Costco Deepdive, Health Insurance Pricing, Iran on the Edge of Freedom and Albo's Royal Commission Dark Arts

21:54It's open your eyes, you close your eyes, you open them again, it's over, right? I love how he said we did extensive consultation in choosing her. Two days before he refused to have a Royal Commission. So either he was lying there or he was lying there. So he's lying in one point. He also said it was the fastest Royal Commission ever. I think everyone saw through that. Firstly, it isn't the fastest Royal Commission ever. And secondly, I think everyone knows he didn't want to do it. Like, you know, like his spin didn't work. I will say this. So there should be more commissioners. There shouldn't be one commissioner.

22:25Well, had it not been this far left campaigning commissioner, I'm fine with one. Well, that's one of the advantages of having multiple is that you get different people. There's very rarely multiple. I'm going to say someone that I think should have been a commissioner and you're going to punch me in the face. We are quite a distance away from each other. So your reach doesn't quite get to here. But I am kind of terrified to raise this person. So it's someone who has done very terrible things. I oppose almost everything that they have stood for. You're not going to say Robert Richter, are you? No, no.

23:02but they're very embedded in the Labor Party and loved by the Labor Party and have consistently spoken publicly about anti-Semitism even when the whole Labor Party has largely been against them and this will give away the rest of it and I would still consider them despite the fact that they are probably a bit too buddy-buddy with Xi Jinping. Who am I talking about? Dan Andrews? I would think about putting him on because he's been consistently standing against anti-Semitism. He's loved by the Labor Party. He would give credibility to the Royal Commission. You reckon? Yep, and even – He was a friend of the Jews, except when he was a massive enemy of the Jews during COVID.

23:44Remember when he held those Jews out to dry and made a fool out of them? Well, that was more that Weimar dude made a few comments, right, that he later recanted about religious Jews spreading COVID or something. No, it was the famous engagement party, and he made that whole song and dance over it. That's true. I wouldn't worry about that. I think this is a guy who's consistently - He's clearly not qualified. Well, we don't need a lawyer to be a commissioner. I've never known a lawyer. In fact, the recommended commissioners that were being bandied about was a senior judge, someone from the security services, like former - Like a Dennis Richardson type.

24:20Yeah, that kind of person, and someone from the Jewish community. I've never known a royal commission to not have a legally appointed person. I think if someone like that was sitting on that royal commission - Essentially, it's like a court. Well, it's not a court. It's like a court. It's got court-like powers. It's like a star chamber. Yeah, it's like a super powerful court. It's got no laws. There's no laws of evidence. There's no right to defence. Yeah. Like, it is a tough place. I don't think you can have a non-legal person. Forgetting the Dan Andrews thing. Well, I'm not sure if I'm sophisticated enough to know whether there have been non-legal people.

24:51I don't recall ever not being a judge. I could be wrong. I'm sure a listener will correct me on this. But also, a lot of it is, look, you might be right. It might be disastrous, but you can't have everything. And this would have been a very unexpected win three weeks ago. So we should just take the win. And I think that it has largely happened because more than 50 % of the population in every poll is supportive of a royal commission. And given that there's 0.3 % of the population that's Jewish, it's not Jews, right? So I think that's what flipped it. Let's not forget there were 15 people killed in Bondi, two of which weren't Jews.

25:32Yes. So, like, it wasn't just Jews. No, I don't think the population feels like this is a Jewish issue. Every person who goes to Bondi is impacted by this. So it's, like, it turned into a community issue. I mean, do you feel, I mean, you guys are not in the Jewish community. Like, do you feel like Bondi is an Australian issue or it was probably a Jewish community issue? Oh, that's a hard one to answer. I feel like it, I mean, it is an Australia issue, but I think it's spurred by a Jewish hatred or disdain that I've been sensing in the country, I think, for a while. Yeah, definitely. I think that's the backdrop.

26:11By the way, the ISIS maniacs, they're quite keen on killing you as well. They're more keen on killing us. They might be most keen on killing other Muslims, to be honest, but they're not a fan of anyone who does not share their particular very fringe, insane version of Islam. I think people rallied towards this because it was on Bondi Beach and everybody could imagine themselves and their kids being on Bondi Beach and getting shot up by some maniac, Islamist, fundamentalist ISIS person and it brought it very close to home for lots and lots of people. I think when you saw the 10-year-old girl, Matilda, who died, and any of us who have kids, I've got kids 9 and 11, so in that exact age you've got kids a little bit older.

26:58I think anyone with a 10-year-old or even a kid of any sort could very much empathise with the heartbreak of losing a child of that age. And clearly the government shot at that young child. So they went out of their way to kill defenceless children, which is pretty important. Speaking of which, have you been following the Adelaide Writers' Festival debacle? I sure have. I sure have. I think that is completely insane. Like you have someone here. This is a great, great example of this view that I have, which is humanity versus identity. And this Randa Abdel Fattah, who's an academic from, I think, New South Wales, who is of Palestinian origin, who has been extremely aggressive with her comments against, well, she calls them Zionists, but really the comments against them.

27:47Yeah, so she was, let's say, cancelled. She was cancelled from the Adelaide Writers Festival, not because of identity. She was cancelled because of humanity. It wasn't because she's a Palestinian. It's because finally after Bondi, people have said, hang on a second, maybe there are some limits to free speech and certain things might be hate speech. For example, calling for Israel to be destroyed, that might be hate speech. And saying Zionists should have no cultural safety or whatever she said, given that... Well, she said a lot of things. That's just the different iceberg. That includes, not only does that include, I don't know, 80 % plus of all Jews.

28:23And by the way, all these terrible, terrible people that said they wouldn't platform Zionists, that's also 80 plus percent of Jews. But it's also if anyone who believes. It's probably 98%. I'm trying to be conservative, right? But also it's anyone who believes that there should be a two-state solution. Which you presume is all of the reasonable people. Yeah. And so that are not Jews. Yeah. And so that is who she's denigrating. Yeah. Plus a whole lot of other stuff that she's said and done. Nobody cares what she is. I'll be very happy to have Palestinians at the Adelaide Writers' Festival. What the hell's identity got to do with anything?

28:59Well, the most – so there's been – people are saying the Adelaide Writers' Festival has been destroyed. I've got a few things to say about this. Destroyed? What, after the cancellations last year? 90 people – 90 writers have withdrawn. Some good writers. Trent Dalton. I'm shocked that someone like Trent Dalton would – I don't think they understand what they're doing. I think these people are a disgrace for a start. First, A, why on earth was she invited in the first place? You know, she was invited because the arts has been a safe haven for the anti-Semite. It's been an advocacy network. It's been a paradise for the anti-Semite.

29:30That's right. It's been an advocacy network for the anti-Semite. Yeah. And there has been a conscious decision to run an anti-Israel, anti-Semitic narrative across a lot of - Well, they call it anti-Zionists. They weren't outwardly claiming they're anti-Semitic, but they clearly are. if we um if we have an ounce of intelligence we can say yeah the nature of the criticism about so-called zionists is criticism of jews yeah and so because the criticism of people don't know what they're saying when they say zionist they don't really know what zionist means they're saying jews right yeah like they're not are they talking about the arab israelis that support a jewish homeland and being part of i don't think they're talking about them are they so so that is why she was invited yeah the question is how did she get cancelled because apparently louise adler did not know that she was being cancelled and louise adler runs that show yeah melanowskis the premier of south australia came out and basically gave some great reasons why it was inappropriate for her to attend ultimately do you know what the language is they use for her cancellation no i think they said i've read it she was it was culturally insensitive yeah and what i love about that is that all theocratic revolutions, because this far-left wokeism is a form of theocracy, all theocratic revolutions, they eventually turn on each other using the same language.

30:52Like once you've rigged up that guillotine and started chopping off heads, don't be shocked when your neck is on there next. And that is basically what's happened to her. She's been executed with her own language. She tried to get Thomas Friedman cancelled last year. I know. And Thomas Friedman hates that, you know. I don't want to say far-left. A very clearly... left-leaning American Jew. Highly critical of the Israeli government. Highly critical of Israel. Yeah. The biggest disgrace of all is of the 90 people who pulled out, some of them I think are good writers, some of them are nobodies. Some of them pulled out knowing what they were saying.

31:25Like there was one woman, I forget her name. I actually have never heard of her before. I think she won an award. She's young. She pulled out saying, from the river to the sea, Gaza, Palestine will be free. I mean, I don't think she knows what she's saying in the sense that she doesn't know what those words mean. Yeah. But she knows they're not very nice to Jews. so I think there's that group of people and then there's another group of people that doesn't understand what Randa Abdel Fader has said and doesn't understand that by pulling out they are essentially advocating that this type of language should be appropriate in a Western liberal democracy.

31:55The most appalling thing she did and she's done a lot of appalling things is the day after October 7th so before that anything happened. Yes this is a great point she put on Twitter a poster of a parachutist with a Garzan flag. I think it's called a Paraglider. Paraglider, whatever it was. Effectively, like effectively. The form of transport used to land at the Nova Festival and kill three to 400 innocent Israelis. 1 ,200 people. 1 ,200 people died. Those particular paragliders were especially bad because they're the things that landed at the Nova Festival. Yeah, so they killed innocent children.

32:30They raped women. So this is what, she supports the rape of women. Well, I think she may be. There's a lot of, I don't want to put this on her, but I think I read, and if it's not her, it definitely is pervasive in this world, they deny the rape of women. Oh, she probably does. But there's clear evidence that there's mass rape, mass murder of young children, and this is what she supports. So if you pull out of the Writers' Festival on the basis of her being withdrawn, then you effectively support this stuff. So every person who pulled out needs to know what they're supporting. They're supporting rape, they're supporting murder.

33:01This is not of IDF, but whatever you would think about the IDF, and obviously we don't like people saying that. This is innocent people being murdered. She's lording on Twitter and this is their support. So I think the tide may be turning, not just because of this, but when I went on Reddit and had a look at what people were saying about this and also what they were saying about Nicholas Rees, the Lord Mayor of Melbourne, saying don't go out on your Palestinian protests. I don't call it Palestinian, Hamas protests. Good on him for saying that. Yeah, go and help the people fighting bushfires. I looked on Reddit at the response to that and Reddit usually is quite left-leaning to say the least.

33:41And people were largely supportive of it and pillorying the protesters. I think the tide is turning after Bondi. I really do. I hope it stays turned. I don't know how much it's going to turn, but there's definitely a change. And I don't know if you saw those protesters, but they're not even ashamed anymore about pretending that they're pro-Palestinian. they basically one of them was standing up in Melbourne and just yelling and saying we totally support Hamas and they're allowed to do whatever they want by any means and their ideology will never die I mean that is what's going on I think the days of that might be coming to an end Can I talk about this on the festival before we move on to the next point which is related but this is a I used to have sponsors sponsors now are all pulled out why is this taxpayer funded like we take money from taxpayers and we can choose what we want to do and we can give it to hospitals and give it to the schools we give it to these these far left woke fools.

34:34That is what we're doing with taxpayer money. Mel and Asker should just shut this whole thing and then they can boycott all they want because they can boycott nothing because these things can't be self-funding. No one's going to pay for this garbage. So I'm supportive of like some funding for writers festivals. Zero funding. For writers festivals. I'm a writer. I'm not getting funded. I wrote a book. Nobody funded my festival. You want to get invited? You should go. I don't want to go to these disgusting events. You should say you want to be a part of the Adelaide Writers Festival. I think they'll be very good because you've got a book.

35:04We're my keffer. You've got a book. Yeah. You can go and say, I've written this book. There's a few spots free now. I'll fill in. Well, can you imagine what good people I could fill those spots with now? So some of the people that have quit. People who don't support rape and murder? I think a lot of the people that have quit that will very much regret that decision down the line. I don't think they understood what they've just done. I'm shocked at someone like Trent Dalton, like a big writer. What is he doing? I understand why, how he could get caught up in the lies, in the lying narrative of what's actually going on here.

35:37But I think, I would hope that he would regret this decision down the line. The most fascinating part of this, the article I most want to read, probably in the Australian, is how the hell did this happen? Like who did this? Because she's running that festival. I suspect she would have filled the whole festival with people like this if she could have. and so someone she came out and said it wasn't me yeah and so someone's done this and managed to make it happen yeah and like has it come out of the premier's office it's possible it came out of the premier's office yeah well it gets funded by taxpayers so it's not funded by the people who go there because no one wants to pay for this stuff since we're talking about divisive people who pretend not to be divisive there was a particular cricketer that retired this week that i thought had the potential to be one of the unifying forces in Australia, and that is Khawaja.

36:26You see he's retired. Yep. Didn't cover himself in glory with his last match. Yeah. And when I saw – so Khawaja is a special person in Australian cricket because he's Pakistani born. And I think he continues to emphasise the fact that Australian selectors are trying to pick the best 11 people, irrespective of ethnic background, where they come from, etc. I suspect that in 20 years most of the Australian cricket team might be of Indian heritage would be my guess, given where cricket is going and where Indian immigration is going. And so when I looked at Kauai, I thought, this is a person who can prove better than anyone that Australia is a multicultural society where if you embrace the culture, like, you know, I mean, he came from Pakistan where there is cricket, but like he's embraced the Australian culture, he's become part of the Australian cricket team.

37:17what a great story unfortunately that was not the story that played out not only did he try to wear palestinian flags or whatever or palestinian riding on his cricket shoes and had to be prevented from doing it after october 7 but his farewell speech that he gave or an interview to the media was basically um a woe is me um like assessment of the fact that he was discriminated against because he's a different religion and a different colour. And when commentators criticised his preparation, it had racial undertones. Now, I don't know about what privilege exactly encompasses, but I'm pretty sure that you can't say that you've been badly treated and discriminated against when 11 people in the whole of Australia get chosen to be in the Australian cricket team and they pick you as one of the 11.

38:09That feels like, you know, it's a pretty reasonable treatment to me. And so I found him unbelievably disappointing. I've actually heard as a human being he's a good human being. Yeah. We have a liberty to do with the luxury escapes. And he's always – He's also quiet. No, I was thinking of Finnish. He was one of my favourite players. I've been disappointed in the last few months for him because I'm a massive fan of his story. I don't understand why it has to be about identity. Like this is a guy that has been embraced by Aussies. As Aussie as it comes. Yeah. He's Muslim. He's got brown skin. He doesn't drink alcohol.

38:44He doesn't pretend to be something he's not. And Australia has embraced him. And why couldn't he talk about how great that is and what a fantastic country this is for doing that rather than just focusing on identity, identity, identity. And so, yeah, I think it's really upsetting. It's not Craig Foster level upsetting, but it is disappointing to me. He certainly was one of my favourite players, if not my favourite player. and I don't think the last month has been great for Uzi but ultimately let's look at his career. It was a great career and maybe the last month wasn't how he wanted it to end.

39:18Yeah. Let's move on to it. LBW off a full toss. Yeah. Sort of great last innings. Not the greatest last couple. Well, I'll say it's a positive note but there's obviously some tragedy here but we've seen the protests in Iran. They started over a falling currency and sawing prices and the inflation's out of control there and it's suddenly transformed to a tax on legitimacy of theocratic regime itself. Protesters have been shouting anti-regime slogans in the streets of Tehran from really the last week or so. Videos have showed burnt cars and mosques. A 19-year-old activist said last Friday, we are marching in thousands tonight.

39:53I saw children on the shoulders of our parents, a grandmother shouting death to Khomeini while she's decked out in a chandor black robe. Do you not realise how significant this is? I should say that there's not all good news. We've seen at least 538 people killed. I said it's real into the thousands. This is 538 people that we know about. According to the Human Rights News Agency, including more than 500 protests, the group reported that 16 ,000 people had been arrested by Iranian authorities. Of course, we've seen this four or five times in the last 10 years. 2019, at least a couple thousand people died under similar sort of riots.

40:28We could be witnessing the end of one of the most brutal, disgusting regimes of our lifetime idea will it happen i'm more skeptical like so i think there's a difference between the ayatollah and the theocracy maybe is how i would describe it my concern is so the plan of this ayatollah who's 80 or something 87 or something his plan is the plan of all dictators ultimately which is to turn into a king and to hand it down to his son and it's like what Mubarak's plan was in Egypt and I think it's one of the reasons that the army didn't save him because the army is all in support of military dictatorships.

41:07That's a great deal for the army but when it turns into a monarchy, that's much worse for the army because not all dictatorships are the same flavour and so I think the chances of Kamei and his son becoming the next Atolla are pretty slim at this point in time. He must be pretty old as well, I would have thought. No, he's like in his 50s, I think. And so I think it's not looking great for him. But then you've got the Revolutionary Guard. Yeah. Is that what they're called? It's the Iraq one. Is that the Republican Guard? Yeah. Then you've got the Republican Guard and IRGC, which is like the international part of it.

41:47And they're very powerful and very well organised and they control a huge part of Iran. And they've got their own secret police and their own apparatus and their own political movement, everything. And so my fear is that they're too powerful to be overthrown and that what is actually going to happen is when they see that the Ayatollah is unsavable, like Assad in Syria, what the Republican Guard will do is they will say, okay, we agree with you. Like he's got to go. It's terrible. Inflation, unemployment, no water. like let us take over power we will make everything safe for everyone and we will get this back on track now that will be no real change at all because ultimately they are the apparatus of oppression and so that's my concern that's the question is that's my do they get overthrown how are you going to get rid of the republican there's what 10 20 000 republican guard i don't know how many there are there's more there's 60 million plus people in iran like there's a lot more non-republican guard than republican they've got a lot of weapons and i think they're they're zealots and they're willing to do anything to hold on to power and um it's hard for me to see at this moment that they will be defeated the question is whether they do a quick slide of hand and they pretend to be on the side of the protesters yeah and they kind of pretend to flip but they're not flipping they're going to retain power generally the people that start revolutions are not the people that end up in power at the end of revolutions you have to admire the bravery of many are led by women really in Iran.

43:25It's just inspirational to say this is what real bravery is. This is not the Rand Abdul-Fataz of this world. This is actual bravery. And this is people who – where are the people changing the streets? Well, I haven't heard her making any comment about Iran. Thousands of Muslims being killed by zealots in Iran and no one's protesting in Australia for that, surprisingly. Well, I suspect a lot of Iranian money found its way into these protests in Australia would be my guess. Not much more coming, I would have thought. Yeah, it's a trickier now, but I suspect that that's one of – If the Royal Commission really digs deep, I suspect they'll find foreign funding in a lot of these protests.

43:56We know that the Iranian was behind a lot of the car bombings, the synagogue bombings. My guess is, my suspicion is, it'll be terrorist elements will have infiltrated those protests in a pretty material way, would be my guess. And, yeah, we can just hope that, like, you know, Iran flips and it becomes democratic. You know, they're calling for the son of the king, former king, the Shah, to come back. I mean, the Shah was not great news for the Iranian people either, by the way. Better than they have it now. They had a democracy briefly in the 50s. Their prime minister was a guy called Mossadegh.

44:32He was effectively overthrown by the CIA and the English for nationalizing oil. It was a Venezuela's crime as well, amongst many other crimes, right? But that was one of his crimes, right? I think Exxon is hesitant to go back into Venezuela because they're like, well, we've been nationalized twice. We're not looking for the hat trick, right? Give us some guarantees. I wish everyone still operates there, but anyway. Yeah, but I think you don't make governments happy when you nationalize their oil assets and their oil companies. But I don't know. That's real sovereign risk. That's real sovereign risk.

45:07So, I mean, I agree with you about Iran, and I think that's the biggest news story of the year at the moment. barely reported. Yeah. A little reporting here and there. Doesn't suit the narrative. Barely reported. Unless there's Jews killing people, it's not relevant to the mainstream media. The mainstream media continues to disgrace itself, by the way. So you take out the Australian and the news, even the Australian probably hasn't given it. I think the Finn and the Australian were consistently good. I think on this topic, the Finn's been terrible. Because it hasn't really covered. Yeah, of course it hasn't, because it doesn't suit the left wing narrative.

45:37The Finn is not left wing. No, but it's not. Certainly it's not. I think it's centrist, the Finn. That's how I see it. I think it's been good. The editorials have been good and honest. I think it's business coverage is excellent. The editorials have been pro-Western liberal democracy. Finally, but it wasn't for a long time. No, I don't agree with that. We have a disagreement on that. But certainly the nine papers, the fair fact, the court, the SMH and the age, they continue to cover themselves. They just ran a cartoon. Forget the cartoon. By a woman with a history of not very nice cartoons about Israelis.

46:07Forget the cartoon because nobody – I think people who made a fuss of that, Streisand, because nobody would have seen it. No, that's true as well. That was stupid. It's the constant editorialising in favour. So you mean the Age and the Sydney Morning Herald. They have been advocating pretty hard for a royal commission. Grudgingly. I'm not sure about this. But your issue is their behaviour. Generally. I'm talking about two, three years of behaviour. Before the Bondi Massacre. I agree with you. From October 7 to the Bondi Massacre, they were deeply problematic. I agree with you about that entirely.

46:37We'll go to a super quick break. Back in a few moments. Back with some really great business stuff soon.

46:51and we're back and idea you've got some i do business stuff for us we don't set up with the ambition of making this a political podcast but the the world at the moment geopolitically it's actually crazy we're interlinks business and politics it certainly does but it's impossible not to talk about this stuff at the moment especially in australia because like the australian narrative today is a narrative where everything is really revolving around the social problems that we're suffering and business is down the line from that and whether it's the consequences of lockdowns affecting cities or work from home consequences or like social discohesion it is all flowing into business and operating in the country.

47:29Tell me about this industry. Tell me which industry I'm referring to here. More than half of the Australian population is connected to this industry. Is it a customer? A customer. COVID was good for this industry and it's been even better post-COVID. It was an industry in decline that was bounced back by COVID and has continued the upward trajectory, unlike retail, which had kind of dipped down in the post-COVID period. This industry continued to strengthen post-COVID. They have managed to double their prices over about 20 years. So that's a faster rate than inflation, obviously. And they are subject to probably one of the harshest levels of government regulation of any industry, despite there being at least 25 competitors fighting each other.

48:26I was going to say insurance. Yes, it is a kind of insurance. What insurance is it? Car insurance? Nope. Car insurance is not regulated. Medical insurance? Yes, private health insurance. Private health insurance has to get government permission on the maximum price rise they can deliver each year. And this is an industry that I think 15 million people have got some form of private health insurance in Australia. 70 % of all elective surgery is paid for by health insurance. That's interesting, isn't it? Because 30 % of people are paying for elective surgery out of their own pockets. Really? Yeah, which is an unusual statistic.

49:00It often makes financial sense, by the way. to not, I spent a fortune on private health insurance and get virtually zero. I was with my legs covered by it. But that was, and I had to call, I actually speak to Boop, but to say, is my leg covered? But it was like a half an hour ridiculous conversation. It should have taken 30 seconds, intently. Super frustrating. Well, and so private health insurance was on a very like consistent decline. Yeah, people could call it death of private health insurance. Yeah, so I think when you look at the number of people that have hospital cover, because you know, a lot of young people buy extras cover, not hospitals cover.

49:29And it's like milk it for whatever it's worth. But so the number of people with hospital cover is 48 % or something like that. But it was down to below 44 % pre-COVID. It looked like the trajectory of a plane that had lost both of its engines and maybe its wings. And so it rebounded in COVID. And now they had to provide all of these rebates after COVID because nobody had surgery during COVID because it was banned. And we're now at what the private health insurers say is an inflection point. and I'll just explain a little bit about how private health insurance works in Australia and then why it's at an inflection point.

50:05So every other form of insurance rates you as an individual and says what is your level of risk and what level of premium do we need to charge you to offset that risk at a population customer level. I could drive if you're under 21. Rating one, rating two, under 21, exactly. Driving one. Everyone tries to rate you. Yep. Your house, like do we want to give you this insurance, that insurance? What locks do you have? Yeah, is your car in a garage? What suburb do you live in? These are all – If you live in Melbourne, you're going to pay double the premium. Exactly. These are all characteristics that at the individual level are not necessarily predictive of anything, but at the population level you can say that people that have their cars in a wealthier suburb in a lock-up garage that are in Sydney, they have a lower risk of having their car stolen.

50:54If you've got to park in Melbourne, good luck. It's going to be – you can't insure it. Uninsurable. So private health insurance cannot risk rate. By law, they cannot risk rate. That's shocking. I can't. If you are a smoker, you do not pay a higher premium. If you are, if you've, nothing, there's no higher premium. I get stolen from every day as a result of this, thanks to this ridiculous. Well, we'll get to this. You don't have to take out private health insurance. You'll just get hit with a big stick if you don't. So we'll come to that. The carrot and the stick is the greatest incentive structure.

51:25so the way that private health insurance works is you effectively pay a premium based on your age and so they're risk rating you at an age level yeah and so someone who is 40 who um and and the only risk rating that exists is self-assessed if you want to take pregnancy cover it's more expensive yeah and so private health insurance would consider pregnancy a risk um because they'd have to pay more money if you get pregnant. And so a 40-year-old who smokes a pack a day, drinks a slab a day, pays the same premium. Doesn't exercise. Doesn't exercise, pays the same premium. Overweight, IBM, whatever.

52:06A super fit, healthy, abstained from everything 40-year-old, provided they took their insurance at the same point. Because if you get to 30 and you didn't have insurance consistently, you get a levy, lifetime health cover or something thrown on top of you. That was a Howard government thing, wasn't it? Yes. in case you think, well, that's not fair. I'm young and I'm paying these premiums. You pay less than an older person. An older person still pays more. The premium goes up with time. It's still grossly unfair. Young people subsidise older people in the system. That is a fact. And every other system in Australia.

52:35And so you might say, I'm 35, and even though I'm a high-income earner, I don't want to take out private health insurance and subsidise older people. The tax man will say, that's fine. We're just going to charge you$1 ,500 a year for not having private health insurance. It's not tax, it's a levy. It's a theft to old people. Yeah, it's still more for young people to give to old people. We've always never sold enough. You can't afford a house. We'll do another$1 ,500 to give some old bloke over there. That's what essentially happens. So what we have to say is what happens if we don't do that? But that levy that you get charged, which is up to$1 ,500, that's on top of the Medicare levy, which isn't a tax either apparently.

53:12It's just a levy. You know why the Medicare levy is not a levy? There's a reason that's not called a levy. because it would take the tax rate over 50 % if it was tax. But by being a levy, we can say in Australia, the tax rate is less than 50 % at the top level. Yeah, because this money just gets given to Randall Abdul-Futara at the Writers' Festival. I'm not sure your Medicare levy goes to her. It's all the same pot. Well, that's an interesting point. So I believe that the Medicare levy does not need to be spent on health. It goes into general revenue like everything else. Even if it didn't, money's cash.

53:45You have to pay for the health somewhere else. That's right. So it doesn't actually make a difference. And so this is how the private health system works. And the reason it works like that is because the government can't afford to pay for health. That's the bottom line. Yeah. The taxpayer is not prepared to just stump up out of their own pocket as part of general revenue. A large enough percentage of income to cover the health needs. And definitely, you know, older people, once you pass probably 70, you start getting very expensive to the health system. the last 18 months of your life you use almost all of your health spend for your entire lifetime a broken hip can cost hundreds of thousands of dollars in hospital stays that's always the if you want to like the top what are the top five most expensive um health insurance claims every year generally broken hips that result in when i was gonna make that in canada or everybody else was a broken hip yeah so that's very common um and so the problem that we've got is that before COVID the health insurance private health insurance was nose diving and it was and when we say private health insurance is facing an existential threat pre-COVID that means the health system is facing an existential threat because it massively subsidizes the public health system and um and if you can still use the public health system if you have private insurance you can try and hide it from them so you don't pay the excess yeah but they want to know because if you go to a public hospital and you go in as a private patient they get more money what you might get in return is a private room maybe and you can choose your own doctors yeah but it's much better for a hospital to make sure they trigger your private health insurance yeah lots of people try to hide it they don't want to pay the excess yeah and so at the moment we had there was a big disaster in australia where the second largest owner of private hospitals health scope went under went broke brookfield yep the canadians jacked them up with heaps of debt with debt didn't work didn't work yeah and so if you go and load up i don't know like a regular business we've had a time in australia by the way brookfield started well and then they bought multiplex and then yeah that's true and so if you go and load up multiplex with heaps of debt and it goes broke that's a headache and you lose a builder but um like the market will take care of it and fix the problem but if you don't run 37 or 39 private hospitals into administration and nobody can run them then that is a much bigger problem for the country and that is where the country is at the moment and people are trying to figure out who's going to buy these hospitals how are they going to run there was talk about nationalizing the hospitals um and so the way that private health can you explain how these hospitals who charge a fortune yeah how do these hospitals go out of business they spend more money than they make i mean yeah that's how yeah because there are all sorts of Other private hospitals, like I think Calvary, is it Calvary?

56:40Calvary is a Catholic system. Pat O'Sullivan, my ex-chairman, who's probably the best chairman in the country, chairman of car sales, he's been chair of that for a long time. We're sitting on the board. And not-for-profit business. And not-for-profit runs it. So that's been an incredible story. So how do these guys do so well and these guys do so badly doing the same thing? Well, I think the answer is they might do the same at the operating level and then they have to fund all of these interest payments and debt. I think that's the answer to this question. So the debt gets wiped away and easily to buy.

57:07It hasn't been that easy. So this is why it's not easy. So you're running a private hospital and I come in as a private patient. Yeah. Now you need to get paid. Who's paying you? A private insurer. Okay, that's obvious. How much are they paying you? That's not so obvious. Because generally, private health insurers, they don't really want to pay. Of course they don't. No one wants to pay if they're an insurer. At the very least, they want to have more control over how much they pay. Doctors, they want to charge as much as they can. That's like everyone. Private hospitals, they want to charge as much as they can.

57:47That's a business. I mean, clearly this was a business. like it's a private equity owned and so you have this tension that exists with the patient in the middle all the patient wants is the best treatment yeah they also think i've paid private health insurance i should get the best treatment and so you have this fundamental tension between um doctors the hospital and the insurer and the way that that tension gets resolved in the u.s is that either they're called HMOs in the US. Either the HMO owns the hospital and the system. The US is a disaster as well. Or they make deals directly with the hospitals on what will be covered and how much they'll pay.

58:27And I think the US spends on average eight to ten times, eight to ten dollars on the same service in Australia for each one dollar in Australia and a worse quality of healthcare. Yeah. Yeah, much more barfix and emergency or that stuff. And so we don't want to go down that road because that's a disaster and lots of people have no coverage for health. Well, now with Obamacare, I think most people have some... Well, there's still a huge gap. So the thing in the US is it's good to be rich or very poor. Then you'll be covered. But if you're a bit poor or in the middle, then you'll have problems, right?

58:59And usually private health insurance is covered as part of your employer payments. There's a great background to that as to why that happens. It was happening after the war. There was this whole thing. It's actually a shocking situation. But it started off as a reasonable payment for the employer. But it shouldn't be. Employers shouldn't pay. That's a huge issue there. Because if you're self-employed or if you're between jobs, you're not insured. It's just ridiculous. And the employer could be paying tens of thousands of dollars a year. This is not a small expense. And so in Australia, there has been a move towards US-style actions.

59:36I don't want to say structure, but actions, which is private health insurance insurers buying dental clinics, even hospitals, and at the very least making deals with hospitals. And the reason people don't like that is people say, we don't want health insurers who are focused on making money and hospitals who are focused on making money being the arbiters of what treatment you should and shouldn't be able to have. And so this is where Australia finds itself now with 30-something hospitals in administration, which is a pretty decent chunk of the hospital inventory. And I think some big decisions are about to be made right now.

1:00:13People are worried that there's going to be a huge, a continued huge level of downgrading of private health insurance cover, which has been happening now that these rebates have disappeared post-COVID. And no one wants to think about paying for health. It's boring and very expensive. And what you think is – We had a conversation probably six months ago. people just want to live forever people just want to live longer and longer and just have somebody else pay for it it just doesn't work that's right and the other thing is when you think about governments paying for stuff paying for boring stuff that you don't want to buy that's not exciting yeah and no one wants to buy health insurance no one wants to buy hospital stays i you know every time every year that i've paid for private health insurance and haven't used it that's a good year okay maybe i use the extras cover on glasses for my kids or whatever but like that's a good year and so nobody wants to think about their hard-earned money being sucked up into the vortex of an aging population with ever increasing more expensive treatments why is it that health insurers can't like the fact that i'm exercising every day don't smoke don't drink why why should i be paying the same amount as some obese lazy person who never leaves the house like what what is the basis for that makes absolutely no sense at all if you look at it from a business point of view, if you were a car insurer, you would say, it's crazy that I have to charge the same amount of money for someone who drives whilst they're wearing a blindfold compared to anyone else.

1:01:42Fine. But you have to think about the fundamental reason that the government likes private health insurance in Australia. Governments lie a lot, especially like Labor governments lie a lot about this. They say they hate private education. They love private It offsets all the costs of the public system. They say they hate private health insurance. They couldn't have a health system without private health insurance. The reason that private health insurance exists like this is this is the way that we can have a health system in Australia. Because young people pay for older people. I get the young, but wouldn't more young people do it if it was cheaper for them?

1:02:17Well, a better way to say it is healthy people pay for sick people. Unhealthy people get subsidised by healthy people. Smokers get subsidised by non-smokers. I get it. But why is that? How? Because if you don't do that, then the healthy people stop paying. Like, if you stop paying, if I stop paying. If we're assuming demand's elastic, if we're saying it's going to be cheaper for healthy people, so me and you are paying less, I'm more inclined to do it, versus the fat guy down the road who's more likely to die, charge him and force him to pay a levy then. Well, he might not do it. Well, the way that they solved that problem, because you're right, like, there is elasticity.

1:02:55if the price gets too expensive, people don't want to pay. You guys have private health insurance or not? I just got it because I turned 30 and I didn't want to pay the levy. I don't. I'm not 30 at all. Actually, I think you have to be 31. I turned 31. So this is the answer. Would you have taken out private health insurance without that penalty? No. So this is how we deal with price elasticity problems in private health insurance. So price elasticity means you move the price, you change demand. And so Mike doesn't want to buy private health insurance. and hopefully, Mike, you don't need private health insurance and I'd advise you to go and claim whatever extras.

1:03:29Can you take extras cover or just hospital cover or what? I've got hospital and extras. The main thing I want it for is dental. Yeah. Like that is the main thing I'm excited to use, to finally get a bunch of dental work I need. Well, the great - Because it costs so much. I'm actually falling out. You should tell me which private insurer you sign up to so I don't sign up to them because they'll be out of business with your teeth doing soon. Mike's either good, I reckon. Yeah, but he said he's held up on all this dental stuff. So, you know, the Greens wanted to make dental free. They wanted to put it part of Medicare.

1:03:59Everything free. I mean, if dental goes on to Medicare, no one's going to have any teeth. Yeah. Because it's not going to be affordable, right? Yeah. And so the thing is, Mike doesn't want it. So the government came along and said, well, we better force Mike to have it. Because if Mike doesn't have it, then like the 70-year-old with the hip problem, like how are we going to pay for them? We need Mike to pay for them. So they go and they say there's a penalty if you don't take out private health insurance. And when you say, why don't they make it cheaper? Actually, everybody needs it to be more expensive.

1:04:28No, I'm saying why it should be more expensive for people who are higher risk. Because they won't take it. Well, then charge a higher levy. What they'll do if you – no, but then they won't take it. No, if you force the levy, they'll have – well, then you get a higher levy out of them. Who cares? So, you know, there are – It's forced – so you say, if the levy was$10 ,000 a year – No, I understand what you're saying. And you made it cheaper for the healthy people, it covers it. It just forces the unhealthy people to pay the levy. Let's say that person really should be paying$40 ,000 a year. And let's say you made it$40 ,000 a year.

1:04:56So you know how there are tobacco wars going on at the moment? Because cigarettes became so expensive that people can't afford them anymore. And so they go and buy illegally imported or manufactured cigarettes. And then that gets owned by like the modern mafia. And they go and blow each other up, et cetera. That's what happens when there's price elasticity and you exceed it. And so you can't charge a very unhealthy older person$40 ,000 a year. they'll just because they can't afford to pay it if you force them to you can what you mean how you're gonna force them force my pay 1500 bucks just force the payment to old fat people it's well it's not does not well you know unhealthy people yeah it's not so what i want to say is mostly it's not fat people that are the problem i'm just going to use blunt terminology but mostly the obese problem people are not the problem for the health system it's older people as they age right that's where the cost is and so you don't want to make people choose between going to hospital or eating for example if you charge too much money they've got no money for food or shelter so there are limits to what there's a lot of wealthy old people out there we've got a country that there are but those people soak up all the wealth those people are not the problem because those people pay private health insurance the wealthy are not the problem the problem is the non-wealthy older people who are being funded by the public system like they they the public system can fund them because it doesn't have to fund a whole lot of other people that are being subsidized by young healthy privately insured people and so that's the perversity the public system and the private system are inextricably intertwined in australia but it doesn't really answer the question as to why we can't maybe not that extreme but e-cup the pricing let's say a young a healthy person a healthy 45 year old should have let's say healthy 45 should pay two thousand dollars and unhealthy ones should pay eight thousand dollars whatever it is like there's a different like make it more reflective of the risks that because there is different different risks if you're healthy and you become a higher burden as you get as in as you get older if you're unhealthy when you're younger so i think one of the answers to that might be this should be my guess about the answer to that question because it's a good question you know you can't just increase prices as a private health insurer the government has to approve it which is um and governments don't like doing that because then people blame governments for price increases so for them to do that there had to be a big motivation and the big motivation is people blame governments for private health insurance increases anyway yeah so at least they're going to try and keep them down yeah and i think the answer is because every single person who's going to get hit with a huge premium is going to blame the government for doing it yeah and the government's going to be voted out.

1:07:35That's my guess of why they try to cap the price increases and don't have risk-rated premiums. But I do think that we are going to see a moment in Australia where there's going to be a reckoning and we're going to have to rethink the way the healthcare system works in this country because like all Western countries with generally ageing populations, it's not going to be sustainable. And just one example to finish with is there's currently a debate about whether they should broaden the PBS, another form of government subsidy for medicine. It's all the same bucket, right? Whether they should broaden the PBS for GLP-1s, the Zempic, to obese people.

1:08:15Yeah. And so you think they should broaden it to obese people? I should, it should. Okay, so that is going to be an enormous expenditure. Enormous. And so where do you... Because it doesn't save money at the back end, though, because people... Right, and so if it does, you'll feel it in 10 years. Yeah. Minimum. Yeah. Maybe 30. And so where are you going to get that money from? Debt, right? Basically. It's just going to have to be more debt. There is a bit of a volume thing. The more you buy, you get it. That's part of the US. All right. But you can't buy so much that it costs you less than buying none.

1:08:42Yeah. Like that's not how economics works. And so that will be more debt, right? Billions and billions and billions of dollars more debt. Where's that money going to go to? Private drug companies in the US and in Northern Europe, right? And so I'm not expressing a view one way or the other. What I'm saying is everybody, as you said, wants to live forever and maybe the caveat would be they want to live healthily forever and they want someone else to pay for it because they can't afford it. And at some point in time there's going to have to be some form of reckoning because the marginal increase in life expectancy is very expensive.

1:09:19And I know doctors in hospitals. I can tell you this. if you if your parent let's say or you if you're an older listener goes into hospital and you're over the age of 70 you better be advocating very hard because doctors it's not like they don't care about you yeah but um the way that they worry about treatment for you and nurses as well is different to a 15 year old that comes into hospital yeah because they have that mindset of of course the value of this medical treatment should be connected to how much life we're buying and so again I'm not I don't know the answer to this it's very complicated it's somewhat playing god but it there is going to be a reckoning in Australia if you look at the like this we still have the best health I think the best balance of health system anyway look at US is bad for the reasons you explained the UK is even worse with the NHS which is communist health system well the US is get any help in the UK I've got multiple family members like in-laws who've been waiting for years and years to get what you get in Australia in a few months like these are not life-threatening but it's like serious and significantly inhibiting life and way of life and you just can't get you just can't get in so the communist system that i have in the uk uk is basically a socialist communist country now and even more so with the tax stuff well that's definitely because at least in the u.s you can say they're just extreme capitalism yeah if you're rich it's great health care yeah in the uk everyone shares terrible health care horrific in the uk so you want to be the u.s china if you're rich you have great health care yeah Well, most places, but probably in the UK, even if you're rich, you can't get a good health care.

1:10:50That's why you say it's communist. Because everyone gets to line up for two potatoes together. Exactly. Let's go to a super quick break one more time. We're back in no time at all.

1:11:08And we are back. And we'll go into one of our favourite segments, the M &A Deep Dive, of course brought to you by our friends at Terrem Capital. They acquire technology companies that grow sustainably over decades. So if you're thinking of selling your business idea, I know you have many, you'd obviously get on the phone to Scott or Terem who will look at purchasing it. So go to terem.capital.com. We'll have Scott back on the show, hopefully in a few weeks. He was a runaway hit last time we had that big Temple and Webster episode. Yeah, that was great. More popular than us. That was great. Obviously, he's a low bar, but this time we want to talk about Costco, one of my absolute favorite businesses globally.

1:11:43We'll talk a little bit about the Australian version of Costco. Because AFR reported last week that despite intensifying competition from rivals including Woolworths, Coles and Aldi, the growth at Costco continued. The members-only US giant reported with ASIC that had sales of$12.6 billion in the 12 months to August, up from$11.4 billion the year before. Profits at Costco, how much profit do you reckon it made? I've got no idea what its merchants are. Because most of its profits come from the membership fee. About 60 % to 70 % come from them. because you know what margin pretty much maintains a flat margin across almost all its categories.

1:12:19There's a few little exceptions. At a gross level, you mean? A gross level. Kirkland's a little bit higher, but generally it's the same margin. Well, Woolworths is high 20s, so these guys will run lower. Is that right? Yeah. Half that, 12 or 13? 15. 15, okay. And I think it goes up to 18 for some Kirkland stuff. So profits at Costco's Australian business, which actually includes Taiwan as well, but I don't think it's that big, rose from$279 million to$389 million. And of course, this is a US business, probably is making more. But the US giant, obviously known for its Kirkland... This is how much of the profit it couldn't avoid paying tax on in Australia.

1:12:54It's known for its Kirkland signature home brand and bulk packs of grocery, operates 15 warehouses, has 13 ,000 staff in Australia, which is pretty massive. Members pay between$65 and$130 a year for membership. This is doubly remarkable. When do you reckon Costco even opened in Australia? Oh, 10 years ago? Yeah, 2009. So it's 16 years ago. 15 years ago. Yeah. So by comparison, this is the most interesting. So Woolworths last year, what do you reckon Woolworths generated in profits? Woolworths has been around for, I don't know, 89 years in Australia. It's got heaps of stores,$69 billion in sales.

1:13:28So this is what, seven times, roughly seven times, six, seven times what Costco did. How much do you reckon Woolworths made net profit? Three bill? $953 million. Really? There was some underlying, not underlying stuff. I just went for 5%. Yeah, no, it's less than that. And Kohl's, which everybody's raving about, Kohl's was the best business ever. They had$44 billion in sales, so smaller than Woolworths. How much do you reckon they made in Kohl's? Well, I'm going to still go for my 5%. Two. $1.1 billion. This is next. There's always some stuff that goes in and out. So Costco, and it probably made more than$380, probably made more like$600,$700, really.

1:14:02This business is almost as profitable as these giants generate four to seven times more revenue. So what a business. So Coles, when you say Woolworths, you mean just a supermarket business? Because they spun off Endeavour, so yeah. And so Woolworths, but Woolworths has also got Big W. I think it includes Big W. Right. So let's say that 69, I don't know what percentage is Big W, but there was 69 and what did you say Coles was, like 44 or something? Obviously Coles is separate from... So let's just round it out and say 100 bill of grocery sales between those two. Yeah. Ballpark. 100 and curtain, but yeah.

1:14:36Oh, grocery. Big W and something. So let's say 100 just for a round number. And what did you say, Costco just did 12? 12. You think that 12 has come – you think it would have been 112? You've got Aldi as well, don't forget. I know, but yes. But do you think that like if Costco wasn't here and Aldi wasn't here, like if we were still running this – And Aldi must do similar to that. I've got no idea how big that business is. I would be the least frequent Aldi shopper because there's just not one that's very convenient to me. and also I never really got into their, you know, replica, their dupes, let's call it.

1:15:12I don't go to Aldi but I can see what people do for sure. Yeah, their fruit and vegetable looks all right. Oh, Aldi's$12 billion. Same. Actually, Aldi's$13 billion, basically the same size. All right, so this is my question to you. Do you think if we assume that Coles and Woolworths do 100, forget about IGA for a second, do we think that if Costco and Aldi never came to Australia, Coles and Woolworths would have done$125. Yeah. You think this is just straight cannibalisation? They're buying paper towels and toilet paper. They've got to buy that somewhere. It's obviously people consuming more of this stuff because I don't think it's that elastic.

1:15:47Do you not think that this Costco purchasing in bulk results in a lot of wastage? I don't think so. Funny enough, my favourite ever acquired episode, one of the first ones I listened to was the Costco episode. It's the greatest podcast I think ever made. And they talked a lot about this stuff. But they sell a lot of durable goods in the US Costco, a lot of non-grocery stuff. Yeah. But I think they do that here as well. So I wonder how much of their 12 bill that is. Yeah. And they obviously don't travel. They don't travel in the US. Do they? Yeah. It's a big travel business. Really? In the billions.

1:16:14Well, in the billions. The similar version of Electric Escape is just the old school website, but they do a really good job of it actually. Do you know the classic Costco customer? Can you sort of think what demo it would be? This is from the acquired episode. I vaguely remember that they're wealthier. Yeah. You know why? You might expect. because I think I'm cheating by vaguely remembering this episode. They have space to store their stuff. Exactly. So if you live in a tiny little apartment, you can't store 300 rolls of toilet paper. So you can't buy there. So obviously you've got an upfront cost, which is higher.

1:16:49So if you're buying 200 rolls of toilet paper, you're paying less per roll, but you're paying more upfront. So are you a Costco member? No, I'm not. I do love the business, but I'm not a member. Are you a Costco member, Michael Joel? No. No. No. All right. You? No, I've never even been to one. Never have I actually. Yeah. I love the business. Why are we not the target demographic? Like none of the four of us in this room. We cover a lot of demographics. I think there's one in Moorabbin. Where are the other ones? I got Epping, Moorabbin, Ringwood, Ardeer. Yeah. That sounds like me, doesn't it? That feels like it's made for me.

1:17:26It's designed for you. A-R-D-E-R. Those are all the. It might sound like me, but I'm almost certain it's not close to me. So we're not in a city – because if you live in a city, it's not. Like there was one Docklands that shut recently. It's like Walmart. I mean, I'm not trying to compare it to Walmart, but Walmart, you know, they're big. Walmart's got Sam's Club, which is different. But they're far away from inner city centres. Obviously living in a regional town is close. But, yeah, so for me, if I had a Costco nearby, I probably would go. Yeah, I agree with that. The closest is Moorabbin, which is 40 minutes.

1:17:54Is Docklands closed? Yes, closed. Oh, I didn't know that. Closed about six months ago. that said I wasn't even though Docklands is notionally close to me it's still a 20 minute drive I'm not going to drive 20 minutes and you can imagine I'm not going to Docklands yeah for you a complete waste of time yeah you'd be close to Moorabbin for sure maybe I don't know I think I think some of my relatives are members so maybe I'll go with them and check it out I just can't really be bothered remember Jim Senegal's famous quote I'm not sure how true it is but when he handed over to the current CEO who's number I forget they've famously kept the hot dog price at like$1.50 since like 1984 God knows what you have to put in a hot dog to sell it for$1.50.

1:18:30Well, clearly it's a loss later. It's actually where Bunnings got their hot dog thing from. It's like the IKEA meatballs. Yeah, exactly the same. I'm not sure which came first, OK, meatballs or the hot dog. But famously, Jim Senegal said to the current guy, and you need to beat this out, Mark, but he said to him, if you change the price of the hot dogs, I'll f***ing kill you, was the classic comment that he made. But this business, and they talked about it on Acquired, obviously, but the powers of this business are unbelievable. like they've got they've even got a bit of network in there but the scale benefits because they've got so much scale on the home brand scale they can get or the kirkland brand scale they get kirkland's like one of the biggest like if you look at kirkland which is their own standalone they make everything yeah pretty much everything it's like in a massive seller of actual gold as well on the stage i think they make a tiny margin on that but this this business is just incredible they've just nailed the content they make most of their money off the membership so which is recurring essentially they make a bunch of money off the credit card relations they have because if you get a credit card, I think it's JPMorgan Chase, Sapphire card or something, you get a bigger discount as well.

1:19:30And then they get the points from when you use the credit card elsewhere. So they've really nailed that ecosystem and it's just such a profitable beast. Why do you think – so in Australia, West Farmers tried Masters. That was a disaster. Yeah. Woolworths has Big W. And so that whole format's been tried. You know, there's like obviously there's Kmart and Target as well. there's like bulk alcohol shops galore in Australia and different chains, Dan Murphy on down. Why do you think that none of these majors ever tried to do a Costco equivalent in Australia? Like why did, why was the market totally empty for Costco to come and do this?

1:20:12I do find Australia a bit of a sleepy place often. Yeah. It feels like it is a strange one. It's been floating around the U S for what, how many years, 50 years. I guess I'll tell you, I can give you one reason. So Costco came in 2009. Yeah. What do you reckon their share price was in 2009? As in maybe what it – Oh, you're asking me because of what it's done since, right? Yeah, yeah, yeah. So when it came to Australia – I couldn't even tell you what their market cap would have been. I was about to tell you. I have no idea. So share price now is – call it$1 ,000 a share. Right. In 2009, before they came to Australia,$45 a share.

1:20:47It's actually ridiculous. So it's 20x'd in that time. So it was$20 billion business. I think that people go, wasn't that big a business? They'd heard of Costco, wasn't that big a business. It's now a$400 billion business. It is unbelievable how much this business has grown. Yeah, that's it. You know, people are very focused on the growth of tech and AI. But the businesses as a group that have delivered the best multiple returns over the last 15 years, you know, they're not the tech and AI businesses. Well, they are. No, but at the top end, like the best ones are. Yeah. But if you look at them as a group, yeah, it's not tech that's been delivering that, right?

1:21:25And so I think this is a classic example of that. Yeah, and Walmart's done very well, not as well as Costco, but Walmart's a great store. What's this, a 20 bagger in 15 years? This is a 20 bagger in 15 years. I mean, that's much better than most tech companies have delivered. Unbelievable. Yeah. And the business is, if you haven't listened to your quiet episode and you have, like it's such a great listen. And if you want to understand, and a lot of what we actually changed our Lux Plus subscription program. After listening to that episode, we basically completely changed the way we were going to.

1:21:52We were about to launch Lux Plus. We were a few months away. And we completely pivoted. And now it's been an incredible success on the back of that pivot. Their model, yeah. Especially doing the Costco model. How many members do they have in Australia? They say that? How many members do you reckon Costco has in the US? So they don't say Australia. They say global. So you can sort of, well, you can't really back-hack it, but you can take a guess. In the US? Yep. what if I said, what if I started crazy, but I feel like it might be conservative, is 5 % of the US population their member? So that would be 350 mil.

1:22:30Isn't that many people in the US? Something like that. So let's say 15 mil, 20 mil. 60 million. Really? Yeah. And given this household, that's actually incredible. Yeah. That's astonishing. Yeah. So it's very much mainstream in the US. Yeah, absolutely. I've got a stat from Gemini on how many Australian members. Do you want to have a guess? Yeah, and there's 80 million globally, so it's less than 20. You've got a stat for Gemini, but what about, have you got a citation from where that's from? It's saying it's from financial reports. Okay, cool. So do you guys want to take a guess? I'll say, I'm going to guess, would it have reached 100 ,000?

1:23:05It must have reached 100 ,000. No, easily. I would have thought 100 ,000. Yeah. I'm going to say 200 ,000. I'll say 500 ,000. Okay, well, I've got 1.5 million. Oh, wow. That's plausible. Okay, yeah. That's plausible. Yeah, well, we think US is, US is a 12-time size of Australia. So that'd be five. So if we were the same penetration, it'd be five million. Obviously, we're not going to have the same penetration as US. Well, that makes sense. So let's say it was one and a half mil, and let's say the average fee was$100. Yeah, it's about right. It's only$65 ,130. And so then what's interesting about that is - Remember, you get a bigger discount if you go high.

1:23:35Yep. And so they say their profit is 450 mil. They say$369. I say more. But let's say 600, right? Yeah. That's probably really their profit in Australia once they start paying IP costs or whatever else. And so what's interesting about that is that means that the fee that they charge is only a quarter of their profit in Australia. It's not nine-tenths of their profit. In the US, it's like 60 % or 65 % for memory. So maybe, yeah, it's interesting. Maybe they get to run better margins in Australia than they do in the US. Yeah, or maybe we're being harsh. Maybe they're not running a tax tax. Maybe they're paying full tax.

1:24:10But even if that was the case, even if they're doing$350, I mean, then it would be, let's say, they stretch to 50 % of the profits. Maybe. That could be right. Yeah, absolutely feasible. That could be right. I still think it's crazy that they really have no competitor. Do you remember there were these things back in the day, cash and carry? Yeah, cash and carry. It kind of is. You get a free membership. We started our business. We got a membership. If you're a wholesaler. Sorry, if you were a wholesaler. I was a sole customer. You said to have business. That's right. Yeah, of some sort. I had a little Campbell's Can't Carry card.

1:24:44That's right. So when I was running youth movements, that's where we got our stuff from. And so today you'd have an ABN, right? If you have an ABN, you could be a member. And it was the same thing. But because it was free. I don't think they're around anymore, are they? Or they still around. I don't know. But because it was free, they would still have to make – it probably wasn't a great business because they tried to play the low margin, high volume game. Exactly Costco, but we don't think. We had a membership fee. Yeah. I mean, we go and buy like, we just run apartments and we'd buy like toilet paper, all that kind of stuff for the apartments.

1:25:16And then we'd buy like a 36-pack of Karawala Koala and I'd just leave it on Jess's desks and you'd be able to resist it. But yeah, and you buy like a whole thing of 36 curly whirlies or whatever it was. Which is the opposite to Officeworks because you can buy bulk goods at Officeworks. You just pay more than you pay anywhere else. Yeah, exactly. For convenience, right? It's an extremely successful business. Yeah, reverse. But they charge you more for convenience. whereas Costco is a bit inconvenient. And you buy in bulk but you get these like very low prices. It just is – I keep coming back to it.

1:25:47It's just astonishing to me in this country. There are some big industries, maybe where the cost of capital is – maybe where the upfront CapEx is high for like a Costco. But like these Woolworths and West Farmers are constantly looking for ways to grow. So, I mean, I would have thought this would have been a better bet. I'm surprised one of those guys didn't do it. Well, West Farmers tried to – so West Farmers has – I said West Farmers did Masters, but obviously they didn't. West Farmers has Bunnings. Yeah. Woolworths did Masters. West Farmers did Bunnings in the UK. That was a disaster. That's right.

1:26:23That's what Richard Goyt is. That's right. So Woolworths spent all this money trying to fight and be a second player in the hardware space. Yeah. Why did they not try to be a – And in the Big W space, the second player to Kmart there as well. Why did they not try to be the first player in the Costco space? Yeah, that's a great question. This is – and there might be a good reason to – Maybe they're worried about cannibalising themselves to a degree, but clearly – which was what Walmart did with Sam's Club. Sam's Club is essentially the Costco of Walmart. So being worried about a secondary business cannibalising your primary business is the road to having no primary business in my view.

1:26:59Yeah. And so – Well, they've still got primary businesses, both these businesses. in fairness. Which means they wouldn't have really cannibalised it with their secondary business, right? Because there is a competitor to that now. There's$25 billion in sales that they've leaked to Aldi and Costco. Aldi is very successful in general business. Well, Aldi might have been inevitable because Aldi, what your argument is they could have done an Aldi model as well. Why not? Aldi's been around for just as long. I agree with you. Actually longer. Basically, this is a country that loves duopolies or low-quantity oligopolies.

1:27:32Loves duopolies. And so what you have is you have – You have juopters. Yeah, and like you've got Vodafone that comes – all right, it's almost an oligopoly. It's like a duopoly with another third player. And so – Four banks. Yeah, it's like little – like tight-knit oligopolies. Two or three electricity companies. Two airlines. Two airlines, famously. And so what you have here is I think very large enterprises with a high degree of complacency often about disrupting their own business models. And also it doesn't help that the average tenure of a public company CEO is, what, three years or something.

1:28:09It's not what Chemist Warehouse did as well. Chemist Warehouse is outsmart. Well, that was not just copying, right? That was using a huge structural disadvantage as an impenetrable advantage. That's the classic cannabis. a bit, Chemist Warehouse is worth the same as, like, not that different value to Coles and Woolworths. That's actually unbelievable. Well, it's not, I mean. You can argue the multiple. It might not really be worth that much. But the thing about Chemist Warehouse is it has to grow now. Yeah. It's under pressure to grow. I mean, you can't run 60 times earnings and not grow. Yeah.

1:28:45And I think rather than, not only have Woolworths and Coles missed that opportunity, they're at risk of Chemist Warehouse eventually becoming a competitor to them and moving more. It really is. A little bit, right? A little bit. They sell some non-perishable groceries now. Well, how many aisles? It's 10 % to 15 % of what the supermarkets sell, Chemist Warehouse would sell, I reckon. Do you think so? I'm thinking how many aisles there are in a supermarket and how many aisles. I reckon a good aisle and a half Chemist Warehouse sell. The Chemist Warehouse sells, because what you're saying is - Not the fresh stuff, obviously.

1:29:17All of the stuff on the shelves of Chemist Warehouse that are not behind the counter. It's all over-the-counter sales, let's call it. That could all be sold by supermarkets. Absolutely, and it is. You're right, you're right. Plus now Chemist Warehouse is running some non-perishable groceries in one of their aisles. I think you're right. I don't know these businesses. There is a very good bit of research that people should be doing into at what size of business and what structure do you become complacent and hesitant to disrupt yourself because that is what seems to happen with these large businesses.

1:29:53That's why counter-positioning is a power. Yeah, you're right. You're right. Well, I think you're right. Woolworths and Coles missed all of those opportunities. Yeah. And if you look at that, they were too busy fighting each other, but you think of the sort of the people leading these businesses. Well, you say they're fighting each other. Are they really fighting each other? Absolutely. One comes out with one thing, the other one comes out with the other, whatever, like... But it's like... All they care about, it feels like all they care about is what little giveaway can we get to get kids in to shop at us, not the other one.

1:30:17But when you say they fight each other, they're not in a cage saying only one of them is going to emerge. They like slap each other gently across the face. I think the way they look at it, they look at it, there's$100 billion in market share for getting the Aldi and the Costco. They fight over who gets the 4 % that moves. Yeah, exactly. And they fought the wrong – your point is they fought the wrong battle. They're too busy fighting each other and they've let Aldi and Costco – and why isn't it – the other question is why isn't anyone in Australia done a Trader Joe's, which isn't another – owned by the other aldi family there's two aldi brothers and this is the u.s the u.s trader and so why hasn't that's another great concept i spoke to one of the sort of senior leaders who's now at aldi globally and we said we should do a trader job but obviously i'm not positioned to do this and he was going on a big round of things but um i can't believe there's not a trader joe's in australia you say aldi's got an element of trader joe's with his home brand stuff but trader joe's is a small tightly like solve the paradox of choice i don't know like costco but a different sense no membership they do an unbelievable within the what i think costco and trader joys both do really well is the surprise and delight aspect there's that costco has famous treasure hunt where you sort of as you're going through the aisles oh well something you weren't expecting to buy you buy it because it's special and they got these great buyers another great thing about costco just what what so reason so good because they have so many lists one of the great benefits of costco is less skews they got like 4 000 skews versus 50 000 gives in a Walmart.

1:31:43So they solve the paradox of choice. Instead of 20 varieties of toilet paper, looking at that, they've got one or two, Kirkland and one other one maybe. So as a result, the buyers at Costco are super specialists. They understand the buyers of chocolate, understand the price of caffeine, of cocoa every day, and they're working with supplies, and they have really great long-term supplier relationships. So they'll help suppliers when they're going tough, and when it's going good, they'll both profit together. So it's a much more holistic, very different business to the supermarkets who really are foot on the throat suppliers.

1:32:14So I think a lot of the stuff Costco's done is an antithesis to what the Australian supermarkets do. And I think they've survived and they've thrived and they're worth$400 billion now because they've thought so differently to every other supermarket in the world. But we can say that, but I'll say the flip side. So this is Costco has an advantage with suppliers, but also they have a disadvantage, which we maybe can call the Amazon disadvantage, even though this predates Amazon. The advantage is supermarkets in Australia are always trying to expand gross margins, so they're trying to pressure suppliers.

1:32:47Costco knows what they want their gross margin to be, and so they don't need to put suppliers under constant pressure. Their growth comes from volume growth predominantly. And this miraculous annuity. Yes, but the flip side is their growth also comes from something else, which is like the reason I say it's Amazon, is this is the Amazon marketplace problem. taking suppliers that are doing really, really well and creating their own version of that product. Now, Amazon doesn't create their own version. They just kind of bring it in-house, right? But every one of those Kirkland products would have been supplied by a third-party supplier if it wasn't a home brand.

1:33:26But it is supplied by – they do use third-party suppliers. I know. It's a brand at Kirkland, same thing. That is the way – that is the only place where they're squeezing margin is when they put their home brand over the top of it. And so that's where – now supermarkets do that as well, obviously, with their home brand. And Kirkland – you would say Kirkland home brand has brand equity, whereas Woolworths does not have brand equity in their Woolworths brand. I mean there's not really – A little bit, but not as much as Kirkland. Tiny, tiny. Yeah, Kirkland's a loved brand. Yeah, that's right. I think I've mentioned on the pod before, but you know, Soul Price, who didn't found Costco, he found Soul's Price Club.

1:34:01Yeah. So one of the greatest, most legendary retailers ever. there was a great story i talked about on acquired about him and remember how sam walton was famous for going into competitors with a notepad and just copying everything so this is the size of the price they could copy it like you copy everything copy the how high the things are stacked up what they're selling so go in like blatantly would copy it probably one time he went to a price price club and he and he was loved price club and he sold prices is genius he He quickly created Costco in many ways. Costco eventually merged with Price Club, but the genius of Costco came from South Price.

1:34:37And Sam Walton's in there taking copious notes, a whole notepad of notes, just copying off this Price Club thing. And he dropped it. He left it there. And someone – oh, no, sorry. A security guy confiscated it. He said, you can't take this. You can't do this. They confiscated the thing. And Sam Walton was furious or whatever. And it ends up in South Price's office. And they go, what's this? He goes, this is Sam Walton's notepad. And he goes, find Sam Walton's number, calls him up, gives him back his notepad. That's a great story. That's a great story. Two greatest retailers ever. And they're just working together.

1:35:10They'd not collaborate, but they'd work together and talk about what's working, what's not working, and two just retail geniuses. But, yeah, the Costco business, if you look at the great and why the quiet episode is so good, because it's such a great business. And the way they use scale, the way they use brand, and the way I use network effects, and that effectively annuity model, and giving the savings back to the customer. It's a customer-centric business. I think Australian supermarkets do a pretty good job generally, and critical of that. I think as a customer experience, I do like Australian supermarkets, but it's not the level of Costco.

1:35:43No, but one of the interesting things about Coles and Wores today is you do find different brands in Coles and Wores. I mean, it is frustrating, but ultimately, the best differentiation that these supermarkets can have probably is exclusive brands to their supermarkets and so i've been going to wars for a long time and i still i don't know i still largely shop at wars and when i go there there's like a loaf of bread yeah that i want that loaf of bread but that means that i can't buy this yogurt that i want that means i still have to go to Coles. Yeah. So I find myself shopping at both of them.

1:36:23And I think ultimately – Do you use online for one and not the other? Yes. Well, I vary. But remember I told you I use Woolworths online because of that crazy – you pay$2 and you get$30 a month of discounts. I do that, but I don't know how to use that discount. It is very complicated to use unnecessarily. You have to go into the app is how I have to go. Find the code. The code is kind of the same every month. It just changes. I always forget though. Find the code, then type that code at checkout into the Woolworths, whatever you're buying Woolworths on the app. I buy it on PC. I buy it on the app, yeah.

1:37:00I buy it on PC. But like, yes, you have to. It is clunky as hell. And so, yes, I buy that and sometimes I just go into a Coles. But I think that that is at least some differentiation. Like the main way that those supermarkets compete is with suppliers, I think. That's a department store exclusive brand concept they've been running for many years. That was a great episode, guys. Thank you all. I hope we're in person next week. You're gallivanting somewhere and I'm rehabilitating. We won't be. I think Feb will be back in person. Feb, that's ages away. Yeah, I know. So you've been gallivanting all summer.

1:37:36I know. Gallivanting again. Yes, that's true. But by Feb, we'll be back. And then business will start again. Because doesn't it feel to you that business is a bit sleepy in Australia? Yeah. Like when you try and say, let's talk about a big deal that's being done. I mean, there are a few. Like a Rio Tinto thing that's going on. Yeah, it's not. Rio Shell is getting ripped off again, I'm sure. And boring. Yeah, exactly. I think that's pretty boring. Oh, it's so boring. Yeah, so boring. So I can't talk about that. You know that Glencore is going to just rip their face off because this is like the smartest miners in the world versus the dumbest at Rio Tinto.

1:38:06And so people talk about that and like there's not much else happening. It feels like the whole of business has gone on holidays. Well, Australia just goes away. Yeah, exactly. It just goes away. Obviously, we're back at Luxury Escape. This is my first day in the office since I was away. And I was very pleasantly surprised here. It was just pumping when I walked in. The only people in your car park were people in Luxury Escape spots. Yes. Everyone else is not in here. No one here. A building company owns the building. So they're obviously off till February. Yeah. It is a good life in Australia.

1:38:33You know, the trick to life is find a place where you can dig a hole and sell what comes out to China and everything else gets a lot easier. That's the trick to an easy country. Well, easy to a point. Exactly. Exactly. On that note, we'll bid everyone farewell and see everyone on Saturday for our Ask Us Anything episode.