The Age of Entitlement in Full Swing, Corporate Travel Deep Dive, Most Valuable Brands, Law Firm Break Up, Maggie Beer, Interest Rates to the Moon and Waymo Flies

23:34It might be brand awareness. This is my whole argument. I'm just not sure the t-shirt thing is the right question on brands. All right, pick something. Because my argument is brand awareness is not brand equity. If you're Nike and your business is making t-shirts, absolutely. But listen to my comment. Brand awareness is not brand equity. People being aware of your brand. All right, you can't have a great brand without awareness. Yeah. But people being aware of your brand does not fundamentally give it value. It doesn't fundamentally give you price and pay. I think it's a component of value. I don't think it's all of value.

24:01but I think it's relevant. If no one's heard of you, you can't have any value. If you have an airline and let's say it crashes all the time and everyone's heard of it because it crashes all the time, then brand awareness is super high. But I take it to the extreme to show you that awareness is not equity. I'll do an example. So Luxury Escapes is a much higher MPS than Expedia and then Booking.com, the flight center. But everybody knows Booking.com. I'd say Booking.com is a much more valuable brand than us in Australia, even though much people love us way more than booking.com. Now we can talk about NPS.

24:34Obviously, I've gone up beyond my neck in brand research in the last year and a half. So NPS is very interesting. So NPS is called - We use NPS or any other kind of - All right, but let me say NPS is what's called attitudinal loyalty. Which is net promoter score. Net promoter score, which is that question. It was started by a guy called - It was McKinsey or something, wasn't it? No, it was Bain. It was a guy called, his surname was Reicheld and his book that he wrote about it was called The Ultimate Question and it basically says on a scale of 1 to 10, how likely are you to recommend this to family and friends?

25:07It's the most common version. And the way the scoring works for people unfamiliar with it is that 1 to 6 is worth minus 1, 7 and 8 is worth 0. I thought it was like 1 to 4. 1 to 6 is worth minus 1, 7 and 8 is worth 0 and 9 and 10 is worth plus 1. And it's the net of adding all of these numbers up. So the most you can get is 100. Which is basically impossible. Which would mean everyone is giving you a nine or ten, and the least you can get is minus a hundred, which means everyone will give you a six or lower. Why is it one to six? Made up. Why is seven and eight zero? Made up. I thought the neutrals was more.

25:38No, it's seven and eight. And so why do people like this thing? Because in the research early on especially, there was correlation to revenue growth over time. Now, the big challenge with NPS is you don't know how to improve it. So that was what I was trying to solve when I was working through all this stuff. It's a relative metric more than anything else. it's not great it's an absolute metric so the thing is you know he's got the highest the highest MPS I've ever seen who Peloton it was like in the 90s well in the 90s for the one year of COVID right no I think it still has a crazy high MPS interesting and also it has one of the lowest churn so it's related to that well I think we should get shares in Kiza you think we should get shares in Luke's Ban Mee I walked past there my problem with Luke's Ban Mee Luke's Ban Mee or Kiza well no I walked past Luke's Ban Mee they're both great businesses it was packed but then I looked at it and I'm like that Ban Mee's 600 calories I can't afford that.

26:26Oh, but your lunches would be normal. How many carbs would you have in a lunch? A lot less than that. Really? Yeah, for sure. How do you get those biceps so big with so few calories? Well, you think, firstly, I've come to respond to that, but firstly, I would say a lot of those carbs in Luke's Banh Mi is that Banh Mi roll, which is like the size of four people, right? The queue outside that joint is just… It was amazing. I kept thinking it's going to reduce, and it doesn't reduce. I agree. Well, you know, human beings like doing things that other human beings… But usually the fad goes… But lines, so when I see a line, I feel repulsed.

26:57Yeah. But that is not the general human sentiment of a queue. It's like a busy restaurant. You want to go to a busy restaurant. Yeah. So, although it backfired in the Soviet Union. You look at a line. Yeah, that's true. That wasn't a want. When there's a potato beetroot or a toilet paper at the end of a line, it's a lot less exciting. And so, Kiza, which we should get shares in because of how much I rave about it, and you use it as well, I just gave them a 10 on NPS. 10? Yeah. Yep. Yep. And as you can see, because I'm vocally recommending - Yeah, I think that'd have a very high NPS. And so that's why people love it.

27:27But the thing about NPS, I know we've gone on a tangent, but bear with me. The thing about NPS is that it is attitudinal loyalty. It is not predictive of repurchasing, which is behavioral loyalty. It's not predictive of that, okay? It must have some sort of correlation. It's not predictive. You're saying it's not an NPS of 100. It's correlated, but there's a lot of other factors that determine repurchasing, okay? One is like the categories, one of the factors. Yeah, of course. And so - You can't buy a car every three months. Yeah, that's right. And so the thing about all of this brand stuff is there's a hundred different ways to measure brand because it's been problematic to measure well, but awareness in and of itself does not give you any kind of brand power or brand equity.

28:11It just means have people heard of you? And so, yes, I'm not surprised your NPS is high because people tell me what a great experience I have with luxury escape. I think awareness is more valuable than you give it credit for. It's impossible to build brand equity without awareness. That's for sure, okay? I think awareness gives you a modicum of brand equity. And obviously you've got to, to your point, you can't be killing people with Tylenol or whatever. It depends how people feel about you. One of the biggest things I found when I was looking at all of this is when you say, you know, so you've got unprompted and prompted brand awareness, which is name a provider of hotels.

28:47have you heard of luxury escapes they're the two right and then what people will do then in tracking they'll say tell me some words you feel about luxury escapes so that doesn't work in brand like that tells you nothing that is what i'll say that tells you nothing that's scientifically validated in research papers but there are things that are validated for example if you ask questions about trust for example so that is validated and that is linked to um ultimately that's linked to attitudinal and behavioral loyalty it's comp what i found is it's very complicated but the reason i I don't like these brand things is that UnitedHealth is the prime example of why I don't like this brand look because they do not get any power of brand equity as a result of that awareness.

29:28Except maybe you would argue if I'm choosing between two health providers and I've heard of them. But what have you heard of them? What have you heard? But if you've heard of Booking.com and you haven't heard of Luxury Escapes, then there is inherently some trust. I've heard of these guys. I've seen them on TV. They must be good. Well, now you talk about something else. So when you talk about I've seen them on TV, you know what? that's called advertising intensity. So those would be questions like, you know, like luxury escapes seems to advertise a lot. You're right, that does drive up, that does drive up brand equity.

29:56But it's like, it's very, I don't know what the like jargonistic word is, but it's very multifaceted, all of this brand equity. And awareness is consistently overestimated in the effect that it has on brand equity. I think you're probably right, but I think you're also underestimating it. That makes sense. I think you've gone, you've overcorrected the other way a bit, saying it's worthless. I think it's worth something. I think it's probably not as valuable I agree that some people give it credit for. I'm not saying it's worthless. I'm not saying it's worthless, but I'm saying because it's the easiest thing to measure.

30:23You know the other problem with awareness is this. So in statistics, you would know all of this, but you're not taking a census. You're not asking the whole population, what do you think of luxury escapes? You're asking a sample. And so sampling, it has standard error based around the standard deviation. And so what happens is most brands are small. They have less than 10 % awareness. And so when you go and run a survey and you say, what's your awareness for this brand? And it's a seven. And then next time it's a six and the next time it's an eight. And you say, why is it bouncing around so much?

30:52It's not. It's all inside the standard error bands, right? They're going to be at least plus or minus one, that standard error band, if you survey a thousand people. And so one of the problems with awareness is that low awareness levels, it's very hard to get a material change in a month or a quarter or a half year. That's the other problem with measuring awareness. But because it's so easy to measure, go ask people if they've heard of you, It becomes a staple of brand equity research. Yeah. Let me move on. Did you see a high-profile marriage breakup happened last week? Do you know what I'm talking about?

31:23I don't look at these kind of things. Well, it was a marriage between two law firms. Oh, that I looked at. I had to read about it because I didn't really understand the history behind that. Yeah, so the troubled marriage of King and Wood Mallison is set to end after just 14 years with a partnership splitting into two firms in March. The firm told staff on Tuesday that it would separate China-focused King and Wood, which would absorb that large and profitable Hong Kong business, and Japan and New York and Australian-based Mallisans, which keep the Singapore business. An investigation by the Financial Review in June detailed how one of the firm's partners in China attended a major Russian legal conference, which wouldn't have gone down too well, and it's linked to an allegedly corrupt deal in Montenegro and the legal and financial problems of one of its top executives.

32:02This is, obviously, I used to be a lawyer, I dear, and you have a lot of experience with law. I always thought this was a stupid idea at the time, like 15 years ago, they did it. It made no sense to me at the time. Mellison's was the bluest of blue blood Australian firms. It was probably the preeminent, Freehills and Allens. It was called Mellison Stephen Jacques. Stephen Jacques, but it was kind of known as Mellison's. But certainly when I graduated in 2003, it was number one. And then Freehills, my firm probably overtook it a few years later. Freehills was, when I was growing up, Freehills was called Freehills, Hollingdale and Page.

32:31And Telstra got them to send me a legal letter when I started a business to do like cheap international phone calls. They said, you have to call it, you quoted Telstra's prices in your literature and you got that like by one cent wrong. And like it was like$2.20 and$2.19 or something, right? Classic. So Malesons was the firm to try and get a job at. If you got the best marks, you went to Malesons and they really destroyed their brand equity by merging with a Chinese firm. They panicked, right? They panicked. Absolutely panicked. They saw like a bunch of other firms coming. They saw the US firms making all this money.

33:05This never made any sense to me. Even the UK mergers didn't make sense to me, but this Chinese one absolutely didn't make sense especially for Mallison to do it so they've sort of arrived the wrong now and David Freelander who was the big M &A guy probably one of the best M &A guys in Australia who's been sharing it was sort of trying to make it work but eventually I think they just gave up and he's resigning next year so how long did they play this for? 14 years 14 years a long time isn't it by the way I didn't know until I was reading articles about this that Ashurst was the old Blake Dawson Waldron yeah and obviously Freel's was now Herbert Smith Freel's Kramer emerged with the US firm as well.

33:40I didn't notice that Kramer jumped onto the end of that. When did that happen? Six months ago, maybe? But it was kind of like a second or third tier US firm. So again, a little bit strange. I always see this Kirkland and Ellis, the big US private, Chicago-based private equity firm. And the partners earning, some of the partners earn like$20 million a year. And they always go, I want some of that. Not thinking, this is why lawyers are lawyers and not entrepreneurs. They have a very minimal understanding of value and brand. Speaking of brand. And they've just destroyed their Australian brands with these stupid mergers.

34:06Listen, when you hear of a lawyer earning $20 million, you can just hear like the capitalism running around the ring of the drain. Like that is not the way capitalism is supposed to work, right? These are like service... Lawyers are tax. That's all they are. The way I would describe it is they are service providers to the value creators of the economy, right? That's how you could describe it in economic terms. Even calling them service providers is probably being generous because they're more of a tax. They're not really providing value. No, I think that, like, look, some of it is a tax, but you do need to set things up properly.

34:43You need that for capitalism to work. I'm much more benign than you are about lawyers, obviously. Look at the big earners, the Kirklander. That's due diligence, which is basically unnecessary. It's ass covering from directors, and it's litigation. Yeah, so I don't think that's a tax. Litigation is absolutely a tax. I don't think it is. Like, it's conflict resolution without, you know, guns at 10 paces. Like, I'm in favour of that. I'm not in favour of – I think it's not fun to go through litigation, but – well, there are parts of it that are fun, to be honest. It's more that litigation has been constructed to make lawyers as much money as possible.

35:14You can have a version of litigation – call it a VCAT. Oh, I agree with you about that. But that's a – A whole discovery process. That's a judicial system problem. Yeah. But my point is I'm much more benign and even supportive of some of the roles of lawyers than you are because probably a dispositional and background difference, right? But I do think they are not the value creators of capitalism. They're destroyers. I don't think they're destroyers. They're the provision of services. And so, frankly, they should not be earning$20 million a year. Like, the big return should come. And that's US, UK, not Australia.

35:50But the big return should come to the value creators of the economy because the only way you can get people to take risk is to make returns commensurate with that risk, and there is no risk in being a lawyer. I think the big Australian lawyers are probably earning the cause guys, like the head of cause,$7,$7,$7,$8 million, which is pretty crazy. It's more than most CEOs. The guy that runs cause, he's earned$100 million on his contract over 10 years or something, didn't he? He's got an extension. Gavin McLaren, I think his name is. Yeah, whatever his name is. Actually, who cares what his name is, right?

36:23What does it matter? So I think that that is not a great sign for capitalism. and you can see like you know so in the US and the problem with that with cause is there's actually some really good lawyers at cause like I've had a great experience with most of the people I've dealt with at cause not at Gavin's level they're super expensive but like there's some lawyers there who are really good probably earning a million bucks a year because the big the top four or five is getting there's only so much pie to split up so you've got some really good lawyers getting shafted and some of the big guys just cleaning up with this crazy amount of more than most CEOs earn way more well I used to think all their law firms were the same but I've really changed my views on that.

37:00Yeah, no, I don't think they're at all. I don't think they're the same. I think there are good ones and there are bad ones and there are some that have bad partners. And firms change. Our partners change. But I definitely think there are all these red flags popping up at the moment. Maybe we call them orange flags around capitalism and nobody wants to do anything about it because it feels impossible to do anything about it. But if no one does anything about it, than the people that think that shooting the CEO of UnitedHealthcare, like those people will do something about it. And we don't want that to happen.

37:34It's not the fault of lawyers. This is the fault of the clients, the private equity firms and the corporates who pay these crazy amounts. If they went to mid-tier firms or bargained harder, they wouldn't have to pay this absurd amount because it's not their money. They don't care. So I agree with you. And I think fundamentally there is no – the difference between the quality of work is not proportional to the price I actually think you get a higher quality of work in many cases from a mid-tier firm and I think the best is top-tier lawyers who then go to mid-tier firms that's who I tend to always use is you get really smart people without the massive overhead and I get all only I prefer to only deal with partners ideally or senior senior associates so you're working with really smart people who could easily work at the Ballisons and the Freehills and whatever but they choose to work at a smaller firm so you're getting absolute top tier quality for half the price so i don't um care even one percent about this melison's news like i don't even care one percent like i don't use them i couldn't care less about that i don't care about that i won't care about is how bad an error they made in the first place and that and the rectification of that error now has come probably a bit late but it's come which is which is a positive uh and just how stupid it was to merge with it and to ignore the cultural differences between an australian firm and a chinese firm is just insane.

38:46And for Malletons being the best firm at the time to do it, just what an error. Yeah, that's a big mistake. What are you going to do if one of your kids says they really, really want to be a lawyer? I'll be fine with that. You'll be fine with it. Yeah. I can't, William wouldn't be. I'll, actually, there's not a zero chance that either of them could be, but I don't think that's what they'd choose. I've met lawyers that love their jobs, especially litigators. I've met litigators that love their jobs. They probably love how much money they earn. No, no, they love, they love the fight. It's pretty hard to love that job having done it.

39:17Yeah. Well, I've met some that love it. It's pretty terrible. Am I going to talk about a business that's only worth$40 million? Of course. I'll talk about it very quickly. Maggie Beer. Yeah. We've talked about that periodically. So as a quick recap, Maggie Beer, she's a, what do you call her? Celebrity chef, basically. One of the earlier, well-known personality. Launched this business. I think she's still a director, owns a bit of it. It's a tiny amount. It doesn't have much to do with her anymore. Is she still a director? I don't think she was. Yeah, I think she was. I don't know. She's connected to the business still.

39:48Where it's her name. Yeah, it's a good point. It went into a million different directions and in COVID. Didn't it buy that hamper business? Correct. It bought a business that owned the hamper emporium. Yeah. I think it was called Gifts, Hampers and Gifts Australia. Which is piece of business, right? Well, it was definitely a good business before COVID. Yeah. And it was a great business in COVID. And now? So then it had problems. Yeah. And so, but that was the least of Maggie Beer's problems. the business not the person I hope she's got no problem hopefully she's happy loves a peasant doesn't she or what was her pheasant I think a peasant is a serf they're the people that work in the field for you and you say you get nothing and I own your kids I think that's a peasant she bought my peasants and pheasants so the bigger problem that Maggie Beer had is that it owned lots of bad assets like it owned this like some kind of Paris farms or something yogurt or some dairy that was a terrible business so I had to flog off all these junk parts of the business and the big plan for buying this hampers thing, which they paid an absolute fortune for, they basically sold half.

40:4580 or 90 million. Yeah, that was basically half the company. Okay. So in COVID. And so they need to make a bet on something because the core business is not good. Yeah. And so the thing was, how about we go and sell all the Mackey Beer products into these hampers and we improve the margins. That actually makes sense. It is a good idea if you don't know how hard it is to run a hampers business. Is it that hard? Very hard. The margins are always under pressure. I thought margin would be great. The thing is this, what people want in a hamper is stuff they recognise and it's hard to make high margins on stuff that's recognised.

41:15For example, if you put champagne in a hamper, then it's going to be a nice champagne and maybe you make, what, 20, 25%. Certainly the champagne, but I would have thought the other stuff you can get away with. It's all branded. But it's cheap. It's often like older or not, it's not a premium brand. It's like a second tier brand. If you put lint, nah, but it's not because people don't want to buy those hamperes. Every hamper I've got has been, oh, lint's fine, but I've very rarely seen lint in a hamper. Well, that's the hampers people want to buy. Yeah, okay. And so the hampers people send you - Because Courtney sells heaps of hampers, right?

41:41No, she loves. Her business is not primarily hampers and she does and she puts a lot of her own good stuff in there. Well, she kind of creates her own hampers, basically. But I think even she would say, like, this is not a business that just runs amazingly in your sleep, okay? And so, obviously, the people that send you hampers don't really like you because they're not sending you lint hampers. Yeah. So that's unfortunate for you. I used to get 10 to 12 hampers a year around this time of year and I just leave and the other people would just crap take them. Yeah. Because I'm like, maybe get one or two.

42:08Like it's gone way, and maybe people don't like me, I don't know, but like it's gone way out. Well, I don't think, well, they might not like you, but I don't think they like you less than they did previously. Mike gave us a lovely chocolate thing last week. That's basically all I've got. Well, I mean, I don't know what to say. If you feel bad for Adam, send your gifts into Luxury Escapes, and my suggestion would be you should have a taste tester that eats the first of every chocolate, and if they're not dead, you can eat your chocolates. Like with Pitten. You actually eat chocolates on the few things you eat.

42:33I do a bit. I've reduced, I don't have much though these days. I'm shocked to hear that. I had Mike's one, but we usually don't. I'm shocked to hear that. And so, not that you had Mike's, that you've cut back on something else. Well, after I broke my leg, I cut back because I wasn't exercising. I didn't necessarily have to cut back. I was eating too much sugar. And so Hampers is tough. And so this business, the Hampers business hasn't gone very well since acquisition, but that's because it's tough. Yeah. The overall business has had a revolving door of CEOs, like really a revolving door of CEOs.

43:00The value in the deal, the transaction was done at like, I think in the 40 something cents back in COVID what transaction the hamper's transaction just trading at 40 cents oh no trading at 40 million dollars yes it went down it went up to 80 cents 10 cents right well it went up to 80 cents it went down to 4 cents yeah it was come back and that's where it was sitting and now what's happened is there's a so I I can say this openly like I reached out I know the the people that sold the hamper's business I've met I've met those guys as well I've met them before yeah so So what, so Tom or something?

43:34No, what there was, the guy that I knew was the guy that invested in it, David Morgan, not the David Morgan. Okay, not the West Bank. Yeah, correct. But an investment banker and like. I think he would think he's the David Morgan. A good operator. I felt him, he's like, felt him, I've always found him very nice to deal with. Yeah. And so I've tried to figure out a way to get in. But the thing is, at a business that's worth, you know,$20 million, there's no liquidity to get into these businesses, right? They can't get into them. And so. It's half your house. And so what happens now is there's a war going on because people have decided, oh, yeah, there is value in this business.

44:09Does it make money? And so it doesn't really make money. And so the Hampus business still makes money, but it gets sucked out by the rest of the business essentially. That's not ideal. And it did a very cheap rights issue recently. The reason I talk about this business is these businesses get stuck on the ASX and in the end, I think this is going to be privatised in a war between a few very successful and well-known consumer packaged goods operators. That's where this is going to go. Makes sense. But this is another hangover from COVID. That's why I raise it. Like even though the lockdown's ended in what, 2021, what we're seeing at the end of 2025 is still like the last glimmers of the consequences of listed businesses buying COVID booming businesses at the peak of the boom.

45:00And that's what this is. It'll be interesting to see how this plays out. Maggie B is still a director and she owns 10 million shares, so worth like, what, call it a million bucks. But, like, it lost last year. Well, write downs, that's the problem. Is it write downs? Yeah, it's got a lot. No, this is continuing operations. Yeah. You get the write downs. We don't lose. Well, it lost. EBITDA was negative 10 million and actual loss was negative 14. Year before was negative 14. EBITDA negative 20. So it's been burning, so 34. It's been this entire market cap in two years. I'm not sure that's from operations.

45:28I haven't looked at it for a little while in detail. Yeah, well, I mean, it might be. But like, they had big write-down issues, right? They had some high value on this dairy and then they sold it for$4 or something, right? And then like that's right. That's never great for that balance sheet. And so this is an interesting business because if you look back at this business, what I would say, people that are interested in looking at how M &A often plays out, go back and look at the announcements they put out when they acquired this business and what they were hoping for. and the commitments they made.

45:59Tom King's the guy I know. He's actually the biggest shareholder. Right. 21 million shares. Good guy, Tom. And so what's his background? E-commerce. He's done a bunch of e-commerce stuff. And so now, I mean, this is going to be a war between, I think one of the people owns like a soft drinks business that's brought into this. The impairment expense was 8 million and 13 million. So if you take out the impairment, they still lost 7 million. Yeah, yeah. So I remember it was sub 10. And they've lost 7 million the last two years. And this is not the Hampers business losing the money. It's the other parts of the business losing the money.

46:29And so, you know, these sort of businesses should not be on the bank. They've got actually a million cash in the bank, which I don't know. Because they just raised some money. This is a financial report, so yeah. And so the thing is that the founders, they were very smart. The founders of Hamper Emporium. Yeah. I think they sold for 40 mil. Cash? Half cash, half stock. Pretty good. So they got 20 mil cash, which would be more than what the business would have been worth two years earlier, would be my take on it. And so they got all of that in cash. Yeah. And the stock is basically, it's not worthless but like it's down three quarters right five oh it was the 80 cents okay yeah i got it and so not worthless but like you know they de-risked heavily and the biggest kind of travesty i think or mistake in all of this is a mistake i will proudly say that catapult never makes yeah which is the people that drove the success of this business were not the people that continued driving this business post-acquisition and i think that's a tremendous mistake right keep the winners in yeah that have made this the business you want to buy so i remember at the time that's why so much m &a goes wrong because the acquirer thinks they know better than the seller and it's just ridiculous of course you don't and i remember at the time i wrote that basically maggie beer is betting their future yeah on an e-commerce hampers business and it's not a dumb bet and the multiple of earnings they paid that 40 mil it was probably only three or four times earnings at the time they acquired it yeah so they weren't dumb or anything like that it was just they just picked the wrong thing to buy to save them well if that's still my if the hamper's making money then maybe and maybe it was sort of doomed either way so i think if that hamper's business was still being run privately yeah my guess is it would still be making whatever the three or four million dollars it was making pre-covid and that would be a nice business right and so um i think like i don't think maggie beer is a cautionary tale i think it's a tale of they got the strategy right which is buy something be prepared to give away half your business and bet your business on it yeah they just bought the wrong thing they didn't know the industry well enough that they were buying into yeah and like me and many people they thought that post-covid was not going to be as bad as it ended up being yeah just before we go to a quick break i was gonna shout out to the rest of my family who've had a pretty good couple of weeks so my my daughter did it she does a lot of stuff she did she won some cheerleading thing and her friend did really well and she got most improved in the whole comp which was great that's great well done uh my son uh got 99.5 on his drums exam which is pretty incredible wow uh pass was 60 um when you're hoping you would fail that because i know you have wouldn't have drums banging yeah he's got the silent thing so he'd listen to headphones oh really so you don't hear the drumming no that's unbelievable but he's actually really good so i don't mind are they like electronic and you hit the pads or something yeah yeah uh and he also got um like he's like a stem captain at school but just shout out to and my wife's actually gone back to uni and actually doing astrophysics so she got into astrophysics so clearly I'm a dunce of the family well I thought that was obvious before all of this story but astrophysics that is that is unbelievable but just shout out to William he had a really good run of he goes to public school he had a really good run of teachers and his teacher this year actually really said he's going to a different school closer to home but just the importance of having he's a male teacher and there's so few male teachers just the value a great male teacher can give.

49:44It's been so valuable to William and to the other boys in his class. And just a shout out, if you are a male teacher listening, thank you for your service. And if you're thinking about it, it's such an honourable, obviously female as well, but there's so few male teachers. Well, you know, there's a good point that you raise because there have been a few articles I've seen about some of the stuff that gets done to male teachers in schools. By schools or by parents or by kids? By girls in the classroom. Yeah. So, because, you know, basically a male teacher, like they're imperiled, we could say, right, because of the current environment.

50:18And so I just read a few articles in the Herald Sun maybe about these girls thinking that it's fun and funny to make, like young girls, like sub-14, to make sexually suggestive remarks towards the teacher and do certain things. Like it freaks out the male teacher. I would be freaked out if that was being done to me. and so it's driving male teachers out of the profession. We had too few male teachers in the first. We have too few teachers, generally good teachers, but just a shout out to the great male teachers out there who have amazing role models. Totally agree. Scott Galway talked about it in his book how important having a role model is for a male.

50:54And often you need a male role model for a young boy and how great William's teachers have been. Every lawyer earning$5 million a year should go and sponsor a male teacher and top up their salary by another$100 ,000 a year. Because it's actually ridiculous what teachers get paid. Totally ridiculous, right? Especially good. I think the problem is good teachers. Yes, that's right. Good teachers are so underpaid and bad teachers are probably overpaid. Well, it's not a merit. Pay in the teaching profession is not a meritocracy. It's where it gets the same, roughly. In a public school system. Yeah.

51:25But even in private schools, they do get paid significantly more than public school teachers. But they have good and bad teachers in private schools as well. So it's not as if every teacher in private school is good. And the best teacher, maybe let's say the top decile of teachers, adds a lot more value to this society than the top decile of almost any other profession. But there is no teacher, as far as I know, except an administrator earning a million dollars a year. Even one million. No chance. An administrator would. Like there are headmasters and principals that are earning one or two million dollars a year of the private schools.

51:58Two million? Where they go that high? In that range. Really? That's super high. Yeah, I think they get really well paid, especially in Sydney. Melbourne's school fees are higher than Sydney, aren't they? Yeah, but I think people just get paid more in Sydney, basically. But I don't think there would be – it's hard for me to mention a teacher in the top desolk earning half a million dollars a year. But there are so many professions where relatively mediocre people are earning half a million dollars a year, delivering almost no value to society. And it's a profession where it's at the top five professions in terms of value accretion to society, right?

52:30But it is, again, we just come back to my continuous theme of society's kind of tipped on its head a bit, unfortunately. It doesn't work for public schools, but for private schools, why can't effectively you bid more for better teachers and those better teachers get more money? Well, the thing is you do bid more for better teachers because the private schools, they do pay more. But not specifically. They do, but the thing is this. The amount you have to bid is not that high because lots of teachers will take$200 ,000 a year in order to go work. I thought most teachers don't get$200 ,000 a year.

53:04I don't think they do. Do any get$200 ,000? Yeah, yeah, they do, like in private schools. Really? Yeah. But you could... They should, but I didn't think I did. The thing is, no teacher can turn around and say, I'm not doing this unless I get$500 ,000 because they're going to be unemployed. Like the money, the supply and demand curve is just not there for us. There's no mechanism to do it is the other problem. The main problem is this. when you think about a lawyer there is on the demand side there are people that say we have huge buckets of money we are not price sensitive to the difference between paying three million dollars for this lawyer over the course of this proceeding versus one million dollars we just want to win and get the best person and actually if we buy the most expensive person and we lose that feels like it's more defensible than yeah i think you lost because you bought the cheap person by cheap I mean a million dollars for the trial and um and so in the education system the parent is paying yeah and the parent is very cognizant of their bank balance and the parent does not say I don't care I'm happy to pay um a hundred thousand dollars of school fees versus 30 I don't care I just want the best for my kid there's much more price sensitivity and much more elasticity on price because there's a sort of thing and it's probably not unfair that if some parents are paying more and I'm paying less than you're sort of monopolizing education more so but let's just maybe there's a way around that where I'm just thinking aloud let's say you go to private school and you can pay private schools cost 50 grand a year and some people can afford to pay a million no problem a lot of people can't but like some people can pay a million easily let's say I want to pay a million bucks maybe you'll pay 500 maybe Mike pays 300 well above the entry price because you're really rich and instead of being able to choose maybe you get it's maybe you get like you You know, in the AFL draft, they have like points for drafts.

54:48Maybe you get like points where you can, you're not guaranteed certain teachers. You can sort of, maybe you're not choosing it, but you can sort of give for teachers in a way. Well, that's private health insurance. That's the same way that private health insurance works. You can go to a private hospital without having to pay because you're paying insurance. And in a public system, you could go in the same room. You don't even get guaranteed a private room, but you choose your doctors, basically. That's what private insurance gets you. It's a way to get more money into the system because people can afford to pay more, but don't because there's a free rider effect.

55:18So do you think I could start a school, not should I, could I? Yeah. Could I? Because I don't think I should do this. Could I start a school where the cost of attending is$500 ,000 a year per student and the teachers are getting paid half a mil plus and you can choose the absolute creme de la creme of teachers? I can probably pull university professors to come and teach in my school, right? And so you think - Who may or may not be better teachers, but yeah. But you know what I mean. I can have anyone, right? The best, yeah. Do you think I could do that? Do you think I could get 500 parents to pay for that?

55:54Year 9 to 12. I think the beauty of what that will be, like you get people to say, oh, this is education for the rich. No, it's education for the ultra rich. Yeah, I think where the advantage is, you actually pull people who will never think about teaching, who maybe are whatever, you're an amazing economist or an accountant or whatever you are, and say, actually, you know, I can get, I think if you paid a teacher$300 ,000, someone$300 ,000 a year, even they could earn a bit more, maybe because obviously the upside of teaching, the non-financial upside of teaching is so great. You could pull these incredible people from non-professions because you're paying them enough and that's where the benefit of that comes in.

56:28I think you're right, but you'd have to put that school in a gated community and with the guards at the thing because the pitchforks are coming for you, right? Well, Jewish schools actually, people do pay different amounts of money. Sorry, but I mean with their guards. Yes, that's true. They could ask the Jewish schools how to do the guarding. But it is true though, Jewish schools generally, like, they're heavily subsidised, right? They're heavily subsidised. And Catholic schools as well. And not just Jewish. Well, Catholic schools. So, so, my daughter goes to a Catholic school and they're subsidised by the Catholic church, which is rich, right?

56:57And I couldn't speak highly enough about the education system. Jewish schools are a bit different. Like, basically Jewish schools, if you're wealthy, because, you know, there's a myth that all the Jews are rich, right? But it's obviously not true. And so, but there are some wealthy Jews. And so if you're wealthy, you pay full fees. Yep. And if you're not, then you might donate to a building fund or something. And if you're not, then you're going to get either loans or some discounts or free would be unusual. But it's a community school. And so that is an unusual situation. Whereas when I went to an Angling school, you were into the same Angling school.

57:31If you don't pay your full fees on time, there's no subsidy. There's a scholarship. You have to earn it, right? And so it's a very different kind of system. Do we have to go to a break? I've got a few more things. We'll come back to the break. We'll come back in no time at all.

57:56And we're back. Adir, you had something for me. Yes. I'm going to tell you a couple of very quick things. Operoo, are you familiar with that piece of software? Rings a bell, but I couldn't tell you what it does. So it's a Melbourne business. It's basically school administration, etc. Like Compass? Yes. I think it's more like forms and things like that for excursions. It's Compass. Okay. I think Compass is more holistic, right? So this was bought by a US company. It was based in Melbourne. Tons of schools in Melbourne and in Australia use this. So use that and Compass or use one or the other? That's a good question.

58:31I don't know what to – I think Opera – you might be right. I think Opera might be like a – Either or. Anyway, announcement went out end of November, shutting in Australia. Really? Globally, yeah, because it was bought by a US company a few years ago. They're all excited. Good news for John and Compass. Well, the US just decided, I think things are maybe not going so well, and we're just going to focus on the US. And so they just pull out of the Australian market. So, Oparoo was an Australian and a US business. It was bought by US private equity and killed the Australian business. Well, I think it was bought in a trade sale.

59:01It was an Australian business. Oh, just an Australian business. Yeah, based out of Melbourne. Well, do you know what they paid for it? It was not disclosed. It was bought by a business called School Status in 2021. And I think I'm raising this because I think it's kind of a sad story, right? Like this Oparoo business was called Care Monkey originally. that was the name of the business and like they've built this startup for whatever it is a decade it gets acquired and ultimately that's the end of uh of the customer base in australia using it i thought it was a perfectly good solution yeah so i'm just sharing it because it's a sad story of of pulling out of australia uh can we talk about uh interest rates so the rba unsurprisingly last week left interest rates on hold uh with governor michelle bullock finally considering what the fall.

59:47Bullock noted belatedly that if inflation continues to be persistent and looks like it's not coming down towards the board's target, I think that it does raise questions about how tight financial conditions are. The board might have to consider whether or not it's appropriate to keep interest rates where they are or at some point raise them. Money markets are now pricing in a 40 % chance for rate rise at the board meeting in February and actually predicting 225 BIP interest rate rises through 26. Amazingly, three members of the RBA board actually voted to decrease rates in July, but thankfully they were outvoted 6 to 3.

1:00:20CPI jumped 3.8 % in October, which is just an absolute nightmare for working people. 3.3 % underlying. This is well above the already high 2 % to 3 % ban that the RBA ridiculously has. John Keough, who's a great writer, said in the AFR, federal government spending is 27 % of GDP, the highest since the 1980s, other than the pandemic. State governments are adding to the public and private spending pressures. Obviously, the obvious impact of the three-inch rate cuts this year, coupled with the Albanese government's ham-fisted deposit scheme, has meant that not only are we seeing runaway inflation in goods and services, but house prices are growing at a clip, especially at the bottom end of the market, as competition amongst first-home buyers intensifies.

1:01:01Dwellings that fit within the government's guaranteed deposit thing rose by 1.2 % nationally in October, well above the our houses at 1%. The inner east of Melbourne showed values increased by 1.7%, which is four times the growth in property values above that level. Adir, what do you make of all this mess? It's a good question. I mean, I think it's totally unpredictable what's going to happen next. That's the challenge with this. I think there are just constant shocks that mostly emanate from the US. A lot of it's based on government policy. Some of it's not. It filters through to Australia. and there's this problem that exists in the West at the moment, particularly in the Western world.

1:01:41There's heavy, heavy government indebtedness. There's actually heavy private indebtedness relative to household income. I think Australia might be number five. Because our house prices are high. Of course it is. You know, what's interesting is the countries that are above Australia, they're all the Nordic countries. But it's a bit different because in Australia, the way I think about it with house ownership is it's a third, a third, a third. Yep. Like a third own their houses, a third have mortgages and a third rent. Yep, that's right. And so the rental percentage has gone up in the last 20 years.

1:02:15Edged up. I think maybe from like high 20s to kind of 30s. Yeah, edged up, like three or four years. Yep. And so whereas in other places, like whilst the debt is higher in a place like, I don't know, Denmark and Norway, like home ownership percentage is actually significantly higher. I think 80 % own their home or something like that. So it is different. But Australia is very high on household debt as a percentage of disposable income because of property prices. Because our banks lend so much on property prices. And if you look at the last 20 years, it's rocketed in the last 20 years. So that's very problematic.

1:02:50We're very susceptible to interest rate movements up. If you look at house, I think the best way to talk about house prices, not in absolute terms, is purely relative to income. It used to be over the years, three to four, eventually five times incomes. Now it's like nine or ten times. Sydney's like 13, 14. So this is two to three X the cost of a house. And so what you can see is that we have got almost perfect conditions right now for mortgage holders. Very low unemployment. So everyone has a major service. And very low interest rates. So these are like, this is paradise. And even in paradise, you can see that consumer spending is under pressure from mortgage repayments in Australia.

1:03:30So we are very susceptible. like a 3 % interest rate rise, not unrealistic. Like that would be devastating to I think the Australian economy. We said that, but remember when interest rates were 1 % or 2 % and everybody said, I think you and I weren't in this bucket, but everybody said, oh, you can't put interest rates up. It's going to kill the housing. It's going to kill people who own houses. It went up to, we had the highest rate of increase in interest rates ever. Went up to like, what, about 4.5 % I think it hit and nobody blinked an eyelid. Everybody was fine. So I actually don't think - Well, it did hurt and then people - Did it hurt?

1:04:04Yeah, because then house prices kept rising and then people kept feeling rich, right? Yeah. And so I think, look, I've got a different view. I think if they went up another 3%, because the reason, like, think about why they would go up, right? Like, because prices would be going up. Yeah, 3 % is probably on the top. But I think you'd easily bring them up 150 bips and no one would blink an eye. So you've got very high national debt levels and very high personal debt levels and governments that cannot be re-elected if they raise taxes or cut spending. And so that creates a terrible, vicious cycle.

1:04:36And I don't see how it ends except in catastrophe. I don't easily know how it ends in catastrophe, but I think it will be unpredictable. So people say, well, private credit will crash and then people will panic. But I think it's the thing that you don't see that hits you, right? Well, the problem is just the government spending is the big one. So like you could - Well, they can't stop spending. You could live with lower interest rates, as in where I'd call this interest rate level, highly expansionary. It's below what I think is the natural level. You can live with this level of expansionary monetary policy if you had a really tight fiscal policy.

1:05:07But you've got things like the NDIS which is blowing 60, 70, 80 billion dollars a year on mostly autistic young boys, allegedly autistic boys. It was meant, it was designed for quadriplegics who need the real help. It wasn't designed for unproperly medically diagnosed autism in seven year olds which is like every second kid. Like the whole thing is just an absolute disaster. Both parties have been involved in making, in building this mess. Well, that's the problem. The problem is... Bipartisan stupidity. NDIS is the most expensive part of the overspend. But the bottom line is, if one party says they're going to cut spending, the other party just says, we're going to spend.

1:05:44By the way, you said in Victoria, like the Liberal Party in Victoria has a new leader. I think she has a chance of getting across the line. It's hard. 16 seats, but it's a chance. But she's not cutting spending. She's not removing commitments to spending. I think she'll get rid of the SRL if she can. Yeah, but most of the money will have already been spent, right? Committed, not spent. You can definitely. It's like, remember when Andrews ripped up that East-West road? It won't happen. I'll tell you why. Because the argument that they'll run against her will be, well, you're just going to leave an 85 % finished hole in the ground.

1:06:16You know what I mean? That's the problem. No, I think you have to. But I think philosophically, well, philosophically is the wrong word. Politically, that would be the right word. neither party is going to be the one that says we're going to cut spending or increase taxes because people will just vote for the other one we've seen it happen we sort of have argentina is probably the real example because that was such a drastic case that malaya was able to do it but like i think the problem is these politicians aren't super smart and you've got to be able to link people know they're getting poorer relatively they can see that inflation's rising we saw last week with the inflation level yes wages are up four percent but inflation at 3.8 means wages are flat so we had one of the lowest level of real wage growth in decades this year i think people and this is what killed biden like in political terms yeah i think people realize they're getting poorer and i think a good communicator and salesperson is able to draw the link between every time we spend money we're taking money out of your pockets population so So a lot of the time we're spending money, you're not benefiting.

1:07:21So if you're not one of those people claiming to have an autistic kid getting money, you're paying for that. Someone needs to explain to the population that the stuff isn't free. Taxation is a cost. That's what I say to you. The government has no money. It just takes your money and every dollar they take of you. We say, but we need a politician to actually tell people that we're going to be running surpluses, not deficits, especially when you've got the RBA running expansionary monetary policy. And if we don't, we're going to have some real issues in two or three. your kids are going to have massive issues and you're going to get poorer.

1:07:49Someone needs to actually be honest with the Australian people and stop lying to them. But also, you know, the challenge is this. We might be able to sustain all of this spending growth and house price growth if we were getting more and more efficient in producing output. But we're not. We've got work from home. We're getting less. That's reducing productivity. We've just got more powerful unions because that's what the Labor Party is. Yeah. And so what we're seeing is at the very best case, productivity is not rising. it might be going backwards it's definitely not rising and that is not sustainable for this constant spending yeah i think i think it's disastrous i think um this is why we see the rise of extremist parties totally because an extremist party comes out and says stop spending money on all this rubbish and letting people immigrate and take all their money and like you might say well that's extreme but that's that's resonating with people who are scared and get poorer.

1:08:43So that's my long answer on what do I think about interest rates? I don't think that you can make any predictions for next year with a high degree of confidence. It largely depends on political decision making, which we can't know. I suspect the people making the decisions don't know what their decisions are going to be yet. And external events that we can't predict, it's just a hell time, right? And I don't think this ends well. What we do know is inflation, which is sticky at the best of times, is way above where it should be like people say two to three percent target really we should be aiming for a point five to one percent like there's no need for inflation the only reason you have inflation is they can inflate away government debts essentially so they so governments tend to want inflation but certainly two to three percent is way more than that's just really harming the poor so even at two to three percent is bad above three percent is catastrophic and we're at almost at four percent well i think we're five percent so how is everybody employed still like how can this Because the government employs people because they're stealing money from the future generations who employ people in NDIS and in hospitals and in schools and all that kind of stuff.

1:09:41Well, that's a good point. Who's employing people. Because in Victoria, almost all the - Or in the Prime Minister's, or in the Premier's office in Victoria, in the PR role, there's 500 people doing that. But in the state of Victoria, the majority of employment growth has been public service. I think all the employment growth - Almost all. But the majority has, like literally the majority has been public service. And so you're right. That is why unemployment is so low. And also the way they record unemployment is probably not fully accurate. You know what I heard on the ABC, which, you know, I listen to periodically?

1:10:09Well, this is what was interesting. Oh, isn't it? So there was some host on a radio show. I don't know what her name is. And she had like, you remember there was some guy that was a detective of crime who's become quite well-known, written books or done documentaries or something now, anyway, in Victoria. Okay. So he was on and I was talking about - Andrew Rule or John Sylvester. It's like a long, maybe Italian name. I don't know. Anyway. And so he was on and they were talking about the fact that they've extended powers in Melbourne in certain areas at certain times to be able to search without a warrant.

1:10:43Not without a warrant, without like… Due cause. I think it would be called in the US probable cause and I don't know what it's called in Australia. Yeah. And so the hypothetical they ran on this radio talk show, which is so ridiculous, is what would happen if they extended it to the whole of Victoria at all times, instead of a little part of Melbourne at particular times. And, you know, the ABC, obviously, like, they live in the inner city, the people that are on this, and they think, well, we don't want any infringement on anything, and, like, we're on the far left, right, just to be a slight rant.

1:11:11And what was interesting, and obviously this former cop was like, I think it would be good to extend that, like, there's too much crime and we need to make people feel safer. And what was interesting is they open up the lines, and I was listening, and the first caller comes in from Fitzroy, like, north of the area, and all of these places. And what was interesting is caller after caller after caller to the ABC, was saying, yeah, give the police effectively unlimited search powers. We feel unsafe. We're scared. Go and do it. And this, like the host, she was horrified, right? This doesn't conform to her worldview and her expectation of the requirements of an ABC caller.

1:11:49And I turned to my daughter and I said, this is how scared people are in Victoria right now about crime. even the people that lean at the least to the left if not further that call into the ABC they want more police powers of searching well if you're getting robbed I don't think you care what political I thought it was a massive beat up till like I saw till it happened to you a few times and like people I know like 100 % with accuracy it happened to and people like I know got like assaulted and all this stuff so like clearly and maybe it's eased off a bit now I haven't heard much in the last month in fairness but there was a period earlier this year where like I couldn't go a day without hearing an actual real crime, not a petty crime, an actual crime.

1:12:30So it got out of control. We talked about the reasons why. So that's why I think there's going to be a change of government in Victoria when ABC callers are demanding more police powers of searching. It feels very John Kerner, 1990, whatever, 1996 or whatever it was. I think that is, you know, that is, there's little things. When did Kenner come in? 96 or earlier? Or 93 maybe he came in. I can't remember. But, you know, that is what's interesting is that there are these little bellwethers that signify a bigger change, they're easy to miss. And I think that was one of them. ABC callers saying give police more powers to search.

1:13:03That, to me, is one of the indicators that there is a desire for a change in government as long as the Liberal leader is electable. And I think they've found someone who's electable. 92 was counted. 92, okay. It was 44 only at the time. As you see, there's a really interesting story. Six months ago, Waymo disclosed was doing 250 ,000 robo-taxi rides each week across San Fran, Atlanta, Austin, LA, Phoenix. How many do you reckon it's doing now? This was released in the Tiger Global IM for its new fund, which I'm not sure if you're participating in or not. I'm in the current fund. Yeah. What year was that?

1:13:37So six months ago, 250 ,000. What is it now? A mil. Nah, well, 450. Still pretty good growth. The thing is, I thought, because they're rolling out in more cities, right? Well, they haven't really done that many more cities. Oh, okay. They're about to do Dallas, Denver, Houston, Nashville, San Diego. So they're close enough to doubled on a like for like basis in six months. Well, that's astonishing. That's why I don't know what annualized that is. That's pretty good annualized growth. Yeah. You see, I was listening to the Peloton episode of Acquired, and I didn't realize Toca Global were really the first mate, the first proper investor into Peloton.

1:14:10They did a couple of family and friends rounds. They invested at a$10 million valuation. Do you remember what Peloton listed at? Oh, God. Well, it listed in COVID, didn't it? Yeah, COVID. No, I think it was just before. Well, who knows? Around that time. But they were worth, I mean, they passed 10 bill, didn't they? They listed at 8 billion? They got to 50 billion? And they're back to like 2 billion now. Did they sell their stake? No. Well, Tiger would have sold. Into the IPO, maybe? Yeah, they got at least 8 billion. They would have at least, what is that? I don't know, 800X or whatever it was.

1:14:38So they invested at 10 mil. They came in at 10 mil, Val. Unbelievable. Well, they put in 10 mil at a 40 mil, Val. Anyway, it's pretty incredible. Yeah, it's pretty incredible, whatever they did. We'll go to a super quick break. What happened to Peloton now? What happened to them now? I had a look because I was listening to the episode. So it went from like$8 billion to$49 billion, and now it's back to$2.6 billion. So it's still worth something. Yeah, we got to$1.3 at one point. So it's gone up. But it's actually a really good business. It's a great, incredible product. Inherently, a pretty good, when you think a good, like they were talking about the unique economics of it on the show.

1:15:12Obviously, they may have changed since then. But how much do you reckon it costs them to acquire a customer? This is US dollars. Oh, that's a good question. $250 not far off $500 US and it may have gone up since then because this is sort of COVID time that feels expensive to me but this is US dollars they charge caught two and a half grand blended for the bike and they're making 50 % margin on that so they get they get their CAC back straight off from the bike so you have to buy the bike up front yes oh I didn't realise then you pay 100 bucks a month or whatever it is 60 bucks a month whatever it is different subscriptions so that's different so basically they've got a CAC which is 20 % of revenue on the upfront payment, well, that's fine.

1:15:52Yeah, but then they've got object operating costs to go around the business. I understand how it works, but if you said to me, you can sell, this is the pitch you're giving me, you can sell an upfront AOV average order value of$2 ,500. I like that average order value. That's in my kind of level of what I'm interested in. And the acquisition cost is going to be, who knows if it's fully loaded, it might just be the media cost. But let's say it's a fully blended acquisition cost of 20 % of that revenue. like even if I never got the subscription revenue, I'd happily take that business. Yeah. Depending on the gross margins.

1:16:26So you said the gross margins 50%. Well, that's too low for me. That's a problem, right? Because they don't manufacture. They have to outsource manufacturing. If I was doing that 70 % and so, yeah, because the thing is this. And they've got obviously below the line costs as well. Well, the thing is this. The way you have to think about it is you start off with two and a half K and then before you do anything, you're down to 1250. because that's the 50 % good night of the cost of goods, right? And I'm going to be generous. I'm going to say that's landed, okay? And then you've got all of these warehousing costs and getting it to the customer.

1:16:56Maybe they pay shipping. Hopefully they charge the customer for shipping, but they might not. I don't know. So they have to absorb all of that. So probably they've just absorbed another 10 % of the price in that. That's another$250, okay? Yeah, because it's a big item to ship. Yeah, and now you're down to$1 ,000. Yeah. And then you've got, I mean, at most you're down to$1 ,000 because, you know, there's also transaction charges from the credit card company. So you'd be happy to break even because the money's on subscription. No, no, but hang on. So I think that the contribution margin on that first purchase before fixed costs is not going to be more than$500.

1:17:27So out of that, and that would still be like a 20 % contribution margin, which by the way, I would never be interested in that in a business. But like, but that 20 %... Well, it depends. If that's the business, no. But if the subscription's the business, yes. Well, then this becomes a question. Like, can they break even after fixed costs on that$500 per unit? Probably. Because surely they can keep their fixed costs to 20%. So they should be, I haven't looked at their numbers, but my guess is they probably can break even on that first purchase. And then you start talking about the$100. So that's interesting.

1:17:57But the thing about the$100 that we've seen with software companies is that, you tell me which company I'm talking about, you can do$4 billion of software subscriptions and not make an NPAT. What company might that be? It's a last year, I presume. It's a last year, right? I'm not sure if they've got still zero NPAT, but you know what I mean. And so the question is, how many hundred dollars a month are they getting? And are they able to make money as a software business on all of that subscription revenue? And that's the question. And I don't know the answer. I haven't looked at their numbers, but that's how I'd be thinking about this business.

1:18:27Personally, I'd be wanting to, if I was selling a$2 ,500 upfront, I'd be wanting to make NPAT after all fixed costs on that$2 ,500 sale. I was looking at, so their fiscal year ended June 30, 2025. like five months ago, they had 550 ,000 subscribers. So subscriptions have actually dropped a lot, which is problematic. So their churn used to be virtually zero, but their churn was like 0.7 a month now. It's 1.6. Their churn's gone right up since COVID. It's not great, but it's gone up. 20 % a year. They had 830 ,000 members back in 2023. They're down to 552 ,000 now. So that's not great. And when do they pay$100 a month?

1:19:02A bit on that, but something like that. So what are they doing? 50 mil a month in revenue from the software business? They're doing subscription gross profit of$1.1 billion. There's a subscription contribution. How the hell does that work? If they're paying$100 a month and there's$550 ,000 of them. I think there's different subscriptions. There's cheaper subscriptions as well. Well, no, they should be making at least, if you have 550 ,000 people. But someone paying like$10 a month. There's different levels of subscription. You can get like just the basic act one. I know, but what I'm saying is even if everyone's paying$100 a month, that should still only be$600 million a year of revenue.

1:19:38Because 55 million people. So, sorry, 550 ,000 people,$50 million a month is 600 mil. How did they get to the one point whatever billion? I don't know. Yeah. I suspect some people are paying more or it was the tail off of the subscribers that have churned. Could be tail off, yeah. So, they actually make adjusted EBITDA for$100 million now. So, if you look at this interesting, so you go back two years, obviously their net loss was negative, but there's probably financing in there as well. But if you go to two years ago, they've lost$200 million. marks yeah last year they kind of broke even well people invest this year they made 400 million well you say they made 400 mil but investors don't believe it because there's something about that 400 mil of adjusted EBITDA investors don't believe because you said it's worth two two point something billion right and so let's say it's 2.4 billion okay yeah and so they had a net loss so that's six times their net loss has improved massively from 1.2 billion to 550 to 118 that's also been a great comeback what i'm saying to you is i think they hate the subscriptions is falling.

1:20:37Investors often look at, in these American businesses, because they don't capitalise their R &D, they just pass it through to the EBITDA, they pass it through as an expense. Yes, but the stock base is bad, but the R &D is good. So that 400 mil is going to be the fully loaded cost of all of their developers, excluding stock-based compensation. And so that 400 mil, investors in the US often will look at that number, and in this case, they're only paying six times EBITDA. And so either they don't believe the 400 mil or there's something we're not seeing or they are so allergic to the falling subscriber numbers.

1:21:11They're paying one times revenue. Yeah. Well, I prefer because this business is generating positive EBITDA in the US. And 330 million cash. Yeah. I prefer to look at, oh, well, that's even more remarkable. So they're only paying seven times free cash. I mean, investors hate something about this business. You've inspired me to look in more detail about this business because obviously I understand hardware and subscription businesses. Well, this is a rare hardware. This is like Catapult, really. It's consumer Catapult. Yeah. Yeah. And so, okay, I'm going to look at this in more detail. I think it could be a case.

1:21:39It could be. And remember, the share price was down at 1.2 billion. So it's doubled since it was low lows. But I think it's a case that, you know, when you have these foreign angels and you have the golden windows passed and investors go, I can't trust this thing. Talk about brand trust. But it did double. Yeah. But off a crazy, that was down at one point. That was like at half revenue. It feels like it's like been overly punished for the sins of yesteryear and it's actually doing okay now. It's a massively high MPS. It's possible. Customers love it, although it's churning now. 850 ,000 to 550 ,000 subscribers.

1:22:08Yeah. The problem is what if it goes to 300 ,000 next year, right? That's the problem. Yeah, they are making a lot more money now. I don't know. I know there'll be some like, you know, if they're dropping like 850 to 500 is a 350 drop, obviously. That's like a 40 % drop in subscribers. Yeah. That's pretty terrible. That's not great. We'll go to Super Quick Break back with a quick deep dive after this.

1:22:41and we're back and of course this m &a deep dive is brought to you by our good friends at terim capital they acquire technology companies to grow sustainably over decades thinking of selling discuss how it might work at terim.capital slash contrarian speak to our good friend scott who continues to get rave reviews for his great appearance on a temple and webster episode agreed so just deep dive quickly on on corporate travel management we spoke about it last week It's obviously the biggest story in Australian business now. I wrote a LinkedIn post about it. I'll just talk about what I talked about because I think it's actually pretty interesting.

1:23:09It's something that for some reason no one has talked about or very rarely talked about. So in the ASX announcement on the 28th of November when they really sort of confessed, CTM claimed they had$148 million in cash and that's the number that people have talked about. $148 million, they got$160 million in refunds. They can cover that almost with$148 million. So these guys, they'll make a bit of money. they'll be right it's kind of it's kind of been the prevailing which is not really before you say what you're about to say that's not how i look at the world when i look at companies like i look at the world as they've got cash they might have inventory but this business doesn't um and then they've got accounts receivable and so they're going to collect some percentage of accounts receivable a high percentage hopefully yeah and then they've got accounts payable and then they may well have revenue in advance or unearned revenue which is all the money they've collected in advance of actually having to pay.

1:24:03And so life is not so simple when you look at a balance sheet, just looking at the cash. I suspect you're heading in that direction. Quite frustratingly, obviously they haven't released their financial statements. So the only financial statements we have are now like 11 months old, which is pretty annoying. So you have to go, these are the ones that were released in like March. So they're basically up to 31 December where they claimed an underlying EBITDA of 77 million for the half. So they claimed at December 31, they claimed cash equivalents of$75 million. This business's cash is all over the place.

1:24:36So every sort of on the June half, cash somehow jumps$60 million, and then it drops down to$75. They're running a buyback here as well, which is what was depleting their cash even further. That comes down to one of the dumbest buybacks in history. This one, I think you'll... They had trade receivables of$368 million, so massive receivables, especially relative to cash. Like why... I'm shocked that they've got such high receivables. Aren't they generally receiving money in advance of providing services? That's a luxury escape star. So we have no receivables pretty much. These guys are corporate travel.

1:25:08So they invoice. So it's very different to consumer travel. They invoice after. Well, people have terms. Most of their customers have terms. As you can tell by that, all that. So then they've got all this, basically they've got$368 million of working capital tied up in this business. That's horrible. All this intangible, so that ball is crap. So they forget. All their assets are pretty much that. But all in all on the balance sheet, if your whole story was, not only do they have$148 million, but they've also got 365 mil of receivables. That receivables are less. I would say that's fantastic because that's actually all more money that's really theirs.

1:25:40Well, they've got$280 million in payables. Well, that's less attractive. But still, that's another 80 mil of a delta between those two. So you look at our total liabilities, because it's all genuine. So there's$321 million in short term, another$30 million in long. So there's$350 million in court liabilities, and they've got$450 million in cash-like. This was at the last announcement. So that's a sort of gap of 100 million or whatever it is, as in positive gap of 100 million. So they said they're 148 million bucks in cash now. They did say they've got 18.2 million in restricted cash. That is, I guess, in trust money.

1:26:16Because basically if you sell an airline ticket in the UK, for example, you want to hold that in trust. That number seems crazy low to me. Like I look at how much we've got restricted. We have more restricted and we're a consumer and we're less UK. So Australia, you don't have to hold in trust, maybe flights only. So these guys can't have less restricted cash than us because it just doesn't make any sense. So that 18.2 number, I can't understand how that's right, but let's just take it, you do your trick and say, we'll believe the 18.2 for now, even though it makes no sense at all. That means you've got 130 million bucks in actual cash, but you can't have zero cash.

1:26:48So you can't refund, like you need to have cash around the business. Especially, I mean, yeah. Well, you're absolutely right. Like that's why we know they're going to have to get debt or raise money in order to survive, We could even be generous and say, even if they had access to 130 mil and they had to refund 100 mil, they would still have to raise debt and cash to keep operating. How much cash we think they need. So let's just believe that 130 million number and let's believe the 160 million in refunds. That's probably undercooking both because in reality, they're not going to have to pay more.

1:27:17They're still probably going to find more and they're going to have to pay some penalties and other stuff as well. But in absolute best case, they say 160. But this business probably needs minimum 80 million bucks cash. I don't think you could run it less than that. I would agree. I mean, I'd like to probably look at their expenses per annum, but like, I agree with you. Payroll and all this stuff. Investors would be very uncomfortable. I would even be maybe more extreme and say, I think investors might get uncomfortable when it drops below 100. Yeah. So let's use the 100 number and let's be really generous with the other stuff.

1:27:46So they, they need a hundred. So they probably need to find another 70 mil court, 60, 70 mil now. That's being generous. Probably it's probably more. They probably need more like 100. Let's just say they need 70. They can't get debt because, so actually before I go into that, 70 mil, that's forgetting the fact that they got this IATA problem. Maybe we talked about IATA, how IATA is the, IATA plates. I haven't submitted auditory financials yet. So IATA will, the only way IATA will let them continue is by giving a massive guarantee, which is more restricted cash. So I think their restricted cash goes up another sort of 50, 60 mil minimum.

1:28:24them like this is absolute best case so they need they need 130 mil now this is again this is best case they probably need more 200 let's say 130 mil can't raise debt we talked about like them raising debt they just can't because no one's got they bust their covenant what bank's going to lend them more money now yeah and they haven't been big borrowers historically so they're not used to um banking facilities they need to find 130 million bucks they've got to raise equity to survive what can they raise equity what they last trade yeah what was their last trading price 1.6 billion well 500 can they raise it 500 million so let's look at the number let's look at that would dilute them that would dilute them 16.67 let's say can they raise it 500 if you look at what they did in the last the last half they reported there let's look at cash flow which is probably a so they had underlying EBITDA of 50 million and a half but that was before the refund remember that there was there's 40 or 50 million bucks in money that so that the underlying EBITDA really is zero because that this they should have been refunding people here so they're making either losing money or not if they when they restate these numbers they're probably losing money i'll tell you why i think they might be able to and the fact of the thing that's not factored in here so i'm going to talk about this in a second but like ecp owns which is a fund manager which i'll talk about in a second like they own seven percent of this dog yeah and ben along on a big chunk of it right and so um he was one of the people that knew he was invested in it a tiny amount but okay so he um so he said that and so if if that never trades again yeah that is catastrophic for a fund that owns 7 % of it.

1:30:057 % of ECP's ASX listed emerging growth fund, 7 % of the fund is corporate travel. Which is a strange investment because it had clouds over it for many years. I mean, we'll talk about ECP in a second. I've never heard of them, by the way. Yeah, well, unfortunately I have. And so basically, I think that the people that are very long on this stock will participate in a rescue raise because without it, they have to do a full write-off. And I think they will possibly fall for the sunk cost fallacy. It may not be because it might resurrect it. Like we can't say, I don't want to say to you, this is unresurrectable.

1:30:47Let's go to first principle. So you've got an issue. The business wasn't making money on the last three years. when you factor in the refunds, it's probably break even to loss making. It may be slightly profitable in a good year, but call it break even. And this has been around for years, so it should be making money. So if you had a business that's turning over all this money and not making money and probably getting worse because earnings have dropped off, forget all the stuff happening in the background, what would you value this business at in good times? Let alone bad times, really bad times now.

1:31:17It's very hard to know, but we can also say there will be a sales pitch associated with this raising that I think will be persuasive. They've lost completely. These guys have no credibility now. I don't know how this guy's, I don't know how Jamie's still got his job. Jamie Ferris, the founder. The chairman's got to go, clearly. Both Sam and CEO, the number two, Laura Ruffles, who was there for years, was the operations. But she had that illness. She's gone. I think it was a genuine illness. You know why I always feel differently to you or generally about whether or not people are going to survive?

1:31:46Yeah. It's like Drone Shiloh said, they're going to survive. Well, that story's still playing. It's in two weeks. Give it time. Nothing happens quickly. They'll survive. And I think, you know, if you loved Jamie Ferris enough to invest 7 % of your fund in him, I think it's going to be very hard emotionally to say I was totally wrong, especially for some fund managers. And so I think that they might throw good money after bad. Now, that good money might turn into better money. Look, I don't want to sit here and write it off. I know you do. I don't know enough about it. But I think they'll get a rescue raise away.

1:32:19This was a very marginal business before this whole thing blew up. It was an average business at best. You're going to have great people being poached by Flight Centre, by Luxury Escape, by every other travel business in Australia. And the picture's pretty easy. You can work for these guys who aren't listening and potentially going on or come work for this rocket ship. What are you going to do? I know, but what if they even raised 100 mil? 100 mil's not enough. No, we're near enough. It is enough. I don't think it's enough. I actually think they need 200 to 250. Why? Because I think I is going to chuck a massive guarantee requirement on them.

1:32:49Oh, I see what you're saying. I see what you're saying. And you're going to lose – if you're an employee, you're going to run for the hills. If you're a corporate – Okay, let's say – hang on. Let's say they need$250. I'm going to go with your view on this, okay? Let's say they need$250. If they do the raising at$300, which is one-fifth of their valuation – Forget the previous – forget that anchoring. Don't get anchored to that previous monstrosity. Don't worry about if I'm anchored. Worry about if the people that have invested in it are anchored. they are okay and so um and so if you raised it at 300 you would still dilute less than 50 percent right it would be 250 or 550 after you raised the money you could definitely get that away i think the problem though is you've got staff leaving your customers leaving in droves big problems you've got a business that i don't think will make money so these investors it's fool me once, shame on me.

1:33:40Shame on you. If they lose another 50, another 7 % of their fund, these guys lose their job for sure. They can maybe explain away the first debacle, Jamie conned me, whatever. To do it again, I don't think these funds can put more money into this thing. I think that it's humiliating and if they get it wrong again, which is a better than average chance they get it wrong again, they lose their job for sure and they never get another job. You know, it's going to be a lot less than double or nothing and lots of people play double or nothing. And so I - With their reputation though? It's different with other people's money, but with their reputation.

1:34:14Let's talk about where people are with their reputation. That's a great segue. So Mark DiStefano wrote an article - He's been great lately, Mark. So he wrote the following headline in his Rear Winner article, ECP's, in quotes, forensic research, somehow missed corporate travel. And in this article, he talks about this ECP business. Now the founder of ECP is actually a gun. It's Manny Pohl, the guy that built Hyperion. And so he went with his two kids and started this ECP business. And the kid that I know there is called Jared Pohl. And my interactions with him around Catapult have not been the most enjoyable, let's say.

1:34:53So you say this guy has missed the Catapult 10 bagger and invested in corporate travel? Yeah, well, he was in Catapult and exited Catapult. When did he exit? I don't know what the share price was. It would surprise me if it was more than a dollar. And what is it now? Who knows on the day, but like$5, let's say. I'd love to get this guy's portfolio and just do the opposite. Just answer him. You don't have to because Mark DiStefano has written the following. I mean, he's trying to be a bit of a Joe as well and he writes - How old's Jared? I don't know. I don't know. He's not 25. Okay. Like, yeah.

1:35:29I know what your question was. Yeah, no, he's like, he'd be in his either somewhere mid to late 30s to mid to late 40s. I don't know, actually. And so, you know, Mark has a bit of a go at him and makes fun of some of the LinkedIn or the bio posts and whatever, you know, picking investments is like picking wine type of thing. You know, and my brother would be a sommelier in another life, which my thoughts when I read that were, I think you should like stay away from the wine and like just focus on the stuff. I think Mark's been really good on this. But this is what he said is the consequence of all of this.

1:36:04And how big is the fund, what are you about to tell me? I think this fund is three bill. Oh, so it's a big fund. Yeah. And so he writes, this is what Mark writes, the good thing about this vapid nonsense, he's talking about like these sommelier comments, the good thing about this vapid nonsense is that it's reflected in ECP's results. All its three major strategies are trailing their benchmarks over the last year. Yeah. One is trailing over three years and then all are again trailing over five years. And then he says, and this is why I said to you, I think you should not underestimate how much money people are prepared to throw at this to try to fix reputational damage.

1:36:41Then he writes what might be the most brutal paragraph I've ever seen him write. He writes, they only outperform if you go back to Inception, which is, in the case of the Australian Equities Fund, 1998. And then he writes this line. I think we have a long time. Then he writes, how patient is its capital? ECP might just be the poster child for the dangers of active investing. Now, that is a brutal, brutal line. And the reason I raise that is because I've had nothing to do with Jared for like five years or something, right?

1:37:14But basically… Shout out to Jared if you're listening. Yeah, shout out to Jared. Yeah, well, not from me. But basically, he was… I won't go into the detail. My interactions with him were not very nice. Let's leave it at that. But the bottom line is, when someone is writing that stuff about you in the paper, your willingness to try to extricate yourself from this reputation. My point is, imagine if he gets it wrong again. I don't think it can get worse than that. It can get worse. How can it get worse? He can put an extra$100 million and lose the extra$100. That's worse. Does that get worse for you're the poster child, your fund is the poster child?

1:37:48That's worse. Against active investing? Can you imagine the articles he's written if he does it again? Can you imagine what we'll talk about if he does it again? So the reason I raise all of this. I don't think a fiduciary of other people's money can possibly invest and remain. Well, I think it's easy to make an investment about a rescue race for this business. Not on the fundamentals. I think the business is dead. I think it's gone. The reason I raise all of this is because what is often overlooked in all of this talk about stocks and numbers and financials is you're dealing with human beings, with human emotion, including ego.

1:38:20and a lot of investment, we know that a lot of investment, in fact, probably most of it is driven by fear and greed in the market, based human emotions. And I just wouldn't underestimate the fact that the involvement of human beings and them, this is not just ECP, but others as well, having sunk costs into this. And it's not just, I made the wrong investment. You know, to make this investment, especially when it's 7 % of your fund, but even if it's not, there's a whole thesis around why this is a great investment. And to be that wrong, I think people are willing to fight before admitting that they were that wrong.

1:38:51It's pretty spectacular to sell Catapult and miss out on 5X and to be invested in this thing. Well, in fairness, I don't know what he sold that. He's not holding. I think when he sold, I might not have had a CEO or a CFO. So that wasn't a great time. Yeah, but still, it's a fundamental misunderstanding of the value of Catapult because clearly you've smashed it. Well, I think it might have been more of a misunderstanding of me and the founders personally. He's allowed to sell his stock. There's nothing wrong. I'm saying his judgment was clearly wrong there. And the judgment - I think he had a very low opinion of me and the founders.

1:39:23Yeah. Would be my take on it. But he's got, and you guys have done incredibly well. Whereas this business, he's obviously got a high opinion of Jamie Ferris. Are these guys Brisbane based as well? Because they have a lot of Brisbane based business. No, I don't think so. I think I've always met them in Sydney. Okay. But like, you look at the - Doug Tynan at VGI and Anthony Abood were raising really genuine serious worries about this business in 2016. Anybody who's invested after that time hadn't noticed that this was a potentially really bizarre, there was really weird cash flow things. Every six months, the cash flow would gyrate massively.

1:39:55Well, one of the things Mark wrote in this article, and he said a few weeks ago, there was talk in the market that a broker was trying to sell down one of their client's positions in the company. They were looking for a buyer in an off-market transaction. And then he wrote, it could have been anyone, exclamation mark. I don't know if that was implying that it was ACP or not. I'm not sure if that's what he's implying. Sure as hell they would kill to get it off their books now. So I think people were trying to sell a few weeks ago off market. There were just no big buyers. A few weeks ago when it was suspended?

1:40:22What do you mean a few weeks before? Before. I think. I don't know. What did he write? He said a few weeks ago. It might have been post-suspension. I don't know. Of course, post-suspension. You want to get post? The fact that couldn't get the numbers in. I suspected the universe of buyers in a suspended stock may be significantly less than in a stock that's trading. Even more disgracefully, this business, let alone the fact they may have been insolvent trading, all this kind of stuff, we don't know, but it's possible. but they were doing a buyback. How can you be doing a buyback? I bet they wish they had that cash now.

1:40:48That's like 50 million bucks. It was significant. They've been doing buyback for years and paying dividends. It's just outright. This whole thing - No, this is not a good story. This is one of the biggest scandals potentially in Australia in a decade. Since Babcock, we haven't had many really. We're talking about drones here, but drones here or whatever. That was a penny stock and went for a run. This was a mainstay of the ASX 200. It was considered the second best travel stock in Australia after flight. In fact, it was maybe worth more than Flight Centre briefly. The interesting thing, though, is Steve Johnson at Forager is good.

1:41:18He's a good investor. He made money on Catapult. Yeah, he's really good. Yeah, I think Bennelong is good. Like, I've had good experiences with Bennelong. So these are not weak investors. These are good investors. They made a mistake, right? Steve was tiny. That was a tiny part. That was irrelevant. But Bennelong, I'm surprised at. Because that was a big investment for them to get this so wrong. Yeah, me too. That doesn't make sense. But, you know, people make mistakes. The big advantage that ACP has is that this is a listed vehicle, and so no redemptions. You can't pull your money out. All you can do is sell it.

1:41:45And so, like, it'll be interesting to see if - What's the share price? Well, that's a good question. Like, I wonder if it's trading below - I wonder if it's trading below net tangible assets, which is the big vote of no confidence. Oh, hold on. Market cap is, according to this,$21 million. So maybe their whole funds under management are$3 billion. And it's been a pretty steady - Like, it hit - During the peak COVID, it hit$1.67, but it's sort of been around$1 the whole time. It hasn't really changed much. So maybe we should have a closer look at this in a future episode. Do they release a – they probably release daily or at least monthly that NTA backing, that tangible asset backing?

1:42:21It's weird that it hasn't really dropped off much since this whole debacle. Like it was trading at$1.19 in April Liberation Day and it's$1.14 now. And it was down to$1.22. So it's been an incredibly consistent stock. It hasn't really done much at all, but it's worth$21 million. It probably just has no liquidity. Is that the ECP emerging growth? Yes. Okay, well, that's the one he was talking about in his article. Yeah. Yeah, well, he did definitely in this article, it says, the latter is so overweight, he means ECP. In corporate travel, the stock comprises more than 7 % of ECP's ASS-listed emerging growth fund.

1:42:57But if it comprises 7 % and it's only worth$21 million, then it's not a very consequential dollar value. Yeah. It made net profit of a million bucks this fund last year, four million the year before. That's pretty immaterial. It only has 41 million bucks of financial assets. So this is what was written previously by Alex Gluyus and Johnny Shapiro on the 9th of December. Well, he's on fire, basically. But he is on fire. Yeah. So this is what they said. ECP's ASX-listed emerging growth fund was holding 7.6 % in corporate travel. The listed investment company posted a loss of 11.1 % in November, 10 days after corporate travel shock announcement.

1:43:40The firm manages three bill across all of its funds. So this is tiny, basically. And it said it had written down the value of its corporate travel stake but declined to disclose the amount. And this is what Jared Pol said. We marked down our position based on last week's news and communicated that to our clients. Our mark is broadly in line with what has been reported in the media. What's been reported in the media? what number is that I don't know but this proves that these guys are irrelevant in saving it because they've only got 20 million even if these guys I don't think these guys are going to do it but even if they did want to it's like tiny so the people you need to really save it is the Jamie Ferris and those guys Jamie's got a decent stake in this business he was at 40 % at one point he sold down but is Jamie going to put his hand in his pocket to good money after bad I doubt it ECP's Growth Companies Fund that's a different fund posted a 5.1 % decline over the last month this was written at the start of December and is now down 9.2 % over the three months to November, the fund had a 4.1 % exposure to corporate travel.

1:44:38So maybe, I mean, that fund has got a 4.1 % exposure to corporate travel, but I don't know if that means that fund is 4.1 % exposed. But what we know for sure is this, ECP really believed in corporate travel. I mean, two of its funds are for the fund, materially exposed, I think, to corporate travel or have some exposure to corporate travel. Jamie has 14 % of the share. He can't save it. Yes, that's the point. He just built a$30 million house or something, didn't he? That's hours a long time ago. He's had taken money out over the journey. Has he taken$300 million out? He's probably taken in the hundreds.

1:45:12So the question is this. If he puts 100 mil of his money in to save it, I would be certain that other investors will follow him. But if he puts 5 mil in, that's a whole different picture. I don't know if he's sold that many shares, actually, over the journey. Like, there was a 2021 where he sold at$21 a share. Like, his shareholding definitely has dropped. Yeah, but I think he's been a true believer in this stock to his credit. Like, I don't think – we can definitely say he hasn't drone shielded it, right? No, definitely not. Like, I think he – you know, the thing is we can say many negative things about where this business finds itself and how it found itself here.

1:45:53but fundamentally I don't think the the founder has shown a lack of conviction in his own business in this company he sold 30 million bucks worth in 2021 and and there was a adverse publicity about which is not which is not a ton of money right for a business that was valued at 1.5 billion dollars and he did 16 million dollar one in 2024 for laura which was when he sort of gave her the money and had the security of the shares now she seemed quite quite ill at the time so yeah he doesn't look like he's taken hundreds out. He maybe have taken 40 or 50 out. He's got dividends along the way as well for sure.

1:46:24Because I don't like to only say the negative things about stuff. Like, you know what? We're not going to know, maybe ever, definitely not now, how much he knew about what was going on in the UK. It's pretty hard to believe he didn't know about this. Five CFOs over the last four or five years. Well, maybe that CFO turnover is why this happened. Joe's been great on this, of course. Joe's written a lot about it. Joe's probably been the first to write about it. He was writing about it 10 years ago. And he was saying, they've had five CFOs. We all know the real CFO of this business is Jamie Ferris.

1:46:56He's an accountant by trade. I did see that he wrote that. You know, Joe can make lots of assumptions in his writing because he's got lots of lawyers surrounding him. And also, that probably is not on the wrong side of the line. That's just, you know, fair comment, let's say. But it might not be true. Like, it might be that he isn't that involved in the detail because he's running all this stuff. and his Gen 3.5 CFOs, which is not a good look, but who knows for what reason, and he might not have been across these numbers because of the CFO chain. Even if he didn't know, and I agree, it's definitely possible he didn't know, the fact he didn't ask that the margins were so high, 58 % margin for a travel business is ridiculous.

1:47:36The fact he didn't ask why these margins in the UK were so high, I get beggars belief that nobody asked the question here. There's no great answer to this, but I do want to say you've got a guy if he knew that this was going on wouldn't he be selling down like you couldn't get away with this forever right and he wasn't selling down yeah not significantly and so I just feel like it might be we don't I'm not there's no abrogation of responsibility for a founder CEO that oversees this but this might be much more firmly in the incompetence camp than the malice camp the cock up that conspiracy yeah I think so I think either way, maybe we'll take a lunch bed again.

1:48:18I'm still waiting for my last lunch bed to pay out. You don't tell me where you want to go. It's what the Vie de Monde will do. Vie de Monde? What are you going to eat there? There is literally nothing you can eat there. Amazing vegetarian for that. All right. We can go. I'm very happy to go there. I'm very happy to go there. So your usual table? I don't think I've ever. I think I was there once. I've been to quite a few months. It's really good. Some bankers took me there. You know, I don't like fine dining. It's not for me. We actually took Gabby and Hezzy there, or maybe it was Hezzy and Jason, after the menu log thing as our thank you because they did such a good job for us.

1:48:50It's hard for me to imagine Gabby and Hezzy enjoying it. It was just Hezzy, not Gabby, actually. Yeah, but even Hezzy. I think Hezzy liked it. I just go to the local cafe with him. Go for a walk, go to the local cafe. Like a Brighton cafe. Yeah, take it easy. I think more likely than not, CTM doesn't survive. Okay. But we'll see. All right, well, I'll take that bet. What can we do with this? within a year within a year okay six months three months three months are too short because they can three months you can like dead businesses can survive 30th of June end of the fiscal year if they submit audited financials for next year you win the bet if they don't I win the bet I think we should do this we should make this bet but we should think about it because we don't have to it doesn't have to be the same thing it doesn't have to be I pay for lunch or you pay for lunch I don't want to go for lunch that's not a good bet for me I don't like that food I'm going to come back next week and I'm going to say this is what I want my price to be if I win this bet and you should give it some thought because look I'm happy to take you to Vue de Monde we should have a contest and we can some listener can win and come with us to Vue de Monde well I don't really want to pay for that Warren Buffett style but like oh you're saying that they should pay for that that's funny I like that a lot better but I'm going to come back next week and I'm going to think about what I want as a prize when I inevitably win this bet you were pretty confident on the last bet and lost that one I feel like I probably won the last one as well No, you definitely lost it.

1:50:11I know that you say I lost it. No, we agreed you lost it. I don't remember what it was about. Maybe you came in and humbly admitted defeat. It was Richard Goyder, remaining chairman of Qantas, and your mate John Mullen took over, ironically. Oh, that's true. It was humiliating. I've never been so humiliating on behalf of somebody else in my life. Yeah. I don't know what to say about that. I probably did lose that bet in retrospect. I should be careful, given I'm speaking to the biggest bicep holder in Melbourne. So it's risky being... The smallest. So the question. Thank you. That was a great episode.

1:50:39we'll see who wins this bet in seven months time thank you Mike and Joel we'll see everybody on Saturday for our Ask Us Anything episode as always