QAV #644 — It Will Be Ended

[00:00:00] Cameron: Wel­come to QAV, Tony, episode 644, the 31st of Octo­ber. It will be end­ed. That’s the name for this episode, Tony.

[00:00:22] Tony: Yes, it will be end­ed at some stage. Or it will just end, it will end at some stage.

[00:00:29] Cameron: I post­ed a quote from, uh, sci­ence writer Ver­na Vinge on Face­book the oth­er day, Tony. Was offend­ed by his gram­mar. Chat­G­PT told me it was fine though, so, I, uh, I don’t know. Don’t know who to believe, you or Chat­G­PT.

[00:00:44] Tony: I mean, I, I was rea­son­able famil­iar with that quote and I always cut up some slack cause I thought, well, you know, maybe Vinger is not speak­ing in his native tongue or some­thing or, you know, but yeah, it always struck me as a real­ly strange quote. The human era will be end­ed. It’s like, why don’t you say the human era [00:01:00] will end?

[00:01:01] Cameron: Because it will be end­ed by some­thing else, by

[00:01:05] Tony: Well, then say that!

[00:01:07] Cameron: Well, it was inferred in the sen­tence. Super­in­tel­li­gent machines will arise and the human era will be end­ed. I think it

[00:01:16] Tony: era will end. That’s inferred too.

[00:01:21] Cameron: yeah, I guess you could say, yeah, that’s arguable.

[00:01:24] Tony: Any­way, I was just always told when you write some­thing, don’t spend a dol­lar, spend 50 cents and say it with less words.

[00:01:31] Cameron: Hmm, Mark Twain who said I would have made this let­ter short­er, but I ran out of time. Well, Tony, it’s been anoth­er dis­mal week for investors and on the stock mar­ket. Uh, we’re speak­ing at about. 3 o’clock in the after­noon, Syd­ney time, and the mar­ket’s down to, uh, 6, 9, 6, 1, [00:02:00] uh, give or take. Um, a week ago it was up over 7, 000, 7, 080, so it’s lost about 100. points. You know, uh, over the last week, uh, I think over the last year now, uh, we’re sort of, sort of basi­cal­ly where it was a year ago.

[00:02:18] Cameron: No, it’s less low­er than where it was a year ago. Low­er than where it was, a lot low­er than where it was two years ago.

[00:02:24] Tony: It’s less than where, it’s about where it was in 2007 before the GFC. In fact, it may even be low­er.

[00:02:29] Cameron: Right. Well, I don’t know. What do we, what do we, what do we have to do? What do

[00:02:37] Tony: Yeah.

[00:02:37] Cameron: do to get it to turn around?

[00:02:41] Tony: I wish I knew. Maybe all the QAV sub­scribers can buy on the same day and push the share price up. Then we can, we’ll GameStop it.

[00:02:52] Cameron: Yes.

[00:02:54] Tony: we’ll get momen­tum that peo­ple can buy into and then we’ll sell out.

[00:02:57] Cameron: Yeah. To the, to the moon. Hold on a [00:03:00] sec­ond. Can I help you, sir? Oh, why are you in here then? You heard a rob­ber in the house. Okay, well, go and tell him to take some of your Lego, because I’m sick of stand­ing on it.

[00:03:16] Tony: How come he’s home?

[00:03:19] Cameron: Oh, it’s a long sto­ry, but, um, so, last week, he and his best friend and a bunch of kids were play­ing Tig­gy at school. Fox tig­gied his best friend a lit­tle bit too hard and his friend fell over and put his hand out and broke his wrist.

[00:03:36] Tony: Ooh. Oh.

[00:03:37] Cameron: He’s got a sling on it, and he had to have a fol­low up at the hos­pi­tal today because they were a lit­tle bit con­cerned with how he was heal­ing.

[00:03:46] Cameron: But both of his par­ents have COVID. So, Chris­sy picked the kid up and took him to… Uh, the hos­pi­tal and they were there for four or five hours and Fox went along too. It [00:04:00]was like, his appoint­ment was at eight 30 this morn­ing. So Chris­sy and Fox and this kid Jack were there all day. And by the time they got out of it, they just thought, well, there’s no point going to school.

[00:04:10] Cameron: So they just, she took Jack home and, and his moth­er is one of Fox’s teach­ers, so she was home any­way. So any­way, yeah,

[00:04:20] Tony: Yeah, well,

[00:04:20] Cameron: bit of a. Bit of a dra­ma day. Okay, um, yes, back to the mar­ket. So, yeah, it’s, uh, I don’t know, just, we don’t seem to be able to get a win at the moment. It’s just one thing after anoth­er.

[00:04:37] Tony: cor­rect.

[00:04:40] Cameron: Well,

[00:04:40] Tony: I can’t, well, I don’t know what to say, Cam, but you’ve suc­cinct­ly put it there with 50 cents worth of words, I think. It’s just one god­damn thing after anoth­er.

[00:04:48] Cameron: Yeah, yeah, yeah. It’s been a dis­mal cou­ple of years. Um, this week on the buy list, Iron Ore and Steel are a buy. Ther­mal Coal and Lithi­um were a sell, which means we had to offload [00:05:00] a lot of ther­mal coal stocks. Alu­mini­um is a Josephine. We talked last week about the, these, this chart­ing that I’ve been doing about buys and sells and Josephines, and I men­tioned last week that the sells num­ber, uh, the three point trend­line sells had spiked.

[00:05:16] Cameron: It was back down. this week. Um, so every­thing was sort of trend­ing down­wards. The buys are down. Over the six or sev­en weeks, I’ve been track­ing these. The buys have been drop­ping. The sells are also drop­ping and the Josephines are drop­ping. So I thought last week it was the begin­ning of some sort of trend, but it sort of went back the oth­er way this week.

[00:05:39] Cameron: I want­ed to ask you though, Tony, With Iron Ore being a buy, Fortes­cue Met­als Group is a buy, it’s back on the buy list. But we talked about the, yeah, but we talked about that a few weeks ago and we said too many red flags. Uh, with all the exec­u­tive res­ig­na­tions and the gen­er­al [00:06:00] con­sen­sus in the mar­ket­place that Twig­gy’s lost his mar­bles.

[00:06:02] Cameron: Uh,

[00:06:04] Tony: At least Joe Astin thought

[00:06:05] Cameron: Joe Astin thought so, that’s right. Yeah. What, what, what are your thoughts on FMG? Uh, change since then, or are you going to wait to see some sort of, uh, exec­u­tive sta­bil­i­ty?

[00:06:18] Tony: real­ly good ques­tion. I’m not sure, giv­en that, like, giv­en I’m sit­ting on so much cash, I can’t find things to buy. I might dip my toe, but no, I think I, well, I’m, I’m con­cerned that when exec­u­tives join a com­pa­ny and then resign quick­ly after­wards and they, they have good pedi­gree that there’s some­thing, there’s a prob­lem going on at Fortes­cue Met­als Group. So it’s a red flag for me.

[00:06:43] Cameron: Yeah, I, I kin­da feel twitchy about FMG, which is unfor­tu­nate because it’s typ­i­cal­ly been a good per­former for us over the years.

[00:06:54] Tony: Yeah, although we haven’t owned it dur­ing this lat­est iter­a­tion of [00:07:00] Fortes­cue Future Indus­tries and 10 per­cent of the prof­its going into invest­ing in green hydro­gen and putting hav­ing a spe­cial advanced hydro­gen con­vert­er or some such. For hydro­gen bat­ter­ies, so, yeah, it’s a, I guess, it’s, I don’t know if it’s a mate­ri­al­ly dif­fer­ent coun­try and com­pa­ny and maybe the iron ore part of the busi­ness will trump every­thing else, but, um, it’s, he’s cer­tain­ly not focus­ing on iron ore at the moment.

[00:07:27] Cameron: Mm,

[00:07:29] Tony: And, and key staff have left.

[00:07:31] Cameron: yeah, uh, well, glad to check in with you on that. Um, I guess I can just talk about our port­fo­lio for a moment, the dum­my port­fo­lio, that is. Navexa have changed their web­site in the last few days and sub­se­quent­ly I’m strug­gling to get it to do things like a, an incep­tion, uh, per­for­mance chart, um, the [00:08:00] cus­tom range thing does­n’t seem to want to work for me, but I can say that for this finan­cial year, Dum­my Port­fo­lio is up only 1.

[00:08:10] Cameron: 7%, uh, ver­sus the STW which is down 3. 85%. Over the same peri­od, so it’s doing okay. If I look in the last, let’s say, month, in the last month, W Port­fo­lio is up 2. 45 per­cent ver­sus the STW down 4. 05%. So again, it seems to be doing well. Uh, uh, from that per­spec­tive, I don’t know what else I can look at here. The last two years, uh, not doing too well down 0.

[00:08:50] Cameron: 46 per­cent ver­sus the STW up 2%. So, over the last two [00:09:00] years it has­n’t had a great run, uh, but, uh, luck­i­ly it had a good run before that, so it’s still trad­ing on that sort of 2019 2020, uh, run, bull run that the mar­ket had. The dum­my port­fo­lio went along for the ride with that as well. But, um, yeah, it’s just been, I don’t know, man, it’s just been a depress­ing time.

[00:09:25] Cameron: Try to nav­i­gate through these waters, see­ing, you know, all the gnash­ing of teeth and our forums. Every­one’s feel­ing it. You’re feel­ing it. I’m feel­ing it. Every­one’s feel­ing it.

[00:09:36] Tony: Yes, it’s, it’s, yeah, it’s hard to, hard to go through. Uh, I guess a cou­ple of points on the mar­ket. Um, I know, I noticed overnight, this was, we’re record­ing on Tues­day, so Mon­day night in the US, there was a, um, rise on Wall Street of like 1. 5 per­cent that has­n’t flowed through into the Aus­tralian mar­ket, um, today on the [00:10:00] ASX.

[00:10:00] Tony: I’m won­der­ing, Um, any­way, whether it was a dead cat bounce on Wall Street, but, um, I, I think in Aus­tralia, peo­ple are spooked that the RBA is going to raise inter­est rates next Tues­day on Cup Day. Um, and they’re prob­a­bly posi­tion­ing for that, tak­ing some mon­ey off the table in case they do get raised. And talk­ing about the mar­ket in 2007 being slight­ly high­er than the mar­ket now, it’s real­ly been an era of, The share mar­ket being run by the RBA, by the cen­tral bankers, um, by rais­ing a lot, by first of all, low­er­ing inter­est rates almost to neg­a­tive ter­ri­to­ry after the GFC, and being slow to raise them again, and then rais­ing them all at once, and in killing, killing the par­ty again in the last year or so.

[00:10:48] Tony: Yeah, so that’s it. I think that’s and, um, You know, they did that big review of the RBA, but no one looked into the fact it’s, it’s hav­ing a lot of con­trol on the [00:11:00] share mar­ket and, and, um, what that exact­ly means and whether it’s a good or bad thing.

[00:11:06] Cameron: So the new man­age­ment, uh, just like the old man­age­ment by the sounds of it,

[00:11:11] Tony: I think you point­ed out the new man­age­ment has worked with at the RBA their whole career.

[00:11:16] Cameron: 30 odd years or

[00:11:17] Tony: Yeah.

[00:11:17] Cameron: like that.

[00:11:19] Tony: Hard to be dif­fer­ent. Like maybe she’s nursed a grudge for the last 30 years and she’s gone, ah, now I’m in charge. I can do what I want. Things will be dif­fer­ent.

[00:11:28] Cameron: I thought she might have Gor­bachev’d it. And you know, she’s just been, you know, bid­ing her time. Wow. Yeah. Well,

[00:11:39] Tony: we’ll see next Tues­day.

Alright, well, I don’t have any oth­er news sto­ries to talk about. Tony’s just, um, all depress­ing across the board for me this week. Noth­ing real­ly that inter­est­ing or excit­ing.

[00:12:30] Tony: No, I’m the same.

[00:12:31] Cameron: you got noth­ing? You gonna do a pulled pork for us this week?

[00:12:35] Tony: I am going to do a pulled pork. Mmm. This is an inter­est­ing one and I, I dun­no what order this is gonna come out, but I allud­ed it to it in the ques­tion before about a cou­ple of inter­est­ing things. So the pulled pork today is on a com­pa­ny called Data three DTL, and it’s an inter­est­ing one.

[00:12:55] Tony: We don’t often get tech­nol­o­gy com­pa­nies on the, on the buy list. Yeah. So [00:13:00]that’s one of the rea­sons why it caught my eye. But it is a, a large ADT stock. It’s a Bris­bane based IT com­pa­ny that’s been around for a very long time. I think it was found­ed in 1977, list­ed on the ASX 20 years lat­er in 1997, and it’s one of the larg­er home­grown IT com­pa­nies.

[00:13:20] Tony: I mean, um, there’s a fair bit of the big account­ing firms, the, um, the PWCs, et cetera, but, uh, this is a ded­i­cat­ed Large IT firm. Um, uh, it cross­es the whole, um, water­front on it. It’s, uh, it, um, offers cloud host­ing. It, uh, helps out com­pa­nies with IT secu­ri­ty, and it does a lot of work on IT solu­tions. So con­sult­ing and sales trans­for­ma­tion projects, uh, ser­vices, data ana­lyt­ics, et cetera, et cetera.

[00:13:54] Tony: Um, it’s a, it’s a large I‑D-T-A-D‑T stock, so trades about, um. Where’s [00:14:00] my num­bers? 2. 49 mil­lion per day, so it’ll suit a lot of peo­ple. It’s not quite over its sec­ond buy line, so it’s a, it’s a tech­ni­cal­ly a Josephine at the moment, but it’s get­ting close to a buy, um, and it’s way above its, uh, its buy. Uh, But it’s inter­est­ing, so I was kind of intrigued by it, um, I have a IT back­ground, so it caught my atten­tion, uh, real­ly good num­bers.

[00:14:27] Tony: When I went to do some analy­sis on this, the FY23 results saw that the rev­enue was up 17%, gross prof­it was up 15%, impact was up 22%, Um, there’s lots of recur­ring rev­enue. So 60, 65 per­cent of rev­enue was recur­ring. So that’s all real­ly good. And look­ing back over the last sort of, I think they put six years in there in their, uh, uh, infor­ma­tion in their pack, uh, the growth has been con­sis­tent for the last six years and the [00:15:00] com­pa­ny claims to have, uh, increased rev­enue by 15.

[00:15:04] Tony: 3 per­cent CAGR over the last six years. So it’s, it’s. It’s been a growth com­pa­ny, so it’s kind of sur­pris­ing to see it on the buy list because we don’t nor­mal­ly get this kind of com­pa­ny on the buy list. Going through the num­bers, it’s, uh, share price I did the analy­sis out of 6. 94, which is just slight­ly less than con­sen­sus tar­get.

[00:15:28] Tony: If peo­ple are inter­est­ed, the ROE on this com­pa­ny is 57%, so return on equi­ty is very, very high, which sug­gests that it’s main­ly a cap­i­tal like busi­ness, as a lot of IT com­pa­nies are. They’re often­times their biggest cost is peo­ple, and there’s some 1, 400 staff work­ing for this com­pa­ny as well. Uh, now I… I was intrigued by the pay­out ratio on this com­pa­ny, which is, uh, 90, 91%, so most of the prof­its are being paid out in div­i­dends.

[00:15:58] Tony: How­ev­er, the yield is only a [00:16:00] lit­tle over 3%, so we can’t score it for beat­ing the, the bank debt rate, um, or the mort­gage rate on that basis. Uh, And I’ll come, I might cir­cle back and come back to why that’s an inter­est­ing stat in itself. But it did, uh, did catch my eye. So I can’t score it for high yield, but I will talk about the pay­out ratio in a minute.

[00:16:20] Tony: Um, The PE is very high. It’s 29 times, which is, you know, way above what we nor­mal­ly see on the buy list. How­ev­er, it is the low­est PE for this com­pa­ny in three years, so it scores for that. Um, Stock Doc­tor Finan­cial Health is Sat­is­fac­to­ry and Recov­er­ing. So it gets a… Um, points for those two things.

[00:16:41] Tony: Recov­er­ing espe­cial­ly, I like. Uh, but the Prop­Caf, uh, sor­ry, the Prop­Caf for this com­pa­ny is 3. 69 times, which is a bit sur­pris­ing giv­en the PE’s 29 times, but, um, uh, cer­tain­ly throw­ing off all the Prop­Caf, and I’ll come back to that one in a minute too. IV1 and IV2 are way below the [00:17:00] share price, so IV1’s 1.

[00:17:03] Tony: 22, IV2’s 2. 67, and the share price is 6. 94. Uh, And like­wise, so is net equi­ty per share. It’s, um, 44 cents, so it’s nowhere near the share price, so we can’t give it a score for that or for book plus 30 per­cent. Uh, earn­ings per share growth fore­cast is 13 per­cent, which I thought might be a bit con­ser­v­a­tive giv­en the growth.

[00:17:24] Tony: The com­pa­ny’s been get­ting over the last five or six years, but that’s what the ana­lysts are say­ing. Uh, but growth over P does­n’t meet our 1. 5 thresh­old, so we can’t score it for that because the P is too high. I did think this might be an own­er founder com­pa­ny, but it’s not. How­ev­er, direc­tors hold 3%, which isn’t too bad.

[00:17:43] Tony: Inter­est­ing, um, inter­est­ing his­to­ry. Looks like the founders are out. Um, they’re prob­a­bly going back to 77 when they found­ed the com­pa­ny. Just as an aside, it’s the his­to­ry of the com­pa­ny is it’s um, uh One of the orig­i­nal, I think, IBM resellers in Aus­tralia, and it [00:18:00] merged with a, I think, a type­writer vend­ing com­pa­ny.

[00:18:04] Tony: So, per­haps an IBM type­writer vend­ing com­pa­ny back in the 70s, and formed this com­pa­ny. And then they decid­ed to, uh, jazz up the name, because I think it was called PCA orig­i­nal­ly, or PCA Part­ners orig­i­nal­ly. And they called it DataHash3. Because, uh, that was the year, when they changed the name, that was the year that IBM released per­son­al com­put­ers that had a hash above the 3.

[00:18:28] Tony: So you pressed shift 3 and got a hash, and they thought that was the, a great, you know, great move for­ward in tech­nol­o­gy, and they’d show them­selves to be, uh, on the cut­ting edge of trends in the IT indus­try, and so they called them­selves Starter 3. Uh, yeah, inter­est­ing sto­ry. Any­way, um, In terms of man­u­al­ly entered data, it’s not a recent upturn, it’s been, been trav­el­ing quite nice­ly as you’d expect with that sort of growth pat­tern over the last five years.

[00:18:54] Tony: It gets a zero for con­sis­tent­ly increas­ing equi­ty, although it was pret­ty close to, [00:19:00] to six halves of increas­ing equi­ty, just slight­ly missed out on one. Um, all in all, qual­i­ty score is 10 over 15, so 67%, QAV score of 0. 18. How­ev­er, let me just run through some of the inter­est­ing… I put this in the risk, uh, sec­tion.

[00:19:18] Tony: Uh, the div­i­dend pay­out ratio is 91. 4 per­cent and I’m, it’s, it’s not on the check­list as a met­ric or it’s not a red flag, but it is a risk. I think when a com­pa­ny is pay­ing out such a high. amount of prof­it as a div­i­dend. Uh, I guess you can read it as a pos­i­tive or neg­a­tive. I, I tend to see it as a neg­a­tive because if they have a down­turn, if there is like a reces­sion next year and, and the prof­its go down, the div­i­dend goes down.

[00:19:45] Tony: And if peo­ple are hold­ing the stock to obtain a div­i­dend, then, uh, they’ll sell it, which will, um, depress the stock price even fur­ther. So I think it’s an issue when a com­pa­ny pays out that much of its prof­it as div­i­dends. Uh, I [00:20:00] guess they’re doing it because they don’t need to invest that much in the busi­ness.

[00:20:03] Tony: Um, Some­times com­pa­nies in this sit­u­a­tion keep more on their books, and then they looked for M& A acqui­si­tions, so that’s some­thing they per­haps could con­sid­er. But yeah, it’s a risk, and I’m remind­ed of the time many decades ago when Tel­stra was a blue chip com­pa­ny, or still is I sup­pose, but was a dar­ling because it was pay­ing an above mar­ket div­i­dend yield.

[00:20:27] Tony: Ful­ly Franked, and peo­ple were buy­ing Tel­stra stock when they retired and liv­ing off the div­i­dends for years and years, not real­ly car­ing what hap­pened to the share price or who was run­ning the com­pa­ny or what it was get­ting into, but rely­ing on that div­i­dend. And even­tu­al­ly as Tel­stra’s prof­it became more chal­lenged, the div­i­dend pay­out ratio had to keep climb­ing because prof­its were decreas­ing a lit­tle bit.

[00:20:49] Tony: Pay­out ratio was increas­ing to attract peo­ple to keep the share price up. Uh, and even­tu­al­ly it got into the com­i­cal sit­u­a­tion where Tel­stra was bor­row­ing mon­ey to pay their [00:21:00]dividend. So the prof­it was­n’t cov­er­ing the div­i­dend. And obvi­ous­ly you can’t keep doing that for­ev­er. And even­tu­al­ly it all came to an unhap­py end and a bit of a mess.

[00:21:09] Tony: So when­ev­er I see a pay­out ratio so high, I’m a lit­tle bit skep­ti­cal and call it out as a risk. Um, the oth­er inter­est­ing thing about this com­pa­ny, and I guess, you know, my brain was picked by the fact that it’s a high PE com­pa­ny. Thank you. Um, but it’s com­ing up as good price to oper­ate in cash­flow. Uh, and it’s, it’s fail­ing on the oth­er val­u­a­tion met­rics like IV1, IV2, and, and net equi­ty per share.

[00:21:37] Tony: So some­thing was going on there and I did a bit of dig­ging. It looks like. In this case, oper­at­ing cash flows is, uh, often affect­ed quite a lot by sup­pli­er pay­ments. So, this com­pa­ny, I think, does about 2. 5 bil­lion worth of sales. Um, I’ve done some back of the enve­lope analy­sis on some num­bers, so they may be out, but they’re sort of direc­tion­al­ly right.

[00:21:59] Tony: It looks [00:22:00] like about 2 bil­lion of that comes from hard­ware. So they’re, they’re buy­ing equip­ment from IBM, et cetera, and then installing it and sell­ing it to com­pa­nies that they’re doing IT con­sult­ing work for or oth­er it work for. And so they’re mak­ing a very thin mar­gin on that. But depend­ing on the trad­ing terms, when they get the mon­ey from the, the client and to, and to how long it takes for them to have to pay IBM.

[00:22:24] Tony: Uh, that can come look like oper­at­ing cash flow because it’s receipts from clients, but it has­n’t been paid out to a sup­pli­er and I think that’s inflat­ing the oper­at­ing cash flow this par­tic­u­lar half because last, last half it was neg­a­tive 22 mil­lion. So, um, some, I’m not sure this is a QAV stock. I’m not sure we can rely.

[00:22:44] Tony: I don’t think we can rely on oper­at­ing cash flow in this case. Uh. I’m not say­ing it’s a bad com­pa­ny, or I’m not say­ing it should­n’t be bored if peo­ple are inter­est­ed in a growth com­pa­ny, it’s got a rea­son­able qual­i­ty score, but I think the oper­at­ing cash flow here is, is not what we [00:23:00]intend it to be, in oth­er words, a good indi­ca­tion of how, how, um, you know, cash gen­er­a­tive this busi­ness is, and dig­ging down a lit­tle bit fur­ther, it’s kind of two busi­ness­es, and man­age­ment do call this out in their pre­sen­ta­tions, and the busi­ness split is impor­tant, how­ev­er, the account­ing does­n’t.

[00:23:16] Tony: Split things into busi­ness units. It just oper­ates at the com­pa­ny lev­el. So, well, the statu­to­ry account­ing does any­way, it looks like, uh, like, like I said before, about 2 bil­lion of the 2. 5 bil­lion in sales is IT hard­ware, and they’re mak­ing about, you know, sort of a 1 to 2%. Um, but the rest of the busi­ness, the oth­er, uh, sort of 350 to 500 mil­lion in sales, maybe 350, I think was the num­ber I pulled out of their fig­ures.

[00:23:42] Tony: Uh, looks like it’s. The peo­ple busi­ness, so the sort of busi­ness that, um, we like to see with IT com­pa­nies where, uh, there’s a low invest­ment, low cap­i­tal, um, high ROE and great mar­gins. And so, you know, if you try and split that up and take the [00:24:00] Prop­Caf from the con­sult­ing busi­ness and the, and the Oth­er parts of the busi­ness, which aren’t it sales, hard­ware sales, then the prop calf blows out to be more like the pe.

[00:24:11] Tony: So I, I, again, I haven’t done the detailed num­ber crunch­ing. I would guess it’s gonna be sort of in the 20 to 30 times ratio, um, sort of equiv­a­lent to what the PEs, which is 29.4. So. Look, I’m not going to say don’t buy this com­pa­ny. I’m not going to say buy it, which I nev­er do any­way, but this is one case where the Prop­Caf isn’t giv­ing us the whole pic­ture.

[00:24:35] Tony: Looks like it’s a good com­pa­ny. It’s had at least six years of con­stant growth. You’d be hap­py to know, Cam, that they’ve high­light­ed AI as being a par­tic­u­lar area of growth for them and that all of their clients are ask­ing them how can they use AI in their busi­ness, uh, in every sort of aspect, secu­ri­ty, um, uh, net­work.

[00:24:55] Tony: Rout­ing, all sorts of dif­fer­ent things. So, uh, trans­for­ma­tion, [00:25:00] busi­ness, um, busi­ness process flow, all that kind of thing. So, uh, I’ve got no rea­son to think the growth won’t con­tin­ue, but I’m just going to cau­tion peo­ple to, um, do a, do some research them­selves. I don’t think Prop­Caf is a good mea­sure for this com­pa­ny.

[00:25:15] Cameron: Hmm. DTL.

[00:25:18] Tony: Yeah,

[00:25:19] Cameron: Thanks, Tony. An old friend of mine, an old busi­ness part­ner of mine, was like the mar­ket­ing direc­tor there for quite a few years.

[00:25:28] Tony: okay.

[00:25:29] Cameron: Yeah, there are, there are, I think, because I think they’re based up here, based in

[00:25:33] Tony: They are based in Toowong. Yeah.

[00:25:35] Cameron: Hmm. Good stuff. Yeah, well, I think, um, AI is going to have a dra­mat­ic impact on IT busi­ness­es and how clients use IT in par­tic­u­lar in the next few years.

[00:25:49] Cameron: Already start­ing to see that flow through. There was an arti­cle. In the finan­cial review last week that I ref­er­enced in my futur­is­tic pod­cast on Fri­day, [00:26:00] basi­cal­ly say­ing that it’s, uh, that AI and the impact of AI is one of the top three con­cerns in every board­room in Aus­tralia right now. It’s what every CEO is think­ing about and talk­ing about.

[00:26:14] Cameron: How do they nav­i­gate this? What this, what is the impact going to be on their busi­ness, et cetera, et cetera.

[00:26:20] Tony: Yeah. I think that’s impor­tant, but I take it with a grain of salt as well, because every year they pub­lish that kind of sur­vey and what are the top three things that CEOs are think­ing about and, you know, one year it’s ESG, one year it’s Inter­net of Things, one year it’s after pay, it’s like buy now, pay lat­er.

[00:26:35] Tony: There’s always some kind of fad they’re focused on. I’m not, not say­ing AI won’t be impor­tant, but that’s not per­haps the best indi­ca­tor of how impor­tant it will be.

[00:26:45] Cameron: What is a good indi­ca­tor?

[00:26:48] Tony: Yeah, I don’t know. I guess we won’t know until after the fact, usu­al­ly. I mean, there’s always a lot of hype and bub­ble around these kinds of

[00:26:57] Cameron: Yeah, that’s

[00:26:57] Tony: I sus­pect, I [00:27:00] sus­pect the next thing we’ll see will be job loss­es. Which is what, you know, going back to the sort of 80s when I start­ed work­ing and IT was becom­ing more and more of a thing.

[00:27:09] Tony: Mov­ing from the main­frame to small­er com­put­ers and, um, the appli­ca­tions were eas­i­er to code and main­tain and things. And we start­ed to see less cler­i­cal staff, for exam­ple. That was a, you know, kind of a, I guess an indi­ca­tor that it was actu­al­ly hav­ing an impact on busi­ness.

[00:27:26] Cameron: Yeah. One of the things that every­one, uh, is pre­dict­ing as Being one of the first casu­al­ties will actu­al­ly be devel­op­ers. The abil­i­ty for Chat­G­PT and BARD to write code now is pret­ty impres­sive. It can write mas­sive chunks of code and, you know, I’ve spent a lot of time get­ting it to write code for me over the last cou­ple of months.

[00:27:49] Cameron: Um, it’s not per­fect, uh, and there’s a lot of debug­ging to be done and that kind of stuff, but I think it’s going to get bet­ter. At those sorts of things, I think its abil­i­ty to [00:28:00] replace, uh, a lot of the work that coders do, whether or not it replaces coders, is anoth­er sto­ry, you know.

[00:28:08] Tony: Yeah. Yeah, I think that’s, it’s going to be a great pro­duc­tiv­i­ty tool if noth­ing else, I think.

[00:28:13] Cameron: Mmm, mmm. Alright, thank you for that pulled pork. Let’s get into, we’ve only got a cou­ple of ques­tions, wel­come, Alex. How are you?

[00:28:24] Alex: Um, Good. Thank you. How are you?

[00:28:26] Cameron: Good. What have you been doing since you got back to Mel­bourne and set­tled back into your reg­u­lar life? What are you doing with your­self these days? Now that your mas­ter’s is done, your hol­i­day’s done, what are you up to?

[00:28:38] Alex: Job appli­ca­tions?

[00:28:41] Cameron: For Famous Painter? Is that where you just apply for Famous Painter jobs? Mm

[00:28:45] Alex: uh, no, Christ­mas casu­al work.

[00:28:48] Cameron: hmm.

[00:28:49] Cameron: As a Famous

[00:28:50] Tony: how much you, how much are you charg­ing to paint a house these days, El?

[00:28:55] Alex: Who knows? I do have a meet­ing

[00:28:58] Alex: with the gallery next week though, so [00:29:00] that’s

[00:29:00] Alex: excit­ing, but that’s for a, prob­a­bly more for like a sec­re­tar­i­al role than

[00:29:05] Tony: Wow,

[00:29:06] Alex: artist, but it’ll be good.

[00:29:09] Cameron: So how does

[00:29:09] Cameron: the, uh, Mas­ters in Fine Art, uh, help you out?

[00:29:13] Cameron: Uh,

[00:29:13] Alex: You know what? Before you ask that ques­tion, it applies well to every­thing. okay.

[00:29:18] Cameron: sure. Okay, good. Con­grat­u­la­tions on that

[00:29:22] Alex: Thank you. It’s my high­ly adapt­able degree. Thank you.

[00:29:26] Cameron: Yes, yeah, yeah, yeah, you’ve demon­strat­ed that you can fin­ish

[00:29:31] Cameron: some­thing and that you’re

[00:29:33] Cameron: clever.

[00:29:34] Alex: Okay. Thank

[00:29:35] Cameron: of val­ue in the mar­ket­place. Do you have a ques­tion from one of our lis­ten­ers to read out to us today, Alex?

[00:29:41] Alex: I have anoth­er Alex

[00:29:44] Alex: and I’m going to ask his sec­ond ques­tion. So he says, Hey Cameron, can TK please walk us through what he looks for and when, for, and where when he does a pulled pork? He often finds and sur­faces insights in com­pa­nies and it would be help­ful to know how he does it. [00:30:00]

[00:30:01] Cameron: Hmm, I

[00:30:03] Tony: The short answer is expe­ri­ence, real­ly.

[00:30:06] Cameron: thought it was Google.

[00:30:06] Tony: it for a long time. Yeah. Google. Yeah. That’s right. Chat GPT gives me every­thing I know.

[00:30:12] Cameron: Yeah,

[00:30:16] Tony: No, no. Um, well, I guess you mean, how do I find infor­ma­tion about the com­pa­ny to talk about, but I guess one step before that in case you meant, how do I pick which stock to ana­lyze? I’m just look­ing for a high ADT stock on the buy list that we haven’t spo­ken about before, espe­cial­ly if it’s new to the buy list.

[00:30:36] Tony: Um, but, um. And I’ll try and check their sen­ti­ment to see that it’s a buy, so it’s worth talk­ing about. Uh, but once I’ve picked one, um, yeah, I do use Google. Um, and I start with the ana­lysts or, sor­ry, not with the ana­lysts, with the investor brief­in­gs and annu­al reports. So I get a sense for the com­pa­ny, um, look­ing at their [00:31:00] his­to­ry, look­ing at who’s run­ning it, um, look­ing at how their per­for­mance has been.

[00:31:05] Tony: Uh, So I get, get all that infor­ma­tion, just kind of glance through it. Um, I’m look­ing for own­er­ship. So I’ll look at who owns it, whether it’s an own­er founder, is there a sto­ry there about, you know, is there an Antho­ny Scali who’s been in the com­pa­ny for a long time? Is that some­thing that’s impor­tant? Uh, and then just go through their, their, um, their pre­sen­ta­tions or their annu­al reports or both.

[00:31:30] Tony: And real­ly it’s expe­ri­ence, Alex. Um, I can’t real­ly pin­point one par­tic­u­lar thing to look for, but often­times some­thing will catch my eye, either on what the com­pa­ny has said, or it’s in their, uh, finan­cial state­ments, but nor­mal­ly I don’t have to go much fur­ther than the lat­est, uh, investor brief­ing that Thank you.

[00:31:51] Tony: Bye bye. Usu­al­ly a com­pa­ny’s a half result or a full year result, or occa­sion­al­ly per­haps the CEO’s address in the annu­al report. [00:32:00] Um, and to give you an exam­ple, today I’m going to talk about a com­pa­ny called Data3. Um, or maybe I already have, depend­ing on how this pod­cast is edit­ed. But, um, When I was going through prepar­ing the pulled pork for Data 3, I noticed that, uh, and they called out, that they have a div­i­dend pay­out ratio of 91%, and that’s not part of our check­list, it’s not part of some­thing I focus on, but it is some­thing which, you know, imme­di­ate­ly flagged my atten­tion, so it was a salient point, and, and, I guess I just ask myself ques­tions.

[00:32:36] Tony: Is that good or bad for the com­pa­ny? They’ve high­light­ed it when they talk about the com­pa­ny. Um, I think it’s a risk and I guess I’ll go into it in more detail, uh, in the pulled pork sec­tion, but it’s just things like that, uh, that, that catch my eye when they’re, they’re talk­ing about it. Um, again, in data threes.

[00:32:55] Tony: Pulled pork. I came across a, um, a state­ment which said that their cash [00:33:00]flows were often swayed by sup­pli­er pay­ments. So again, the ques­tion is, was that good or that bad? And I dug into it and found out that, uh, it did mate­ri­al­ly affect their oper­at­ing cash flow, which is impor­tant to QAV. So, I think that’s, um, that’s…

[00:33:16] Tony: I guess the lev­el of research I do, look­ing for salient points, ask­ing ques­tions if it’s good or bad, maybe doing some deep, deep dive on that. And then I go through the QAV num­bers and, and, uh, look at those and decide whether, I guess, the num­bers gel with the sto­ry that was in the investor brief­ing or that I’ve read about the com­pa­ny and its his­to­ry or, um, and the analy­sis I’ve done.

[00:33:39] Tony: Uh, so things like, um, How is op, how is oper­at­ing cash­flow affect­ed in the num­bers, giv­en that most of it is mon­ey and mon­ey out to sup­plies for, for hard­ware pur­chas­es? In the case of data three, uh, yeah, and the num­bers might also throw up some­thing which is worth look­ing at, like, for exam­ple, future growth pro­jec­tions, [00:34:00] um, uh, high ROE, that kind of thing, which might be worth a bit of.

[00:34:05] Tony: Um, dig­ging down on. So that’s, that’s about it. It’s, it’s, Yeah,

[00:34:09] Tony: just the process of, of read­ing what they say, um, what they call out as being inter­est­ing, decid­ing if that needs fur­ther research, and then going through the num­bers. But it’s, it’s all

[00:34:19] Tony: based on expe­ri­ence. You’ve got to, you know, read some­thing and think to your­self, Oh, that’s inter­est­ing.

[00:34:25] Tony: Why are they say­ing

[00:34:25] Tony: that? Or what does that? mean for the com­pa­ny when they say they have a high

[00:34:28] Tony: div­i­dend pay­out ratio, for exam­ple? Is that clear, Al?

[00:34:33] Alex: And, um, I guess more broad­ly too, we were just talk­ing about, was it Char­lie Munger and Lat­tice, his book.

[00:34:41] Tony: Yeah. So Alex and I have been talk­ing offline about invest­ing. And I men­tioned that, uh, both Buf­fett and Munger always pro­mote life­long learn­ing and not just in the finan­cial press or the finan­cial indus­try, but, uh, par­tic­u­lar­ly Char­lie always talks about how every­thing. [00:35:00] Informs every­thing else and that you should read wide­ly about sci­ence and read wide­ly about psy­chol­o­gy and art and all sorts of dif­fer­ent things because they will have appli­ca­tions in the invest­ing, in the invest­ing world.

[00:35:13] Tony: And he uses the exam­ple of know­ing about, um, human psy­chol­o­gy when it comes to think­ing about how to val­ue a, um, like a casi­no type com­pa­ny or a, uh, A slot machine com­pa­ny. And he talks about how, you know, human psy­chol­o­gy is used against us when we’re, when we go into a casi­no and gam­ble on the slot machines, because they’re, they ring loud, they ring loud bells and they have bright flash­ing lights, which are try­ing to attract us to, uh, play the slots.

[00:35:42] Tony: Um, but yeah, he said, if you are, um, going to play the slots, find a qui­et machine at the back to play, cause it’s prob­a­bly the one they don’t want you to go to, um, but yeah, so he, he’s always talk­ing. They’re talk­ing about con­tin­u­ous learn­ing, not just look­ing at the [00:36:00] finan­cial books and finan­cial press, but

[00:36:02] Tony: to try and read wide­ly and then have that inform your

[00:36:06] Tony: analy­sis of dif­fer­ent com­pa­nies.

[00:36:10] Alex: Oh,

[00:36:10] Cameron: cross pol­li­na­tion of ideas too.

[00:36:13] Tony: Yeah, or Lat­tice as Char­lie calls it. There’s a good book out there that

[00:36:16] Tony: he, I don’t know if he wrote it or

[00:36:18] Tony: he had some­thing to do with it, but it has

[00:36:21] Tony: dif­fer­ent chap­ters on his read­ings in dif­fer­ent areas. It’s real­ly, real­ly inter­est­ing.

[00:36:25] Cameron: Is the name of the book Lad­ders, as in some­thing you climb up, or a Lat­tice, as in frame,

[00:36:34] Tony: Lat­tice as in a frame

[00:36:36] Cameron: with T’s? Okay.

[00:36:37] Tony: with T’s. Yes,

[00:36:39] Cameron: Yeah, and you know, it reminds me of, um, you read­ing the

[00:36:43] Cameron: Check­list Man­i­festo, and uh, the guy who came up with that, look­ing at air­planes and apply­ing it to hos­pi­tals, and then you

[00:36:52] Cameron: read about it, applied it to invest­ing, and yeah,

[00:36:56] Cameron: ideas

[00:36:57] Tony: Yeah, no.

[00:36:58] Cameron: car­ry over from dif­fer­ent [00:37:00] domains.

[00:37:01] Tony: Yeah, and yeah, I mean, after hours, I’ll talk about a book I’m read­ing at the moment on, the life of a sports gam­bler in the US. And inter­est­ing­ly enough, he said at some stage that, uh, he’d adopt­ed a prin­ci­ple of not hav­ing more than

[00:37:16] Tony: 5 per­cent on a par­tic­u­lar bet because that was good risk man­age­ment.

[00:37:20] Tony: And straight away I said, well, that’s the 20 stock port­fo­lio rule, right? That’s 5 per­cent of each invest­ment. So it’s inter­est­ing how these kinds of ideas cross pol­li­nate into dif­fer­ent areas.

[00:37:32] Cameron: Yeah, And you know, I just

[00:37:35] Cameron: fin­ished on, uh, on our

[00:37:36] Cameron: Renais­sance show, we just fin­ished our Da Vin­ci series,

[00:37:39] Cameron: which took us

[00:37:41] Cameron: three years to tell the sto­ry of the life and career of Leonar­do Da

[00:37:45] Cameron: Vin­ci. And, but he’s like the clas­sic exam­ple of some­body who just stud­ied every­thing he could get his hands on and he saw par­al­lels between, veins in plants and trees and the veins inside the [00:38:00] human body and then water­ways in moun­tains and rivers.

[00:38:02] Cameron: And, you know, some­times suc­cess­ful­ly, some­times unsuc­cess­ful­ly, but he was always try­ing to look at the micro world and the macro world and see where the over­laps were and mak­ing the assump­tions that if some­thing worked in one domain, if, you know, um, if, if the way, the way that water moved around a plant, uh, was impor­tant to how it.

[00:38:25] Cameron: grew and sur­vived, then the same was pos­si­bly true with how blood moved around the human body. And in his day, these were deep insights

[00:38:35] Tony: Mmm, yeah,

[00:38:37] Cameron: blood mov­ing around the body was actu­al­ly an impor­tant thing and not just a thing that car­ried the, uh, the breath or the, the ani­ma.

[00:38:47] Tony: yes, that’s right, all that came out of your body when you cut your­self.

[00:38:51] Cameron: And if it’s one thing that I got out of this deep dive on Da Vin­ci is real­ly that pas­sion that

[00:38:56] Cameron: he had for over­lap­ping [00:39:00] mag­is­te­ria and look­ing for pat­terns right across every­thing that he could turn his eye to. Look­ing for

[00:39:06] Cameron: pat­terns. He was a big believ­er that there were pat­terns in there. The curls of hair and the swirls of water and things like that, you know, that they were all dri­ven by sim­i­lar forces.

[00:39:20] Cameron: Any­way. Thanks for

[00:39:21] Tony: it kind of makes sense. But we, you talked a bit last week about the book you read about, um, a new kind of sci­ence and I’ve got the chap’s name, um, Hur­witz, Hur­witz, no,

[00:39:30] Cameron: Wol­fram.

[00:39:31] Tony: Wol­fram. Thank you. Uh, and how Every­thing comes from an ini­tial state

[00:39:36] Tony: and there are first con­di­tions and then there’s a code and every­thing prop­a­gates from there

[00:39:41] Tony: under a set of rules. of course, there’s going to be pat­terns,

[00:39:44] Tony: right? Cause every­thing’s start­ing from the same thing and then repli­cat­ing. It’s going to, pat­terns are going to

[00:39:50] Tony: repeat All

[00:39:51] Tony: over the place, real­ly. Giv­en that.

[00:39:54] Cameron: Every­thing runs by the same set of phys­i­cal laws.

[00:39:57] Tony: Mmm.

[00:39:58] Cameron: All right. [00:40:00] Back to, uh, job appli­ca­tions for you, Alex.

[00:40:05] Alex: Okay. Thank you

[00:40:06] Tony: Hey, duck, duck your head Alex and show Cameron how you, what you’re up to on his paint­ing.

[00:40:10] Alex: Okay.

[00:40:12] Cameron: Oh, that looks like

[00:40:14] Cameron: me.

[00:40:17] Alex: guy in white T‑shirt.

[00:40:19] Cameron: yeah, you

[00:40:20] Cameron: got to take 20 kilos off and, uh, make me look more like Brad Pitt for the final ver­sion.

[00:40:26] Alex: That’s not done yet. There’s still some

[00:40:27] Alex: wig­gle room, you know?

[00:40:28] Cameron: Okay. Yeah. Good.

[00:40:29] Tony: Yeah.

[00:40:30] Tony: that costs more.

[00:40:31] Alex: Yeah. Mm-Hmm.

[00:40:33] Cameron: The Brad

[00:40:34] Cameron: Pit­ti­fi­ca­tion. Yeah,

[00:40:35] Tony: Yeah, yeah, cos­met­ic surgery. Yeah.

[00:40:39] Cameron: Thank you, Alex. Have a good

[00:40:40] Cameron: week.

[00:40:41] Tony: ya, Al. Thanks, hun. Bye.

[00:40:46] Cameron: All right, the only oth­er ques­tion we got is also from the oth­er Alex.

[00:40:51] Cameron: Can TK please explain how share incen­tive plans work for direc­tors and man­agers?

[00:40:56] Cameron: How do these relate to the dif­fer­ent

[00:40:58] Cameron: trans­ac­tion types?[00:41:00]

[00:41:01] Tony: Yeah, of course, and I can draw on my own expe­ri­ence being employed in big com­pa­nies and get­ting, uh, incen­tive plans. So, so, uh, Gen­er­al­ly, there’s, I’m hop­ing I’m not being too basic here, but gen­er­al­ly exec­u­tives are remu­ner­at­ed both in their base pay, but also with what’s called STI, short term incen­tives and LTI, long term incen­tives.

[00:41:22] Tony: So think about the STI as being an annu­al bonus and the LTI is nor­mal­ly over a three year peri­od. It could be five years, but nor­mal­ly over a three year peri­od, um, his­tor­i­cal­ly. They were the, uh, the, well, sor­ry, I should step back from that. STI is often paid in cash. So it’s a bonus at the end of the year.

[00:41:43] Tony: Some­times it’s in share com­pen­sa­tion, but often in cash. LTI is most­ly paid less in cash and more in share issuance. And I’ll use the word issuance because there’s dif­fer­ent ways of doing the share issuance. But I think issuance is an [00:42:00] impor­tant word because, uh, you know, Buf­fett and Munger used to bang on about this in the dot com boom that cor­po­ra­tions would­n’t call out how much shares they were issu­ing, new shares they were issu­ing, to pay their tech staff, um, incen­tive pay­ments, but, uh, as if it was free because it was­n’t hit­ting the, um, hit­ting the bot­tom line.

[00:42:18] Tony: And I think back then account­ing stan­dards were that you did­n’t have to report share issuance in the P& L. It was a coun­ter­force in some oth­er way. Uh, and so there was a lot of it and, um, peo­ple would say,

[00:42:31] Tony: uh, they’d use num­bers like EBITDA rather

[00:42:33] Tony: than talk­ing about the bot­tom line so they could avoid say­ing how much

[00:42:36] Tony: was being issued and what it was actu­al­ly cost­ing the com­pa­ny. But of course it does

[00:42:39] Tony: cost the com­pa­ny because new shares have to be issued, um, which affects, which, which dilutes all the oth­er share­hold­ers. So, so gen­er­al­ly share com­pen­sa­tion plans are now

[00:42:49] Tony: put togeth­er in a, in a very care­ful way to avoid too

[00:42:53] Tony: much. Dilu­tion and, um, when we’re talk­ing big com­pa­nies, you, you can, you can pay a, decent LTI to [00:43:00] some­one with­out dilut­ing the big com­pa­ny too much, like Com­mon­wealth Bank, for exam­ple. Um,

[00:43:05] Tony: what kinds of ways do they issue the shares and how do they

[00:43:08] Tony: work? Well, it’s annu­al. Meet­ing, annu­al gen­er­al meet­ing sea­son at the moment, AGM sea­son. So, um, peo­ple are being asked to vote on com­pen­sa­tion, uh, pack­ages

[00:43:19] Tony: and there’s all sorts of dif­fer­ent

[00:43:21] Tony: ones. Um, they, these days they try and get a blend

[00:43:24] Tony: of soft and hard tar­gets. So you know, back in the

[00:43:28] Tony: days when, when I was being, Um, giv­en these kinds of incen­tives, say 15 years ago, you would, uh, You would be remu­ner­at­ed main­ly on meet­ing your tar­gets, your P& L tar­gets,

[00:43:39] Tony: and there’d be a split between

[00:43:40] Tony: my sec­tion or my divi­sion or my com­pa­ny, um, ver­sus the over­all com­pa­ny, and there’d be maybe a, you know, 10 per­cent for things like, um, no injuries at work or,

[00:43:52] Tony: uh, you know, I think I remem­ber once

[00:43:54] Tony: there was a um, a require­ment I had to, have, uh, you

[00:43:59] Tony: Three poten­tial [00:44:00] suc­ces­sors nom­i­nat­ed and in the

[00:44:01] Tony: sys­tem, ready to take over if I got moved or

[00:44:05] Tony: left. So

[00:44:07] Tony: that’s, that’s there.

[00:44:08] Tony: I think these days, if you look at some of the pack­ages, they seem to have a high­er

[00:44:12] Tony: soft com­po­nent. And that’s been an issue

[00:44:16] Tony: that orga­ni­za­tions like the ASA and

[00:44:18] Tony: Proxy Advi­sors haven’t tak­en all that

[00:44:21] Tony: Um, keen­ly to, uh, although you do need some soft

[00:44:25] Tony: incen­tives in there, um, cor­po­rate respon­si­bil­i­ty, a lit­tle bit of ESG there,

[00:44:30] Tony: um, seem to be impor­tant to a large num­ber of investors.

[00:44:34] Tony: So they’re prob­a­bly in there a bit, um, these days more than they

[00:44:37] Tony: were in the past, but any­way, so there’s a make­up of tar­gets

[00:44:41] Tony: and hur­dles that the exec­u­tive has to,

[00:44:43] Tony: meet to um, receive their They’re full bonus com­pen­sa­tion, and I’m talk­ing

[00:44:51] Tony: par­tic­u­lar­ly LTIs here. Uh, and then

[00:44:55] Tony: usu­al­ly… They’re issued in a cou­ple of dif­fer­ent ways.

[00:44:58] Tony: So

[00:44:58] Tony: there’s, in terms of the [00:45:00] shared types,

[00:45:01] Tony: uh, back when I was work­ing cor­po­rate, they were main­ly

[00:45:04] Tony: options. Um, that’s less and less the case these days, because main­ly because account­ing treat­ment has

[00:45:09] Tony: changed and in the past they were taxed ben­e­fi­cial­ly, um, used to be able to, uh, elect to pay the tax when the option was issued and then.

[00:45:18] Tony: Uh, if you hap­pen to make

[00:45:19] Tony: a decent wind­fall gain in three years time, because the

[00:45:22] Tony: share price had risen above what it looked like three years before, when the option was

[00:45:26] Tony: issued, you did­n’t have to pay addi­tion­al tax. So there

[00:45:29] Tony: was a, that was a good look. Um, I think that loop­hole has been closed now. So it tends to be

[00:45:35] Tony: that man­age­ment get issued what’s called deferred shares.

[00:45:38] Tony: So, um, Uh, if you meet your, your incen­tives or your hur­dles, uh, they will put shares aside for you and then

[00:45:46] Tony: give them to you in three years time. So,

[00:45:48] Tony: you may have had some cap­i­tal gain if you, if you met your hur­dles in the first year or sec­ond year and,

[00:45:53] Tony: um, pro­gres­sive­ly got more deferred shares issued

[00:45:55] Tony: to you.

[00:45:56] Tony: Um, but you’ll be pay­ing tax,

[00:45:57] Tony: cap­i­tal gains tax on that, on that [00:46:00] appre­ci­a­tion when you final­ly came around to sell them. But that’s prob­a­bly the main way of doing it. Um,

[00:46:06] Tony: that’s, that’s by share grant. So they have to

[00:46:09] Tony: actu­al­ly, um, I guess mint new

[00:46:12] Tony: shares and issue them much the

[00:46:13] Tony: same way they have to do if there’s a div­i­dend rein­vest­ment pro­gram.

[00:46:16] Tony: They have

[00:46:16] Tony: to actu­al­ly issue new shares on the mar­ket to

[00:46:19] Tony: give to peo­ple who’ve opt­ed to buy them in the DRP in lieu of a div­i­dend

[00:46:24] Tony: or in this case to take them as part of their incen­tive pack­age. And I guess the last point

[00:46:30] Tony: to men­tion is that more and more these

[00:46:32] Tony: days, these kinds of long term incen­tives have a claw­back pro­vi­sion.

[00:46:35] Tony: So Uh, that was­n’t the case back when I was work­ing cor­po­rate,

[00:46:39] Tony: but, uh, these days, uh, it’s not unusu­al to see that even though you’ve been giv­en the shares three years after the, the

[00:46:46] Tony: year that, you know, you start­ed the long term incen­tive pro­gram, uh, the com­pa­ny can take them

[00:46:51] Tony: back off you in cer­tain cir­cum­stances, like you’ve left the com­pa­ny and then the com­pa­ny’s done bad­ly, or, um, there’s been some

[00:46:58] Tony: malfea­sance uncov­ered, [00:47:00] um, after the fact, after the shares have been

[00:47:01] Tony: issued, they can be clawed back. So I hope that answers your ques­tion, Alex. Thanks. Pret­ty much it

[00:47:05] Tony: in a nut­shell as to what

[00:47:08] Tony: LTI com­pen­sa­tion is.

[00:47:11] Cameron: Hmm. Thank you, Tony. Well, that’s all the ques­tions for this week,

[00:47:18] Cameron: Tony. Peo­ple are too mis­er­able to send

[00:47:21] Tony: Lick­ing their wounds. Yeah.

[00:47:23] Cameron: Yeah. After hours, what have you done for fun in the last week, Tony?

[00:47:31] Tony: I went to the Sir Paul McCart­ney con­cert on Fri­day night in Syd­ney. that

[00:47:34] Tony: was a lot of fun.

[00:47:36] Tony: Um, yeah, it was good. I mean, it’s great. The guy’s 81 or what­ev­er he

[00:47:40] Tony: is, still bop­ping along.

[00:47:42] Tony: Got­ta say he missed a cou­ple of high notes, I

[00:47:44] Tony: think. Um,

[00:47:46] Tony: but I’d for­give him that giv­en how… You know, you put on a three hour show, you kind of

[00:47:50] Tony: for­give an 81 year old for

[00:47:52] Tony: doing that. and it’s still lots of fun. I mean, par­tic­u­lar­ly the, I par­tic­u­lar­ly like the sort of hard­er rock

[00:47:57] Tony: num­bers, You know, the [00:48:00] Hel­ter Skel­ters and things like, that, which were real­ly good, done real­ly well, Um, the inter­est­ing thing was, I saw him in Cana­da about sev­en years ago, and it was

[00:48:11] Tony: sub­stan­tial­ly the same show as it was then, this time. The only dif­fer­ence was the Get

[00:48:16] Tony: back. Uh, por­tion where

[00:48:18] Tony: he plays, um, along with John Lennon

[00:48:22] Tony: from the Get Back Dis­ney, um, chan­nel videos that Peter

[00:48:26] Tony: Jack­son put togeth­er. So they sing, John Lennon’s on the rooftop of, Um, the stu­dio and, and Paul’s singing along with him. So it was a

[00:48:36] Tony: real­ly That was a real­ly good touch. But oth­er­wise the show was fair­ly sim­i­lar. So he’s,

[00:48:40] Tony: uh, he’s been doing the same stuff for a long time now. I said to Jen­ny, it must be like doing

[00:48:45] Tony: a gym, three hour gym

[00:48:46] Tony: work­out where you just go, you know, you do your 10 reps, do your 10 reps, do your 10

[00:48:50] Tony: reps, and then get off and go home.

[00:48:52] Tony: It’s, you know, a sim­i­lar sort of thing, but it was good fun.

[00:48:55] Tony: I enjoyed it. um, great show.

[00:48:58] Tony: Uh, oth­er­wise, um, [00:49:00] been watch­ing some slow race­hors­es run. We had three rac­ing on Sat­ur­day and they all did

[00:49:04] Tony: poor­ly.

[00:49:05] Cameron: no.

[00:49:05] Tony: And they’re all, all going for a spell. How­ev­er,

[00:49:08] Tony: I was redeemed just before we came on air. Cause I had a um, a horse called I Nev­er Dreamed, which won by five lengths at Swan Hill this morn­ing. And it’s only race one at Swan Hill on a Tues­day, but gee, it was Good to see a horse win. So that was great.

[00:49:24] Cameron: Good to see any­thing win at this

[00:49:26] Tony: Yeah, exact­ly.

[00:49:28] Cameron: Stocks or hors­es.

[00:49:29] Tony: Yeah. and uh, as I said before. I’m read­ing a book called, um, Gam­bler, Secrets from a Life of Risk, a Life at Risk, sor­ry,

[00:49:37] Tony: by Bil­ly Wal­ters, um, which I, you know, I like those kinds of books and, uh,

[00:49:44] Tony: being a being a bit of a gam­bler at heart, I sup­pose.

[00:49:47] Tony: Uh, it’s a great sto­ry.

[00:49:48] Tony: I mean, you know, the guy pio­neered sports bet­ting in the U. S., um, but just that point of crossover where he was talk­ing about his risk man­age­ment

[00:49:56] Tony: strate­gies and

[00:49:57] Tony: how he nev­er puts more than 5

[00:49:59] Tony: per­cent of his. [00:50:00] He’s a bankroll on a bet, which just sound­ed

[00:50:03] Tony: like peo­ple con­struct­ing a port­fo­lio of 20

[00:50:05] Tony: stocks, which is 5

[00:50:06] Tony: per­cent per stock.

[00:50:09] Tony: So that

[00:50:09] Tony: was inter­est­ing. Um, yeah, inter­est­ing sto­ry. I don’t

[00:50:12] Tony: know if peo­ple are inter­est­ed, but he was, um,

[00:50:14] Tony: sent to jail a cou­ple of times. Um,

[00:50:16] Tony: Pos­si­bly wrong­ly, he claims, um, and was involved with Phil Mick­el­son, who was a not­ed

[00:50:24] Tony: addic­tive gam­bler, bet­ting tens of

[00:50:26] Tony: hun­dreds of mil­lions of dol­lars over his career, um, and it.

[00:50:31] Tony: was alleged

[00:50:32] Tony: that, uh, Bil­ly Wal­ters had passed

[00:50:34] Tony: on insid­er infor­ma­tion about shares that Phil Mick­el­son then bought, and, uh, So Bil­ly Wal­ters went to jail and is bit­ter that Phil Mick­el­son did­n’t stand up for him in court and

[00:50:47] Tony: tell the true sto­ry or back up his sto­ry any­way.

[00:50:49] Tony: So

[00:50:50] Cameron: Shares. I thought he was a sports gam­bler.

[00:50:53] Tony: Yes, he was, but, he became very rich And then just sort of invest­ed in all sorts of dif­fer­ent things. Golf cours­es at some stage, um, did a lot of [00:51:00] char­i­ty work, uh, was one of the sort of non

[00:51:03] Tony: casi­no own­ing big wheel, big wheels in Las Vegas there for a while. Prob­a­bly still

[00:51:08] Tony: is. Yeah.

[00:51:10] Cameron: Hmm. Inter­est­ing. You say invent­ed sports bet­ting. By

[00:51:15] Tony: he did­n’t invent

[00:51:16] Cameron: sort of online thing.

[00:51:18] Tony: He pio­neered it. No, he, um, so

[00:51:21] Tony: back in when I,

[00:51:22] Tony: guess he start­ed a long time ago, the, the casi­nos

[00:51:26] Tony: in Vegas were the only places legal­ly

[00:51:27] Tony: able to

[00:51:28] Tony: take a bet on sports and it was­n’t their main game,

[00:51:32] Tony: uh, because they were more inter­est­ed in the bet­ter

[00:51:35] Tony: mar­gins on the craps tables and the roulette tables and things.

[00:51:39] Tony: So they used to have the sports bet sec­tion in a dingy bar at the back of the casi­no or in the base­ment or some­thing. And, uh, yeah, he,

[00:51:48] Tony: he, he. He’s had a lot of

[00:51:52] Tony: acquain­tances in his life. He was a,

[00:51:54] Tony: um, a kid who,

[00:51:56] Tony: uh, uh, start­ed off just gam­bling from a [00:52:00] very young age as a,

[00:52:00] Tony: pool hus­tler and card play­er, all that kind of stuff from, I think, Ken­tucky from mem­o­ry, and, um, then became like Very entre­pre­neur­ial and very

[00:52:11] Tony: action ori­ent­ed.

[00:52:12] Tony: He became one of the biggest car deal­ers in the area because he was that good at sales. He would, you know, he said he walked in to buy his

[00:52:18] Tony: first car and the deal­ers were all sit­ting around read­ing the paper. Um, and they only worked when some­one

[00:52:24] Tony: walked onto the yard and came and talked to them. So, um, he said, I can do a bet­ter job

[00:52:29] Tony: than that. When he had down­time he was going through the phone

[00:52:32] Tony: book, he was ring­ing peo­ple on the same street as the, last sale he’d made to say, hey, have you seen the car I sold your neigh­bor? I can do a deal for you. Just nev­er

[00:52:41] Tony: stopped and even­tu­al­ly, you know, came

[00:52:43] Tony: to dom­i­nate the car sales in what­ev­er town he was in in Ken­tucky

[00:52:47] Tony: and then went from there.

[00:52:48] Tony: But all the time was, he would often go out all

[00:52:50] Tony: night and play high stakes pok­er and, um, would bet on any­thing. Pitch­ing

[00:52:55] Tony: pen­nies, all sorts of dif­fer­ent things. Um, and, uh, [00:53:00] and, and

[00:53:00] Tony: at the race­track, uh, and yeah, I had

[00:53:03] Tony: this kind of almost like a ADHD per­son­al­i­ty that just

[00:53:08] Tony: kept want­i­ng to take action all the time.

[00:53:10] Tony: Um, almost like had these ups and downs,

[00:53:13] Tony: um, was. bank­rupt­ed a cou­ple of times, had a cou­ple of mar­riages,

[00:53:17] Tony: uh, and then met up with a guy

[00:53:19] Tony: who was a com­put­er geek who had one of the first algo­rithms on how to

[00:53:24] Tony: bet on NFL foot­ball and col­lege foot­ball, which is big in the U. S., and had a, had, he was actu­al­ly,

[00:53:30] Tony: I think work­ing on, um, like a, uh, uh, a nuclear reac­tor

[00:53:37] Tony: some­where for one of the man­u­fac­tur­ers of nuclear reac­tors. and he was doing, you know, math into radi­um decay and things like, that. And, uh, and then thought I can use this kind

[00:53:47] Tony: of, uh, mod­el­ing in some oth­er ways. And he start­ed to try and gath­er all the

[00:53:53] Tony: data they could on, on, um, Foot­ball teams, and he built a mod­el for that and he put togeth­er a cou­ple of

[00:53:59] Tony: peo­ple [00:54:00] called the Com­put­er Gang, and uh, this guy Bil­ly Wal­ters, um, said, hey, uh, you know, That’s a great idea, I can get us out of action, and start­ed to set up this whole, um, pyra­mid of, of, uh, Peo­ple with pages run­ning betts

[00:54:14] Tony: across, uh, dif­fer­ent book­mak­ers in,

[00:54:17] Tony: in, uh, Vegas

[00:54:18] Tony: to put all these dif­fer­ent, uh, um, betts on the

[00:54:21] Tony: col­lege foot­ball and NFL that this com­put­er guy had worked out. and then they fell out. He, he was raid­ed by the FBI, they thought he was mon­ey laun­der­ing.

[00:54:30] Tony: He,

[00:54:31] Tony: uh, he, I think he beat one rep for that, but then got put in jail anoth­er time for

[00:54:35] Tony: it. And, uh, even­tu­al­ly broke up with The com­put­er

[00:54:39] Tony: gang, but then did his own sort of sim­i­lar thing where. He used to do things like um, back before the inter­net, went to the head of the Team­sters

[00:54:47] Tony: at, um, at the Las Vegas

[00:54:49] Tony: air­port and said, I’m going to do a deal with you, I want every time a plane

[00:54:53] Tony: lands, if there’s any news­pa­pers

[00:54:55] Tony: left in the plane, bring them to me, and he, he Pay them for a [00:55:00] ser­vice because he had teams of peo­ple read­ing the sports pages, pick­ing up

[00:55:04] Tony: infor­ma­tion

[00:55:05] Tony: about the local foot­ball team that just was­n’t wide­ly known out of the cir­cu­la­tion area for the

[00:55:10] Tony: local paper and was putting all this into a com­put­er pro­gram and com­ing up with the spread that he want­ed to bet.

[00:55:16] Tony: And then, um, so

[00:55:17] Tony: the book­ies would­n’t know it was him. He’d have hun­dreds of peo­ple with pages,

[00:55:21] Tony: putting the bets on for him in tiny amounts. It was, yeah,

[00:55:24] Tony: quite the empire he built.

[00:55:27] Cameron: I can see Leonar­do DiCaprio in that role, direct­ed by Scors­ese, after Flower of the Killer Moon, or Killer of the Flower Moon, or

[00:55:36] Tony: it does real­ly feel that

[00:55:37] Cameron: what­ev­er it is.

[00:55:38] Tony: Yeah,

[00:55:41] Cameron: good stuff, sounds like a good read.

[00:55:42] Tony: Mmm.

[00:55:45] Cameron: Well, I’m gonna plug a cou­ple of things, Pub­lic Image Lim­it­ed’s new album, if you’re into a lit­tle bit of angry post punk, uh, John Lydon, John­ny Rot­ten, their first album in many, many years, came out this week­end.

[00:55:58] Cameron: It’s pret­ty good [00:56:00] stuff. I mean, I’m a, I just, I’m a big fan of John­ny Rot­ten. I love his, always loved his snarly deliv­ery. Just some­thing about the tonal­i­ty of his voice that I like. I like pub­lic, the whole Pub­lic Image Lim­it­ed. I’ve been a big fan of their stuff and his sort of the, I don’t know, droney music with his angry whiny voice over the top of it just works for me.

[00:56:24] Cameron: So yeah, I give that

[00:56:24] Cameron: a plug. It’s pret­ty good. Um, we’ve been watch­ing an inter­est­ing TV show called Alphonse, don’t know if I’ve talked about that before, Yeah. I think I talked about that when Alex was on last week, Jean Dujardin, the

[00:56:38] Tony: yes you do.

[00:56:39] Cameron: we talked about OSS

[00:56:41] Cameron: 117, so this is his new TV show, um, French TV show, basi­cal­ly the set­up is, he’s a bit of a, bit of a los­er, mid­dle aged guy.

[00:56:55] Cameron: Mar­ried to, in an abu­sive mar­riage. Uh, his wife does­n’t [00:57:00] real­ly love him. She just beats up on him psy­cho­log­i­cal­ly all the time. Uh, and then his, he los­es his job down on his luck

[00:57:11] Cameron: and his father, who he has­n’t spo­ken to, he’s estranged from his father, has a heart attack, he goes to the hos­pi­tal. Long sto­ry short, finds out that his father’s actu­al­ly a gigo­lo.

[00:57:22] Cameron: He’s like.

[00:57:23] Tony: Ha ha ha

[00:57:23] Cameron: 70s, ear­ly 80s, he’s been a gigo­lo for decades.

[00:57:28] Cameron: And he can’t do it any­more because he had a heart attack and he’s in a wheel­chair. So his son, who needs mon­ey, and his father tells him he’s mak­ing like 20 euro, 20, 000 euro a month from this. His son picks up his clients and he’s train­ing his son on how to be a gigo­lo.

[00:57:44] Cameron: But all of his clients are women in their… 70s, rich women in their 70s, um, with all sorts of dif­fer­ent crazy fan­tasies, and now his son is learn­ing the roles of being a gigo­lo to rich French women, rich Parisian women. It’s, [00:58:00] it’s the sort of thing you’d only get out of France, and uh, it’s fun, it’s just fun to see Jean Dujardin not play­ing the smooth OSS 117 role for a change, and this one he’s sort of a bit of a, bit of a, Doo­fus, uh, you know, says the wrong thing, does the wrong thing, and his father’s hav­ing to coach him into being smooth and charm­ing, so it’s kind of fun.

[00:58:25] Cameron: And then I’ve been read­ing Robert Sapol­sky’s new book. You know Robert Sapol­sky? Ever come across him?

[00:58:31] Tony: I have not.

[00:58:33] Cameron: Writ­ten quite a few books, um, Pro­fes­sor of Biol­o­gy, Neu­rol­o­gy, Neu­ro­surgery at Stan­ford Uni­ver­si­ty. He’s done a lot of work with great apes and things over the decades. He’s got a new book called Deter­mined, where he’s… Yet again, anoth­er per­son rip­ping off my work. Uh, he’s mak­ing the case, the sci­en­tif­ic case for how free will, free will does­n’t [00:59:00] exist, can’t pos­si­bly exist, has nev­er exist­ed.

[00:59:03] Cameron: And if you think you have free will, you’re kid­ding your­self. And. Why it’s impor­tant for hap­pi­ness and also for the jus­tice sys­tem, uh, and soci­ety in gen­er­al that we get over this illu­sion, this myth that peo­ple are respon­si­ble for their actions and we accept, as he says, what you’re doing is you’re look­ing at the last three min­utes of the tape.

[00:59:27] Cameron: Oh, well, he pulled the trig­ger. So there­fore he’s respon­si­ble and you’re ignor­ing the 45 years of things that led to the three min­utes where he pulled the trig­ger. All of the, you know, from ges­ta­tion, the genet­ics, the con­di­tion­ing, um, all of those things.

[00:59:46] Tony: That’s not a free will argu­ment. That’s a social jus­tice argu­ment.

[00:59:50] Cameron: Well, it comes back to free will at the end of the day. The way that we treat peo­ple in the jus­tice sys­tem is dif­fer­ent already today. I mean, if, if [01:00:00] we deter­mined that some­body was not in con­trol of their actions at the time because they were on med­ica­tion or they were hav­ing a psy­chi­atric episode or some­thing like that, they get treat­ed dif­fer­ent­ly.

[01:00:14] Cameron: They get… put through the jus­tice sys­tem dif­fer­ent­ly than if we decide that, no, they were in full con­trol of their impuls­es at the time, it was pre­med­i­tat­ed, etc, etc. Where­as he and I make the argu­ment that no one’s ever in con­trol of any­thing that they do, and it’s, we should­n’t be think­ing about it as pun­ish­ment, we should be think­ing about it as, well, try­ing to, A, reha­bil­i­tate them if pos­si­ble, B, try and under­stand what went wrong in their brain.

[01:00:45] Cameron: To see if we can fix it, but also so we can pre­vent it from hap­pen­ing to oth­er peo­ple. And then, then going and shoot­ing up 80 peo­ple in a shop­ping mall or what­ev­er it is. You know, we, we still are stuck in this [01:01:00] mid­dle ages, uh, you know, he says at one point, some­thing like, well, you know, we have, we have made some progress when a hur­ri­cane hap­pens.

[01:01:08] Cameron: Now we don’t blame the. Old lady liv­ing in a ram­shackle house with no teeth and say that she cast a spell and brought it upon us. But we’re not far removed from that, real­ly. We still have this oth­er woo woo mythol­o­gy that says peo­ple are in con­trol through mag­ic, the mag­ic of free will. Um, any­way, it’s just good to see, you know, I wrote my book on it 2011, so it’s, it’s good to see increas­ing­ly physi­cists and sci­en­tists and neu­ro­sur­geons and peo­ple like that writ­ing books that Peo­ple actu­al­ly read and take seri­ous­ly, as opposed to my book, um, push­ing the same argu­ment.

[01:01:53] Cameron: Seems to be a bit of a trend at the moment for, um, sci­en­tists, cred­i­ble sci­en­tists, [01:02:00] um, get­ting on board the no free will. It’s just been me and Sam Har­ris for the last 10 years, so it’s good to see oth­er peo­ple get­ting on board. Any­way, so

[01:02:07] Tony: There has, there has been oth­er sci­en­tists, I’ve heard of oth­er peo­ple, I’ve heard the research of sci­en­tists, like, uh, the per­son who, uh, did the exer­cise where they mea­sured the impulse in the foot and the impulse in the brain, uh, dur­ing a brak­ing inci­dent in a car. And the foot moves before the brain moves.

[01:02:25] Tony: So it’s a reflex rather than being a, oh, I thought I saw the kid run out in the road and I told my foot to, to stop. No, the foot stopped. It’s before. Before you, um, deter­mined to do it.

[01:02:36] Cameron: yeah, you’re talk­ing about Libet. Libet did some work on that, you know, in the, I think the 80s, 70s, 80s, and, you know, that’s had a cer­tain amount of influ­ence. Yeah, but it’s increas­ing­ly peo­ple com­ing at it from a hard sci­ence per­spec­tive, like I do, which is to say every­thing’s gov­erned by atoms. It’s all physics and chem­istry, and there’s no, there’s no wig­gle room in [01:03:00]physics and chem­istry to say that Some­thing could have hap­pened dif­fer­ent­ly if, but then else.

[01:03:05] Cameron: No, the, the physics and the chem­istry of the brain at that par­tic­u­lar point in time were the only way that they could be based on their antecedents. And that action was the result of the chem­istry of the brain at the time. There’s no, there’s no wig­gle room in it. It’s just, it’s got to take a hard sci­en­tif­ic view.

[01:03:25] Cameron: And you know,

[01:03:26] Tony: all the way down, so you nev­er had an ele­ment of con­trol over any of it.

[01:03:30] Cameron: yeah, that’s right. All the way back. Your upbring­ing, all the things that have hap­pened to you, your genet­ics, your epi­ge­net­ics, you know, that’s, we’re learn­ing more and more about epi­ge­net­ics, um, these days,

[01:03:44] Tony: Well, for me, the, I mean, we used to talk about this many years ago when you were writ­ing your book, and it took me a while to cot­ton on to your con­cept, but, um, And you con­vinced me, but the, the light bulb moment for me was Ein­stein. I mean, if you think about space time rel­a­tiv­i­ty, all of space and [01:04:00] time exists at the same time in the same point and have always done that and will always do that.

[01:04:05] Tony: It’s already writ­ten out there on a map. Um, as soon as you real­ize that and accept that, how do you change it?

[01:04:13] Cameron: yeah.

[01:04:14] Tony: Byrne, as David Byrne says, every­thing that hap­pened, hap­pened today. Yeah.

[01:04:19] Cameron: Yeah. And for peo­ple who don’t under­stand what you just said, I, I’m glad that. You, you artic­u­lat­ed it so well, you know, the pre­vail­ing cos­mo­log­i­cal the­o­ry in sci­ence is what’s called the block uni­verse. It’s, and it plays out of, falls out of Ein­stein’s spe­cial the­o­ry of rel­a­tiv­i­ty. That is that, you know, we, we talk about space time since Ein­stein, we, we, we talk about space and time as being the one thing.

[01:04:45] Cameron: We have three dimen­sions of space, one dimen­sion of time, and they are. The fab­ric of the uni­verse, the fab­ric of the cos­mos, as Bri­an Greene refers to it. So the block the­o­ry of the uni­verse is, you can think of the uni­verse as like a, uh, Bri­an [01:05:00] Greene uses the anal­o­gy of a loaf of bread. It’s like a loaf of bread, three dimen­sions, height, width, depth, and the time is the direc­tion that we’re trav­el­ing through it.

[01:05:12] Cameron: Stephen Wol­fram talks about sim­i­lar things in his new book on com­pu­ta­tion­al the­o­ry, but Just as you said, just as like Mel­bourne and Syd­ney coex­ist. Mel­bourne does­n’t sud­den­ly exist when you fly from Syd­ney to Mel­bourne, it co exists. You know, New York and Mel­bourne co exist, the Earth and Mars and the Earth and, you know, dis­tant plan­ets all co exist at the, you know, at the same time.

[01:05:38] Cameron: They co exist, and if space and time are the same thing, and all points in space co exist, there­fore all points in time must co exist. And if, like Ein­stein famous­ly wrote to the wid­ow of a col­league of his, Some­thing to the effect of… As hard as it is to accept, um, every­thing that [01:06:00]has ever hap­pened, all points of, all points in the past and the future are hap­pen­ing right now, basi­cal­ly.

[01:06:06] Cameron: Every­thing that’s ever going to hap­pen is already hap­pen­ing in space and time. We’re just catch­ing up to it, and the way that Wol­fram explains that in his new book is the, you know, where… The, the algo­rithm is play­ing out and we’re sort of part of the algo­rithm pay­ing out, but how the algo­rithm is going to play out has already been deter­mined by where the algo­rithm is at, you know.

[01:06:28] Cameron: So when you ful­ly accept that, I think that’s the hard point I’ve found with peo­ple over 30 years, is peo­ple will say, well, I can’t argue with that from a sci­en­tif­ic basis, how­ev­er,

[01:06:38] Tony: Yeah. Or they say, Oh, so I can go and kill you now and get away with it. It’s like, no,

[01:06:46] Cameron: or

[01:06:46] Tony: were always going to kill me and you did­n’t get away with it. We already know that.

[01:06:51] Cameron: Or they will say, well, that means, you know, I can’t learn or I can’t devel­op. No, you will still learn [01:07:00] things. You’ve learned things up until this point and there was no free will. just the way brains work, right? It’s the chem­istry of brains. We learn and yeah. Your actions are going to be what your actions are going to be.

[01:07:12] Cameron: Any­way, so they have been read­ing that and lis­ten­ing to some pod­casts that he’s been on and he’s good. I like Sapol­sky. He does, he takes no pris­on­ers. I was lis­ten­ing to an inter­view, a psy­chol­o­gist inter­view­ing him on a pod­cast this morn­ing, and he was try­ing to find some wig­gle room and Sapol­sky just kept shut­ting him down.

[01:07:28] Cameron: No, well, you can say that you can believe that if you like, but it’s just not true.

[01:07:35] Tony: is almost, I know there’s a reli­gious ele­ment to it, but it is almost like reli­gion, isn’t it? The idea of free will. It’s like, I can’t prove it. Now I think about it. I’ve got no argu­ment for it. How­ev­er, I believe it.

[01:07:47] Cameron: I choose to believe it any­way. And it’s a sim­i­lar thing too in that, you know, if you go back 100 years ago, um, peo­ple, gen­er­al con­sen­sus was that if you did­n’t [01:08:00] believe in God, you would, there’d be no mean­ing to life, you would­n’t be able to func­tion, or you know, there would be no rules, there’d be no guide­lines.

[01:08:09] Cameron: If you took that away, there would be noth­ing, you know, no Morals, no ethics. And of course, as the world has increas­ing­ly become filled with athe­ists, we real­ized, well, that’s not true. It’s the same with free will. I found over the last 30 years talk­ing to peo­ple about it, they seem to think that if they stop believ­ing in free will, their life’s going to col­lapse.

[01:08:29] Cameron: There’ll be no mean­ing. They’ll be depressed. They’ll feel like they won’t be able to change any­thing. And that’s sim­ply not true. It’s just, you know, you just accept, okay, well, every­thing that hap­pens is deter­mined by physics. So

[01:08:43] Tony: The physics was there while you were believ­ing in free will. The physics is going to be there after you stop believ­ing in free will. The physics does­n’t change.

[01:08:52] Cameron: physics, sci­ence does­n’t care is what I

[01:08:54] Tony: Yeah, exact­ly.

[01:08:56] Cameron: Yeah, but also, like, for me any­way, it did­n’t make my [01:09:00] life worse when I stopped believ­ing in free will, it made my life bet­ter, because as I was explain­ing, the things that fuck most peo­ple up, psy­cho­log­i­cal­ly and emo­tion­al­ly, fear, regret, guilt. Anx­i­ety, anger are all pred­i­cat­ed on the idea that either you or some­one else has free will. It’s very hard to stay angry at some­one when you accept that they don’t have any con­trol over their actions. They did what they had to do based on the way their brain was at that par­tic­u­lar moment. It’s very hard to feel guilt.

[01:09:32] Cameron: If you go, well, I did what I had to do based on the way my brain was at that par­tic­u­lar point in time, it could­n’t have been any oth­er way. It’s also very dif­fi­cult, you know, like you just said about if, you know, the time has already hap­pened. The future’s already hap­pened to wor­ry about it. You go, well, it’s going to hap­pen how it’s going to hap­pen.

[01:09:49] Cameron: And I’m going to do what I’m going to do. So why wor­ry about it? Just get on with it and see what hap­pens. You

[01:09:57] Tony: Yeah, live in the moment.

[01:09:58] Cameron: by moment, day by day. [01:10:00] It’s actu­al­ly, it’s lib­er­at­ing. It’s free­ing, but most peo­ple think it’s ter­ri­fy­ing because they haven’t thought about it very deeply. Well, speak­ing of ter­ri­fy­ing, that’s the end of the show back to the mar­kets.

[01:10:12] Cameron: Tony, hap­py share mar­ket to you, Tony.

[01:10:15] Tony: Hap­py ASX cam.

 [01:11:00]