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23:22And then he starts, he ends up like he's a professor or he's a whatever lecturer and he starts going on shows because he's very, he's eloquent and he can tell a great narrative. Yeah. And he starts becoming more and more famous on these shows that he does. Sounds like this guy's making a fortune. Well, let me tell you about his thing. So I will say this guy put in so much effort into this show. Like a Saturday night, right? I think, yeah, I went on a Friday night. What did your family say about the show? Well, my wife thought she'd have to leave at half time because my son's pretty young and it went quite late.

23:51But he loved it. And my wife's doing physics at uni and said it was very similar. Like a semester of uni in two hours. So she was really pretty amazing. Well, I was quite – because, you know, I'm very into physics and I was quite shocked at the sophistication of the content. Yeah, it was quite complicated. But it was done in such a – it was an audiovisual extravaganza. It was really incredible. So this guy – How do you know about it? Someone told me about it actually, that he was coming. Oh, you know him. I know who he is. I thought he was okay and after this I think he's incredible. And so – Is he like that Neil deGrasse guy?

24:23I think he's better than Neil deGrasse Tyson. Yeah. They all want to be the next generation of – gosh, who was the guy that did Cosmos? I just forgot his name. Carl Sagan. Carl Sagan. They all want to be the next Carl Sagan. Nailed it. Bang. Redemption. Was that Googled or you just... No, no, no. Nailed it. Nailed it. Okay, well done, Mike. I'm very impressed by that. You're back in the game. It just goes to show how much worse the original comment was coming from you because you actually know what you're talking about. And so basically they all want to be Carl Sagan and Neil deGrasse Tyson does have Carl Sagan's old job, which is the head of the Hayden Planetarium in New York.

24:59Yeah, I went there. He commentates it. It's very amazing, right? And he did do the next version of Cosmos, the show, right? Yeah, he did. But I actually think Brian Cox is better. So this is what Brian Cox does. He goes and does this show. He fills the auditorium. It's 5 ,500 people at the Melbourne Convention Centre. He's charging an average of, we're just going to use round numbers, let's say$100 a ticket. It's unbelievable. It's more than$100 a ticket. There's thousands of people there, right? There's 5 ,500. 5 ,500? I just said that. That's the bit you didn't listen to a second ago. Yeah, there's 5 ,500.

25:28Make a deal with the 5 ,500. And so it's pretty good, right? And so basically you do like the numbers on that. 500 grand an episode. And there's no cost. I reckon he's – well, no. It's not like Cirque du Soleil here. No, but he has to – there are two costs. Obviously he's got to rent the stadium. Yeah, there are multiple costs. So – and then I'll get to what I think he's making and then I'll tell you what I think he's making from his whole tour. Yeah, it's unbelievable. Because I just want to say something now which – if I wasn't Jewish, I couldn't say this. But like what's the difference between anyone else and like a Jewish person that goes into these shows?

25:58I think it's a bit stereotypical. Everyone else just enjoys the show. So the juice can numbers and multiplying it by the ticket cost. I wasn't there when I did that. No, I knew you were going to do that. No, you can just sit there and enjoy the show. It's like, what? This guy's making half a million bucks to do this? And how hard I work? It's like, I don't know, how much does that one cost? Yeah, 100%. Anyway, so I think the cost would be he's got to hire the place. That's cheap. That's not expensive. It would be the audiovisual stuff was expensive. 50 grand max? To hire the place. Yeah. Yeah, but I think the audiovisual stuff, he would have a team putting that together.

26:30and he brings his own AV wherever he goes because it's so big, the show. And then there's like, you know, you've got to do all of the people that are selling the tickets and promoting and all of that stuff. The merch was hopeless. I was shocked. Like Taylor Swift makes a lot of money out of merch. His merch was junk, okay? And so I would have bought merch, okay? It was like a trestle table with two people that opened like the back of their caravan. Coxy, lift. It was not great. So I think he's pocketing half on average. I think higher than half. That would be typical. It's typical for like a Taylor Swift.

27:07Taylor Swift doesn't take any risk because promoters pay it. But that's typical for an artist like that. But there's very little cost with this. He's not having to pay 100 backup singers and all. It's like it's very low cap. Let's even assume it's half, okay? Let's assume. And so last tour he did. Even more Jewish having to argue about how much they're making. Yeah, yeah, that's right. Next we'll be saying, does he deserve? Actually, he did for this. And so it was really a great show. And so the last tour he did. Obviously paying zero tax, he's not an Australian resident, so he's coming in. He's not paying any tax in Australia.

27:37Yeah. Probably a Monaco resident. And so last tour he did, he got 365 ,000 people around the world. This time I reckon he'll get half a mil. Wow. Yeah, I reckon it's a big global tour, 90 shows. And so I think if you multiply that out, it's not$100. It's got to be closer to$150. Yeah. But let's just say$100. USD, okay? Let's just say 100 USD. He's got 500 ,000 people. Yeah. And he's charging 100 USD. And he's making 50 USD. That's 50 mil USD. And he's got to be keeping half. And that's the annual, that's one year. That's, yeah, but he does shows every couple of years. I know, but the 52, the 50 dates, it's not going to take him a year.

28:16Who would ever have thought, can you imagine talking to this guy when he was 24 years old? Yeah. He's in a rock band. Unbelievable. He thinks this is his big break to be famous. Doesn't work out. I mean, they had a big song. It doesn't work out. He plays a bit of music on the stage. I don't want to ruin what he plays. It's very fun. And so then he says, I'm just going to become a physicist. And he's a smart physicist. Incredible. There's very good stuff. And it turns out that's how he makes like$100 million, by being a physicist. It's actually an incredible, incredible bit of entertainment. It shows how niches are so profitable.

28:46And we talk about us being a niche, but this is even a niche-y niche. This is like, I wouldn't have thought that that many people super into physics. Neither would I. The diversity at this show was incredible. And like the only thing. Young and old and male and female. And also people that look very different from one another. Like physically look very different. And you would think, you know, what have they got in common? They're kind of all nerds at heart, right? It's heavy duty physics, some of this stuff. I mean it's not, there's one equation in the whole show. So he stays clear of equations.

29:15But like it's pretty detailed. And so I just think. Look on him. We're still living in a good world. Yeah. where a guy that talks about physics is basically giving physics lectures and he can make$50 million a year. That is still a good world, right? Unbelievable. To what extent is that business only possible because of social media? Well, that's a good question. I think it would still be successful if there was not social media, but definitely it accelerates the velocity of him being able to do a global tour. But I thought you were going to say, to what extent is that business dependent on him as an individual.

29:52And I think it segues exactly into what you were saying, which is that is a celebrity-based business built around a single personality. Anyone else doing the same show, even if it was the same show, could not even get an audience, I don't think. Now, he is an amazing entertainer, I will say that. There's a way you dismiss that business, which is, oh, this is just a sort of further influencer-ization of everything we do. and I want to be really clear that you can only do that business if you're extremely talented. I mean, this is a one in a million guy. Like, former rock star becomes quantum physicist.

30:25Well, less than one in a million. One, maybe. Just one in a billion. I mean, that's the point, right? But if you try to do that show without relying on that kind of unique talent, well, then you do need to have a team of 100 and you're reliant on all the capital expenditure of the lights and the rays and all these sorts of things. And so I think, I don't know if it's where all the revenue will come from, but I think there's a lot of margin to come from businesses that are reliant on well-known personalities and the personalities become the marketing. That's how you reach everyone and that's how you get whatever you feel like 5 ,000 people.

31:00So I totally agree with you. So that is what I did with my, that was the highlight of my week. It was super enjoyable. You know, I wasn't really that much looking forward to going because like he's interesting, but like the level of effort that he put into this show It was just mind-blowing. I think they were happy to go, and they raved about it, so it's really similar. So congratulations to Coxie for not big break Coxie, Brian Coxie. So is this what your wife is planning on doing? That's her career trajectory? She might be doing Cox too. Yeah, like do physics. She's studying physics. Yeah. I mean, that's very impressive.

31:31I've done a couple of things. I had a pretty big week last week. I saw your big week last week. We had LA Live, which was incredible. The team just lifted. So you should explain what that is, because you kind of mentioned that in passing. I did the week before. giving it a plug. And I was a bit like, that sounds cool. But then I saw it online. Did you come to it? Let's say I was away. And I saw it online and I was shocked. Yeah. That you basically took out the exhibition buildings in Melbourne and it was all luxury escapes. Yeah, so you always get a bit nervous. The first time you do something, is it going to work?

32:05So we started planning it not that long ago, probably seven months ago maybe. So we had to get a bunch of corporate partners to help underwrite the event because it's about one and a half million bucks to put it on, speaking of capital costs. And then we obviously got to get a bunch of – we got a bunch of commercial partners, hotels, tour operators, blah, blah. We had amazing hosts, Sarah Davidson and Jack Velgate and Miguel and Shane Dealey came on. So we had some great partner talent. But ultimately it's all for nothing if you can't get people to rock up. So that's always the risk. What were you – like what were you – I don't want to say selling, but like what would be the motivator for someone to come?

32:37There's a couple of reasons. One is like people need travel – want and need travel ideas. Like it's – we obviously give them online. But having in-person travel advice and expert advice, be it at a booth or we have a stage as well. So we have people giving – talking on the side. We have a few sessions. We have about maybe 50 different sessions. So there used to be this thing called maybe the travel and leisure show or something. Well, Flight Center just did a big travel expo every year. I think having seen ours, they're now bringing their one back, funnily enough. So this is not – like there's stuff in the States that's a 40 ,000-person one.

33:04But this is – you're trying – this is not just you trying to sell LA packages. You're trying to do a broader travel show. We do – no, we have a lot of partners there. So you could be APT, you could be a tour company, you could be a hotel. So people can – essentially they're offering special packages you could buy there or the next – a week after. So if you want to get the special package, you just have to go through us. But if you just saw this hotel in a year's time, you want to stay there, people just stay there or go through us. So it's kind of – it's very much brand-new. Do people pay to get in?

33:32Totally free if you're a luxury tax member. It was a$29 charge if you weren't, but you might as well sign up for free and get in. So we ended up – we were hoping for 10 ,000 people. That was sort of our aspirational goal. And we got to 13 ,000, so for 13 ,000, which is what we're doing. For a first year, I think we can do 20 ,000 next year. You should have gotten Coxie down there. We should have gotten Coxie down there. You have to get people. He'll tell you how many neutrinos are passing through your body at any point in time when you're there. Real Coxie. A lot. What I'm super proud of was how well the team did.

33:57These people worked through the night. It was multiple nights. I can't name them because there were too many, but it was just – there's probably a couple of hundred people. There was a hundred people who worked on the days, but a couple of hundred people who made it happen. So I was super proud to see that. And then literally 24 hours later, we had our first Maldives charter. So the marketing team had two massive lifts. They got to the airport and there were people everywhere and Mark who was running it for us and Chris who did it for us. Was that the first paid charter with paying customers? Yeah, so it was our first charter.

34:26Yeah, and we had the marketing team up there until 11 o 'clock at night after being two days at LA Live, which was incredible to back it up. So there was just so many people who made that happen as well over probably even a shorter period. I think we probably signed with Maldivian under six months ago. So it was a bit of a rush. Very impressive. And first flight was basically full, had lots of great celebs and partners and media on board. We'll do a contrarian thing in Maldives. We should do a contrarian thing, yeah. With your charter flight. We don't have first class. I presume you won't come as a result of that.

34:57I'm sure there's business class. We've got business, but I thought you didn't go business. I'm fine with that. You always make fun of me. I'll sit in economy if you sit in economy. You sit in economy? You can have the middle seat. I'll have the aisle. We've got 242 in economy, which is actually pretty good. That's good. You don't have to sleep over three people or two people. So the economy seat, because it's a slightly, it's a kind of 15-year-old, what is it, KSL, the Dutch carrier? What are you talking about? What's the carrier that was the old Scandinavian airline that merged with Air France?

35:27KLM? KLM. It's an old KLM plane. If you want to know anything about travel, you know who to come to. Whatever you want to know, I'll let you know. Okay. So it's a 15-year-old car. So great. In its day, it would have been as good as anyone in the world. Now it's flying a Qantas plane to Hawaii or Singapore. What aircraft is it? It's a 330. It's a twin half. Okay, that's nice. So it's not as good as like a brand-new Qatar or Singapore Airlines flight, but you're paying half as much. I couldn't just fly those to Singapore, I think, aren't they? Qantas flight, yeah. Same way you fly to Qantas. Qantas Singapore, Qantas to Hawaii or Fijian Airlines.

35:55So, yeah, it's a really solid plane, plenty of room, and ran on time, which is great. We landed in the landing in Malta. Welcome to Malta. I saw that. There's like 200 people. There was politicians, there was trade minister, the foreign minister. We had a gift-giving ceremony, which was lovely. I didn't get a gift. We gave them or you got them? We both gave and got. I don't know. I get nothing on this podcast. And Laurie from Melbourne Airport was there and they did an amazing job making it happen. So it was a real thrill. And we pretty much sold out the first six weeks. Got a few seats in June.

36:24Then we sold out again during school holidays and we had a few seats in August. So jump on before we sell out completely. We're hoping to extend it into next year, but we're just seeing how fuel costs play out. So when you go to Melbourne Airport, do you have to go through the same security? Same security. I think even Laurie had to go through the same security as well. But I definitely went through the same security and actually got straight through this time, which was quiet. No complaints? Of course no complaints now because the head of the airport was on the flight. Yeah, what a remarkable coincidence.

36:49Suddenly no complaints. It was completely smooth. We had a – so I had to give five speeches in 24 hours in the Maldives, which is fun, then came back. So it was a whirlwind 72 hours, but it was great. and super proud of the team. We had actually a record contribution March and Day on Monday as well, which was nice after a tougher month. What a week, huh? That was a good bit. The bad bit was obviously the budget isn't getting any better. So let's move into this budget corribute. Can I tell you something you were right about before we go to the budget? Yeah. Okay. And then I'll tell you something that will infuriate you and get you worked up in preparation for your budget conversation, which is very short.

37:28Both of these relate to you. I know that's your favourite topic. Me and Scott Galloway. Love talking about ourselves. So you know your pitch to me, I don't know if it was last episode, whenever it was, about Lime bikes. Was that last episode? Last episode. Okay. Great episode. We were trying to pitch me. That was a good segment. Okay, very good. So I don't feel like the praise counts for much when it's us giving it to each other. But you go ahead. You tell me. You should focus on how great I am. Okay? So basically you tried to pitch me network effects for Lime. Do you remember? And you kind of got me a bit of the way there.

37:58I listened to that and thought, yeah, I made some great points. Yeah, well, don't get carried away with that because I heard a better argument than your argument, but I'm still going to give you the network effect argument. Okay, great. And this is a guy. I'll take the better argument. This is a guy, Lippy, whose office in Israel I recorded out of when I was in Israel. He runs Multiply, a business. And so. We had him on the pod. Correct. Oh, yeah, good memory. Much better than mine, in fact, despite the fact that he's my friend. It was March after October 7th and we had him on. Yes, you're right.

38:22And so this is what he said about Tel Aviv, and I think he's absolutely right. He said you can have scale and you can put tons of bikes in Tel Aviv, but what really makes it great is that – As in Lime specifically? Yeah, Lime. He said there's three different brands in Tel Aviv and they all put heaps of bikes in. Actually, it's more scooters there than bikes, but it's a mix. And what makes Lime better is that way more people use them. Now we're getting to network effects and what that means is the person that uses it and lives a bit further north, they go and leave it further north. And then when I want to get the bike further north, That's exactly what I said last week.

38:57That wasn't exactly your point. It was literally my exact point. That's not what I took out of your point. More people who use it make the network better for others because there's more bikes. I can afford to have more bikes. Literally the same point I made. I'm happy you reiterated that point because it's absolutely not the same point. The point is not how many bikes. Someone's getting sued for defamation here. The point is not how many bikes there are. The point is if I'm north and I want to bike up north in the north part of the city. More nodes improves experience for others. Exactly what the point I was making.

39:22But it's not about how many bikes you have. You can have the same number of bikes as a competing company. It's about how many people who use it. And leave it in different places around the city. Was that the point you were trying to make? The point is more people using it makes it better. That's exactly the point. Well, I understand what network effects is. Thank you for clarifying that. And that was an example of this. But, all right, well, whether it was you that said it here more, between the two of you, I do agree that there are network effects I do agree with you that is a good point. With this business.

39:46Yeah. Now, let me tell you the other point that you're going to love and it will get you worked up and we can roll into your budget stuff. So I'm driving down the road not far from where we record this pod at your office and I see a billboard and the billboard just has these words on it because you know your postcode is 3206 is that correct? Our Park is yes okay and this is what the billboard says it says I'm gonna I wrote this down it says delivering for 3206 that's the whole billboard yeah what company you think that is delivering for 3206 Australia Post yes it's a good guess Australia Post.

40:24How do you think I felt about that billboard? You think that's getting them a lot of business? What do they need the business for? They're coming up for you anyway. What in the hell are they spending that money for? Taking billboards, saying, delivering for 3206. Does the ambulance advertise? Saying, when you have a heart attack, we'll come and get you. No, because there's not a lot of competition. Yeah. And so I just thought that was, you know, they're always asking for more money, Australia Post. It's like Woodside sponsoring Cremantle. They're a B2B business that owns the gas fee. I know, but they probably want a good seat.

40:52But like, basically. Who's chairman of both? Yeah. Your mate, Richard Goiter. Finally coincidence. Or ex-chairman of both. But what are they doing? Complaining about, you know, they have to cut services. You know, they're cutting services. Every fourth day. Yeah. They're always cutting services. And this is how they're spending their money. I just thought that was completely infuriating when I saw that. The CMO has to earn that million dollar salary. That's what they're doing. They've got a marketing budget. Yeah. And they've got to spend a marketing budget. And so, do you think, I mean, are they running that in every postcode around Australia?

41:21Probably. Or just Albert Park? I just thought it was the biggest waste of ultimately... Oh, it's ridiculous. Ultimately... How money? Is it taxpayer money? Absolutely. Do they run into profit or not? It doesn't matter. It's still taxpayer money. Which direction does cash flow in with Australia Post? I think it flows back to the government. It depends on the... It used to go massively to the government. Now I think it actually doesn't, but it depends on the year. But I just thought that was ridiculous. All right. I agree. Get worked up. Come on. What do you got? So the budget new cycle refused to move on, with the Prime Minister becoming teary last week as he told a speech to the Victorian Labor Party's conference that federal government had thrown everything at increasing housing supply and lifting home ownership rates and needed to be done.

41:58By everything, he means nothing. Pretty much nothing. Yeah. He said Australian taxpayers were a partner in every investment property due to generous tax breaks, while young people continued to miss out on buying their first home. Of course, most of the proposed budget changes have absolutely nothing to do with property, with Albanese and his art degree-holding treasurer replacing the 50 % CTC deduction on all assets with a ham-fisted inflation-based model underpinned by a 30 % floor. A negative gearing would limit to investments in new properties. The AFR appears to be listening to us, knowing that rather than being a budget that supports aspiration, the biggest winners are naturally wealthy older voters who keep virtually all their tax advantages.

42:31Let me just list a few of the advantages the older people still keep in this so-called intergenerational fixing budget. So retirees have long structured their financial affairs to enable them to qualify for an aged pension to get access to a lucrative pensioner concession card. This provides discounted doctor visits, medication, utility bills, and they're now even exempt from the 30 % GST floor. Bear in mind, 63 % of Australians over 67 get the pension. So it's not like it's a few people. It's the majority of old people get it. Super remains the greatest rort of all time. And I actually didn't realise just how much of a rort super was.

43:02They've changed the nature of super with this budget. It's not even rorty. And I'll tell you how I think people need to use self-managed super in a different way as a result of this budget. But go on with your rorts. Well, I didn't realise that CGT and super is like 0 % if you're effectively retired. So we should be precise about this. So if you're in what's called pension phase, which means you're drawing money out of super. Retirement phase, yeah. Yeah, it's called pension phase. That's just the name of what it is. Versus accumulation phase, which is where you're putting money in super. And so there's a minimum that you need to draw out each year and the amount that you draw out is tax-free and the gains made inside super during the pension phase are tax-free as well, notwithstanding, you know, this$3 million and$10 million caps.

43:48I don't mind the drawing out because drawing out is kind of around which time. But it's more the earning that's the problem. Like the fact that you can earn in Subart versus earning out of Subart and Subart is tax-free. But you should think about this in terms of drawing out. I agree with you. Like there's no issue with it being tax-free. But everyone else who earns income has to report it on their income tax return and pay tax on it. But the money that you take out, it's treated like a bank account, which would be fine if it was a bank account. But it's not. It's an investment account that you are paying no capital gains tax on and then also drawing out tax rates.

44:20So there is no tax. Yeah. It's under like two million. There's the thresholds. Thresholds are pretty high. And bear in mind your primary residence doesn't count. And remember we talked about that 63 % of people on the pension. If you've got a$20 million house, that's ignored for the means testing. So you can own this crazy expensive house and still get the pension that young people are paying for and they're 47 % GST. Yes. Well, you want me to tell you why self-managed super has changed? Yes, please. So that remains the only very tax-advantaged way to achieve capital gains. And so where's – you know, there's a – what's it called?

45:00Not a single-purpose test, but it's something – it's got a name like that, which means – Sole-purpose test. Sole-purpose test, exactly. The purpose of superannuation has to be only for the accumulation of retirement savings for whoever the trustee of the super fund is. the beneficiary. And so in the past, the assets in super were pretty conservative and there's limits to what you can actually put in super. Couldn't use it by property. That's right. And now you can take loans in super to do all sorts of things. And so the nature of these changes means if you want to – I'm not advocating this, by the way, but I just want to be blunt about unintended consequences.

45:35If you want to make – Was it unintended? Apparently Paul Keating came up with these changes and Mr. Super himself. So it may have been intended. Well, if you want to go – well, I doubt this was intended. If you want to go and invest in riskier assets that are more likely to generate higher growth but also might lose your money, the only logical place left to make that investment is inside super. Because any asset that grows substantially over a period will be taxed at a higher rate of tax than a poorly performing asset. And so super all of a sudden has a totally changed risk profile because of these tax changes.

46:08It's pretty absurd really. But if you look at all these, and obviously the primary residence exemption remains, the negative gearing remains if you own the assets, which of course has to be, you have to be old to own the assets already. And people get their CGT value grandfather. So if I had a business worth a billion dollars as of next year, I'll get that billion dollars. So every single thing has been tilted, even like we already had the most unfair tax system you could imagine for older people. Well, I thought you could imagine and they just made it worse. And funny enough, been obviously been pretty active on LinkedIn those last couple of weeks.

46:38pretty much the only people who seem to be supporting these changes are rusted on Labor types, fair enough, they're going to support anything Labor says, and old, wealthy white men. They're the only people who seem to be supporting this change. Well, I'm not sure the colour of their skin is. I mean, I'm sure if there were old, wealthy Indians or Chinese or... But none of these people seem... Well, they might not be exposed to your ransom. Because they understand aspiration. I think these old, wealthy white men have made millions of dollars sucking off the taxpayer teeth like a lot of them are.

47:05They've been ex-politicians, ex-Labor advisors, like an ex-minister, it's like half the ex-Labor Party washed up hacks who get paid by the government has spent their time commenting on LinkedIn posts. Not a single young female founder is commenting on this misogynist policy that Chalmers has brought in. Well, people don't understand that every aggressive – I saw a back and forth that you had on LinkedIn with a post that you posted this week. And like the guy came off really second best. And what he doesn't realise is like that is your energy dream. So let me tell you a couple. Instead of just ranting about this, because there is a lot to rant about, and then I'm very open to your criticism of my article.

47:42What's coming? I look forward to arguing with you on that. But let me tell you, I thought you'd be interested in some OECD facts. Yeah. What is Organisation for Economic Cooperation and Development? Like 30 countries in there now? I think it might be 35 of like 35 developed. I don't know if you can say developed anymore. I'm going to say developed. Yeah. Developed economies. So here are some facts about that. Before I tell you that, let me explain. I'll explain in a second. Here's a fact. So when you look at the share of total tax that is contributed by income tax on wages in the OECD, roughly what ballpark percentage do you think it is?

48:19If you average that out, everybody. Average it out. What percentage of the tax tax? 35%. It's like low 20s, okay? That low? 23, 24. Oh, wow. Yeah. And now some of these countries have social security taxes. Add 50 % to the US. But most countries don't have state taxes. The US has state taxes depending on the state, right? And so it's average low 20s, low to mid 20s. What do you think Australia is at? What share of our tax take is from income tax Australia? Oh, sorry. I misunderstood the question. The first one was the OECD average. Sorry, I thought you were asking what average tax rate do people pay.

48:51No. Well, that's a more complicated question. But, like, if you took it the total tax pool, how much does income tax contribute? On average, it's in the low to mid 20s of the OECD. Is it like 40 to 50? Yeah, it's like 40s. And so basically I think it's like 24 versus 42 or something like that. GST in there or GST? Well, I'll talk about that separately in a second. Would you put CGT in there? CGT is not income tax. And so we are much more reliant on taxing people when they earn their wages as a percentage of the total tax take versus the OECD. Which is getting worse every year because Jim Chalmers refused to index the brackets.

49:25Because there's no indexing, right? We'll get to that. And so now, you know, the average full-time salary in Australia, It's a full-time wage. It's a bit misleading, but it's a full-time adult wage. It's about$100 ,000 for an individual. The top tax bracket in Australia kicks in at$190 ,000. That idea of 1.9 times the mean – it's not the median, it's the mean salary. Like that is very, very low. Like the US kicks in at 10 times. $500 ,000, right? Yeah, Singapore's$1 million Singapore dollars, like 14 times the average salary. Like even New Zealand, which has a lower tax rate. I think their top tax rates are not.

50:02And no CGT. And no CGT. They kick in at 2.6 times the average wage. So we're kicking really low. Now we talk about the consumption tax, which we call GST. So confusing these three. CGT and GST are very similar. So the GST, that's our consumption tax. What do you think the average rate of consumption tax is in the OECD? About 10%, I would have thought. So it's 19.3%. Oh, really? That's higher. And we are at 10%. And you can see the game that's going on here. Basically, nobody wants to raise the GST because then everyone hates you. To Howard's credit, he took the GST to an election as an incumbent.

50:40So what I've worked out is you can't take tax to an election from the opposition, but you can take it as an incumbent. That's what makes Elbow even more egregious. Elbow and Thomas just lie about it 50 times. Yes, that makes it more egregious because they're doing it from incumbency. What makes it so egregious is the fact they expressly said they would not do it and then six months later did it. That's just disgusting. And they always plan on doing it. So I don't think they always plan on doing it. I think what happened is that the Liberal Party lost Albury's seat to One Nation and they basically woke up and said, there's no opposition in this country.

51:09If ever we're going to do something, now is the time. When they say we thought about it three weeks ago, I think they're telling the truth about that. I think they just thought, we've always kind of wanted to do this, but we weren't planning on it. But my God, like there's no Liberal coalition in this country anymore. We can do it now. No one's going to listen to them. So I think what's happening is no one wants to lift the GST and what probably has to happen in this country, if we were honest about it, is the GST needs to go up, payroll tax needs to go at the state level, and income taxes need to come down, and CGT does not need to be touched.

51:42But with negating... Well, CGT should be 0%, really. Well, that's a whole debate. I'm not sure I agree with that, but we don't have to have that debate. It certainly shouldn't be 30%, like somebody wrote in the AFR this week. Well, let's argue about that. Let me tell you one other thing before you criticise me. I think you've got Stockholm syndrome. All right, thank you. In Paddy Hurst, I'm doing a podcast. You know, whenever I'm wondering what is wrong with me psychologically, you're not the first person I think of to go to um so let me just tell you something else that um that I think is going to become quite topical and that is the following so 35 percent of capital gains tax in Australia is paid by one percent of transactions yeah so that and so there's a bit of a theme I think that exists which is whatever the government has forecast that it is going to collect from these new taxes, it will be collecting much less than that.

52:27Yeah. Because people will rearrange their tax affairs and not pay the tax. And people just won't sell. They'll just borrow off their holdings. And so do you know there's this thing called the Laffer Curve, which I think is going to become quite popular in discourse, which is, you know what this curve is? From cigarette sales. Modelled Laffer Curve. Yes. It's for cigarette sales. But it's a broader – Wasn't it made famous by Ferris Bueller's Day Off? Was it? Yeah. Oh, that's a good bit of trivia. Who was the Ben, what's his name? Who was the teacher in Ferris Pools Day? It's before my time. Win Ben someone's money.

53:00Coxsaint. It was before my time, so I'm not sure. You ever watch Ferris Pools Day off? I have seen the movie. Well, back on, let's just get off the back road and back on to the main road. And so basically this curve essentially is the relationship between increasing taxation and demand. Also the decrease. And taxes. Sorry. It's trickle down. Let me just start again. It's the relationship between increasing tax and tax collections. Yeah. And so there's all these complicated graphs, but really you could draw it as an inverted U, let's call it, where you increase taxes and your tax tax goes up, but you're past this point and suddenly you collect less tax.

53:33That is what's currently happening in the UK. So tax collection as a result of all of these taxes on wealthy pay is going down. And so almost – Happened in France, they reversed it. That's right. Almost certainly this increase in capital gains tax is going to result in reduced collections. That is what happened with cigarettes. They put the tax up so much that people now buy illegal cigarettes and the tax take has plummeted. The irony about that. Plummeted. Everybody knows that's a disaster. And it wasn't Labor's fault. Like, that's been – every government keeps increasing it because it was an easy win.

54:05Because you say, oh, I'm doing it for health reasons. Yeah. And eventually, like, Labor just happened to be in power when it trickled over that to your Laffercare point. But instead of just reducing the excise on tobacco, which they should have done two years ago and could have significantly actually increased revenue and also stopped bombings, they, for some reason, haven't. and are targeting young female founders. It's just bizarre. Yeah, well, you're going to criticise me after I say this, because I'll say this and then you can criticise. So there's a war going on inside the Labor Party at the moment between, we can call it the cha-cha war.

54:35It's between Chalmers and you know who the other one is? Andrew Charlton. Andrew Charlton. Now, Andrew Charlton, he's a winner. This guy... So he'll help a beta for 50 million bucks, right? And so he's taken a ton of money. I reckon he's got somewhere between 50 and 100 million dollars. I was going to say he's involved in business. He's involved in consulting. an adjacency to business, right? It's like to build a business. No, so totally. This guy almost certainly got shares for zero because founder shares, no cost base. So this wouldn't be good for him. So when he says, like, I support this and some of my asset sales in the past would have been better under this system, it's almost certainly untrue.

55:07I couldn't think of a single asset he could have sold. He's actually been pretty, relative to Charmers, he's been pretty good. Except his interview with Sky News was just one bit of dishonesty after the next, right? But basically there is – it's pretty clear he wants to be treasurer. He's actually qualified, which might be – Couldn't be any worse than the current guy. Well, it could be a disadvantage to be qualified. There's a Yes Minister episode where basically the Prime Minister – I think he's just a minister at that stage – does this whole dissertation of why not being an expert is a huge advantage in being a minister.

55:39It's a great, great scene. But I think that you see Charlton now going on some shows, doing the rounds. He can explain it better. Now, he had inadvertently lobbied against the government's trust changes without realising. Also, he was asked about, do you have trusts? Of course, I have family trusts. Do you do it to reduce tax? No, I do it for 112 other reasons not to reduce tax. I think he should have just been honest and said, of course I do it to reduce tax because there's loopholes to reduce tax. We're closing the loopholes that I used because they shouldn't be there. Instead, he tries to lie about it.

56:10If he didn't do it to reduce tax, he's a complete moron. He's not that, right? So I think that's an interesting battle to watch play out. And I'm not sure Chalmers makes it to the next election. Well, I think if you look at Jim Chalmers six months ago, he was, I think, a pretty dependable middle of the road. He's not going to be too controversial. And now he's turning into a raging communist in the space of six months. Like, what does happen to this guy? Like, it's just – then you've got Daniel Petrie and Paul Keating chiming in. So you've got Paul Keating, that geriatric old fool, who was a great prime minister but now has completely lost the plot.

56:39By the way, I don't think he's an old fool. I think he's still sharp from what I hear about him. Oh, I think he's lost the plot. But his views are stuck in a time where he can hold on to the narrative that says, I was the greatest thing that ever happened to Australia. And he did some great things as treasurer. This is the most un-Keating-like policy ever, even though he's reportedly behind a lot of it, but now he's geriatric. The Keating of 1987 is not releasing this policy at all. I agree with you on that. And his capital – he's reberting to my capital gain. This isn't Keating's capital gain tax at all.

57:11There's no averaging. There's a 30 % minimum. It's a completely different taxidermist. Well, you should say there's no averaging because you introduced me to this. I didn't realise it. Well, you introduced me to this originally. Did I? And I introduced you to – yeah, you told me about – we spoke about this two weeks ago and you were first on the scene with this. Well, I think I understood like the mathematical implications. Inherently. But then you said what they actually – yeah, that's right. I introduced you to the concept of it shafts people that have been on a low income and suddenly they get a gain in one year and they don't get the benefit of – they're not really high income earners.

57:36Splitting it, yeah. Yeah, they're just one year they were high and then I went back after you pointed it out and looked and I saw that what the Keating version of this did was if you buy something for$20 and you sell it for$100 and you have an$80 gain, that's a terrible number. If you buy something for$120 and if you buy something for$20, you sell it for$120, you have a$100 gain, you would take 20 % of that gain, put it on your tax and work out what tax rate you'd pay on that and then apply that to the entire gain. And that's a version of averaging it over five years. Not perfect but simple. And this doesn't have any of that in it.

58:09No, they don't care. Yeah, they don't care. I just didn't think about it. They rushed it out in three weeks. But Keating, who, great treasurer, now 83-year-old, he sold his business for$40 million in 2024, paid a discounted amount of tax, gets all these government – he gets a million dollars a year of government, taxpayer-funded stuff, and this is the guy who's waiting in on that young people should be forced to pay WGST. It's just outrageous, the hypocrisy. Then you've got Daniel Petrie, a guy who – You're very worked up about Daniel, but I like him and also I'm going to – I'm not talking about him personally.

58:38I'm going to tell you something at the end of this that I think you'll agree with. You're piling on him and, I mean, he did come out and make some comments. But the audacity to come out. Joe Esten piled on him today. Did you see that? I'm saving that because, like, you know, like you get a piece of caviar. Who else piled on? Rear window piled on to him. You're saving the caviar. Everyone's piling on. It's a piling. Well, this guy came out and abused people for doing exactly what he's done for 20 years. His Canva carry is hundreds of millions of dollars that will be grandfathered in under this discounted capital gains rate.

59:07Canva carry as part of Airtree, you mean? Because Airtree is best in Canva for a low valuation. Now it's worth$60 billion. He'll make a fortune, he's got it. But I do want to say one thing about him and others like him. In a way, they can't say anything and maybe they shouldn't. Of course he shouldn't. But the thing is this. If he says you should – it's unfair, then people will say, yeah, of course you think it's unfair because, like, you're all this rich guy and you want to make more money on cheap tax. And if he says it's fair, then people are like, You come out and say, yeah, of course, you got the benefit of it, blah, blah.

59:38So he kind of can't win no matter what he says. He can win. I think there's a problem with it. Steve Baxter polled on him as well. He had a bit of a fun back and forth on LinkedIn. That's a fair fight. Two gorillas. Like, you let them fight, right? Yeah, absolutely. Yeah, that was Steve. I think Steve won that on points easily. Well, I don't think. I think it was. That's just like. And differences in position wrapped in some aggression, basically. The outrageousness of this whole thing and of Keating and Petrie's views is we all think something should be done about this intergenerational inequality.

1:00:05But what Labor's done has made it worse, not better. So to come on, simply because you're a Labor guy and you love Labor, to simply just support this policy. Like we've voted Labor as much as we've voted Liberally the last 20 years. Not only if we're rusted on Labor haters at all. But what's happened is they've lied to us. They've created a policy that's simply terrible for young people across the board. That's the problem with it. So tell me, so now you can move from criticising them to criticising me. Well, being credible for old people. Criticise me. Oh, so you came up. I opened the financial view.

1:00:32My favourite journalist, Ideas Shiftman. You mean you loaded the financial view? No, I get the hard copy paper. You opened the paper. Was it in print? Oh, actually, I don't know. I'm making that up. I think I assumed it probably was, but I didn't check. Yeah, I presume it was. But actually also, I think I was in Maldives at the time, actually, so I would have been online. But I think Ideas are going to come to the rescue of these young founders. What did I read? Which I did. 30 % capital gains tax you want them to pay? Well, did I want them to pay it? Well, it sounded like you did. Okay, so we can summarise in one line and say, I think that there's a bad problem for people that build businesses in that this CGT change is being sold as they are inflation-adjusting the gain, but they're not.

1:01:17They're inflation-adjusting the cost base. So even if you buy something that has a cost base and then you sell it and they adjust the cost base. What that means is they're saying, it's like you bought it this morning and sold it this afternoon. Okay, if I did that, I'd be happy to pay higher tax, but what about the last 10 years? And so the way you inflation adjust a gain is you inflation adjust the sale price. And that stops a whole lot of problems. I thought, you know, as we have discussed, the bigger the gain, the higher the tax rate you pay. I thought that was a bug. It turns out it's a feature.

1:01:46That's what Treasury wanted. Presumably because they're all bad at investing would be my guess. Now I've never had a business. It's so crazy. Anyway. Jenny Wilkinson, Jim Chalmers, Anthony Albanese have never worked a day in their life in the private sector. They're all three taxpayer-funded leeches. So, of course, they don't have a rope-bolls. And so, basically, I said, the problem is when they index the base, it's very bad for people who build businesses, but it shouldn't be limited to tech bros who get all of their time. Totally, yeah, totally. It should also be a hairdresser, a florist, or whoever else.

1:02:18I hate limiting to tech. It's outrageous. We have the same view on this. So, so far we're aligned and this is where we deviate. You want to do a version of war that is I'm going to fight. It's better to die on your feet than live on your knees. That's your attitude to life, which I generally agree with, okay? But you would rather die in glory on the battlefield than take an injury but live to fight another day. And so what I mean by that is there is a chance that Elbow will completely flip on the CGT because he completely flipped on the Royal Commission. The reason he completely flipped on the last bunch of super changes.

1:02:56That's right. The reason he flipped on the Royal Commission is because athletes came out against him and he did not want to be disliked by athletes. That's my view of it, okay? And so the question is, can someone come out on this that makes him feel as disliked as that? I don't know. I give it a 10 % chance. 1-0, 10%. And so you want to fight and die on 10%. No, I also want to fight at the election. Let him take this to an election. and where are... So people who love this election, love this policy, are rusted on Greens and Labor. Who are you going to vote for in the election? When you want to fight it in the election, who are you going to vote...

1:03:28I don't even mean you. Who are you counting on to win the election against Labor? Well, the hope is not Labor. Well, the coalition will be One Nation and Liberal Party by the looks of it, rightly or wrongly. So your hope... So my view was, I think they're going to pass this. Let's not make it completely disastrous. Let's give them an easy change they can agree to that is politically palatable. that will shave off the sharpest of the edges. And I wrote, I don't know if you read the whole article, presumably you did. I was too much in fury. I ripped out the paper and left. We should keep opposing the whole thing because the whole thing's terrible, but if we're only going to get one thing, this is the thing to go for.

1:04:03I think we should be reducing CDT is the point. It should be 15 % max, like every other country. Well, what's your chances of getting that with this government? Not with this government. Zero. I think we vote out this government is the point. Well, now we come back to this point. What's your dream? Your dream is I'm going to go and fight on the battlefield in the hope that one nation becomes the next leader of Australia. Is that your pitch? I don't feel like that's a good pitch. The problem is, like, you accept 30 % and you're kind of given something incrementally, people aren't that bothered by it, and Labor wins the next election with this deceitful, fraudulent policy.

1:04:37So I don't think this... So this is what I think is going to happen as a result of these changes if they go through. Australia has 1.1 % GDP growth at the moment. It's going backwards in real terms. It's going to go backwards further. Inflation is 5%. There's increased spending. I'm not sure it will stay at 5%, but it ain't going to 3 % is my guess. Unemployment's just gone up. Property prices are going to go down. And rent is going to go up. And so what I suspect is going to happen in two years' time at election time is there will be a massive cost of living crisis with people not finding places to rent and possibly a recession.

1:05:13What do you give the odds of recession in two years? We drew a recession anyway. So 30 % plus chance of recession. They'll quickly drop interest. The real question is what happens with inflation because inflation is crazy high. Even forgetting Iran, it was above 3%. You have to say, in fairness, a chunk of inflation is not the fault of this government. It is due to geopolitical problems. Forget who you blame. No, you say forget who you blame now because you can't blame them. I do blame them, but I'm just not taking in that discussion. But the Iran war is not them. It was 3.3 underlying. Correct.

1:05:47Before the war. Correct. It's now like 6%. Like forget that. It's 5%. Yeah, well, whatever it is. That's before it's really come through. Before this stuff comes through. No, 3.3 was, 3.3, 5 % headline was pre-war. War's about to just make it even higher. All right. And 3.3 excludes the fuel costs and all that kind of stuff. So RBA, which was jawboned by the government, Jim Chalmers jawboned the ABA had a drop rates three times. So 100 % it's Jim Chalmers' fault, the economic dunce. So like we know whose fault it is. You also blame Frydenberg and Morrison for their ridiculous spending during COVID.

1:06:16So they're not blameless. Leave the past in the past. Let's move forward. But you just said who you blame. I'm telling you who's blamed. I'm not sure the last two prime ministers we have of this country are in like the top quintile of just overall intelligence of Australians, right? That's one of the challenges. Morrison's more cunning, I think. I think Elba... Wasn't a great prime ministership as you've seen many times. He's a shocking prime minister. Yeah, it wasn't. Dan Andrews is like super cunning as well. No, he was a very – like this political success and intelligence are completely uncorrelated.

1:06:47So I think this government is going to get – if they get rolled at the next election, it won't because people are angry about these tax changes because I go to cafes and talk to people in the cafes about what they think and do you know what most people think? I don't think it's going to make things any better for me. It sounds like it's hurting rich people a bit and they move on. So most people don't care. It doesn't – the people in PACs are massively impacted and they also – if you look at people in PACs, It's young founders mostly. And they're the ones who are creating jobs for other young people.

1:07:16But they're a minority of young people. So what I mean is – No, but these are people who all left Liberal Party, who are naturally at home in the Liberal Party and vote. And I'll put myself in this category. Our view was I can't vote for Scott Morrison, robo-debt guy. I can't vote for Peter Dutton, the anti-immigration guy. Labor are much better on social policy and I can kind of trust them economically to not do anything really stupid. I see what you mean. And I think there's literally millions of people who did this and now we're completely double-crossed and defrauded and lied to. I never would have voted for a government that was going to increase capital gains.

1:07:44Do you know the number one political issue for the electorate, especially it's all about 25 to 35, do you know the number one issue? Housing. It's all cost of living. Yeah. It's all about cost of living. This doesn't make it better for them. I agree with you, but my only point is this. I don't think these specific tax changes are going to make any difference in the votes of 25 to 35, but I do think cost of living in a recession will make a difference. And so I think we're on track for that. I think they both will. as a consequence of this. And then the question is, like, who do you vote for? That's a whole other conversation.

1:08:15But, like, the reason that I came out and tried to do something is, and I don't want to go into too much detail on this, but, like, the behind-the-scenes conversation on this, because, you know, there are people in the Labor right that don't have much power at the moment, but they're very opposed to this. Yeah, the Mileses and the Evin Chalden. And it goes deeper than that, right? Yeah, absolutely. And so they want simple... Wasn't Chalmers on the right? I think he is, technically. Well, it used to be until his communist policy just released. It doesn't have to be because of the way the Labor Party does their factional stuff.

1:08:44I actually don't know. But, like, what I do know is they look for changes that are simple and will make things less bad. And so that was the motivation. I think you should keep fighting. I'm right behind you. Like, most of the stuff I write is just completely against a terrible system. Answer this question for me. So negative gearing. When the government says they've done everything for housing and we say they've done nothing, What we mean is they haven't increased supply, they haven't made it cheaper to build. They haven't made the hard decisions. They haven't reduced the debt that banks can give for buying property, which pushes up prices.

1:09:19But negative gearing, you would say, has a distortionary effect on price, right? You've said that forever. I don't like negative gearing. Don't get me wrong. And so one of the distortionary effects it has is that when you sell a house, traditionally, you got a 50 % discount on the gain. But when you use negative gearing to offset your tax, you get 100 % benefit of the loss. And that's a mismatch. That's a numerical mismatch. Because if that loss was quarantined inside the gain, you really only get the benefit of half of it, but you get the benefit of all of it on your tax. No one talks about that.

1:09:55And so I like evolution, not revolution, because revolution, there's blood in the streets, okay? And you don't know where the revolution is going to go. And so I don't understand why this wasn't the policy. For the next five years, we're reducing the percentage of the loss you can claim from 100 % by 10 % a year until it gets down to 50%. And it's going to be on all properties. All properties. No one is going to get grandfathered. And that will genuinely provide a gradual release of the bubble in property. And, like, it's actually much fairer not to grow. Like, why is that not the plan? Because that's too stupid.

1:10:30Well, do you think that it's an intelligence issue? Absolutely, it's an intelligence issue. You might be. I just don't know the answer. That's why I want to get, like, Charlton on the podcast. He can't be honest, though. He can completely agree with us, but he can't go against Cabinet's views. Well, we can say, why didn't you do this? The frustrating thing, the most frustrating thing is, like, if you're going to tackle intergenerational inequality, do it properly. Yes, I agree. Put some tax on the primary residence, not 50%. Put a little bit of tax on the primary residence. Get rid of negative gearing completely, not the grandfather garbage they're doing, and actually make it fair so older people don't have these bands, get rid of the super thing.

1:11:04Like, there's so many things they could have done that actually would have been brave, harsh moves that maybe you or I may not have liked, as in terms of personally, but were the right thing to do. This is the wrong thing to do, and it targets the wrong people. It targets the young, not the old. The last thing I want to say about why I think this is we're going to end up in a recession potentially. From what I've been told by the smartest economist I think I've met in Australia, 15 % of this country's turnover, like economic activity, in some way connects to property transactions, if you add it all up.

1:11:37People that have a primary residence, they hold for 15 years. People that have an investment property hold for about half. The majority of turnover is coming from residential... Investments. Residential investments being turned over. No one is turning those over now. In fact, I think the opposite will happen. Depending on what the actual legislation looks like, At the moment, it looks like there's a loophole where you can turn your primary residence into an investment property and claim negative gearing on it. And so I think the lack of turnover, like if you want to go and short stuff now, go short every real estate agent, every mortgage broker, maybe the banks, although they're very diversified.

1:12:10They've already been smashed. But they've already been smashed. Like I think that people underestimate the impact of a reduction, that a reduction in property transactions. You know who gets smashed more than anything there? Yeah, go on. Our bankrupt Victorian government who's dependent on stamp duty. Well, that's a great point. To keep the lights on which are barely on as we speak. But you know what's another$10 billion of lost money to the Victorian government? So, yeah. So that's why I wrote that article. I get your point. We should keep fighting the good fight, but I suspect there's a 90 % chance that the worst parts of this will not be changed.

1:12:41Again, I just think they could have also said, we're going to change capital gains tax discounts so that you get a 10 % discount every year for five years until it gets to 50%. We'll encourage people for holding assets for longer. Yeah, totally. Take care of everyone. Easy, yeah, easy. Everyone, but house flippers are going to pay more. I mean, there are so many easy solutions. People say, well, it's a complex problem. It doesn't mean it's got a complex solution. It's not a complex problem. Or you can just go 0 % or 15 % like every other country does. Like, it's not exactly complex. It's really crazy.

1:13:11Anyway. I'll go quick back. Thank you. By the way, I said I was going to have to wear Kevlar with ceramic plates to this. But you were very gentle on me. I thought that was very nice. Thank you, Will, for sitting in. We can't wait to have you turn this into Australia's best media company. We're excited. Our dear's excited. Thanks both. Absolutely. We're back from breaking this in just a moment.

1:13:43And we're back and we've got a special guest in the studio. He's actually coming for a deep dive, which you'll hear on Saturday. But he thought, well, come in and speak to us about some media business stuff. We've got Scott from Terram Capital with us. Welcome, Scott. Thanks for having me. Hi, Scott. And we'll talk about GYG, one of our dear's favourite businesses to talk about. So we had a big announcement last week. I like the food at GYG. You like the food? I'm not a massive Mexican guy. I quite like GYG. Well, I've got good news for you. It's not Mexican. What is it? Tex-Mex. Well, it's Tex-Mex-ish.

1:14:11Yeah. But I think it's actually very nice. It's good. Yeah, you do a good job. Debatable. You like it? It used to be good. Oh, you think it's changed? Yeah, it used to be fantastic. I love to hear that. Really? It used to be the best burrito going around. Really? And now it's all rice. 90 % rice. What used to be in there? Oh, that's interesting. I used to be able to get a barramundi burrito with like all the beautiful amount of beans, massive amount of flavor, coriander, salsa, and now I get an 80 % stodgy rice. That could explain why the franchises make so much EBITDA. Because here you go. I am friends with some Mexicans and they find it very culturally outrageous that GYG calls themselves Mexican.

1:14:55Yeah. I think it's quite nice. So co-founder Stephen Marks pulled the pin on its ill-fated and very costly six-year expansion of the US just months after claiming the business was on the cusp of breakthrough in the world's biggest fast food market. Investors love the move, sending shares rocketing 26 % in days with the Mexican giant's market cap back above$2 billion. While it remains below its$43 per share peak, it has almost returned to its$22 IPO price. Obviously, capital markets analyst Michael Toner said the US business had very low prospects of being successful and was not expected to break even until 2037 if it continued to operate.

1:15:30Baranjari analyst Tom Kirath said the US exit would allow management to refocus on the core Australian businesses. Very few investors saw the US becoming successful and we think the US losses precluded some investors from investing, Kirath said. The strong Australian performance and growth outlook now become the key focus. So GYG said expected EBITDA was going to be$85 million for the 226 calendar year, up 29%. A dear, Scott, views on this. I think it's good, though. I mean, this is the logical thing. It was pretty obvious to me they were going to shut it. They took a bigger charge than I thought.

1:16:02I thought it would be a$15 million charge for shutting this. It was like 50 mil or something like that. I can't remember the number. It was a big number. I mean, I will say something very positive about Stephen Marks, who I don't know. I think he's a New Yorker or something. Originally. Yeah. You know, CEOs often fall in love with their own ideas. And then the more that people disagree with their ideas and say they're wrong, the more enamoured they become because they want to prove that they're right and, like, that's the contrarian nature of founders. I think it was very impressive the way he did this.

1:16:35Like, number one, he accepted the reality. Some people inside the business say to me, he should have accepted it earlier. okay, I don't really buy that argument. Like he accepted the reality. That's very hard to do. It's still going and everything as well. Yeah, he's still running and he's basically just accepted the reality and then he's been very honest about it. He's done this mea culpa that said we've made lots of mistakes. This is one of the mistakes. I'm shutting it down. It's hurting our business. I really think like founders can look at the way he's handled this for some lessons in, you know, when there's high return, and there's high risk.

1:17:10Some of the risks don't work. I think it's really good. It's really good. You don't want to be trying something and then as soon as something doesn't go right, you back out because you need to give these asymmetric bets a real chance of succeeding. So I think he gave it a real shot, which is great. He copped the personal fallback and then eventually became so obvious he should have had to pull out. We talked about it literally a month ago. And I think I said that valuation's being impeded by this US stuff. And that shouldn't be why you do stuff, by the way, because the short-term vicinitudes of the market shouldn't be determining your business strategy.

1:17:36But I think he gave it a real shot. No, I think it played out exactly the way you said that, you know, what was going on. I think that we've been largely right about GYG, and I want Scott's opinion on this, but the last line I'll say is, it went up, it was IPO'd, it doubled, it went down, halved, this and that, now it's back to IPO. It just reinforces my point about investing, which is founder-led businesses in particular form a view about whether you think the founder's great and the business has got great potential. and if you do, buy it and come back in like 10 years and see how it's done. And so if you would do that, you wouldn't have worried about any of these ups and downs and ins and outs.

1:18:15The rational$43, which was never right either. We saw it when TDM sold float at 22. Remember, so TDM were long-term holders, long-term believers in this business. We'll get Ed on at some point to talk about it, but they were long-term believers in this business and they obviously held a view that that$22 IPO price must have been a somewhat of a full price. they sold down some, not all of their stake. When it went to 43, it was crazy. 2022 has always felt to be a fairish price for this business at this point. It's really, 85 Viva D 'art is really sort of a bit irrelevant because of the whole leasing issue.

1:18:47But this is a great business with great powers. So if you look, and well run with a fantastic founder, a great board, great brand, very good scale. Didn't have any in the US, by the way. So it had no powers in the US, which is why it kind of made sense. I think on the branding one, just driving, despite my misgivings about the change in food ratio. About the rice quantity ratio, exactly. My daughter is the number one fan and wherever we go, whenever we see a GYG, we're stopping to get some burritos. We were there on Friday night. How old is she? She's 11. Okay. Yeah, so we went after netball, grabbed a burrito afterwards and some nachos.

1:19:25It's still way healthier than McDonald's. It's a fantastic option. I still eat it regularly. I just maybe if they're listening, maybe they can. now that they're not investing so much in the US, maybe they can bring back the barramundi and change the ratio a little bit. Just say to the person serving you, can you put less rice in and more meat? They'll do it. Like, people don't ask enough questions like that. The Scott's secret menu, is that the... It's actually, there's no, yeah, there's no camera measuring the ratio of... Just ask them. You make a great point. And I think there's that cafe. So I'm not a big cafe goer, as you can imagine.

1:19:56But, like, smart cafes almost always give big helpings. and because you think the food cost is a third of the cost. If your food cost goes from 33 % to 36 % but you're giving a 30 % bigger helping, think of that as a brand investment. So I think I go to a cafe, I come out full, not half full. This is such a better way to retain a customer. Think about lifetime value. And so I think GYG making the – the fact that you've noticed the rice and obviously go there less, that's exactly what they shouldn't be doing actually. And I'm really surprised because I know Stephen is a really big believer in food quality and customer service.

1:20:28Well, he'll listen to this. So I reckon that you might have had an influence on his decision-making on the ratios. It's a very un-GYG move. Yeah, putting myself in the shoes, you know, you're making this big investment in the US and you're thinking about EBITDA, you're thinking about all that kind of thing. You are going to look, even if you've got that high focus on brand and quality of food, you're going to inevitably shift things a little bit to try and keep things right while you're public. Have you found this at multiple different GYGs? Yes. Okay, so it's not like just one bad franchise. Like I said, my daughter's probably one of their number one fans, so I've sampled a lot of GYGs all up and down the coast of Australia.

1:21:01They don't have gross margin problems. Like I'm surprised that they're feeling the need to mess around with it like that. I feel like they've got so much growth opportunity in Australia. Like they've got hardly any stores here. There's 200 stores out of 1 ,000. Yeah, compared to the big players. I will say like I just want to reiterate this. Like there's a Wilson Asset Management Fund which is a founder's fund. It's got some money that invests in founder businesses. Like I really like that idea. without commenting specifically on that fund. Well, one business has been built on that essentially.

1:21:31They should look for L4 and their founders. Absolutely. And I think it still seems to me the best way that you make a return over 10 years, the best return, is just back founders that you believe in and that you believe have got a great opportunity and stick with them. And like GYG's had a roller coaster. I can say Catapult's had a roller coaster. It doesn't matter if you would have bought the IPO 11 years ago, you're up 20 % a year for 11 years. Like, no, what's returning that? If you bought when Contrarian started, you're up like 70 % a year, I reckon. Probably. But like, and you know, there could have been times, like we did a placement that was a much higher price than the current price.

1:22:06Like I want to get back there so they all make money. I think, you know, that's the ambition, right? And like, but fundamentally, like the market goes up and down based on the people that know least about your business when you really think about it. Like often low volume shifts pricing. And so I really, GYG is a great example. If you believe it's a good business, I think it's a good business. Like you just buy it and you come back in 10 years. If you're an investor though, are you hanging out, like looking at the roller coaster of GYG, are you hanging out a bit longer after IPO when all these growth plans are on the table?

1:22:43I haven't followed GYG too closely except for on the food front, but are you hanging out and waiting for the, you know, the IPO? There was talk about expansion to the US. That was a big part of the sell. Are you waiting a little bit to get good pricing that bakes in a bit of downside risk? Because you could have mistimed this in a few ways if you got in at the wrong point. You could have, but the thing is this. It's a long paragraph to say, should you try and time the market? That's really the question you're asking, right? But you just want to use up your word count. I think I said a lot more than that in that comment.

1:23:16You said it's got this, it's got that, it's going up, it's going down, it's going in, it's going out. Should you try and time it? Hang on, hang on, hang on. Should you in founder-backed, to riff on what you're saying about founder-backed businesses, do you wait a little bit longer after IPO? I see, I see. Knowing that you're going to back them? I mean we were talking about Karma the last time I was on I think. It's a founder-backed business. Yeah. It's down off IPO. If you back the founders, do you know it's the right move to wait it a bit? Well, if you would have backed the founders at IPO of GYJ, you would have doubled very quickly and then you would have thought, oh my God, why didn't I buy it at IPO?

1:23:50So maybe a slight variation to that point is if a business is coming to market and insiders are dumping a ton of it, what should you think about that, if anything? Because I don't know if you remember GYG. They upscaled everything. And like TDM, who was like really the cornerstone investor, TDM were not going to sell it. They were going to sell a bit and then they sold more. But I don't – by the way, I don't think that's a reflection of the way – from my conversations with TDM, it's not a reflection of how they feel about the business. They're very big believers in the business. They might have had fun life or something playing into it.

1:24:23No, they've got indefinite fun. Yeah, I think they basically just thought, well, we've invested in this and we've made a lot of money. They thought it was above the interesting day. I don't think it's any more than that. And so this is how I feel. And maybe karma I'll put in the same basket in most things. I think that unless you look at it and there's a very obvious orange, I'm going to say red flag, orange flag. An orange flag could be the founders are selling down tons. That might make me a bit nervous. But founders should be allowed to sell down a little bit, right? Of course. I think they're crazy if they're not selling down.

1:24:57Yeah, I think when I invest in business, it's always secondary. I always give it to the founders because then I think, yeah, now you feel a bit safer and we can grow the business harder. So, yeah, but another sign is what you've just said, which is if I looked at this business and I thought the US is a joke and, like, it's hurting them, I should just wait until they shut that thing. In the meantime, it's going to drag them down. I just think that is one of a whole lot of factors. I think it would be a big call to wait for that. And I think that if I was a believer in GYG, I would have happily bought their IPO and put it in the draw for 10 years and ring me in 10 years.

1:25:28And the thing is this, what if you bought GYG? What would it get to? $44, right? $43, yeah. $43. What if you bought it at$43? Well, you would have lost half your money. And then like the mathematicians amongst us would say, now it has to double to get back to where you started. And I would say, but if you really believe in this business, you think it might 5X plus off the IPO price, maybe more. And so, yeah, like don't engage with the ups and downs. Form a view, have a thesis, invest in it. And unless something changes with a thesis, like the founders leave or they do crazy, I don't know, they go into water parks or something, I don't know, something totally different, right?

1:26:06Like I think that you should just form a thesis on the business and the founder. At$43, there was no margin. That was a crazy valuation. That was a$4 billion plus valuation. I wouldn't have bought in at that price. And for a business that makes like no impact. And we said that. We said it's too expensive. What we love about, what I love about GYG, the most important thing for a franchise business is the franchisees making money. Yeah. And you know, that's the absolute indicator. We know with Domino's, all the franchises lose money and it went to drop 90 % or whatever. Subway had to make money.

1:26:32Well, no, you make okay money. But Mac is obviously the, McDonald's been the best forming fast food business ever. And that franchisees made the most money. and GYG is more profitable for franchisees than McDonald's in many cases. So I've always been a huge bull based on that and that alone. Because, you know, as long as your franchise is making money and you've got plenty of TAM, you can just pop up new stores because there's more people. So if you're making$3 million,$2.5 million a GYG franchisee, that's unbelievable. And if your franchisees are making money, they shouldn't have to do things like rice stuffing your burrito.

1:27:03I'm glad you brought that up and not me. The whole rice thing, I just don't get that. It's so out of brand for GYG. I'm sure Stephen will hear this. But the biggest, the best per store revenue is a non-franchise business. Yeah. Chick-fil-A. She was about to say Chick-fil-A is an up-and-down. Yeah, and it's a non-franchise store, company-owned store. And only open six days a week as you came to see point out. Yeah, so I mean, look, there was a lot of noise about this GYG IPO because there was Baron Joey involved in it. Once they got involved. It was a retail business. Exactly. And then there was all the we can do drive-through better than anyone knows how to do drive-through.

1:27:38Yeah. We can do, you know, we've got this US. There was a lot of noise. Fundamentally, they're a business that has nice margins with a very big TAM in Australia and a big opportunity to expand. And if they can execute well, it's going to go well. Do I think it should be valued differently to other similarly growing quick service businesses? Probably not. But I do think that there's a big opportunity with this business in Australia. If you wind it back, do you go telling the big stories about doing better drive-through? or do you play the middle? I think they believed it. Let's move on. Final story before we jump off.

1:28:14And I'm not sure if you noticed this last week, guys, but Australia's woke brigade were out in full force last week lining up to take shots at accounting firm EY after the giant announced it will make employees pay back two months of their sixth-month parental leave if they resign within a year of that paid benefit. So say that at a human comprehension speed. So six months, they've got six months parental leave and they have to pay back two months if they leave within a year. EY has 8 ,000 staff in Australia and offers parental leave well above the statutory minimum. Despite what appeared to be a fairly sensible move to stop people taking advantage of a very generous benefit, it was, of course, slammed by pretty much every special interest group you can imagine.

1:28:54Carol Schwartz, the daughter of billionaire Mark Beeson, claimed a callback provision on parental leave sends exactly the opposite signal. It treats paid leave not as a genuine commitment supporting working parents, but as a conditional loan, one that comes due the moment an employee decides to no longer work for them. Schwartz bizarrely claimed that the fact staff were walking out the door within a year of returning from the parental leave tells you something is broken in the culture, the flexibility, the leadership, or all three. Or alternatively, they were going to leave anyway, but just hang around to collect a parental leave.

1:29:20Or stay before they had the baby to get the parental leave, which is what a lot of smart people would do. I would do it the same. Georgie Dent, head of parenting group The Parenthood, said EY's changes were a significant step backwards for working women, and the clawback provision fell disproportionately on women at the most financially vulnerable stage of family life. Well, also the six months falls disproportionately on women as well. Absolutely. Dent said parents may have a legitimate reason to leave in the year of attorney, including a child with additional needs, a partner's job change or workplace that isn't working for them.

1:29:48Gents.

1:29:51One of the interesting things about this topic is, if we bring it back to productivity a bit, is just thinking about I think Australia does a lot of great things for employees and how we think about employees as a society. Then we've got to be careful when it comes to productivity how far we push the lines on things on employers because then they become more reluctant to employ and hire in the first place. To hire child-bearing age women, for example, is an issue. That's the second-order effect for sure of having a really generous scheme. Yeah, and I worry about that a lot in these things where things can be very well-intended but then have unintended consequences.

1:30:34I'm not even sure this is well-intended. I'm not sure the original generous parental leave is well-intended. Do you have your views? What do you think? Well, I'll tell you a funny thing. I play this game with my kids where we find funny signs and we have to say, what happened for them to need this sign? That's pretty funny, right? Because there's no sign without some disaster that preceded it, right? And there are some crazy signs like don't feed the crocodiles for example. And so... Not so funny if anybody's a crocodile, but yeah. Yeah, right. And so basically the question is, what happened that they needed to implement this policy?

1:31:07Like it didn't come out of nowhere. For sure. And obviously this was some kind of problem. Now I happen to think it's a bit of a dumb policy, but on the flip side, I think six months... What, the clawback or the original? Yeah, I think the clawback's dumb. Because like the amount of... My guess is... We have a clawback, by the way, 100%. I've only used it once, I think. Do you ever see how much parental? We have a return to work bonus because I actually like supporting working women. I don't give people a payment not to work, a payment to work. So you come back to work, we'll give you a bonus.

1:31:31Yeah. And so I think because you're a much smaller business than EY, they're kind of – Yeah, they're king woke. They're a bureaucracy, right, in some ways. Not them particularly, but these kind of big organisations, right? And so they have to do more general things. And so I think the six-month parental leave is generous and I think it's smart because it is – like if they've got high-quality employees, women, they want to keep them like it's hard to hang on to them. I just wonder how much money they're going to save on the clawback and what message they're trying to send. I think it sends a great message.

1:32:03What's the message? For a start, let's go back to the original paternity leave issue and I've talked about this on the pod before. What is the law on this? I'm not even across the law on this. This is not compulsory. The government has a scheme and you can add to it and these guys add to it essentially. The government has like I think gives you two months I could be wrong and you can choose that. We give obviously a bonus for people to come back but you don't have to. A lot of people don't. A lot of people do. It's up to the business. My point is most businesses, actually all businesses, have an amount they can pay for staff.

1:32:29Yeah. And I can pay, we've got three people who work with entrerians, you're going to get 50 bucks, you're going to get 50 bucks and you're going to get 50 bucks. But I then say, actually no, you want to take on maternity leave, I'm going to have to give you another 20 bucks. That means me and Will only get 35 bucks each because I've given you an extra 20 bucks and I've only got 150 in the pot. It's got to be split somehow. You're now getting more and you're not working. And you have to hire someone. I'm going to hire somebody else to cover you and I've got to, Tell them, sorry, ideas back, I'm going to have to fire you.

1:32:55So, like, there's a whole bunch of stuff that... Anyway, that's less of an issue than for you or for us on the podcast. I think it still plays out at a big scale because you've got to get someone to replace the... You do. But, like, these are... I'm very nervous making this comment because I think you might put me in Marxist jail for this. You really did. That's right. Yeah, because he's already against me. But they are big and profitable organisations and this represents a pretty small percentage of their profitability. But instead of giving a small percentage to people on maternity leave, what about the poor parents who can't have kids because they just can't have kids for health reasons?

1:33:29They have to get a pay cut so this person who's had the fortune of having a kid can get a pay rise. I'm not sure. That's essentially what's happening. I'm not sure. What about the gay couple who can't have kids? Why are we giving them less money? This is the most discriminatory policy in favour of people with kids against people without kids. I'm not sure that free market economics lets you give people pay cuts Adam's the anti-woke woke I've decided. Yeah, like he's a unique blend of everything. He's like every flavour of ice cream that blends together to just, I don't know, create grey. But you're not grey.

1:33:57You're like the brightest thing. Championing equality whilst you're... Yeah. There's a point in the market. It's real equality. No, no, I don't think it's fair. Don't say that. Like, basically, it's not true. It's not part of the whole work infrastructure. If you try to drop someone's salary to pay for someone else... No, but you won't give a pay rise. It's the same thing. But it's a free market economy. They'll go somewhere else. Like, that is how a free market economy works. But we're talking the margins here. Are you going to leave a job for$1 ,000,$2 ,000 a year? Probably not. Or maybe I can give everybody here free lunches because I'm not giving everybody maternity leave.

1:34:29What's fairer? Everybody getting a free lunch every day or 10 % of people getting this massive largesse? What about males who aren't even the carer getting parental leave? These guys give 13 weeks male leave. I want to jujitsu you and see if I can get you worked up at someone else. Ready for this move? The people you're taking money from, they are the partners of these big consulting firms that get trust distributions and don't even pay payroll tax on their trust distributions and then funnel it out. That's who you're taking a bit of profit from to pay for people. So maybe you should only... No, apparently, it's the other employees who get...

1:35:03The partner's probably getting the same amount. It's the other employees who are getting stitched up here. And so if you... It's the poor gay parents. It's the single parents. It's the people that... I just want to say, you've seen it on Tinder lately. It's a hellhole out there. We've gone... What are we talking about again? We've gone... You know, I'm not sure you're aware of this, But same-sex couples are having kids. We've passed that line a long time ago. It's super expensive and hard. You should ask a different question. I'm going to reframe your question in a more socially acceptable light.

1:35:31Should you not, if you're going to be paying six months of maternity leave, why are you not paying for people's IVF that can't have kids? 100%. That's much more justified. I know what your buttons are. There you go. 100 % is more justified. But going back to your regional point and Carol Schwartz. Have you came to this podcast? Yes. If you look at Carol Short's comments saying if people are walking out within a year, something's broken, that may be the case, but much more likely is someone's gone, show me the incentive. I can get my six-month pay. I can get a bigger pay rise at PwC across the road.

1:36:01I'm just going to get paid double. That's what they've done. Also, after you have a kid, pretty much everyone re-evaluates their life choices. And no fault of these people. That's probably one reason, but there's probably 20 other reasons. We've had one person claim this claw back on the baby bonus. so we gave them whatever, two months to pay a bonus. And like literally two weeks later they claimed, I'm leaving. So of course we didn't pay the rest of the bonus. Yeah. And she had the audacity to start arguing. I said, you've been back two weeks. We gave you a bonus because we want our emails come back, our mums to come back or dads come back to work.

1:36:29Not to leave after two weeks. In defence of EY at that big bureaucratic scale that you get to, I think you get one or two instances like that and then the machine of HR gets into play and the lawyers and they just want to put things up. I think it's amazingly brave they did it. They stood against this – look at the woke criticism they got from the Carol Schwartz of this world who did pretty easy when you're hearing a billion dollars from your dad. Like what about people who actually built businesses? I love the way you just summarise everyone in like eight words. I'm terrified of what my eight words are.

1:36:59What about if I said they do have a cultural problem but the cultural problem might be that people are sticking around in order to take advantage of this bonus. Absolutely. That's everybody. That's also a cultural problem. Show me the incentive. I'll show you the outcome. I agree. I don't blame the mums or dads, by the way. You're giving me money to do something. Of course we're going to take advantage of that. They're just fixing that massive incentive misalignment. Could we have a very worked up argument about this? On that note, we'll go full stop. Is this podcast over? We're done. Thank God for that.

1:37:26We've got... Simple mercies. We've got Scott back obviously for our deep dive on Saturday, so you don't want to miss the big man for that. We'll be back in five days' time with a super exciting deep dive. Thank you, Will, for coming on board to this menagerie. That's a great summary of this podcast. Saturday. Thanks, everyone.