Drone Shield Cut and Run, Menulog Dies, the World’s Greatest Insider Trader, Open AI, Woke Judges and Airport Security Fail

24:09I said, so? She says, I wasn't interested by any of the topics. She'll be mortified if she hears this. Anyway, she actually was. She loves behavioral economics and she's a doctor and whatever. So I thought that was hilarious. There you go. Just when you think you're flying high, there's always family to bring you back down to earth. I usually get on. I listen to the podcast. I do as much more interested in you is what I usually get. No one says that to me. No one says that to me. Oh, they all say it to me. Yeah, because I don't know. They're trying to mess with you. Next one, I went to another dinner.

24:39It was a Goldman Sachs dinner. just after we did the whole acquisition for Catapult recently. That was very fun. That was a nice dinner. I very much enjoyed that. And it was interesting, like, you know, the talk around the table, people are very, very interested in AI and the future of AI. And I'm not talking about just in what's it called terms, like not just in making money terms, which you might assume. I presume these dinners, they have like a throne for you? They have. Like an iron throne, so to speak? Honestly, I reckon we are the least consequential people in that restaurant. Which restaurant was it?

25:18Why don't you give a shout out? We're in Shell House. It's a Sydney restaurant. And so what was interesting is everyone is basically genuinely, I wouldn't say paranoid, but very concerned about what the impact of AI is going to be on all these different industries, etc. it definitely there is this palpable wave of concern going around we'll call it the higher income earning echelons of society as well as most other parts and so you know it's very it's very interesting to hear that there was also there's also a guy there matt ziden he's like one of the goldman sachs guys and he was very disappointed that we didn't mention him on the podcast previously.

25:59So, MZ, this one's for you. I expect the low fees to continue. That's the biggest backhanded reference I've ever seen. Yeah. He was very disappointed and I said, I'll call you out. What I didn't say is I'm going to make it sound like you were begging to be called out. But there you go. That's going to be a wish he didn't raise that with me. It's not like one of those financial reviews when Sarah calls out the best deal makers. He's like the opposite of that. He is very good. I mean, the thing is this. I've used Goldman Sachs for years and they're very good. There's a woman, Amy Shee, who did the ECM stuff for us, like the raising, the equity capital markets.

26:31They're very professional, very reliable, and they make me feel like I'm not transactional. And so that's why I keep going back to the mechanical. It's just if you make me feel like I'm not just a dollar sign, then I'm much more likely to continue the relationship, and that's how they make me feel. Speaking of AI, did you see the Sam Altman interview with Brad Gerstner? How can a company with$13 billion in revenues make$1.4 trillion of spend commitments? And you've heard the criticism, Sam. We're doing well more revenue than that. Second of all, Brad, if you want to sell your shares, I'll find you a buyer.

27:09Just enough. So that's the clip. This is, Adi, I've never seen a CEO behave like this. Not only to an investor, just to anyone. This is a great chance for Sam Altman to say, yeah, we've got, I don't know, a trillion dollars of commitments, but this is how we're going to get to it. This is the value we're going to create. This is how we're going to charge our customers. And this is why it doesn't sound ridiculous. Instead, he attacks the question asker who's a shareholder. This is just outrageous. Like the more I see this guy, this Sam Altman guy, the more I think this – if there's any ever doubt that this thing's a bubble, and I'm not talking about the applications of AI because clearly there's going to be lots of uses around AI.

27:47but OpenAI is at the epicenter of this bubble and this guy, this fraud, is at the epicenter of the epicenter and he's abusing shareholders. How is this still a thing? Well, this is called the AI bubble, isn't it? That's it. There's a one-line answer to that. How do people never learn? We had the dot-com bubble. We had the 2007 real estate and this is happening again in such place. You know because SoftBank's involved, there's got to be a bubble because Massa is just the king of bubbles and he gets it right. Well, not necessarily. Some of the calls have been great. He's got some right. He got the Alibaba call right.

28:22That could have been as much good luck as good management. He sold NVIDIA before it went up like 10 ,000%. So that was a disaster. He got an arm right in fairness. He obviously did WeWork. He's done a heap of dud in it, but he just does it. But basically invest in everything and some stuff eventually comes out. But it's more, this just feels so WeWorky, like continually investing at a higher valuation without any justification for it when the business is looking worse and worse. Yeah. Well, I don't know. There's nothing more I can add to this. Like it is a bubble and they are the leaders of the bubble and this is what happens.

28:54And you've got a view of him, which is extremely negative. I think more people are coming to that view of him. And so you'll be vindicated, I think. If you look at Anthropik, we talked about this last week, how Anthropik's really targeting the B2B sector, as in selling to businesses. And I think – and Anthropic is saying they're going to be profitable by 2028. And Airbnb is saying in the 2030s. Anthropic looks like this is a business that has legs. You think selling AI to business makes complete sense. Businesses are the ones who are going to benefit from AI because it just makes their operations more efficient.

29:28If I can use AI and AI costs me a grand but I'm saving$50 ,000 in wages, that makes a lot of sense for business. OpenAI has 800 million plus users, but I just can't see consumers paying for AI. Maybe they'll pay 20 bucks, 30 bucks or whatever. Maybe you can get advertising. It becomes another Google. That's potentially the most likely success of the business. How much can they get out of advertising? But I'm not sure they get that much out of advertising. I just can't see it because it's a very different platform to search. I agree with you. I think people are basically realizing that all of the money that is being made by big tech on AI is being paid for by investors in open AI.

30:09That's basically what's happening, isn't it? It's just a transfer of funds because – Well, it's called a Ponzi scheme. It's not exactly a Ponzi scheme because the thing with a Ponzi scheme is like the next investor gets the money of the previous investor. No, so the previous investor gets the money of the next investor, right? And the thing is this, open AI, the investors in open AI, it is very possible, maybe even probable, that they're going to get no return. I think what's happening is that the people that are investing money in open AI, the losses being incurred by open AI are effectively to run the machine, let's call it.

30:46And so that's driving AI. And the financial beneficiaries of AI, that's big tech, Microsoft, Google, Amazon. and so they're making profits out of AI. Are they? I don't think they're making profits out of the capex. They are because AWS usage is crazy because of AI. Oh, the data centers. Yeah. Yeah, maybe Amazon is. Google is back to growth. Google search is back to growth. Yeah, that's nothing to do with that. That's neither here nor there on AI. No, but the point is I think that like at the end of all of this, I think there'll be an incineration of money, but I continue to believe that – You say they're making money though.

31:28That's the Ponzi. I don't know why they're called hyperscalers. They're not scaling that fast. But the inverted commas hyperscalers are spending capex and getting it back through income but it's actually capital spend. Well, that's a bit concerning. I agree with you. That's what Burry was talking about. Burry's talking about lifetime of chips and I don't know if that's right or wrong but this isn't really Burry's expertise. But there's that risk as well. But my biggest concern, this has always been our concern, This is recycling capital off P &L on balance sheet. So, Barry, you're talking about the guy that was in the big short movie because he correctly and very intelligently predicted, not even predicted, identified what was going wrong behind the scenes.

32:06But the thing is this. That guy makes this fantastic discovery, makes a ton of money. It's a great call. And then he's got plenty of stuff wrong before and after that. Like I've seen him get stuff wrong after that, these big calls. And so then what he's dropped back to is resorting to be like the Delo Lama on a hill, making tweets like the sun rises in the east and the gentle breeze ruffles a feather. And people say, well, that's a comment on AI or something, right? And so I think we all get caught up in wanting to – people are greedy. People are scared. People want gurus. People want to – I think this whole discussion is just an endless repeat of human emotions.

32:50And of course, people don't learn because human emotions don't change, just the humans change. And so it goes around and around and around in circles. And that's a boom and bust cycle of capitalism. I'll tell you another. I was going to pivot the drone shield, but if you've got something small. Before we get to that stuff, I'll tell you some other stuff. So let's talk about some things in our ongoing theme of the wealth polarization in Western countries might start becoming a problem. Number one, the gold toilet. Did you come across the gold toilet? Mike, you nodding your head you saw the gold toilet?

33:26I did see this and I do remember like something years ago that like Kanye West had a solid gold toilet in his mansion. That'd be right. So it's not new to me that a multi-millionaire would have a solid gold toilet. Well, in this case, it's not a multi-millionaire. It's a multi-billionaire. and there's two pieces of art. I'll use that word very loosely. Created a solid gold toilet complete with plumbing. You could plumb it in. So one was bought and then subsequently stolen and I suspect that that's gold bars somewhere right now. And the other one, no one knew who bought it and I don't know if you saw who bought it, Adam.

34:08No, did not. I saw the article but I didn't see it. Oh, Steve Cohen of SCA fame. And prior to that, he was of what, not fame, I don't know what you say, infamy. Infamous for insider trading. He settled a case about insider trading, I think, about 10 years ago. I think it was like he got a billion dollar fine and had to shut the fund or something, didn't he? And it was like, it wasn't. Yeah, it was very much, it's like a line from billions. It was a storyline from billions, literally. It wasn't just like, it wasn't like an insider trading. That wasn't the word. I don't remember what the word was, but I remember when I read the word, I felt like it was El Capone in the 1930s.

34:43It was like racketeering. I mean, I don't think it was that, but it was these great words. And I'm like, wow, that's impressive. And so I think my guess is probably - It was wire fraud and securities fraud. He got - But everything's wire fraud over there. I mean, doesn't that sound great? Yeah, but that sounds better than insider trading. And so - No, he also - There was also insider trading. He was 1.2 billion fine for planning guilty to insider trading in 2014. But that's okay. He was fine. He paid the fine, shut it, opened a new one. And he's got$100 billion or whatever he's got, right? $50 billion.

35:13Who knows? That's a slap on the wrist for Big Steve. Okay. And so he bought a gold toilet secretly and now he's selling his gold toilet. And the starting price is$10 million USD because that's the value of the gold in the toilet. If you can imagine how heavy this toilet must be. I think it's 100 kilos or something. And so what you've got is this entire generation of Gen Z and the bottom end of millennials. And they can't afford to buy a house. And this guy's got a gold toilet for$15 million. I mean, that is not. So, you know, once again, we just say the word pitchforks, but probably in a much more worrying sign.

35:50I didn't know what to make of this. I'm surprised you haven't raised this. How have you not raised Nancy Pelosi? What in the hell is the story with that? So the summary is this lady joined parliament when she was 46 years old. She's just retired at the age of 80 or so. And she was, what was she? Speaker? I can't remember what she was. Yeah, she was Speaker. Yep, she was a Democrat. Yeah. Very senior Democrat, very senior. And somehow the$100 ,000 or$200 ,000 that she had available to her or whatever it was when she started is now worth$137 million with the greatest – I think it's like$300 million.

36:31Well, whatever it is. It's crazy. It's the greatest return of any fund full stop. Like people talk about Renaissance, you know, the greatest return of any fun. Yeah. No one's heard of them. Well, this is much bigger than that. And maybe even more surprisingly, a very, very large number of her purchases were ultra high conviction, very short dated options that would hint that maybe she knew something was going on. And so, but the Republicans. But it's all legal. Yes. It's all legal. It's completely bizarre. Is there any way that somebody could mount a plausible argument that this didn't involve access to information as a result of being a politician?

37:13Oh, I don't think she even mounts this argument. I think she's the greatest insider trader of all time. This is next level. In both senses of that word, because the greatest is in the biggest and also the most amazing because she did it legally. And the most successful. Yeah. With Venice, all politicians can do that. So she did it more effectively. But Australian politicians can do it? No, no, this is you. I don't think Australians – well, not that I'm aware of. But this has been an ongoing joke in the US for a decade that she's just a criminal mastermind masquerading as this hero of the left.

37:47It's outrageous. Is there any better way to erode people's faith in elected politicians than this? I think – because I was trying to think about if I wanted to – if that was my game, I was like a criminal mastermind trying to erode people's faith in democracy, what would I do? And so you've got the January protesting where they broke in and tried to turn over democracy and people saying the election was rigged. I think that's too overt. Like this is so much more malevolent. Nefarious. Yeah, nefarious. Like really, I think this is absolutely appalling and a genuine threat to the way people view democracy.

38:27Like how could you believe in democracy? Yeah, it's ridiculous. So you're 25 years old, let's say. I mean, you're not. You probably claim to be. So you're 25 years old. You're just like kind of early in your life journey as an adult. You cannot really afford anything. The cost of living is crazy. You're struggling to survive. And the two things you see this week is a dude with billions of dollars who's previously had run-ins with the law that are a billion-dollar fine. He's selling his gold toilet. and the person that you elected and has been in parliament for 35 years, and this is a Democrat, right?

39:04This is people on the progressive left. The person you elect made hundreds of millions of dollars openly insider trading stocks while she was in parliament, in Congress. I mean, how do you have faith in the system with that going on? You can't. You're right. It's a disgrace. And she's a disgrace. And there's a special place in hell for Nancy Pelosi, the world's greatest insider trader. I think that's just outrageous. Yes. The other thing I wanted to flag to you is that I went and bought stuff from Coles this week, and there was a problem with one of the items that came in. All I wanted to do was to say, this item didn't come, please refund me the$8 for the grapes that didn't arrive.

39:43And so I went to the app, and the app was such a bad experience, it was difficult to explain to get the refund. And I thought, I can't believe Uber Eats does this better than the Coles app. and then instead I went to the website and gave it a go and the website had this perfect refund experience that was even better than Uber Eats so maybe someone can explain how Coles goes and builds an entire app that delivers a worse experience than the website even after the app questioned whether I had used the app so I was in the app getting a refund it asked me whether I have the app i feel like that's a superfluous question and uh then it said are you sure you've got the app if so click here so i click there then nothing happened it was like they just it was a button to degrade the experience further it's hard to understand what goes on in some of these large organizations i i'm constantly surprised there's all these plaudits on coals smashing woolworths i find woolworths a much better experience than coals um i'm staggered that the market loves coal so much and it is performing better but it just doesn't make a lot of sense to me i find that an entire ux worse than more worse every five years the other one is doing better switches right and now aldi's come in it gets a bit more complicated but basically not much more it just goes back and forth yeah yeah you're right speaking of not so much customer service but what are your views on the new fancy um security machines at airport domestic airports and international, but especially domestic.

41:17The bag check. You don't check your computer out. Yeah, the bag. The security check. I'm a huge fan of those. I'm a huge. What's the opposite of fan? I'm a huge critic. A critic. You're a detractor. Detractor. Hater. What's good about them? What did Mike say? What was your answer? I said hater, which was very millennial of me, and I'm surprised you didn't think of that, Adam. Well, that's the thing. That's how we know Adam's not a millennial, because he didn't say hater. I was reading something on Insta this week, and apparently I'm an Xennial. There's a small cohort between like 82 and 78 or whatever, which is between millennial and Gen X because just the way it sort of falls, like grew up in analog, came to digital.

41:55So I think that resolves our long term. I'm an Xennial. I feel like this – I'm clearly not a Gen X or baby people like you, but probably not quite as young as Mark. I mean, 30 % of this podcast is talking about you and 90 % of that is talking about your age. We could change the name to this podcast to Is Adam a Millennial and then like a lull after it. And you won't know what that is because you're not a millennial. Go back to your complaints about the greatest innovation in airport security for the last 10 years. So why do you think it's good? Why do I think it's good? One, you don't have to take your laptop out.

42:30Two, you can just throw everything on the tray. Three, instead of standing in one long queue, they can service six people at a time. Should I go on? Four, it actually scans what's in your bags. That's a good step up. So let me address those points. So the first three points relate to speed and the last point relates to safety. Well, not just speed. Also, just the inconvenience of taking out your laptop. I'll address the first point first, which is there was only ever an incident in an Australian airport before these machines. So clearly the old machines did the job. So the notion that these are much more safe.

43:03Or it's all just designed to make travellers feel safe because there's really no risk. Yeah, it's potentially that as well. That's most likely. would be my guess. Your point on, so that makes these whole things a waste of time generally, but your point, your first three points were it's quicker and more convenient with these new machines. I would argue it's five to eight times slower. It takes so much longer. What are you doing doing your knees? It takes, it literally takes, like you save five seconds taking out your laptop, big deal, but it takes, literally you're waiting at the thing where you put your bag in initially.

43:36That takes an extra minute to two and then it takes forever for the scanning process is way slower and then it gets, you know, the bag gets that slot and it spends another 30 seconds of the slot. Should I let it go through or should I put it in purgatory where it goes to this other bit? Pretty much 90 % of the time, it puts me to the other bit. The person then looks at it again and goes, okay, that's fine. It must take, it literally takes, instead of one minute, it takes five minutes. And I spoke to a guy. That's called the Swiss cheese approach to security. Do you know that? Because every security has holes and the more slices you have, the less likely the holes are going to line up and something is going to slip through.

44:12Except there was never a problem in the first place. So the whole Swiss cheese thing is completely a waste of time. I was going to ask you this question. You know the Brisbane – you know the Brisbane – Brisbane's got the premium entrance if you're in any kind of lounge? No, I don't often go there. Well, yes, I kind of do. Melbourne used to have it shuttered in COVID and never reopened it. That's Virgin had it. This is the – Brisbane has a – so Qantas Lounge has a premium entrance. And usually like one or two – there was never anybody there. I was there. I was in Brisbane last week for a panel.

44:42There's like 50 people there. It took like 20 minutes instead of one minute. And I said to the guy, God, it's taking a lot longer than usual. He goes, yeah, it's so much worse. Can you speak to the airport? Even the security guard himself is saying this is worse. They spent tens of millions of dollars. Tens of millions of dollars for this sideshow that takes way longer. Well, I just want to tell you this concept, which is an extremely sophisticated concept in technology called series versus parallel. Are you familiar with the difference between those two things? I'm so condescending in the way that I'm speaking to you.

45:12It's like GPU versus CPU? No, it is actually kind of like that, but that's overcomplicating something that's actually quite simple. When you line people up at a supermarket checkout, they all stand in one line waiting for the checkout and every checkout has its own line. And that is a bad system because everybody always feels like they're in the slower line and it's unfair to the people when you make people choose up front. And that's because all of those lines are in series. It means each person cannot proceed until the other person has finished. And then there's an idea of parallel. Imagine you had one line in the checkout and whichever checkout was free, the person at the front of that line funneled to the free checkout.

45:55That'd be a much better system because you wouldn't have to make choices. Of course. Yeah, I disagree with that. And so that's parallel. And so parallel, it's you process multiple things at once and you don't have the same dependency on one thing moving to process the next one. You have moved in the airport. They have moved from a security in series where everybody stands behind everyone else. And if one slow person is there, everyone backs up behind them to six people at a machine at once. And so the person with eight kids that's trying to load their stroller on or whatever they're doing, they don't hold up the whole line because the other five people keep moving.

46:31How could you rebut that system? It's like – Because you get the series at the actual thing anyway. So you're actually not saved. All you're doing is you're getting slightly quicker putting your bag on, but then it takes way longer to get the bag scanned. So this is actually ridiculous. You don't because you line up in the queue and then the person at the front of the queue who's managing it says, go to that machine, go to that machine. They spend longer scanning it. So you save a bit of time on the front end. Then you hit a much longer time at the back end. Actually, it doesn't save any time at all.

47:02so it takes more time. It is very obvious that I'm not - You go from parallel into series is the problem. So they just spent all this money to - You literally do. When you get to the machine, how do you go into series? Because then everybody has to wait for the bag to go through. So all you do is get the bag on quicker. You're right, but you still had that at the other end anyway. I know, but all you've done is just transfer the time from - You transfer the time from waiting before the bags go on to waiting after the bag goes on. We're waiting for longer after the bag. We're going to do a poll on this.

47:33I'm going to try – I'm going to send the wording to you and Mike to vet because of the overwhelming level of criticism of my wording. Extraordinary criticism. I'm too emotional. I'm too whatever. All right. So, Mike, you'll sign off on it. You'll say yes. That's the way a normal human being would write a poll. Okay, fine. And we're going to ask about this because clearly we're at an impasse. You are not for turning and I am not going to be persuaded. and so let's leave it to the listeners to make this call. I'm staggered that you don't recognize how much slower this is. Well, it's amazing how I mirror your exact emotion.

48:10But we'll let the listeners – I think they've been paid off by the airport here. You're going to have to accept the verdict of the listeners. And don't you go through special lines anyway. I thought you'd just go underground somewhere and then you reappear in the front of the plane. If only. I'm waiting half an hour for my bag to come out And I reckon it pings me out of spite now. I must have a special tag. And like every time it pings my bag, I have to wait for some other guy. Some woman comes and she finally gets the bag. She looks through it. And you're fine. Are you aware of what you're whining about?

48:41You would be, you know, there's the one percenters in life. And then there's the 0.1 percenters. And then there's the 0.01 percent. That's the billionaires. You are that for travel. You are the 0.01 percent. Your experience. I mean the only way you could have a better experience is on a private jet like your commercial travel experience is in the 0.01 percent and that is what you want to complain to the masses about your this is like the most extreme version of let them eat cake I think I've ever heard on this podcast so good luck with that I'm speaking on behalf of the masses who may inconvenience by this ridiculous oh god if you're speaking on behalf of the masses how much dollars will waste on this ridiculous system that takes longer it's just a joke I just love that you just said, I'm speaking on behalf of the masses.

49:29I think that is not going to stop the pitchforks coming for you. You're claiming that you're speaking on behalf of the masses. When the pitchforks come out, the first thing they should overturn is these ridiculous security systems and move on to your house. So we're going to have no judges. That should be the order. No airport security. What else have you gotten rid of this podcast? Well, we've got more. Let's go to a quick break. We've got our next target coming right up. It's a good one.

50:01and we're back and we're going to straight into our very popular deep dive segment and of course our deep dive is brought to you by terim capital they acquire technology companies to grow sustainably over decades thinking of selling discuss how it might work at terim.capital slash contrarians and today we're going to do a slightly different deep dive we're not going to do an m &a deep dive we're going to do a company deep dive on one of our of course favorite companies talk about at the pod, DroneShield. We basically called that for what we thought were all the right reasons. Valuation. My reasons were every time I read an article in the Wall Street Journal, I spoke to my Israeli friends that literally fly drones or shoot them down.

50:40No one had ever heard of DroneShield that was never written about. And so I thought, well, I'm not sure this is what it says. And then it turns out everything happened much faster than we had expected. And for a different reason. It happened real fast. So we saw during the week, DroneShield shares got absolutely smashed, dropping 31%, falling to$2.25, wiping a billion dollars off the market cap. DroneShield, of course, develops AI-placed platforms to use drones and autonomous systems to government, police, infrastructure owners. And shares, of course, have still jumped 200 % this year, making it one of the hottest stocks on the ASX.

51:14And the reason it fell, well, there was two reasons. Firstly, it released an announcement that it ran a US contract that turned out didn't exist. It made a mistake. No, well, I think it did not exist. It had previously been announced. Oh, okay. I wasn't quite sure if it had been announced or they just got it wrong. Or re-announced the same announcement. It's like you put out a big announcement that says, I've got a podcast called The Contrarians. It's brand new. And then I say, you know, we've done 150 episodes. And you're like, oh, I retracted. It's not brand new. We've already been doing it for 150 episodes.

51:44That was drone shill. What would have been worse if I then sold shares in the podcast? Because Oleg Gvornik, the CEO of this, he wasn't the founder, there was the CEO sold his entire share holding,$50 million last week around the time of this very dubious announcement. And what's even worse is the chairman, Peter James, who's another friend of the pod, offloaded$5 million worth of shares. And Jethro Marks, who's an online character in Australia, sold his shares as well. So this is staggering share sales. I think we do find Peter James sold$12 million of shares. Oh, did he? Sorry, you're right.

52:19Peter James sold 12 million and Jethro sold 5 million. And Peter James, of course, he was chairman of Halo Foods and he put his - I wrote about Halo Foods in the Fin Review. You did a great article. You foreshadowed this. And a lot of people put the blame on Peter James. We won't comment whether it's his fault or not, but it was his protege, Jordan Thompson, who was CEO when the business went down. A lot of people blamed him for that. So now he's got this situation, got the NARMAP situation, which - Well, they bought the Healthy Mummy or whatever it was called. Is that what it was called? Which was – I mean, people were paying crazy prices for a lot of stuff in the boom.

52:56And my understanding is that was Peter James and Jordan Thompson really did sort of push that deal. Yeah. It wasn't a good deal. I think I flagged when you wrote that I think that deal was going to unwind that business. Yeah. And you did and you got it right. I think sadly you weren't the chairman of that business. If you were, I think it would still be going – if you were chairman and Danny was running, I think it would be going pretty well. So Peter James had questionable history there. There was obviously NAMAP, which got sold in the end for far less than it was trading at. That was a pretty disappointing result.

53:22And now he's - You mean it got sold off its highs? Well off its highs, like 70%, like miles off its highs. I know, but it's got sold for a billion dollars plus. I think people were disappointed by that result. And there you've got, and this was his great result here. And it's just, he's selling, I don't understand how the CEO is allowed to sell 100 % of his shares. What do you mean allowed to? Well, presumably you have to get permission from the chairman before you sell all his shares. You do. So why would the chairman allow the CEO to sell all his shares? 100%. You know, it may or may not be correlated that he also sold$12.5 million worth of shares and another director sold five.

53:59The question is whether they – to what degree, if any – I say this cautiously because like I actually am not trying to cast dispersions on people here. But to what degree, if any, did each know that the other was selling this large number of shares? because that could be problematic if the answer was they did it in a coordinated fashion. Well, it's possible that Oleg, the CEO, didn't know the chairman was selling, but the chairman would have known that the CEO was selling because the chairman presumably has to prove it. Yes. Look, I don't know if they have to, but I have to approve any share sales by the CEO.

54:32But I'll be a devil's advocate on this. On what grounds? I just want to be clear that I'm not defending this. I think this is deeply problematic. There's no doubt that the CEO had made representations to investors about how confident he felt about the business and to the media and that the future was bright. And then selling every last one of your shares is not consistent with that message that I think tomorrow is much better than today. It may be consistent if you think the business is going to be much better than today, but the price is overvalued. That could be the case. But selling all, you know, that's the Adam Schwab binary approach to life, right?

55:10I sell none. I sell all. There's no middle ground. But I'll give you a devil's advocate. On what grounds could the chairman have stopped the CEO selling all of his shares? What would you think the grounds could be for that? On the grounds that you shouldn't be selling all your shares while you're running the business. But that's not his. I think that would be a stretch to use that reason to block a share sale. On the ground of optics being terrible, for one? Not a good enough reason. I'm just telling you. I'm telling you what reasons I think would be good enough for the chairman to do it. That wouldn't be it.

55:40I think that's absolutely a good enough reason to not be selling shares. When you're trading at record highs, you appear to be a meme stock and you've grown – your share price is up 300 % this year. You're making bullish comments and you're selling all your shares. It's disgraceful. I agree with you about everything that you've just said. And I think it's, you know, I feel like it's deeply dishonest to investors that he's made representations to. But, you know, I would be very hesitant to prevent anyone from selling shares in the company unless either they were contractually restricted. Obviously, if it's blackouts or something.

56:22No, it's clearly not a blackout. But I think I would want a really, really good reason. And it does raise an interesting question, which I don't have the answer to. I've never thought about this because I don't face this problem at all, thankfully. Like, what if one of your senior executives, let alone the CEO, wanted to just sell out all of their shares and were contractually entitled to and it was in a trading window and you just thought this is going to tank the share price and look bad? Is that enough of a reason to prohibit them from accessing their liquidity? I think it is. I don't know the answer to that.

56:54I think it absolutely is. I know you think it is, but like I'm thinking about it from the inside of that. I'm not sure. I would, you know what, I tell you what, I would take advice on it is what I would do. I know I would absolutely make sure there was a very good paper trail on the advice that I took on it. This isn't a question of where there's no one saying this is illegal. Like this wasn't, this isn't during a blackout, we know. I'm not downing for a second the legality of it. I'm down in the commerciality and the morality of it. And commercially, it's moronic. And morally, it's just wrong.

57:27So on both those grounds, we're not talking about the black letter law. No one's saying these guys should go to jail. We're just saying, I don't know if they're capable of running this business. And this has become a meme stock. If your cousin, who you're very close to, I'm just making this up, comes to you and is running this business and says to you, I think this business has got a really good next three years, but there's no way we can keep this share price going. It's crazy. Even when we go and double the size of the business or triple the size of the business in three years, I think the share price will be materially lower than it is today.

58:02At some point, this price is crashing, but I really do believe in the business. What should I do about this$50 million of shares I have? It's my whole net worth. What would your advice be? I think that where the issue comes in is what you said before is if you're talking up the prospects of the business and participating in the share price run up, that is a very different situation than a share that just becomes a meme stock independently of that. I think that is a big difference here. I know, but he spoke positively about the performance of the business. But listen, I know you don't want to answer the question, Elbow, but you've got to answer this question.

58:38Let's say he was speaking very positively about the prospects of the company, which he believes, but was not jacking the share price. It was not saying this is cheap, you should keep investing, but was speaking for, what would you advise him? But you know my view is part of the responsibility of a CEO is to make sure that the share price doesn't differ from its intrinsic value too much. And you should be, these people knew the share price was getting out of control. They should have been cautioning the market. We think we're getting ahead of ourselves. Whatever the case, like it's no different how Warren Buffett would act when he thinks the share price is getting out of control.

59:13These guys put more fuel on the fire, wait until the share price appreciated to this ridiculous level, then dump their holding en masse. This is just outrageous behavior. So I'm trying to take the opposite argument because it's pretty compelling what you just said, right? But Warren Buffett is answerable, or he's retired now, but he was answerable to no one, okay, effectively. He ran a public company. It was like a private company. He was answerable to no one. and so um but but you know what happens if a ceo and a chairman start talking down the share price what how do you think their investors these institutional fund managers how do you think they respond to that what they were responding is they start agitating for the removal of the i think you get the i think you get the investors you you get the investors you deserve well everybody invested in this business every small cap invested in everybody people invested in this business I don't think are very good investors because if you're investing at this price now, I question whether you should be managing people's money.

1:00:14Not at this price. If you invested in this business at the front of this year and you said, I don't think this represents intrinsic value, but you're a fund manager and you say, I think this is a bit out of control on intrinsic value, but I can see how the human psychology is going to play out on this. This stock has momentum. This stock has FOMO. People are going to be piling into this stock in the next six months. And so you go and buy it and you sell it in six months time. Even though when you bought it, you thought it was overvalued for the underlying business, but you are very good at picking human behavior.

1:00:50And would you give your money to that fund manager or not if they could consistently do that? I think the problem with bubbles like we're in now is that dumb people look smart. That's the thing I hate most about bubbles. And the fact that share prices are miles, like voting machine, weighing machine, intrinsic value is differing from price. That is what it is. But it's the gloating you get. It's like people who buy a house that's too expensive and gloat, I've got this really expensive house because I've taken out debt to buy it. Or it's people who buy shares that are clearly overpriced and pushing these meme stocks.

1:01:19And Jones Hill is on the pointy end of it. It's not the worst meme stock out there, but it's pretty bad. All these fund managers who are jumping on this bandwagon, and it's not all of them. Some of them are excellent. There's some excellent fund managers out there who are avoiding these businesses and credit to them but there's a cohort of fund managers who are bubble seekers and meme stop seekers and i don't have any great um compassion for people who lost money in this stock don't get me wrong i just question whether this guy i think this guy should be running this business anymore well i don't think he will be pretty i don't think he's going to be running the business for much longer is he with my guess well who's going to all his mates also sold shares unless both the chairman and the CEO go, who's going to do it?

1:02:00Well, so we can say when you see this kind of behavior, you know you're in a bubble. Like this does not happen when it's outside a bubble. So at least we can say, I don't like the word bubble because bubble is just 100 % emotional, but we can say late in the boom part of the cycle. Definitely that's when this behavior happens. I don't think we're at the end of this. like there are a lot of very angry fund managers and very angry people and i don't think we're at the end of this and so you know you're very astutely avoided my question but like so would you say to your cousin don't sell any shares just go and tell your investors the company's overvalued and accept that your 50 million dollars of money is going to drop to 20 which is the advice that you'd give i think you're taking you're you're taking the extreme position here i i wouldn't have an issue if he sold 10 so that's what you would tell him to do if he sold i would say sell something well that's it i just want to get to an answer i think by the way that is the right answer to the question like you're allowed to sell shares you got liquidity if you got 50 million dollars and that's all your money then sell 10 million dollars sell 15 mil like that's fine but you got to um you got to show you i think the most important thing to show investors is that you are in there side by side with them and you care more about the success of the business and value creation than they do.

1:03:28Because I can tell you this, share price goes up, share price goes down. I say it with Cattleball all the time. I've seen it for 10 years. The person that has least control in some ways of the share price is the chairman and CEO because we're not buying or selling, right? But we're messaging. So we have a little bit of control. And I think getting the messaging right is very important because you've got to take investors on an honest journey to understand the performance of the business. But the number one thing that we have control of is executing the performance of the company itself, having a strategy, executing on the strategy.

1:04:02And so I think the ups and downs of the share price, if you are going to be successful as an ethical, honest operator in public markets, you have to turn off the screen and not look at that share price all the time and basically say, I believe in building this business long term and I'm going to be, what they say, in for a penny, in for a pound. And I think that to me is the biggest problem that's happened here. The CEO and chairman and director of this business, do they all sell 100 % or only the CEO? The CEO definitely is 100%. I can't speak for Peter James and Jethro, but I would have been at 12 million, it must be a fairly big part of his holding.

1:04:43Maybe, but if they sold, like let's say Jethro sold a third or a quarter, I'd be all right with that. I wouldn't throw him in the same basket as that, right? But I think you've got to signal to the market, when I tell you I really believe in this and we think there's a lot of value to be created, I'm putting my money where my mouth is. And that to me is the unethical part of this, that you should not give nasty surprises like this to people that are betting on you, basically. So we're actually in agreement on this entirely. Interesting. I'm just looking at their annual report last year. It looks like Peter James and Jethro sold a huge number of shares last year as well.

1:05:30And so did Oleg, actually. They all did. So I've got a feeling as soon as these guys seem to get shares, they seem to sell them very quickly. So they get these massive options grants and sell them straight away. So Peter James sold 6 million shares last year as well, which is pretty much 100 % of his holding. It looked like Jethro sold his entire holdings and Oleg sold his entire holdings, which is pretty bizarre. Which makes me think, hang on, if that was true, maybe they weren't sold in one piece. maybe they were sold like not as one hit. And so the annual report says they sold it all. Obviously through the year, annual report shows you the annual movements.

1:06:11Well, so I'm a bit less sympathetic for investors if that was the case. Because if you see that like effectively all of the shares are being sold by these senior people in the organization the previous year, if that's correct. Last two, actually 23, last two years, they seem to get these massive grants, sell them, get these massive grants, sell them and completely sell them. Well, they've put the flag up the mast, right up the flagpole. So if there's a big flag flapping on the flagpole and you don't pay attention to it, then maybe I'm a bit less sympathetic to investors. Oh, so just to reiterate, I'm not sympathetic to investors at all.

1:06:44You get the CEOs and the board members you deserve and they've got these guys and good luck to them. I'm not at all sympathetic to investors. So maybe what they've thought, the CEO, maybe what his thought is. I've sold my whole shareholding in the past few years and it hasn't been an issue. Where would it be an issue now? And there's a few reasons. One minor but important reason is because in the middle of you selling it seems like you put out an announcement that you had to retract. Not great. And the second reason is because you banged$50 million in one hit on the table and presumably that wasn't done in the past.

1:07:23The thing is, you can get away with death by a thousand cuts. Maybe nobody notices, but you can't get away when you just slice off someone's head in one hit. And I think maybe there's a bit of that lesson to learn here as well. This company also gives an incredible amount of, it was obviously, they had a much lower share price, but they gave like 46 million, no, 49 million options between, I don't know, 22 and 24. This is like an incredible amount of dilution. At what price? Like how does it? A whole bunch of various prices. Like 20 cents, 20, 25, 35. And what was the share price before this? Some were zero.

1:07:57Some were exercise at zero. And what was the share price before this event? Oh, the share price has had a pretty wild ride. But what was it the day before this became public? Oh, three bucks or something. Okay. More. I was like, no, it hit. So sorry. No, the share price hit. Its peak was$6.36. And so what's happening? Directors are being paid options. The share price is down. It was obviously only very briefly peaked. But the share price, we'll go through a history of the share price. So it was trading at like 20 cents for a number of years. This is when they got given all these options. So 50 million options was really$10 million worth of options back then.

1:08:40That$50 million worth of options suddenly became like$300 million briefly because the share price peaked from 20 cents to up to six bucks. But what do I need to do to get these options? As a director, do I just get these options? How do I get them? It looks like both directors and executives got them. And can you - It's part of that. In lieu of cash? Oh, yeah, because Peter James only got 150 grand cash. So it looks like the majority of his board fees essentially were in the form of these options. So the thing about options, options are a bit of a - I love options if you believe in something. because if a share price is$2 and you give someone shares in lieu of cash at$2 and you give them, I don't know,$100 ,000 worth, they get 50 ,000 shares.

1:09:29It's a pretty easy calculation. And you know what the shares are worth. But if I say I don't want shares at$2, I want options at$4, on the one hand, I love the director that does that because they fundamentally believe in the trajectory of the business. It must have. On the other hand, those options are not worth much. And so you don't get, because they're miles out of the money and they're dated, right? They might have two or three years till expiry. And so instead of being worth$2, they might be worth, I just make up a number, like, I don't know, 10 cents. And so all of a sudden, those$100 ,000 don't make 50 ,000 shares.

1:10:05They make 1 million options. And so that is why the number of options grows so dramatically. Because if you give people out of the money options, significantly out of the money, more expensive than the current price, especially if the share price hasn't been there anytime soon, anytime recently. They get very cheap and the number escalates very quickly. That's why there are so many. So if you go back to the share price in January 2024, it was about, they basically got given at the money options. It was around that price, give or take a few cents. So I think the share price was 38 cents. They got a 41 cent option.

1:10:39So they got a pretty much in the money option or at the money option. Does it say what that was valued at the option or not? Can you work that out you can tell in their director's report uh in 2023 peter james's share based payments was a million and jethro's was 200 grand and oleg's was two million he didn't get none of these guys get much base pay in fairness then the next year two million dollars or two million two million dollars because you know you've got to value them for the for the annual report so the chairman got a million dollars of this was you know how when you look back and you sort of readjust the value of the options.

1:11:13Oh, I see. So they weren't worth a million dollars when they were given, but by the time they vested, they were worth a million dollars. The following year, he got$222 ,000 worth, which is high given the business wasn't that expensive then, but it was not grotesque. So he got$368 ,000 pay in 2024, Peter James. That pay is now worth like what,$12 million we've seen. And so the options, because there's two ways to get options really. One way is that you can find a counterparty somewhere in the market, so some investment bank, and the investment bank wants to bet against you. And these can be publicly traded, like they're on the ASX, or they can just be a private deal.

1:11:54And that's a derivative, which effectively means, really, that if you say, the share price is$1, I want to buy options at$2. I say that to you, and you say, I don't think they're getting to$2 in the two years that you're going to have. I'll take that bet, basically. then we just like making a bet we're doing a bet and you might say to me the cost of buying those options is fifty thousand dollars and at the end of the bet we basically work out who won the bet and if you won the bet the share price didn't get to two dollars you keep the fifty thousand dollars but if i won the bet and the share price got to two dollars fifty you basically pay me the different price difference between two dollars and two dollars fifty and so that's that's like sports betting, but we're just betting on stocks, right?

1:12:38And it's a derivative, maybe we never even touched the shares, we're just betting. Or I can make a bet where you have to go and buy the shares and give them to me, that would be another version. But that's kind of 1A and 1B. But version two is where the company gives you options. And what that means is the company says, we'll give you 2 million options at$2. And if they get there, so you're actually going to pay us the price. Let's say I had 100 ,000 options at$2. Now I want the shares. Okay. I pay$200 ,000 to the company. The company gives me the 100 ,000 shares. And now I've got the shares. And you say, well, where do those shares come from?

1:13:18Well, they come from magic. I press some buttons. They appear. Now I've got, well, but where do they really come from? They come from all the other shareholders. The other shareholders are diluting themselves to give you those shares. And so I've got no issue with that whatsoever, by the way. Like I told you, I really prefer people. I don't have an issue either. I'll go further. In every business that I'm involved in, I would much rather get out of the money options than any other form of payment. any other form of payment. I don't want the cash. I don't want shares. I just want to be able to bet big.

1:13:55And the way to bet biggest is out of the money options in a company that you believe in. But that's how options work effectively. Yeah. I think the two differences here is one, the options look like they're pretty much in the money. They were five-year options. That's why I was asking you the cost because the thing is this, a$2 share costs$2, but if the share price is$2, an option at$2, it's not going to be very different. There's multiple. A, there was no – they were basically in the money or at the money options, which is one problem. Two, there was no performance. It doesn't look like there was any performance hurdles attached.

1:14:29Or if it was, it was obviously based on TSR. And I have no issue with them. I don't think the actual quantum – because obviously the share price is much lower at the time. We shouldn't retrospectively criticize these guys because the share price went up. But where I think they should be criticized is A, about the money, and B, they sold them all. That's the two issues here. But for those two things, I think good on them for taking low base pay and backing the business. I actually have no issue with Oleg, Jethro, Peter doing any of that. I have issues with getting them out the money. So they sort of did it half right and they did it half wrong.

1:15:04So if their share price was$0.30 and it had never been to$1 and I said, and I was the director of that company, and I said, I would like all of my pay in options at$1 that expire in three years' time. Let's go to someone and calculate the value of those options. Your Black Shoals will calculate the value of those options, whatever they're worth, five cents. And I want you to give me my whole$150 ,000 salary this year in those options at five cents a piece. Would you be happy with that? Would you support me on that? Because that's what I'd like to do. I think you need to have some performance hurdles, but I think you also need to have significantly out of the money options.

1:15:47Why should you have performance hurdles? You were going to pay me$150 ,000 as a director's fee. And instead of the cash, I say to you, no, I want to buy options that are massively out of the money and we'll get them priced independently. Oh, so out of the money's okay, but these weren't out of the money. Yeah. I told you, share price's 30 cents, share price has never been above 45 cents. No, that's fine. That's fine. Dollar strike price. That's not what this wants. You'll support all of my - Nothing like what this wants. I know, but would you support all of my director's pay - Absolutely would.

1:16:15In those options? Okay. So, so would I, and by the way, I just want to reiterate, as a director, that would be my vastly preferred way of doing it. But how do you think investors in the market and proxies would respond to that pay structure? I think if they were out of the money enough, they'd be okay with it. I think. I don't know. I have to ask Dean directly, but I would have thought that – The problem with this is, look at the share price hit$0.37 in early 2023, and sort of drifted through the year, and then it was sort of late 20s in December, so it dropped off and then hit sort of late high 30 it was 38 cents in the 12th of jan 39 cents just after that and then by the time they granted them they were basically in the money so they were out of the money a few months before but it was because the share price dropped so basically got at the money in the money and within a couple of weeks it was well and well and truly in the money so but the issue i had is just these guys are giving themselves in the money or at the money options and just flogging them off as quickly as they can.

1:17:17And this is a recidivist. Investors should have looked, if you're a smart investor, you should have been onto this. Like that's why I'm zero sympathy for these investors. Zero. Yeah. Well, it's an interesting discussion about options. I mean, you know, the downside with options when you use them for executives, because so options are a derivative that gives you leverage. That's the way to think about them. And like everything with leverage, it works both ways. And so the problem is that when you give an executive like these performance options rather than performance shares, if the strike price is$2 and the options expire and the price is less than$2 and then it goes to$2 three years later, it doesn't matter.

1:18:04They've expired and they're worth zero and they're gone. And so if you play the game with options the wrong way with executives, it's a very effective way to demotivate executives as well. That's why I generally will prefer RSUs, restricted stock units for executives, where they actually get shares. And so Catapult puts a premium on them. So, I mean, you're like this. So, like, we give shares even for, like, the short-term bonuses. But we say the share price is X right now. or a 30-day VWAP or whatever we use. And we're going to give you restricted stock units as your bonus if you earn a bonus.

1:18:47But we're not going to give you them at this price because we think the share price should have grown in the last year. Totally. And so we give them at like 12.5 % above the share price that they're currently at. Yeah, which I think is a great way to do it. We try to build in some premium and shareholders love that. Like Proxy said, we've never seen that before. We say, well, it's common in the US and shareholders love it. That was another great deep dive idea. thanks to our good friends at Terram Capital. If you want to sell your business, speak to them. We'll go to a super quick break and we're back in no time at all.

1:19:27And we're back. And last week, food delivery giant Menulog announced on its website it would stop operating in Australia in two weeks. Profitability, of course, was a massive issue at Menulog with its costly marketing campaigns involving Katy Perry, Christina Aguilera and Snoop Dogg contribute to the company's high operating costs. In 2022, the business lost $275 million, the following year$110 million and last year$32 million. And according to the corporate regulator, the company's revenue is almost halved$244 million over this period. Shockingly, Ibisworld claimed that Uber had a 54 % market share in 2024 and Menulog was at 24%.

1:20:08But by this year, by September, it had dropped to only 10%, which is pretty catastrophic. Decision to exit Australia is made by Menulog's European owner, Proces, a Dutch investment company that bought Just Eat Takeaway for 4.1 billion euros. Just Eat famously, and you talk about golden windows. This is the most golden of golden windows I think we've ever seen in this country. Just Eat purchase menu log back in 2016 for$855 million, literally weeks before Uber Eats entered the market. Of course, I was a very small beneficiary of that large yes, but the biggest beneficiary was of course Leon Kamenev, Dan Katz and Gabby and Hesi-Libovich who all did incredibly well from the sale.

1:20:49A dear to you. Well, I was just going to say to you, like this is a golden window moment. People say most acquisitions are value destructive. This ticks that box. The question is, did they get any value out of it before they shut it down? The answer is almost certainly no. Did it give them any foothold in Australia that then turned into other good stuff? The answer is almost certainly no. Did it generate a whole ton of cash after the acquisition before they started losing money the answer is almost certainly no and so I think ultimately this was a ridiculous transaction at the time I was very happy for everyone I didn't know you were involved in any way at the time so I'm not even happier when I found out you were involved but like I certainly knew Gabby and Gezi were involved in it and like they went through a very long period where nobody would give them one cent for this business and And, you know, this was another, like, I just want to be super clear.

1:21:49I'm not on commission for Goldman Sachs here. I mean, I'd be happy to be on commission for Goldman Sachs, just to put that out there, or anyone. In fact, I'll even say bad things about them if someone else pays me to say bad things about them. But this was another Nick Sims special, right, at Goldman Sachs. This was Nick Sims' Mona Lisa. Well, I think you only say that because you don't know the other. You say that because you don't know the other masterworks hanging in his gallery, right? but like I don't think this is this should be in the Louvre and hopefully not stolen this is this is one of the all-time great transactions in the Australian industry actually I think this is the second greatest transaction the greatest transaction was us so Jez and I selling a little business called My Table to Gabby and Hezzy just to paint the peaches and Jez was running My Table at the time I was running deals.com.au at the time we were losing about a hundred grand a month we had 30 odd staff one of our staff was a guy called Justin Joffe who runs a fantastic podcast called What the Flux that NetWealth purchased recently.

1:22:46We had a great team, but we just couldn't get product market fit. We were burning cash like drunken sailors. And it was potentially putting at risk the bigger business we had. And so we had shutdown costs. So this business was losing money. We had to do something with it. We had literally weeks to do something with it. And I managed to convince Hesi to purchase it for 10 % of Eat Now. Bear in mind, Eat Now didn't really exist in great form then. Matt had sold it to Gabby and Hesi, but it was worth like a million bucks. And we'd spent more than a million. But we knew that Gabby and Hessey do a great, especially Hessey do a great job.

1:23:20Got Jason Rudian who did a great job. Matt did an amazing job with Nathan as well there. We knew these guys were much better than us at this stuff. We got 10 % of this business. For our business, it was literally worth less than zero. Like there was no question. We would have to pay the money to shut it down. And then because of the great job, and this was one of the great transactions when Menulog and Eat Now merged. and this was a, so Menulog was market leader, had about 80 % of the market, 80, maybe 75 % of the market. EatNow had about 25 % of the market, but was growing faster. They did an amazing deal where it was a 70-30 split.

1:23:54So Menulog took a bit of a haircut on revenue, but EatNow was growing faster. And they went from two businesses that was losing money to a business that was basically break-even and about to be profitable. Obviously UberEats hadn't come yet. And we were able to sell our dog of a business into this into this merger which was before it which was great for us and i just did and together with nick sims and the goldman's team did an unbelievable job of selling this merge business timing it the goldenness of golden windows and we sold our business it was probably worth negative 300 grand for what was tens of millions of dollars so the most unjustified windfall in australian business history i like to call it well that is just called Hustle is unjustified.

1:24:35No, it's unjustified. You know, you have all of these because there was no DoorDash. Nope. There was no Deliveroo. There was no Uber Eats. DoorDash did exist, just not in Australia. Yeah, that's what I mean. Like in the local market. And I think, let me tell you the sad part about this story, apart from all the job losses is definitely the sad part about the story. But the other sad part is this. Menu log. Australian leader now vaporized. whatif.com, totally dominant in Australia. Who bought that book? Expedia bought that. Expedia. I forget who Expedia is. Which one do they own? Expedia is Expedia.

1:25:14They have hotels.com, whatif. Hotels.com, that's right. Their main business now is really B2B through Expedia Partner Solutions. Okay, that's interesting. Well, yeah. Okay, so they buy whatif and whatif. I mean, like they had stagnated because I think Graham Wood basically lost interest in the business and was funding the Greens, right? That was his main... It was sold for like 700 million bucks in the end, which is a pretty low valuation, given it was the market-leading OTA in this country. And if you look at booking, booking's probably a$10 billion business in Australia. So menu love, dominant Australian business, eventually vaporized.

1:25:49Booking, what if, dominant Australian business, sold for not much, largely irrelevant. I've heard ads for them recently, but who cares? They're irrelevant. But look, there is a difference between those two, in that what if we subsumed as part of Expedia and they kept the brand and whatever. And Expedia does have a pretty good presence in Australia as a result. It's over-indexed in Australia versus Menulog. That would have died either way because you had Uber Eats and DoorDash coming for it. So the ownership structure, it actually survived longer because Just Eat bought it. But why couldn't Just Eat win in Australia with that head start?

1:26:23Because the model was different. So Just Eat and Menulog's model was, and they did change. at the time this was they were a bit earlier but at the time their model was use the existing delivery infrastructure of the business so if you're a pizza restaurant and you've got a delivery um part infrastructure they'd leverage off that so you basically use your own or it'll be pickup versus doordash and uber eats which created this new basically this new industry of we're going to hire or going to whatever the exact sort of legal mechanism was we're going to create these independent contractors who would live who will create this delivery infrastructure which didn't exist and we spoke remember speaking to jason rooney and hezzy about this probably 2015 we need to be able to turn these great restaurants into delivery restaurants we just couldn't work out how to do it and the problem was it was so capital intensive you need to be global business really yeah you didn't have a billion dollars to burn and australia australia is a small market and so like it would be hard to make that because your whole the whole um pitch would be we use australia as an incubator and then become globally dominant in this space, I mean, that's a hard pitch to do for this kind of money.

1:27:30Yeah, and it took Jodie Oster, friend of the pod, fellow doctor like yourself, who was the first CEO of Uber Eats here who did an unbelievable job and has created – I think Uber Eats in Australia is possibly the most profitable part of Uber globally. I think it makes more money than anywhere. So they've done an unbelievable job. And DoorDash came in quite late. So DoorDash is much weaker here than it is in the US. DoorDash is actually more valuable. I'm pretty sure DoorDash is a standalone. Uber Eats is obviously part of Uber. If you look at DoorDash's market cap, DoorDash is a$90 billion business and Uber, the entire Uber is worth 190.

1:28:05So it's hard to split up because Uber's got all these different parts of it. But you probably assume that DoorDash is equal or slightly more valuable than Uber Eats and they're much bigger in the regions and obviously much bigger in the States, whereas Uber is more global. DoorDash is more US centric and DoorDash came into Australia quite late never quite got that's what uber 55 is just incredible market share for for a business in a in this kind of environment well i don't believe those ibis world numbers just to put that out there it feels right though it might feel right but like i've often had some experiences with those numbers where they maybe were not no i agree but like it's let's say that's close enough yeah so what you're saying is this menu log wasn't going to survive either way no matter who owned them unless it was because their model was not as good as the models that were coming and they couldn't afford to compete.

1:28:51So that is like sell or go broke and miraculously sold for a great price. Whatif.com, is there an alternate universe where they are still the dominant player in Australia today? I think had they continued independently, they would have remained a strong business. They had a great brand here, had a great UX. There was obviously Graeme Wood, the founder, was sort of phasing himself out. So that's a real question. Can the business have another generation? But those marketplaces, the online travel agent marketplace, they do have some pretty strong powers. So I think – and remember what it famously had really low commissions?

1:29:32I think it had like 10 % hotel commissions, which was actually ridiculous. They eventually increased it slightly, but they could have continued to increase those commissions to what everybody else was charging. Oh, that's right. You're right. I remember that because they were publicly listed in Australia. And so you could see their numbers. That's right. I remember that. I remember that. And so do you think they could have become a global player? They were never going to be booking. Booking was well and truly on its way. I think what if sold in 2011, 12, 13, whatever that era, booking was a big business then.

1:30:05Maybe not as big as it is today, but it was a big$50 billion sort of business back then. So you say with MenuLog that Uber Eats came in literally three weeks later, right? I'm probably exaggerating, but it was very soon after. Okay. So let me ask you this question. MenuLog sold for$850 or something, right? Is that right? That was a number. Okay. And so what's the price the week after Uber Eats comes to this? Well, there's a question. If you look at that price that Nick Sims got, the$800 plus million, the underbidder, I think was like$500 million. So that was just a crazy price paid for 100 % cash to make it even more outrageous.

1:30:46I got this great debt for, I think it was JP Morgan or something. There was an argument that it was probably only ever worth like$400 million in the first place. So after Uber Eats came in,$200 maybe, best case. So you think the true value of that business a week after Uber Eats comes in, which might be three months later, six months later, whatever it is, not long, is a quarter of the price they got, that you got, I should say. And so there you go. That's golden windows. And by the way, by the way, the price of that business today is negative because they have to shut it down, pay all these termination costs.

1:31:21Yeah, exactly. So like that has a steep, basically the curve of the value of menu log looks like$8.50 on the day that the deal's done, sharp drop to maybe$200 six months later, and then a slow burn down to probably minus 5 mil or something. Because of all the losses as well, we're not even factoring that in, right? But equity value might be now minus 5 mil because of shutdowns. And how long ago was it sold? About 10 years, nine years ago. Okay. So the curve of menu log value, 850 day one, 200 mil day 180, minus 5 mil nine years later with probably a linear curve pretty much down to minus 5 mil.

1:32:11I'm actually just looking at Alistair Venn. Alistair Venn is actually a really great guy. He's a, do you remember 10 McGinley? He was in Married for Children and Ringing the Nerds. He was the patron saint of something called Jumping the Shark which is a great. Which one was he in Married for Children? He was the next door neighbour who came in later. There was a guy who replaced. Basically whenever 10 McGinley went on a show it basically went, It got taken off the air soon after. He was called the patron saint of jumping the shark. I think it was on Happy Days as well at one point, around when it jumped the shark.

1:32:41So Paul Woodall also, who I think is actually a really smart guy and a good operator. So I was just looking at his LinkedIn profile, and he was saying that Menulog made$26 million EBITDA in 2017, which actually, who knows what the actual EBITDA was, but that's not losing that much money probably below the line. How does he know? Because he was CEO of it. So hence my jumping the shark reference. Alistair ran Groupon during its glory days and then he left and Groupon went terribly. Then he ran Menulog when it was doing well and he left and it went terribly. Then he went to Safety Culture and there's real question marks over how Safety Culture is going.

1:33:20Is he currently the CEO of Safety Culture? No. Then he went to Woolworths, probably did a decent job there. And now he's running Pet Circle, who we talked about last week. So poor old Alistair, who's a great operator. Failure seems to follow him, unfortunately. And I think Pet Circle could be the latest in that run. But just in terms of the - But when he was at the other businesses - They were doing well. They did well when he was there. He did well when they were there, and then subsequently they did badly. Yeah, and so we can't blame that on him. No, I'm not blaming it. I think he's a good operator.

1:33:48I'm just saying he's got this knack of things going badly after he leaves. Yeah, so his resume should just be those examples, and then he should say, you've got to pay me a$50 million retention payment because the minute I go, it's all dead. And so the question with Pet Circle is, can he do turnarounds? Because what he can do is grow businesses. Yeah, exactly. And bad things happen when he leaves. Yeah. Can he do turnarounds? Yeah. Well, I think the menu log is a sad story, but it just goes to show. It's sad but predictable. Clearly, they handle us too much. Did you think that menu log, when you were getting the offer for menu log, Did you think the future is bright for Menulog or not?

1:34:30We thought it was bright. Well, there you go. That's my point. They were the number one. There's a couple of points there. One interesting story. So Jez and I were tiny shareholders in this thing. But as you know, when you do a sale, you pretty much, unless you can drag, and I'm not sure what the drag provisions were like here. So drag basically means if I'm selling and I've got lots of the company and you've got a little bit of the company, I can just force you to sell at whatever price I'm selling for. Yeah, exactly. And usually there's like a 75%. So it's like compulsory acquisition. Once you hit 75%, the majority can say, oh, you 1 % shareholders, you can't blackmail us.

1:35:07We're going to sell. I got a feeling there wasn't either there wasn't a drag or they couldn't use the drag because they needed like time certainty here and it was a cash transaction. I didn't want to lose it. It was an auction. So for whatever reason, they needed all shareholders, including me and Jez as very small shareholders to agree. and we were never going to like it's not in our interest we're not the kind of shareholders who block something like this um especially given we're tiny shareholders but even if we were big shareholders we wouldn't have blocked this but i remember dan who was running it and did an incredible job to get this price and gets a lot of credit along with leon and and gabby and hezi and jason but dan called me like day before saying we've got a price we need you to agree to we need to agree to sell i said well what's the price he goes i can't tell you i said well how can i agree to sell something i don't know the price he goes it's a good price i said well can you just give me like a ballpark?

1:35:54And I'm sure we'll agree, but just give us a ballpark. This price could have been a hundred million bucks. It could have, obviously it was 850 or something in the end, but we had no idea what the price was. And Jez was like overseas uncontactable. So I had to like agree on his behalf. I said, how can I agree on Jez's behalf? Whatever not the price is. Anyway, we eventually said, okay, fine. We trust you guys. Like they messaged to us that we'd be happy with the price. We said, okay, fine. We went to the signing ceremony at Goldman Sachs office and nobody knew the, well, maybe, maybe Gabby and Hesley knew the price in that room but and Nick Sims but like none of us knew the price like like Jess's dad was there we had to actually sign in the room on the day so we went into this room not knowing what with I thought if you asked me what I thought the price would be I thought it'd be about 400 which would have been a great price because it was a lot more than would have been a year before and that would have a great result for everyone but anything above 400 would have been amazing they showed us this 800 million dollar price and Jess's dad almost collapsed like it was just the most bizarre it's it was the most bizarre circumstance i've ever seen and we i've never heard anything like that before in my entire life it was and we were it was a beautiful morning it was like on september october and the sun was streaming in the goldman sachs 101 collins street office and it was like an angel had dropped down and dropped this piece of paper i mean hezzy showed it to me and like i just i've never seen something like that in my life it was the goldenness of gold i don't know it wasn't my choice to sell i obviously would have sold that price but like not knowing what the price was going into this room and selling it it was it was just remarkable yeah well that is a that's an incredible story and my point but in asking you whether you thought the future was bright is this the challenge with golden windows is that everyone thinks that tomorrow is going to be better than today and everyone thinks the future is bright, including the founders and the sellers.

1:37:45And you basically have to say, I'm selling something that I think is going to be amazing tomorrow, but everyone else thinks it's going to be amazing tomorrow as well. And so I'm getting the price for it being amazing tomorrow. Yeah. And like, I have to not be greedy and I have to get out. And people just say this story over and over again, Mark Zuckerberg declined a billion dollars from Yahoo or whatever it was, right? Famously a billion dollars. That was idiotic. That was the worst decision ever. Like, there's a golden window. Everyone thinks this thing is worth a billion dollars. It's not worth a billion dollars, but he thinks it's going to be much bigger than this.

1:38:20And in the version of the universe that we live in, it's worth a trillion or five trillion, whatever the number is. Who knows? About two and a half trillion. Irrelevant, right? But if there are like 500 parallel universes, in at least 490 of them, it's worth a lot less than a billion dollars. And in some large number, it's worth zero. Yeah. Well, had you offered us$200 million, it wasn't our call, obviously, but had the shareholders been offered$200 million for Menulog, which in hindsight now is a pretty decent price, you probably would have thought, I don't know. I think at$400 ,000, everybody would have taken it.

1:38:58At$800 ,000, that golden window is so golden, you can't open your eyes, the light golden window. Yeah, I know. That was an easy decision, right? But like the thing is at 200, you wouldn't, maybe let's say you wouldn't have taken it. Let's say he says, no, that's undervalued or Leon says that's undervalued. Yeah. And you fast forward nine years and you're going to be telling the story. You know, we got offered 200 mil for that business and we knocked it back because it was too cheap. But it wasn't, the window probably became like Uber Eats did come in, but Uber Eats started, You probably could have sold it for$300,$400, probably could have got that a couple of years later.

1:39:36I know, but the challenge is… If these guys running it. Remember, these guys stopped running it, and these guys were really good operators. I get it. But once the price, once you get offered a price, and you knock it back, and then the world gets worse, what you think is… Yeah, anchored. Yeah, I'm going to get back to that price and above. I know we felt that with Catapult, right? Like the price was at$3 something, and then it fell to like$0.60, and nobody was interested in selling. Now, yes, we were right. The future was bright and it did get back there. But like if someone would have offered a price that was substantially above that price, that low price at the time, it would have been hard to say no to that.

1:40:12We were lucky that those big bids didn't come in and we weren't put under pressure, right? But like that anchoring is a real problem. And I think maybe my next moral of the story is if you had the golden window and you knocked it back and you're now sliding, take the silver window. And if you knock back the silver window, take the bronze window. Because when you get down to the coal window, you're going to be just remembering the gold, silver and bronze up the top, right? The wood window is not amazing. Exactly. Don't be anchored, basically. Yeah, exactly. It's a good point. And it obviously becomes even more pertinent because as a business is dropping, generally, the trend is your friend.

1:40:54A business that's struggling continues to struggle and a business going well continues to go well. Yeah, that's right. I think your point about Golden Window is that's when you sort of – you want to imagine that sort of – call it the normal curve. You want to get it 20 % below that peak of that normal curve. It's very hard to hit the top of the normal curve. Yeah. And you get anywhere near that sort of top 40%, that's probably a good result. Agreed. On that note, a huge episode this week. Thank you, Michael. Thank you, Adia. We will be back, of course. That was a big 150th, big celebration for us.

1:41:25Sadly, no cake this time for Mike, but this is a pat on the back to you guys. Thank you, Mike, for sitting through so many episodes. And thank you, Adia, for being such a fantastic podcast. Thank you, Adia, for being such a fantastic co-host. What's the market going to be at episode 200? As in the stock market. Still fly or crash? That's six months for now. So who knows? That's probably too close to call a crash. I reckon it could have been. But we can say in one, in episode 300, it's unlikely that the AI bubble will still be going strong. Put forward that episode 300, Sam Altman will not be running OpenAI.

1:42:07Oh, I like that. Write that down somewhere. I'll actually deliver on the dinner that I owe you if that comes true. Double or nothing. I'm not going to regret for that one. It's not double or nothing, actually. It's one or nothing because I'm not going to give you two deals. That sounds like a bad deal to have to wait for another year and a half. I might pass on that and enjoy my free dinner. On that note, thank you, everyone. We'll see everybody on Saturday for our Ask Us Anything episode.