Firmus Goes to the Moon, Anthropic’s Profit Problem, Founder Tax Chaos, Breakthrough Victoria Death March and Xero's Year from Hell

28:43What if that price is above the price that people are paying for chips at that point in time? I think that will happen at some point, especially when all these other chips get paid. I don't think they're going broke, but I think there'll be a massive… Yeah, that's why it's not a PA14. Basically, they will survive and take everybody down around them. The market agrees. It's giving them a PA14 for a reason. Yeah. It's because there's the margin compression coming. Yeah. I think the far more… Well, that's actually a good point. The far more likely short-term risk is OpenAI and Anthropoc just can't raise money to fund this massive compute build out and then becomes a real problem.

29:12That, to me, is the obvious short-term straw that breaks the camels back here. Well, I thought Anthropic was not a company that would do stuff like this. That's what I thought. You might say, very naive. I think Dario Modi makes Sam Oldman look like a good guy. Do you? He is the greatest flogger of all time, this guy. But he's a tech guy. He's the altruist guy. But he's a tech guy. He said that when Freed's made. They're despicable, these guys. What can you say about it? This whole tech capture thing they're trying to do. You don't think Sam Bankman-Freddy is despicable? That's not your view of him.

29:43No, it is. Absolutely it is. I thought your view of him was, this is a guy who was in his own echo chamber, went down the wrong road, compounded his problems, then committed fraud, but wasn't out to run a huge fraud and got too harsh. So it was Eduardo Ponzi or Charles Ponzi or whatever his name is. Some people are out to commit fraud. And don't you think Sam Bankman-Freddy got too long of a prison sentence? You think that, right? Yeah, I think he should have five people. But you still think, but you still are very opposed to him as an operator, right? Yeah, yeah, he's still a despicable operator.

30:14And so is my motive. But he's smart. Yeah, you agree. He's very smart. In a way, he's smart. He's in jail now, so he can't be that smart. Well, he wasn't smart about not getting caught. Yeah, that's an important element of smartness. That is true. Just don't go to jail. If you're going to commit crimes, probably the smarts you want is not getting caught. I do accept that. Yeah. And so, okay, I didn't realise that was your view of Anthropik. But anyway, but if you look at the whole, and this links into that whole... Their model is much better on a day-to-day basis for me than OpenAI at the moment.

30:42I use Claude as a... And I flip all the time and now Claude is my go-to. OpenAI is fast though. That's what it's got, so fast. Yeah, and Anthropocic's slow as all hell. But I moved my board packs from Notebook, which is Gemini, which had Nano Banana, which is that great, to Claude. So I did it on Claude. The beauty of that is you can do it on Claude. Claude's much more accurate than like Gemini. Notebook will make mistakes everywhere. like this hallucinations was insane and it couldn't be fixed beauty of Claude is you can export to PowerPoint fix it then then run it through Claude design it looks amazing so Claude's now like fantastic I think people say Codex is as good as Claude codes it's harder to get people to swap once people are comfortable with something unless there's an issue with it they discount you and you change we moved from Claude to OpenAI for price and the team's really happy on Codex so I think the products are really similar because I was trying to think about whether Anthropik is worth $2 trillion?

31:36I think the answer is no. But to anyone. But the answer is no because... The only person who can buy it is NVIDIA. No. Well, like the hyperscalers could buy it. Not really. You think it's worth 200 mil to a hyperscaler? Yes, for sure. 200 billion? Yeah, 200 billion. I know, I keep getting... I'm always at by a factor of 1 ,000 because it seems implausible. I don't even know if that's the case. Apple 200 mil? Apple wouldn't touch it. I'm not sure... Well, they need something, don't they? They never buy anything. Yeah, that's true. Maybe like a Google... Google is the one who would buy it, or Amazon.

32:05But I'm not sure, like, what do I need it for? Well, Google doesn't need it. And why does Amazon need it, really? Amazon might want it. It's a B2B business. And it's probably because of B2B coding business. Yeah, but Amazon might want it because they don't really have a commonly used front-end system. The reason we talk about powers is it's a great way to understand the longevity of a business. And these businesses have no powers. Well, maybe scale. Hang on. They've got brand because we're sitting here talking about Claude. No, they don't have brand. Why? Because we just switch from Claude to OpenAI at the top of the hat.

32:34That's not brand. There's really no switching costs. But there's like 250 other models out there that you could use, and we're not talking about those. But people are using them. And this whole Dara Modi, Jacob Copson fraud they're running here with the regulatory capture thing, and they're trying to create this FDA for AI because they want to be one of the two people that own this regulator. So this is old school regulatory capture in front of everyone. It's like the greatest parlour trick of all time. And thankfully, like I don't agree with Trump on a lot of stuff, but the fact that he's seen through this bullshit really quickly is actually credit to him.

33:06And Jensen's his credit as well also, because Jensen's now team open source. He's right, he sits on both sides of the fence. So Meta's pushing back against it. Yeah, because it's now open source. And Elon, no one could be more enthusiastic. Elon goes back and forth. Well, the problem is no one could be more enthusiastic on wanting to cut spend on models than Elon, right? Like he's got all his spending and basically no revenue attached to it. We're selling compute now to these guys. But Elon had a good idea on All In. It's actually made a lot of sense. Instead of having an FDA, he said, we should have a peer review process where OpenAI reviews Anthropic and DeepSeq reviews Kimmy K or whoever it is.

33:39And that's the process. We don't have this FDA thing, which is what Emody wants. But we have, we don't want to create, there are potential dangers in AI with chemical weapons and all kinds of stuff. We don't want that getting out of control. Like using the whole - And taking, and even like, you know, people love talking about existential threats. Forget about that rubbish for a second, okay? Maybe, but no one can assess that, okay? And so a bigger issue might be every day you'll wake up and something that you're using has been taken over by an AI swarm. That's probably more of an issue, right?

34:10And I don't really want my bank to get taken over by an AI. And so that's very hard. But existential is, I think, an over-dramatised way to look at this, but they need headlines, right? It was a young person who was not that senior, right, that first came out with this. The whole thing was a fraud. It was a Lee Harvey Oswald-style fraud. I wouldn't say it was a fraud. They had three, multiple other massive posts straight after he tweeted, retweeted it. Oh, this is why you're saying it. And then they had, suddenly Dario, the fraud, had a 3 ,800 word essay ready to go on the shelf. That was convenient.

34:40The whole thing was just a pure regulatory capture attempt. Thankfully, there's enough people who are smart enough to see through this garbage. I thought Elon's idea was a pretty good one. Since you don't have an FDA, you have peer review, which makes actually a lot more sense. It's quicker. We won't actually get China to agree to that because otherwise China says, get staffed, Dario. We're not going to join your ridiculous FDA. We'll just roll out our models and suddenly the US has gone from frontier to backwater. Well, this is the problem. Trump is terrified of losing the AI water to China. It's not a bad worry.

35:08Well, it's not China. It's actually closed source versus open source. And Modi and even Musk and Altman are worried that they lose that... Like, these frontier models have a massive price premium, a 20, 30, 100x price premium. They want to maintain that premium. They think the only way they can do it is by regulatory capture. And they're probably right. That goes to my point on not having powers. If you need a co-op regulator and create a regulator, you're basically telling the world, I've got no powers. The same time he's trying to list for$2 trillion. The same time OpenAI can't list because there could be real regulatory issues with this whole hugging face thing.

35:40That opens some real criminal sanctions potentially. So if Dario and Sam and even Elon think we're a danger, well, stop doing this. And otherwise, if you do cause damage, you should be going to jail with your mate Sam Backman-Fried. But this is how I do think about markets a bit as I've gotten older and have had more interaction with them. So markets are not regulated by God. So that is a dramatic thing to think about, right? Like they're regulated by people and people, they're flawed and they have all sorts of biases and self-interests, et cetera. And the most powerful people and markets effectively are there and run by the most powerful people in those markets.

36:23Like, there is a regulator. Totally. It's pretty rare that the regulator goes and tears shreds off the most powerful people in the markets. Most regulators are co-opted by the biggest players. Generally, it's how it works. In one way or another. And it doesn't mean they're corrupt. It just means... No, it's just how the world works. That's how the world works. That's a good summary. There's a reason why there's a chairman's club. Yeah. That's a good summary. They're not because Qantas are nice people. They might be nice people, but they want to make sure that next time Catherine King wants to give a route to Qatar.

36:49Well, Catherine's not giving the route to Qatar. We're giving you a lifetime platinum membership. That's kind of how it works. Qantas's not doing anything wrong. Maybe Catherine is. But she did get, I mean, just to digress, she did get lifetime membership based on taxpayer-funded flights. So Qantas didn't have to give it to her. You gave it to her. Yeah, we paid for it. Yeah, so the thing is... There's actually a question where she actually hit that level. But anyway, because to hit 75 ,000, that's like ridiculous. So I think if you accept, as you just said, that's the way the world works. I think you're more aggrieved by that than I am.

37:19I used to be very aggrieved by it and think it was terribly unjust. And now I've come to understand we're not going to get that much justice in the world, so take it where it's most important. I think that doesn't mean we let battles be lost without a fight. Like, I don't think we want AI co-opted by these guys. I agree, but also we have to understand how these wars work. And this is my view on AI floats. too many people that are the most powerful people in the markets have got too much money riding on these getting away and so there is massive momentum behind it trying to push them it doesn't mean it's going to happen because ultimately you don't get to control momentum in the face of like say huge public backlash or markets collapsing or whatever but you know i i said a while ago that i think firmness would get their ipo away yep i don't i bet valuation goes up by five billion every time.

38:12Yeah, I'm not going to make friends by saying this, but that's okay. Like, it's not the first time. Like, that should not get away, that IPO, in my view. But it will, because too many powerful people have got too much financial interest in getting it away. It's the valuation increases every day. My bearishness is about... You know how much money the... So, like Regal, who got in early, they're going to make what, like... Billions. Like many tens of times their money on it. And it's not just Regal, there's plenty of others who got in there early as well. Yeah, but can you imagine being a fund manager who's buying of Regal the backstop of the whole market Regal making that level of return and you're on the buy side of that like it's just it's that must be painful for fund managers that's why I think I'm not sure this is going to be my issue with firmness remains if Nick Curz is selling I've got real dad who's always dad who's the smartest guy of all these people if he's selling at 150 he sold at a 2 billion which I thought was high and now talking 50 like what the hell Let's create a higher and higher and higher value that's so detached from reality that if maybe we go from 50 to 15, some of the 15 looks cheap.

39:17It's like the classic act we had Vicky Medvedge on that. Let's anchor at this crazy high valuation. So maybe about 15 billion, which is insane, doesn't feel that bad. You know, the thing is that at a$50 billion valuation, nobody loses. The losing comes later. And people are hoping that the people that lose are the people with no power in the market because that's not going to be them, right? Retail investors. And so do you think that – That said, at 50, you're in ASX 10 or 5th, 20 or whatever. You've got a lot of index funds, a lot of fund managers having to buy you. But it might be – they might not pass the liquidity threshold for being in the index.

39:53You have to have a certain amount of liquidity. Well, all the indexes are only on 13 each. And anybody who can sell will sell. Clearly, if you can sell anything like this, like all these smart fund managers who got in earlier, they'll be selling every – like we know when they're chucking stuff off a boat when it's sinking, they're going to be selling at that level. So it's like they're losing billions of dollars. They're going to forecast to lose billions of dollars, these guys as well. My issue is more on the revenue side. Like, yeah, the losses are terrible, but like they have nowhere near enough revenue to justify a$50 billion valuation.

40:21He actually gave them a call out on All In. He actually called out Firmus, which is pretty significant that Jensen, who runs the biggest business in the world, is calling out this little Aussie company that three years ago barely existed and was doing Bitcoin mining or whatever the hell it was. He has backstopped that business as well, right? He's backstopped heaps of businesses. I know, but I think, doesn't he just go through the list and someone gives him a list and says, tell me which of the things that we've backstopped are heading towards IPO. I'll call them out, right? Isn't that what goes on?

40:47Do you see the article Jensen is the Taylor Swift of AI? Yeah, it's an article in the Wall Street Journal, I think. Jensen is the Taylor Swift of AI. You know, he's like this, basically he's this guy who is unbelievably commercial and involved in everything. And like the brand is bigger than the music kind of thing. His brand is bigger than the company. But Taylor Swift isn't maintaining a Ponzi scheme. She just sells music. Yeah, I agree with you. But Taylor Swift is not trading at 14 times her profits, right? She might be. Do you answer me this question with firmness? Because I know we talk about it periodically, but that's because it's certainly the biggest story in the ASX, right?

41:23Yeah. You think this is going to need to be a retail game for the IPO or you think fund managers are going to buy? Well, you think retail would help the price in Saturday? Retail is going to pile into this, in my view. But there's only so much retail. Like if they're trying to raise, let's say it's a$50 billion, somebody's trying to raise$10 billion. I don't know how much they're trying to raise, but if you want some free float, it's got to be$10. How the hell are we going to get$10 billion in retail? It's a good question. I know Morgan's just involved in it. He's like the ultimate retail broker.

41:52I mean, it's a good question. It's hard for me to, surely none of the funds that are in there are doubling down at the IPO. I wouldn't have thought. That would be surprising. Exiting stage left as soon as you can. Probably. I think there was the latest update on escrow as Ollie and Tim can sell something in a year and then more after another. They've got to hope this gravy train lasts a year to get some cash out. If they've got 13 % of$50 billion, Lazy$7.5 billion. And let's say you let them sell 5 % of their shareholding. It's 350 mil each. I mean, that combined is more than the whole company should be worth it.

42:30That's your IR index coming up. I mean, I think this is, at some point this is going to look terrible, but the thing is this. There is a very slight chance that their end is someone bigger buying them and they do get a good exit. That's the best hope for everyone. That can happen. Maybe Jensen will buy them. That's the classic bigger idiot theory. Is there a bigger idiot out there is the question. I don't know. But make sure you run out of idiots. So Nvidia 6 trillion. That's when a bubble bursts. Nvidia 6 trillion dollars. Something like that? 5.5, yeah. Australian, well over 6. Yeah. So, yeah, so 8 Australian, let's call it.

43:05And 7, right? And these guys, 50 billion. So that is like... 6 %? Yeah. I mean, he could just... No, that's not right. No, it's less than 6%, sorry. It's under 1%. And so he could gobble this up. I mean, it depends how much he believes in this. What is he wanted for? Well, I think... It's not that they're making money. I think Nvidia is the octopus that's trying to have its tentacles wrapped around every part of the industry. So I don't know, but I think their best exit is someone has to buy this thing. I'm not disputing that for a second. I just can't see it happening. We should have invested it$2 billion.

43:41It wasn't handy, or even$100 million when it was. Anyway, that's one to watch out. But we'll go to a super quick break back with some great stories just in a moment. Today's episode is brought to you by Seneca. You may remember friend of the pod, Luke Larative came on a couple of weeks ago and our listeners absolutely loved him. Of course, we're not the Agreeables podcast, we're the Contrarians and Luke is a contrarian himself. He finds positions that we didn't even know about and really gave us an incredible run for our money. The reason we love Seneca so much, not only is his incredible outperformance over a number of years, but Luke only charges performance fees for his small cap fund.

44:17That means if he doesn't outperform, you don't pay any fees, which is really unusual for almost any fund manager around the world. So go to the Seneca Financial Solutions website, check out the funds, and also check out Luke's incredible newsletter, goodresearch.com, who puts always best ideas and thinking for a really limited number of subscribers. Tell them the contrarians sent you.

44:41And we're back. And Australia's worst treasurer, the man who hates small business, anyone who works for small business, Dodger Jim Chalmers, made yet another backflip on his horrendous tax policy last week, pretending to make it easier for founders and investors to not pay the outrageous 47 % tax on startup gains. The minor changes announced removing the 30 % capital gains tax floor, reducing the hold-in period from five to three years, and removal of the$10 million lifetime cap. While this lipstick on a pig removed some of the most horrific elements of the founders tax, Chalmers has nefariously kept the worst elements that make it almost impossible for founders to avoid paying the highest capital gains taxes in the world.

45:18Specifically, the business needs to be under$50 million turnover. But really, most importantly is, and this is what we talked a lot about a couple of months ago, the predominant activity must still be developing, commercializing or scaling innovating product, service or process. This of course is super complex, unclear and requires very hard - Even that sentence put me to sleep. Like basically it's nonsensical. It means you've got to be basically a high tech business essentially. According to who? Well, that's the problem. This means a huge number of startups are excluded. So if you run an e-commerce business, forget about it.

45:48if you run a florist, forget about it. If you're on a luggage business, forget about it. You're not high tech enough. There's a risk you also might lose the status down the track if you change your business somewhat along the line. Plus, you need to get a really expensive private tax ruling to know you haven't qualified. And most startups don't have the cash or time to do that. So this is a disaster. Seek founder and one of Australia's best investors, Paul Bassett, slammed the latest changes, noting they are complex, bureaucratic, small in scope. They do very little to mitigate the harm caused by the budget announcements.

46:15This is a massive own goal for Australia at a time where it is imperative to encourage start-up formation at an all-time high. I saw Paul recently and I said to him, I'm really very grateful that he's come in and been quite vocal on a number of issues recently, which is not the politically safest place to be, especially... I think he's always been pretty brave at taking position. So I think it's good that he's come out on this stuff and he also came out on this kind of anti-Semitism stuff. Yeah, I'm a huge fan of Paul. I mean, this is not lipstick on a pig, by the way. this is lipstick on like a 15-day rotting pig's carcass.

46:49That's what this is, right? Like the lipstick is not making any – it's not even fooling anyone, right? The lips are long gone from this carcass. What are they putting lipstick on? It's not just like a skull. Yeah. It is so terrible. It is so terrible. And of course you've got the useful idiots in the media who said, oh, how great are these changes without understanding – like I question whether these people in the media are even – there should be some duty of care. that if you're that bad at doing a job, you shouldn't be doing a job. And some of these mainstream media, and New York Times is obviously the worst of all, but how do these people still have jobs?

47:20Because people buy the publications. Well, they subscribe. You know capitalism? It's quite popular. I mean, not as popular as it used to be, by the way. Because of these guys. You know, I've been thinking a lot about capital gains tax recently and how to grow the wealth of society. And I want to tell you something that is very extreme. But you tell me if you agree with this. It is the inverse of these tax changes. I think any founder that starts a business in any industry, and we could work out what that means, but generally it's going to mean they have a cost base of zero. I see a pretty strong argument for them paying no capital gains tax at all on their shares.

48:09Zero. Now, maybe if they make a billion dollars or a hundred mil, you want to bring it in because you maybe need the revenue and it's a bit unfair. But all we want is for people to create jobs and export earnings especially, right? And so why would you ever say... And good jobs, not just jobs, jobs you really want. And I don't care if it's a suitcase maker or a hairdresser or a tech company. Maybe I do care if there's export income. I care more about that because that brings money into the country, so that's good for the economy. But I don't really see any merit in the argument that says there's this universal concept of capital gains and it doesn't matter how you made the gain.

48:54I think that that's totally wrong. And I think that basically founders – so I'm arguing the opposite to Tim Doherty, the opposite to Daniel Petrie. I'm not sure Daniel founded any businesses. He's an investor. We are getting founded, actually. Still a business. A venture capital business is still a business. Yeah, I'm not sure. I might carve finance businesses out of my founder category. But maybe not. Maybe that's unfair because they still create jobs, right? No, they still create jobs. That's true. All my disagreements with Daniel on this tax. I don't disagree with the fact he's a founder. No, that's true.

49:22I jumped to the wrong conclusion there. And so I think that like if you come into a business early and you're angel infested, there should be benefits to that. But that is not the same as a founder. and right now under these laws, the person that invests capital didn't start the business. They pay no capital gains tax at all through either the ESIC structure or the ESV CLP. Or if you're a foreign investor, you pay nothing. But that's always going to be the case. But my point is this. It doesn't have to be. You can take money that you've earned somewhere else and you're rich and you go and put that to back a founder and you can use this, what's it, ESIC?

50:00Early stage investment company. So you can use that mechanism or you can invest in an early stage venture capital limited partnership, ESVCLP, worst acronym ever created, and you'll pay effectively zero capital gains tax. But the founder who did all the sweat, guess what capital gains tax? They're going to pay close to 50%, close to half of the gain. And so I just think, how can that system be right? How can a system where the rich person who backs the founder pays no tax and the founder, who probably is poor... Again, the problem is when they're paying the tax, they've become rich, is the argument.

50:37So at that point, they're now rich. We're going to take your money, is the argument. Obviously, you're thinking of it. That's a nonsensical argument. I don't agree with this argument. Now you're rich, we're going to take... You know, I hate this argument. I hate this whole thing. Well, it's not tax that makes the founder decide whether or not to start a business. So maybe I'll say, let's just accept that argument. I've got many disagreements with that argument, but let's accept it okay that that doesn't matter like we're talking about like what's ideologically and societally and economically correct here and what's correct is people that create jobs they should get or try they should get the best financial outcome of anyone on the gains they make of their shares and under this terrible terrible terrible terrible labor system they will get universally the worst outcome of anyone in the equity stack.

51:30That is, how is the one just making that simple argument? They get the worst of anyone out of anything. That's right. That's right. It is so ridiculous. I'm going to just say bull crap around the edges of this lipstick on or whatever. It's all irrelevant. It's all irrelevant. The fundamental problem is the founder is the most penalised financially for making a gain. I wrote a pretty long piece for our Substack about six weeks ago saying how I think we should change that. And it was obviously a high level. I thought 20 % CDT is about right. What's your rationale? With income tax being 30 % and GSE being higher.

52:12So I thought ultimately you've still got to... You want to change the whole tax system. I'm totally supportive of that. I think having a 0 % tax... You can't get voted in putting the GST up. Well, I don't know. You have to get voted in without putting the GST up and then go to the second term election with the mandate. Well, do it. Albert didn't lie. No, but they're suffering from this, whereas Howard... They may still get elected. Howard got elected and then went to the election with it and got the mandate for it. That's the... Lost the popular vote, got lucky. I know, but I think that's the ethical way to do it.

52:42Clearly, Chalmers and Albanese don't care about ethics. They are ethical. They're ideological warriors. I think the higher GST, lower income tax, much lower CGT, to me is a much fairer system. I think zero is probably a bridge too far. I'd love to see it as a founder, but I think it's a bridge too far. I think 20 % is fair. I think 30 % income tax max is what we should be. Like, we had this back – and this is essentially what Ireland did. So Ireland's for all its faults and pretty anti-Semitism country. But other than that, like, their tax system, they nailed it. They had huge economic growth, massive improvement living standards.

53:11They were basically a backwater. became one of the most wealthiest states in Europe by basically saying, higher VAT, lower income tax, much lower company tax is what we're going to do. Look at Singapore, look at Dubai, all these incredible successes. And these idiots in the government are doing the exact opposite. So now we can talk about how you might structure this, if this system, like if the government, there's many questions about this system. The challenge is, they've made all these changes, they've legislated some of them, but they've kind of legislated the big picture and not the detail is regulation, not legislation.

53:44And no one knows what these regulations are. And I don't know if you've spoken to your accountant recently. I talk to my accountant frequently. No one knows what to do right now. And there's a period where you don't have to make a decision on trusts. That's the government admitting no one knows what's going on, right? That's what's happening. And so this government might not get re-elected. And I'm pretty sure any other government would get rid of these changes. Certainly a Liberal government would. Well, there's no vote. What other government is there going to be? One Nation? Greens? I mean, there's a coalition or there's this, right?

54:14But both One Nation and Liberals have said that I want them. Yeah, and the Greens are not going to form government, right? The Greens want 100 % tax. Yeah, but no hex. And no Jews. Yeah, that's true. So basically, they might get voted out or they might get re-elected, but they might put this back to a lot of the old system, right? And just focus on the negative gear and partnership, right? It was a good system. Elegant system in the end, yeah. Also pretty consistent with global standards. Still high, but less high. It was in the acceptable very broad. But let's say that that doesn't happen and this sticks.

54:53And you think about, well, if you're a founder, how should you own an asset? There's a pretty good argument that, I mean, I'm not giving tax advice here. Definitely not giving tax advice. Yeah, that's right. But there's a pretty good argument as I see it that actually you should own the equity inside a company because then when you sell the equity, you're going to pay the 30 % company tax on it. And yeah, eventually it might have to get to you and then you'll pay tax. But number one, if you have a big exit, a lot of it doesn't need to go to you personally. You can just reinvest it through that company.

55:27And number two, if you sell it at the company, you might then become a tax resident of Singapore, for example. And then when you send it to yourself, it will be Singapore that taxes you on the capital. or the dividend. Actually, that would be a dividend in that case. And guess what the tax rate on dividends is in Singapore? 12 % of them. Zero. Oh, really? Zero? Yeah. And so you could sell this thing inside a company structure and then run away. I'm sure there's smart accountants working on this as we speak. Well, no one knows what to do because the regulations are unclear. Exactly. That's the problem.

55:54But my point is that would be the most perverse outcome to have a situation where people quarantine capital gains inside a company and then flee to a preferential jurisdiction after that. The thing I hate most about this policy, well, one of the things I hate most about the policy is the average person can't see how dumb it is because it's a kind of sub... It'll hide below the surface. We'll have great founders leaving. No one's paying attention. Yeah, no one will realise. It's not like losing the Commonwealth Games, which was so obvious. That was what the death knell in Dan Andrews. It wasn't all the other stuff he did.

56:26It was Commonwealth Games. This is the same. This is like Comm Games times 1 ,000 and that we'll lose these incredible founders. A lot of people who would have got great jobs won't get great jobs. People who would have become millionaires won't become millionaires. all these people will suffer they won't even know it's because these two idiots and fools running the treasury don't have a clue what they're talking about and they're just killing enterprise and killing jobs yes I completely agree I mean it's hard to believe this and I think it's bad on both arguments sometimes you say this might be bad for the economy but ideologically it's the right thing to do sometimes you say the reverse you have to make compromises ideologically to grow the economy this is bad on both fronts it's ticked both boxes right it's terrible ideologically and is really bad for the economy I think people do hate this like it doesn't move a huge number of votes people you know hate it no I think people out there normal people we look at the resolve polls and the trust and Albanese is still it's hard to know because of the whole three corner ways now but the trust in Albanese has dropped incredibly so like he was a relatively popular PM he's now really not liked but don't you think the lie is what dropped the trust not the structure yeah absolutely but the they're one of the same to a degree.

57:36Yeah. Well, it's very hard to know. You know, I can talk about this in personal terms, just to be very blunt. I know people might not have that much sympathy for me. I get it. But I just want to talk about this in honest terms. So I go and start this Tansu suitcase business. My equity has minimal cost. I mean, I put money in. But I mean, it's going to... There's loans that get repaid. And the cost base is effectively going to be two-fifths of nothing, right? Very low. and so my hope is that this grows yeah and let's say it exits for even let's say it was a bad outcome it exits for five times my cost base i go straight to 50 tax on it or 47 yeah but if it's a real exit like tens of millions hundreds whatever like 47 tax on that gain and so i look at that and i'm like there is no way i would sell my equity in order to pay 47 tax on you don't qualify for any of these fancy grants because you're not a technology company.

58:35This is just a business that I've created that does nothing much except employ people and hopefully get export revenue down the track. Well, there's nothing good about that for the economy, is there? If there was no sympathy for you, there's going to be sympathy for Maya, my cousin, who doesn't have your wealth. You're your, what's it called? Cousin of 1L. Yeah, cousin of 1L, exactly. So we should say she's Maya Schwab who runs the Tansu business. and I presume has a little bit of equity in the business or maybe gets a negative in business. So she's going to be paying 47%. How outrageous is this that the young person who's giving you the crack, creating jobs, creating expert revenue, she's paying 47 % in one hit if you did sell it.

59:13So she won't mind me saying that she's in her mid-20s. It's not like she's produced all this wealth. Taking a huge risk. Could be working for a big corporate. Instead, it's a great business. Although I do pay her well. But yeah, but no, definitely she's taking risk. And I can promise you that she's not working seven hours a day, she would be working 80 to 100 hours a week. Just a machine. Every Schwab is. Yeah, that's true. Everyone with that combo of letters, plus or minus an L. And so basically, it is fundamentally wrong on an ideological level to tax her 47 % on her gains. And so I... We talked about being the higher sexist policy as well.

59:58Why would we sell that business? It's a misogynist policy from misogynist bunch of wives. Well, that's true. It is also misogynistic, but we talked about that. I got hate for saying that, but I stand by it. By who? Well, mostly by men. But like, I really do get hate on public forums. Yeah, I got hate for that. I love the hate and you don't like it. That's the difference. Yeah, that is true. That is what it differs. I've learned to be a bit like thicker skinned. Usually I respond to hate with a bit of love and it diffuses a lot of it. Hate for me is like the sun to Superman. I know, that is true.

1:00:31it's crypt enough and so but why would I so what am I going to do like let's say this thing grows over the next five years and this is the more we've got a hope that eventually this but what if it's not what should I do what do you think I should do I think you can sell I can't sell right until it gets overturned I can't sell and so we talked about no property there's been smart accountants finding ways around this I'm sure people will find a way around it so yeah so the only way I could think about is that if I pay 30 % tax and it sits in a company and then I run away but like but the thing is like we talked about how bad it is for the economy because there are not really property transactions going on and like 15 % of the economy is hitched to property transactions in one way or another.

1:01:09But I think you're going to be adding like company sales to that as well, aren't you? Like who in the hell is going to sell to pay 47 % tax? Yeah. I think it's going to be this, it's typical, it's your Mr. Size Horse situation. The government's thinking this is going to generate all this revenue for us. Could end up generating less revenue. Exactly. Is the great irony of all this. Exactly. As well as rob people like Paul Meyer of all deserved gains if they actually do happen. So transactions are going to evaporate. The capital gains tax is going to diminish in our view. And fundamentally, all of the money that flows into what is loosely called the ecosystem from these exits, that money will not be there to invest in more businesses.

1:01:50And that's what Paul Bassett and Lee Jasper, these are great oracle. These are legends of Australians, founding legends, great venture capitalists. These guys are really smart, far smarter than the idiots making these policies. That's who we should be listening to. not Treasury, who've never worked day in that life, these people. Let's move on. Speaking of idiot politicians, and this is another slap on the back for you. It's an organisation that almost no one would have heard of, but for my co-host, breaking news on our very first episode, but the horrendous breakthrough Victoria Fund. Was that our first episode?

1:02:19Very first episode. Was it? It was at Nathan Chan's office. Based on the earlier discussion, you didn't even know what was the first episode. I'm not even aware that I'm doing this podcast. So, of course, you broke in on that very first episode that Breakthrough Victoria could soon be coming to an inglorious demise. The AFR reported that the state-owned venture capital firm will be abolished and its investment divested if a coalition government is elected in November. And, of course, thankfully, they're ahead now. We won't count our chickens. But according to Bridget Verlant, the opposition finance minister, she said the fund had comprehensively failed to deliver on its promise to create thousands of jobs and dividends to taxpayers and axing it would save$1.27 billion over the next decade.

1:03:01The terrible Dan Andrews established Breakthrough Victoria in March 2021 to partner with private investors, superannuation funds, VC firms and the government to target early stage ideas across health, manufacturing, energy, agri-food and digital tech. An initial director of the fund was Andrew Bassett, who had a tired time running Seeks VC firm and former Labor Premier John Brumby has been chairman of the fund. Valance claimed after a few short years, Breakthrough Victoria has spent hundreds of millions of dollars on foreign-owned ventures that manufacture goods offshore or on bailouts for companies that sunk into administration and fails to deliver on its promise of 15 ,000 jobs.

1:03:35Unless we abolish Breakthrough Victoria now, Victorians will continue to see hundreds of millions of dollars on ventures that deliver no jobs and no return. So it's good to see the fantastic Victorian opposition following your lead, Adir. Well, I'll tell you something, that you've got to give credit to Paul Smith, who's the IT editor at The Fin, because I can't believe that was our first episode because I went to him, you know, I was writing these articles for The Fin and I went to him and I said, you know, the biggest VC fund in Australia is actually government funded. And he's like, is it? And I said, yeah.

1:04:03And I told him about this thing. I'm like, you think that's a story? And he said, you got to write that stuff. That is a massive story. And he's like, how come no one's heard about it? And I'm like, I don't know, because no one cares. Like no one pays it. Two billion dollars no one even concentrates on in Victoria anymore. And so like Paul really saw that this was going to be a big deal. So credit where it's due. What I like is that everyone calls me or messages me now when they're going to write anything about Breakthrough Victoria or politics, when they're going to do something about it. Yeah, shut this down.

1:04:30I mean, one of the things you might want to note is that when they say they're going to save$1.27 billion, you'll notice that the value of the existing investments do not offset the saving at all, which effectively means everyone is expecting all of these investments to be worth zero or in totality to be worth a negligible amount. If you try to boost his millions, this i think he's struggling well it's very hard to know because you know the disclosure of what they have actually bought is close to zero yeah in fact i would more say the disclosure document is a pr document i actually reckon they accidentally have some good investments not due to any sort of it's definitely possible but the point is like it's not like the 500 million dollars or whatever they've deployed they're going to get some 3x return out of that and we're all going to live happily ever after yeah like most of this money has just been burned the most of the deployed capital presumably.

1:05:20I don't know. I think they'll get something out of it. I don't think it's a complete right off. I think the problem is the running costs and the continued waste of money in the future. It just needs to be stopped. I'm going to actually raise you on my next story but this is just a debacle. It's a debacle. They shouldn't, by the way, I don't think they should sell the existing assets. No, of course not. You don't sell now because it's a bit stressed. Correct because basically the worst thing for a government would be to sell this asset to 10x or something. So they should just put it somewhere and never talk about it again unless it succeeds.

1:05:48I'm going to see your breakthrough, Victoria, and raise you the National Reconstruction Fund. Have you heard of this? Of course. Do you know Chris Prunty? He's a fantastic investor. No, I don't. You don't know Chris? I don't. Oh, he's a QVG. He's struck me in a small cap guy. Had some great wins. I really like Chris. He's one of my favourite fund managers out there. He wrote a ripping article for Rampart last week. I don't know if you read this. It was so good. I've met him. I don't know. Yeah, he's a ripper, Chris. And he's even more of a rip after I've read this. This is so good. There's some amazing lines in this article.

1:06:16So Chris noted, and there's some great background. This is like the equivalent of what you did for Breakthrough Victoria. He's done for this Reconstruction Fund. So the fund has$15 billion mandates. This was the post-COVID. That was when it was established, post-COVID. I think it was the Labor government, but I could be wrong on that. It wouldn't surprise me with the Labor government, but I think it was Labor. $15 billion, 64-person team,$28 million cost base. This is like worse than Breakthrough Victoria. It's more of a PE than a VC fund, but regardless. In three years, it committed$1.6 billion.

1:06:49It has not published any number telling taxpayers whether any of these investments actually worked. Do you know what was invested? Do they reveal what they invested? And I remember some of the stuff they revealed. Chris goes in some detail, but I'll get to this in a second. Chris noted that the fund produces quarterly investment reports with the enthusiasm of his teenage son emptying the dishwasher, which I thought was pretty funny. According to Chris, on 30 June this year, the fund reported a$245 million debt investment in a WA defence business. It didn't name this. $120 million debt investment in W.O.

1:07:16Manufacturer. Didn't really know it, but he suspects it's built living, which is a JV between built and West Farmers. Built a great, both great businesses. So, you know, that could be okay, but who the hell knows. It previously invested in Arafura via a$200 million condo. I know them. That's now languishing at 18 cents, well below its 47 cent conversion price. It invested in Alpha HPA, 75 million bucks in January. That's now 33 % down. So these guys seem completely hopeless. Other investments include Arnott's PE back, I think US PE owned. Paddy's Pies, also PE-backed. Obviously, the mysterious WA investment.

1:07:48Also invested$200 million in a hybrid note in Macquarie Tech Group, which is different to Macquarie Bank. Who do you reckon is on the board of this absolute boondoggle? Labor people. Partially. So there's climate lawyer, Martin Wilder. Great to have a climate lawyer. Obviously, great investor. Strong PE background. Yeah. Ahmed Fahour, who had an interesting career. He's been a Shropo. He's now at Tim Gerner. I don't know how he's got much time to do this, but he's at least worked in business, Ahmed. my mate Daniel Petrie, the CGT maxer. Well, he actually does. At least he's an investor. You know, you and I have different views on Daniel, but even you'll have to say, at least they found an investor to put on the board.

1:08:24My father most qualified person on the board is Daniel. And I would say, I know you probably are going to at some point talk about... Which implies it's a Labor government start. Correct, because he's Labor-aligned. I would say this with Daniel. I know I get a bit defensive about Daniel, but I would say, whether you're Labor or Liberal, he would be a legitimate, high-profile person with an investment track record to put on a board. He may be, I think what you're going to say is he's the only guy that ticks those boxes, is my guess. Yeah, of these guys, he's the only one. In the last two are two former union officials.

1:08:53Someone from the AWU. No women on this board? It doesn't seem like it. It could be people who weren't mentioned, but there must be women on this board. It just hasn't been mentioned. But yeah, two union officials. Obviously, great investors are union officials. Adee, what's your view? This is one up to your breakthrough. This is billions and billions of dollars of taxpayer dollars being sprayed around like no tomorrow. So if we think about this in the context of what are they trying to achieve here, so my recollection of this is when they started this reconstruction fund, it was the country had all of this damage after COVID and we're going to invest in things to build up especially sovereign infrastructure because remember that during COVID everyone was stressed out that you had to import stuff and no ships were moving.

1:09:38That did for Breakthrough Victoria in fairness. We'll take taxpayer dollars and put in businesses we choose. We'll pick winners, essentially. I think Breakthrough Victoria was much more politically motivated to the individual person than this. I'm not sure that's the case. I think they're both levels of terrible. We can argue on what's worse. And so what this has ended up doing is supporting private businesses with taxpayer money. And the question that you might ask is, why would any private company go to this fund to get its money versus private markets and the answer can only be one of two things either they're giving you a better deal than private markets or private markets were prepared to give you no deal yeah and so that is my fundamental issue with these types of things it's less about the return they get on them like i don't think governments are bad investors horrendous but i don't mind if governments say there are these um businesses like the defence one might be an example.

1:10:34I'm going to have to ask Steve Baxter what he thinks about this defence business but like a defence business might struggle to get private investment. It's really important for sovereign capability and it might have very long lead times. Yeah. I wouldn't be philosophically opposed to the government supporting that. Probably I'd rather grants, although$250 million, whatever they put in, it's a bit big for grants. Yeah. But if you're going to go and invest our money, be ultra transparent. Don't just be as transparent as the private sector. Be more transparent than the private sector. They have no transparency, no real transparency.

1:11:08That's my fundamental issue. They've got something to hide, clearly, which is that investments are terrible. Listen, has there been anyone in history that has said, I would really like people that don't have to know about this and might be critical, I would really like them to know about it. Nobody wants that. Like, transparency, like, generally most people think it sucks. Yeah. But if you're going to spend taxpayer money, it's the ethical thing to do. The side of how outrageous this government has become is we just talked 15 minutes ago about how bad this CJT is. We're going to take money from honest, hardworking, risk-taking founders and give that exact money to these businesses who are established businesses.

1:11:47This government is so outrageously bad. Well, it's worse. I would say it's even worse than that because this is the point. I feel like we make this point a lot and it just does not get made enough. There is no money. So this$15 billion, it's borrowed. Stolen. It's not borrowed. It's stolen from people. No, but... The threat of jail. You don't pay your taxes, you go to jail. It's stolen from people. No, but I would go further than that and say, you can call that stolen. All of that so-called Adam Schwab stolen money, that's all been spent. This$15 billion, it's borrowed. Like, we're running deficits.

1:12:22It's still stolen from younger generations who don't know they've been stolen from. But we're running... It's your kids who's been stolen from. It's everybody listening to these programs' kids who are being stolen from by these idiots in Canberra. So I agree because we're running deficits in this country. That means there's no spare money to put into a reconstruction fund. We go and say, oh, we want to put some money in a reconstruction fund. Let's go and borrow the money, pay interest on the money, settle Australians and, you're right, future generations with the debt that we've borrowed because it's unlikely to generate a return to pay it back.

1:12:54Certainly it's not going to pay it back with the interest. Governments are not good investors. like the whole concept of borrowing that money it's outrageous. And Chris actually talked about it that the return on investment target is lower than the cost of capital. So this is designed to lose money. And so if it was really and so all I would say is there might be a good argument for deploying this capital. I told you what I thought the good arguments would be. At least make the arguments prove to us that this is the right decision. Don't hide. It feels like there's a bit of hiding going on. It's unprovable is the problem.

1:13:25It's like it's nothing about this Same with breakthrough Victoria. Nothing about any of this is... You can argue in a Norwegian situation. We've got all this cash, surpluses from the North Sea oil. We're going to invest it future fund style. There is arguments for that. We've got to do something with the money because we're generating too much free cash. And we don't want to just give it to the... I guess they could pay a lot of taxes. But we're happy with our tax rate so we're going to invest it for future generations. We're going to do the reverse to what these guys do. These guys are the opposite.

1:13:52These guys steal from future generations. They make big pensions in Norway. I think they try to stop you working over the age of 50. Yeah, probably. You know, because to make jobs available. And also, I just want to point out, I've said this before, the Norwegian Sovereign Wealth Fund cannot invest in Norway. Yeah, so it's the opposite. Yeah. So everything these guys does, I want to move on to a final story. Embattled Zero CEO, Sir Kindersin Cassidy and her beleaguered boss. Oh, you've got all the hits coming out today. Yeah, the best of. I can't, I don't make the news. I just report on it. And a beleaguered boss, David Doty, went on the offensive last week.

1:14:28Cassidy told Patty Durkin in the AFR, she's unapologetic about trying to drive growth at the global tech company. And she said, unapologetic doesn't mean being entitled, unapologetic doesn't mean being a jerk. Unapologetic means being ambitious and wanting to do great things, whatever that means. Cassidy said she didn't regret - Has anyone ever been apologetic about trying to drive growth? Don't think so. I mean, that would be unusual. Cassidy said she didn't regret the controversial merely acquisition, claiming, you have to remember, the US is one of the biggest SMB markets in the world. It's got 33 million SMBs, so there is room for more than one player.

1:14:59Which is true. Yeah. She naturally didn't want to talk about her own pay, given she's one of the highest paid and worst performing executives in Australia. But Suki did note she still holds more than 170 ,000 restricted stock shares and a million unlisted options, although no ordinary shares, which is true. Thody is still desperately defending his disastrous hire and her pay rise, despite a stunning 70 % of shareholders voting against Cassidy's mammoth pay packet last month. Thody claimed, zero strategy is to grow in the USA as it is a market that is 14 times bigger than the Australian market.

1:15:30So he hired a capable global executive to lead the company who is based in the US. Who we pay based on benchmarking of salaries in the US consistent with our remuneration principles is our belief we will drive value for shareholders. That said, a significant zero shareholder lashed out at Thody saying, why do they bother engaging with investors if they're just going to ignore their views anyway? Is that a named significant investor? A named significant investor, unsurprisingly. Executive remuneration consultant Michael Robinson, who's been around for decades, this guy, who has probably done more to increase CO pay than anyone, argued we may not like high CO pay, but that's what these executives can get elsewhere.

1:16:04The higher the pay gets, the better the talent. Talent pool in the US is so much higher, we just don't get the best. The higher the pay, the better the talent. So what he's saying is that there is a direct one-to-one correlation between how much you pay executives and how they perform. Do you know this Michael Robinson guy? No. I've written about him. I've written about him like 15 years ago because he was around the last pay boom in like the late 2000s. If that's your job and you're going to say that and you believe it's true, we don't know if he believes it's true, but let's say he believes it's true, what you should do is go out and do a ton of research and provide me with some data that that's true.

1:16:38This guy, and he's just one of these, there's this whole industry of innovation consultants whose job it is, and Ron Buffer's talked about it for years, ratchet, ratchet and bingo he used to call them. And to his credit, Michael Robinson knows who his client is. His client is the CEO. So he gets hired by the CEOs, notionally the boards, and he's like, how can you pay me more? I'm not, there's 50%, and essentially all these boards go to the remuneration consultants. He's one of many, let's not pick on him too much, but he's saying what other people are thinking and doing. At least he's being honest, as in not right, but honest.

1:17:07And he's saying, essentially, so the boards go to a rem consultant, the rem consultant says, I think we should pay the CEO$5 million. That's the, sorry, the medium is$5 million. And the board goes, oh, but Sukinda's not the medium. She's amazing. We can't give it a medium. We've got to give her$8 million, or in her case,$26 million. So they say we need to pay in the top quartile. Top quartile, because we're a great board. We're really high. And then the top quartile becomes the median. Yeah, and then the next company goes, oh, we've got a great CO. Suddenly, the medium's gone up a bit. We've got to pay our CO 25 % more.

1:17:39And that's why Buffett called it Ratchet, Ratchet and Bingo. These pays get ratcheted up by this cottage industry of remuneration consultants and dim-witted boards who don't care about shareholders. And clearly shareholders have said to this board, stop paying her so much. And they just ignore them. So you'll be happy to know there is an alternative approach. Because look, we've got a US CEO at Catapult. And he would never think to recommend the remuneration consultant. I think we get data from Aon or whoever. Michelle Guthrie, who's the head of nomination and remuneration, she owns that relationship.

1:18:12And the consequence is there was a 90 % vote in favour of a special incentive that we provided the CEO because everyone thought it was completely reasonable. So it doesn't have to be like this. But in fairness, Sekinder Singh Cassidy would not accept the pay that Catapult is offering to its CEO. She wouldn't walk in the front door for whatever you pay your guy. That is true. She would possibly walk out of the room. And so I really am very supportive of CEOs earning very large amounts of money based on company performance. but I do not think you need to pay these kind of bases to CEOs. Well, even worse here, and I think everybody agrees, good performance deserves good pay.

1:18:52Here we've got terrible performance and massive pay. And so it's the worst. We haven't really seen that much of this. We saw a lot in the pre-GFC. We used to see this happening a lot but we haven't actually seen it that much, thank God, but except for zero. These guys are the high watermark for malfeasance in executive remuneration. And not only they, you think after getting a 7 % REM knockback, you quietly walk it back how do we how do we just sort of keep our heads keep our heads down deliver some great performance and and then we'll maybe start looking at pay and remember this share price keeps getting smashed and people just don't want to be part of this business anymore even though it's an incredible business that was started by fantastic founder roger he had our friend chris reed and training this great ceo still worth a lot of money oh like down more than 50 60 percent how many billions is it worth i think it's about 10 billion now that's a lot of money You know, you said that joke about bingo.

1:19:41I'll tell you, there's zero bingo, because since we're laying into zero. So they managed to get the following stakeholders offside recently. So they got investors offside. They got the media offside. And now I'm not sure about employees other than the CEO. I don't know if they're offside. But I can tell you who... I doubt employees are apt to see this happening. Possibly. They've got shares. They've got shares. Yeah, that's true. But I tell you who else they got offside recently, and that is the customer. So that is an achievement. And so do you know what happened in the UK that Xero did? Yes, I saw that.

1:20:17They had a go at account and said, we can be AI you out of the picture. Yeah, they ran a promotion that said, you can plug AI directly into Xero and get all of the information that you need out of that. And they got attacked by that. But there is a bit of a problem. Now, I sent you something that we can't talk about too much on this podcast, but we can allude to it or talk about it broadly and say there is software out in the marketplace that is AI powered that is doing exactly this type of thing where you can plug whatever you want into it and it's doing your accounting and it is in the double digit millions of revenue and growing hundreds of percent a year.

1:20:52And the thing is this, if you think about a financial advisor, I'm not sure that these advice and relationship businesses, as we've discussed, are just going to be usurped by AI. but what Xero is providing to accountants it's administrative material it's data for administrative material and the truth is that Xero should be exploring how to use AI in their business to make this much simpler but they can't but like there is a balance between how you talk about it I actually thought the euro's issue here was a poll I would have just ignored the like accountants there's switching costs in this business if accountants can move they'll move I would have just ignored it I wouldn't have done it again because I think it caused I think by apologising was actually the wrong call here.

1:21:36I think they should have Roy Cohned it and just ignored it. And the person who apologised was the UK CEO. Yeah. So it was a senior person that apologised. I agree. They just should have said, if they were going to say anything, they just should have said that was a decision taken down in marketing and it's not reflective of our... I wouldn't have said anything. I'd say that's your decision. It was in the media because now if you, now anything that Zero does goes straight into the media, right? Zero's down 68 % by the way. off their highs. So this is a pretty significant... What's their revenue?

1:22:04About$200 million profit from my understanding. So it's$200 million profit and... Maybe a little higher now. ...10 bill of valuation. 11. 11. So it's... I mean... We talked about this a few... I know, but it's still... I'm just trying to track it as it falls. Yeah. Still not bargain-based. We said$5-6 billion feels about right. Especially with a CEO we don't have much faith in. Yeah. They also put a heap of money on that Milo thing, which is... That's now becoming... That Milo is now like a third of the value of the business. Like it's... So the share price at the moment, actual dollars of the share.

1:22:34$64 a share, I think. It was$193. So can we say at$30, we think this is getting to buy territory? I think with a great CEO now, it's buy territory. But with current management and board, probably$30, yeah. When we had a go at WiseTech when it was$44 billion, it's now$10 billion. So we've seen these businesses. And Seek, I was critical, when it was$32 a share. It's down to$11 a share now. This is Seek's now back to 2012 days. This is when Paul was still there. It's actually incredible. At least that pays dividends. Does zero pay dividends? I don't know. I doubt it would. Yeah, Seek pays a couple percent dividends.

1:23:06But there have been some tech blood, some absolute massacres of tech businesses' share valuation. These were holy cows of Australian stock exchange. Zero, Seek, WiseTech. They were the highest flyers we had. They've been destroyed. So everything is called cesspocalypse. But actually, if you look at zero, this is not cesspocalypse. It is we've got a strategy and we're failing to deliver on our strategy. I think there's an element of apocalypse in there as well. I think it's bad strategy coupled with saspocalypse and that's why the market's – because not every SaaS business has been hit like this.

1:23:37Well, the strategy would be good if it worked. Like it's only bad because they're not delivering on it, right? Look at technology one's a SaaS business. Market loves it because it's a great business. Like it's not – I don't think we can put – it's the – you've got two things compiled. No, you're 100 % right, but my point is more you can't just turn around with these businesses because I live this pain every day of my life, right? and I try to draw a distinction between this is macro, like the market has got issues with SaaS, and in the US it's bounced back, but in Australia it hasn't. And then there's are you actually delivering on your commitments as a business, especially strategically?

1:24:14And I would say a lot of Zero's pain is they've made these strategic promises and they're not delivering on them. And it had that great core business in Australia and New Zealand and UK is okay, and they could have stuck to that core business and said they did this US stuff because US has got a great TAM. They don't disagree with that, but yes, it's a great TAM in the US. But Australian business, there's a graveyard of Australian businesses who haven't been able to do well. Like it's almost 99 % of Australian businesses who try to do well in the US don't. The ones that have done well historically, even like a GYG, great business didn't do well there.

1:24:45You kind of have to be international day one, the Atlassians, the Canvas. They won international. They did well in the US. Well, I think maybe this is also a characteristic. I can just talk from personal experience with Catapult. You guys are obviously very successful in the US, but you're always international. Yeah, because our Australian revenue is like 5%. The thing is this, we had a huge advantage. The market wasn't big enough to support the company in Australia. And so it is hell to expand overseas. And there are hard things about Catapult for sure, being in all these countries. But if your market in Australia is not big enough, you've got no choice.

1:25:14That's why Israeli companies are so international. Because there's no domestic market to speak of, right? And so I think that if you look at Atlassian, they could have built a business in Australia, but it wasn't a big enough market to build a real business in this category and that's the issue. And Xero's problem is they built the dominant business in this market and now they're kind of ex-growth in that market and that's their challenge. And there were incumbents in – oh, they're still growing. They're still growing. It's not as if they were Xero. They'd be a nice business. No 10 % grower is running a 50 times earnings multiple.

1:25:51You can't justify that. sorry 10 % growth at the top line I don't know what the bottom line is yeah but you can't you can't justify that you know no one's going to pay 50 times earnings unless you're West Farmers there you go but it's clear there was like the other issue all these businesses had but they were overpriced like WiseTech my bet is on WiseTech my initial bet it wasn't that Richard White's a weirdo but my theory and it's 71 and can't have that many years left my theory was just simply overvalued it was on a 100x PE this business never deserved that same reason why Zero probably didn't deserve it either so there's a lot of there was just investors got it wrong was a big reason.

1:26:26I think our thinking is they haven't actually fully corrected yet. Like I think WiseTech's getting to the point where it's getting to the right valuation. It's down 75%. So when we, because we should take another look in future episodes at things like SiteMinder. And I think the questions that we should ask when we look at valuation, do we feel good about leadership? Yep. And are they delivering on their strategy? There will be businesses floating around in the software space that tick both of those boxes and have been pummeled because of macro factors. We saw ProMedica's come right back. Great business come back.

1:26:56So I think SiteMinder came back. TechnologyOne came back. So the good ones have come back. Good leadership. Yep. Delivered on their strategy. Yep. And so very expensive. Yep. But those two boxes are ticked, right? Yeah. I think we like the SiteMinder. SiteMinder is like a unique business at the ASX, right? And it's transactional as well as market. It's got a lot of good things. And TechnologyOne's another incredible business. Pat O'Sullivan, ironically, on the board of both businesses, is my ex-chairman who's a ripper and he's been on car sales for many years. But retail investors love ProMedicus.

1:27:27Yeah. It's a heavily retail investor driven business. And a great story run by great guys that we love. I think we're going to call it a day. It's been a great episode. We'll see everybody on Thursday for our special episode.