WEBVTT

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Welcome back to The Rate of Change with York

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Wealth Management. The Rate of Change is a podcast

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designed to help you in the pursuit of building

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long -term wealth through the insights of some

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of the brightest minds in asset management. I'm

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your host, Murdoch Gaddy, and we welcome back

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a guest, Michael Frazes from Frazes Capital Partners,

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to get into what I love, you know, global growth.

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you know, AI, you know, what's happening in the

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world today. There's a lot happening in the world

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today and his beloved life science companies.

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So, Michael, welcome back to The Rated Change

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and let's get into it. Thanks so much for having

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me on, Myrtle. Looking forward to it. Fantastic.

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Okay, so why don't we just quickly do an introduction

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to yourself? You know, who's Michael? What do

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you do for the people that are just joining us

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for the first time? Yeah, sure. I mean, we run

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a wholesale fund, invest globally in growth.

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The key things we do different is we really focus

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on the fastest growing companies we can find,

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mostly in healthcare and tech, but increasingly

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in other sectors of note defence. You know, it's

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never a dull moment at the moment. These are

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pretty wild markets. So being able to look more

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broadly for growth is really helpful. And we

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also are very quantitative. So we have quantitative

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risk models. which help us scale in and out of

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positions, you know, systematized profit -taking

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and levels at which we'll close positions and

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then re -enter them when markets recover. And

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that's quite topical because there's a lot going

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on at the moment. Wartime markets, I think was

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the exact tagline you dropped before we hopped

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on. I think it's a good way to... Kind of stated,

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it's kind of like a four or five speed economy.

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On one hand, people are getting their bums handed

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to them. On another hand, you know, in some of

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the resources sector, it's doing quite well.

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So I suppose, you know, what does wartime markets

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look like for you guys? Yeah, you know, interestingly

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enough, there's a pretty well -established playbook.

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And I'd say, actually, this is a very typical

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example of that. So in war, typically resources

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go up a lot. Energy, resources, there's immense

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demand for rearmament. In fact, if you think

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about it from first principles, people are just

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blowing stuff up, right? It has to be replaced.

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In this case, every missile that's been fired,

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certainly from the United States in Israel's

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case, will have to be replaced. And also, there's

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a whole set of new technologies that are being

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pioneered in this particular conflict, as there

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usually is. And some of them have been pretty

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impressive. For example, laser defense systems,

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drone defense systems. And it remains true that

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the vast majority of air bases and militaries

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do not have these capabilities. And they're getting

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a very clear demonstration of why they desperately

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need them. So that's likely to trigger a huge

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amount of spending as well. And the downside

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is commodities going up might be good for commodity

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producers, but for consumers, it's terrible.

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It's like an extra tax. So if a family has to

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pay an extra $1 ,500 for fuel every week, then

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that comes directly out of their purchasing power.

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And if the conflict's short, it doesn't really

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matter. You know, if this is over and resolved,

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then we'd never pretend to have any better idea

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of anybody else of how long these things go,

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other than the fact that these things always

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seem to go on way longer than people expect.

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You know, four years in Ukraine, even Israel

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and Gaza, that was two years plus. These things

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are always longer than everybody expects. The

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longer that goes on, you know, that extra $1

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,500 drain a week starts to really hurt consumers.

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And in Australia, it's even worse because inflation

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is high. It's nearly 4%. So before the war, it

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looked like we're about to enter a rate -rising

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environment, which would further squeeze wallets.

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So the combination of all these things makes

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it pretty bad for consumers and pretty good for

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a very small subset of the economy, which is

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commodities, energy, defence, and some industrials.

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Yeah, this is wild. where to begin but i suppose

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where did where to begin with this is the normal

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human being like you know i've got a isuzu ute

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you know i was loving and enjoying so much i

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think it was a dollar 60 about like a month ago

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um it's two dollars 60 now and then up in queensland

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it's 280 going on in some places three dollars

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where essentially all they drive is you know

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diesel utes like that's a lot people see it on

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the pump but i think what a lot of people when

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you agree don't realize is think about all the

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people hauling your products. Think about essentially

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your Amazon orders bill, right? They're all essentially

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diesel -based trucks. The cost, that's a 40 %

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to 50 % increase on those prices. It has to go

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somewhere. Yeah, it's massive. And ultimately,

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it comes out of consumer pockets and consumer

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wallets. And to the extent that cutback spending,

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that's bad for all kinds of companies that might

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not even be directly affected. And to the extent

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it affects equity markets, it's one of the reasons

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why these environments are so bad for stocks

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is... you know equities are kind of like the

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end of that purchasing thing you know that's

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the money you have left over you might invest

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and that's certainly getting drained so there's

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there's that to consider as well so all up it's

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a pretty uh It's this war kind of came out of

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nowhere. I think it's a bit surprising. I mean,

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obviously, people did comment on the build up

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in the weeks leading up to it of the US moving

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so many military assets in close proximity or

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in, I guess, in range of Iran. So there was maybe

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a couple of weeks warning. But really, you know,

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before this was happening, the debate was around

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memory, semiconductors, how much, you know, the

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800 billion capex or trillion dollars of capex

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was going to affect industrials. You know, that

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was the kind of things that we're talking about

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only a few weeks ago. And now there's another

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huge factor going on. And that is these wartime

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markets. And it's absolutely going to affect

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everybody the longer it goes on. That's what

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I love chatting to you, Michael. You know, what

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I see compared to what you see, compare notes

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and then try to make a play. But what was very

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interesting is someone said it to me. They found

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it very interesting that, you know, Trump went

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into Venezuela. And now you look at it now, like,

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you know, on the 4D chessboard, it kind of makes

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a lot of sense. Like, why would you go? and potentially

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impact the straight and shut down essentially,

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you know, access, well, you need another source.

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So essentially now they've got access to those

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Venezuelan, you know, oil fields and gas. It

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just changes everything. And the other thing

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as well, if you think people wonder how it impacts

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people, we're about to move into the European

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summer holidays. You're Greek, my wife's Greek,

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you know, good luck trying to get to Greece,

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you know, through the Emirates these days. It's,

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you know, pretty much everyone's on standby.

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Yeah, you can't risk it. I mean, why would you

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risk going through Dubai and be stuck there for

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two or three days in an airport hotel at best?

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You know what has been interesting? It's been

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interesting to see the Aussie dollar kind of

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break out of a range and strengthen. This happened

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before the war, and I think the war will, if

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anything, kind of strengthen that, particularly

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against heavy energy importers like the euro,

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because Australia is somewhat shielded because

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we export gas, we export energy, we export commodities.

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But because we're already higher inflation than

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most of the developed world, for various reasons

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that maybe we won't go into, it's political of

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nature. So it looked like Australia was going

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to enter into a rising rate environment ahead

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of the rest of the world. And that was pushing

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up the Aussie dollar. But now you've got this

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demand for energy and commodities, which fortunately

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Australia does export a lot of it. So we can

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all things equal expect our currency to strengthen

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against. commodity importing nations and currencies

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yeah the currency is a really interesting one

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like you look at whenever a lot of people invest

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so hypothetically buy nvidia shares right everyone

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goes oh it's great it's doing well but then the

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currency's going from 60 cents up near 72 and

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then you know one i used to work in foreign currency

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back in the day so i had a conversation with

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a guy that i know the only reason why some asx

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listed businesses showed a profit for the year

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was his currency calls and Again, not advice

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anyone, but they're forecasting for their firm

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like 80 cents by the end of the year potentially.

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And over the next five to eight -year period,

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they're also forecasting parity. Interesting.

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That does help for a year. Very interesting.

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It helps for holidays. Absolutely. But, yeah,

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no, it's just an interesting – yeah, look, I

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know we just jumped straight into wartime, all

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the topics, but it's just so fascinating from

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like an asset allocation. perspective on like

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global equities like how are you playing this

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market right now considering you know what's

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happening well it's been interesting you know

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i think it's been a pretty tough year for growth

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managers We started getting sell signals across

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software, you know, almost six months ago. You

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know, a lot of those companies really peaked

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in September and they're down 75 % plus, even

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like big names that Australians would know, like

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Atlassian. Certainly a lot of companies like

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Adobe, even companies like Microsoft are in some

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of their biggest sell -offs in the last decade.

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So we've been selling before this kind of happened,

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but we have a lot of positions on our risk models

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that are basically hovering just above. So one

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of the things that our risk approach does is

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focus on price and momentum to cut things out

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when things really turn south. And it looks like

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we might enter one of those periods now. And

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before this war, there was no real reason to

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think that the global economy was going to roll

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over. And the reason for that is there was that

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enormous CapEx build out in the United States

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and everywhere. Every country needs sovereign

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data center and AI capabilities now. It's not

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just big tech companies. And so while that CapEx

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was going, there was no reason to assume that

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wouldn't support markets, support economies,

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support all kinds of industrials that help in

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semiconductors, even things like refrigeration

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units or tools that are used to create something

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like a data warehouse. All those things were

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getting excess demand. But now there's going

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to be a lot of demand destruction, right? Again,

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this is if the war continues, if it ends quickly,

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which might be optimistic, but it's certainly

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possible, then... then that would be a huge relief

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to markets. But if this continues and energy

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stays where it is and every week that those energy

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prices stay high, consumer wallets are drained.

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And in places like Australia and elsewhere, that

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translates into higher inflation, demand for

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higher wages, higher interest rates, consumer

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wallets get drained more until you reach a point

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where you actually do start triggering that demand

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destruction, which is what you sometimes need

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to bring down that level of inflation. That's

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a pretty... bearish outlook so we're trying to

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be pretty focused we do have about 10 of the

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fund in defense equities that seems like a bit

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low now if anything but you've got to be careful

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especially you know you know you know how many

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twists and turns there are in the world and in

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markets you know the war could end and then all

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these trades reverse almost overnight that's

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that's very possible so i don't think it necessarily

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makes sense to pile into something just because

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it's a war beneficiary either um but we own some

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We own a little bit of drone shield. We own electrical

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optical systems, which was in the news recently

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over controversial contracts. But the reality

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is, you know, they have, if you think about drone

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shield, that's like drone jamming. That's like

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part of the puzzle. It's like a small part of

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what you need on the battlefield now. You certainly

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need to jam the airwaves so that people can't

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just fly a super cheap drone at a tank. You know,

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you need to jam those things. But sophisticated

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drones won't be defeated by that. and potentially

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and and you actually need to destroy the drone

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if you really want to want to be sure that you're

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safe and so computer aiming projectiles you know

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guns lasers things like that that's probably

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where the bulk of the spending will go to from

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here and eos just happens to be a local company

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there's there's a couple in the united states

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and offshore that you can invest in as well just

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so happen to sell these things um there's huge

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demand for lasers already from data centers and

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the next generation of semiconductors and there's

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also demand for lasers now in defense so ultra

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high -powered lasers that can dazzle missiles

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and shoot them down and dazzle drones you know

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there there's no doubt there'll be a multi -year

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build -out and even if the war does end people

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are going to need these devices they're going

00:12:18.559 --> 00:12:19.679
to need them on their ships they're going to

00:12:19.679 --> 00:12:21.679
need them surrounding their airbases arguably

00:12:21.679 --> 00:12:23.960
they'll need them around They're major cities

00:12:23.960 --> 00:12:27.100
if they're in a conflict area. So the demand

00:12:27.100 --> 00:12:29.000
prospects are pretty strong for some of these

00:12:29.000 --> 00:12:32.299
companies. Other than that, I think Australians,

00:12:32.519 --> 00:12:35.100
you know, the beauty of what you do, which is

00:12:35.100 --> 00:12:36.779
kind of very different to what I do, is that

00:12:36.779 --> 00:12:38.960
you can play the asset allocation thing, right?

00:12:39.080 --> 00:12:41.240
Like, ideally going into this, you already had

00:12:41.240 --> 00:12:43.740
some commodity exposure, some energy exposure,

00:12:43.980 --> 00:12:45.960
maybe a little bit of defence. It's harder in

00:12:45.960 --> 00:12:48.960
Australia. Obviously, in the US, there's, you

00:12:48.960 --> 00:12:50.860
know, a whole sector of massive high -quality

00:12:50.860 --> 00:12:53.159
companies. to invest in. Here, the sector is

00:12:53.159 --> 00:12:57.559
smaller. But, you know, I imagine most people

00:12:57.559 --> 00:12:59.299
do have some of this stuff in their portfolios,

00:12:59.340 --> 00:13:01.700
particularly in Australia with commodities. And,

00:13:01.759 --> 00:13:03.980
you know, we won't see it. When the Aussie dollar

00:13:03.980 --> 00:13:06.019
strengthens, it's not like your portfolio goes

00:13:06.019 --> 00:13:08.100
up. If anything, it goes down because so many

00:13:08.100 --> 00:13:11.179
of us hold up foreign stocks. But in a way, you

00:13:11.179 --> 00:13:13.620
kind of are getting wealthier. So we can all

00:13:13.620 --> 00:13:17.360
take comfort from that. Unless you're smart enough

00:13:17.360 --> 00:13:21.980
to hedge the US dollar. Yeah. I mean, the problem

00:13:21.980 --> 00:13:24.379
with hedging, you see there's famous... You're

00:13:24.379 --> 00:13:25.639
damned if you do, you're damned if you don't,

00:13:25.659 --> 00:13:27.080
if you get it wrong. You're damned if you don't.

00:13:27.080 --> 00:13:28.519
And sometimes it's better just to go with your

00:13:28.519 --> 00:13:30.740
market. So if you're unhedged, you know, usually

00:13:30.740 --> 00:13:34.080
prices will adjust so a whole industry doesn't

00:13:34.080 --> 00:13:36.639
go under. You know, there's all these like feedback

00:13:36.639 --> 00:13:39.340
loops that come into play. But if you hedge,

00:13:39.559 --> 00:13:41.139
the worst thing you can do is hedge, make a ton

00:13:41.139 --> 00:13:43.240
of money, then you've got a treasurer of your

00:13:43.240 --> 00:13:45.500
company that's like, I just made $800 million

00:13:45.500 --> 00:13:48.519
personally, a dwarf, the entire profits of the

00:13:48.519 --> 00:13:50.700
business. Why don't you give me more capital

00:13:50.700 --> 00:13:53.100
to invest? And that's been the source of a number

00:13:53.100 --> 00:13:55.220
of like very high profile blow ups over the years

00:13:55.220 --> 00:13:58.179
where somebody got a hedge right. Five years

00:13:58.179 --> 00:14:00.740
later, they blow up. You know, the treasurer

00:14:00.740 --> 00:14:03.379
starts becoming much more vocal, much more powerful,

00:14:03.559 --> 00:14:06.879
starts running a team of traders and that therein

00:14:06.879 --> 00:14:09.480
lie the seeds of destruction, because these things

00:14:09.480 --> 00:14:11.799
are inherently unpredictable. I don't think you

00:14:11.799 --> 00:14:14.019
can predict which countries will be at war this

00:14:14.019 --> 00:14:16.179
time next year, for example. But if you're going

00:14:16.179 --> 00:14:17.840
to hedge, that's probably a time frame that you're

00:14:17.840 --> 00:14:22.139
looking at. Yeah, I think it's hard. In some

00:14:22.139 --> 00:14:25.399
ways, it's better not to hedge. For example,

00:14:25.399 --> 00:14:27.019
if you're an airline and you're only partially

00:14:27.019 --> 00:14:29.820
hedged or mostly exposed to energy prices, as

00:14:29.820 --> 00:14:31.240
energy prices go up, it's going to affect all

00:14:31.240 --> 00:14:32.960
your competitors as well. So you'll all have

00:14:32.960 --> 00:14:35.480
to lift prices together and that will soften

00:14:35.480 --> 00:14:37.080
the blow. They're the kind of feedback loops

00:14:37.080 --> 00:14:39.450
you can do when you're... when you hedge less.

00:14:39.909 --> 00:14:41.809
Well, with your portfolio, if you're not going

00:14:41.809 --> 00:14:44.409
to hedge, but I suppose you're purchasing assets,

00:14:44.750 --> 00:14:46.269
you know, your global growth, you can go anywhere.

00:14:46.490 --> 00:14:50.070
Does that mean that you focus on, like, say,

00:14:50.090 --> 00:14:52.289
the Australian market or the international market?

00:14:52.450 --> 00:14:54.210
Like, what do you do in that situation? Do you

00:14:54.210 --> 00:14:56.870
look towards where potentially the currency is

00:14:56.870 --> 00:14:58.929
favorable and try to, you know, maybe increase

00:14:58.929 --> 00:15:01.129
the percentage weighting of, like, say, Australian

00:15:01.129 --> 00:15:04.250
-based businesses that you like? Or do you just

00:15:04.250 --> 00:15:06.269
go based on, you know, what businesses are the

00:15:06.269 --> 00:15:10.679
best regardless of? you know, geographical locations?

00:15:11.720 --> 00:15:14.279
Yeah, look, I think in our fund, in our strategy,

00:15:14.340 --> 00:15:16.539
in our companies, currency is usually a rounding

00:15:16.539 --> 00:15:18.240
error, right? Like we're targeting two and a

00:15:18.240 --> 00:15:19.940
half to four X returns out of everything that

00:15:19.940 --> 00:15:23.240
we invest in. And the movements on both the upside

00:15:23.240 --> 00:15:26.200
and the downside are quite large. So it's not

00:15:26.200 --> 00:15:27.679
really something that we take into account in

00:15:27.679 --> 00:15:29.840
a major way. We're looking for the best opportunities

00:15:29.840 --> 00:15:32.710
and we're going to risk manage them. One thing

00:15:32.710 --> 00:15:34.470
I will say, though, is it's a huge part. It's

00:15:34.470 --> 00:15:37.529
an unappreciated part of the dynamics of Australian

00:15:37.529 --> 00:15:41.129
fund management industry. So maybe, I guess we're

00:15:41.129 --> 00:15:42.710
getting older now, aren't we? Say 15 years ago,

00:15:42.870 --> 00:15:44.470
you know, the Aussie dollar was really high.

00:15:44.649 --> 00:15:46.730
You know, it was well above parity. And then

00:15:46.730 --> 00:15:48.629
it dropped, you know, to 60 cents, basically.

00:15:48.690 --> 00:15:53.029
It dropped 40 % plus. And that was basically

00:15:53.029 --> 00:15:55.409
a five, I think some people calculated over eight

00:15:55.409 --> 00:15:58.210
or nine years, it was a six or 7 % tailwind to

00:15:58.210 --> 00:16:02.690
offshore funds. to Australian funds that invested

00:16:02.690 --> 00:16:05.509
offshore to global funds. So some of those managers

00:16:05.509 --> 00:16:08.509
were investing in very low return, basically

00:16:08.509 --> 00:16:11.029
underperforming assets, but got like a 6%, 7

00:16:11.029 --> 00:16:14.450
% or more tailwind every single year from currency

00:16:14.450 --> 00:16:16.629
and massively outperformed anybody who either

00:16:16.629 --> 00:16:18.450
hedged or anybody that was investing locally.

00:16:18.809 --> 00:16:20.889
Effectively, they could market a 15 % net return

00:16:20.889 --> 00:16:25.450
on very low returning stocks in a portfolio that

00:16:25.450 --> 00:16:27.850
actually underperformed. Now, when the currency

00:16:27.850 --> 00:16:29.990
has kind of been stable and low for a long time,

00:16:30.509 --> 00:16:32.330
When that performance kind of vanished, you saw

00:16:32.330 --> 00:16:34.370
a lot of these funds come unstuck. And I'm talking

00:16:34.370 --> 00:16:36.610
about like some of the biggest names. Now it's

00:16:36.610 --> 00:16:38.230
actually even worse. Now you're going to see

00:16:38.230 --> 00:16:42.690
if this bull case continues and, you know, I

00:16:42.690 --> 00:16:45.289
don't think anybody can say whether the Aussie

00:16:45.289 --> 00:16:47.690
dollar should be at 80, 90 cents or 60 cents

00:16:47.690 --> 00:16:49.490
or 50 cents. You know, these are things that

00:16:49.490 --> 00:16:52.740
will come. As interest rates unfold, as the war

00:16:52.740 --> 00:16:55.940
situation unfolds either way, the factors that

00:16:55.940 --> 00:16:58.620
will drive it up $0 .10 or $0 .20 or down $0

00:16:58.620 --> 00:17:01.419
.10 or $0 .20 all lie in the future. The carry

00:17:01.419 --> 00:17:03.220
trade is really relevant to it. So there's a

00:17:03.220 --> 00:17:06.160
huge suck of money into Japan out of other countries

00:17:06.160 --> 00:17:08.160
as their market recovers and their interest rates

00:17:08.160 --> 00:17:09.920
recover. There's so many factors that lie in

00:17:09.920 --> 00:17:11.900
the future. But let's say there is a scenario

00:17:11.900 --> 00:17:14.640
where we do go back to parity or even $0 .80,

00:17:14.759 --> 00:17:18.119
$0 .90. That could be a 5 % headwind that every

00:17:18.119 --> 00:17:20.859
global growth fund manager has to face. And there's

00:17:20.859 --> 00:17:23.740
basically no currency hedge funds. That was something

00:17:23.740 --> 00:17:26.799
that everybody did. The last time there was that

00:17:26.799 --> 00:17:29.500
huge rip in the Aussie dollar, the hedge currency

00:17:29.500 --> 00:17:32.000
funds did a lot better. But after so many years

00:17:32.000 --> 00:17:34.559
of the currency falling and such a big disparity

00:17:34.559 --> 00:17:36.799
between hedged and unhedged, basically all those

00:17:36.799 --> 00:17:39.339
funds disappeared one way or another and the

00:17:39.339 --> 00:17:42.160
money went to unhedged funds. Now we're in a

00:17:42.160 --> 00:17:45.059
rising dollar environment, which is when you

00:17:45.059 --> 00:17:47.839
want a hedge fund and nobody is really doing

00:17:47.839 --> 00:17:50.509
it. And so it'll be interesting to see. If that

00:17:50.509 --> 00:17:53.769
happens, how the industry reacts to a 5 % return

00:17:53.769 --> 00:17:56.710
headwind from holding US dollar stocks or offshore

00:17:56.710 --> 00:18:00.910
stocks? Something to think about. Yeah. I've

00:18:00.910 --> 00:18:02.609
been thinking about it. A good mate of mine with

00:18:02.609 --> 00:18:05.910
a currency fund knocked at the door going, if

00:18:05.910 --> 00:18:08.450
you do this, you can do that. So, you know, got

00:18:08.450 --> 00:18:10.549
to go see him Wednesday. Always interesting to

00:18:10.549 --> 00:18:13.630
have a look into that. But the one question I

00:18:13.630 --> 00:18:15.710
suppose everyone wants to know, right, is...

00:18:16.419 --> 00:18:19.640
Where are we on the cycle? And let me tee this

00:18:19.640 --> 00:18:22.539
one up nicely with our good old insider trading

00:18:22.539 --> 00:18:24.759
friend, Nancy Pelosi, right? Come on, you have

00:18:24.759 --> 00:18:27.519
to have a giggle. I love it that Trump and their

00:18:27.519 --> 00:18:30.680
policy actually created an anti -insider trading

00:18:30.680 --> 00:18:34.440
and called it the Pelosi bill or whatever it

00:18:34.440 --> 00:18:37.900
was. So she sold out of, what was it, Apple and

00:18:37.900 --> 00:18:40.119
Nvidia pretty much at the top, like $50 million

00:18:40.119 --> 00:18:43.099
out of the top. which is a massive sign. I think

00:18:43.099 --> 00:18:44.279
it was around about the Christmas, New Year's

00:18:44.279 --> 00:18:48.220
Eve time. But what I found fascinating was she

00:18:48.220 --> 00:18:51.000
did long -dated cover calls for, say, NVIDIA

00:18:51.000 --> 00:18:55.319
at $100 with like a three -year strike price.

00:18:55.579 --> 00:18:59.140
So the question becomes, considering using NVIDIA

00:18:59.140 --> 00:19:01.119
where the price is currently now, it's mid -range,

00:19:01.319 --> 00:19:05.299
is where do you think we are currently in the

00:19:05.299 --> 00:19:07.660
cycle of this current correction and drawdown?

00:19:08.799 --> 00:19:11.259
Do you think there's further to go? Do you think

00:19:11.259 --> 00:19:13.339
essentially it's starting to stabilize around

00:19:13.339 --> 00:19:15.640
about here or if this continues? Yeah, you know,

00:19:15.640 --> 00:19:17.799
like we've been talking about war, right? But

00:19:17.799 --> 00:19:19.400
the reality is this is the biggest technology

00:19:19.400 --> 00:19:23.420
shift anybody's seen. Like it's enormous. And

00:19:23.420 --> 00:19:25.839
you've got these companies like, I'll use the

00:19:25.839 --> 00:19:27.500
Australian example, Atlassian, but there's a

00:19:27.500 --> 00:19:29.660
host of them. Their business model is going to

00:19:29.660 --> 00:19:31.400
be under threat and it's not going to be, it's

00:19:31.400 --> 00:19:34.039
not under threat today by any means at all. Over

00:19:34.039 --> 00:19:36.079
the next five years, absolutely it is. You know,

00:19:36.079 --> 00:19:39.099
as contracts go. up for renewal as there's a

00:19:39.099 --> 00:19:41.920
host of low -cost competitors, as people build

00:19:41.920 --> 00:19:46.640
out their internal tooling, as new VC, it's cheaper

00:19:46.640 --> 00:19:49.119
than ever to launch competitors to these products,

00:19:49.359 --> 00:19:51.640
whereas in the past it would have required substantial

00:19:51.640 --> 00:19:57.359
investment. I think you need to have a bull case.

00:19:57.480 --> 00:19:59.119
I don't think it makes sense to just buy things

00:19:59.119 --> 00:20:01.599
because they're down a lot because there are

00:20:01.599 --> 00:20:03.920
huge risks out there. There's going to be immense

00:20:03.920 --> 00:20:08.400
change. It's not like one big change that's going

00:20:08.400 --> 00:20:10.279
to slowly happen. There's going to be many, many

00:20:10.279 --> 00:20:12.579
twists and turns. There was a moment where it

00:20:12.579 --> 00:20:14.380
looked like Google was going to lose search dominance.

00:20:14.619 --> 00:20:16.900
Now Google is on top. They're building their

00:20:16.900 --> 00:20:19.119
own chips. They basically got their own little

00:20:19.119 --> 00:20:22.859
NVIDIA along with 9 billion consumer plus products.

00:20:23.279 --> 00:20:25.119
All of a sudden, it's gone from the loser's basket

00:20:25.119 --> 00:20:29.220
to the winner's basket. NVIDIA is doing exceptionally

00:20:29.220 --> 00:20:33.910
well. growth there what if and i'm not saying

00:20:33.910 --> 00:20:35.329
they'll lose money or anything goes wrong there

00:20:35.329 --> 00:20:38.869
i'm just saying what if 2027 capex is the same

00:20:38.869 --> 00:20:41.710
as 2026 capex you know that means their growth

00:20:41.710 --> 00:20:43.450
stops what does that what does that do for them

00:20:43.450 --> 00:20:46.210
in the market and where's the you know it's it's

00:20:46.210 --> 00:20:49.549
it's hard it's hard to have a clear answer but

00:20:49.549 --> 00:20:53.569
on the cycle comment i think we're still late

00:20:53.569 --> 00:20:56.599
cycle you know, indices are pretty close to their

00:20:56.599 --> 00:20:59.799
highs. You're just starting to see major indices

00:20:59.799 --> 00:21:02.859
cross the average, which is one definition of

00:21:02.859 --> 00:21:04.940
a bear market. So some companies are entering

00:21:04.940 --> 00:21:07.880
a bear market. The other definition that they're

00:21:07.880 --> 00:21:09.720
down more than 20 % was still pretty far away

00:21:09.720 --> 00:21:12.460
from that on most major indices. They're probably

00:21:12.460 --> 00:21:15.200
the two definitions I like most. And then you

00:21:15.200 --> 00:21:18.799
have in Australia in particular, you had this

00:21:18.799 --> 00:21:21.680
huge speculative or this huge increase in real

00:21:21.680 --> 00:21:24.390
estate prices way beyond the capability. of a

00:21:24.390 --> 00:21:28.089
wage earner to afford and the impact of that

00:21:28.089 --> 00:21:29.950
has been softened by extremely high immigration

00:21:29.950 --> 00:21:32.490
firstly and secondly the fact that there was

00:21:32.490 --> 00:21:34.049
a lot of housing stock a lot of people made a

00:21:34.049 --> 00:21:36.470
lot of money and the bank of mum and dad has

00:21:36.470 --> 00:21:38.789
come in to help their kids you know get their

00:21:38.789 --> 00:21:40.309
next property like there's been a huge amount

00:21:40.309 --> 00:21:43.450
of equity creation as those prices have risen

00:21:43.450 --> 00:21:46.029
that's sitting on australian balance sheets it's

00:21:46.029 --> 00:21:47.769
softened the blow but that can only last for

00:21:47.769 --> 00:21:50.180
so long sooner or later you need wage earning

00:21:50.180 --> 00:21:51.920
Australians to be able to afford an apartment.

00:21:52.660 --> 00:21:54.940
And that's a challenge. And you combine that

00:21:54.940 --> 00:21:58.380
with a surprise uptick in inflation before the

00:21:58.380 --> 00:22:01.079
war, another surprise uptick in inflation because

00:22:01.079 --> 00:22:03.380
of the war. And it's kind of like, it's kind

00:22:03.380 --> 00:22:05.259
of like a, it's a very, it's a very dangerous

00:22:05.259 --> 00:22:08.700
situation. And I'm not the first to notice it,

00:22:08.779 --> 00:22:11.019
but it's very similar to 2008. But actually markets

00:22:11.019 --> 00:22:13.619
weren't down that much in 2008. There were isolated

00:22:13.619 --> 00:22:17.539
credit blow ups and markets were rolling over.

00:22:18.329 --> 00:22:20.369
But then actually commodity prices, that's when

00:22:20.369 --> 00:22:22.549
oil went up to $150 and everyone thought we were

00:22:22.549 --> 00:22:25.410
running out of oil. That's when shipping rates

00:22:25.410 --> 00:22:28.670
went up from $10 ,000 a day to $200 ,000 a day.

00:22:28.849 --> 00:22:31.930
There was this huge squeeze, which it seems like

00:22:31.930 --> 00:22:33.549
if the war continues, we could see it again.

00:22:33.789 --> 00:22:36.250
And that destroyed, that was like mid -2008,

00:22:36.289 --> 00:22:38.710
that destroyed consumer purchasing power. It

00:22:38.710 --> 00:22:40.769
sucked money out of consumers. By the end of

00:22:40.769 --> 00:22:43.210
2008, it was catastrophe. The bank went under.

00:22:43.329 --> 00:22:45.789
It was the shock that... It shocked the market.

00:22:45.890 --> 00:22:47.849
And then markets sold off until March, April

00:22:47.849 --> 00:22:51.329
next year. You know, it was the stimulus had

00:22:51.329 --> 00:22:54.470
gone through. It was all the bottom came in six

00:22:54.470 --> 00:22:58.230
months later. So that's like the worst case scenario.

00:23:00.470 --> 00:23:07.509
But we are on that track now. Well, the interesting

00:23:07.509 --> 00:23:10.890
correlation on OA, which I found very interesting.

00:23:11.549 --> 00:23:13.869
Apparently the only two times where gold and

00:23:13.869 --> 00:23:17.450
equities have gone up at the same time was 2007.

00:23:17.950 --> 00:23:20.549
And don't quote me the year, but what was the

00:23:20.549 --> 00:23:26.130
year of the tech? Essentially like the tech crash

00:23:26.130 --> 00:23:28.599
previously. Yeah, the dot -com crash. When was

00:23:28.599 --> 00:23:31.000
that? I think early 2000, then bottom. Yeah,

00:23:31.019 --> 00:23:33.079
so the same thing happened there. The year before

00:23:33.079 --> 00:23:36.380
that crash, gold and equities were rallying in

00:23:36.380 --> 00:23:38.799
unison. And it was very interesting that towards

00:23:38.799 --> 00:23:41.079
the beginning of this year, they were rallying

00:23:41.079 --> 00:23:44.900
in unison. And now the other thing I say to mates

00:23:44.900 --> 00:23:46.579
and clients, I always find it entertaining. They're

00:23:46.579 --> 00:23:47.559
like, what do you think is going to happen this

00:23:47.559 --> 00:23:49.539
year? I go, look, it's probably going to be the

00:23:49.539 --> 00:23:52.490
exact same thing as the market goes up. And then

00:23:52.490 --> 00:23:54.809
at some point when it gets overinflated, an event's

00:23:54.809 --> 00:23:56.190
going to occur. No one knows what it's going

00:23:56.190 --> 00:23:57.730
to be. It's going to be something random. No

00:23:57.730 --> 00:23:59.049
one can guess what it's going to be. And then

00:23:59.049 --> 00:24:01.329
everything comes back down again and it consolidates

00:24:01.329 --> 00:24:03.970
to six months. The smart money's already kind

00:24:03.970 --> 00:24:05.869
of moved into different asset classes. It's just

00:24:05.869 --> 00:24:07.730
kind of like, you know, one comes out and say

00:24:07.730 --> 00:24:10.049
the tech sector and goes into resources and then

00:24:10.049 --> 00:24:12.990
everyone reassesses again and goes again. Pretty

00:24:12.990 --> 00:24:15.609
much. Exactly. And I mean, what you often see

00:24:15.609 --> 00:24:17.069
in these sell -offs is you see the growth stocks

00:24:17.069 --> 00:24:19.769
sell off six months before. Which just so happens

00:24:19.769 --> 00:24:21.769
to be about six months since they've picked.

00:24:22.990 --> 00:24:25.650
They've got isolated sectors of the market that

00:24:25.650 --> 00:24:30.529
have severe stress. So in this case, it's software.

00:24:32.049 --> 00:24:34.930
The software boom was so strong and so long lasting

00:24:34.930 --> 00:24:36.549
that it looks like some of these credit funds

00:24:36.549 --> 00:24:38.690
seem to have, offshore seem to have 20 to 25

00:24:38.690 --> 00:24:41.529
% of their loan portfolios to software companies,

00:24:41.710 --> 00:24:44.089
which is strange because usually you think of

00:24:44.089 --> 00:24:47.250
credit busts as being real estate driven. This

00:24:47.250 --> 00:24:49.569
looks like there's a real credit bus going on

00:24:49.569 --> 00:24:52.390
in software because no one really knows what

00:24:52.390 --> 00:24:54.089
a loss -making software company that's growing

00:24:54.089 --> 00:24:56.869
at 20 % is worth anymore because the outlook

00:24:56.869 --> 00:25:01.630
is so unclear because of AI. It's extremely hard

00:25:01.630 --> 00:25:06.789
to value. Before the AI revolution of only a

00:25:06.789 --> 00:25:08.569
few months ago, so if you think about the chat

00:25:08.569 --> 00:25:11.250
GPT era, it was like November 2002 to November

00:25:11.250 --> 00:25:14.289
2005. Basically, it was just chat. If you want

00:25:14.289 --> 00:25:17.049
to code something, you can dump the files into

00:25:17.049 --> 00:25:20.170
a chat box and it'll tell you what to do. And

00:25:20.170 --> 00:25:22.529
then Cloud Code in November wasn't even that

00:25:22.529 --> 00:25:23.910
much of a better model than what you could get

00:25:23.910 --> 00:25:25.710
a couple of months before. But they basically

00:25:25.710 --> 00:25:28.170
hooked it all up so the output and the text could

00:25:28.170 --> 00:25:30.490
go into your computer and the harness, it just

00:25:30.490 --> 00:25:34.269
all worked. So you could actually get the chat

00:25:34.269 --> 00:25:36.650
bot to control your computer. They also figured

00:25:36.650 --> 00:25:38.769
out how to get agents running in loops and checking

00:25:38.769 --> 00:25:41.230
things and breaking... big tasks into lots of

00:25:41.230 --> 00:25:43.470
little small tasks that can be checked and accumulated

00:25:43.470 --> 00:25:47.569
up. All that's only a few months old. So now

00:25:47.569 --> 00:25:51.569
it's before that agentic revolution, you kind

00:25:51.569 --> 00:25:53.309
of had an idea that these companies could when

00:25:53.309 --> 00:25:55.910
they wanted to reduce headcount and turn on the

00:25:55.910 --> 00:25:59.069
cash. And, you know, something's five or 10 times

00:25:59.069 --> 00:26:01.730
sales, even if it's growing, was very justified

00:26:01.730 --> 00:26:04.390
traditionally. But now you don't have that. You

00:26:04.390 --> 00:26:06.559
don't have that. You don't have that comfort

00:26:06.559 --> 00:26:09.220
that that's the case because there's just going

00:26:09.220 --> 00:26:11.299
to be so much competition in software. The cost

00:26:11.299 --> 00:26:13.700
to build software is so low, so easy to clone

00:26:13.700 --> 00:26:16.160
bases. It's so easy to migrate them from one

00:26:16.160 --> 00:26:19.319
language to another. Things in the past were

00:26:19.319 --> 00:26:22.160
so difficult that people said never do them under

00:26:22.160 --> 00:26:24.339
any circumstances or get bogged down for two

00:26:24.339 --> 00:26:26.480
years. You know, all that has become trivial.

00:26:27.559 --> 00:26:30.420
And so if you had some loans out to these software

00:26:30.420 --> 00:26:32.880
companies, that puts you in a really sticky position.

00:26:33.859 --> 00:26:36.680
I think the main fund was a BlackRock or Blackstone

00:26:36.680 --> 00:26:39.339
just essentially had to stop all redemptions

00:26:39.339 --> 00:26:41.519
because of that exact scenario. They had a massive

00:26:41.519 --> 00:26:44.220
loan book out. But again, what people must understand

00:26:44.220 --> 00:26:47.359
is just to understand this is not a conversation

00:26:47.359 --> 00:26:49.160
to make everyone run for the doors when it comes

00:26:49.160 --> 00:26:51.799
to private credit. You must understand that with

00:26:51.799 --> 00:26:53.599
private credit, there are different types, right?

00:26:53.680 --> 00:26:57.269
So Australia is predominantly... short -term

00:26:57.269 --> 00:26:58.970
loans, like, you know, first mortgage, second

00:26:58.970 --> 00:27:00.789
mortgage, short -term base, like, you know, six

00:27:00.789 --> 00:27:02.410
months, 12 months, you know, looking, I want

00:27:02.410 --> 00:27:04.609
to buy that house. And essentially, you know,

00:27:04.609 --> 00:27:08.529
I need to sell my house first. You need a bridging

00:27:08.529 --> 00:27:10.890
loan. Over in the States, it's completely different.

00:27:11.029 --> 00:27:14.230
Like, they're three to seven -year loans, some

00:27:14.230 --> 00:27:16.309
of them. Like, Blue Hour ran into a big problem.

00:27:16.450 --> 00:27:19.769
So, but the other thing as well with these loans,

00:27:19.849 --> 00:27:22.369
as you're mentioning, one of our friends knows,

00:27:23.160 --> 00:27:24.960
Very good friends with one of the big founders

00:27:24.960 --> 00:27:27.259
of a SaaS business. He said it took him about

00:27:27.259 --> 00:27:28.980
four or five years to build that business. He

00:27:28.980 --> 00:27:31.259
reckons it's about four to five months now. So

00:27:31.259 --> 00:27:35.480
how in the world can yourself as an investor,

00:27:35.539 --> 00:27:37.220
running capital, when you're looking at these

00:27:37.220 --> 00:27:41.019
businesses, identify where to allocate money

00:27:41.019 --> 00:27:44.440
in these fast -moving businesses that benefit

00:27:44.440 --> 00:27:47.869
from the... ai boom when it's almost like it's

00:27:47.869 --> 00:27:50.150
completely like two or three speeds on one hand

00:27:50.150 --> 00:27:52.569
you're having the fastest arms race you know

00:27:52.569 --> 00:27:55.089
as you mentioned you know in in tech in you know

00:27:55.089 --> 00:27:58.230
literally arms uh but on the other side you've

00:27:58.230 --> 00:28:01.990
got businesses that are potentially non -existent

00:28:01.990 --> 00:28:03.630
or going obsolete at the same time they have

00:28:03.630 --> 00:28:06.150
all this debt hanging out like how do you how

00:28:06.150 --> 00:28:08.910
do you even think about allocating into markets

00:28:08.910 --> 00:28:11.750
like that and how's it look i think you keep

00:28:11.750 --> 00:28:13.369
it simple i mean we're lucky we've got a momentum

00:28:14.109 --> 00:28:17.150
based risk management. So to some extent we will,

00:28:17.170 --> 00:28:19.490
we can definitely get clipped 20, 30%, you know,

00:28:19.490 --> 00:28:21.569
cause we try and stay long and invested through

00:28:21.569 --> 00:28:23.750
the book, through the, through the long uptrends.

00:28:23.990 --> 00:28:26.230
Um, but on the downside, you know, we should,

00:28:26.250 --> 00:28:28.490
we shouldn't lose that much more than that. Um,

00:28:28.670 --> 00:28:31.309
that that's helpful because that means you can

00:28:31.309 --> 00:28:33.509
watch something like an Atlassian and just see

00:28:33.509 --> 00:28:35.930
how they react. Remember there's, there's a two

00:28:35.930 --> 00:28:38.990
way loop because if some of these, these CEOs

00:28:38.990 --> 00:28:41.589
are all taking vastly different. So you would

00:28:41.589 --> 00:28:43.089
have seen Block said they're going to cut the

00:28:43.089 --> 00:28:46.309
headcount by 30%. Atlassian, I think it was 30

00:28:46.309 --> 00:28:49.849
% in Australia, but maybe 10 % globally. I think

00:28:49.849 --> 00:28:51.589
there were documents or Meta said they're going

00:28:51.589 --> 00:28:54.849
to cut maybe 20 % of their workforce. There's

00:28:54.849 --> 00:28:57.170
two ways that these companies can benefit. They

00:28:57.170 --> 00:29:00.250
can either take full advantage of the AI capabilities

00:29:00.250 --> 00:29:03.329
and generate huge efficiencies, in which case

00:29:03.329 --> 00:29:07.490
they can... switch on the cash fountain, certainly

00:29:07.490 --> 00:29:10.750
over the next few years, where revenues are actually

00:29:10.750 --> 00:29:12.730
relatively clear. This is a change that's going

00:29:12.730 --> 00:29:14.210
to happen over the next few years. It's not the

00:29:14.210 --> 00:29:15.309
change that's going to happen over the next few

00:29:15.309 --> 00:29:18.990
weeks. Some of these companies will actually

00:29:18.990 --> 00:29:21.369
find ways to implement AI and get people to pay

00:29:21.369 --> 00:29:23.410
for it. I think most of them won't. It doesn't

00:29:23.410 --> 00:29:24.990
make any sense. We have a software -developed

00:29:24.990 --> 00:29:27.190
business, so we're very much on the cold face

00:29:27.190 --> 00:29:31.740
of this. You're not going to go... Like, for

00:29:31.740 --> 00:29:33.500
example, to use Salesforce as an example, they're

00:29:33.500 --> 00:29:35.259
trying to set up their own agents within Salesforce.

00:29:35.640 --> 00:29:37.140
That doesn't really make sense. It's not the

00:29:37.140 --> 00:29:40.339
best flow. Ideally, you have one language model

00:29:40.339 --> 00:29:42.720
or a couple that you use across everything. You

00:29:42.720 --> 00:29:44.539
don't just use it across Salesforce. You give

00:29:44.539 --> 00:29:45.900
it access to your emails. You give it access

00:29:45.900 --> 00:29:49.900
to your company hard drive, your company storage,

00:29:50.039 --> 00:29:52.400
your company databases. And then by giving it

00:29:52.400 --> 00:29:54.720
access to all the different tools, it can then

00:29:54.720 --> 00:29:56.700
do a much better job. You're not going to go

00:29:56.700 --> 00:29:59.700
to each different tool and use their own. particular

00:29:59.700 --> 00:30:02.339
agent particular intelligence i've pretty like

00:30:02.339 --> 00:30:05.799
that's that's that's like a thesis i have a pretty

00:30:05.799 --> 00:30:08.000
strong view it could be incorrect but my view

00:30:08.000 --> 00:30:10.920
is people will not use um a different ai agent

00:30:10.920 --> 00:30:12.519
on every one of these software platforms so they

00:30:12.519 --> 00:30:14.680
won't be able to get that long -term growth that

00:30:14.680 --> 00:30:17.359
they'll need um in terms of where to invest i

00:30:17.359 --> 00:30:19.680
do think that it's usually best just to keep

00:30:19.680 --> 00:30:21.700
it simple like there's winners and losers in

00:30:21.700 --> 00:30:25.339
this current regime stick to the winners avoid

00:30:25.339 --> 00:30:28.200
the losers And the regime will change at some

00:30:28.200 --> 00:30:29.920
point. But at the moment, it's pretty clear.

00:30:31.200 --> 00:30:34.559
You know, there's immense CapEx. There's a handful

00:30:34.559 --> 00:30:37.640
of companies. The semiconductor industry is extremely

00:30:37.640 --> 00:30:40.079
consolidated. It is boom and bust. There's been

00:30:40.079 --> 00:30:42.740
multiple booms and busts in, say, NVIDIA in the

00:30:42.740 --> 00:30:44.640
last five years. You know, there was a crypto

00:30:44.640 --> 00:30:46.259
boom and bust. There was another boom and bust.

00:30:46.960 --> 00:30:49.240
And then there was the AI boom. So far, no bust.

00:30:50.809 --> 00:30:52.690
It will be cyclical, but this is the regime we're

00:30:52.690 --> 00:30:54.250
in. So I don't think it makes sense to fight

00:30:54.250 --> 00:30:57.549
the regime. So I wouldn't want to be like picking

00:30:57.549 --> 00:31:00.470
through the busted up software companies trying

00:31:00.470 --> 00:31:03.609
to decide which ones are actually going to recover.

00:31:03.809 --> 00:31:05.309
I think you need to see the evidence of that

00:31:05.309 --> 00:31:07.509
and then maybe there'll be an opportunity. And

00:31:07.509 --> 00:31:08.869
if there's a software recovery and a software

00:31:08.869 --> 00:31:10.730
boom, it'll go for five years after a sell -off

00:31:10.730 --> 00:31:13.089
like this. It's not something you need to get

00:31:13.089 --> 00:31:15.470
right to the day. But to give you some warning,

00:31:15.529 --> 00:31:19.059
like... instances where it didn't work like adobe's

00:31:19.059 --> 00:31:21.220
gone down basically consistently everyone thought

00:31:21.220 --> 00:31:23.940
git lab where companies it's kind of like a enterprise

00:31:23.940 --> 00:31:27.420
version or enterprise enterprise version of github

00:31:27.420 --> 00:31:29.859
where people keep their keep their code you know

00:31:29.859 --> 00:31:32.640
that came out with results stock collapsed um

00:31:32.640 --> 00:31:36.079
even even block you know 30 reduction in head

00:31:36.079 --> 00:31:38.000
count still it's still not above its 200 day

00:31:38.000 --> 00:31:40.740
moving average it's still still down over basically

00:31:40.740 --> 00:31:45.240
any period of the last five years um it's it's

00:31:45.240 --> 00:31:48.009
not clear and i don't think I don't think capital

00:31:48.009 --> 00:31:50.049
is going to pour into those. And the fact that

00:31:50.049 --> 00:31:54.470
Adobe trades at a P of 15, I mean, who knows?

00:31:54.690 --> 00:31:56.809
You know, like BlackBerry, you know, grew for

00:31:56.809 --> 00:31:58.970
years after the release of the iPhone and was

00:31:58.970 --> 00:32:02.630
doing very well for years after it peaked. But

00:32:02.630 --> 00:32:04.009
if you bought that, obviously it was basically

00:32:04.009 --> 00:32:06.990
a one -way ticket down. Same with most media

00:32:06.990 --> 00:32:08.450
companies. There are a ton of people that bought

00:32:08.450 --> 00:32:10.990
media companies on the way down and they continue

00:32:10.990 --> 00:32:15.319
to go down. Maybe Amazon and... Online and physical

00:32:15.319 --> 00:32:18.279
retail is a good example. You know, Amazon, one

00:32:18.279 --> 00:32:20.720
of the original dot -com companies, has been

00:32:20.720 --> 00:32:23.000
around for ages. It was clear, it was super clear

00:32:23.000 --> 00:32:25.519
where the dollars were going to spend, like people

00:32:25.519 --> 00:32:27.359
were going to buy stuff online. And they grew

00:32:27.359 --> 00:32:28.859
basically every year, even when the stock was

00:32:28.859 --> 00:32:33.240
down, you know, 90 % plus or 95%. But at the

00:32:33.240 --> 00:32:34.880
same time, you know, there were a ton of value

00:32:34.880 --> 00:32:36.740
measures, one by one, year by year, that would

00:32:36.740 --> 00:32:39.740
go into like Macy's or one of these like big

00:32:39.740 --> 00:32:42.079
brand name e -commerce. And they all, you know,

00:32:42.079 --> 00:32:45.799
just bled out. And there was no recovery. And

00:32:45.799 --> 00:32:47.599
was there a solution for it? Was there strategic

00:32:47.599 --> 00:32:50.240
ways those companies could have adapted? Possibly,

00:32:50.279 --> 00:32:53.799
but very few found a way forward. You know, Costco

00:32:53.799 --> 00:32:58.220
did well. Walmart did well. It probably concentrated

00:32:58.220 --> 00:33:00.119
things into the handful of companies that were

00:33:00.119 --> 00:33:03.960
big, had scale, and then eventually had the time

00:33:03.960 --> 00:33:06.759
and capital to find the right strategy to do

00:33:06.759 --> 00:33:08.759
physical retail well. But, you know, the whole

00:33:08.759 --> 00:33:11.019
sector basically got annihilated. So did everything

00:33:11.019 --> 00:33:14.359
advertising related, right? When advertising

00:33:14.359 --> 00:33:18.319
dollars went to Google and Meta. So I feel like

00:33:18.319 --> 00:33:20.019
you could do a lot of work trying to sort through

00:33:20.019 --> 00:33:22.099
the software companies. Most of them probably

00:33:22.099 --> 00:33:25.940
are going to lose. It's just not going to be

00:33:25.940 --> 00:33:30.180
justifiable to spend, have 50, 10, 20, 30, 50,

00:33:30.180 --> 00:33:32.220
$100 million expense lines going to a software

00:33:32.220 --> 00:33:36.839
company. To give a local example, WiseTech, their

00:33:36.839 --> 00:33:38.720
biggest client is building their own internal

00:33:38.720 --> 00:33:42.640
software. Now, I think it was, I should know

00:33:42.640 --> 00:33:43.700
this off the top of my head, but I think it was

00:33:43.700 --> 00:33:47.259
DHL or somebody tried to build, tried to replace

00:33:47.259 --> 00:33:49.940
WiseTech and failed, spent a fortune doing it.

00:33:50.079 --> 00:33:51.700
And that was one of the reasons why WiseTech

00:33:51.700 --> 00:33:53.500
was trading so strongly. Because everyone was

00:33:53.500 --> 00:33:55.500
like, look, this huge company tried to copy their

00:33:55.500 --> 00:33:58.220
software and couldn't. Now there's another company

00:33:58.220 --> 00:34:00.700
that their biggest customers publicly stated,

00:34:00.859 --> 00:34:02.420
it's publicly this company that they're going

00:34:02.420 --> 00:34:06.529
to migrate to an internal solution. And you'll

00:34:06.529 --> 00:34:08.530
only know this for the biggest companies. Now,

00:34:08.590 --> 00:34:12.690
pre -agentic AI, that was still really risky.

00:34:12.829 --> 00:34:14.969
There's a chance they'd lose way more than the

00:34:14.969 --> 00:34:17.070
$50 or $100 million. I don't think it's disclosed

00:34:17.070 --> 00:34:20.550
how much they spend at WiseTech to be the biggest

00:34:20.550 --> 00:34:23.130
customer. But now, with agentic intelligence,

00:34:23.570 --> 00:34:25.369
that this time next year is going to be vastly

00:34:25.369 --> 00:34:29.000
better than it is now, you know, the... Claude

00:34:29.000 --> 00:34:30.739
Code, they only have a few months of data with

00:34:30.739 --> 00:34:32.300
which to improve their models. Soon there'll

00:34:32.300 --> 00:34:34.420
be a year of data, a year of tens of millions

00:34:34.420 --> 00:34:36.739
of people using it extensively with which to

00:34:36.739 --> 00:34:39.480
improve the product. These things, these migrations

00:34:39.480 --> 00:34:41.460
are not going to fail. They will be able to do

00:34:41.460 --> 00:34:43.659
it with the help of intelligence. They might

00:34:43.659 --> 00:34:46.219
have been able to do it before. And what does

00:34:46.219 --> 00:34:47.400
that mean? What does that mean for a company

00:34:47.400 --> 00:34:50.139
like WiseTech? It's not clear. But I don't think

00:34:50.139 --> 00:34:55.070
these are safe bets. It's not. They're not safe

00:34:55.070 --> 00:34:57.650
bets. And most of them, the Australian companies

00:34:57.650 --> 00:35:00.010
actually are probably better at this, probably

00:35:00.010 --> 00:35:01.969
because under pressure from fund managers in

00:35:01.969 --> 00:35:04.510
Australia, very focused on profits, cash flows.

00:35:05.150 --> 00:35:07.929
But offshore, a lot of these big companies, they

00:35:07.929 --> 00:35:09.809
actually lose money. You know, the last thing

00:35:09.809 --> 00:35:12.130
is never really made money. You know, look at

00:35:12.130 --> 00:35:14.369
its income statement. You will not think this

00:35:14.369 --> 00:35:16.960
is a mature, successful business. And that has

00:35:16.960 --> 00:35:19.960
been hit twice. It was already so mature that

00:35:19.960 --> 00:35:22.639
there was an up and coming like linear and alternatives

00:35:22.639 --> 00:35:24.880
that were like, that were basically doing to

00:35:24.880 --> 00:35:27.219
Atlassian what Atlassian did to the prior workflow.

00:35:27.380 --> 00:35:29.340
Everyone's like, this is a better workflow. The

00:35:29.340 --> 00:35:31.639
early leavers were already using it. The startups

00:35:31.639 --> 00:35:34.119
that are switched on in Silicon Valley were already

00:35:34.119 --> 00:35:37.039
not using Jira. They're already under threat.

00:35:37.159 --> 00:35:40.719
And now they've got this other threat. They waited

00:35:40.719 --> 00:35:43.579
so long to turn on the cash flow. that they're

00:35:43.579 --> 00:35:45.559
actually now the mature company that's being

00:35:45.559 --> 00:35:48.800
disrupted. So what do you pay for that company?

00:35:49.059 --> 00:35:51.519
And can you, even if you get the price right,

00:35:51.679 --> 00:35:55.179
can you get 2, 3, 4x return, which is kind of

00:35:55.179 --> 00:35:57.380
the return you need to invest in companies this

00:35:57.380 --> 00:36:04.250
risky? That's a big ask. It's a big ask. It's

00:36:04.250 --> 00:36:06.530
a big ask. I like the TV show Silicon Valley.

00:36:06.610 --> 00:36:08.190
It's hilarious. And there's a scene in there

00:36:08.190 --> 00:36:09.969
where he's discussing, oh, Pied Piper, we should

00:36:09.969 --> 00:36:12.190
do revenue. And the billionaire pops up and goes,

00:36:12.190 --> 00:36:13.710
whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa.

00:36:14.309 --> 00:36:16.389
Revenue, revenue. No, no, no. You want to be

00:36:16.389 --> 00:36:19.630
pre -revenue. And the guy goes, but isn't the

00:36:19.630 --> 00:36:21.530
point of running a business to show revenue?

00:36:21.840 --> 00:36:26.159
No, Jeff Bezos is the goat. He never showed any

00:36:26.159 --> 00:36:28.500
revenue. You want to be pre -revenue, so you're

00:36:28.500 --> 00:36:30.920
a pure player. And everyone's like, how the hell

00:36:30.920 --> 00:36:32.880
does that make sense? He goes, but that makes

00:36:32.880 --> 00:36:35.760
sense. Otherwise, you'd be a two times dog, or

00:36:35.760 --> 00:36:38.860
you could be a hundred times megastar. Nobody

00:36:38.860 --> 00:36:41.820
knows, and that's the game. Yeah, I mean, it's

00:36:41.820 --> 00:36:43.780
true. I mean, look at Adobe. That's trading on

00:36:43.780 --> 00:36:46.280
a low P &R. It hasn't helped the stock at all.

00:36:47.840 --> 00:36:49.739
i'd say like instead of obviously these aren't

00:36:49.739 --> 00:36:51.599
pre -revenue but they're pre -gap profits and

00:36:51.599 --> 00:36:54.079
that never seemed to bother anybody attract growth

00:36:54.079 --> 00:36:57.579
attract growth investors um the problem is growth

00:36:57.579 --> 00:37:00.840
investors have such a hard time like i don't

00:37:00.840 --> 00:37:04.559
know if there's any left but who imagine if you

00:37:04.559 --> 00:37:06.699
like were bought a long -term position in in

00:37:06.699 --> 00:37:07.980
atlasia and was like i'm gonna hold this for

00:37:07.980 --> 00:37:10.280
10 years Um, and actually, you know, you probably

00:37:10.280 --> 00:37:11.820
bought it a billion dollars of revenue and now

00:37:11.820 --> 00:37:14.159
it's doing 5 billion, you know, and that's over

00:37:14.159 --> 00:37:16.099
a short, like five, six, seven years, like a

00:37:16.099 --> 00:37:17.860
short, like they've actually executed. They've,

00:37:17.860 --> 00:37:20.940
they've built a huge amount of revenue and that's

00:37:20.940 --> 00:37:24.539
not an easy thing to do. Um, but you know, you

00:37:24.539 --> 00:37:26.920
had the, you had a 70, 80 % drawdown in 2022.

00:37:27.280 --> 00:37:31.579
And again, again, now, um, how do you even justify

00:37:31.579 --> 00:37:33.400
that? Like at that point, you're just wrong.

00:37:33.559 --> 00:37:35.409
It's not. So what do you do in this situation?

00:37:35.489 --> 00:37:37.750
I heard another very good trader out of the States

00:37:37.750 --> 00:37:41.190
said the money has come out of the MAG7 and it's

00:37:41.190 --> 00:37:44.429
going towards more the bottleneck now, like companies

00:37:44.429 --> 00:37:48.030
like Lamb Research and other components type

00:37:48.030 --> 00:37:50.230
companies that kind of play into some of these

00:37:50.230 --> 00:37:54.190
larger businesses. Are you finding that rotation

00:37:54.190 --> 00:37:56.849
is still there or it's kind of run its course

00:37:56.849 --> 00:37:59.369
on the bottleneck side? I mean, one of our big

00:37:59.369 --> 00:38:04.440
winners was a company called Ticker AI. And,

00:38:04.440 --> 00:38:06.079
you know, there's just this rolling shortage.

00:38:06.440 --> 00:38:09.599
You know, it was memory. Now it looks like it's

00:38:09.599 --> 00:38:15.320
optical companies who can network these GPUs

00:38:15.320 --> 00:38:17.519
together so they can handle large models, large

00:38:17.519 --> 00:38:21.360
training runs. There is this rolling shortage.

00:38:21.760 --> 00:38:24.280
And funnily enough, NVIDIA hasn't been the top

00:38:24.280 --> 00:38:27.219
performer. That's gone sideways down. Better

00:38:27.219 --> 00:38:29.880
part of the year now. Or certainly the last seven

00:38:29.880 --> 00:38:33.619
or eight months. Look, I think one thing that

00:38:33.619 --> 00:38:35.400
is interesting is I think actually big tech and

00:38:35.400 --> 00:38:36.840
the mags, I don't know about all the mags 7,

00:38:37.000 --> 00:38:38.820
but most of them are positioned really well.

00:38:39.000 --> 00:38:41.179
So if I think about winners now, it's probably

00:38:41.179 --> 00:38:44.320
the right semiconductors, anything defence and

00:38:44.320 --> 00:38:45.900
commodity and energy related while the war goes

00:38:45.900 --> 00:38:48.739
on. Industrials that are related to the data

00:38:48.739 --> 00:38:51.719
centre build out. Even if you're selling refrigeration

00:38:51.719 --> 00:38:54.400
units and you've got 10 % extra demand, these

00:38:54.400 --> 00:38:57.360
are stodgy, cheap, cash flow generating businesses

00:38:57.360 --> 00:38:59.590
that all of a sudden have got growth. You know,

00:38:59.610 --> 00:39:03.530
they've been really strong performers. But the

00:39:03.530 --> 00:39:04.889
other one, which is probably the easiest one

00:39:04.889 --> 00:39:07.090
for people to access, is the NASDAQ 100. Like

00:39:07.090 --> 00:39:08.769
I go through that top list of companies, I'm

00:39:08.769 --> 00:39:10.769
like, wow, each one is positioned well. Like

00:39:10.769 --> 00:39:14.849
Google, you know, was it 9 or 11? Yeah, about

00:39:14.849 --> 00:39:17.889
nine, maybe nine separate businesses with over

00:39:17.889 --> 00:39:22.150
a billion users, like Android, Chrome, Gmail.

00:39:22.289 --> 00:39:25.329
You know, you can just go through the list. And

00:39:25.329 --> 00:39:27.500
they've got their own GPUs. And they've probably

00:39:27.500 --> 00:39:29.079
got some of the best models, not necessarily

00:39:29.079 --> 00:39:31.559
the best models in every category, but some of

00:39:31.559 --> 00:39:33.440
the best models. Then you go through Microsoft

00:39:33.440 --> 00:39:37.519
and AWS and Amazon. Huge beneficiaries of compute

00:39:37.519 --> 00:39:39.480
spend, whichever large language model is winning.

00:39:39.579 --> 00:39:41.280
It's got to be hosted somewhere and big people

00:39:41.280 --> 00:39:43.420
are going to host it on Google, Microsoft or

00:39:43.420 --> 00:39:46.630
Amazon. Amazon's got huge efficiencies. When

00:39:46.630 --> 00:39:48.250
I think about AI and robotics, they're probably

00:39:48.250 --> 00:39:50.309
the clearest beneficiary. They're going to have

00:39:50.309 --> 00:39:53.309
an unassailable lead in what they do. They already

00:39:53.309 --> 00:39:55.309
have an unassailable lead. Now that it's going

00:39:55.309 --> 00:39:59.030
to require huge capex in robots and AI robotic

00:39:59.030 --> 00:40:01.849
technologies, the lead's just going to continue.

00:40:02.030 --> 00:40:04.630
And they do have the lever to cut staff. Meta's

00:40:04.630 --> 00:40:06.590
an interesting one because their Lama model is

00:40:06.590 --> 00:40:09.969
way behind and might be so far behind that they

00:40:09.969 --> 00:40:13.550
can't catch up. But still, if you need to advertise,

00:40:13.829 --> 00:40:16.429
it's either Google or Instagram and Facebook.

00:40:16.510 --> 00:40:19.489
It's one or the other, typically both. They've

00:40:19.489 --> 00:40:22.809
still got the billions of users. What else do

00:40:22.809 --> 00:40:25.250
we have? Apple missed the CapEx spend, which

00:40:25.250 --> 00:40:28.190
now looks genius. And they've also got these

00:40:28.190 --> 00:40:31.170
phones and computers, which they invested in

00:40:31.170 --> 00:40:33.210
their own chip designs with Broadcom, which is

00:40:33.210 --> 00:40:35.880
also... I guess, top 10 stock in the NASDAQ 100,

00:40:36.139 --> 00:40:39.099
also a beneficiary. And those chips just so happen

00:40:39.099 --> 00:40:40.760
to be perfect for running local large language

00:40:40.760 --> 00:40:42.900
models. And as those models get better and better,

00:40:43.019 --> 00:40:45.360
the ability to run them locally is insane. You

00:40:45.360 --> 00:40:48.199
don't have to pay anything. If you buy enough

00:40:48.199 --> 00:40:50.380
hardware, they can be super fast. You don't have

00:40:50.380 --> 00:40:52.800
to share your data. It's quite likely that companies

00:40:52.800 --> 00:40:56.940
do this, that they host their own models. You

00:40:56.940 --> 00:40:58.579
can just go through that list. I don't know if

00:40:58.579 --> 00:41:01.099
I've missed any of them, but the top... you know

00:41:01.099 --> 00:41:03.300
the top 10 companies look really really strong

00:41:03.300 --> 00:41:06.219
and if you look at their numbers as well they're

00:41:06.219 --> 00:41:09.599
growing eps at 25 35 probably on average 20 to

00:41:09.599 --> 00:41:13.159
25 and all things equal and they're not trading

00:41:13.159 --> 00:41:15.920
expensively they're not trading dirt cheap but

00:41:15.920 --> 00:41:17.460
they're not they're kind of middle of the range

00:41:17.460 --> 00:41:20.539
to get that 20 25 earnings growth in the next

00:41:20.539 --> 00:41:24.010
few years that's going to be most Well, it sounds

00:41:24.010 --> 00:41:25.829
like from this conversation, the biggest risk

00:41:25.829 --> 00:41:28.929
to current markets is just human beings and psychology

00:41:28.929 --> 00:41:32.730
and just behavior, like how people will perceive

00:41:32.730 --> 00:41:35.530
these events to unfold and just a good old -fashioned

00:41:35.530 --> 00:41:38.130
run on the bank if what you're saying is accurate,

00:41:38.269 --> 00:41:39.769
that these companies are actually looking quite

00:41:39.769 --> 00:41:42.070
healthy in particular spaces. Is that what we're

00:41:42.070 --> 00:41:43.829
looking at predominantly, just like a run on

00:41:43.829 --> 00:41:48.440
the bank? Yeah, so the big tech companies are

00:41:48.440 --> 00:41:51.219
rock solid. The small companies are under huge

00:41:51.219 --> 00:41:53.380
pressure, but it is true. Like, as you say, this

00:41:53.380 --> 00:41:55.880
is narrative driven. You know, this is a run

00:41:55.880 --> 00:41:59.079
on those companies. For this run to continue,

00:41:59.239 --> 00:42:01.940
for the bear case to manifest, it's going to

00:42:01.940 --> 00:42:04.219
have to show up in the numbers. So over the next

00:42:04.219 --> 00:42:05.920
this year, we've probably got three quarterlies.

00:42:06.159 --> 00:42:08.780
Actually, yeah, we've got all the quarterly reports

00:42:08.780 --> 00:42:11.659
for this year yet to come. Obviously, last reporting

00:42:11.659 --> 00:42:15.190
season was the end of last year. If Atlassian

00:42:15.190 --> 00:42:16.929
is going to continue to go down, at some point

00:42:16.929 --> 00:42:17.989
it's going to have to show up in the numbers.

00:42:18.309 --> 00:42:19.469
You know, at some point they're going to have

00:42:19.469 --> 00:42:21.269
to, their pricing is going to have to come down

00:42:21.269 --> 00:42:22.750
or they're going to have to start using losers,

00:42:22.929 --> 00:42:27.809
losing users. If they continue growing and generate

00:42:27.809 --> 00:42:30.730
efficiencies and get to gap profitability and

00:42:30.730 --> 00:42:33.030
all of a sudden there's a gap EPS growth story,

00:42:33.230 --> 00:42:36.250
then the bear case is wrong and people will pile

00:42:36.250 --> 00:42:38.530
back in. At the moment, everybody's just guessing.

00:42:38.650 --> 00:42:40.570
It's purely narrative driven. This is what makes

00:42:40.570 --> 00:42:44.570
me wonder, you know, how this is all going to

00:42:44.570 --> 00:42:47.510
play out. If you look at how Trump and the government

00:42:47.510 --> 00:42:50.150
are currently behaving and operating, if the

00:42:50.150 --> 00:42:52.469
war would have kicked off in the Biden times,

00:42:52.590 --> 00:42:54.949
we'd have been screwed because it's kind of like

00:42:54.949 --> 00:42:57.469
Australia. We're screwed a bit. We've given away

00:42:57.469 --> 00:43:02.690
too much. Oh, perfect one. Perfect one was, I

00:43:02.690 --> 00:43:05.090
can't remember the name. Is it Pocock? Pocock's

00:43:05.090 --> 00:43:06.909
been out and about. Some absolute great memes

00:43:06.909 --> 00:43:09.869
from that guy in Australia. He worked out that

00:43:09.869 --> 00:43:15.909
Australia's making... 2 .5 billion dollars in

00:43:15.909 --> 00:43:20.230
taxes out of alcohol taxes, beer. Meanwhile,

00:43:20.349 --> 00:43:23.130
our gas from exporting is only 1 .7 billion.

00:43:23.250 --> 00:43:25.349
So we're making more tax income from selling

00:43:25.349 --> 00:43:29.829
beer than exporting our gas and oil, which is

00:43:29.829 --> 00:43:31.809
one of the biggest exports in the entire world.

00:43:31.889 --> 00:43:34.130
It mathematically makes no sense. But then if

00:43:34.130 --> 00:43:36.510
you look into it deeper, Australia used to have

00:43:36.510 --> 00:43:38.429
12 refineries. Do you know how many we have now?

00:43:38.889 --> 00:43:43.130
We have two. We have two refineries. But the

00:43:43.130 --> 00:43:46.070
reason why I'm bringing this up is I'm just finding

00:43:46.070 --> 00:43:49.170
it a very interesting, you know, world politics

00:43:49.170 --> 00:43:52.750
right now because the current US government almost

00:43:52.750 --> 00:43:56.510
went intentionally with the tariffs, dragging

00:43:56.510 --> 00:43:58.550
everything back in, cutting the deal with Nvidia

00:43:58.550 --> 00:44:01.989
where they get 25%, right? They've almost...

00:44:03.130 --> 00:44:06.070
dragged everything back in, fixed up essentially

00:44:06.070 --> 00:44:09.050
the base, and then gone, right, let's go try

00:44:09.050 --> 00:44:13.030
to solve a whole bunch of problems. If Australia

00:44:13.030 --> 00:44:15.230
tried to do that right now, it wouldn't really

00:44:15.230 --> 00:44:18.250
work because, you know, it's leaky. But I don't

00:44:18.250 --> 00:44:20.710
know. I'm just wondering. It's been politically

00:44:20.710 --> 00:44:23.650
mismanaged. And it's kind of clear where all

00:44:23.650 --> 00:44:26.309
the money's gone as well. So, you know, look

00:44:26.309 --> 00:44:28.869
at Norway and look at – there's so many different

00:44:28.869 --> 00:44:33.000
examples of countries that had – extensive resource

00:44:33.000 --> 00:44:34.739
wealth and some of them managed it really well

00:44:34.739 --> 00:44:37.699
and some of them did it. And companies like Norway

00:44:37.699 --> 00:44:39.820
have like this huge sovereign wealth fund that

00:44:39.820 --> 00:44:41.420
is, you know, one of the major holders of every

00:44:41.420 --> 00:44:44.019
equity and it holds on behalf of their citizens.

00:44:44.340 --> 00:44:46.519
And there's all kinds of benefits that accrue

00:44:46.519 --> 00:44:48.340
to everybody because of that. We haven't done

00:44:48.340 --> 00:44:50.019
that. You know, there was that attempt to do

00:44:50.019 --> 00:44:54.079
a mining tax, which got defeated. And also, ultimately,

00:44:54.219 --> 00:44:55.980
we've gone down a different route where it's

00:44:55.980 --> 00:44:57.880
extremely high welfare, extremely high welfare.

00:44:58.300 --> 00:45:00.239
like the NDIS, you know, a whole new welfare

00:45:00.239 --> 00:45:02.900
program that's going to exceed defence shortly.

00:45:03.659 --> 00:45:06.099
That money's gone. It's every year. So it might

00:45:06.099 --> 00:45:08.860
only be $50 billion this year, but it's probably

00:45:08.860 --> 00:45:12.380
$700, $800 billion over the next decade. You

00:45:12.380 --> 00:45:14.579
know, that's wealth that is out of everybody's

00:45:14.579 --> 00:45:16.619
pockets in the country or is out of the nation's

00:45:16.619 --> 00:45:21.699
pockets. And that ideally would be sitting in

00:45:21.699 --> 00:45:24.739
a sovereign wealth fund, which could then easily

00:45:24.739 --> 00:45:28.050
afford... to look after civilly disabled. Similarly,

00:45:28.170 --> 00:45:30.170
if there was some kind of way of capturing more

00:45:30.170 --> 00:45:32.949
of that resource wealth, but it just hasn't been

00:45:32.949 --> 00:45:35.010
done. It's kind of been mismanaged on both ends,

00:45:35.110 --> 00:45:37.690
on the spending and on the revenue. But, you

00:45:37.690 --> 00:45:40.570
know, NDIS wasn't really put to a vote, certainly

00:45:40.570 --> 00:45:43.289
not in the state that it is now. Mining tax was

00:45:43.289 --> 00:45:46.750
put to a vote, so that was a live political issue.

00:45:46.889 --> 00:45:48.469
So I don't think you can really blame anybody

00:45:48.469 --> 00:45:50.909
for that. You know, that was something that the

00:45:50.909 --> 00:45:55.559
nation decided collectively. But while I was

00:45:55.559 --> 00:45:57.840
mainly bringing it up from a growth stocks perspective,

00:45:58.079 --> 00:46:00.619
it's kind of like you're looking at foresight

00:46:00.619 --> 00:46:04.900
of it all. Why would the US go to these military

00:46:04.900 --> 00:46:07.980
war times if they didn't feel their base was

00:46:07.980 --> 00:46:10.900
stable, right? And the definition of why, if

00:46:10.900 --> 00:46:14.079
they felt their home was stable, what does that

00:46:14.079 --> 00:46:16.059
mean? Well, that would mean that they feel comfortable

00:46:16.059 --> 00:46:19.619
that they've brought in enough domestically to

00:46:19.619 --> 00:46:22.159
essentially not repeat COVID where essentially

00:46:22.159 --> 00:46:24.719
you can't. move a car because you're missing

00:46:24.719 --> 00:46:28.880
like a transponder or like like some some views

00:46:28.880 --> 00:46:32.780
or something silly like you know a gas line or

00:46:32.780 --> 00:46:34.639
something the equivalent which you know because

00:46:34.639 --> 00:46:37.019
they make it out of you know china or something

00:46:37.019 --> 00:46:40.300
the equivalent i kind of feel like they've nationalized

00:46:40.300 --> 00:46:42.860
and then they've now they've gone outbound so

00:46:42.860 --> 00:46:45.019
i'm just i'm just really starting to wonder with

00:46:45.019 --> 00:46:47.400
these this current market cycle we're in is this

00:46:47.400 --> 00:46:52.920
you know sell the rumor by the fact If companies,

00:46:52.980 --> 00:46:54.599
as you're saying, are looking quite healthy,

00:46:54.679 --> 00:46:57.639
but we are seeing this profit taking off the

00:46:57.639 --> 00:47:00.719
lofty highs, or are we going to see like a March

00:47:00.719 --> 00:47:03.199
step out of COVID where all of a sudden it just

00:47:03.199 --> 00:47:06.480
drops again another 20%, 30 % before it stabilizes?

00:47:07.460 --> 00:47:09.840
Look, I think that lies in the future. It really

00:47:09.840 --> 00:47:11.679
lies in the future and the outcome of this war.

00:47:11.860 --> 00:47:14.559
I mean, like I said, our risk models are basically

00:47:14.559 --> 00:47:17.599
like stay long, but they're rolling over now.

00:47:19.179 --> 00:47:21.800
from complete risk on to complete risk off. I

00:47:21.800 --> 00:47:22.980
think the points you made about the United States

00:47:22.980 --> 00:47:24.199
were really interesting. You've got to remember,

00:47:24.260 --> 00:47:25.719
like, they're the biggest energy producer, right?

00:47:27.199 --> 00:47:29.599
Certainly one of. And their companies are now

00:47:29.599 --> 00:47:31.219
making hundreds of billions of dollars of excess

00:47:31.219 --> 00:47:33.579
profits at these current prices. Now, it's quite

00:47:33.579 --> 00:47:35.820
unlikely. It's quite possible that, you know,

00:47:35.820 --> 00:47:37.619
the spot price today is not the price that they

00:47:37.619 --> 00:47:39.619
realise over the next year. But at current spot

00:47:39.619 --> 00:47:41.340
prices, they're going to make an absolute fortune.

00:47:41.900 --> 00:47:44.420
And then on the AI stuff, they're the major beneficiary

00:47:44.420 --> 00:47:47.429
there as well. Other than the Chinese labs, the

00:47:47.429 --> 00:47:50.150
vast bulk of the spending will happen in the

00:47:50.150 --> 00:47:53.170
United States. The boom is centered, the CapEx

00:47:53.170 --> 00:47:56.550
boom is centered in the United States. And it's

00:47:56.550 --> 00:47:58.989
the U .S. big tech companies that will be building

00:47:58.989 --> 00:48:00.949
most of the data centers and managing most of

00:48:00.949 --> 00:48:03.809
the AI revenue. Most of the AI revenue around

00:48:03.809 --> 00:48:06.610
the world will flow through those U .S. big tech

00:48:06.610 --> 00:48:09.170
companies. U .S. is sitting very strong. And

00:48:09.170 --> 00:48:11.130
you mentioned earlier - Plus the weaker U .S.

00:48:11.150 --> 00:48:13.530
dollar, right? If you look at how China was built

00:48:13.530 --> 00:48:14.929
when they pegged it against the U .S. dollar,

00:48:15.289 --> 00:48:18.650
an intentionally attracted income into china

00:48:18.650 --> 00:48:21.949
because it was cheap to build right but and that's

00:48:21.949 --> 00:48:24.349
trump's thing said multiple times that he wants

00:48:24.349 --> 00:48:26.389
essentially the us dollar to be weak to essentially

00:48:26.389 --> 00:48:29.230
attract money to come into the states to essentially

00:48:29.230 --> 00:48:31.409
grow back up again before re -strengthening it

00:48:31.409 --> 00:48:33.250
yeah i mean if you're a domestic political leader

00:48:33.250 --> 00:48:35.570
lower yeah it's it's obviously hugely beneficial

00:48:35.570 --> 00:48:39.130
um the other thing is interesting is you're talking

00:48:39.130 --> 00:48:41.460
about venezuela Like, it's pretty interesting

00:48:41.460 --> 00:48:43.460
geopolitically. I mean, China is a massive loser

00:48:43.460 --> 00:48:45.900
here. Like, they've lost Venezuela, their ally.

00:48:46.159 --> 00:48:49.360
They're all producing ally. They've lost Iran

00:48:49.360 --> 00:48:53.239
now. They're all producing ally. People have

00:48:53.239 --> 00:48:57.579
seen on TV, you know, the Venezuelan president,

00:48:57.699 --> 00:49:00.559
I guess it was, being kidnapped in a helicopter

00:49:00.559 --> 00:49:05.199
and the Iranian leadership killed in airstrikes.

00:49:05.219 --> 00:49:07.639
Like, imagine how it feels from Shisi. And then

00:49:07.639 --> 00:49:09.340
also they've got... to deal with high energy

00:49:09.340 --> 00:49:11.860
prices. They're not energy producers. They don't

00:49:11.860 --> 00:49:14.019
have that release valve the United States has

00:49:14.019 --> 00:49:16.239
or Australia has. They're going to have to cop

00:49:16.239 --> 00:49:19.280
it. And they've lost these energy -producing

00:49:19.280 --> 00:49:23.719
allies. So it's a really tight spot for China.

00:49:23.760 --> 00:49:26.340
And to be honest, it's probably good because...

00:49:26.940 --> 00:49:29.340
Most people who seem, most people closest to

00:49:29.340 --> 00:49:31.460
it say that they actually are serious about taking

00:49:31.460 --> 00:49:34.320
Taiwan. And I think, obviously, we're not really,

00:49:34.360 --> 00:49:35.940
we're kind of straying away from markets. But,

00:49:35.960 --> 00:49:37.800
you know, there was a meeting between Xi and

00:49:37.800 --> 00:49:39.880
Putin right before the Ukraine war. There's no

00:49:39.880 --> 00:49:41.400
doubt there were secret agreements done there.

00:49:41.980 --> 00:49:45.099
China's support or acquiescence to Ukraine invasion

00:49:45.099 --> 00:49:47.800
returned to some kind of Russian support over

00:49:47.800 --> 00:49:50.480
Taiwan. Now, the Russian thing was a disaster.

00:49:51.119 --> 00:49:53.940
for Putin, no matter how you cut it, like it

00:49:53.940 --> 00:49:55.340
wasn't what he was expecting. And if he knew

00:49:55.340 --> 00:49:57.639
it was going to be a four -year stalemate, there's

00:49:57.639 --> 00:50:00.079
no way he would have done it. So that was one

00:50:00.079 --> 00:50:02.400
thing. And then now to see the United States

00:50:02.400 --> 00:50:05.199
military capabilities against their two other

00:50:05.199 --> 00:50:07.780
allies, Venezuela and Iran, who they completely

00:50:07.780 --> 00:50:10.039
depend on for energy, to see their leadership

00:50:10.039 --> 00:50:13.199
get decapitated or kidnapped and potentially

00:50:13.199 --> 00:50:16.860
those oil flows going onto the international

00:50:16.860 --> 00:50:19.039
market. where they kind of benefit everybody

00:50:19.039 --> 00:50:22.539
because China's playing below market, this is

00:50:22.539 --> 00:50:25.739
a huge loss. And it probably makes Taiwan probably

00:50:25.739 --> 00:50:28.900
much safer from the failure of the Russian invasion

00:50:28.900 --> 00:50:33.079
in Ukraine and these military actions. In that

00:50:33.079 --> 00:50:35.320
case, that's a good outcome. Well, I think this

00:50:35.320 --> 00:50:37.639
completely impacts markets, definitely from like

00:50:37.639 --> 00:50:39.460
an asset allocation. I know the space that you're

00:50:39.460 --> 00:50:40.880
playing. You're playing growth. You're playing

00:50:40.880 --> 00:50:44.530
the life sciences, right? These companies will

00:50:44.530 --> 00:50:47.190
either fail or essentially benefit from these

00:50:47.190 --> 00:50:50.530
major macro changes at a massive scale. It's

00:50:50.530 --> 00:50:53.309
just going to reshuffle the deck, so to speak.

00:50:53.809 --> 00:50:55.469
Everyone thought that this is how it was going

00:50:55.469 --> 00:50:57.489
to go for 20 years. Now this has just turned

00:50:57.489 --> 00:51:00.429
on its head. But we discussed it off air. Why

00:51:00.429 --> 00:51:03.110
don't we actually get into it? You also, just

00:51:03.110 --> 00:51:05.989
a different perspective, you run a business,

00:51:06.170 --> 00:51:09.090
another business, right? So you run, what is

00:51:09.090 --> 00:51:12.019
it exactly again? Because we're always discussing

00:51:12.019 --> 00:51:13.820
stocks and everyone's thinking like as an investor,

00:51:13.920 --> 00:51:15.320
how do I look at these businesses, you know,

00:51:15.340 --> 00:51:18.000
outside in? And why I like this analogy, it's

00:51:18.000 --> 00:51:20.199
kind of like when you're listening to a, you

00:51:20.199 --> 00:51:21.679
know, Wayne Rooney or something like that that

00:51:21.679 --> 00:51:24.039
used to play, right? He's got an opinion when

00:51:24.039 --> 00:51:26.000
he was actually playing. Now he's a commentator.

00:51:26.000 --> 00:51:28.199
He can't play. He can't actually impact the game

00:51:28.199 --> 00:51:30.099
and kind of sitting on the sidelines and kind

00:51:30.099 --> 00:51:32.059
of taking backs with his tab account, right?

00:51:32.139 --> 00:51:33.840
That's kind of how sometimes it feels being an

00:51:33.840 --> 00:51:38.039
investor. But you're running, what is the business

00:51:38.039 --> 00:51:41.110
you're running? How are you, you know, seeing

00:51:41.110 --> 00:51:43.690
things from, you know, running a business? How's

00:51:43.690 --> 00:51:45.650
that impacting you? Yeah. So I'm more of a shareholder

00:51:45.650 --> 00:51:47.869
than running it. So 50 % shareholder of a software

00:51:47.869 --> 00:51:50.090
development business where we basically build

00:51:50.090 --> 00:51:52.949
software for clients. So maybe 25 clients, all

00:51:52.949 --> 00:51:54.750
kinds of different startups, levels of maturity,

00:51:54.869 --> 00:51:57.130
but generally early stage, early stage stuff.

00:51:58.329 --> 00:52:00.690
You know, the people probably had 20, 25, probably

00:52:00.690 --> 00:52:03.610
25 staff. We're cutting that down. We're cutting

00:52:03.610 --> 00:52:06.110
it down by 70, 80 % because of these new technologies.

00:52:07.090 --> 00:52:11.679
Wow. And how that's helping us is, you know,

00:52:11.699 --> 00:52:14.639
a project that, how would I put the numbers?

00:52:14.739 --> 00:52:17.619
Let's say it was a 75 to 100K build. We can now

00:52:17.619 --> 00:52:20.880
price that at like 20, 30, 40 and basically keep

00:52:20.880 --> 00:52:23.639
most of the bulk of the margin. So we've cut

00:52:23.639 --> 00:52:26.480
the cost of the project massively, but because

00:52:26.480 --> 00:52:28.900
the cost of delivery is so much cheaper, we're

00:52:28.900 --> 00:52:33.449
still doing roughly the same. But it's been interesting

00:52:33.449 --> 00:52:35.230
because we've had to have all those conversations

00:52:35.230 --> 00:52:37.510
internally. And there was huge resistance by

00:52:37.510 --> 00:52:40.650
some people. Basically, there were three years

00:52:40.650 --> 00:52:43.630
in the ChatGP era from November 2022 to November

00:52:43.630 --> 00:52:46.610
2025 when Cloud Code got launched. There were

00:52:46.610 --> 00:52:49.250
so many issues with using AI. You know, it hallucinated.

00:52:49.429 --> 00:52:51.809
It couldn't handle large code bases. Couldn't

00:52:51.809 --> 00:52:56.590
be trusted. All that changed overnight. And then

00:52:56.590 --> 00:52:58.909
it's not just me. Like, I could see it because...

00:52:59.230 --> 00:53:00.909
I went from being able to not do some of these

00:53:00.909 --> 00:53:05.190
projects to actually being able to. So the change

00:53:05.190 --> 00:53:07.090
in capabilities was obvious to me, but like the

00:53:07.090 --> 00:53:08.829
real leaders, the thought leaders in the United

00:53:08.829 --> 00:53:11.150
States, the car pathies, the people that built,

00:53:11.210 --> 00:53:13.230
you know, Tesla self -driving, you know, the

00:53:13.230 --> 00:53:15.130
people that built Linux, you know, these people

00:53:15.130 --> 00:53:16.670
all came out and said, all of a sudden this stuff

00:53:16.670 --> 00:53:18.829
works for coding, whereas it didn't before. And

00:53:18.829 --> 00:53:20.860
whereas they were... skeptics for the last three

00:53:20.860 --> 00:53:23.199
years so a software developer i'd be like well

00:53:23.199 --> 00:53:25.000
look what these leaders are saying they're all

00:53:25.000 --> 00:53:27.099
saying it's not good enough all of a sudden those

00:53:27.099 --> 00:53:29.159
leaders said actually this is wild this is the

00:53:29.159 --> 00:53:30.980
biggest thing that's happened in software ever

00:53:30.980 --> 00:53:32.960
this is the first time the biggest change in

00:53:32.960 --> 00:53:35.420
writing software since you know since software

00:53:35.420 --> 00:53:38.679
started being written um and then yeah they're

00:53:38.679 --> 00:53:40.260
pretty fierce arguments i feel like now the arguments

00:53:40.260 --> 00:53:42.679
are pretty settled like three or four months

00:53:42.679 --> 00:53:45.179
ago it was ahead of the game to be saying these

00:53:45.179 --> 00:53:46.739
capabilities are enormous everything's going

00:53:46.739 --> 00:53:50.159
to change batten down the hatches Make sure you're,

00:53:50.179 --> 00:53:52.679
I think I read a piece saying, you know, safest

00:53:52.679 --> 00:53:55.579
in the barrel, like be at the forefront. You're

00:53:55.579 --> 00:53:57.699
safest at the forefront using these capabilities

00:53:57.699 --> 00:54:00.380
to the absolute maximum. That's probably the

00:54:00.380 --> 00:54:02.320
safest place to be. Because at least then you're

00:54:02.320 --> 00:54:04.440
useful because you're useful to people because

00:54:04.440 --> 00:54:05.940
you're using them. You're using the capabilities.

00:54:06.420 --> 00:54:08.440
And, you know, even now, like we've done a number

00:54:08.440 --> 00:54:11.599
of projects using these capabilities. And so

00:54:11.599 --> 00:54:13.719
we have one eye in the land of the blind. You

00:54:13.719 --> 00:54:15.500
know, we have like some minimum level experience

00:54:15.500 --> 00:54:17.739
that somebody who hasn't used them to this extent

00:54:17.739 --> 00:54:21.449
has. um but it's interesting also it's also interesting

00:54:21.449 --> 00:54:23.269
because a lot of these tools i've never actually

00:54:23.269 --> 00:54:26.230
used but obviously software business users. So

00:54:26.230 --> 00:54:27.809
we have engineers who have like very strong opinions

00:54:27.809 --> 00:54:31.750
on MongoDB as a database or Jira as project management

00:54:31.750 --> 00:54:34.030
or all these other companies. In the past, I'd

00:54:34.030 --> 00:54:36.449
only seen through an investor lens. All of a

00:54:36.449 --> 00:54:39.130
sudden I was seeing from a user lens and, you

00:54:39.130 --> 00:54:40.789
know, paying business owner who has to get the

00:54:40.789 --> 00:54:43.510
bills and seize them and can calculate, wait,

00:54:43.650 --> 00:54:45.230
should we just build this ourselves? Can we just

00:54:45.230 --> 00:54:47.750
use WhatsApp? Like how robust is this? You know,

00:54:47.769 --> 00:54:50.090
okay, if we have a team of 20, can we just ship

00:54:50.090 --> 00:54:53.349
this tool? And like maybe it's just, $30 a month.

00:54:53.449 --> 00:54:55.849
But if you've got 20 people, that could be 10

00:54:55.849 --> 00:54:58.110
grand, 10 grand here, 5 grand there, 10 grand

00:54:58.110 --> 00:54:59.989
there. All of a sudden you're spending 30, 40,

00:55:00.010 --> 00:55:02.250
50K and we're a tiny business in the scale of

00:55:02.250 --> 00:55:04.070
things. You know, we talk about WiseTech, you

00:55:04.070 --> 00:55:06.289
know, they're in the tens of millions of dollars.

00:55:06.670 --> 00:55:08.929
And you can actually run those numbers on what

00:55:08.929 --> 00:55:12.409
it takes to replace a tool. And there's no doubt

00:55:12.409 --> 00:55:14.670
that it's going in that direction. Like the future

00:55:14.670 --> 00:55:18.190
of probably work is basically databases and data

00:55:18.190 --> 00:55:20.230
sources, whether it's Excel files, whether it's

00:55:20.230 --> 00:55:23.250
just... databases, and then using AI to interact

00:55:23.250 --> 00:55:25.750
with that directly. Not going through Salesforce,

00:55:26.050 --> 00:55:28.889
not going through some middle platform. You do

00:55:28.889 --> 00:55:30.989
not need that middle layer. That middle layer

00:55:30.989 --> 00:55:33.789
just gets in the way. You've got your data, you've

00:55:33.789 --> 00:55:35.989
got your sales data, your customer data. Whatever

00:55:35.989 --> 00:55:37.570
it is you want to do with that, maybe you want

00:55:37.570 --> 00:55:39.690
to email every person. Maybe you want to email

00:55:39.690 --> 00:55:42.469
every person with a personalized comment. All

00:55:42.469 --> 00:55:44.929
that stuff can now be automated simply by typing

00:55:44.929 --> 00:55:48.139
that in. to a large language model like i really

00:55:48.139 --> 00:55:50.159
i'm like super bearish from all these companies

00:55:50.159 --> 00:55:51.780
long term i don't know about the short term i

00:55:51.780 --> 00:55:53.719
do know they're very oversold and i understand

00:55:53.719 --> 00:55:57.800
how people can i i you know i that's what makes

00:55:57.800 --> 00:55:59.639
a market right i i understand why people are

00:55:59.639 --> 00:56:01.760
running the numbers and will buy the dip especially

00:56:01.760 --> 00:56:03.639
when they're down 75 percent especially when

00:56:03.639 --> 00:56:06.000
the 10 -year valuation lows but you know personally

00:56:06.000 --> 00:56:08.199
i think it's I don't think it's a safe place

00:56:08.199 --> 00:56:10.360
to bet. I don't think it's a high returning opportunity.

00:56:10.719 --> 00:56:12.519
I think they're bottom feeding opportunities

00:56:12.519 --> 00:56:14.659
where maybe you can make a 50 % or 100 % on a

00:56:14.659 --> 00:56:18.539
bounce. But in my mind, there's no doubt the

00:56:18.539 --> 00:56:20.400
world's going in a direction where most of these

00:56:20.400 --> 00:56:22.059
middle layer of software companies are simply

00:56:22.059 --> 00:56:24.320
not needed. You know, you'll interact directly

00:56:24.320 --> 00:56:27.059
with your data and anything you need will be

00:56:27.059 --> 00:56:28.880
generated for you. Just say, this is what I want.

00:56:29.519 --> 00:56:31.659
And maybe you just need one smart person in a

00:56:31.659 --> 00:56:35.840
business who... builds like some useful tools

00:56:35.840 --> 00:56:39.380
on top of that data layer. Whereas in the past,

00:56:39.460 --> 00:56:41.119
there might've been literally thousands of people

00:56:41.119 --> 00:56:45.599
or certainly large teams of people managing this

00:56:45.599 --> 00:56:48.900
software. So yeah, I mean, it's given interesting

00:56:48.900 --> 00:56:51.380
perspectives to see that stuff from inside and

00:56:51.380 --> 00:56:54.000
to run those numbers on Byverse build, even at

00:56:54.000 --> 00:56:57.619
a tiny scale. So yeah, be careful out there.

00:56:57.739 --> 00:57:00.699
I think it's a difficult time. Like we have our

00:57:00.699 --> 00:57:02.480
risk management thing. We're basically aggressively

00:57:02.480 --> 00:57:05.960
long in most environments, but we do have a way

00:57:05.960 --> 00:57:07.920
that we're going to exit and that will happen

00:57:07.920 --> 00:57:10.800
based on price. It won't rely on our judgment.

00:57:10.840 --> 00:57:12.880
It won't depend on our judgment. It won't depend

00:57:12.880 --> 00:57:15.000
on predictions of the future. I think if you're

00:57:15.000 --> 00:57:16.039
going to invest in these kinds of environments,

00:57:16.260 --> 00:57:18.380
you need something like that. You know, taking

00:57:18.380 --> 00:57:21.380
a long -term view and buying something when everything's

00:57:21.380 --> 00:57:23.800
up in the air. And it might go your way, but

00:57:23.800 --> 00:57:25.699
it might not. And the reasons why it goes your

00:57:25.699 --> 00:57:28.019
way or doesn't all lie in the future. I think

00:57:28.019 --> 00:57:30.079
that's a really dangerous way to invest at the

00:57:30.079 --> 00:57:32.699
moment. The one last thing which I want to get

00:57:32.699 --> 00:57:34.699
into, this is just a good old personal one for

00:57:34.699 --> 00:57:37.019
me, which I find fascinating. My kids do nippers

00:57:37.019 --> 00:57:39.179
down at Balmoral. If anyone wants to do nippers,

00:57:39.340 --> 00:57:41.119
it's awesome. Get your kids into the nippers.

00:57:41.239 --> 00:57:45.840
Give it a plug. fun you know it's great but what's

00:57:45.840 --> 00:57:48.159
interesting on the beach everyone's discussing

00:57:48.159 --> 00:57:50.940
how AI is starting to impact their lives and

00:57:50.940 --> 00:57:53.559
a number of the families including us have realized

00:57:53.559 --> 00:57:57.260
that AI and like AI tutors in education for the

00:57:57.260 --> 00:57:59.699
kids they always say like you know with businesses

00:57:59.699 --> 00:58:01.500
you know the parents control the wallet of the

00:58:01.500 --> 00:58:03.460
kids spend for all particular things how have

00:58:03.460 --> 00:58:07.900
you seen You know, AI -based tutors, you know,

00:58:07.920 --> 00:58:10.260
potentially revolutionizing. Have you seen anything,

00:58:10.360 --> 00:58:12.880
you know, regarding the education space? Because

00:58:12.880 --> 00:58:14.739
I know a lot of the stuff you spoke about in

00:58:14.739 --> 00:58:16.460
your business you're covering is like, you know,

00:58:16.480 --> 00:58:19.059
AI largely involves improved work, improved efficiencies.

00:58:19.219 --> 00:58:22.400
Have you seen this kind of really hit, say, the

00:58:22.400 --> 00:58:25.179
education piece yet? I sadly don't have kids.

00:58:25.260 --> 00:58:26.860
I don't have personal experience. But I will

00:58:26.860 --> 00:58:29.539
say, yeah. When I was studying, I used to do

00:58:29.539 --> 00:58:31.219
the Chemistry Olympiad, really hard questions,

00:58:31.300 --> 00:58:32.880
and there's no answers in any books. You'd be

00:58:32.880 --> 00:58:34.239
going through university textbooks trying to

00:58:34.239 --> 00:58:37.199
find some kind of clue. At the moment, you'd

00:58:37.199 --> 00:58:40.679
be able to personally advance so much faster

00:58:40.679 --> 00:58:43.239
by getting a detailed explanation on anything

00:58:43.239 --> 00:58:45.500
you want and then just saying, dig deeper. What

00:58:45.500 --> 00:58:47.619
does this mean? How does that? And if you had

00:58:47.619 --> 00:58:49.920
the AI tools that kind of do some of that for

00:58:49.920 --> 00:58:52.619
you so they give you the next step. which I think

00:58:52.619 --> 00:58:54.480
is basically where AI goes. Everyone's trying

00:58:54.480 --> 00:58:56.980
to put AI chatbots on their websites. I think

00:58:56.980 --> 00:59:00.139
it's too much work for a user. At least if a

00:59:00.139 --> 00:59:02.059
user wants to speak to their data. I'm like,

00:59:02.179 --> 00:59:03.400
oh, I want to speak to my data. I don't want

00:59:03.400 --> 00:59:05.099
to do that. I just want to see the stuff I need

00:59:05.099 --> 00:59:07.159
there and the next steps and click or direct

00:59:07.159 --> 00:59:12.820
it. Yeah, it comes back to that stay in the barrel.

00:59:12.920 --> 00:59:17.039
Be at the forefront. Use all the tools. Google

00:59:17.039 --> 00:59:18.900
was amazing. You could just type things in and

00:59:18.900 --> 00:59:20.880
get like a Wikipedia page or something. But this

00:59:20.880 --> 00:59:22.800
is like complete next level. I can explain it

00:59:22.800 --> 00:59:26.019
in as much detail as you need and give you infinite

00:59:26.019 --> 00:59:28.679
practice problems with work solutions. You know,

00:59:28.679 --> 00:59:30.380
all these things that would have been so useful

00:59:30.380 --> 00:59:32.059
back in the day that we had to spend so much

00:59:32.059 --> 00:59:35.460
time sourcing and maybe found a handful of questions

00:59:35.460 --> 00:59:37.800
on a particular problem and that was it. And

00:59:37.800 --> 00:59:39.599
maybe there was no work solutions or maybe no

00:59:39.599 --> 00:59:40.940
solutions at all. So you didn't even know if

00:59:40.940 --> 00:59:43.099
you got it right. It's barely helpful. You know,

00:59:43.119 --> 00:59:45.780
that's... you can you can be smarter you can

00:59:45.780 --> 00:59:47.360
be better you can use this intelligence to make

00:59:47.360 --> 00:59:50.280
you smarter to know more about more things um

00:59:50.280 --> 00:59:53.219
and yeah i think it's super interesting like

00:59:53.219 --> 00:59:55.260
even personally definitely i'm definitely talking

00:59:55.260 --> 00:59:57.480
my own book and i'll give you something to uh

00:59:57.480 --> 00:59:58.960
me to have a look into i'd love to hear your

00:59:58.960 --> 01:00:00.780
opinion next time we talk so it's called alpha

01:00:00.780 --> 01:00:02.980
school it's currently one of the fastest growing

01:00:02.980 --> 01:00:06.159
schools um in america have you heard about it

01:00:06.159 --> 01:00:09.719
i think i've heard about it yeah is that It's

01:00:09.719 --> 01:00:13.780
Mackenzie Price and Joe Liedman worth $6 .6 billion,

01:00:14.079 --> 01:00:15.539
but I think it's been going on for about 10 years

01:00:15.539 --> 01:00:20.000
now. But the comment Joe made was, to your point,

01:00:20.099 --> 01:00:22.079
when these large language models came out, he

01:00:22.079 --> 01:00:23.760
realized now he can actually scale the business.

01:00:24.000 --> 01:00:25.960
What's interesting, what they're discussing is,

01:00:26.139 --> 01:00:29.739
like imagine this, right? They're saying that

01:00:29.739 --> 01:00:32.599
if you go to classroom, my kid's in year three,

01:00:32.659 --> 01:00:34.440
if he would have gone into that class, there

01:00:34.440 --> 01:00:37.980
would have been 31 kids, right? I don't know

01:00:37.980 --> 01:00:39.760
how you learn anything, right? But imagine you

01:00:39.760 --> 01:00:42.219
had an AI program that could teach reading, writing,

01:00:42.239 --> 01:00:46.579
maths, like the whole nine yards. But a one -on

01:00:46.579 --> 01:00:48.760
-one chewed up that just like, you know, how,

01:00:48.840 --> 01:00:51.820
I don't know, Suri knows you really well. Then

01:00:51.820 --> 01:00:54.000
they know exactly who you are, how you operate,

01:00:54.099 --> 01:00:56.519
how you think and communicate and the instantaneous

01:00:56.519 --> 01:00:59.719
gamification of information and feedback. Like

01:00:59.719 --> 01:01:03.019
it's insane. So this has been going for 10 years

01:01:03.019 --> 01:01:07.349
now. I'm looking into it personally. They have

01:01:07.349 --> 01:01:09.809
their entire thing is they call it two times

01:01:09.809 --> 01:01:12.329
learning where they only do their education piece

01:01:12.329 --> 01:01:15.329
in the morning. But instead of taking six hours

01:01:15.329 --> 01:01:17.050
to teach coursework, they knock it over in two

01:01:17.050 --> 01:01:19.710
hours. Then you get the afternoon. So when a

01:01:19.710 --> 01:01:23.090
kid hits 12 and 13 years old, they have no longer

01:01:23.090 --> 01:01:25.329
teachers. They have a thing called guides where

01:01:25.329 --> 01:01:27.210
their entire thing is to figure out the kid's

01:01:27.210 --> 01:01:29.030
purpose. Like I'm different to you, Michael,

01:01:29.130 --> 01:01:31.349
and find out what you want. They help the kids

01:01:31.349 --> 01:01:38.000
go build businesses. produced her first ever

01:01:38.000 --> 01:01:40.920
broadway musical live there's you know tech week

01:01:40.920 --> 01:01:43.699
was on what a month or two ago yeah one of their

01:01:43.699 --> 01:01:46.079
students a 16 year old kid essentially built

01:01:46.079 --> 01:01:47.800
uh you know some tech app or something equivalent

01:01:47.800 --> 01:01:51.300
to standing ovation at the event like it's unheard

01:01:51.300 --> 01:01:54.039
of i just i'm just it's fascinating how everyone

01:01:54.039 --> 01:01:55.860
discusses how it's impacting businesses but i

01:01:55.860 --> 01:01:58.309
just wonder how you know, this AI revolution

01:01:58.309 --> 01:02:01.710
is going to impact, you know, education because

01:02:01.710 --> 01:02:03.469
it's happening over in the States and whenever

01:02:03.469 --> 01:02:05.349
it's going to hit here. And can you think about,

01:02:05.510 --> 01:02:09.289
imagine having the ability to, you know, have

01:02:09.289 --> 01:02:11.829
a crack at starting your own business at, you

01:02:11.829 --> 01:02:14.590
know, 15, 16, 17 years old, instead of waiting

01:02:14.590 --> 01:02:17.590
until 25 years old and finishing a degree that,

01:02:17.590 --> 01:02:18.969
you know, you spent a bunch of money, you couldn't

01:02:18.969 --> 01:02:22.250
get a job for it. Isn't it just crazy? I reckon

01:02:22.250 --> 01:02:25.489
that's the path forward for education. Because

01:02:25.489 --> 01:02:28.219
if you think about it, there are going to be

01:02:28.219 --> 01:02:30.380
heavy, heavy job losses. There's no way around

01:02:30.380 --> 01:02:33.440
it. Like even in our firm, on a small scale,

01:02:33.599 --> 01:02:35.860
on a medium scale, on a big scale, there's already

01:02:35.860 --> 01:02:37.619
big layoffs being announced in the United States,

01:02:37.760 --> 01:02:40.579
big layoffs announced by local tech companies.

01:02:41.739 --> 01:02:44.619
But what's staying the same is you've still got

01:02:44.619 --> 01:02:46.940
a lot of people glued to their phones. It's still

01:02:46.940 --> 01:02:48.679
super easy. It's cheaper and easier than ever

01:02:48.679 --> 01:02:50.360
for a million. It could cost you in the order

01:02:50.360 --> 01:02:52.280
of thousands of dollars or certainly like $10

01:02:52.280 --> 01:02:55.059
,000 to get a product in front of a million people.

01:02:55.599 --> 01:02:57.639
If you have agency and you're building things

01:02:57.639 --> 01:03:00.440
and you can create something, maybe not on the

01:03:00.440 --> 01:03:02.139
first try, maybe on the fifth, sixth, seventh,

01:03:02.219 --> 01:03:04.840
20th, 30th time that a lot of people find useful,

01:03:05.059 --> 01:03:06.699
you can get that in front of millions of people

01:03:06.699 --> 01:03:09.699
for very little. So in some way, it's like this

01:03:09.699 --> 01:03:12.360
huge opportunity for people with that agency

01:03:12.360 --> 01:03:14.539
that are willing to learn how to use these tools

01:03:14.539 --> 01:03:18.679
and build things. And it's a super scary and

01:03:18.679 --> 01:03:22.079
super exciting time at the same time. So, yeah,

01:03:22.159 --> 01:03:24.300
I mean, I don't know much about it, but it sounds

01:03:24.300 --> 01:03:27.199
like that's exactly what an education system

01:03:27.199 --> 01:03:29.980
should be doing, you know, tailoring it, finding

01:03:29.980 --> 01:03:32.920
people's interests, getting them to, you know,

01:03:32.920 --> 01:03:35.659
think and then to potentially do things and helping

01:03:35.659 --> 01:03:37.000
them get through the roadblocks. They want to

01:03:37.000 --> 01:03:39.360
start a business, start a business. It's wild.

01:03:40.260 --> 01:03:42.760
And it's not just businesses. It's even the arts.

01:03:42.840 --> 01:03:44.940
Like you mentioned Broadway musical. We'll post

01:03:44.940 --> 01:03:47.239
a clip. If it's good, you're going to get millions

01:03:47.239 --> 01:03:50.519
of views. Actually, that was one of the main

01:03:50.519 --> 01:03:52.119
things they're discussing is you have all these

01:03:52.119 --> 01:03:55.599
things. Don't be a user, right? Some of the kids,

01:03:55.699 --> 01:03:57.099
all they want to do is play Fortnite. Christ,

01:03:57.280 --> 01:03:58.739
they're a 15 -year -old kid. I would want to

01:03:58.739 --> 01:04:00.760
play Fortnite being a 15 -year -old kid. But

01:04:00.760 --> 01:04:02.860
if you knock over everything in the morning,

01:04:02.960 --> 01:04:06.179
then you get your privilege. right? Good old

01:04:06.179 --> 01:04:08.199
word, privilege. Your privilege is you get to

01:04:08.199 --> 01:04:09.820
play Fortnite, but you're not just going to play

01:04:09.820 --> 01:04:12.280
Fortnite. We'll teach you how to essentially

01:04:12.280 --> 01:04:14.320
build a business with Fortnite. We'll teach you

01:04:14.320 --> 01:04:16.260
how to stream, how to create content, how to

01:04:16.260 --> 01:04:20.039
get users, how to essentially get a donations

01:04:20.039 --> 01:04:22.219
account, actually making a business and make

01:04:22.219 --> 01:04:24.039
it work for you. You can still have fun, but

01:04:24.039 --> 01:04:25.920
actually to give you the skills. So then when

01:04:25.920 --> 01:04:29.300
you hit 25, the other one is with music. The

01:04:29.300 --> 01:04:30.800
other one's with music, right? Say you're just

01:04:30.800 --> 01:04:32.920
an artist. Could you imagine essentially being

01:04:32.920 --> 01:04:37.260
in the 70s? And then you make like Guns N' Roses

01:04:37.260 --> 01:04:38.860
or something equivalent, you sign a contract

01:04:38.860 --> 01:04:41.739
and 50%, you get 50%, but all the costs end up

01:04:41.739 --> 01:04:43.539
in your bucket, you end up being broke. Isn't

01:04:43.539 --> 01:04:46.739
it amazing that an artist like, you know, a painter,

01:04:46.800 --> 01:04:48.239
a musician or something equivalent, they may

01:04:48.239 --> 01:04:50.400
not what they've been inclined. Using AI as a

01:04:50.400 --> 01:04:52.760
tutor could potentially just open their eyes

01:04:52.760 --> 01:04:54.960
to actually ask the question, do I need a lawyer

01:04:54.960 --> 01:04:57.139
for this instead of signing the contract? And

01:04:57.139 --> 01:04:58.880
then, you know, giving away the next 20 years

01:04:58.880 --> 01:05:00.940
for the one song that I made, that was amazing.

01:05:01.219 --> 01:05:04.550
I just, I think it's going to be great. Everybody,

01:05:04.550 --> 01:05:06.050
we all need to stay at the forefront, whether

01:05:06.050 --> 01:05:09.650
we want to or not. None of us built this AI.

01:05:10.349 --> 01:05:13.429
None of us have any control over the direction

01:05:13.429 --> 01:05:15.349
and the pace of the change. All we can do is

01:05:15.349 --> 01:05:17.010
really kind of try and be at the forefront and

01:05:17.010 --> 01:05:19.170
take full advantage of the tools and the intelligence

01:05:19.170 --> 01:05:23.090
that comes to us. Always been fun chatting to

01:05:23.090 --> 01:05:24.389
you, Michael. Is there any thoughts you want

01:05:24.389 --> 01:05:26.969
to leave everyone with? I think we've covered

01:05:26.969 --> 01:05:28.550
a lot. Thanks so much for having me on, mate.

01:05:28.650 --> 01:05:30.440
It's been a pleasure. It's always having fun

01:05:30.440 --> 01:05:33.039
chatting with you, Michael. For anyone that wants

01:05:33.039 --> 01:05:36.079
to learn more about Michael Frazis and Frazis

01:05:36.079 --> 01:05:39.000
Capital Partners, how can they find you? Just

01:05:39.000 --> 01:05:43.579
go to www .fraziscapitalpartners .com and you

01:05:43.579 --> 01:05:46.840
can follow us from there. Fantastic. All right,

01:05:46.840 --> 01:05:49.420
Michael, catch up with you soon. Thanks, Murdoch.

01:05:49.619 --> 01:06:02.940
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