too harsh, that's a failure of the board, right? After 10 years to not have someone that we can say, all right, the CEO has left suddenly. We've got succession worked out. Isn't that what I've done, that the interim person has come in? Isn't that? Well, no, they've now appointed a search firm to hunt for a CEO. into the search. Yeah. Okay. So I don't think that's ideal, right? You might disagree, but like I – It's also – it could be the person who's taken over in the interim could be a candidate.

30:34So why not just appoint them? Like why not have that kind of lockdown? Yeah. Because that – you know, the business now is going to be rudderless for a bit. Yeah. And you know what happened at nine. I mean, nine was an exercise in like much of value and perfection. So the current CEO – Matt. Matt. Yeah. So he was appointed the interim CEO and just decided I'm just going to change the strategy while I'm the interim CEO. But he was always – I pretty much guaranteed him the CEO. But he was always very capable of stepping into the CEO. He was probably the next in waiting anyway. I know, but the minute the board let him - He came up to Hugh, right?

31:04It was Hugh then, Matt? Yes. No. Well, no. There was Mike in between. Of course. Yeah. Steve's me. Yeah. Yeah. And so the fact that the board let him change strategy or adjust the strategy made it pretty obvious he was going to become the CEO. Absolutely. So maybe, I'm not trying to be overly harsh on this board, but 10 years feels like - And Mike's obviously run off to Dubai in a very plumb role. It's a pretty good deal, right? I mean, he was running the ABC, which, I mean, that's a nightmare role, right? I mean, I think that role, I thought a lot about that company. I don't want that organisation.

31:37No, ABC. I don't want to talk about it now. Defund the ABC. My view is actually, so I don't think we should defund the ABC. I think we should defund it. So I think that it is like, it's got a great role. And you remember, it used to be excellent like 20 years ago. I think it's done as dash this. I think it's rotten to the core. Well, it's rotten. So this is the problem. Defund the ABC, defund the universities, defund the ball. It has to be changed. The ABC has to be changed from the inside out. It can't be, though. And so that's the challenge. The challenge is - It's like a house being invested by termites.

32:05You can't, like, it's gone. You've got to replace the whole thing. Well, we maybe disagree on that. But, like, the chair is good. The CO is good. Who is the chair now? Sir Kim Williams is the chair. I've met him twice. And so the chair is good. The CO is good. But the trick is that it's very hard to change from the top down. Yeah, I don't think that's stuff. All right. Anyway, so NRMA, they should have had succession planning, I think. But the other thing is this. I was thinking, what happened with NRMA? And so I did a bit of a deep dive on NRMA. Like, why is there a sad departure? Because they own a big kind of IAG, right?

32:33Is that their business? I think they were somehow connected, but I can't remember. The JV and NRMA both own a big chunk of the biggest shareholders in IAG. And so then I started with their annual report. And how big is this business? What do you think? I mean, you're a bit familiar with this space. I know the RACV business. How much revenue do you think NRMA generates? Because I've got – not RACV much better. I presume they're pretty similar. They've got a big holidays business. Well, I thought they'd generate a couple of hundred mil, and I was like – that was a bad guess. RACV, which I think is bigger in fairness, is like a multi-billion dollar revenue business.

33:07So this is smaller than that. Yeah, I think. But it's still – this is still a billion dollars of revenue. Yeah, so they're pretty much – And like half of that is coming from like these travel properties that they own. Discovery parks. I guess, yes, exactly, Discovery. And so I was shocked by what a business this is. This is a great, both RACV and RMA and possibly other RACs. I don't know. I presume they're all pretty good. Like this is the benefit of a mutual. So what happened? I can talk about the RACV a bit. RACV invested in, you know, there's like nine RACV properties. They're very good properties.

33:42Like RACV Club or whatever they call it. No, the club's separate. Oh, that's right. So clubs in the city. This is like at Cape Shank in Victoria. There's Cape Shank. There's Ballarat. There's... Near Bells Beach. What's that one? Torquay. Yeah, Torquay. Hillsville, which used to be a club, but now is open to any person. Oh, so they started them that you had to be an RSCV member or a guest of a member. Invaloxville, the big one. And then they're like, we'll just let anybody stay there. Maybe you get a discount. Hillsville was like... Yeah, so RSCV... If you're a member of the club, you get like a 50 % discount.

34:14If you're a member of like the, like you and I, probably roadside assistance, you get like 25 % off. And the club is like a Qantas club, but in the city kind of thing. It's more like a better version of Melbourne. As a club, I would join if I worked in the city. You get like gym, there's a hotel. It's actually amazing. It's like two grand a year or not even. No, it's like$1 ,200 a year. And you get like gym, it's like incredible value. And you get discounts to all these properties. It's actually really good. And it was really, I know Craig and Gavin really well who run the hotels part, obviously.

34:43Yeah, yeah. And these guys, like this business makes so much money, it actually doesn't know what to do with it. It's that good a business. And you go there, you have amazing, it's got great, the F &B is outstanding at all the venues. They do an amazing job at hospitality. I presume NMA is a little bit more down market, but do a great job as well. But RSV is like a$10,$15 billion business. I stayed in Torquay. It's great. It was nice. Yeah, and Cape Shanks, an amazing property, great golf course. It is actually a real pride of Victoria, these properties. And they're in Noosa and Gold Coast, which are great properties as well.

35:14Obviously, we feature a lot on Luxury Escapes. But I was just saying, that's not what I'm saying, because they actually are great, great properties. So it's just a real benefit of you think, oh, a mutual is not going to work because there's no shareholders generate profit. This is a mutual that's actually done an unbelievable job. Well, I can tell you NRMA is similar. So they are, let's say, 900 and something mil of revenue. And they made like$50 million of profit at the end of that. And then I was like, well, let's look at the annual report. And let's look at how much people are getting paid.

35:40I was very interested to see how much Rowan Lund was getting paid for this gig, right? So they've got this whole governance section, as you would expect. And then they've got this whole remuneration report, as you would expect. And so what do you think is missing from the remuneration report? The actual remuneration? How much anyone gets paid. And so then I was very suspicious about that. So it turns out, like, ChatGPT gave me a bit of a hand and said, you should click on this link because on their website, they'll show you how much the directors are getting paid. You would never have heard of any director except maybe Kate's, I forgot her name, who used to be an ACT senator.

36:14London? Yes. So she's on the board. But the rest are exactly the kind of people you would think would be on a mutual board, right? But this is a$1 billion revenue business. Oh, it's a massive business. And so they get paid. I looked at how much they get paid. And then I saw, it wasn't in their annual report, and I'm like, well, obviously they're hiding it. And then I looked at how much they get paid, and I thought, oh, they shouldn't be hiding this. They should be putting it front and center. Not much. They get paid like$120 ,000 to sit on the board of a billion dollar revenue. They probably get some good benefits as well.

36:40Maybe, but like definitely these people are not milking the members of this organization. Because Stephen Mayne, or maybe Stephen's wife was on the RSF board. The RSF board is very competitive to get on. Yeah, I can imagine. It's a esteemed board. And I forget actually Stephen's wife's name, but she's very accomplished. She's a very senior lawyer. And she was on for a number of years. And it's a really well-run organization. Well, the chairman of the board of NRMA is earning like a bit more than$250 ,000 a year. Yeah, that's right. You'd be getting twice that in a public company at least, if not three times, at a billion dollars of revenue.

37:14It's an easier role. You've got no shareholders. That's true. That's absolutely right. I think it's fair. That's right. And you're not at risk of a hostile takeover. Yeah, exactly. And like it's a stiff... Because public company is almost like one of those things where it's fine until it's not. That's right. That's right. Until your company, everything's blowing up, you've got to have 30 board meetings a year. Otherwise, it's nine a year and you trundle along. Well, public companies want much more money, but arguably not worth the money. Like the trade-off is not good enough, to be honest. Well, it's actually not that much more.

37:39It's only, and you know, you live in this world. It'd be double. What do the high-pages directors get? I think they would get like, I actually don't know what it is, but it's probably about 120. Yeah, it's not. That's very little for a challenge, as in challenging as in an intellectually challenging business. For a 100 mil revenue type. But it's a competitive field. Like it's hard. Yeah, listen, lots of people want to be on there. I would say people think that - Yeah, great business, but a hard, like a hard sector. People think being a public company director is prestigious and opens up their professional opportunities, right?

38:06I think that's why it's in demand. Well, it opens up to get other public company directors. That's right. I bet all it opens up. And so I was trying to desperately find how much Rowan Lund got paid, but I couldn't. But my guess would be one to two mil. Yeah. I would literally have said one to two mil. Yeah. Which feels fair. Yeah. And so it's pretty dramatic to quit a role that gets paid one to two mil after 10 years. Yeah. All of a sudden where they say now we're going to appoint a search firm to find the next CEO. I assume he's got a job somewhere else. Well, then I looked at what had happened in the NRMA recently.

38:37Maybe there's an issue. And all I could find is, so there'd been a chairman change seven months ago. In 2019, there'd been some big kind of – you would have loved this, actually. There was this big issue where, I don't know, the people that drive the ferries were not very happy about the pay. The NRMA operates those, it turns out. Okay. Or they pay or whatever. And so the MUA went after – It's in the Sydney Ferries. Yeah. And so the MUA went after them. Okay. and they used the NRMA logo to make fun of the NRMA and like I said, a few nasty things, but not very nasty about Rowan. But it wasn't dramatic.

39:05And then NRMA tried to sue them. They actually did sue them for misusing the logo and for like injurious falsehood with like defamation for a company. Anyway, that got thrown out of court. That wasn't the greatest day for the NRMA. But who cares? That faded into the background. But then a year ago, a year and a half ago, they got censured by like, I don't know who was, ASIC or whoever runs the insurance thing. because they basically took – APRA. Yeah, APRA because they basically took too long to pay out people who got injured and were waiting for like their money and had insurance with NRMA. And so I thought that wasn't great, but that's not a sackable offence.

39:40That's not NMA. That's – I don't think they actually run that insurance. They're a shareholder in that insurance. No, they were – the NRMA was censured and they put out a statement like a mea culpa saying, we did it and like we fixed the problem. And so I just wonder whether the change in chairman had anything to do with – Always. Sudden departure, right? Because the CEO chair relationship is usually a really close one. Obviously, Tim and Rowan were close. I think they came from a similar sort of world. And they put out press releases together, you know? Yeah, exactly. So, no, I thought that was very fascinating to read about the NRMA.

40:09And it's something – I don't know why nobody has really reported this. Like, this is like a 10-year CEO. Well, no, actually, no, I saw that Rowan moved on. I know, but you saw it as like a snippet of gossip, right? Not even gossip, it was just like a story. Rowan's moved on, good tenure. But I think people don't realise how consequential NRMA is as a size of business. What have you got? I've got a quiz for you. I knew it. And this is thanks to our good friends at Canaccord. Don't say thanks to. I like Canaccord, but don't say thanks to when it's a quiz. I was chatting to the Canaccord guys. We were talking about Rule of 40, and I said, oh, can you send me across your Rule of 40 data?

40:44And they kindly have. No, in Canaccord, this might be a quiz on what are the 10 reasons why Canaccord is better than anyone else in the market. I don't know anyone to help me with the quiz so that you can abuse them are they your house broker? I would never abuse them they did a very lovely raising for us are they your house broker kind of hold? they are we don't really have a house broker per se but they're very they do a lot of stock trading Owen covers the stock he's been a great analyst they're very yeah they're very good and they just they were them and Goldman Sachs did this raising now they did a great job so I'm teasing them not being nasty I really like that and they've actually it's a business obviously it's Marcus effectively yeah Marcus Freeman They've founded it, but obviously the deal with Canaccord.

41:20And they've come from nowhere to be really up there with the bulge bracket firms in many ways. So a great Australian story. Obviously Canaccord itself is good. What have they given you that you're so enthusiastic about? Well, they've given me this quiz. This quiz, that's it? I cannot believe how easy it is. Pretty easy to be my heart. You're not even cash for comment. You're quiz for comment. Give me free stuff or give me a quiz is the two. Yeah. Okay. Can you name the top 10 Australian ASX companies basis of Rule of 40? Who are the highest Rule of 40? Top three. Let's start with. I'll give you the top 10.

41:48No, but I'm not going to get to top 10. That's why I'm asking the question. I lose interest after three. What's the top one? One, all right. I'll tell you the top one. One is Pro Medicus. Obviously top one. Two. And also, can you tell me what the rule of 40 is? 70. Pro Medicus? Yeah. No. What? Well, they make like 80 % margin. No, they don't. They make 50 % margin and 35 % margin. Well, according to Canaccord, they make 70 % cash over dollar margin, according to Canaccord. Well, it's not possible. Well, you and Owen can take this up separately, but this is what he's saying. We're going by the countercourt numbers here.

42:19Cash EBITDA. Maybe they put there. No, they do. Maybe they don't. Cash EBIT. Maybe they put there. So cash EBIT margin. Cash EBIT? Yeah. 70%. That's what they claim. Hang on a second. Like, astonishingly, they're completely right. I can't believe it. I just want to tell you one thing. So they're right slash you're wrong. No, I'm happy to say I'm wrong about this. I'm actually shocked. By the way, I just want to say to you, they got$166 million of revenue. Yeah. And do you know what? they say their gross profit is? How many millions of dollars? Oh, gross profit? Yeah, gross profit. Like 160 or something?

42:53166. They've gotten zero cogs. Their cost of sales is$301 ,000. That's a SaaS thing. I mean, I think they're not selling product. Look, what's crazy is they basically have no expenses. Like their employee benefits expenses. 100 staff or something. Yeah, they've got$31 million of employee benefit expenses. There must be some share-based stuff on top of that. Well, no, this is the - They don't have 10 staff. This is the gap. $31 million. Well, they're not paying$3 million per staff member. That makes sense. 310 mil. Oh, I thought you said$1 million. No. 31 mil. Oh, 31. Yeah. But it's crazy. They've got no staff.

43:26Anyway, I'm not trying to say I'm wrong. I'm totally wrong about that. I'm shocked. Okay. They're number one. Okay. Now, what's their number? 70 % and 35 % of growth or something? Yeah, about that. Their rule of 40 is 106. Okay. So pretty much spot on. All right. Well, that has blown my mind. Oh, that's why everybody overvalues them. Well, these are obviously all really high-quality companies, these top 10. Yeah. I don't know if Life 360 is next. It is not next, but it's up there. It's one, two, three, four, five, six. It's like number six. Okay. And that's got – because it doesn't make that much cash.

44:00It's only got like 12 % EBITDA. Yeah, but it grows fast. Oh, no, because it's really 44. Okay. All right. So that's 44. No, it's 43. Yeah, it's not great. Okay. It's all right. So it's growing 30%, all right. Yeah, yeah. Not bad. So, gosh, there's a big gap between – Yeah, always. There's pro-manacus in this kind. Oh, no, number two is very good. Number three is okay. Number four. So you can see, like, the two components in front of you as well. Yes, I can see the two components. And so for number two, should I be thinking of a very fast grower or a very profitable business? Very profitable and growing pretty well as well, but really profitable.

44:34A listed tech business. Well, all these companies are listed. I'm so bad at this. There's a person who we're actually going to have on the pod, but I just got a message from his marketing person who can't come on anymore, but he's got him coming on to the pod in a couple of weeks. We'll get him on later this year. A good friend of the pod. A very good friend of the pod. Almost argue a best friend of the pod. A SaaS business? Yeah, kind of SaaS. Yeah, SaaS-ish. Well, Netwell is the other one I can think of. Is that number two? That shows why it should be a friend of the pod. That's what happens.

45:01Number two. They have 75 on rule of 40. And how much of that is earnings? 50 % earnings. That's a very high – it's a profit-making beast. And they're growing pretty nicely as well. Number three? Number three. Is, again, high earnings or growth? Very similar. More earnings than growth. Much more earnings than growth. Is it like another one, like Hub24? Hub24 is number – no, it's number four. So there's one between NetWealth and Hub24. Yeah. Hub24, by the way, interestingly, has less profit and a lot more – it's about 30 % profit, 30 % growth. It's much more balanced. So the next one is probably – I just forgot the name.

45:35It's the property thing, right? The conveyancing. No, it's property, but it's not conveyancing. REA? REA. Okay. So zero is, I say zero is about number 10, and that is only 38 on Rule of 40. Okay. And that is like 12 % growth. So 12 % profit and the rest growth. Okay. So REA is number three at 59 on Rule of 40. Do you have number five, close friend of REA or close companion of REA? Close companion of REA, like car sales? Car sales. Okay. That was brilliantly run. That's 51 on Rule of 40. Then you've got obviously Hub 360. And then - I mean, we spoke about Coden two weeks ago. It's not Coden. They're going to be somewhere on there.

46:15I don't think Coden's – I can't see it anyway. I can't see Coden. I'm surprised by that. Well, the font's pretty small. It's not top 10 anyway. Thank God we're stopping at the top 10. What number are we up to? Seven. Up to number six. Six. A close link to car sales. In personnel terms, maybe Cher's the same chairman. He used to also be chairman of Lucky Escapes. Oh, that's interesting. Arguably best chairman on the ASX, Pat O'Sullivan. I know who you're talking about. Technology One is who I'm talking about. Oh, okay. I honestly didn't know who was chair of that. Great business. So if we've said car sales, we've said RE & car sales, you might as well tell me where Seek is on that list, if they're on there at all.

46:50Seek is definitely on there. Because they've got very strong earnings. Seek is that one, two, three, four, five, six, seven, eight, nine. About 10, I think, Seek is. And that is basically all earnings, no growth. Yeah, but they're still in the top 10. They're still 39. It's not that high, though. So three of the top 10 on Rule of 40 are the three marketplaces. And then you've got Hub and Netwell. which is kind of marketplace-ish in a way. But you know, and look, the business I alluded to earlier, whose name I've forgotten, Macquarie IPO, that is the conveyancing, I'm going to say monopoly, but they wouldn't like that term.

47:21You know the business that all of the property conveyancing goes through? Plexa or something, isn't it? Plexa, yeah. Are they on the list? They have problems. Yes, they're about number 15. Okay. So I think - And you've got - So one after that is TUA. I don't know who TUA are. I've never heard of these guys. Three billion market cap? Who the hell is Tuas? How do they spell that? T-U-A-S. Literally never heard of this business. Well, we can think about it. We can investigate it. They've actually stumped us. Future episode. Oh, it's TPG Telecom. It's the old TPG Telecom. Okay. Yeah. WTC is also on there.

47:56I think that's like number nine. Isn't that WiseTech? WiseTech, of course. I was wondering who WiseTech was. So can I - And then SLC is the last one. And then C. What's SLC? Superloop. Bevan Slater. I'm surprised. That's so high. So there's a few telcos on there. Heaps. And guess where Luxury Escapes would be based on our most recent Rule of 40. Eight. We'd be number four. There you go. So Catapult is certainly on here as well. They're number 20, I think. I think the problem with these lists, because, you know, I don't agree with this list. What don't you agree with? Well, there's two things. Do you not agree with Rule of 40?

48:30That's what the list is. It's simply Rule of 40. Well, it depends what metrics you use as well. This is a cash EBIT, which feels right. Right. Well, you can - Although I think you should include share-based payments, but - Yeah, and you can influence cash EBIT, to be honest with you. Yeah, you can influence any - I know, but the bigger issue is this. When you say, do I not believe in rule of 40? I think, you know, rule of - I thought you loved rule of 40. I think it's good, but I think that the truth is today that investors are back to preferring growth over profit, although they still want profit.

49:02And so when you look - Are they? They're preferring growth over profit? Yeah, they are. And so when I looked at a Goldman Sachs document that looked at correlations between market value and the relationship between cash EBIT and revenue growth. And by the way, one of the things for us is we wouldn't use revenue growth. We would use ACV growth, which is more similar to ARR growth because it's a boring argument to say. But we've got some capital revenue. And that's not very – What's capital revenue? Like sometimes we sell stuff and we just get paid up front. Is that included? That'd be unusual though.

49:36Well, it's like 5 % of our revenue, but a movement in that can heavily influence. That's an unusual business. Most businesses don't have this capital. I know, but for us, like a bit of a movement in that can heavily influence revenue growth. So for us, I'm just telling you the nuance. But actually, when you do this regression analysis of how do revenue growth and cash EBIT relate to market cap, it turns out that instead of just multiplying the percentage by one on cash EBIT and one on revenue, you should probably multiply. It's not the fit is not great. Bias at 2.6 times towards revenue growth.

50:13And so this is now called the rule of X, which is arguably the worst name I've ever heard. But that is the thing that I'm more commonly being sent now. I think the notion that investors prefer growth to profit, I find bizarre because it's pretty easy to buy growth. Like we've seen a million companies buy growth. It's not 10 to 1. It's 2.6 to 1. I agree with that. I could grow so much faster if I didn't care about profit. We just pump money into AdWords. You can't not care about it because it's still there, right? To me, profit's more important than growth because you can't buy profit, you can buy growth is the point.

50:45You can pull a lever one way, you can't pull it. That's a straw man argument. How is a straw man argument? Because, yes, you can buy growth and erode your profit entirely, and that will penalise you on rule of 40 or rule of X. But not on your 2.6 times. It does. You can be a Temple and Webster and use a heap of marketing, so you're growing really strongly because you're spending a heap on marketing, but you've got no profit or you've got very little profit, but you've got a great rule of X or rule of 40 because you've got its growth. So what you're saying is – I think the market's wrong there is my point.

51:16Yeah, but what you're saying is it's got leverage, right? You get 2.6 times the value for the growth versus losing the - And I'm saying that makes no sense. And so the reason that growth is preferred is pretty obvious, right? Because if you can increase your growth rate from 18 % to 25%, then instead of doubling your revenue in four years, you double it in three. And if you can, and so you're using - That's in a world where revenue is important. You're using a smart example of how the system can be gamed. And what I'm saying is that's true. So you need to watch out for that. Yeah, totally. But all things being equal, if you're throwing off 15 % cash EBIT margins, the difference between growing at 18 % and 25 % is much greater than 7 % more EBIT margin.

52:06And one-to-one makes those two things the same, and they're not the same. And so you're right. You can game it. But if you said to me, do you want a business that has – so I'm saying we've got a starting point of – let me use kind of round numbers. 20 % EBIT margin. I'm going to use – it's cash EBIT. I'll say EBIT. 20 % EBIT margin and 18 % growth. Okay? And now I give you an opportunity to adjust. And I say you can go for 27 % EBIT margin and 18 % growth or 20 % EBIT margin but jack the growth to 25%. you should always take more growth because that's going to increase the size of your revenue much faster.

52:46Assuming that revenue is transferring to – are you talking about Catapult being able to transfer 75 % of revenue to profit? That's very unusual. What I'm saying is you're able to maintain the 20 % margin. If you can maintain the margin. That's right. So I'm giving you the option. I'm saying what would you rather add 7 to? Would you rather add 7 to your EBIT margin or would you rather add 7 to your growth? No, I agree with that. If you can maintain – the problem is that often that doesn't happen. But that is why rule of X biases towards that. I think on the regression model, because it's just based on investors.

53:13I agree with you. If you say, like, we can go and take our 10 % margin to zero by adding 3%, 4%, right? 4 % revenue growth. And the rule of X will end up to be the same because it multiplies by 2.6 or whatever. Then, yes, that would be a mistake. But even worse is you go from growth from 20 to 40 and profit from 20 to zero. and you've got a much worse business that's not making any money but it's growing fast and you've got the same rule of 40 or rule of X. That to me is what really doesn't make sense. So the only way I use rule of 40 now really is to talk about it with investors and to look for outliers that are being incorrectly priced, which Catapult has been for a long time.

53:55So we're still below the median line on rule of X. But we were massively mispriced on rule of 40. and like now I think we're kind of – I look more at Rule of X. So Rule of 40 for me is just a screener now really more than anything else. That was a pretty interesting quiz. Great quiz. I like that quiz. I'm going to do a couple of very – No, I'm going to say a couple of very quick things, okay? Did you say that the business called Great Rep went out of business? I'm really sad about that. I know Great Rep really well. When I went through Startmate, me and Kate were both – Kate Dynan, who's obviously a friend of Escapes in the Pod, were their mentors.

54:33So Jordy and Julia Kay, they're married. I'm not sure if they're married. The husband and wife, too. They're married at the time. Lovely couple. And it was such a fantastic business. I haven't sort of spoken about three or four years. Well, what do you mean by – Well, so firstly, let's say, you know, there's this line. I think it was a line by one of the HP founders that said, the price of innovation is a high tolerance for failure. Yeah. And I think that is absolutely true. is a horrible experience to go through for a business to go broke. And like, I mean this from like the bottom of my heart, as I know you do, like totally hats off to them for trying to do something genuinely innovative.

55:09I was devastated to say that. Physical tech, right? Coming out of Melbourne and it was great. It was an environment. Basically, to say what it was, the business was basically glad you're at, but biodegradable glad you're at. And bizarrely, nobody else was doing it. Well, you say bizarrely, and so let's come back to this very briefly. When you say great business, what do you mean by great business? They had unbelievable – again, I haven't seen them for four years, but the metrics I saw had very strong margin, obviously, that they were D2C. They had huge TAM. They were making great headway into the B2B space.

55:39They were selling this massive wrap to restaurants, essentially. They did a little bit in the consumer space. They never really made the consumer business work. So what if I told you their revenue to me when I had a look seemed to have gone pretty close to zero? Yeah, I'm just really surprised at that. So what if I say when I was trying to figure out what happened here, I decided to go and look at reviews. Oh, okay. And the reviews basically said this stuff doesn't work. Like you can't get it off the roll. It falls apart in your fingers. I had a few rolls. I bought some originally. And they worked well?

56:07I thought it was fine. The only thing I didn't like about it, it didn't have a great cutter at the bottom. Because of that, that was annoying. But I didn't find it. I found it as good as Gladrap in terms of the wrap itself. So you know what I think about reviews in general, right? It's just plus and minus three standard deviations and tends to skew towards minus three standard deviations. So you get a lot of hate on there. But let's say there was a product problem. Let's say that was the issue. The thing about it is this. They raised$39 million. I know. And so maybe you need to raise$200 million.

56:39I think that's probably the issue. To create a brand new category or such a dramatic improvement in product. It takes a lot of time to get it right. They got a heap of money from there. Who's the meat guy in South Australia? I know. I forgot. Yeah. The son of the founder. And he's an impressive guy. And there were a few named VCs that were in there as well. I can't remember. I think Blackbird was in there. Yeah, I know. But the thing is – Obviously, they've been through StartMate, so Blackbird indirectly did. For Catapult to create its product, it basically went through seven years of a Commonwealth collaborative research centre, which was not commercial.

57:13And a whole lot of tech was created, including the Catapult tech. All that money. And then it got all these kind of consulting fees from the AIS and others to give it a go. It wasn't$39 million. It wasn't even$1 million, really, I think. But it probably took nine or 10 years. How much money did you raise? To get it right. Have you raised along the journey? Take out acquisitions and stuff. How much money have you raised for core product? Taking out acquisitions? Yeah. Certainly less than 100 mil. Yeah. But 50 mil is less than 100 mil. That's a lot of money. 50? Okay. Yeah. Probably about 50. And that's obviously a high-tech product.

57:50Like, so. Yeah. And, like, so the thing is that to create something brand new when it involves hardware takes generally a lot of time and probably a lot of money. And this business is not that old, right? Five, six years or something? Yeah. I think when they go through Startmate, yeah, maybe 2019, 2020. Yeah, exactly. And so I think if you're going to do a hardware startup, this is a hardware startup. Yeah. Like, we can say atoms rather than bits. Well, this is a fast-moving consumer goods. Well, but it involves atoms. Is it fast-moving? It's fast moving, yeah. But it involves atoms, not bits, right?

58:22You have to get the atoms right. And so I think if you're going to do this business, the huge upside is if you nail it, it is very hard to replicate. Huge margins. And huge margins. But you've got to sit there for 10 years and you've got to pump money in because it takes a long time. And I think the investors, like either they pulled the plug too early or they didn't think they were going to get there. It sounds like that was the issue. Investors didn't stop backing them. And I think the market's changed. to be. I think they had some issues with Walmart and some other stuff. And you deal with these big department, these big stores, especially in the US, whether it's Walmart, whether it's Amazon, you're kind of at that whim and it can make or break you.

58:59So you can hear on how I built these fast moving consumer goods businesses who basically made their business through a contract with Walmart or whatever. But you hear just as many who died as a result of these guys screwing them over. Yeah, absolutely true. Now, another quick one. If I said the word Nike and then I said the letters AF1, what would you think I was referring to? Alpha Fly 1? Most people would have said Air Force 1 and they would not have been correct about what I was referring to. What I'm referring to is that AF1 was one of the partners of Nike for stores in Australia. Oh, an Australian partner, right?

59:35And do you know the way that - I didn't realise that was the case. They have franchises. Well, the way they work in Australia, it's very confusing and complicated. So they have some company-owned stores. Okay. I think that the – Like Lego almost. Yeah, like the one – Lego is different to the – Well, Lego's – Yeah, Alchemy owns Lego stores, but Lego sells into the department stores directly. Exactly, exactly. And so Nike has some company-owned stores, which I think like the ones at DFOs or whatever, like those outlets. Okay, and they have the one next to Kogan, there's the outlet. You can go – Yes, that one, no, is only for staff or people that are invited.

1:00:07I've been invited to that a few times. Yeah. I've always tried to sneak myself in when I wasn't invited. They weren't to that. Is everything basically just 50 % off there? About 30 to 40. Genuinely 30 to 40. It's amazing. I load up big time when I go there. In their factory store, in their head office of Portland, which I've been to, everything is like 50%. Oh, yeah. Everything is 50%. You get to buy stuff? Of course. And so they've got some company-owned stores and then they've got some partners. One partner is now owned by a big Israeli group and they run most of the Nike stores. And then there were these six or seven other ones, predominantly in Sydney and George Street or whatever, that were owned by this AF1.

1:00:43Yeah. And what seems to have happened is that AF1 went broke. Just owning Nike stores. And Nike pulled. Do they have other business or just the Nike stores? They have like a consulting business on how to run retail businesses, which doesn't seem like the greatest pitch right now. I reckon they could be struggling for business. But they went broke and Nike pulled the relationship. And I was trying to work out what came first. It would make more sense for Nike to pull the relationship first and then they go into liquidation. Either or. But I don't think that was the order. I think they went into liquidation and then Nike pulled the partnership.

1:01:12Yeah. And here's the problem. And tell me what you think about this. So this is the consequence. Obviously, all the stores are now shuttered immediately. Oh, they're shuttered? Shuttered. Because the lease is under these AF1 dudes. Yeah, 100 and something staff. Gone. Gone and owed money. You get that. Government covers that, doesn't it? Yes, that's right. And all gift vouchers issued by this AF1 stores, not honoured. That's problematic. And so what we have - You've got to wonder why Nike allows these clowns to take their brand. And so it's not – like, do you not think that – we talked about this before, and I just want to say it again.

1:01:51Where these gift vouchers sit in the stack of own money at the very bottom. Like, just – they're like, what, a millimetre above shareholders? I'm surprised Nike aren't making good these vouchers. So I think everybody should make a fuss about – like, so this story has barely been written up. Part of the reason as well, because Nike have allowed these AF1 clowns to take their brand. I think Nike should be on the hook for these vouchers. I totally agree with you. But also, you know, I think this is the case for like, you know, these laser clinics as well, which are all independently owned. If you buy a gift voucher from one of them, you can't use it at any other one of them.

1:02:29Well, that makes sense because they're separately owned. No, I don't think it makes sense. Like, I think that if you have a brand and you're, can you imagine if you went to a Macca's and every Macca's had different offers going on at that point in time? Like the Southland store in Melbourne, Nike, sends me 20 % off offers, which is not available anywhere else, right? If you're a brand, like Mecca's has worked it out, centralised marketing. What the lazy clinics could do is just have a centralised pool where you just get made good each month. Exactly. It's so simple. When you sell a voucher, you keep a 15 % or 20 % commission.

1:03:02The rest gets remitted to head offers. It's great news for head offers. They get a huge float. Probably not enough. It doesn't get redeemed. But like, what world do we live in where all of these employees thought they were working for Nike and now they have entitlements owing to them? Yeah. And all of these people thought they bought Nike gift vouchers. Well, I think Nike needs to stand behind this. They've got to step in, right? They've got to step in. Like, it's inconsequential to them dollar-wise. Also, I'm not sure why Nike would lease this brand out to these guys. Like, Nike's capable of running their own stores, clearly.

1:03:29But globally, it's very common that Nike has these partnerships with local operators. This doesn't make sense. For a brand who's so concerned about branding. That's all they are. They're a piece of rubber and whatever, and they're a brand. Well, they would say, with some justification, we're also a technology business. And it is true. I tell you, I'm wearing these cloud shoes. And there is a lot of tech that's got into designing these shoes. Even though the best running shoes are no shoes at all. Do you train barefoot as well? Yes. Yeah, of course. But you have to say, that's a minority of people, right?

1:04:01Sadly, it is, but it shouldn't be. And so Nike... These guys are so good at marketing is why it is. Well, I think people are different. Like, that's how the world works, right? There's a variety of different people. And there is tech in them. And Nike can design better shoes than a company that's got$3 million of shoe revenue, right? But you're right. Like, there's a brand. And this is terribly damaging. It's clearly Nike's most valuable power. Yes, absolutely. But also, it's totally unfair. And this should not be the law. Yeah. Like, this is a bad law. And I want to say, like, I can't believe no one is writing up this story.

1:04:32Yeah, I'm aware. How do you find out about it? Because, you know, I just read everything. It is snippets. Your finger's on the pulse this week. It is snippets here and there. But like Johnny Shapiro, who we love, go write up this story because this is like a total shonk, right? This is total shonk what's going on here. Totally great. We'll go to a quick break now. We've got some really good stories coming up after the break.

1:05:25Thank you. It was called something different, wasn't it? I don't think so. You might be right. I don't know. I don't think so. I thought they'd always been called this. Oh, it was called Oscar before. Oh, I had no idea about that. Yeah. And so, like, the big pitch about this Heidi Health business is that it's growing faster than Canva grew at a similar age. It's quite small, though, I think, if you look at it. Well, this is what I want to talk about, right? So this is a competitive space. Like, you know the business Epic that rolls out – Yeah, the massive one. A quiet episode. That rolls out software to all of US hospitals.

1:06:02That is an epic business. So they've got a competitor to Heidi. I mean, that doesn't feel like great news, right? I wouldn't want to be competing against those guys. But there are tons of competitors. There are Australian competitors. There are overseas competitors. Like, there's a very competitive space. Yeah. In the transcription business, doctor transcription, they would say one of their competitive advantages is the training data they get from so many consultations. It's probably true. Are they the biggest? They're the biggest in Australia. They wouldn't be the biggest globally. So this is the point.

1:06:33Yeah. I don't care about Australia. Are they the biggest globally? Yeah, well, they're not. And you know who? There's another company competing in this space you might have heard of called Microsoft. And so I'm not disparaging a lot. It was valued at$700 million, which is crazy. So that's what my point is. So its valuation is$711 million Australian dollars. Do you know what the ARR is? The annual recurring revenue? It's like$20 million or something? $25 million. Yeah. And so they're basically trading at - 28 times. Yeah, 28 times recurring revenue. And so what's that, of revenue? Of revenue. Oh, revenue or recurring revenue?

1:07:06Recurring revenue. So of revenue, it's more like 40 times. Yeah, probably. Now, I take Blackbird's point that they're growing faster than Canva grew at a similar size. So they might be tripling. And so that 30 might come down to 10, and then that's great. But that's something like, I mean, you know, one thing to say is valuations in the world of like private equity, I don't mean as PE, I mean like venture capital is part of private equity. Like those valuations because of preference shares and other things where you get your money first, like they're bonkers, right? Those valuations. I think I was talking to someone, I'm not going to say his name on the pod, but he knows who he is.

1:07:44He's very, very smart in tech, maybe the smartest guy I know in tech. who said he thinks there's a spot for niche-specific AI agents or AI tools like Heidi. So he's not bearish on this at all. I think the business makes sense. Like totally. The question is how competitive. Will the margins be squeezed away? Well, you say the business makes sense. But my first question was, isn't this just going to be consumed by Gemini slash OpenAI? And so his view is there's probably a space for these niche players. I think the niche thing makes sense. But the thing is this. Yeah. what are the long-term margins going to look like in this category?

1:08:20And is the AI going to be competitive with what these global AI players are building out? And it feels to me they're your core bets. Your core bets are not how much is it going to grow in the next two or three years. Your core bet is at what point do you think you can extract massive amounts of profitability out of this business and at what margin? And to me, I understand perfectly. I don't know how much was invested this round, 100 mil or something like that. and so I understand why they're investing at this high valuation like that's the price of pay to play right but but it is a very big bet to say that this Australian business because when Canva like the the artificial comparison with Canva is that nobody was doing what Canva you can't compare to Canva Canva had the market themselves that's right and arguably still does because Adobe and everything that Adobe was doing Adobe's different it was totally not it's different yeah it was incomparable yeah incomparable to what Canva was doing and also Canva was competing in sort of a forgotten, unloved space.

1:09:17And Canberra was in that. And AI is the hottest space in the world. So I'm not sure you want to be going to where the puck is, which is very much this investment. Yeah, and so I think medicine is going to be, like the medical field is super ripe for AI-related like workflow improvements, which is what this is. It's a great idea. It's a question about AI. Well, recording doctors' consultations, I don't think that is going to be the best place to play because it's too obvious and there's too many players that come from that space. I question how good the team is as well. I think it just gets commoditized away is my gut feel.

1:09:51Yeah, I agree. Did you see, speaking of Blackbird, I don't want to pick on Blackbird because this would just be emblematic. I saw the article. I can no percent about this article, by the way. Speaking of Johnny Shapiro, Johnny Shapiro wrote this. I know. So, yeah, I don't want to belittle Johnny Shapiro's article because I just spoke about how much I love him, right? Friend of Pod. But, like, I know what you're going to talk about and I'm going to tell you why I don't care. I thought you'd be joking. I'm usually the Blackbird defender on this show. No, neither one of us is anti any of these VCs.

1:10:20We think it's great that this money is pouring in and whatever, but maybe I'm anti-hubris. We're both anti. You might even be more anti-hubris than I am. I hate hubris. But this, I think, might be hubris in the other direction. That's my issue against Blackbird. What the article basically said is that three recent-ish Blackbird funds, 2018, 2020, 2022, have been sold. And again, I'll take this with a grain of salt, but I'm sure it's correct. But as you take the concept, at a 35 % discount, which is kind of probably an illiquidity premium to some degree. And that was essentially the article. Basically, what it's saying is the Canva fund that Blackbird did, the early Canva funds have been incredible.

1:10:56And these non-Canva funds that came later have struggled. That's essentially what they're talking about. So this is newsworthy, no doubt about it. Anything Blackbird is newsworthy. Yeah, but also this particular thing. Like, because the core of this is true. I've got no doubt about that, right? But we can put it maybe into this context. There were a few investors that put money into Blackbird and held on for a long time. The one that was quoted in there was a$250 ,000 investment and they only got$283 ,000 back after 10 years or something like that. And so there are a few investors that really want their money back.

1:11:29But now is not the time that Blackbird is dishing out money. Yeah, because companies aren't selling. Right. And so I suspect that a chunk of this might be the supply and demand curve where you've got an investor on one side saying, well, I want my money back and not really buyers on the other side or BlackBerry's got something in their contract saying that they can buy it back. And they've just found a way to buy this back for much lower than the value of the fund at the moment. So that's why I wouldn't say, read into this and say, it must mean they're overvaluing by 35%. Yeah, take 35 % however you want.

1:12:02I think what the bigger issue, and this is not a BlackBerry issue, this is an everybody see issue, is if you look at BlackBerry and SquarePig were the same, all the big ones are the same, is a lot of super money. These funds from 2015 or certainly from 2018 were basically Host Plus, Rest, all these big super funds gave a heap of cash. Like they were filling these like$500 billion. A heap of cash that represented none of their funds under management. No, but still significant cash. But my point is like it was huge for the VC industry. But do these super funds really care about, is it going to impact their returns?

1:12:33Absolutely not, right? And so it was a mismatch. They could be cool and involved in VC and investing in startups and alternative investments without risking returns from their actual super funds. And this is the problem. And kingmakers in the VC world. Super funds have been doing PE investments for a long time. But PE is naturally investing in bigger businesses generally. So BGH raised a$2.5 billion fund. Well, they're putting a billion dollars into different investments. The problem with VC is it's not really a business. I know in the US, obviously, the big endowments have been doing it for years.

1:13:04But I don't think VC is a great investment at scale. So the problem is always VC's got so much money. And I don't think it's Blackbird's fault or SquarePak's fault. They got all this money from these LPs. But you can't actually spend it in Australia. Because you think of how – imagine if Blackbird raises a billion dollar fund, which they are, and SquarePak – So when you say LPs, you mean – Because LP is a fancy word for people that give money to a fund. Investors in VCs or PAs. They just don't call them investors. They call them LPs. Because it makes them feel better that they're some kind of partner.

1:13:34They're limited in the sense that all they have control over is nothing. Like basis. Yeah. So all these LPs put money in, or as you say, the investors put money in. But there's nowhere to put this money. So I think Blackbird raised a billion dollar fund. In the US, even the biggest VCs, even the Sequoias, aren't raising the equivalent, what,$12 billion fund. Look at the size of US economy versus Australia. Sequoia's not raising a$12 billion fund. Andreessen Horace isn't raising a$12 billion. So I think the funds were just too big. Well, part of the issue is they all pitch - Actually, more like a$20 billion fund if you look at the size of the US ecosystem versus Australia.

1:14:08So they all pitch power law, which means a few investments succeeding, one or two, make all of your money for the fund. And the thing about that is you can't have very large funds because in order for that power law to work and to make many, many, many multiples, 1 ,000x, 100x on your money, you've got to get in relatively early. and you can't go and deploy$150 million early in these things. And so you can be a late-stage VC. There's lots of funds that do pre-IPO investments. They're really late. That's not VC. Right. They're not trying to make this power law investment, right? And so I totally agree with you about the challenge with VC.

1:14:48It's very hard to do it with$10 billion of money. I think VC has been ruined by these in-store LPs coming in, for one. It should be family officers. Should be family offices and former founders backing VC. And that makes sense. And in my view, any individual who wants to up to a certain size. And you're, of course, an individual. But it shouldn't be in stows. I think that ruins the whole thing. The other thing that's ruined VC returns is companies aren't selling. So you've got the double blow of too much in-stow money sloshing around an entry and no exit. So again, this is not a BlackBerry criticism.

1:15:20This is an everybody criticism. Well, this is how I think about VC investments. I told you I'm in the tiger investment. Yeah. Like, I mean, basically the way I think about VC investments is - Well, Tiger's a classic case of ruining the whole lamp. Just drawing money around. That's true. So you give them, you give VCs money. And then what you should think is that money's gone. And don't worry about valuations along the way. Some point in the future, it used to be after eight or 10 years. It could be after 15 or 20 now. You're going to get a return. And hopefully it's a good return. But until then, the interim valuation doesn't matter.

1:15:53It should be 10 years. It used to be 10 years. And it's just blown out. You know, you talked about this, you run marathons. Yeah. Nobody is getting excited about who's winning the marathon at the five kilometre mark. Yeah. No one even talks about it. Yeah. And yet VCs - That's it. If it takes you two hours to get to 5K, you're probably not going to do that well. Yeah, but that's true. Well, you can't, if everyone else is finished, you're not going to win. An energy isn't perfect. But like, I feel like a lot of these - Are best in average. Illiquid investments, right? They basically are boasting about how good things are looking at the five kilometre mark of a marathon.

1:16:25And I just would ignore all of that. But it's relevant for the bad ones, which I think is where your analogy does actually work. Possibly. Yeah. Can we move on? Speaking of actually good VC investments, Waymo, did you see their announcement last week? No. They're launching a fully autonomous ride-hailing service in the UK in London, making the Alphabet-owned companies European debut. Uber's also rolling out a London robotaxi service with a company called Wave, which has been backed by SoftBank, NVIDIA, and Microsoft. Waymo said a small fleet of Jaguar I-PACE vehicles fitter with sensors are already in transit and we're navigating through London in coming weeks.

1:16:58Humans will do the driving to map the city streets and gather data. And this is Waymo's second city, international city after Tokyo. Obviously, robo taxis poses a new threat to London's traditional black cabs, whose numbers have declined significantly. They were 22 ,000 a decade ago. They're now 14 ,000. Can you guess how many private hire vehicles, that is like Ubers you can book, are in the UK now? 10 times the number of taxis. Very close. So 96 ,000. So I call it eight times. We've just seen a massive switch across. And I think, and then driverless cars should wipe them all away in time. Well, that's your view, isn't it?

1:17:32Like your view of black cabs is it's over. It's just taxis in general. Yeah, I'm not targeting them. But like when they say there's another threat, there's not another threat. I think black cabs survive the longest because they're the professional driver. I think it's the crappier cabs that go down. The black cabs survive the longest. They get swept away, but they'll last a bit longer. But black cabs in 20 years are going to be like the horse and cart rides around Central Park, right? I was listening to an old Acquired episode and I talked a bit about this. This is like a years ago one, but they were early on it.

1:18:03And something like in the US, like 100 people die, more than 100 people die in road accidents every day in the US. It remains insane that we allow people to drive cars. It's like allowing you to wield a knife around the office. Like it just makes no sense that doing something so dangerous is so readily - In the meantime, Australia keeps dropping the speed limit, believing that you can have zero road toll when you're having people driving around. Well, Victoria keeps dropping the speed limit and the road toll keeps going up. So there's zero correlation between... I'm not even sure if the speed limit was zero and every car was stationary, you'd have a zero road toll, to be honest.

1:18:35So, like, basically... But speaking of which, why... But it's not another threat, right? This is the end. Why has an Australian... Why is an Australian... Why are we always so backwards in this stuff? Well, we have to wait. Like, we're not developing them here. But neither is London. Neither is Tokyo. I know, but we're far away. Why aren't we encouraging Waymo to operate here? I'm sure. We'd be a perfect city. Melbourne's a perfect city for drivers. Do you not think that people are pitching Waymo to come to Australia? I don't know. I think someone probably is. They should be. But like, listen, they're only in the US now.

1:19:06This is the first city outside the US. It makes sense that it's London. I hope that London's a really hard city though. Like Melbourne, and Sydney would be hard, but Melbourne would be a super easy city. Adelaide would be an even easier city. Yeah, it doesn't. Yeah, listen, I'm sure somewhere is a strategy to roll it out. Australia is far away, right? If Australia is closer to LA, then it's about the same. Yeah, I think, I don't know. You know what? We just need to be honest and say Australia is in the southern hemisphere. It feels like we're on the other side of the world. Well, more of a question, Australian politicians should be actively encouraging, be it WAI, be it whoever.

1:19:41Well, I'll tell you why they're not, because no politician in Australia is held accountable for the road toll. But when the politician encourages autonomous taxis and then they come and the first person is killed, that politician's career is over. And so this is all risk management, right? Agency cost at its finest. Yes, that's the problem, exactly. Agency cost at its finest. That's a perfect way to say it. I totally agree. We're going to probably one of the world's most interesting business at the moment, OpenAI, which obviously runs the ChatGPT app. What do you think I'm going to talk about here, Eddie?

1:20:13The fact that they have allowed porn generation? generation? No, that's a subset of what I'm going to talk about. That's how it goes into that. That's not... Well, you can add to that. I'll tell you something else you can add to that. The fact that one in eight young people, kids, are using ChatGPT for conversation because they have nobody else to talk to. I saw it as a companion, which is the most common use of ChatGPT. Tie that into the fact that they're allowing porn generation. I mean, that's a great mix, don't you think? I mean, I really thought that through. We'll go into the porn stuff in a second, as they like to call it, erotica.

1:20:43But I think the bigger concern about OpenAI and deputy is according to a third-party intelligence firm called Apptopia, estimates that new user growth has peaked for the app, which is really surprising. Because they've got the entire world's population using it. That's 700, 800 million people. That's nowhere near the entire world's population. Is that really what they've got using it? Yes. I thought they had more than that. No, it's about 800 million. It's gone up significantly in the last year. So it's sort of multiplied numerous times. We need to think about, do you know what Google's user knowledge?

1:21:12Because obviously that's close to unique. It's not totally unique because there'll be some duplicated accounts. But think about this. Google's well in the billions. But not uniques necessarily. No, I think there'll be – look it up. Because while you're looking at that, I'll tell you this. China is out for chat CPT, so there's one and a half bill gone. Almost all of India is out because they're just not going to have access to it. You've probably got more than two billion of the world's population gone. Google had the same issues. There's Baidu in China, but Google's not even in China. They were obviously in.

1:21:44Google has 4.9 million monthly active users. Billion. Billion. Well, how is that possible? I mean, I guess so. And Gmail has 1.8 billion, amazingly. All right. Google Sheets has more than OpenAI. Well, you're right about your concern on this. Okay, so let's dive in deeper. It looks like metrics indicate that average daily active use in the US has dropped 22.5 % since July. Well, that's a disaster. This is the US. Average sessions in the US is down by 20%. This indicates the US users spending less time on GPT app and opening it fewer times. So because if you said to me their growth is slowing, I would have said, okay, I get that.

1:22:23Maybe it's reaching some maturity. Yeah. But you're not saying that. You're saying it's massively running in reverse. I wouldn't say massively running in reverse. I'm just showing you a graph here. You just said to me the sessions are down 20%. Yeah, but it ramped up a lot and it's dropped. The froth has definitely come out of it. So if you look at the annual, it's still well up year on year. like miles up year on year. It's just, it's mentioned one of those massive peaks and then the peaks sort of, the top of the peaks now come off. So I'm so surprised by this. I've never been using Chet GBT more than I am now.

1:22:53Really? I hate GBT. I love perplexity. I find GBT generally gives me a useless answer. I don't know how you love it so much. I'm going to try perplexity more this month. I love perplexity. For research, I find perplexity incredible. And this to me, to your porn point, this is leading, it feels like a smacks of desperation, pardon the pun, that they're now grasping for porn. They can't make money off their core business, which is, I guess, making people more efficient. Okay, let's give them porn. Well, I think they were jealous of Elon, weren't they? Because he gave porn. But I don't think Grok's doing that well either.

1:23:24So like of all the things to be copying, like GPT is clearly the, and we talked about 76 % of people who use, I use GPT, but clearly the number one brand, by a mile number one brand. Like Claude's like 3%. Like we talked about Gemini's like, what, 8 % has got Google behind it. It's clearly number one. Think about this for the numbers. If they're 75%, let's call it, and they've lost 20%, and the total usage hasn't changed. We've seen that in the last year. Let's fix that, okay? That means that there's 15 % market share that's just been spread through the rest of the market, right? Gemini's getting better.

1:24:02Claude's great at certain things. Complexity's amazing for research. I feel like GPT's got this incredible brand, but it's the everyman that's the classic jack-of-all-trades, master of none. It's not really great at anything. So everybody that I know that's building stuff, let's say, agents to help people in SaaS or using it for coding, they're almost all using Claude. Yeah. So Anthropic for it. It's B2B. It's the B2B King Claude, but terrible on B2C. Yeah, I agree with you. And we talk about the joke where every time OpenAI announces a partnership, the partner goes up 25%. Yeah. They don't announce a partnership with themselves.

1:24:36Yeah, OpenAI. There was a tweet on that that I sent to Jays earlier today. OpenAI shares after – OpenAI shares saw after OpenAI announced this partnership with OpenAI, wasn't it? But I've tried – Oh, that's disappointing that somebody thought of like a criticism before me. They talk about this Booking.com partnership. I went to ChatGPT this morning and said – typed in, I want to make – can I make a booking on Booking.com for Sydney on the 28th of October. So I had to type that in. That was annoying to type in. I go there and it basically says, here's the link to go to booking.com for your thing.

1:25:09It was a terrible experience. It's not connected. Yeah, it's not connected. It was connected, but not well. And this is what you want to refine with these filters. Much easier to click a box and to type in. I don't know how this is a better experience for customers. Everybody gloats about, oh, Etsy's connected, Booking's connected, all these people connect with GBT. How is it a better experience? Yeah, well, I think you're, listen, you're an ultra sophisticated user for travel booking, maybe top 0.1%. But you've got to create the prompt though. So how do you create the prompt? I would have thought that the way that they would integrate with booking.com was to replicate the travel agent experience for people that are not your level of sophistication on booking.

1:25:47Because that's the thing that's been missing mostly for all of this travel booking stuff. And this goes back to like the rise of the internet and the World Wide Web is that it's great for very discreet types of bookings, especially point to point. Obviously, you do at LuxuryScapes more than point to point. but you've packaged it up into something that people can buy. If what you want to do is say, ah, I'm kind of thinking about this place or this place or this place and I've got this much time and kind of this much money, the internet is not great for helping you with that kind of stuff. I thought that is the problem that ChatGPT was trying to solve.

1:26:22Possibly. But I still think you need to be able to prompt it to give it the parameter. Jez, my co-founder here, is really good at prompting. He's sent me what he's done. He's gone to the GPT last week. He said, locate this random sandwich shop in London, access this Google business profile, analyze the text of all Google reviews, search for reviews, articles, blog posts about this place, examine the content from these sources, see which sandwiches are consistently rated highly, synthesize these findings from sources, create a consolidated list of the most praised sandwiches, based on frequency and positive sentiment mentioned across the platforms, rate the top three sandwiches.

1:26:54This took like, this would have cost GPT like three or four bucks at least. It took them like half an hour to come up with this thing. Well, actually, it's much cheaper than you think it is. Whatever. But this was a lot of tokens it's using to come up with this. And this is some - Why does he care so much about the top three sandwiches? He loves this stuff. But it came up with this, like Google would have come up with something. As my other friend said, you could just go onto the sandwich board and see what the top three were. It's the other option. But it's done all this work. And this is free.

1:27:21This is why GPT has$13 billion of revenue on$20 billion of losses, because people are just misusing it. But that's a problem. But the bigger problem - Feels like a pretty big problem. No, but the bigger problem is after everything that you've just said, it's gone backwards 20%. Yeah. Like if you're essentially giving away things for free, which is Robin Hood, rich VCs giving money to poor consumers. Actually, it's worse than Robin Hood. It's just burning cash. Well, no. The consumers are getting value out of it. It's not burning. Yeah, that's true. People are getting value. Well, questionably.

1:27:55It's not net value creation for society at the moment, but it's net value shifting in society. Yeah, that's true. So you're an older Uber principal. Yeah. And so I think that the problem is they're doing all of this stuff and still they can't get people to buy a dollar for 80 cents, right? Or for nothing. Yeah. For nothing. A dollar for zero. So that's alarming to me. Yeah. And obviously this is one app. Maybe this analysis is wrong. Who knows? It's one consulting firm in the US. But in terms of utility, I find GBT minimal utility for me. Like unless you're an expert prompter looking for these weird things like jazz wires.

1:28:30I'm just not sure there's that much benefit from it. I'm shocked you say that. I was out at a restaurant the other day, and there was a print of art on the wall. I don't really care about art, but I was interested to know something about it, and I just threw a photo of it with the GPT. It knew everything about it. It recognised it instantly. It's good for that stuff. Good for the picture stuff. I'll put Mike Williams' Pokemon cards on there. It gives me a value for it. Exactly, and so it depends what you're doing. I reckon I did five or six different things over the weekend. But would I pay for that?

1:28:56Would you or I pay for that? Well, I do pay for it. But would you pay for the specific use case? Of what? Because you pay for it for business reasons. You don't pay for it to look at the artwork. I'll tell you why I pay for it. Because I think it's the future and I just want to have as much access to it as I possibly can. I pay for plexity. All right. Well, I don't. So I'm going to start and I'll tell you if I agree with you that it's much better or not. Okay. I'll come back to it. Plexity, I find, A, it doesn't hallucinate really ever because it sources really accurately. And I find any information-based question I ask, I'll often ask perplexity and GPT the same question, and GPT inevitably disappoints me, and perplexity inevitably makes me really happy.

1:29:35That's how I feel about Claude as a consumer proposition. You like it? No, I don't like it. No, I don't like it. But I will say this. But the porn thing just kind of proves my point. If Sam, the greatest fraud in business in the world today, is grasping for porn, that's a great disappointment. I don't think he's – he's not a fraud. He's just riding a bubble. He's not a fraud. He's not stealing money, hiding money. He's raising a$500 billion valuation on this business that's not adding any value to anyone, I think. But he is delivering a - This feels like the greatest positive scheme in history.

1:30:05I think it's a very unfair undersell of how incredible what's been built is. It's revolutionary, life-changing. It's incredible. And I listened to their acquired OpenAI episode. It's now four years old. But it gives this - No, no, it wasn't four years old. I listened to the Google episode, the new Google one, which talks about the history of all this stuff. It was a week old. Correction. and it goes through the history of all this stuff. One of it was OpenAI. And you had Ilya Sixova, who's a genius. Had a bunch of geniuses in there. Geniuses are all gone now. They've all created their own things.

1:30:35And now you've just got Sam and Greg left, the two non-tech guys. All right, but you know what? Sam's had a failed startup. And he ran Y Combinator. He's never achieved anything before this. But you need a leader to build these things. It's even better if the leader has technical. Who was fired for being dishonest. It's better if the leader is technical, like Elon has technical chops as well. But I don't think he's a fraud. Basically, he was part of creating something incredible and led it. It's revolutionary. And now he's riding a bubble up. Yes, it's going to pop and it's all going to end in tears.

1:31:06And then something amazing will be left behind that kind of revolutionizes the world, like the Industrial Revolution revolutionized the world. I don't think that's fraudulent. I'm not criticizing AI in general or LLMs in general. I'm criticizing this valuation. Well, he's been the primary driver. Has he? of mass uptake. I'm not a consumer uptake. Yes, that's right. Big deal about it. Consumer uptake, as I said, is minimal utility. It's business uptake where there's utility. And that's clawed and that's all these other ones. So I'm very, very opposed to this erotica use case. That's right, yeah.

1:31:36I'm opposed to it, one, because the user base is going to be a lot of kids. I'm also opposed to it because we just – I thought it was just weird. Well, the other problem is they say, obviously we're still going to be opposed to deep fakes. Yeah. And so they probably do believe that. But one of the issues with that is everyone eventually looks like someone when it's artificially generated. And it is eventually going to look too similar to some real people out of being unlucky. And also, I promise you there will be people that figure out how to get around it and deepfake it. Well, there's really heaps of deepfake sites out there.

1:32:12So it's not really revolutionary. Yeah, that's true. But this is mainstream. I really oppose the direction this is going in. I agree with you. I oppose it. The fact that they're doing it is the biggest worry because that was always going to tarnish the brand. How can you be a business brand if you're also peddling porn? It just makes no sense. Look at that to the porn guys in Russia. Yeah, I agree with you. I'll be shocked if in two years' time, up to episode 350, that we're talking about Sam Altman in anything but diminishing terms. I'll be shocked. But you think in terms as bad as, what's the guy's name?

1:32:46I forgot his name that founded WeWork. Adam Newman. You think that's the way you're going to be talking about Sam Elliott? It could be. It could be. But not in like - Well, Newman wasn't really a - Both SoftBank's invested in both of them, so there's a similar commonality there. I think there's a lot of similarity between them personally. Both sold a dollar for 50 cents. And both are incredible leaders and can sell - And unbelievable salesmen and marketers. Yeah, charismatic. And built something that has fundamental utility, just maybe not for their investors. Yeah. No, that's a fair point. And I'm not talking about all the other bits of work.

1:33:23But Adam Newman's probably the most criticised business leader in the last decade, though, so I'm not sure you want to be able to mention the same thing. Yeah, and I'm not talking about all the other bits of Adam Newman, right? I'm just talking about this bit. Yeah, I know. But I don't think we're not going to be talking about Sam Altman like Theranos or something like that. Like, I don't think that's – No, because Theranos was a complete fraud. It was totally dishonest, right? So I don't think we're going to talk about – how about like Sam Bankman-Fried? Where does he fit in with that story? Well, because that was also a significant fraud.

1:33:52It came good in the end, but unfortunately - So when you say you think he's a fraud, you don't actually literally mean I think he's committing fraud. No, no, no. I think he's more a fraud in the - His hubris strikes you as being fraud, like personally fraudulent. Yeah. I think that's probably true. Yeah. We're going to move on to our last story. Did you see in the AFR this week that institutional investors in$26 billion ASX Listerstock Zero have slammed proxy advisors for recommending a shareholder strike against Chief Executive Sekinder Singh Cassidy with her Silicon Valley-style pay package.

1:34:27The investors, and there's a couple of investors, said it risked undermining an ambitious growth strategy. This came as almost half of zero shareholders slammed Singh Cassidy's$15.2 billion US pay packet alongside a 26 billion US one-off grant. You mean million. You want to say that again? This came after almost half of zero shareholders slammed St. Cassidy's US$15.2 million pay packet alongside her US$26.5 million one-off options grant. Catherine Alfrey, a portfolio manager at Wavestone Capital that owns around 1 % of zero and bought in before COVID, so it would have bought in at a pretty good time.

1:35:04And Platinum Asset Manager Peter Brook say institutional shareholder services and Glass Lewis failed to recognise that Xero operates in a global market. Elfrey claims that it is frustrating the comparisons that ISSUs are based where they are listed rather than who they're competing against. Xero's competitors are Intuit and Sage, big multinationals. That's who you should compare them against, not Nine Entertainment. Our friend is at Nine. That's a bit rough, I thought. However, what do you see the problem is with this comparison? Do you notice the problem I noticed? Well, Xero, she doesn't live in Australia.

1:35:35She lives overseas. She's in the San Fran, yeah. Yeah. So Zero's revenue is$2 billion. I don't know what Intuit's revenue is, but I suspect it's 10 times the revenue. Is that right? So Intuit, let's look at MarketCat rather than revenue because they've both got pretty high multiples. So Intuit's CEO, Sassan Ghudazi, was paid US$36 million last year. So actually slightly less than Sikinda because of the one-off grant, but it's called slightly more on a base level, but not massive. Call him equivalent. Oh, he's maybe like 50 % different before our options grant. Yeah, okay. But equivalent is probably fair.

1:36:06And so you said Xero is a$26 billion business, we think. Intuit,$184 billion. So it's seven times the size. So they pay the same. So that comparison is ridiculous. And let's look at Sage. So Sage is double the revenue of Xero, so double the size. And its CEO gets$9 million a year. So like a third of what's akin to get. So both those comparisons prove the point that the proxy advisors are right. She's grossly overpaid. Well, listen, the underlying point I agree with, which I'm not sure proxy advisors got wrong, And the criticism is the proxy advisors are comparing this based on where you're listed.

1:36:40I don't know if that's right or not. Because when I spoke to the proxy advisors, I mean, like, not even one-tenth of this. Yeah. One-tenth, right? Yeah. And so, but the proxy advisors, apart from one who was a box-ticking exercise, the rest of them were actually very attuned to the fact that we're paying an American who's living in America. And I didn't find this problem. Yeah. But if that were to be a problem. Because you're making up the problem. Well, if that were to be a problem, I would agree that that would be a problem. I can find it to be a problem, right? Like the argument is if you're going to pay$30 million US, like is this the best person you could get for$30 million?

1:37:17I told you in a previous episode like what I had thought happened here. Basically, it's a mega multiple. Unless they grow in the US, the share price is going to plummet. They found the person that they thought, well, we think that she can make it grow in the US. She's in the US. She said, I'm not doing it unless I get paid this. They're like, well, it's not going to matter. If she succeeds, no one's going to care. And if she fails, we're cooked anyway. And so they just capitulated to it. The issue that proxy managers had isn't necessarily paying her. I've got an issue with paying her that much.

1:37:47But the proxy issue wasn't that. The proxy issue was the fact that she's paid this one-off options grant on effectively what is a flattish share price. That was the problem. Which is, so the strike price. So basically she gets options where they say at any point in time, you can buy shares for roughly the current price. Yeah, the share price has now dropped a little bit since the performance has been great. And so the advantage of that, it's like, I was going to say, it's like a free option, but actually literally it is a free option, which is she doesn't have to outlay any money today. And over the course of her tenure, like how many options does she get?

1:38:21Oh, you don't know the number. Oh, it's like a lot. $20 million worth. And so like that is like 200 ,000 options, let's call it, ballpark. But if it's$150 ,000, whatever, it's a bit less. And so basically every$1 it goes up is making her more than$100 ,000 of gain. Yeah. And so your issue with that is you think – why do you think that's an issue? Well, first, the quantum is an issue. Like the quantum is way too hard. But you said you want to put the quantum to the side. Oh, let's say – sorry. No, you can't put the quantum to the side. I said I was – I initially said that. For a proxy. So a proxy puts the quantum to the side.

1:38:55Why do you think a proxy has an issue with her getting upside based on where the share price is when she starts? Well, I think just using the share price is really problematic. So look at zero share price. So when Sekinda started, it was$82. You think, oh, she's done really well. It's doubled. But if you go back two years before that, it was$160. So the share price went from$160 down to$80. She started at a really great time. It came back to$180. Now back to$150. So share price done nothing in five years. So he's basically saying in five years of zero growth, this person's going to get a payout based on doing nothing, essentially.

1:39:25No, but if... I'm pretty sure she gets the money. If the share price stays at 170, she gets the 23 million US. I think she has to do anything to get that money. Hang on. Isn't the option strike price at the current price? So if it stays at the current price, she gets zero. I think it could be a performance, right? Exactly. So let's say this another way. Or Zipo is what you want. If she's getting these effectively as shares, free shares, and the shares are being valued at the current share price, I don't think that's right. Like, I'm not supportive of that. But if she's getting them as options and she only gets the benefit above the current share price, number one, I've got no issue with it.

1:40:05And number two, she may well be shafting herself because of the rollercoaster share price that you just outlined. Well, she's also getting 20 million bucks a year as well on top of that. Well, that's a separate issue, right? But like on this issue, I've got no issue with their options. If they're shares, I don't think that's good. Yeah. So it's got an exercise price of$171. Well, I'm fine with that. I think she shafted herself a bit with that, to be honest. Like that price is a mega multiple. But it's at the money though. I'm right. Usually, as you said, when you give performance rights, you have a 30 % premium.

1:40:40So you have to – this was no premium. More than 30%. Yeah. So you do a very different strategy. So if you thought this was such a good thing, why don't you do it at Catapult? Because you're gifting money to the CEO. I'm not as desperate. Like, they're desperate. What's another problem? They're desperate. Why are they dead? Because they're... Zero is an amazing business. Why isn't it a hundred round? You know why? We always have this discussion. You know why they're desperate. Because their multiple is very high, and it cannot be sustained on Australian growth. It's digging a bigger hole for themselves, though.

1:41:09And they've done this ridiculous acquisition in the US that looks like a disaster. Well, it's not... Like, we don't know. Massively overpaid for all. We'll see. Listen, I just come back to this same point over and over again. I basically say to you, I'm going to give you a massive valuation on your revenue slash profit. And you say, that's incredible. There's lots of good things about that. I wouldn't say that at all. You know I wouldn't say that. All right. But like - I hate that. Then you would not be the chairman for very long. Because that's - Right? You don't understand how it works. This is the game.

1:41:37It depends which investors you want. If you want in and out hedge fund investors, sure. No, this is the game. And then what happens is that the chairman has to say, well, we better do something to maintain and grow the share price. and we've tried the US time and time again and it's been totally a failure every time over and over again. And we've got a bit of growth in the UK but Australia is still going well. But we can't maintain this multiple based on Australian growth so we better nail the US. How the hell are we going to nail the US? We've got to find someone who we think can nail the US and bet hard on them.

1:42:06So they go and get someone. This is the money she demands. And then she says, if I'm going to nail the US, I need to buy this thing. And then they say, well, our money is pretty cheap because our share price is so high. So yeah, if you really think this is the thing that's going to open up the US, I think this is the right choice. Their money may be cheaper. We back you as CEO because we're backing you to be able to do this. That's how this all happens. So this is a mistake, compounding on mistake, compounding on mistake. It's like a mistake cube. I can't believe you're so confident that it's a mistake.

1:42:33I'm so confident. I can't wait to revisit this in a year's time. I think the odds – I wish I had DeLorean because it's a jump for a year's time. A year's not long enough. How long do you need? What, 10 years? Two years. One year's enough. She's been in the job two years already. So starting 23. Yeah, but this acquisition is newish, right? Six months or something. Yeah, sure. But she's been in the job for a while. And she was praised for cutting a bunch of costs. Now she's added a bunch of stuff. If you say to me, do I think there is more than a 50 % chance that it doesn't work out? Yes. Well, that's a shocking odds.

1:43:02That's terrible odds. I think there's more than 50%. So you agree with me then? I think that - You want a 90 % chance - Well, you've ridden it off to 100 % chance of failure, right? I know, but that's pretty hard. I thought it'd be more like 10%. You think I think there's a 90 % chance this strategy is going to work? Yes. Come on. Really? That's what you think? You're in Cam Schwab then. No. You can't bring yourself to agree with me. I think you totally agree with me. You can't bring yourself to say it. The difference between us is you go straight to the extreme. And you've got no sympathy for why these things are happening.

1:43:30Because what you say is it's destroying shareholder value. Because it's so obviously wrong. And what I'm saying is if you're a shareholder today in zero and you don't want value destroyed and you're worried that this is the wrong decision, sell now and your value won't be destroyed, right? And so it's liquid. You can get in and out. And so what I'm telling you is that now, this is my summary of this. There's a chunk of investors that believe in this story so strongly who might be right. We get the investors you deserve, like this Catherine Alvarez person. Well, but like platinum is now L1. And so like - No, she's not platinum.

1:44:00She's some other. No, but you said one of them was platinum. No, platypus. Oh, platypus. Yeah, not platinum. All right. So I'll be surprised if like Mark and Rafi hold on to a zero investment. I'm pretty sure Mark and Rafi had investments. But the thing is, they might be right, okay? They might be. And so they believe in this strongly enough to say, leave her alone is basically what they're saying. Well, they obviously hunted around. They obviously gone to the board and said, find me, as in for the article, find me a shareholder who thinks your strategy is right. They found this tiny person with a vote.

1:44:29Maybe, but you say that. But they might have been. They might have been the ones that came in. The thing is this. I've said this time and time again. The way you make lots of money is believe something that nobody else believes. bet on it hard, and be right. Fearful when others are greedy, and others are fearful. This is the most unbuffered investment in the world. Well, they've ticked box one, believe something that others don't believe. Although the share price would imply that a lot of people still do believe. It has dropped a bit. I know, but it's still high, right? But share price hasn't moved in five years, which is a growth stock in inverted commas is a disaster.

1:45:02Think about the Nasdaq starting that time. Yeah, I agree. So believe something others don't believe, tick. Bet on it heavily. Well, they have. They've bought shares. And they just have to do the hardest part, which is be right. And so maybe they will be, maybe they won't be. But I get why the company is doing this. And it makes sense to me, even though I think it's a high-risk strategy. I don't disagree with it in their circumstance. I just wouldn't have agreed to be chairman of Xero. If you were chairman. I wouldn't. I would resign. I wouldn't want to be chairman of Xero. But if I said you have to be chairman, that big knife on the table to your head.

1:45:35Yeah, thank you. Throat to my throat. What would you do? if I would say you have to be deputy chairman. I don't think I'm the chairman role. I'm the deputy role. What would I do? I mean, so what are my parameters? Like if you said to me, you have to be chairman for the next six years, then I would not pursue this strategy. What would you do? I would say, let's figure out how we can maximize profitability in our core markets in this business like Australia, whilst figuring out which are our best growth markets to expand. And UK is going to expand. And I haven't really thought deeply enough on what I think the core – when I say powers, I don't want to say powers because that's like Hamilton Helmer, but let's say the core assets of this business.

1:46:17I haven't thought deeply enough about – It's got good powers. It's got huge switching costs. It's got solid brand. When it's got a customer. It's got a huge good when it's got a customer. That's every big switching cost. I know, but what's its – What's its cack? It's acquisition power, which is not really powers. What's brand? What's its brand like is what you're saying. Yeah, so it's brand in the U.S.'s week. Yeah, but brand in the U.K. is getting better. Yeah. They should hire that sage guy. He sounds cheap. He's$9 million a year. Well, so maybe I would think about something like that, right?

1:46:42But if you said to me you have to be chairman for the next three years and all you're going to get paid in is options above the value of the current share price. But that's not all she gets. She gets all these – oh, you mean you as chairman, sorry. You mean as chairman. You're only going to get paid in options above the current share price. Then obviously – I'm offering you$500 ,000 a year. My calculator – well, come on. And first class flight. And one first class flight for a sport meeting every month in San Fran. Thank you. But like, who flies first class to San Fran? Well, they're like, sorry.

1:47:13Yeah. Oh, you know who would fly? You know who would have first class? Or they've got Polaris? I don't know. I don't think they've got first class. But like, basically. Hence why I haven't flown them in four years. Basically. United, when I started flying United not that long ago for Catapult, and I think I paid for business class because it was the cheapest. Yeah. They actually had like two middle seats. It was like two, four, two. That's why they had the first flight. Yeah, two, four, two. That was their business class. 242? Yep. Yep. 242? Yes, that's right. That can't be right. I'm telling you, 2012, that's what they had.

1:47:42Oh, okay. But the Polaris is good. It's the 1-2. Yeah, I get it. So obviously, if that was the way you were paying me, my decision-making would be different. Right? And I think that's what's going on here. Not that I think that David 30 has only got three years or whatever. But like, you know, he's under pressure. He doesn't want to see the share price halve. And if it just continues its Australian growth with a bit of UK growth, it's going to halve. That's my view. Are you not better to have it halved now and build from a stronger base and have it halved in two years' time and be completely stuffed?

1:48:12No, you're better off to have it halved with the previous chairman. Which is fundamentally why I said to you, I wouldn't take any role associated with this company right now because I think it's priced, not even for perfection, it's priced for an outcome that I don't think they're likely to deliver. You could hire your guy out. I'd recruit your guy out of Catapult, the gun CEO you've got. pay him whatever you're paying him, suddenly earnings are up 10 % because that's the difference between her paying his pay. Like an automatic arbitrage going in. And you're getting a better CEO. I don't think investors are focused on earnings with this business, do you?

1:48:47Like you can't justify this month. What are they focused on? Because it's not growing that much. The promise of growth. But it's only growing 20%. The promise of growth in the US. That's what they're focused on. But you've got a pretty brave hyphen stupid investor to be betting on zero's growth in the US against Intuit when you've never been able to get a... Like investors I've ever spoken to about us because we've had everything that's really hard to grow in the US. You guys have. That's rare. And we've done pretty well in the UK, a bit like these guys. But nobody gives us any credit for US potential.

1:49:15And we're probably a better business in the US than these guys. Well, you don't want to say you'd be a dumb investor. What you want to say is you better be a very high conviction investor to be making this bet. And you better think either I understand the risk of the downside or I really understand some upside that Adam and Adir do not understand. Which, by the way, I just want to say it's possible because I'm not very familiar with this business. We talked about it. Memphis is a business. I know, but like - It's half-tax profit to like 200 million. I know, but like - And it's not growing that fast.

1:49:42I don't use its products because I'm not doing any of that stuff. We do actually. We're shifting off it. But do you? We still - We do. You know what? You're a better case study because you're across all the detail of everything. Whereas for me, I wouldn't know what features this has and I don't really care. It's great for small - The product's great. If you're a small business, it's basically the only product. I know it might be as well, but it's an amazing product. But it's a$5 to$6 billion business. It's a 30 times PE multiple, maybe 40, maybe being generous, go to$8 billion. And if you're giving it a higher multiple, if you're giving it 40 times, it's growing at, what, 20%.

1:50:12So you can probably forgive 40 times, so$8 billion. In what universe is this a$26 billion stock paying its CEO $30 to$40 million a year? It's just crazy. When someone like Liam, my son who's in Israel, is coding make.com for this company, he's integrating Xero. That's what he's integrating in. and he's got views on every piece of software and how good it is and how easy it is to integrate. What did he say about Xero? He hasn't had an issue with Xero. Yeah, no, it's a good product. For a small business, it's a great product and it's a great business. I just don't think it's a$26 billion business with that CEO.

1:50:51His main issue is with Stripe, by the way. Oh, really? I'm surprised at that. He's like the API is a bit of a nightmare. Yeah, I'm shocked at that. On that note, we better run because we're way over time. Thank you, Joel. big day of editing coming up. We will see everybody on Saturday for our Ask Us Anything episode as always. Thank you, I dear. Unless it's three minutes till you can start eating the apple, right? Oh, sure. I've actually got a call. I've got a call at 12.30 so I have to eat the apple after the call. I'll break the past. The pear, not apple. Whatever it is. Okay. Thank you, everyone.

1:51:17See you on Saturday.