Xero Gets Whacked, 4DMedical’s Meme Stock Moment, SEN Circles ARN, Uber's Loyalty Lock Up, and Adam’s Safari Business Lessons

24:39You've got website views, email clicks, purchases, orders, AOB, everything's 50 % higher. So we absolutely see that behavior. Of that cohort or of that individual when you look at their history pre and post Lux Plus? We cut the data in a few different ways, but whether we look at it as someone who was a member before and the member after or a new member because there's a bit of correlation correlation in the sense that your best members are always going to subscribe to something that saves them money for purchasing because you're kind of pre-paying a discount so even when you exclude for that the behavior stays really similar where we saw the behavior change when we gave it away the behavior is nowhere near as good when you give it away which is totally unsurprising right and and also so this is what i would do falls in your shoes i would because you've like lux plus is relatively new.

25:24Two years. Yeah, you've had customers for a long time before that. And so I would go and look at the behavior of the customers way back in the past and then post Lux Plus, how that behavior changed. And then I think you'll be able to get a real view of the impact that Lux Plus had on customers with a long history with the business, which you might well already do, but that's what I'd be looking at. That's exactly what we did internally. Yeah, exactly what we did. Yeah, 100%. That's what we looked at. And our LuxPlus churn, we expect a churn of about 50%. And we looked at a bunch of – companies aren't super keen to give this data away, obviously.

26:00But if you look at the sort of streamers talk about it a bit. So Netflix has the lowest churn. I think Netflix churn – it's hard to get a great read because you've got people coming in and out. But I think the real churn is about 25 % to 30%. This is including people who drop in and out constantly. Then you go up to like Peacock, which is like 70%. Yeah, Peacock is like 70 % annual churn. So we thought our churn would be 50%. And our churns now, it's dropped to below 40. So it's in the sort of high 30s, which has been surprisingly low, given we're not a high frequency purchase like Amazon or Uber, for that matter.

26:30So it's been surprisingly good how low the churn's been. This area of subscription, I don't know what you'd call this. It is transactional businesses trying to have an underlying subscription component that doesn't just drive a more predictable annual recurring revenue, but drives massively increased transactional behavior. So Kogan does it. I've had lots of experience with the Kogan program. I did it recently. So I was going to use Lime Bikes for two weeks straight. And so I signed up to, do you know what Lime's program is called? I certainly used to be a member. Is it Lime Plus or Lime Prime?

27:12Lime Prime. I wonder where they got that name from. And so basically that is like, that's a weird kind of system. It is, you pay some pretty small amount of money,$5 a month. And if your ride is less than 20 minutes, it's capped at$3. Like there's a lot of moving pieces with it. And so I don't know what happens if your ride's more than 20 minutes. You also can reserve it for half an hour, not 10 minutes, which is a big plus actually. because I tend to get the minutes, like the bundles. I get the bundles. I stopped using the plus prime thing because you don't need it. I actually got my own bike anyway.

27:50But when I'm in the UK, I'll get the bundle. I find the whole thing too complicated with Lime. There's too many options. Yeah, that's a problem then. I didn't know. That's the case. You can bulk buy minutes. You can buy a subscription or you can use it casually through the Lime app or the Uber app, either of them. And so I feel like that's too many options. You should give me casual and one other thing. But I'm not sure. But I could be wrong, right? Yeah, I think the prime thing, the prime thing, I don't think I need the prime thing. But like going back to your question on Uber, which I never really answered, I think part of the reason why Uber brought in Uber 1 was, well, I think the bigger part is less about the ride, it's more about the Eats.

28:32Because riding that, well, certainly in Australia, they're a quasi-monopoly competing against taxis, I guess. But in Eats, they've got a very strong competitor in DoorDash. So I think that's, I think they, because you get obviously a fee and door, I think DoorDash may have brought, actually the first to bring in subscription was Deliveroo. And then I think I'm not sure if DoorDash or Uber Eats brought them in next, but I think it's more, and obviously in the U.S., in UK competing as Deliveroo in the U.S. It's DoorDash here, it's DoorDash. I think it's more driven towards getting that share of wallet with food.

29:01And then if you can benefit from rides, they can give a little bit back on the rides to get you as a Uber Eats customer. That's a trade where it's very well worth making. I think it's a pretty smart move for Uber to be honest. To me, that would be the more interesting thing. So at the moment, you ride and you get 5 % back on your rides. It would be more interesting to me if you ride and get 5 % back to use on Eats. Now, I don't know the economics of it, but I'd much rather, or get 5 % back to use on the courier service or whatever it is, try to get - Well, you can't do it with the free delivery.

29:34The free delivery, you're kind of getting that with your kind of - My point is this. my point is, I think the most value for Uber could come from becoming a multi-product or multi-service platform for people. And they got to push people to use more of their services. And it would be much more interesting to see them do something like that, I think. But again, I don't know the economics of it, but that's my - Well, good question for you. Uber share price, what do you reckon it's down from its October last year high? I've totally not followed this. Let me think of all the things that have happened since last October.

30:09So there's been the Sasspocalypse, which they're not Sass, but they probably got hurt. But Uber's not really a Sass business. It's a marketplace. I know, but they probably got hurt from tech, right? Because they would have said we're all about software and then the Sasspocalypse would have happened and they would have said we're not about software. Oh, roughly. Yeah, it's probably just a little bit like 25%. But it's actually, it's still up. If you look at it, Nadir, which was 2022, which would have been, that would have been that whole, was it the crypto crash and all that sort of stuff? They were down at$23 a share then.

30:41They're now at$72 a share. So they forexed from$22 to$25 and they dropped off 25%. So still trading pretty well at$148 billion US, but obviously off they were above$200 billion. They're obviously just looking like trying to buy takeaway.com, which is one of the – there's three big food delivery businesses essentially. And effectively DoorDash, DoorDash Just Eat, and then there's takeaway.com and then there's Uber. Uber takes takeaway. They become, I think they become bigger than DoorDash there, but it's pretty interesting actually. I'm not sure they have any antitrust issues there because they become really two players there.

31:14And I think Takeaway is the dominant player in Europe, so it's not so impactful in the US or in Australia at all. Okay, guys, so before we move on to the next topic, I've got in honour of our safari, my kids have heard about the famous quizzes that Deer and Mike love so much. They're desperate to give you a quiz on collective nouns of animals. So I'll get one each to do one question. Surprisingly, I quite often get comments about, are you going to have more quizzes? So whilst I despise the quizzes, Mike probably quite likes them because he does well at them. Unfortunately, a lot of listeners are asking me to pass on that they're keen on some quizzes.

31:49Well, here's a quiz. I think the listeners will, I love a collective noun quiz and give her in the jungle, there's no better place for them. This is real life quizzes. I'll get my son William to ask the first. He'll ask two and I'll ask two. This is William first and we will ask a question and Mike and our dear will answer it and don't give the answer until they've had a chance to answer it, okay? All right. So the first question is what is the collective noun for a giraffe? A what of giraffes. A giraffe. Tough one to start with. Mike, what have you got for that? A herd? Is it a herd? Everything's everything's a herd.

32:22I'm pretty sure it's not a herd. Adia, do you have a guess? Oh, so there's a unique. Yeah, all unique. Unique. Everything's a herd. He's not going to ask you three questions and everything's a herd, Mike.

32:36A giraffe, a neck of giraffes. Could that be it? The collective noun for giraffe is a journey, a journey of giraffes. A journey of giraffes. A journey of giraffes. That's interesting. Oh, I never would have guessed that one. That's a good one. If you would have given me a thousand guesses. Okay, I think the next one you might have a better chance of. What's the next one, William? So what is the collective noun of crows? A what of crows? I know that one, Mike. I know this one as well. It's a murder of crows. Agreed. Correct. The collective noun for crows is a murder of crows. Got it right. Both got it right.

33:05So Isla's going to ask two questions now. All right, Isla, you're up. Hi, Isla. Hi. Are you having fun on your safari? Yes, I am having fun. What is the collective noun for a warthog? A warthog? That is a great question. What is a warthog? All right. I think we might need the first letter of this answer, I would say. What's the first letter of this answer? The first letter is an S. An S. How about a something of warthogs? That's my guess on it. I'll say a smothering of warthogs. A snuggling of warthogs. Neither of you are right. What is it, Ella? It's a sounder of warthogs. It's a real thing of warthogs.

33:54That's not even a word. That's not even a word. It's a word. A sounder. Okay, this is a better one. This is a good one. You may get this one. Okay, there's two for this one. There's two options here. You get either right, you'll get it. That doubles our chances of getting it wrong. What is the collective noun for a zebra? I think Adam said this one at the beginning of the episode, but because we don't listen to anything he says, we don't remember what the answer was. I'm going to say, is it a gallop of zebras? Well, that's ridiculous. I'd actually say that's ridiculous. All right. That's good.

34:35You've put the bar low enough that whenever I say it's not going to be as bad as a gallop. So, yeah. Well, at least it's a word in English. How about a crew of zebras? No. What are they, Alan? So the first one is a dazzle of zebras. I love that one. And the second one is a harem of zebras. A harem. Oh, that's a bit controversial. All right. So we'll go with the dazzle. I like the dazzle. Otherwise, one more. What's that last one, quickly? A baboon. A what of baboons? By the way, who's making up these collective terms? That's my question. Like, who gets to name these? That's a good question. There's a collective noun group.

35:15Probably the same guys who do AAC 16 for leases. Probably the same guys. Baboon. How about a caucophony of baboons? That's my guess. A bunch of baboons. What is it, Ella? You were both wrong. It's a troop of baboons. A troop? A troop of baboons. Oh, wow, okay. If ever I was going into battle, there's no one I'd rather take than a troop of baboons. Ah, sweet. Well, we did advertise we were going to be terrible. Make sure you leave all your answers in, Mike. That's where all the comedy value is. That was good. Some light entertainment. Predictably disastrous for us. My happiest moment about that quiz, other than I do like a dazzle of zebras, that's very nice, is that it's the first quiz where Mike has been as bad as I am.

36:04So that is a great moment in quizzes for this podcast. Now I want to talk about something where your initial reaction to it will not be positive, but I think I can talk you around to it being important because you'll like it in general. I'm going to say something about universities and you're not going to like it in particular because they've covered themselves in disgrace at the anti-Semitism Royal Commission, let's be honest, and it has not gone well for them. They have. It's not the only place they've covered themselves in disgrace, but that's one of them. Yep, I agree with you. And I know which part of university education is probably your least favorite.

36:39How do you feel in general about philosophy and the liberal arts at university? I think it's fine. I just don't think it should be funded by taxpayers. People want to spend three years of their life wasting it. That's their decision. All right. So I thought for a moment with your original answer that somehow you'd come to a very moderate view and then you'd quickly put the chaser through on their wasting three years of life. So that's good. I do remember how you feel about this issue. So I'm going to say this to you. I think the reason you feel like that, this is leading somewhere, which is going to continue over the next few episodes, just for four or five minutes per episode.

37:17So I think the reason that you feel that way is because this is how you feel about society. And I'm actually not sure this is how you feel, but I think the reason people feel that way, and really the way they feel is that universities should be funding vocationally oriented courses that drive the economy, is because the way to think about society is you've got the foundations of society and then you've got what you build on top of it. And for a long time, it felt like we were on very stable foundations of our capitalist, liberal democracy with enlightenment values. And so we could focus on building on top of it.

37:51But what my view is now is that the fundamental foundations are looking shaky of our society. And so as much as you may hate to admit this, the reason we live in a capitalist democracy and not pulling some hoe or something, by that I mean a tool, I just want to emphasize. lies, so we're not pulling some hoe behind us for working for some king that arbitrarily is going to kill us, is because there were philosophers and they created this subspecialty called political science. And that is how we got to capitalism and liberal democracy. And I think the moment that we're at in society right now is that we need to spend some time talking a bit about the philosophy and political science part of our society because I think we're in a moment where we're about to have a clash of philosophies in how our society should be structured and should be run and to what degree and how we want capitalism to operate within these societies and we've seen it in New York with Mumdani, we've seen it in Australia frankly with the budget that was just passed and some of the rhetoric around this budget, and I would say a general disdain for the accumulation of wealth.

39:09And so I think on the next few episodes, for four or five minutes, I want to talk about some views around the philosophy of capitalism in a very practical sense, so that we can start having discussions in society about what we actually want society to look like before the whole thing blows up and we end up with a very unworkable society, which is where I think we're going. The first bit of this I want to talk about, which we could maybe call knowing your enemy. So before you fight your enemy, you need to know your enemy. And with all of the things that are going on at the moment, there are all sorts of words flying around to describe these people.

39:49And the main words that are flying around are socialists, Marxists, communists. And I think it's worth just like taking two or three minutes to say, what do these words mean? And what are we actually talking about here? And are we really fighting socialists and Marxists and communists in the battle that we're having in society at the moment? The spoiler is we're not fighting them. That is not what they are. But I think it's worth just a very short trip down this road. And maybe I want to start by saying this. This guy, Karl Marx, he gets a very bad rap in capitalism. He's like a demagogue in capitalism.

40:25But really, that's because people are oversimplifying what this is all about. And there's subtlety in all of this. And the way this Karl Marx guy, it's like a German guy, ended up to be very poor, not a winner, but definitely a deep thinker. His diagnosis of the problems that were going to arise in capitalism was pretty much spot on. He was a very good diagnostician. As a clinician coming up with solutions to the problems, that's where all the issues were. But he basically said this. He basically said, things are very unfair. So we have to go through these three stages. We need to get control of the state.

41:07So the workers need to get control of the state. And then we need to go through and this transitional phase, and then we need to turn it into communism. We'll get to what communism means in a second. And the way he started with his first phase is he has 10 rules. And the scary thing for people who just want to call Karl Marx a demagogue is that here are two of those rules. One of those rules is we should have a progressive income tax system that charges people higher taxes based on higher incomes. And another one of his rules is we should have free education and not have child labor. Now, those have been mainstreamed into society.

41:45And if I run around saying we should have free education and no child labor, no one's going to call me a Marxist. But that is where those two particular ideas came from. And then there were a whole lot of terrible ideas, like we need to do this via a revolution, like the state should take all of the rent generating assets, like if you disagree with the revolution and try to fight it, we'll take all of your assets and a whole lot of not good ideas. And so that was kind of stage one. And where he wanted to go was this thing called communism. And so let me tell you, because people get confused, socialism, communism, communism, the easiest way to think about it is think about a commune.

42:22What's a commune? It's a whole lot of people living together. And what do you not need if a whole lot of people are living together collectively? you don't need money, you don't need property, and you don't need a formal permanent leadership or government. And so that's basically what communism is. Let's get this some kind of utopia where there's no money, there's no property ownership, and there's no permanent kind of overseeing government, and the people control that. And the problem is that it's very hard to get from stage one to stage three. So he had this terrible idea, which he called the dictatorship of the proletariat.

42:58So dictatorship, that's never going to be a good word and predictably turned out terribly. And what that was meant to mean is a group of workers come together and they're going to be the bosses and represent all the other workers and help make this transition from taking over the capitalist society and locking in its gains to getting to communism. And fundamentally, to finish this thread, what ended up happening through, I reckon, probably what, 18 or 20 examples around the world of countries that said, let's adopt this Marxist view, is that it turns out that when you say to people, we're going to go on this journey, and in the meantime, you can be the dictatorship of the proletariat and have all of this power, and they're going to lose their power by finishing the transition to communism, those people are very unenthusiastic about making that last transition, because they don't want to lose their power.

43:50And what you end up with is this guy Lenin. You might have heard of this guy, a Russian guy that kind of interpreted Marxism. And he said, this whole idea is never going to work with these people in charge doing the transition. It's much better if we have a party and we put a party in charge of the transition. And so that turned into people leading a transition to a party. And then the end of it was like this Stalin guy saying, and how about we make this party like militaristic and have apparatus of secret police to ensure that we really keep control and let's not internationalize this. Let's just keep it about our own country.

44:25And ultimately what happened is that no one got to communism. So that's the important thing to understand. No one got to communism except maybe the Israeli kibbutz movement got to communism briefly because it was a small commune of a few hundred people where everyone knew each other. They didn't need money. Their reputation were basically the thing that kept the whole thing together and it didn't last for long and it was being supported from outside by a capitalist, a labor capitalist state. And so no one got to communism. All these countries that call themselves communist, what they really were was like this Leninist oppressive government and with state ownership.

45:03And even if you look at China today, they call themselves the communist party, but really what they've got is like a Leninist type government controlling the country and a state-controlled capitalism that's going on underneath. China is probably more capitalist than most countries now. They're highly capitalist. And the main difference is that all of the capitalism runs through the state. That's the fundamental difference. And whilst Marx was all in favor of having elections inside this dictatorship of the proletariat, and even Stalin had elections inside the Communist Party. Like China now, Xi Jinping is now president for life.

45:40And so that's a bit of a transition as well. And so it's important to say we shouldn't call anyone communists because no one is a communist. Communism got this bad rap because everyone who said they were communists turned into a non-communist, just a totalitarian oppression center. You could argue that the inevitable result of trying to hit communism is that it's unachievable and you end up with authoritarianism. I would argue that. I would argue you never pass the dictatorship of the proletariat, which becomes the dictatorship over the proletariat. And so the race - Can I also add quickly, just quickly add a couple of points.

46:14Karl Marx didn't come up with progressive taxes. That was a bloke called Adam Smith, a hero of both of ours. Karl Marx was about 100 years later. And just in terms of the child labor, Karl Marx definitely didn't like child labor, but just looking up, in 1788, the British Parliament passed the Chimney Sweepers Act, which reduces hours of young people. And in 1833, and that was before Marx was born, and in 1833 they passed the Factory Act, which banned children under nine years from working. So it was well and truly in progression. Absolutely correct. But he did embrace those ideas and also he certainly didn't invent socialism.

46:47I mean, that was around way before him. And so what I would say is that, well, the last thing I'll say about Karl Marx is he intended this to be in developed countries, a global movement of developed countries. He did not target developing countries like Russia. That was not the objective of what he was doing. And so the reason I say this story is as follows. You've got to label people correctly if you're going to fight them. We've got people to fight. If you're a capitalist today, you've got people to fight. Now, I'm not advocating unbridled capitalism. We'll talk about that in other podcast episodes.

47:20But when you look at someone like Mamdani, take him as the most extreme example, a mayor of New York. So what's he doing? So two of his big policies that people hate, because he's increasing taxes, but two of his big policies that people hate is that, one, he is starting to open state-funded grocery stores to compete with private grocery stores. And number two, he advocated a state-owned bank in New York with$100 billion taken from Wall Street to compete with Wall Street banks. And so now I want to say two last terms that are often confused or just not known. So these two terms are very confusing.

48:01One is called a social democrat and one is called a democratic socialist. Now, when I first heard these terms, I thought about, you know, there's a Monty Python sketch where you've got the Judean People's League and the People's League of Judea, and instead of fighting the Romans, they just kill each other because, like, they're so similar that they just focus on their differences. But actually, this is not like that. And the way to understand what these things are, and this is relevant to Mamdani and also, I think, to Elbow and to Chalmers, is you have to think about it like this. If you understand nouns and adjectives, you understand what these things are.

48:38So a socialist democrat or a social democrat, they are a democrat, but their flavor of democrat is socialist. And so what that means is that they fundamentally believe that society should be capitalist. They just want to apply a whole lot of socialist elements to a capitalist society. And a democratic socialist is a socialist. That's the noun. And their version of socialism is democratic. What that means is they want to get to socialism. That does not mean that everything is owned by the state. It means a lot of the means of production is owned by the state. The state's heavily involved in the economy.

49:23I don't support any of this, by the way. I think it goes terribly. And it also means that, for example, the credit and banking is largely centralized and controlled by the state. That's a democratic socialist. The democratic part means instead of doing the Karl Marx, let's have a revolution, they think they should get there via democracy. And so for them, bringing socialist elements into capitalism is just like a stopping, a waypoints on the road to socialism, whereas to a social democrat, they will say, yeah, we want capitalism. We like capitalism as a permanent feature. We just want modifications to it.

49:59And as much as it feels uncomfortable to say this, definitely Albanese and Chalmers, you could not accuse them of being socialists. They are not trying to dismantle capitalism. what they're trying to do is make significant changes to capitalism. And the objective of those changes is largely to stop the compounding effect of wealth, making some people richer than others. And I think their mechanisms are terrible, but they are not trying to create a socialist country. And even Mamdani, in the past, he said things like, I want to nationalize the means of production, which is Marxist language for taking over the making of stuff.

50:42So he said that, but to date, his policies have been social Democrat policies. That is, I still want a capitalist society. I just want to change it. Although he might be a democratic socialist, his ultimate aim might be for the state to effectively take over most of the machinery of society. So I don't know if that makes sense. I hope that makes sense. But I think understanding what these things are makes the battle much better and clearer because fighting Elbow, and I say Elbow, but mainly Chalmers, fighting Chalmers on this terrible tax stuff whilst calling him a Marxist or a socialist, let alone a communist, it's absurdity.

51:20And it means that you can't fight effectively because you can't actually characterize what he is accurately and then have strategies for overcoming that. And so I want to talk about this a little bit on each episode, but I think it's important to understand the battle that we're fighting here and how we might be able to save, I mean, it sounds dramatic, but how we might be able to save Western capitalism without having to go through some horrible events that pull society to pieces. I think where, and Mamdami is more, I think Mamdami is more of a grifter and he's using whatever means he can to get votes essentially, whether it's hating Jews, whatever it is.

51:55I think if you look at the Chalmers, and certainly what happened in Victoria with Dan Andrews and Sinter Allen and Chalmers-Albo, clearly they're not actual socialists, but we talk about this public service replacement theory. And we have a bit of it in the sense that they're taxing at a higher rate. So taxes are still real. It's still like 27%, 28%. So it's still relatively low taxes percent of GDP, but that's creeping up and they're finding more and more ways to tax people. And they're using that to spend on an enlarged public service and an NDIS and making more and more people reliant on the government.

52:26So government doesn't control the means of production, but the more and more people in public service, they're essentially, it's a form of that. I totally agree. They're owning, so it's a slow creep to socialism. They're clearly not there yet, but there's definitely a lot of socialist tendencies. But I don't think they're trying to dismantle capitalism. They're trying to reduce its power. That's right. And so I think, you know, that's an extreme social democrat. It's not a socialist. One of the reasons I say I think Mum Darny could actually want to bring socialism in is because he calls himself a socialist.

52:54It's a bit of a giveaway. I suspect he's read the books. He gets what it is. So I think when bad people tell you that they want to do bad things, you should believe them. And he tells you he wants to do socialism. Okay, he may well be a socialist, but Chalmers is not a socialist. He's not trying to dismantle capitalism. What he's trying to do is stop wealth compounding for people, which is very bad for capitalism and I think might break the system and ruin a society that needs to have enlightenment values. You have to have wealth creation. It's very fragile. So I think he might break it if he's not careful or voted out.

53:28But I don't think he's trying to bring down capitalism and replace it with socialism. Interestingly, if you look at superannuation, obviously a Paul Keating invention effectively in the late 80s, early 90s, and Chalmers was a student of Keating. While Chalmers and Albanese have gone after all sorts of, well, they've claimed to go after the older and the richer people in Australia, they've left the biggest tax rule of them all, superannuation,$50 billion a year, which really goes to older, richer Australians. Because why? Because that goes to industry fund. Tim Wilson said this beautifully when he came on the pod.

54:00It goes to industry funds and then funnel the money back into labor. And then you have effectively workers owning the company. So it's another way to sort of have bracket creep socialism in a way. They haven't touched super despite it being this massive tax rule as well. So it proves they're just completely disingenuous. They really cared about intergenerational theft. They get rid of super completely, but it goes against this sort of creeping socialism aspect of workers essentially owning the means of production. So I'd argue they're using super as a Trojan horse to achieve some of that as well.

54:27So I think you're a little bit generous. They're not Karl Marx, these guys. They're not Lenin or whatever. They're nothing like that. But they are definitely trying to increase the power of the state continually every way they can. There's no podcast or forum that talks to a larger number of more influential people in the cogs of society. And I think this is an important point. And I think we can't just keep building on top of the platform because the actual platform is burning now and we have to talk about how to put out this fire and create a stronger platform, basically. We'll go to a super quick break.

54:57Got some juicy business stories coming up just in a moment. Don't turn off.

55:10And we are back. And in a move that has shocked investors, albeit probably not contrarians listeners, Australia's most highly paid and possibly one of the worst performed CEOs, Sukinda Singh-Cassidy, has sold every single one of her zero shares that she has, allegedly defiant tax obligations, which may be true. This comes as embattled Chairman David Thote, who is also Chancellor of the apparently anti-Semitic University of Sydney, is desperately trying to get institutional investors to support zero rebasing Singh-Cassidy's equity grants to allegedly bring the chief executive's take-home pay closer to what her peers get in Silicon Valley.

55:44In a notice filed on Monday morning, the San Fran-based executive cited tax commitments as the reason for her disposing of her entire 30 ,000 shares. It came a month after she sold more than$4 million worth of shares, citing the same reason. This means the highly paid executive has sold$6.2 million shares in space of five weeks. Atlas Funds Management CIO Hugh Dive told the AFR that he was weighing up whether to buy into zero, but Cassidy's share sales caused them to down tools. Dive noted that it's never a good look when an insider who knows the business far better than we do sells all their stock.

56:20In fact, it tells me that we shouldn't be on the other side of that trade. I don't know the CEO's tax situation, but it's not a very good sign for investors. She sold everything she can apart from options in restricted stock. Respected investor Anton Tagliaferro said, it's never a great look when the CEO of a company sells down shares she owns, especially when the share's trading at five years lows. It's a pretty extraordinary thing to happen for the CEO to sell all their shares in the middle of an apparent pay negotiation. Zero shares are down a staggering 61 % in the past year and are now trading at levels last seen in 2019.

56:51I do. What do you make of all this? I cannot think of one positive to say about this situation. There is nothing, because I know you've been negative about this the whole time. I've been very defensive of it. My main argument in defense has been David 30 came into a business that was priced to perfection and the existing business couldn't really justify the share price and the valuation and so they had to pull rabbit out of the hat and the rabbit that they chose to pull out of the hat is employ this ceo pay her the fortune that she's demanding and let her make an acquisition that was very expensive and looked like there was a high risk it wouldn't work that was the bet that they made and so i think um if you're going to make a bet then you need to let that bet play out if it's a bet like that.

57:38You can't try and backpedal away from it unless you've stopped believing in it. And this narrative is we haven't stopped believing in it. We just don't like the fact that like the share price went down in the meantime and I'm worth less money as a CEO. And my view is the time to make a call on the strategy is now. And the call is this. We think it sucks. It was a mistake. If that's your view, I'm not telling you what the call, that's your call, but like if that's the call that someone's going to make, that's fine. Make the call and then decide, keep or fire the CEO based on that outcome. If the answer is, we think the strategy is still good, then you need to accept that, you know, I've experienced this many times before.

58:27I know long-term something's going to turn out well, but in the short term, investors hate it and it pummels the share price and you just keep swimming until you get through it. And if that's the case, Keep swimming. Don't sell your shares. That's terrible. Don't ask for more. Like, do that. And my issue with this is the question that everyone should be asking and they should be answering is, do you still believe in this strategy? And if so, why should people that believe in things just keep going? They don't do stuff like this. And if the answer would be if we don't rebase her whatever and give her more, she's going to leave, I would say that's okay.

59:07we'll find a new CEO because we can't be held hostage to the demands of a CEO. I don't want to go into detail on this, but I've been in this situation in a business and it is always a mistake to be held hostage to demands of a CEO. And I'll just emphasize it's not any, it's not the CEO of Catapult or any current CEO that I'm working with. But it is very important that they link the compensation of the CEO to a strategy that they believe in. Those two things cannot be untethered. And I think they're asking the market to untether them. I think that's a great point. I think what's most sickening about all this is, and Thodi even mentioned it last week again, is that they've called Sukinda some sort of incredible Silicon Valley CEO.

59:57There's a real checkered work background there, which I won't delve into this episode. We've talked about it before, but I think she's a Canadian. He originally grew up in Canada, spent a bit of time in Australia working Google Maps, had worked at a few startups. Some went well, some didn't do very well. She didn't last that long at some of them. But what the most calling is, this was a really well-run business. So obviously, Roger Re-founded, a great New Zealander. Steve Vamos has been running it. Had some incredible Australian leaders, which Australia really was the main part of this business.

1:00:22And they had Trent Innes and Chris Reard, our mate. So had some incredible leaders, this business. And what's really sad, they put this blow in from Silicon Valley and said, oh, we've got to pay her Silicon Valley amounts because she's this incredible leader. I think there's no real evidence that she ever has been an incredible leader. But even so, we've got incredible talent in Australia who was doing an amazing job bringing this business. They've brought in this American or Canadian-American so-called superstar who's proven to be the exact opposite. You can say North American. North American.

1:00:47That's your catch-all. And Australia's got a history of bringing in these North Americans who do a terrible job and get paid a fortune. And Al Dunlop was that classic. I remember Chainsaw Al, Kerry Packard brought him in And eventually he went to jail for fraud, I think, at a couple of different businesses. And he's dead now, thankfully. But the history of bringing in these dud American CEOs who get paid a fortune, say, oh, you've got to pay me. I'm a Silicon Valley CEO. I need to pay a fortune. And it's still happening. It's just actually incredible that we haven't learned our lesson. And someone as smart as Thodey who's been around the traps, who's worked at Telstra, who should know better, he's fallen for it now.

1:01:23It's just really sad. So let me tell you my view on American CEOs because obviously I've got experience with it with Catapult. So these are my part A and part B of my views. Part A is the time to bring in an American-based CEO. So that's really what I'd be talking about. Not an American and importing them to Australia, but an American-based CEO is when the majority of your business either is in the US or global, or that's really what you're betting on as the next phase of your business. In that case, I'm obviously all in favor of and have put my money where my mouth is on bringing in an American-based CEO.

1:02:02And if you're going to do that, my part B is you do have to pay them differently because salaries are different in the US. And that is why you should avoid doing it unless you've got reason one to do it. That's my view. Like don't do it unless you need to do it. And by the way, if you need to do it and you don't do it, I think that's going to cause you all sorts of problems. I think the US, it's its own huge and idiosyncratic market, and I would very much be in favor of a US leader if that was the core part of the business. The thing about zero, and I've had to accept, I mean, like, candidly speaking, the amount of money that she is being paid is actually, in my view, completely disproportionate to even the amount of money you need to pay a US CEO when you have to pay them more than an Australian CEO.

1:02:51This is just outrageous to suggest that she should be on anything like what she's on. But it's on an American-centric business, and while their dreams are the dreams of America and their acquisition is an acquisition in the US. That is a big risk. I would have no issue with her being able to earn lots and lots of money if the share price goes up materially as a result of some great operation or acquisition to build a US business. My issue with the initial, I don't know what she was paid,$25 million package, is I didn't think the hurdle was high enough based on where the share price was today. It turned out that that initial hurdle is now unachievable because the performance has been so bad.

1:03:31She basically got a bunch of shares at a pretty high exercise price. But then she got a bunch of shares annually or options annually that have no hurdles at all pretty much. So there's sort of two. There's one that she won't achieve and there's one that she doesn't, has to do nothing to achieve basically. It's almost tenure-based. But if you said to me, we've brought her in, what's the market cap of zero today? We've got$12 billion from memory. So what was it when she came? $20 or something? No, it was – Probably more. She came – so it was much higher. It dropped just before she got there. It then went up because the market thought she was doing this amazing job, and then they realized, actually, she's not doing a good job at all.

1:04:05It's now dropped back below what it was when she started. Right. So I think if the board would have said – Look, we're going to have to pony up for a lot of money to get her and we really believe in her and we really want to give her a shot at strategy. I've got no issue if she makes$100 million, if she goes and does incredible stuff that ramps the share price in a sustainable way over a significant period of time based on the US business succeeding and becoming a significant driver of the company. Like, I'm not stingy on the amount to pay her. My issue is just link her to the right thing. This is a bet on the US is going to grow in a way that not only justifies the high valuation, but drives it further based on fundamentals.

1:04:57Fine, do that, pay her well. But if that is not what happens, I don't think you start rebasing, et cetera. And I think the 100 % sell down, I don't really under, it feels like, I don't know if you, There was one with DroneShield. Now there's a zero full sell down. Maybe, what do they say, two swallows don't make a spring or whatever they call it or summer or whatever season. Well, this is nowhere near as bad as DroneShield in fairness. DroneShield was far worse. That was comical. The idea of a CEO selling 100 % of their shares in a company whilst saying, I still believe in a long term, I just had to buy some very expensive new slippers to walk around the house with, like, come on, give me a break.

1:05:38Like, it's a terrible look and it shouldn't be happening. And I think, you know, that's - Well, so far be it for me to defend her or Zero because I've been a pretty strong critic. But I think she genuinely would have had tax obligations. She's got all these other options that aren't vested yet, but she may have had to pay some tax on that. So I think the tax, I think it probably was legitimate. But I think the reason she had to sell was she's got all these other, like, in the money options. Maybe. Or invested in the money. So the Xero boards created this noose for her back and it made it even worse.

1:06:08So she sold all available equity. She always has this other equity that's not quite available yet. So, again, I'm not defending her, but this is nowhere near as bad as DroneShield where they just cut and run and sold everything. So, by the way, you've been generous to put the noose around her back and not her neck, so you are a very soft guy, which I always say. But so this is my question to you. What would you – I make you the chairman of Xero now and you say, I don't want it, and I say, too bad. You have to get it because, you know, I'm forcing you. And so what are you going to do? What would you do now?

1:06:36I wouldn't care. I'd get rid of it for sure. I'd bring in, like we saw a guy like Chris Reid who did an amazing job growing this business. I'd bring someone like him. He wasn't technically a founder, but he was like as good as. You'd want someone really entrepreneurial based in Australia who can effectively start making some proper money. But sales heavy because that's what you're talking about. I mean, a lot of our listeners won't be familiar with Chris, but Chris is heavily sales focused. And so you'd bring someone in that you can say, show me the money, and they'd say, yeah, I can show you the money.

1:07:06Can I say, you just made the point about, you just made the point that, oh, they can do an acquisition and make us a bunch of money, increase the share price. This is another part of the problem, is when you give someone incentives aligned to rapid short-term increases in market cap, and then you let them go and buy expensive, highly risky acquisitions like Milleo was, it creates a completely perverse incentive. It's a heads-eye-win-tails-you-lose situation that I'm going to go and do this highly risky stuff. I'm using the company's money, not my own money. I'm going to use the company's money.

1:07:37This is the downside of giving equity to employees or to CEOs especially is incentivize them to take stupid risks with shareholder money because if something goes wrong, it's not like it's you or I founding this business. If this is a disaster of an acquisition and we lose 90 % of the share price, Skinda's still got a massive base. She goes on and gets some other job. She doesn't care. If you're a founder of this business, you've lost all your money. You would never act this way. I would never do a risky acquisition like this at Luxury Escape. It's moronic. But the board incentivized her to do this through the way they structured her incentive.

1:08:10Well, you would call this – I mean, it's less heads I win, tails you lose. It's more you would call it maybe agency costs of her agency. You might call it – This is classic agency. Encouraging people to take very asymmetric bets. So the thing is, if it flies, she makes a fortune. And if it bombs, her shares bomb as well. but she still walks away with a chunk of money and she can go on and do the next thing. And she's got a big base and all this stuff, so who cares? No, I agree with you. Well, it's interesting you say. I'm not sure what I would do, but I do know this. Like we said when this price was flying up, we said, this is a short.

1:08:44And we would say it was a pretty easy call. People thought the mail that we got maybe didn't entirely agree with that. It definitely was an easy call. Like it was absolutely the right call. I haven't looked at revenue and profitability, et cetera, for a while. So I don't feel like I'm super across this business. But I don't feel like things have gotten better with this business since the last time we spoke. And I think the likelihood of her still being in this seat in two years, but she's not going to be in this seat in two years. You agree with that? One way or another, she's not going to be here in two years.

1:09:18I'd be sure. And the real tragedy, this is a great business, to your point, that has a lot of powers. It's got, it was a great brand. It's got incredible switching costs. Like it's almost not impossible to switch, but it's super hard. It's like a mini ARP for businesses. So it's not Oracle and it's not quite NetSuite, but it's getting there. So it's a really great business. That's why the market valued it so highly. And we don't believe in the AI apocalypse story on this business. Like you and I don't believe in that story. And also you mentioned Oracle. I mean, actually, Xero has not gone and done these huge debt deals to pile into the AI because they're just not that kind of business.

1:09:54They don't have that Oracle problem. I mean, Oracle might go broke from their debt pile. It's not impossible. I think it's unlikely, but it's not impossible. And so I would say with this business, the best thing that can happen to them, probably not for shareholders today, but the best thing that can happen to them is the Atlassian slide, let's call it, which is enough value is lost that the most intelligent thing to do with the business becomes run it as a really great profit machine with some growth. And Atlassian couldn't do that for a long time because the minute they pivoted to that kind of business, they would lose their market cap.

1:10:30But then when they lost their market cap, lo and behold, they did pivot to that kind of business. And I think that Xero needs to go on the same journey so that they can actually do what's best for the long term of this business. And that is throwing off big amounts of cash, solidifying and expanding their customer base in Australia and New Zealand and seeing whether they can make some overseas markets a nice option for the upside as opposed to this huge bet that costs an absolute fortune. If you look at just some quick metrics, it makes a huge amount of EBITDA because obviously there's a lot of, I think there's a lot of DA essentially.

1:11:08So it's 750, almost$760 million last year in adjusted EBITDA. EBITDA take a big grain of salt, Because his net profit still is$167 million New Zealand. It was down from$228 million last year, but there was a bunch of Melio costs there. So the$230 number is probably pretty reflective. That's a post-tax number. That's a clean, good number. This is still a profitable. This is not Atlassian that till I hope potentially now, or actually even now, still loses money. This business actually makes money. So it's a great business that just didn't need to be stuffed around with. Just keep making more money and grow incrementally is what they should have done.

1:11:42And how much cash is this throwing off? oh 500 like a lot of cash 500 plus 550 okay and so if you basically turned around and said if we just run this business in a growth but maximizing earnings kind of way then maybe we can throw off 300 mil of earnings pretty quickly and we impact and we can grow it 15 percent what's that great growth rate now is pretty high right because of these acquisitions i think we're about 30 percent last year it's hard to yeah to isolate i think organic growth from memory, we talked about it about six months ago, about 15%, 16%, I think it was organic growth. Yeah, that's what my recollection was.

1:12:17So if they were throwing off 300 mil, growing at 15%, I'd pay 20 times earnings for that. I might even pay 25 times because of the free cash. Net profit, you mean? Net, yeah. Or free cash flow? Yeah. Well, if doing 300 mil of net profit and growing at 15%, I might pay 20 to 25 times net profit for it, PE, because their cash conversion is so good. I might pay them a bit of a premium for their cash conversion. Then you're a big seller because it was trading at like 100 times net profit for a while. This is my problem. My problem is that business at 300 mil times even 25 is a$7.5 billion business.

1:13:01And what's this worth? 20, 12 or 20. Well, just to add, it's not doing 300 mil. It was doing 230 is its best number. If you have slowed down the growth to 15 % underlying organic and just didn't try to win this overseas war in one sweep, you just tried to grow in an intelligent, cost-effective way overseas. You might make an acquisition, but really you're driving this for profitability and 15 % to 20 % growth. You could throw 300 mil pretty quickly of NPAT on that basis, and I could pay 25 times for that because probably it's a bit much for the growth rate, but the free cash kind of compensates for it.

1:13:39And you could pay me dividends as well, if you want, especially good in this tax environment. And so considering most of their earnings are coming from Australia as well, so you get frank dividends. And so all of a sudden, I say this business, if you run it really hard and really well in that way, maybe$7.5 billion market cap, how bad is that for what I've just pitched on the current share price? What's the current market cap? About$12 billion. So it's pretty bad. $12. So I still think if it was run really well, it would be maybe 35 % cheaper than the current share price, but that would set a base for a really high quality company over the next 10 years.

1:14:14And so I think that's my view on this, that that's what they should do. They capitalise about$300 million of spend, which is why there's such a big gap between EBITDA and net. Obviously, there's some tax in there as well. So the real before tax amount is probably more like 400 so i think yeah it it's hard to see this but like even as i think you're right even at 12 billion it's hard to justify this i think it's got a fair way to fall to be honest so i think it should go down 512 which is a bit more than 40 percent and um that's why i said like a 35 fall and i think you could take this and say now we can run this thing properly and build like a real compounder over the next 10 years but i still can't quite figure out how it's going to valuation.

1:14:56Yeah. I think you justify a seven, eight billion. I think you'd be a bit more generous than the six because it is, this is a business with real powers, like really good powers and it's not going anywhere. And it should continue to expand. You could just hack out more expansion revenue and do, there's lots of cool product stuff they could do, but I think you put in - No, we're in agreement. This is going to, this will upset you, but we're saying exactly the same thing. You said between seven and eight and I said 7.5. I reckon I'm in your range. So like we're on the same page. It's disappointing, but here we are.

1:15:26Yeah, let's go to another story. This is an interesting one and these are businesses that get a lot of press but actually relatively small businesses in terms of market cap and profit but super interesting. And in a move that would have been unthinkable even two years ago, the Australian's Data Room reported that Craig Hutchison, a good friend of the pod and Greg Ohachie's sports entertainment group which owns obviously SEN, the radio station, is running the rule over ARN Media. ARN, of course, owns 58 radio stations in the digital platform iHeart in Australia. SEG has allegedly bought 2 % of ARN, which of course remains ARN, that is, remains in broad and a legal fight with former star Jackie O, who is suing the business for$82 million.

1:16:06ARN was able to settle with Jackie O's former partner, Cole Sandelands, for an amount believed to be$12 billion with the help of former CEO, Kieran Davis. ARN was known as APN News and Media before changing its name to here, there and everywhere. It then sold its advertising business, ad-shel to O-Media for$570 million in 2018 and became a pure play radio broadcaster and changed its name back to ARN Media. It then made an unsexful attempt to buy rival Southern Cross in 2024. Southern Cross, of course, since hooked up with Channel 7. This deal got derailed after its private equity partner Anchorage withdrew.

1:16:43AON share price has incredibly slipped to only 25 cents, valuing the business at$76 million. What do you reckon this business was worth a decade ago? What do I think ARN was worth? I think it was worth$500 million. $1.5 billion. So it's been quite the fall from grace. I think it was a lot more than that if you go back further. That was the glory days of newspapers. I own a bunch of newspapers. So it's been a bit of fall from grace. SEG, meanwhile, is a bit of a trading places. That's trading close to decade-long highs. Share prices rebounded from$0.18 in 2023 to$0.36 now, giving the business evaluation of$100 million.

1:17:21And the company recently lifted its EBITDA guidance from$16 to$18 million. This is a remarkable comeback story from Hutchie. I remember a few years, it was like three years ago, that the nine papers were running stories about the business being insolvent. So it's been one of the great comebacks, one of the great business comebacks for the sporting radio station. ARN reported declining profitability. It still actually makes more EBITDA than SEG. It had EBITDA of$45 million before significant items. It had a bunch of significant items. If you look at its before tax profit, ARN made$7.1 million. And SEG, which has much lower EBITDA and other costs, generated$5.9 million last half.

1:18:03So if you look at a net basis, SEG is actually materially more profitable than ARN, despite the EBITDAs being quite different. So it's a really bizarre story of cat and mouse, this one idea. What are your views on this sort of dog eats man story? Well, I don't have a lot of strong views on this. I always wondered whether the attacks on Hutchie a few years ago were based on reality or wishful thinking by media rivals because, I mean, it might have been true. He denied the stuff all the way through. if you remember you hosted him at an event where I spoke to him afterwards and he said I did he was it was during that time actually it was right during that time and he said to me afterwards it's just all a beat up and it's not true now of course he'd say that I didn't know him but um but I think he might have been telling the truth like I'm not sure he was ever in such dire straits as that.

1:19:03I think the Murdoch papers were running some stuff against him as well. So who knows? It was more the nine papers. The Murdochs a little bit, but nine were going super hard. And the bottom line is that radio, in reality, radio has become a niche media business. It is no longer a mainstream media business. There's kind of no mainstream media business except the main social media players now. Everything is niche media. And so these businesses are never going to get valuations of mainstream media again. And that's what you've seen in the drop in valuation. And I think what Hutchie has managed to do is to figure out a way to run a very profitable, small niche media business, small by historical standards.

1:19:52And he does it really well. It's another example of a founder outperforming hired executives. And, yeah, I think that - Well, he's not - Archie's not technically a founder, but he is in - Archie's a founder in substance, but not informed. Okay. Well, I didn't know that, but he feels like, listen, that business feels founder-led. Maybe what I'd say is this. We need a name for someone whose sense of self-worth is so tied to the business that it's essentially indistinguishable from them. And traditionally, that's a founder. But really, it's less who founded it you're looking for than that emotional dynamic that makes the difference.

1:20:36He basically MBO'd it in some ways. He had backers who backed him in. So he's in substance a founder of that business because the original founders are long gone. But I think that makes a great point. He's effectively excellent. And I was going to say the same sort of thing. So we work with SEN, we have for a number of years, even though it's probably not exactly the demo you'd think would be ideal for us, but they did such an amazing job in crafting a media solution like we do with our partners on the podcast. And we're obviously founders and Will's now a co-founder. So if you look at what we do on this podcast, our sole goal is how do we make sure our partners have an incredible experience and they make money from us?

1:21:12We don't, we're not, it's not about how much money we can make is we want to make sure they make lots of money. And obviously then they'll feel good about partnering with us. I think Hutchie does, operates the really the same way. And so we have a three times a week segment on SEN at 555, where me or someone from the business goes and talks about our deals and we can, and we speak for five, four or five minutes and we can really get across. We want to solve the trust issues we have because people said, how it's the too good to be true issue with Electric Escape. So we can really do that because I can go on and literally speak to SEN talent.

1:21:42and talk about our deals and how we get the deals and why the deal is so good and what's so good about them. Even if you don't buy it, you can sort of learn a bit about going to Bali or going to Vietnam or going to wherever. And Hachi came up with this great structure and we obviously do other stuff with them. And we did this with a couple of other radio stations, but we actually tried doing it with ARN and they just wanted to charge us too much and we couldn't get there on commercials and they lost our business. And Hachi has kept our business for like four or five years, however long it is now, justifiably so.

1:22:10And we will continue to advertise with them because they do such a great job and I see Hachi every year and multiple times. And he's an old-school media proprietor who understands his clients and wants his clients to succeed. And I think most other – and ARN is not the other. They're all like that. So we're a bit harsh on ARN because they're no worse than anyone else, or no better or worse than anyone else. But I find that other radio stations just care about how do we maximize – how do we get the most out of our clients rather than how do we get our clients a great result? Well, I would also say with ARN, just to flip to them for a second because, you know, if they're the target, it's interesting.

1:22:44I would rather be ARN than Jackie O today. I think there's a lot of question marks over what that contract is. Kyle did not make her life easier, both on air, obviously, but also by settling in the way that he did. Like he's going to be, he's not going to be a witness that makes life good for her if that goes to court. a judge is probably going to be reluctant to bankrupt a company full of employees to enforce her contract and so i think that um it definitely there should be a settlement to this like this should not go to court oh surely there has to be a say like it cost her a fortune to do this because they're going to repeal her and she doesn't get the money for you like and she's got she can't work elsewhere like this is disastrous i think the challenge is that she thought that she had$100 million coming down the pipe over the next 10 years, and she has to emotionally let go of that before she can settle.

1:23:43So let me give you a line about my view on this. That is from a book that Mike has read but didn't love enough to buy the sequel to, which was The Robot Diaries we just talked about. And this is a line that the murder bot gives in this book, which I don't know if this is the one in the book that you read. No, it wasn't. This was in the next book, Mike, that you missed out on reading. I think this is a great piece of wisdom. And by the way, I think the author's got this wisdom because she's 60 years old and she basically channels her wisdom through the robot in the book. And this is what the robot says.

1:24:18It says, or he says, sometimes people do things to you that you can't do anything about. You just have to survive it and go on. And I think that in that simple line that seems almost nonsensical or childish is very deep wisdom that sometimes these things happen and people do things to you and it's terrible but you can't do anything about it and just make the most of it stay alive and move on and that would be my advice to her about this situation with her contract get as much as you reasonably can and the best deal you possibly can and move on with your life because you're not going to be able to do any more about it than that.

1:24:59Just something, Jackie, I actually hate long-term contracts like this. I think they're terrible for both parties. They're terrible for – and one of my criticisms of my football team was for doing the exact same thing, doing these ridiculously long-term contracts that turn out terribly is because if you look at ARN example, they did the Kyle and Jackie O thing. It wasn't working out commercially. It's no good for – clearly no good for ARN because they've got this huge commitment. But it's also no good for Jackie O and Kyle who clearly had this relationship that descend into animosity. And you almost have a case of unjust enrichment.

1:25:31They now have to demand all this money when they weren't earning it in reality. So long-term contracts always are terrible. No one should enter into them. Like a 10-year, eight-year contract is bound for disaster. And there's no need to do it because both parties can always break it anyway is what happens. So there's no upside. There's only downside. I don't know why anybody enters into these long-term contracts. It's just so stupid. I hear you. I hear you. Do you want to talk about 4D Medical, which is a company I actually don't know much about. Okay. So let me tell you about this business. We're talking about it because it's a$2 billion business.

1:26:05Recently, it was a$3 billion business. A year ago, like literally 12 months ago, what do you think the valuation was? This is a publicly listed business? Publicly listed business in Australia? Yep. I'm going to tell you what they do in a second. They're worth two bill. They were worth three bill. What do you think they were worth 12 months ago, 365 days ago? $500 million. $150 million. So, there's a business that's gone on a bit of a run. What do you think their revenue is? Let me just start with a big picture. I'll tell you what they do. Mike, company worth two bill, was worth three bill. How much money do you think they do in revenue, in sales a year?

1:26:40Have a guess. $200 million? Yeah, I think that would be about the top amount, as in that should be the least that's selling to be valued at that. Yeah, unfortunately, you're out by$194 million because the answer is$6 million. So it did$6 million of revenue. This looks like a – I'm just looking quickly because I don't know much about it. This feels like a ProMedicus but for a slightly different field. So instead of analyzing x-rays essentially, it analyzes other stuff. So is that sort of a ride in the ProMedicus story? Yeah, so they should use you for their PR. You'd be great for doing their investor relations.

1:27:16That is exactly what they want their market to say about them. And even better, ProMedicus entered into a deal with them, which is a bit of a complicated debt and equity type of deal. But ProMedicus invested$10 million in them. And in December, that$10 million, they said it's worth about$160 million. And it's come back a bit since then. So let me tell you what they do. And then let me tell you why you might not think that today they're a great comparison with ProMedicus. So I want to explain a little bit about how the human body works very briefly. So when you breathe, air goes into your lungs.

1:27:51You're probably familiar with that part of the process. But inside that air is oxygen. And that oxygen is very important that oxygen gets into your body and to your tissues, to oxygenate your tissues, to produce energy. And the way it does that is blood flows through your lungs. And there's an exchange between the breathing part of it and the blood flow part of it, where the breath comes in and the oxygen jumps from the breath, the air, into the blood, and then gets carried around the body by the blood. And so that's how your lungs are supposed to work. And mostly, you'll be happy to know very successfully.

1:28:27But sometimes your lungs are not working so well. And one of the reasons might be because there's some mismatch between what's called ventilation, breathing, the air coming in, and perfusion, the blood going past. And so the letter that medicine uses for ventilation is V. That makes sense. and the letter that medicine uses for perfusion is Q. That makes no sense, but it does. That's okay. So you can do a VQ scan, it's called, and a VQ scan basically tries to see is the ventilation, the air coming in, being matched with the perfusion, the blood going around the body. And so the way that these have historically been done is in two settings.

1:29:08In one setting, the way they've been done is that you get someone to breathe in some radioactive puffer kind of thing. And then it's got like, it's for nuclear medicine. And then you can take an image of them with a scanner and it can show you the way that that breath has moved through the body, through the blood, because it's radioactive. So that's one way of doing it. That's a VQ scan. And another way you can do it is as follows. In fact, let me leave the other way. You can do it for a second. And so, because we'll come to that, because we'll start with a VQ scan. So what 4D Medical has said is we've developed this software, and by the way, this came out of a university.

1:29:48It's been developed since 2005, it's a long pedigree. We've developed this software based on a well-documented and researched and published principle. So they didn't invent this idea. They've just developed one way of measuring with this idea that says, instead of having to get you to go to nuclear medicine, which is expensive and it's often not very accessible, and then do this scan of you, we can just get a CT scan, a CAT scan, which is very readily available and cheap. And we've got a special way of being able to measure the way the breath is moving and the blood is moving based on that. And they call it CT VQ.

1:30:27That means ventilation and perfusion. That's the VQ part via CT, CT VQ. And that means no one's going to have to do all this expensive nuclear medicine stuff again. And there's been a whole lot of research about how good this is compared to traditional VQ scans. And the answer is, it's probably not worse. It might be. It's not clearly a lot better, but it might be an alternative. And the FDA has given them approval. And lots of very, not lots of, but some very prestigious hospitals have partnered with them to trial it. So keep in mind, like this six mil of revenue, okay? So not exactly rocketing, but they're doing a trial.

1:31:04And they would say the addressable market on that business, if we can displace all of the VQ scanning, we can talk about whether that's going to be likely, we replace all of that, maybe there's a few billion dollars a year of TAM on that. And we can make like a 99 % gross margin and have ProMedica's type profit margins of like 50 plus percent on the net profit line. Cool. And so then they said, we've got an even better thing that we think we can solve. And we've just started a test on that. And that is as follows. the real risk with all of this is that someone comes into the emergency department and it's really, they're in terrible shape.

1:31:42And like, they're barely responsive. It's super hard for them. They're puffing. And it's like, oh, we think what might've happened is maybe a clot occurred somewhere in the body and it circulated around the body. It went into the lungs because it's a closed circulation. And that clot of blood got stuck somewhere in the lungs. And that means no other blood can go past that clot. And so when we breathe in the air, the blood vessels that are opposite where we're breathing, they're not going to be able to take any oxygen because no blood can flow past the clot. And so ventilation perfusion is going to be mismatched.

1:32:16It's not going to work. And so what they'll do in the emergency department is they'll go and get some radioactive iodine and they'll inject that into you. And then they'll take a certain kind of CT scan and they'll scan to see, is the radioactive iodine being stopped by anything like a clot as it moves through the blood vessels of the lungs? And if it is, you'll actually see this kind of obstruction in the image where nothing is passing. And that's called the CT pulmonary angiogram. So pulmonary means lungs and angiogram means angioblood and gram is like a visualization. And so that means doing a visualization of the blood using, in the lungs, using a CT scan, CTPA, pulmonary angiogram.

1:33:03And so the dream would be, the thing is, it's not great to inject this radioiodine into people. It's not bad. I've actually had it done because I thought I had a pulmonary embolus. That's this clot that goes into your lung. And it doesn't feel very good, but it was okay for me because my kidneys work fine and I'm not pregnant. But there are some people that can't get this injected into them. And the truth is this, that of every hundred people in the emergency department that you go and do this process on, because you're worried, because this is a cause of sudden death, okay? So all these people you're worried about, like maybe 3 % of them will end up having a pulmonary embolus and the other 97%, it will be negative.

1:33:38And so the study that 4D Medical is doing now is they're doing a study with Mass General Hospital, which is the main Harvard teaching hospital. And it's to test whether their software applied to CT scans is going to be good enough so that it can replace having to inject the radioactive iodine and doing that scan. And that's another few billion dollars of TAM, a total addressable market. So that sounds amazing, right? But it's six mil of revenue. And just to put the icing on the cake on this, when a few days ago they decided to do a halt, a trading halt on the market, and to have a price-sensitive announcement.

1:34:23And so that's a big deal to tell the ASX you got a price-sensitive announcement. And their price-sensitive announcement was in Congress in the US, there's a bill, not a law, a bill that's being introduced that says the government wants to fund these kind of studies, and we're the best at this kind of technology, and the total value of this bill is going to be 20 million US dollars. That was their big announcement and it certainly was price sensitive because the share price fell 15%. I think that if you're being priced as a meme stock, you better be pretty good at your market announcements and keep the meme stock announcements.

1:35:03Yeah, that's right. And this was not a good meme stock announcement. And one of the things that the CEO said in one of his releases is this, and now you can be the judge about this, 4D Medical is already displacing nuclear VQ. That's the VQ scan where you breathe in the nuclear stuff. It's already displacing nuclear VQ at pace. And now my question would be, what do they mean by at pace? That word's doing a lot of heavy lifting because I think that pace would be very slow pace because their revenue is$6 million. At a pace. I wouldn't call that at a high pace. That's a pace. Yeah, at a pace, they should have said.

1:35:41I know I'm being very cynical about this. It's a slow walk. That's right. Maybe. Yeah, exactly. And so I know I'm being cynical, but I'll finish by saying this and you can tell me what you think about all of this because you told me, is this being positioned as a Pro Medicus lookalike? I'll finish by saying these two things. One is, so Pro Medicus is trading on whatever it is, 100 times revenue or something, and this is trading on, depending on what you use, 250 to 400 times revenue on 6 mil revenue, you're not the 250 mil revenue that ProMedicus is on. And ProMedicus is like a 20 year old proven business and took a long time to get to this kind of profitability.

1:36:19But one advantage of coming from the medical profession, apart from being able to explain VQ scans, is that I can speak to people in the emergency field and a few of them in the respiratory field. And I can say, have you ever heard of this company? And what do you think about all of this displacement argument with this new technology. And from, this is like an N equals a few, okay? It's not N equals 50, but number one, no one's ever heard of this company that I spoke to. And number two, this VQ scanning that's non urgent, like not in the emergency department, but just sucking that stuff in. From what I've heard, it's actually on the decline, not the increase.

1:36:55And me personally, this is just based on me, when I speak to them and based on what I know, I think in a real emergency situation, when this is real life and death, sudden death pulmonary embolus, I'm going to take whatever the gold standard is that lets me visualize if there's a pulmonary embolus, not tells me that there's a very high probability that there's a pulmonary embolus, which I think is what this is going to come out as. And so I think, and like, so yeah, there's some people that can't have the radioactive iodine. Maybe this will be the last resort for them, but I just am very, I could be totally wrong about this, but I'm very skeptical that in the next five years, let's say, this business is going to be able to generate the kind of revenue and growth that's going to justify this kind of valuation.

1:37:40That's my position on this. I'm very happy for you to tell me what I've got wrong on this or what I'm missing or to rebut it, but this feels to me like a crash and burn when the market falls. Well, I haven't spent as much time as you on this and you've got the medical background that I don't have, but I think we know how this story ends. It ends not well. And look at, Brent Rennick has an 85 times sales multiple. It's the most highly valued stock on the ASX. It's rightly or wrongly - And it's been falling. Very richly valued on the basis that it's got, and it's fallen and recovered. But this is the Rolls Royce of Australian companies in terms of valuations.

1:38:15So I think you almost think best case, this 14 business drops 90%. That's probably my best case. I think more likely it drops like 99 % because we've seen this story, but this is 1999. And the problem is we've got, this is just another, we talk about a meme stock. This is just another case. The market has become part genuine investment vehicle, part casino now. And what's so sort of challenging is there's some businesses that are really fairly valued that aren't overvalued at all. And there's others like this joke that are completely overvalued. So the problem is you've got both two companies or multiple companies on the ASX.

1:38:47One's treated like a casino and one's treated like a genuine Warren Buffett style investment. And the problem is for the average sort of punter coming on, they'd struggle to tell the difference between both. And this is, we know where this one sits. This is just like, this may be a great business, but risk-weighted return. This should not be valued anything like, this should be maybe a$300 million business now based on the chance maybe this technology succeeds, probably doesn't, but you're going to give it that sort of roll of the dice. But valuing this at$2 billion is so beyond the realms of any kind of sensibility that's not even, almost isn't worth talking about, it's such a joke.

1:39:18And it actually just makes a mockery of the entire market when shit like this gets valued in ridiculous amounts like$2 billion. And we saw it with Satire. We saw it with Temple. We weren't geniuses calling these businesses being overbought. Strangely, most people weren't. But it was so obvious that Satire wasn't worth$2 billion. Satire is now worth$30 million going to zero. We saw when Temple was worth$3 billion, it was going back to 150 years already on the way. It's down to$500 now. It's so obvious these meme stocks get revalued at some point, yet there's people gambling on them every day. Well, I feel like, so this business to me, I don't feel about it the way I feel about, whether you felt about Cetor and I feel about Temple and Webster or Adore Beauty or these types of businesses.

1:40:02The way I feel about this business is there's not a 0 % probability that this becomes a big deal and really succeeds. And the probability, I'm not saying not zero is in like 0.1%. I think there is some probability. It might be 5 % to 10%. It would be my estimation of this, okay? That's where you get the$300 million from. That's where I get my$300 million bull case. Well, I would say less, to be honest with you. Like this company spent a long time being worth$100 million. Now, they did just pick up another couple of$100 million from shareholders to jam into the bank, which is handy because they currently lose$30 million a year.

1:40:36So there's your floor on it. So maybe it's the$100 plus the$100 plus the$200 of cash. But I think if you said to me, that's the price, should I invest in that? I would say, if part of your portfolio is binary investments that are VC, venture capital-like in character, then I would say, sure, you can invest in this, but you should be aware that you're going to have the hell text out of you under the new tax system for any company that generates this kind of return, because the higher the return, the higher the tax rate. I mean, that's so appalling. I won't talk about that again. But I think the problem with this business at$2 billion is I don't think there's room for upside, even if you're right, about how it turns out.

1:41:21Oh, clearly. No, clearly not. It's a joke. And this is a casino. This is a full casino now. And I think well spotted by you. But this is the casino where even if you – it's like betting on a roulette wheel. And I don't know much about betting. It's going to become obvious in a second. It's like putting your money on a roulette wheel and you pick one number, number one. And if it lands on that number, instead of getting what do you get, like 35 times your money or whatever it is, whatever it is, you get two to one. That's what this bet is like to me, you know? And it's like, I think there are more numbers than that on this roulette wheel.

1:42:00I think it's going to be spinning for a few years still. And like, you need a better return if it lands. So do you agree this is S-H-O-R-T? I think you struggle to short it. I don't think you get the stock, but yeah, if you're able to. Well, it's ASX 200. So if this is, I don't know if it's in ASX 200, but like this valuation, this gets you into the ASX 200. And so that means that there are probably passive funds that will lend you the stock to short. So I think, I mean, you know, we have to say it's not investment advice. And like, I can tell you, I'm not short, I'm not going to short it. but like I think that this is an obvious short frankly.

1:42:40I think good call. We better leave it there. It's pretty much clicking over to two hours now. Thank you, Adia. We'll be back. We're going to do a – we had so many business stories to talk about. We're going to actually put our Saturday episode to be a business-focused episode. So we'll push back the Ask Us Anything again this week. So listen in for our big business episode on Saturday. Thanks again, Adia. Thank you, Mike. We look forward to seeing everybody in a few days' time.

1:43:05Thank you.