Shark Tank Star and VC Steve Baxter, Mythos, Will Quantum Kill Encryption, Pope Double Standards, Data Centres, Glydways and Hermes

27:04It's ridiculous. So she actually changed it for me. She did the right thing, changed it. So we both go in row three. And then I said to the guy, I said to the lady, I said, why are we moved? She goes, oh, there was a non-operational seat in Verticom. I was really skeptical of this. Get in, someone's sitting in the seat. So they just lied to me about the non-operations. I wonder why. Somebody must have complained and wanted row one or whatever. And they bumped us to row three. And they completely stuffed it up all along this way. And then, so we get on the seat, so the story's not over, and the old guy rocks up.

27:35The old fool who wasn't answering the 25 calls they made, goes, you're in my seat. I said, oh, no, no, we changed. The idiots at the gate didn't give him the updated tickets. They could have had the argument at the gate. Oh, I see. Didn't give him the tickets. So he's now going, this guy's obviously a fool. But you're in the seat first. We're in the seat. No one's, once you're in, you're in. And I'm pretty, and I also thought, I misplaced my notebook and my laptop at the time, so I was frazzled about that. I found it. but obviously this guy would have like killed this guy before moving, leaving the seat.

27:59But I could have wrung his throat and he would have been dead on the, on the, in the plane. Anyway, he's going, you're in my seat. I said, oh, I'm not. And he goes, I want my seat. I said, I'm next to a kid. Why do you care? You're in row one. It's a better seat. He goes, I want my seat. And then thankfully the real gentleman who isn't like across, he goes, just take my seat. And he moved to the front, but whatever he wasn't. He got to go right where I'm. But so he had this kind of stuffed up like air can, I said, like four times and he had this flog bloke who refused to give up a seat for a kid like what kind of terrible person is that then he starts speaking on his phone with speakerphone this guy like you think of all the bad memes about terrible boomers this guy was it like he looked like Uncle Leo actually a dead ring of Uncle Leo so big reverse slap on the back record Air Canada did such a great job last year just a terrible job this year well you know if you catch an LL flight the Israeli airline the number the designation you get is more a suggestion there is so much haggling and negotiation when you get a one guy basically when i was on the plane he was meant to be sitting next to me and he just said to the flight attendant i'm not sitting there and she's like why not and he's like i'm much too fat to sit in that seat you need to move me to a seat where it's more room for me i'm too fat he was very blunt and he was not wrong by the way but like good result for you yeah i was pretty happy about it now i'm going to say something and it's going to open up a window for a barrage of abuse from you.

29:17But let's, so a couple of episodes ago, you started laying into cartoonists. I did. In newspapers. And so I did a survey. Oh, Mike is preparing himself for this as well. So I did a survey and I tried to make it as fair as possible. I did five options. I had a midpoint. I could have got the new A.T.O.W. I'd like to prepare a survey when I'm more legit than this survey. So you can criticise it after you tell me what the result was. So the question was, how do you feel about the political slash social commentary cartoons in your favourite news media? Now, before we go to you, Mike, is that a fine question or have I manipulated that question?

29:57Is the answer to the problem, not the question. No, no, we're not asking you. I thought it was a good question. That's a good question, right? I put some thought into it. All right, so far, one out of one. What about the answers? Now I'm going to read the answers. Now I'm going to read the answers. The answers were very emotionally pointed. I do remember thinking that when I said that. I'll tell you why. Because the two of you have got this disadvantage where you're boring. And so I'm trying to make it more entertaining. I'm not talking about entertaining. It's just a little gerrymandering. No, tell me what's unfair about this.

30:30First tell me what people answered and then you can criticize. So this is top to bottom. I love them. This is pertaining to the cartoons. I love them. I generally enjoy them. I'm indifferent to them. So that's strong-like, middle-like, somewhat-like. Don't care. I generally don't like them. Get rid of them. These are balanced. They're balanced scale. It depends how you define them. I'll listen to the segment again. Our original segment from two weeks ago. What do you think was most, before you start your, you know, what's it called? That's the beginning of a case called? Opening statement. Yeah, before you make your opening statement.

31:05Your Honour. Just tell me what the verdict is. so what do you think was the most what was the most popular answer we've got a hung jury no the jury's not hung Mike what's the most popular answer well I think I because I have access to LinkedIn I did see at one point that it was leaning towards a deer being right I think it was love objection the two of you can't answer questions I'm not sure you could have done this survey because you can't even answer this question which do you think was the most popular answer? I think the most popular I love them I love them okay that was absolutely not the most popular answer so what do you think was the most popular answer?

31:46the middle one correct what do you that was 34 % so I think that that's legit mostly people don't care about stuff that proves that I'm right okay of course I'm shocked that whatever answer came up would prove that you were right it literally did because I listened to the podcast again and I was surprised that your gerrymandered poll proves it right you well you the thing that you the advantage that you've got is that you never provide one view on anything so your view on this was i don't care about them get rid of them i said nobody reads them they're irrelevant why do we have them but let's be because that's exactly what they came back with so you've got some self-awareness let's be honest about your personality would you ever would you would the plane ever stop at the midpoint when it comes to you of course not it will taxi to the extreme by the end of the journey So I'll tell you, I Love Them was actually the least common mic.

32:35So if you meant, by most, if you meant least, you would have been correct. That was only 8%. Only 8 % of respondents. It was a lot of respondents. And you were in the 8 %? I mean, I think I'm actually in the majority on this one, which is the next one down. I generally enjoy them. That was equal top, 34%. So this is like 300 people just about. So it's a good sample. How much? So 42%. So 58 % sided with me, essentially. So 34 % were indifferent. Indifferent or worse is what I said. Oh, indifferent or worse. I get the worse as well. I get the worse. You want three out of the five responses to some.

33:11Yeah, it's your shitty poll. So 42 % of people get some enjoyment out of them. Yeah. 34 % don't care. Yeah. And 23%, like roughly split evenly, don't want them. And so what I would say about this is, Do you think this survey would be a surprise to the editor and or the cartoonist? It's really interesting. And I think about this a lot with newspapers is newspapers are like a menagerie of 50 different columns. So you take one column away. Does it like take out Joe Aston and it makes the AFL a lot worse, but take out the other 49 columns. And does it make a difference? Some of them are more followed than others.

33:49Some journalists don't have a personal following and a few do. Take out a stench hole from the Australian. It makes a difference. but the most so I think you take this out but generally you take out generally the cartoonists are more well known they are more than a like John Kehoe or Joe Astin or John Stensholt no let's put Joe Astin aside but like I would say yeah like Kehoe and Stensholt would be I don't know the name of the cartoonist so you might not know the name of the cartoonist because they don't have a byline in the same way and you'd loynear that Vera and Andy Samar but other than him I don't really know I don't really know any of them or Kathy Willocks I know or Cox yeah well she's not great but like but I think their style is well known.

34:28Like people know their style. Who was the Herald Sun who did the posters after the footy? Yeah, I forgot his name. But like, you know his style, right? And like Wedge, was that him? Weg, Weg, yeah. And so I can't even pronounce his name. But you know his style. So I think people know cartoonist styles. I think the fact that 42 % of people look forward to them or somewhat enjoy them or love them, I think that's way more than you could say about most individual journalists. So I think on balance, they're actually a pretty good thing to have in a newspaper. On the portfolio basis, you're probably right, but a lot of people seem to not care about them.

35:04The problem with them is, like everything in the media world today, you have to become more polarising to get attention. And so I think what editors have become is more and more tolerant of despicable views from cartoonists because they get clicks effectively. Yeah. Can we move on to some news stuff? That went better than I was expecting. I think we should talk about Iran, which obviously is still massively in the news. Donald Trump said on Friday that basically Iran had opened the Strait of Hamuz. That was the Iranian foreign minister said that. Trump must be listening to the pod. He does message me with notes on the pod, if I'm honest about it.

35:49Remember, nobody had talked about this and we talked about how Iran closing the Strait of Hamuz wasn't, it's just simply they were more willing to kill innocent people. And if the US was willing to, the US or Israel or anybody could have also blocked the Strait of Hamuz if they want. Iran has no advantage. The whole thing that Iran's mining the Strait is complete bullshit because the Iranian ship's getting through. So clearly there's no mines there. There's just a fast boat risk and maybe the Shahad drone risk. Well, you know, minefields, I say this seriously, you know, minefields have a map. Like when people mine an area, they have a map.

36:16They claim they don't know where it is because it's a, a fuckle of a mind. Well, I'm not sure they would pass a polygraph test on really any topic, would they? Well, I don't think there's that many minds, if any, in Australia. They passed a polygraph test on death to Israel, death to America. Yeah, absolutely. Flying couples. So we've got the straight, which is sort of continuing. Obviously, the US is now using that as economic leverage to try and get to a deal. It feels like they're heading towards a deal. Donald Trump's saying there's a great and brilliant day for the world coming. The price of oil obviously tumbled 10 % on Friday after the whole sort of straight back and forth.

36:49And still remains$87 a barrel, which is not that much more than it was pre-conflict. So oil actually is basically headed back to what it was. Where do you think we sit on this conflict at the moment? As in, what do I think is going to happen? Are we going to finish soon? Is it going to drag on? I think it's turned out to be a lot less bad than people had feared. Like, it is damaging the economy globally, but it's not destroying the economy. If it continued for six months, I think it might send the world economy into a recession at some point. But, you know, the thing about the world being so globalised now is that while it's true a lot of the oil comes through this particular body of water, like a big chunk of it doesn't, and the world is not as reliant on oil as it used to be.

37:35And you've got Saudi pumping 70 % through the pipeline. Across the pipeline. There are alternatives. America is largely self-sufficient. I think Dubai is doing the same. Or America exports. Yeah, America is self-sufficient. So what I think has happened is that you saw this with the Russian war. Like basically there was blockades and all sorts of things on Russia. And then ultimately, like the Russian economy is not in great shape, but it adjusted to the – and the world adjusted, right? Absolutely. And so I think that a globalized world means that there is more capacity to adjust for these shocks over time.

38:06Do you remember in Jurassic Park, and I've talked about this on the pod before, Jeff Goldberg has this immortal line that's so applicable to so many things, and this is no different. is he said life finds a way. He's talking about the dinosaurs getting out of the thing. And in this case, life finds a way. Like we build pipelines, we find other sources. That's right. You stop driving, you do, you encourage public transport. There's ways around, but we adapt, but humans are incredibly adapted species. That is true. Well, antibiotics, like there's resistance that develops to antibiotics. Like you're absolutely completely right about that.

38:36I totally agree. On that note, there was also an interesting war of words between obviously Donald Trump and Pope Leo XIV. Pope Leo claimed that we're not politicians, we don't deal with foreign policy with the same perspective as he might understand it. After Trump called on the Pope to stop cutting him to the radical left and focus on being a great Pope, not a politician. The President's criticism of the Pope hit a nerve amongst some of Trump's allies, actually, with Italy's Prime Minister, Georgia Maloney, who's been criticised by the right recently, called Trump's attack on Pope Leo unacceptable.

39:03The Pope continued his attacks by claiming the world is being ravaged by a handful of tyrants who spend billions on war in comments that were seen as another sharp escalation in his week-long feud with the White House. And while the Pope has been extremely vocal and assertive in his condemnation of US operations against Iran, he seemed to be much less vocal on the Iranian regime's internal governments and human rights record. The Pope didn't say a word about the 30 ,000 innocent protesters who were brutally murdered by the same regime. As the Washington Examiner noted, the Pope's newfound affinity for public criticism, condemnation and geopolitics does not include Iran.

39:34It's an inexplicable and shocking consistent moral failure by the pontiff, who was quite the lion when criticising Trump, but quite the lamb when criticising the Iranian regime. Obviously, Israel has had a somewhat fraught relationship with the Vatican. This goes back to, have you heard of Hitler's Pope, Pope Pius XII, who famously refused to criticise the Third Reich? He claimed, or the defenders of Pius claimed that they were protecting hundreds of thousands of Jews in churches, which may or may not be true, but there's been obviously a lot of animosity between Israel and the Vatican since then.

40:04Things sort of did ease somewhat in the 60s, But we have a Pope now that's really sort of wading into strange waters. Well, the thing is this. For a start, I'll say this. So today people look at this conflict between Jews and Muslims, which I don't necessarily agree that's a good framing of the conflict. But even if it is, that's a modern situation. Like historically, Jews and Christians have been the biggest problem of Jews, and Jews have not been enthusiastic about Christians or vice versa. and actually the Jews that were in Israel, I think there were like 150 ,000 Jews or something out of a million people in what's now Israel when the Muslims marched in in whatever year they marched in, 638 or 39 or whatever it is, and the Jews were pretty happy about that because the Muslims then go back to Jerusalem.

40:49So I think that's worth keeping in mind. It's nice today. In fact, it's really nice that generally speaking, like religious Christians tend to be supportive of Jews being able to defend themselves and not get killed. The Catholic Church is in my experience I have a lot of experience with Catholics in Australia. They're terrific. Probably the best. Well the Pope doesn't speak for all Catholics. I know. Like the Mullahs don't speak for all Iranians. Now we move on to the Pope. The Pope, that's political. That's a political job right? It's always been political. It's a politician. 100%. This is an American Pope.

41:23The first American Pope. Well I know he's called Pope Leo XIV or something, but his name is like Rob Prevost. Yeah, exactly. Robert Prevost. From Chicago. Yeah. So, like this American guy, and so he's got a political job. Yeah. The president of Italy. Maloney. She's got the Vatican in her country, although it's its own country, and like it's the home of Catholicism, Roman Catholicism. Yeah. And so she's got to be careful what she says and keep people on side. And Trump, I think he wanted to be the Pope, didn't he? like he said he thought he might have been a better choice and so i don't think he spent a lot of his life being a catholic but all of a sudden like he is now and so um so i think what it's just this i would just say this is politics and it's just about whoever has the bigger constituency and i find it um like it's a slightly entertaining but as i said in my experience of all of the christian denominations the catholics would have to be at the top of the level of support they've had for what I might call enlightenment values.

42:24I've got no issue with the Pope criticizing Trump by all means, criticizing all he wants, but I've got a big issue with the Pope criticizing the US and not saying a word on Iran. obviously people, which is like the heart of double standards. Maybe the most surprising thing is that the head of the Catholic church now seems not to be a conservative. Like that is the biggest change in the papacy. Bill Maher had this great bit on it last week when he said a week ago, the left hated the Pope is anti-abortion, is anti-gay rights. Suddenly they love the Pope. Well, that's a good place. They've turned around in the space of two days.

42:56Suddenly the Pope's great. Forget about this abortion stuff. He doesn't like Trump, so he's good. Well, the week's a long time in politics. Yeah, it certainly is. That's the bottom line. So we'll go to a super quick break now back with this very special guest. Before we go, if you jump on the show notes, we've got a really important survey about the pod that you'll see in there. It's also on our LinkedIn page, on my LinkedIn page. So jump on. We'd love to get your feedback on what you like, what you hate.

43:20survey. I hope it is. You just drive home the humiliation at every opportunity. Please jump on, it'll take you like under five minutes. I think there's a nice prize. I think we're giving a luxury escapes voucher potentially as a prize. So a great prize to be won, but we'd love to get your feedback and to make the show better. And we're back in just a few moments.

43:46And we're back and we're super pumped to have one of the godfathers of Australian tech with us. Steve Baxter, legendary founder at VC, is joining us. And most listeners will know Steve from his long stint on Shark Tank, but his story is pretty epic and goes back a bit further than that. So Steve left school at 15. Correct me if I'm wrong on any of these facts, Steve. And he joined the Army, where he trained in electronics, telecoms, and guided weapons systems before betting his life savings on his first startup age, just 23. Steve grew SE Net, one of Australia's first ever ISPs, to 35 ,000 customers, and sold the business to Aussie Mail, which is being run by I think Sean Howard and Malcolm Turnbull at the time.

44:22One of the great exits to Wellcome I think they sold to in 1999. Yeah, well thanks for the Godfather reference, that was awesome. And Shark Tank was actually like, it's 2026 now, I first got approached in 2014, so it's a long time ago. But yeah, we sold that first business to Aussie Mount. I didn't meet Malcolm until probably two years, I think he was undersecretary for comms at that point in time, I want to say when I first met him. Sean Howard unfortunately passed away a couple of years ago from an aggressive disease. It was quite sad. So yeah. And then as we were selling, they were acquired by UUNet, who was in a new, halfway through the acquisition process, UUNet was acquired by MCO Wilcom.

44:58So it was this amazingly gated process of acquisitions that just actually enhanced it because initially we were going to do all stock and then ended up being, because they didn't want us as newbies in the register having too much power to take it out. So they basically gave us all cash and stayed on level. This is dot-com boom, right? Yeah, 99. This is extreme value creation for vendors, we could say. Yeah, look, we didn't have – I think we didn't sell for as much as many others did in the headline rate at the time. But at the same time, we got cash. And then I know so many people basically saw their stock go to zero because there were a lot of roll-ups, a lot of listings were on the back of basically a paper transaction.

45:38I think a dollar is worth infinitely more than MCI Worldcom's. Yeah, well, the first – this is interesting, actually. I listened to your capital gains tax one, I think, last week you did, I want to say, capital gains tax. And the first half of that transaction, we didn't do two tranches, was done in the old CGT right there. Oh, what a dream. Turned me instant libertarian when I got that tax bill. So you were pretty young then. You were early 20s, right? Yeah, it would have been – well, I came back to Brisbane after the second tranche, and I was 30 then. Oh, wow. Yeah, yeah. So you went from that – so that was a great exit at a perfect time and a great transaction.

46:10Then you founded Pipe Networks, which is probably your biggest win, I think. Yeah, very much so. Co-founded Pipe Networks with a chap I went to school with up in Rockhampton. And this is Bevan's story? Yeah, this is Bevan, yeah. So I got with his parents last week before. Actually, unfortunately, my dad's funeral. But it's always good to catch up with people. If funerals need to bring you together, then so be it. So, yeah, we started that in 2001. We listed that in the ASX in 2005. And then I actually left there as a full-time executive in 2008 and worked for Google in California for a year and a day, something that that shocked me when I read I had no idea you worked for Google yeah look you know there was only one job left from the company and Bevan was you know the better CEO and so it was you know I wanted to do something else so and I was sitting on these offers and whenever you meet Google there's always five recruiters in the room so you always get these recruiting emails afterwards yeah we're building the submarine cab between Sydney and Guam yeah and so we were meeting with anyone who had high capacity bandwidth requirements around the world to be honest Google included and you know and I was just sat on this email there and they said come work for us you need at least like a master's degree.

47:14You might accept if you've got a bachelor. I'm thinking, well, I didn't finish high school. This could be a problem. But I thought he'd reply anyway. And yeah, then I was probably a couple of months later, I was having an interview in Mountain View. And then, yeah, I was sort of working there. Yeah. Why was it a year and a day? What was, that seems very specific. It does, actually. So when we had the offer to acquire pipe networks on market, so TPG, not market, excuse me, but there was a scheme, TPG Telecom acquisition. That was in October, I want to say, late September. I can't remember exactly when.

47:50And we went and saw our California accountant and said, okay, well, how does this work? And we knew there was a double taxation treaty between Australia and the US, but as it turns out, to quote this lovely American accountant, but there's no double taxation treaty between Australia and the sovereign state of California. Oh, right. So you're like 8.95 % or 9.85%, a bit under 10%, 8.95 % I was in capital gains tax here, regardless, and that doesn't net off anything. So that is just double tax. Yeah, and I said, well, when's that actually happened? He said, it must be settlement day. He said, well, they'll probably bag that off a date, which is like three days before we met this guy, and I was like, I just need to get out of this country, get that stamp on my passport.

48:26So we packed up and left the next night. Wow. I resigned. I see. And it just happened to be a year and a day. What was working the Google like? That was terrible. I did not enjoy a single piece of it, to be honest. How about the stock? Did they pay you in stock? That would have been good. Yeah, we got some stock. Well, I was very – I think once you've been an entrepreneur, it's very hard to be an employee. Strange – I guess the DeepMind guys did it, but it's a strange move to go from two hugely successful exits to working for someone. Yeah, look, I was keen to – yeah, look, it was something I wanted – I do love the US, so I was keen to go and work in Silicon Valley, and this was the opportunity in front of me, so there was a large element of hey it's there um so and it was very much i mean i think i went to their their restaurant their famed restaurants maybe five times while i was there i was just eating at my desk and i started eating my desk if you know i mean i like getting things done yeah um it's very it was a very well very very entitled workforce um it was literally it was you'd have like no meetings fridays and and because people wanted to work from home and you'd ring them and they're getting their car fixed or they're down the park playing with the kids and this is 2009 right i found the lack of productivity i found it i should have just taken my brain out of my head put on the table and enjoyed the ride i just my wife constantly reminded me that we should do that and i should but i just couldn't i don't like being i don't like being i don't like not providing value and stuff i suppose so um but we had a great time personally we had a great time i learned to fly over there so you know let's take a session on weekend we'd fly up to Yellowstone or wherever you wanted to go so we had a really fun time you have a private jet business now as well right no I've sold all my aircraft now so um I had a last one I sold um had a I've never had jets I've had turbines and um uh King Air 350 so a raw flying dock aircraft eight sort of pretty decent seats in the back and went to do the the type rate and the training in Wichita 2023 I want to say late 22 late 22 first thing I've failed since So I was 17.

50:28I hadn't flown fixed wing for 10 months. So I have to admit, I went there with absolutely zero preparation. I went there prepared to fail. Yeah. Accidentally enrolled in the commercial course instead of the private course, which means your errors instead of being four degrees or one degree. Yeah. It's a lot more precise. I only crashed the simulator once. It was on the test, so it wasn't helpful. But I knew I wasn't going to pass. I was just going to complete it. And then I had one of those – it was actually beautiful moments now. Think about it. I thought, well, okay, what do I have to do to pass this?

50:55I have to either do three weeks of straight revision before I come over here, then do a week 10 days in Wichita or Florida or Texas. There's a few simulators over there. Or I just have to probably fly four or five weeks a year more in Australia. And then I had that stage. I had twin girls in grade one and I had my eldest in grade four. And I'm like, geez, I'm a shit dad. I'd realised how freaking selfish I was. And actually I felt aviation leave my body. Oh, that's very interesting. And I'm just like, if I'm going to do this, I thought, okay, I've got these, you know, I've got, it's just selfish.

51:32I mean, so that was a, and I still do a little bit of rotary wing, so I still fly helicopters. I'm a far better helicopter pilot than a fixed wing pilot. Helicopter sounds, it feels a lot harder than fixed wing. Look, and I think, and this is just me, so I took, you have to do 40 hours to get your license. Now, the last person, their aircraft license in 40 hours is probably Chuck Yeager. Average is about 55, 60. You're ready when you're ready. If you go with your feed test before you're ready, you'll just fail it, right? So it took me 120. Is this instruments or this is just? This is just your basic PPL, VFR, visual license.

52:03So I took 129 to get mine. Yeah. You're ready when you're ready. And I tell people I was hovering a helicopter in four hours, no one believes me. So it's much more natural for you. That's all it was. The fact that a lot of people get freaked out by the radio as well, and I wasn't because I had a bit more. But I was an instrument-rated fixed-wing pilot as well, multi-engine, turbine, fixed-wing. What's your view on VTOL? Have you invested in any VTOL businesses? No, I haven't. I love VTOL. I was Queensland Chief Entrepreneur for a year in 2018-19. And one of the – the Queensland – which is a great role, and I really respect the fact that Anastasia Palaszczuk sort of gave me that role.

52:40It was great. One of the – they asked me to do three things, and I'd take to fourth on the end, which is flying cars. Yeah. I just look at the way we build roads and our transport. I have to look out the window here and the transport infrastructure, which is all necessary. but it just forces into a certain way of life. And so, you know, if you can get in a flying car, and you mentioned this last week with respect to fast trains, I think, and I've been saying this for a while, if you can get into a flying car, as I say, 300 k's an hour as an example, and you can then, so if you will put up with a half-hour commute, you can live 150 k's away.

53:12Absolutely. And it doesn't have to be attached to a large piece of linear infrastructure. Fifty-fifth of the cost of choppers. People will say we'll get busy up there, but, you know, in a cubic kilometre of airspace with 50 metre separation, you can put 4 ,000 vehicles. Now that's somewhat incredible, right? I was having a discussion with the Deputy Opposition Leader in Victoria who happens to be the Shadow Minister of Planning, David Southwick, like last week, and we were talking about all of these planning issues, which is essentially when there's no good transport system to get people out of the centre, even to Geelong out here, you're very constrained with what you can plan and like ultimately whatever you decide in terms of planning, the answer is largely going to be things that's still too expensive and people have got nowhere to live.

54:00It is very problematic. I want to ask you this, Google. That's horrible. Well, all the money went to Suburban Rail. Nothing left for transport. It was going. Nothing left for transport that people ride. Did you feel – when you were at Google, that was 2009. By the way, I had a quick look. Do you know what Google is up since 2009? How many times it's up? I've got no idea, actually. you think yeah you're usually very good at these things i hope you fail at this because it's got an alphabet too right so yeah i'm looking at like alpha could turn into alpha how much it would oh you're pretty close 14 times yeah it's 14x i should have kept my google stock did you think in 2009 did you think people there were smarter than people that you were working with in australia i mean it's like it's like it's like you know that who cares how smart they are they're not very clever so i mean it's a bit like the university sector and the whole the constant R &D and research, but the innovation debate we have, we put smart people and we put these PhDs in charge of this stuff and they're just very good at their speciality, but they're not very good otherwise.

54:59So you didn't think when you worked there, you didn't think, I wish I could have had access to these people in Australia? Well, I think the situation, so when I first got there, I shared an office for four days with a guy called Urs Holtz, who was Larry and Sergey's doctoral professor at Stanford. Right. To give you some idea. I didn't know that until about a week later. So that was pretty special. So look, very, very smart people, if you know what I mean. Was Larry and Sergey coming into the office? I saw Sergey once. I saw him twice, actually. He almost ran me over on his mountain bike once.

55:27So don't walk around Silicon Valley with headsets in, right? That's probably the best description for it. if you don't get to run by a bike, it'll be like a bloody electric car, even back then. But I got there, so this is the first day. So, you know, I woke up to the, it took me about three months to get Clee to work there because we were doing business with Google. So there's massive conflict that actually just took a while to work their legal years, which is fair enough. And so it took a long time and you get your E3 visa and right in the middle of your E3 visa number is the word Google. The number's about like, you know, it's 20 centimetres.

55:58It's the length of your passport and in the middle it says Google. No worries. So I get there and I walk up the front counter and go, you know, Steve Baxter here to start work. And I was like, how do you spell that? I'm like, oh, this is bad. He goes, are you meant to be in the Sydney office? No. Pretty sure I was supposed to be here. And so for the first half day, I was locked out. Because I wasn't in their system. This is my introduction to Google, right? So, you know, first impressions might count. And we're then watching it. And if you've ever been to the Google, the Googleplex, there's this large sort of quadrangle.

56:27It's the old, ah, Sun, Microsoft. No, the old Silicon Graphics campus, sorry. There's a large quadrangle in the middle where there's a volleyball. Amongst other things, there's a garden and there's restaurants and there's a volleyball court. I'm watching these people for two hours play volleyball. I'm like, man, don't they have work to do? I realised one of the players was Sergey Brin. You're not getting fired if you're playing volleyball with a boss, right? That's a 20 % time. 20 % time, that's it. Well, thank you, because Google now has – someone was telling me people started Google the first day is remote.

56:57So at least you're in the office. It was funny. You've probably all been to America. You go there and everyone goes, oh, from Australia, you've got all these dangerous creatures that want to kill you and stuff. I'm like, I suppose. But that first week I was at Google with my induction, we did something called the big cat drill. I'm like, big cat briefing and drill. I'm like, what? What's a big cat briefing and drill? Also, it's when the cougars or the pumas or something come out of the hills and prowl around the campus, you know, get like attacked by one. I'm like, we don't have those things in Australia.

57:25We do not have. The answer to the drill is you lock yourself in the office until they go away. So it's actually quite simple, but I'm like, you guys are worried about spiders and shit? Snakes? I thought you were going to say there's these dangerous creatures in the US called Americans that prowl around with guns. No, no, I find, I mean, I've been there. I mean, it's a very overtly polite society. I mean, not in California. No, no, they're still pretty well armed. One of our advisors lives in California, a Beaton's own business, and she has like, what, 74 guns or something? You wouldn't know I'm looking at her.

57:56and she's quite charlie. I mean, she's a weapon when it comes to space warfare, don't get me wrong. But, you know, it's just an otherwise polite lady, and she starts talking about gun collection. You're like, ooh, okay. And what do you think? You know, obviously founded Pipe Networks. It's one of the, not the original infrastructure businesses, but pretty foundational infrastructure for a lot of stuff that's going on now. Obviously, Bevan has now continued his involvement in various types of tech infrastructure. data centers, et cetera. What do you make of the data center boom right now? Well, I don't know if people are aware, but the CFO when we sold, our CFO when we sold Pipe Network was a lovely chap.

58:37I'm still really friendly with a guy called Robin Cooter. Oh, there you go. So Robin Cooter is - Who was his next DC? Before next DC. So we had another chap who was our CFO, Malcolm Thompson. He departed and Robin came in just as we, just as a GC, you don't want to say. Okay. So he came in there. What was he like? He's a lovely guy, lovely chap. Yeah, look, you know, very professional and he's a very, you know, lovely, polite man and he was very competent. We were going through pretty well. We'd hit a bit of GFC had occurred. We started a large infrastructure project so the company had its problems and that's what generated the sale and it was quite a good day.

59:12You know, we sold ours for, you know, a bit under 400 million bucks and Robin said, you know, hold my beer. Watch this, right? So what do I make of that? I mean, I think that, look, I've been surprised by the data center stuff. When I was at Google, they were doing 90 megawatt floor plates and I was there in 2008, 2009. Which is huge. Which is massive. And they were talking maybe an Australian data hall wouldn't be 90 megawatts at the moment still. So very, very big data halls. But they put these things next to hydro plants and other bits and pieces all around the US. They had a lot more choice of where to put them.

59:42What were they using those status centers for at the time? Oh, just for compute, just for everything, you know, for... For basic search business? AdWords and stuff like this. Yeah, their search business. I mean, you get shown the crown jewels when you walk in. and I probably can't talk about it, but you do get exposed to quite a lot. The documents you sign for a signature are actually quite... What was your role there? Technical program manager. My job was to build... Actually, I was employed... Here's the other thing. So when you get there on day one and they change your job. So I was meant to be in the strategic negotiation team with respect to building and buying submarine capacity, international.

1:00:17We were building a submarine car on Australia. It made a lot of sense. And I get there, and then after your first day, when I finally got let in the door, at the end of the first day and they give you this stupid sort of Google hat with propeller on it for Christ's sakes. Like the internet. Yeah, you've been identified as a new Googler. This chap came down. He used to be George Lucas's IT manager from Dust for a Light and Magic, right? Before I knew his name, he goes, you know, when I heard the, because we had these name tags around us so you knew who I was. When I heard the job they gave you, I wasn't too sure whether to laugh or cry.

1:00:45I said, well, my name's Steve and I put my hand out to shake because I, and they said, your new job is to basically build massive, well to complete and build massive fibre paths between their data centres and their pulps and other bits and pieces. Oh that's interesting. They acquired all this infrastructure. They acquired like they were missing five miles here, 10 feet there, 20 miles there. They decided to join this stuff together essentially. I didn't know where stuff was in America. I'd sit in these meetings right. The back of my notepad was like a map with a scale on it so I could tell where Chicago was compared to Atlanta and what the approximate distance was.

1:01:15We're going to order like 800 miles of fibre pool and things like this. So my job got changed on day one as well. so that was it didn't add to my understanding and my like of the job if you know what I mean it was pretty and inside it literally you'd have these amazing products and projects run despite their data run on Linux servers under desks so it was really quite surprising how they handle a lot of that stuff we've got to let Steve get back to the data centre then because aren't you interested to know like we talk about data centres NeoCloud etc like you think that This is for real a bubble.

1:01:52The reason I missed data is I saw them building this amazing, well, I call them compute factories. I thought, who the hell is going to compete with that? They must be able to drive the cost down amazingly. And in the end, I did not quite understand the demand, how big the demand curve was going to be as opposed to the supplies. I only looked at one side and I got that wrong, to be honest, I think. Have you looked at Thermos? No, I haven't. Isn't there a very interesting chap involved in that one who did a bit of time in jail? Oh, the Curtis is this. Yeah, I've looked at it. I would say that's the least dramatic thing about that business in my view.

1:02:21You know, their latest pitch today, I don't know if you saw this. I saw this at Nondil Roadshow, stuff they're doing now. Yeah, so this is their pitch. When we IPO for, what,$7,$8 billion,$10 billion, whatever the valuation is, it's irrelevant. What would be really good for markets, we say, is if we basically didn't have escrow. We need free flow. Yeah, we need free flow. Because then we will go in the index. We need to be able to sell at this valuation. And then people, active fund managers will buy us as well as passive. And so nobody should be really escrowed because it will be good for Australia.

1:02:52We should never sell into the float they want to do. Forget the S &R. Wouldn't the ASX as a requirement if you're not profitable? I don't know. They're not going to let that. I think, you know, if this IPO's, it will be the biggest tech IPO maybe ever in Australia. I'm trying to think what we haven't come close to. Yeah, IPO-wise. I mean, I use the word tech loosely, but it's more of a building infrastructure. And they start with like a data centre down in Tasmania getting access to hydropower. That's what this is. They're jumping the queue to get access to, which is another really bizarre thing about how they jump the queue.

1:03:24Well, even when I spoke to, I don't know, okay, I spoke to it. I don't want to breach any conferences here. So I spoke to a person who owns a lot of data centres and has done really well. And he was talking about how they had potential for 900 megawatts of draw on the New South Wells grid, the data centres. And I'm like, dude, where's that power going to come from? And he's a firm believer in the energy transition, that solar panels and windmills are going to power these things. And I'm like, okay. But he knows about some battery challenges with solar panels and windmills. Like they're good sources of energy, just not very often.

1:04:00And everything works. It just comes in and works at what price and what cost. Yes, you can make that work. But is it, you know, now the cost stack up here. and, okay, maybe your revenue is that profit dense, you can do that, but I doubt it. Excuse me. When I look at data centres, I think, and I look at the curve that's being projected for the continued growth of capacity, I think you'd virtually have to be a bull on coal, wouldn't you, if you believe in this capacity? Because it doesn't feel like there's any way in the short term to be able to let data centres continue. If they're allowed to build them.

1:04:34We're seeing in the US a lot of kickback. Or then you have to be in Texas. They're effectively banned. You can't have every data center in Texas, though. They're effectively banned. I went and pitched, as a part of my defense fund, I went and pitched the Midland Texas Venture Club. So have you ever seen Landman, the TV show Landman? I haven't seen it. It's all about the Permian Basin. And Midland Texas is the town that basically sits on the Permian Basin, which has more oil and gas in Saudi Arabia. I see. Right. And the Venture Club there is great. They've got big hats, lots of guns. They're the loveliest people.

1:05:06But you're flying there and you're flying through this inversion layer. It's that dirty brown layer. You get typically due to weather conditions, but it's mostly caused because they're just fracking all the gas. They've just got to burn the gas. They can't handle it. People are now moving data centers. The fiber is the building and the fiber to get there because you need the capacity is the cheap bit. If you can get, like, they're talking 10 cents, they're talking 25 cents a gallon equivalent. so to get the equivalent energy from a quantity of gas is 25 cents as you would from a gallon of petrol 25 cents a gallon you can put that through a generator and burn it all day it's 10 cents Australian if you look at the price and you can burn this in an automotive plant as well and it'll only cost you 10 % more less than efficiency so I think like who knows what data centres will look like in 10 years and what cooling especially is going to look like in 10 years and energy efficiency of chips, but in two years, if they want to keep building capacity, then surely that is the ultimate bull case for non-renewable fossil fuel energy because there doesn't seem to be any other way to meet the demand in the short term.

1:06:17I was brought up in Emerald in the Bowen Basin in central Queensland, home of the world's best thermal coal. I have no issues at all. I was at a Morgan's breakfast in the early 2000s in Brisbane and someone was pitching a mine. And I was like, at that stage, I was probably on the more green left side of life, being a bit younger and a bit sillier. And I was sort of thinking, isn't this stuff going to run out? And I think there was a projection there saying that proven resources in the Bowen Basin, that point in time, and this is before China took off, right? So just to put that in perspective, 167 years of world thermal coal supply in that one basin.

1:06:52And I'm like, yes, it's not going to run out. It is going to run out, but we've got some time to get there, right? I just want to say this because we have – you can say anything because it's just the two of us in this room. But sometimes some other people listen as well. And they have diverse views on these topics. And I'll say my view. My view is I think coal and gas – coal is pretty dirty when it burns and gas is less dirty, cleaner. And the sun is better and wind is better and water is better. and so I'm all in favour of moving across to that because I think it'll just be a less polluted, nicer world but I'm not in favour of doing it in the dark and so that's basically my view on all of this is that I think that's the place we should go because it will be a nicer earth to live in but there is a lot of energy intensive stuff that we rely on like planes flying and other things and I think that disadvantaging people, especially poorer people while you make this transition is absolutely not the way to go.

1:07:51That's my view on this. Look, I'm a huge fan of human flourishing. I think we're probably agreeing on this idea. So I think that we should, you know, more humans are serviced by the cheaper energy because you pull yourself out of poverty, you can do more work, and people live longer when they have access to more energy. That's the reality. So anything you do to make that more expensive, I think you haven't thought through your decisions, or if you have, you're not a very nice human, excuse me.

1:08:15So I don't 100 % agree. I think that coal can be made exceptionally clean. It's not as clean, but, you know, there's better ways of burning. And to be quite blunt, I mean, climate change seems over, guys. The big emitters around the world don't care. Even if it – whatever it might be, we can be the most honourable, morable people out there and we'll lose in every economic race because everyone else is ignoring it. And forget their words, look at their actions. Because you say from an Australian point of view, we're not going to move the needle. Nope. Yeah. Not when you have China, India, Indonesia, US, Russia pretty well doing what they want.

1:08:48Yeah, I think, you know, that's a bigger discussion. But I think numerically, mathematically, that is correct. That's correct. But I think if it worked, if all these other non-fossil-based generation sources were better, we just used them. And there'd be no argument because it's just better. And we're going to use it. The fact we have to force it says a lot. Did Robin ask you for funding when he launched Air Trunk? No, actually, he had another role before. and he was working for a like a mobile company of some description i'm saying mint by well that's a us company it's not right i can't remember the name of the business now they were a small listed business um and then i met him again once very early in the air trunk days i had no desire i mean i thought that after i left pipe i didn't like what the government had done through mbn i thought that was a large piece of sovereign interference yeah we left with some of the world's most expensive token infrastructure but everyone seems happy to pay more which is probably you know the accurate description for Australia.

1:09:45It's basically becoming defunct by Starlink as well. Yeah. Yeah, well, the government will just pass the law. If the government business is going broke, they'll pass the law to stop it because that's what you've got the incentive to do, right? Yeah. So, and so, but I wasn't, that being said, I was on the focus board. I was on the focus. We took focus from a$50 million market cap, ASX 93. That was, you know, through about 10 ,000 acquisitions. I'll have a tick over some of those acquisitions. Vaughan is one of the most entertaining people I've spoken to, Vaughan Bowen. Oh, Vaughan, yeah. It was a very entertaining guy.

1:10:15It was the other guy who was involved in that. James Spenceley? That's right, James. That's right, yeah. And there was some interesting sort of board activities after I left there. There was a bit of sniping back and forth, which was pretty funny. I left when we were M2 and Vocus. Yeah. I left because I thought I was being – Dave Spence, the chairman, asked me to be the chairman of the audit risk committee. Well, that's terrible. And I'm like, you realise companies have audit risk committees because of people like me, you know what I mean? So, and then he said, like, just do it for a while. And as soon as we merge this thing together, you can parachute out, which I did.

1:10:46It was just too big. I don't like the big companies. So, post that, you've really been into the venture capital world. So, I think you started with transition level investments and then obviously 1013, which Stu runs, has done a great job. And more recently, Beaten Zone Venture Partners, which you basically, I think you call it an anti-ESG arbitrage fund targeting sovereign defence space and critical tech companies. How has your VC career – I guess your third career in a way. How's that gone? Yeah, look, I suppose I haven't encountered a career since. The transition-level investments was my family office.

1:11:16It was just what we used to collect the expenses on that journey. And we then – we morphed that, pivoted that into 1013, I suppose, along the way. And that's going great. Which started off – I don't know if it's still SPV-based or has a permanent fund now, but it started off as SPV. Yeah, it's just – So a special purpose vehicle for each investment. Yeah, deal by deal, essentially. Deal by deal. It's a nominee, not quite – it's an SPV. It's a nominee structure. How many deals have we done with – 1013, I want to say it's 55 portfolio companies, about 80-something rounds. Oh, wow. So 121 mil under management, I think it is.

1:11:45Some of your biggest wins? We've had one exit so far, one outsized exit. There's been a few others out there. What was the best one? That was ClipChamp. It was our third or fourth investment, I want to say. And that was about – I was in there for a long – Did they go to Microsoft? It did, yeah. I was in there for a long before that. I'd actually bought my pro-rata allocation into the 10-13 deal. So our investors there after about 18, I think it was 19 months, it was about 4.7 post fees. I was, I've made, I think it was about 14 or 16 times, I think. Very good. It was a good day, yeah. Yeah. And the rest is, you know, late 2022, obviously, when the zipper zero interest rate environment left in the US, then venture's been on a sideways journey ever since, to be honest.

1:12:33that's when I started fundraising for Beatin' Zone. That was not the cleverest thing I've ever done. Beatin' Zone is the most – I want to say this about Robin Cooter as well, which has something similar – has a similar way with you and hopefully with us, which is very prepared to be outspoken about fundamental enlightenment values, which is not that common in the business community, and I think it's not – It's even less common in the venture community, unless it's a hard-left opinion on something. Literally, you are a pariah in the venture community. I think that's a queer guy. I forget his name.

1:13:03Yeah, the Sequoia guy that came out pretty strongly. Oh, did he? Yeah, there's one guy in Sequoia who's somehow still there. But through all the stuff that's been going on in the last couple of years, I mean, obviously you have outspoken and public about your views, but I was kind of, because I don't know Robin, I was pleasantly surprised at how prepared he was to have these very reasonable but definitive views on what right and wrong looks like in the world, which is not so common. Yeah, I mean, he's putting money behind it. He's got that scholarship for young female STEM students, I want to say.

1:13:35He's doing something with a big battery in Western Sydney somewhere. He's from Western Sydney. That's great.

1:13:43Yeah, he's obviously out there. He's making a name. I've spoke at conferences with him as well. He's got a great story. Yeah, he's got a great story. It's an amazing story. So Bearden's only is the most interesting venture firm in Australia. Forbes called us the most controversial. In Australia? In Australia, yeah. So we're an early stage venture fund. we invest in... That's probably also true. ...and precede through to Series A, what we call Good Value Series A. And the naming of rounds is like art, not science, excuse me. So we'll sort of do anything. We're ESVCLP. You guys probably understand that.

1:14:11But we're a very tax-effective fund. So if you sell... So I think the rules on that, you'll correct me, is if you exit an investment within 10 years, there's no... And up to 250 is CG2 free. And up to 250 is no capital gains tax. And you get a discounted tax year one, right? That's right. 10 % credit on the way in, CG2 free on the way out. But everything over 250 has collapsed, essentially. So it's up to 250. Yeah. And I think it's 10 years as well. 250 million, that is. 250 million, yeah, market cap. Yeah, which is great. I mean, governments mostly do bad things in Australia for investment, but this is actually a good thing.

1:14:44It's a rare thing. It's a 2005 or 2006 scheme's been around for a long time. It's because no one in recent history has had anything to do with it, probably. That's why it's gone well. They've left it alone. Oh, I see. When I advocate on behalf of what I get asked a lot, what we should do around our sort of part of the fence sort of industry base and investment and spending. I'm like, well, why not look at that investment scheme? That works. The tax office understand it. The accountants understand it. The investors understand it. And if this really is the most dire strategic situation we've been in for the last forever and everything's urgent, why not just make the tax credit 50 % or 100 %?

1:15:18I say 100 % because there's an equivalent US scheme that runs at 100%. It's for debt, if it's for debt, but it runs at 100%. So, yeah. By the way, Israel literally last week just put forward a new bill to increase the tax effectiveness of R &D spending because they feel under pressure from European moves to do the same thing. So it's not like... I'm not sure Europe's a big worry. Well, no, but Ireland certainly makes it very available. And like Europe is increasingly trying to... Ireland has tax haven. Tax bases, yeah. I know, but Europe is increasingly trying to increase the share of GDP invested in R &D.

1:15:49They are starting to be quite aggressive. And so if Israel is worried about this, one of the most supportive countries, I think Australia, yeah. I mean, we're a bit slow on things in general, if you've noticed. Well, I think we've got to be careful not to beat ourselves up too much. We have some really good bonds in that respect. And I think the ESVCRP is one. What Malcolm Turnbull did under NISA, probably the only good thing he did, to be honest, is the ESIC as well, which is the angel investor version. Which I've taken advantage of a few times. Yeah, I've taken it as well. That's the angel investor version of that, which is great.

1:16:17We have the RRN. But the challenge with that is, so this is the thing where if you're – I'm going to simplify it and say, if you're a little startup, your investors can get a tax benefit for investing in you. However, there's no rulings around it. You don't seek a ruling. And so it's kind of, I'm not opposed to this. It's self-regulated and self-policed, but there hasn't yet been a big test case of what isn't an e-sick. You can seek a ruling as well. I know, but not many companies, because they're little, so they don't seek a ruling. So there hasn't yet been a test case on the e-sick. No, there isn't.

1:16:50And there's no$250 million cap either too, right? So the first big investment that comes off, the tax office is going to, they're going to test that. It's guaranteed that will go all the way to the High Court to test it. I agree with you. So, but we also then have the R &D, we have the R &D sort of working capital sort of, you know, provisions, which is good. So, it's a good place to start. We have some great bones. I was on the board of Commercialisation Australia. One of the Labor guys, Greg, Greg, someone, Conbay pointed me to that. It was terrible. It was literally, it was an organisation just to put university research and keep it on life support.

1:17:22It was horrible to me. I mean, well-intentioned, blah, blah, blah. They're all well-intentioned. There's nothing personal here, but the scheme was horrible. Tony Abbott came in, took money off it, called it advanced commercialisation, sort of turned the C and the A around. So the thing is, we rely on our academics too much. And we don't, you know, the worst deal, the deals, you ask my team, the deals I walk away from, where there's any university or academic involved. Really? Just walk away. Sorry, guys. It's so ironic because Keterpult came out of a collaborative research centre. So did Google.

1:17:51Well, I'm aware of my Google interview. I actually read the Google, my research for the job interview, I read the Google annual report, and they talked about the levers that Stanford still have with respect to the Google IP. It was very little. There was no control. So when I say that, I'm sorry. So that's what you're worried about. I see. Well, the CRC had no control over Catapult because they literally, they started off licensing the IP to Catapult, and then the story is that the price of managing the license was greater than the license fee, and so then they effectively sold it for not much to the founders at which point the business flourished.

1:18:27I struggle with the concept. So look, okay, so the founders go to university, they pay hex to do that. So literally they're paying to go to university. The university gets some sort of government underwriting. They then, you know, literally the university houses and provides electricity to the student, right? And then they think they get a say in the IP that that student creates. I actually find it offensive. When you consider the amount of public effort and support that goes into that, Literally, you've kept the roof over their head and you actually want a part of their intellectual property.

1:18:56Maybe if you change that, you'll get more people coming through and you'll get more pull through. It's one of the problems, not the only problem. The CRC was a bit different. And in a way, it's more interesting. And I'm surprised they haven't used this more effectively. So this was like a CRC for microtechnology, a partnership between academia and industry. I think Motorola had been a partner. They pumped 70 mil into it of government money. in over seven years, and they go and build all of these things in partnership to commercialise them with industry. Now, at one point, this microtechnology CSE, as I understand it, their IP had been valued at hundreds of millions of dollars.

1:19:30Needless to say, they never sold any of the IP out of this thing at all, except this pittance for this Catapult IP. But if you look at what$70 million bought, just in the way, in terms of Catapult, in terms of export revenue for the country, employment, and so on, It's actually a very good investment. And so I think these things are a bit messy, but sometimes they work in producing. Now, the founders were employees of the CRC. It was a bit different, right? And so they then bought out the IP. But there are lots of different ways to do this, to create this IP. I just think I generally agree with you.

1:20:05There's a lot of good IP in this country that is stuck inside universities with no easy way to get it out of universities. If I was the czar and charged all the IP, I would basically put it all on eBay. I'd take it out of the cupboard and say, right, because it's worth what someone's going to pay for it. Put it out there, expose it on and say, right, who wants to come and get this? You have to say Facebook Marketplace. That's the line. Yeah, yeah. Facebook Marketplace. You can't say eBay. I use eBay, I mean, occasionally, but I want to buy junk. $15 billion or something. So Beedon Zone invests in defence.

1:20:35Early stage defence, Australian capability, essentially, that market to the US. So we look at capability that the US armed forces or the overseas armed forces use. The Australian Defence Force budget is roughly$40 billion US. The US budget is$1 trillion, going to$1.5 trillion. They're the biggest spender on defence globally by a significant margin. By a significant margin. And it's easier. So they're willing to buy from small companies. Like the US market in general is willing to buy from small companies, which might be another issue around why our companies through R &B don't succeed. Our larger businesses don't like buying from smaller businesses.

1:21:08I think that's a huge issue. But we invest in companies that increase capability around lethality and survivability. Now, we do lethality not because we're especially bloodthirsty, but because you don't stop the enemy with harsh language alone. You need a robust man carrying something heavy. And we back people who make heavy things. We don't want to see any of these things used. But the reality is that soldier sales and airmen are about to need a lot of these tools. For that not to be the case, we need better politicians and diplomats, to be honest. But we're entering a very uncertain time with respect to geopolitics, playing it every day in the Strait of Hormuz, let alone what's going to happen in Taiwan.

1:21:45So we're selling into that space. We've got six portfolio companies so far, another 300 DD at the moment. All Australian? No, we can invest up to 20 % of our capital offshore. Under that scheme we have. We have two US businesses. We have a long range artillery business. So they put a ramjet motor in the front of an artillery shell and you can work at 150 kilometers instead of 30 kilometers. That's sort of handy. That's a bit delayed at the moment. the testing range that business is in Jordan so we can't get people there to test at the moment which is anyway pretty funny and then the other one is a counter drone so it's actually an attachment for a soldier's rifle to allow them to shoot Like a drone shield type No it's an attachment for a soldier's rifle to allow them to shoot drones out of the sky How does that differ from the drone shield product?

1:22:26Drone shield is soft kill so it uses jamming and other So this is using a kinetic force like a basically it's If you've seen these the smash the smart scope You hold the trigger and then you get the first shot off or something and then it mediates when the next rounds are fired. Different mechanism, but similar outcome, yes. What are your views on drone shields being that somewhat market-dialing, that's controversial, it's still valued at like$4 billion,$5 billion somehow. Are you bullish on that business? Look, I like the drone shield business. I think I come from the kinetic side of defence where I know that's not really a solution.

1:22:59It's part of a layer of solution, but right now in the conflict with Ukraine, for example, you're now seeing fibre-optic tethered drones. So you've seen drones with a 30-kilometre spool of fibre going behind it, which only weighs three kilos. So it's unjammable, essentially. So in my world, I'm like, well, unless a soldier can use a tool seven times out of ten and it works, they're going to drop it. Well, that's a great point because the drones that are being fired by Hezbollah into northern Israel now are fibre-optic cable-based drones. They're very – you don't really hear them. You can't jam them.

1:23:30They're very hard to get rid of. And so you mean kinetic as in like F equals MA. like there's force because there's something that has mass and it's accelerating or it has velocity and it hits something. Yeah, well, the general counter drone solutions are generally broken down to soft kill, which is jamming, essentially, and then kinetic or hard kill, which is shooting it out of the – putting a big smoky hole in it, basically. So there's only a guaranteed way to stop it. Yeah, and so this fund is controversial because I'm going to – I'll say something controversial and you can correct me if I'm wrong because people like to think we can talk our way through everything and be gentle and don't realise if there are bad people with weapons trying to hurt us, then we need good people with better weapons and training stopping that happening.

1:24:15And people don't want to accept that reality of Western civilisation. I've said it in a big way, but that's effectively the pushback that this sort of thing gets. I think we should prevent. If we can actually be dangerous enough to our potential opponents, then we can prevent it from even starting, which is the best way because nothing could come. I'm an ex-soldier. You'd never find a bigger pacifist than an ex-soldier or a father, for God's sakes. So yes, people have the perception that if we don't do, if we don't participate in defence, then obviously we're kind. You're just weak. You're not strong.

1:24:49Yes, you're weak. You're just weak. And there's nothing good about being weak. You're only dangerous to yourself, your family, and the people in your community when you're weak. And do you feel, have investors, because if you have gambling, for example, some investors, they're not mandated to invest in gambling or they won't invest in gambling. Do you think this makes it harder to attract investment? Oh, yeah, yeah. Don't put the word lethality in your mandate. None of the wives let their husbands invest. So at the same time, I think that the West has experienced a little bit of a crisis of confidence the last few years because we refuse to have tough conversations and we use way too many euphemisms.

1:25:25If there's a really good company here in Melbourne We're talking about euphemisms. They make a cardboard drone called SIPAC Systems, right? And the way they marketed it to the Army was it would take two kilos of humanitarian payload. I'm using air quotes for everyone on the podcast. 60 kilometres. Humanitarian payload is explosives. Yeah. But the Army wouldn't touch it back then unless it was called humanitarian payload. Well, if you bombed terrorists, that is humanitarian. I think it is as well. So I think we're in trouble because of euphemisms. So the name of our business is called Beaten Zone Venture Partners.

1:25:54Now, this is a business. I'm out to return multiples of invested capital to my investors. That's my only task. People confuse a bit of patriotism. I'm also a patriot, but it's not what it's about. It's about money. So if we get that right, we can return a lot of cash. But I'm not going to stand behind these people. So the companies that we back over the years have taken a lot of social flack of what they do. Our business, we couldn't get from Airwallex. We couldn't get credit cards because we were involved in defence. Really? A lot of these businesses – I'm surprised Airwallex were that bothered by it.

1:26:21Very bothered by it. so a lot of these businesses when they first start they have to bank on their own personal names until they get like a contract with the Commonwealth it's actually crazy insurance is almost impossible to get so I thought look I'm going to actually do this I'm not going to stand behind this I'm going to stand beside them so beaten zones are military term it's a spot in the battlefield where all the bullets led but there's more lethal places you can be but not very many we're not going to hide this is what we do if you don't know what we do fine just keep walking so like I said I think my life would have been easier if I'd left a few of the lethal concepts out and still went and did it anyway, but I'm not a huge fan of lying.

1:26:57Is Andrel a poster for how VC-backed defence stuff can work out well? Very much so. Andrel, Shield AI, I mean, there's a whole bunch out there at the moment. But Andrel was lucky. It had an ablative billionaire that helped start it too. Didn't mind just spending hundreds of millions of dollars to get to the point. What's their current valuation? They've just raised another one to 7 mil at something, didn't they? 60, 70 or something? Yeah, I think they've got a$4 billion contract with Australia. Yeah, they do. Yeah, we actually caught up with Palmer Lucky about 18 months ago. He gave us some time.

1:27:25He was lovely. He gave us some time in his office in LA. Of course, the founder of Andreal and also he was the founder of Octalus as well, wasn't he? Oculus Rift, yeah, Oculus Rift. And yeah, they just raised, I think, like a billion on a$14 billion number or something like that. And so, you know, always, yeah, now I can help you. So I'd love to buy some of your stock. Yeah, I didn't get any, unfortunately. And my last question on this before Adam's going to push on to other things is, I mean, I don't know if you can answer this succinctly, try and answer it succinctly. How worried are you about Australia's ability to defend itself right now as a country?

1:27:56Exceptionally. We're not spending enough. And I think actually using an accounting shift to actually pretend we're now spending 2.8 % of defence is ridiculous, including the military pensions. The US doesn't. The US spends a trillion and their pension budget is$0.4 trillion through the Department of Veterans Affairs. So I'm exceptionally worried. We just need to spend more. until that happens. And real dollars, we need to probably double. We need to take the NDIS budget and put it into Defence. Otherwise, we're going to have a lot more disabled people down the road. And if you had to pick one thing to invest more money in for Australia's Defence now, what area would you invest more money in?

1:28:37Oh, I'm too old to pick that. No, I get asked this all the time. What's the best innovation? Go find a young person who's actually going to have to use it. And they'll tell you. The most innovative thing I've seen, that's come out of, since I've started on this journey, is a website in Ukraine. The website's called Brave One Marketplace. So the Ukrainian Ministry of Defence, the innovation arm is called Brave One, Brave Number One. They have something called the Brave One Marketplace. It's eBay for things that solve issues in conflict. So literally, if you're a Western supplier, only supplier, you can put your goods onto that.

1:29:09Oh my gosh. It gets better yet. So just hold your breakfast down. You can put your goods onto that. A commander in a trench with mud on his boots in Ukraine can pull his phone out and go like, yeah, I need that sort of drone and he's allocated X many much currency from the Ukrainian central, I don't know what that currency is, X many Ukrainian dollars, whatever that is and I'll buy one of those. So, it gets delivered to his trench, right? He gets to use it. If it doesn't work, then there's a star rating on there. If it doesn't work, he can give it a one star rating. That's incredible. Nobody wants a one star rating.

1:29:38So, what actually happens is you contact the person and say, mate, this thing didn't work, right? And he goes, don't give me one star rating. I'll fix it and send you three more so then they use it and there's this iteration curve, this innovation cycle has now gone from in our society here, it's gone from decades to years, they do it in weeks and days but it gets better yet so if they use a if they have verified they've destroyed a certain, if they've destroyed enemy equipment they get awarded points, so there's in-game currency so they get awarded 40 points for a tank and 20 points for artillery and blah blah blah and there's a leaderboard, all the units, young men in combat and a bit of competition, there's a leaderboard that what units winning this week for destroying how much Russian equipment.

1:30:20So those points you use for destroying those equipment, instead of using central bank currency, you can then use your in-game points to buy more drones. Now, they ran a test around incentives and outcomes, and they changed the points for a Russian KIA, because a soldier killed in action, from two points to six. In one week, they doubled KIAs. that's unbelievable so there's instant this feedback loop so i say what's that what's the scariest thing for me it's the fact that you can shorten that innovation loop down to that is positively terrifying when we're still we're still talking about you know we're now talking about three to five years to increment on technology instead of 10 to 15 and some people will listen to this and they'll they'll think it's terrible that you're gamifying killing people my response to that would be these people whether they want to be on the battlefield or not they're trying to kill the Ukrainians and unfortunately this is what war is about people are trying to kill you and you need to kill them before they kill you and so I think this is part of what people find unsavoury because it's been a long time between real wars for the West and I think like accepting the reality that we have to defend ourselves at some point is going to be central to being able to take it seriously.

1:31:36You know I feel for the mothers of Ukrainian Russian conscripts I think it's terrible. It is absolutely, and you look at the video from this stuff and well, don't. You'll have nightmares for days. But it's above my pay grade not to start them unless we need better politicians and diplomats to be quite blunt. Yeah, absolutely. But if the damn thing is going to kick off, we've got to make sure the boys have the best tools they can get their hands on. Can I speak up on one point you made about military spending and increasing it? And I think as a sort of libertarian, the sort of view of libertarians we should be spending less, government should be spending less, not more, taxing less and spending less.

1:32:05And if you look at the US, we should spend something like eight times number two or whatever it is, and the way they spend on military is cost plus basically. So contractors will incentivize to charge more because that's how they're paid. So we've got this huge government failure, which resulted in a trillion dollars plus spending. Whether you can say that the end goal is noble, but what you talked about in Ukraine with the eBay type thing is the opposite to how the US manages the spending. So I argue that government spending in military has gone way too much, as it has with NDA, as it has with every government spending.

1:32:36So we should be trying to run back governments, but he's not increasing it. Well, if I could say, in the US, so I do love a young man in a hurry, and love or hate Pete Hegseth, the US Secretary of War. He has done a lot to change that. He's doing, he has been, the last sort of three months, he was doing his Arsenal of Freedom tour. You know, very showmanlike, but Arsenal. And seven out of the nine companies he visited didn't exist 10 years ago. Right? They are awarding more contracts now, not cost plus. He did four fantastic executive orders last year. One was around the acquisition of software being not cost plus, but how the rest of us acquire software essentially, just to cut it down to be less boring.

1:33:13There's one around naval shipbuilding, which I didn't read that much, to be honest. There's another one around drones, and essentially it was just we are going to acquire these levels of drones now. And the fourth one has now slipped my mind, but I really liked it. But yes, there's a tale of that. What you're seeing now more is, okay, it's not cost plus. It is those contracts being fully awarded. That's the opportunity of selling to the US. The US not only spend a trillion US dollars, but there's 275 organisations inside the US DOD who can buy without a tender. They're called OTAs, other transaction authorities.

1:33:44We think in Australia there's probably 19, from what we've counted, right? So that's, people sort of say, you know, it's not easy selling to America, but it's easier. You literally can ring up the purchasing officer for, or the programming purchasing officer for SEAL Team 6, and he'll tell you what they want. And if you can provide that, they'll buy at full rate, They'll pay you to come and implement it for a trial. They'll trial it. You better make sure it works because they'll not only give you a glowing report, it doesn't work, they'll shit-can you forever, and you're gone commercially. But you can walk in the front door and knock and say, I've got this, and say, great, let's go and test it.

1:34:16And in Australia, they'll lick it and dime it. It'll take forever. You'll be dragged close to bankruptcy during the process. They actually send over teams to Australia, I think called Foreign Comparative Testing FCT teams. They'll actually bring teams over here so you don't have to go there, and they'll test it here for you. It is the opportunity there. And there's a joke inside the Australian Defence Force that the easiest way to get your capability being used by the Australian Defence Force is sell it to a yank and come back with a funny accent. And that's unfortunate. I hope that changes. I'll move on to a story I noticed.

1:34:53We'll pivot from military into other form of tech. I saw this in TechCrunch this week. I never heard of this business, but I thought it was super fascinating. Have you heard of Glideways? No. Glideways. So this is a San Francisco-based startup that basically, I think Cosler may have given them some cash, but it's raised$170 million in a Series C last week and it's working on another$250 million. Its valuation is past a billion dollars. Glideways essentially makes autonomous pods. So we talk about sort of EVs. It's a take on EVs. I've never heard of this before and it looks super fascinating. So Glideways claims it can move 10 ,000 people per hour, reduced per lane, reduced infrastructure cost by 90 % compared to rail.

1:35:29Start-up found in 2016. Has three pilots in Atlanta, New York City, and the United Arab Emirates, and is hoping to launch in 2027. I asked Jim and I how this thing works, and this is what it told me. It says, vehicles don't drive on public roads. They use proprietary narrow elevated or ground-level glideways. Isn't this the Boring Company? This was the... It's underground. Yeah, but this was the same idea of the Boring Company. Similar-ish. I got a cap from the Boring Company. I think Boring was probably after this. This is 2016 founded. Anyway, so they don't share roads with human drivers. is they don't need level five super complex AI that obviously Waymo uses.

1:36:02They operate in a controlled environment that simplifies safety and software hurdles. The game changer for the passenger is that a subway train stops at every station, whereas a glide car carries two to four people, goes from point A to point B directly without stopping for other passengers because the glide way allows cars to divert off the main line into station bays. Hang on, they have to build... What is... This is a lot like a monorail to me. A cheerlift. I think it's cheerlift. A little bit like a monorail. Ski lift. It's a personalised monowail slash chairlift. Personalised, except they have to build an entire city of infrastructure.

1:36:32We're far cheaper. We're spending$60 billion on Suburban Railway. It's a lot cheaper than$60 billion. A lot cheaper than what spent$15 billion on a train that nobody uses. You're spending$20 billion on CFMU and the other$40 billion on Railway. That's true. And I'm sure you've figured this out, but that's less about a train and more about votes. So I'm sure you've... But this feels like, this feels, if it works, obviously they're testing it in real life now, potentially game-changing. It's really a rail killer, more than an AV killer, I think. Why do you think – I just want to challenge you on this because, like, you've been the number one advocate in my life of autonomous vehicles.

1:37:03That's like a high bar, okay? And you started before other people were advocating them. Now everyone understands me. I think Elon was advocating them, but – Well, Elon advocates whatever he is. Today's razzle dazzle, right? Watch his book. But, you know, like now people send me these videos from California and I just delete them. Like I've seen enough of them, right? Yes, I know. It's amazing. and so but why do you not just think autonomous vehicles on demand will move so efficiently through a city that we don't need an alternative roadway well the question is this is less of an av competitor i think this is more of a rail competitor but i think so you're saying avs can kill rail when i was young i had this idea when i say young maybe 20 years ago i had this idea which is they should just lay rail on all of the roads because i didn't understand the idea that cars would be able to steer and do stuff autonomously.

1:37:53They should just lay rail and then you could press a button and your own private carriage would come to your driveway and then it could zoom around on a network and the whole network would talk to each other and so there would be no accidents and super efficient. And so I was wrong about the rail part, but I think I was right about the autonomous part of that. Well, that's what this is essentially. But I don't think you need it. It's a much cheaper route. I think autonomous cars on demand will replace rail. I think it's far cheaper than ABs is the difference. Maybe. My vision of the future is more like a fifth element.

1:38:20never seen that movie that was flying through the sky wasn't it yeah just like you know just between it's just tens of thousands of vehicles in the sky type thing there's this chase and all the rest of it as you can imagine you've got to see they've got Mila Jajovic I'm shocked you haven't seen it I was working at cinema when it came out in 99 when you didn't see it 35 times no I was thinking American Pie was my favourite movie but that's the same that's the same concept it's just that there's many levels of roadways in the sky but it is the same concept I think all of that could potentially replace suburban rail?

1:38:52You think about the shape of a city. All these arteries come into a city and you get these big buildings for efficiency and all the rest of it. If you can travel 200 kilometres in half an hour without being tied to a piece of linear infrastructure, that to me is the holder grail. But what do you say about the serendipity of being inside a city? I go out into the city and one, it's quite – I mean, people used to go to cities. They do in other cities in Melbourne. They don't. And so everything is there, so it's very convenient. But also you kind of bump into people and talk to people about stuff and it's like a bigger version of the serendipity of being in an office together.

1:39:26Do you not think that is material for innovation? It's interesting. I've never lived in a city, so I've always lived out of suburbs, you might say. So never thought about it. You have to think about that. But I definitely think if everything electrifies, which feels like it's going to be likely over time, like transport is going to electrify and things are autonomous, it's hard to imagine that suburban rail will be a lot cheaper or it will be less efficient and maybe not even cheaper. Rail feels like it's yesterday's technology. You think so? Yeah. This is a hundred year old plus technology. Yeah, it's like an 1860s technology.

1:39:59It runs on old trails. This compared to rail is so much more efficient and cheaper and effective and private and just better in every way. But some countries run 600 kilometer an hour rail. Yeah. Not right in the city though. Yeah. That's true. Between cities. Shanghai kind of does. what else have you got that's it I think we've hit we've hit two hours so I think our listeners have probably had enough of us for now but unless you're listening on 1.5 which I don't think anybody does for us let me say this last thing before we end you love these luxury brands what's your favourite I mean I don't mean personally I mean you love following them well I think the best brand is rather than someone I'd buy which is your favourite Hermes have you seen Hermes as share price in the last little while it dropped off a bit hasn't it so it's been falling pretty hard not as much as LNH it hasn't but there's a general fall And in fact, what's kind of most interesting is the sales of non-bags has been falling much more.

1:40:50Like the growth has been barely existent. Bags are their hero product for sure. You only buy the other stuff to get the bag. Well, that is an interesting point because I think the lead indicator of bag demand is how much non-bag stuff people buy. The other thing you'd say is secondary markets. What you might have noticed is, I saw an article in Bloomberg last week, the secondary market for Hermes bags is compressed. So what used to be able to happen six months, or a year ago, was the cost of a secondary bag on the secondary market was like double the cost. You have to spend, generally the rule is you've got to spend one to two times the cost of the bag to get in the queue to get a bag.

1:41:30So your personal shop. A handbag? Sorry? A handbag? Yes. This is a Birkin or a Kelly bag. It's a$40 ,000 handbag. No, they start from about$5 ,000. All right. If you want to buy a$20 ,000 Hermes handbag, you have to be invited to buy one. And you have to spend$40 ,000 on other stuff at Hermes before they invite you. And then people would go and sell the$20 ,000 handbag. For$30 ,000. For$30 ,000 without telling anyone because if they find out you sell it, they don't let you buy another one. But actually selling it on the secondary market is pretty good for them because it creates a perception that it's much more.

1:42:02So the problem for Hermes now is the secondary. And their margins, their EBIT margins are like what? 50 % I think. The EBIT margin. I thought it was 50. I think it was a bit lower. But it's a gross margin. It's one of the great, like people look at software businesses and say, I mean a sasspocalypse maybe put a bit of, took some luster off but put it to the side. People look at software and say this is the greatest thing, no cost of goods, amazing margins. You can't beat the margins of luxury brands. You cannot beat those margins. So you've seen the secondary prices collapse to be not that much higher than the primary which means there's much less demand for Birkins and Kellys now which means people don't need to buy the, I bought my wife a Hermes rug for her birthday last year.

1:42:40It was actually, no, like a blanket, sorry. Oh, a blanket. For your person, not for the floor. No, not for the floor, for the person. But yeah, like if I can buy a Kelly or a Birkin for the same price, roughly the same price what they're selling for, then I'll just do that and I'll have to spend 30 grand to get in the queue. So do you think this is a sign of weakening consumer demand or a sign that there are limits to everything in the market? I think it's both. It's both, yeah. Clearly we know there's weakening consumer demand, but I think the luxury side, The luxury in the market has been so inflated for so long.

1:43:09We've seen Porsche has been smashed recently, share prices down significantly. Ferrari's even down a little bit. So even the best luxury brands with those massive margins, and Ferrari's margins double the second best car maker, which I think was Porsche. Even the best luxury brands are being smashed now. Yeah. Kering's been absolutely smashed over a period of years. LMH, you think Hermes 1, LMH 2, Kering 3, and that's the reverse to the decline in share price. So do you think we've passed peak fake rich credit card purchased Insta luxury? I think we talked about it very early pod episode. Bernie Arno was the richest person in the world briefly.

1:43:43I said that just is a shocking symbol for society. An indictment on humanity. Yeah. We want, unless we don't like Elon Musk for some things he does, you want someone like Elon Musk who's a creator being the richest person in the world. Forget the fact that Tesla's grossly overvalued and whatever, but Elon being the richest person in the world is a much better signal for humanity than Bernie Arno being the richest person in the world. What do you think about SpaceX then? the valuation or the business I think the business is great but you know the valuation is in that context we talked about it last but the valuation seems ridiculous it's an Elon religion yeah it's a Elon religion it's a business that makes potentially 8 billion dollars we look at space we look at space and I'm not too sure if you're on my mailing list you may be I'm not too sure but we say we love space as part of defence space is 85 % millitrile love or hate it it just is it's about to be fought there unfortunately but if you go from 200 kilometres low earth orbit to 350 kilometres low earth orbit there's 192 billion cubic kilometres of space.

1:44:34So I think space is very well named. But when you think about that, and then if you go further, at the 600, where he's, Stalin called about 500 kilometres, I want to say, the room for exploitation, the commercial exploitation is just staggering. And what he's doing to the cost of launch, we love space, but it's bloody confusing at the same time. So, yeah. Very interesting. So great to have you on, Steve. We've wanted this for a long time. You've been an absolute oracle of the tech sector. You know, the Queensland and Brisbane in particular, like tech ecosystem for lack of a less disgusting word has been incredible over the last five or 10 years and definitely like you and what you've built there has been a significant contributor to that.

1:45:13I'm a full partner mate but thank you very much. Thanks coming on. Great to see you everyone. Thank you Mike and Joel for your great work as always and we'll see everybody next week.