He Did Everything Right and Still Lost $70K…

Unknown · 00:00:00Jason: Welcome to another episode of The Numbers Game. I'm Jace. I'm here with Nick. And a quick shout out to our drink sponsor, Carmen Stormy, who unofficially have got on board and sent Nick and I, uh, about 20 slabs of calm and stormy. So cheers, mus.

Unknown · 00:00:13Nick: Yes. And um,

Unknown · 00:00:14Jason: thank you Carmen Stormy

Unknown · 00:00:15Nick: averaging one an episode at the moment and no intentions are slowing down.

Unknown · 00:00:18I, I'll tell you.

Unknown · 00:00:19Jason: No, no. Um, sensational just, just water though. I mean, even though it is. Friday at time of recording. And sometimes we talk about having a Friday arvo beer, but we'll stick to the calm and stormy. Do they

Unknown · 00:00:27Nick: have an alcoholic one, Jace?

Unknown · 00:00:29Jason: No,

Unknown · 00:00:29Nick: no,

Unknown · 00:00:30Jason: no. But the lemon lime one, uh, does go good with a little bit of vodka crew.

Unknown · 00:00:34The, no, we can't talk about that online. We'll get back to the real reason we're here. And Nick, I, uh, I'm, I don't know if I should say, I'm excited to unpack this episode and talk about it. Um, there's a, there's a lot of activity online as we know, and we try not to get too bogged down in social media and influencers and whatnot.

Unknown · 00:00:51And sometimes some of the information that's put out there is great and you learn, and it might be, you know, the particular food you should eat or, you know, a tax tip. Um, but there's a bit of activity online and, and I'm interested to see whether you've seen it around. Moving out of Australia to avoid paying tax or, you know, Australia's, you know, we, we get taxed too much here.

Unknown · 00:01:11I'm sick of paying tax in Australia, so I'm gonna leave and go to somewhere like a Dubai or a Singapore. Are you you seeing or hearing much around All the

Unknown · 00:01:18Nick: time. Yeah. I was thinking about doing it.

Unknown · 00:01:19Jason: Oh, perfect. Well, I'm, I'm about to, I'm about to give you the playbook on how to do it. Oh. Well, kind of

Unknown · 00:01:26Nick: you are, you are seeing a lot of it.

Unknown · 00:01:27It's definitely a trend at the moment and uh, as we know nowadays, we, we get exposed to a lot more through social media. Mm-hmm. And I think the people that are actually, um, going overseas to live the ones that are, you know, have built their lives possibly, or their income through social media. So the exposure's high and, um, I think gone are the days of.

Unknown · 00:01:49Thinking people went there to build infrastructure. Yeah. Which used to be why people went there, you know, got exorbitant salaries to build infrastructure. But you've got people that I guess are, are they not earning particularly just in Australia? They're earning

Unknown · 00:02:02Jason: Yeah. World worldwide income. Yeah. You know, let's say you are running an online business and you know, you, you don't need to be here in Australia to service your customers.

Unknown · 00:02:09Um, you know, there's the potential there. Like let's say business coaches, life coaches, yeah. Professional services where there isn't as much of a tie to Australia

Unknown · 00:02:17Nick: glamorous over there.

Unknown · 00:02:18Jason: Yeah. Well, I mean that's the, to be Yeah. That's what we all get told. But yeah, I mean, look, I mean, just off the bat, this, this comes up because I'm having a real life conversation with a particular client group of ours that is moving to Dubai.

Unknown · 00:02:29Nick: Yeah.

Unknown · 00:02:30Jason: Um, so, you know. I try and take, as we both do, we, we see things that are happening in, in future advisory and innovate, and we go, this is actually relevant to discuss with, with the audience. Um, our audience that tune in each week and was talking to this particular client, he actually said him and his business partner went out for pizza.

Unknown · 00:02:46The pizza cost a hundred Australian dollars for them to have a basic pizza. Or they said, sorry. He said it was a really good pizza, which I said it would wanna be for a hundred dollars. And he goes, the next morning they went out for two coffees and cost 50 Australian dollars for the coffee. So I'm starting to think like these people that promote and spruce online about moving to Dubai and these places to pay less tax.

Unknown · 00:03:07But the planning that needs to go into it, which is what I want to kind of unpack a little bit today, that the planning that goes into it needs to go beyond, I wanna pay less tax, or I don't wanna pay tax in Australia. The things that you also need to do to then not have the A TO watching out for you. So.

Unknown · 00:03:23There's this idea that you can leave the Australian tax system or you can leave Australia. Sorry, but you can't leave the Australian tax system that easily. Um, so I want to go into a little bit of detail about what type of things you'd need to do to realistically separate ties from Australia and not fall under the resident tax system.

Unknown · 00:03:41So. Look, and as we touched on the reasons why people might go lower tax, better lifestyle, more freedom, but I don't know, we're, I think we're pretty lucky here in Australia apart from obviously we've had that episode about tax before and uh, we are taxed quite high potentially, and there is the rising cost of living now plus interest rates.

Unknown · 00:03:58And, uh, people obviously think our government aren't doing the best job, so we won't go into that though. Um, so what I do want to talk about though is if you leave Australia, do you stop paying tech tax? So just from. Very high level. Nick, what would you imagine if you were to move overseas, essentially the day you leave the country?

Unknown · 00:04:16You know, why would you, why would you have to pay tax in Australia? Like what, what would your perception or understanding be at the moment?

Unknown · 00:04:22Nick: Yeah, so the perception for sure would be no tax in Australia. Uh, I'm not utilizing any services over there and I now live in Dubai. That's who supplies me services and things.

Unknown · 00:04:36Um, so I would pay taxes there. Dubai, isn't it?

Unknown · 00:04:41Jason: Okay.

Unknown · 00:04:42Nick: Yep. Yep. That to me seems common sense.

Unknown · 00:04:43Jason: Yep. Yeah. And correct. I think a lot of the times what we think is common sense doesn't necessarily go hand in hand with, uh, what the A TO do. So from a what a TO tracks and what they look at. And then I'll run you through the residency tests, but the a TO will be looking at things like your travel movements.

Unknown · 00:04:59How often are you moving back and forward in and out of Australia? They'll be tracking your bank accounts. Have you kept an Australian bank account where. You're moving money back into Australia or moving money out of potential business here. Um, OECD, um, which is the global, um, banking background. They, they share data.

Unknown · 00:05:17So if you do have a bank account in Dubai. The a TO is actually getting that data as well. So, you know, just 'cause you've moved to Dubai and you're earning money over there, not paying tax doesn't mean the a TO don't have that linked back to here. Um, anything that's TFN linked. So if you've still got shares or investments that register your TFN, like a, a managed fund or ETFs that's still being tracked.

Unknown · 00:05:39Your assets and your family connections are ongoing. Things that the HO will monitor as well. So if you've left the family home behind and you didn't sell it. It starts to look like your intention isn't to have Le leave Australia permanently and no longer return as a resident. That looks like you've gone, if you sold your home, if you keep your home, and even worse, if you leave your spouse and kids behind the a TO is then essentially going, Hmm, you haven't really left Australia behind to separate ties because you've left a home spouse, kids, potentially a business where you were a director, but you're still operating through that business and then the source of your ongoing income.

Unknown · 00:06:14Mm-hmm. So if a lot of your ongoing income is generated in Australia and you think you can just funnel that over to Dubai. We start to have, uh, some issues there. So the residency tests, you know, the big one is the resides test. So it's around your, your home, you know, where is your address that you live in?

Unknown · 00:06:31Um, how often are you there? Like, do you live there day to day where your family is? And then your routine and lifestyle. So this particular client we were talking to, they're, they're going about this properly in a sense. There's a few extra steps to go, but they, they've put their family home on the market 'cause they're gonna sell that and the husband, wife, kids are all moving to Dubai and the family home will be sold.

Unknown · 00:06:52This from an A TO perspective looks much more like someone who is leaving Australia and will have no connection. To be able to pay Taxo as a resident, Australian resident, they look like, and that's the big one. So the next example though is the domicile test. So it's all around where your permanent home country is or where you're considered a tax resident.

Unknown · 00:07:14And the key thing is, have you kept enough ties to. Like, do you have a place you can come and stay here, like an apartment or a home? And if you're back here often enough, the next step is the 183 day test. So atos got all these little mechanisms, but if you, let's say you move to Dubai, but you're in Australia for 195 days.

Unknown · 00:07:35Out of a full calendar year, the a TO is gonna go, you haven't met the 180 3 day test you've been in Australia for more than those days. We're taxing you here regardless of your income going to your Dubai bank account, or Singapore, or wherever you've chosen to call home. So they're the top three tests.

Unknown · 00:07:54You know, resides where your home is. Um, the domicile test, which kind of linked, and then the 180 3 day test. Again, they're all about where you spend your time and your connection. Another big one is intent. HEO always loves the intent. There is a fourth test, which is less relevant, but it's around government workers.

Unknown · 00:08:12So you imagine your, um, department of Justice or um, Australian Federal Police and you get posted to, let's say Papua New Guinea for three years. Even though you're in Papua New Guinea for three years, you are still being paid into your superannuation. So for government employees that continue to get their super paid in Australia, that will connect you to be a resident for tax purposes.

Unknown · 00:08:34Nick: So it's about, um. A lot of the underlying message I was getting there was intention. So if you are, it sounds like if you're, if you're doing this to try and evade tax possibly, or try and look like. I'm not gonna be an Australian resident, but I really am. They will work that out and it's, you know, it's more about what you're actually intending to do, what not, what you're trying to appear to be doing.

Unknown · 00:09:02Jason: Yep. Correct. Yeah. Correct. Yeah. Intention is one of the biggest words with the a TO too. Yeah. Like, uh, you know, your intention, especially around your main residence exemption, so if you do keep your main residence and you rent it out and you go and live overseas, well all of a sudden your intention looks like you've kept your main residence.

Unknown · 00:09:18You're getting the six year main residence exemption rule. Um, it probably looks like you're gonna try and come back at some point, so you haven't really severed ties if you keep your Australian phone number. So if you're in business here in Australia and you're a director of a company and you keep your Australian phone number and bank accounts again, doesn't really look like you've severed ties with the Australian tax system in that way.

Unknown · 00:09:38So there's a few of those ones, and there's also a couple of big ones that people miss regardless of whether it's. Going to Dubai, not Paytex. These are just some big ones where people may leave Australia for a few years and maybe their intention, they don't know if they're coming back, but they've separated all ties, closed bank accounts done as much as they can.

Unknown · 00:09:56But the big one is your hex or help debt. So even if you leave Australia and you have a hex or help debt, that will follow you around the world and the expectation is that you will still lodge your Australian tax return, um, because you've still got A TFN, you're still formally an Australian. Citizen, an Australian resident.

Unknown · 00:10:13So you go to Dubai, Nick, let's say you've met every other test and you're not an Australian resident for tax purposes, and you earn 200 grand, you will also lodge an Australian tax return. You'll say, I'm not a resident for tax purposes. You'll put in that you earn 200 grand, you'll pay no Australian tax, but you'll pay your help repayment calculated on a $200,000 taxable income for help surcharge purposes,

Unknown · 00:10:38Nick: right?

Unknown · 00:10:38Jason: So. That's a big one that we've had people miss before and when we've reached out to them to say, Hey, it's time to lodge your annual tax return, they, oh, no, I'm overseas. You know, I'm working in London, or I'm working in New York, and we're going, cool. Just tell us your tax. Tell us how much income you made.

Unknown · 00:10:54Over the Australian tax year, and they're like, well, hang on a minute, what do you mean? Like, I'm, I'm not in Australia. So that one catches people out and then often we're sending a bill for at least 10 grand depending on what they're earning. And that's chipping away at their, they helped debt that the Australian government doesn't wanna let you, uh, leave with.

Unknown · 00:11:09But to be clear, yes,

Unknown · 00:11:11Nick: there's no outside, there's no tax though.

Unknown · 00:11:14Jason: No, there is no tax. As long as you're satisfied that you're not an Australian resident for tax purposes,

Unknown · 00:11:18Nick: yeah.

Unknown · 00:11:18Jason: You won't pay tax on your global income. Yeah. You'll pay, you'll be paying that. Where you are now a resident for tax purposes. So London, New York, Dubai.

Unknown · 00:11:27Nick: Yep.

Unknown · 00:11:27Jason: Um, it's just the help debt is a, is that big one that people forget about is when they leave the country, they'll go, I'm done now. All good.

Unknown · 00:11:35Nick: Yeah. It's, it's, it's, it's a loan. It's not a tax. Correct. So yeah, they want to, yeah, it's, yeah.

Unknown · 00:11:41Jason: Yep. So still want that page.

Unknown · 00:11:43Nick: That makes sense to

Unknown · 00:11:43Jason: be. And another big one that, you know, catches a few people out.

Unknown · 00:11:46You know, they've got this genuine intention to leave Australia and not come back. So let's say that was you, Nick, and you were gonna go, um, let's say you've got a couple of hundred grand in superannuation, you have no intention of coming back to Australia. Um, would you like your superannuation?

Unknown · 00:12:01Nick: Well, it's mine, so yes.

Unknown · 00:12:02The answer is yes.

Unknown · 00:12:03Jason: Yeah, you can't have it.

Unknown · 00:12:05Nick: Yeah.

Unknown · 00:12:05Jason: Not until you're 65 or not until you reach one of the preservation age or one of the tests to get it out. Yeah. So generally turning 65 in the past, reaching, preservation, age or retirement, um, few extra ones might be terminal illness. If you can prove that you have serious medical condition and go through that, um, that not a loophole, go through that route.

Unknown · 00:12:23Yep. Otherwise severe financial hardship or compassionate grounds. So, but apart from that, that was an interesting one, having this conversation with a, um, with a client that wants to move over to Dubai and ties with Australia. Again, doing all the right things, but this perception of, well, I'm gonna take my super as well and invest it over there 'cause that's my life now and I have no intention of returning to Australia.

Unknown · 00:12:44And, and unfortunately that was, uh, one of the ones that kind of was like, oh, okay. Um, wasn't expecting to not. Be able to take my retirement wealth that I've been saving. Yeah. But no, that's, that's trapped in the Australian system.

Unknown · 00:12:56Nick: Mm.

Unknown · 00:12:56Jason: The only time where some people might go, oh, hang on. But I've heard of people releasing it is if you weren't born in Australia or you weren't an Australian citizen, basically from day one when you opened your super fund, if you were a working holiday maker, so let's say you're born in London, you came to Australia to work for a couple of years as a backpacker, you might have got 20 grand in your super fund.

Unknown · 00:13:17You can. Exit the Australian superannuation system, but I'm pretty sure it's taxed something like 40 something percent on the way outta the country. So, um, they still take their slice of that, but they're the only people that really can exit the super system.

Unknown · 00:13:32Nick: Yeah, and I, I guess now in this day and age with open data and um, the access that the likes of the A, you just can't get away with this stuff.

Unknown · 00:13:48Tracking bank accounts. Yep. And you know where you're spending your time, how are you spending your money?

Unknown · 00:13:52Jason: Yep.

Unknown · 00:13:52Nick: Whereas prior. To the current environment. That would've been very difficult for the a TO to do. Not saying they could, could not have done it if they wanted to, but the resources that would've went into that, such as if they wanted to investigate someone understanding flights, hypothetically, how do you work all that out?

Unknown · 00:14:12You, there's a process to go through getting access to bank statements.

Unknown · 00:14:15Jason: Mm.

Unknown · 00:14:15Nick: Now moving towards a digital identity, it's almost like you're wearing a tracker.

Unknown · 00:14:21Jason: Correct. We, we've got a little myGov ID that pops up whenever we try and log in and outta the system. So the, you're right. And that is the, the sophistication and the amount of data that, that is now being shared all around the world.

Unknown · 00:14:33And specifically for our example into the A TR, I mean, we had an episode, it was 600 million data points per year. And that was a few years ago, and it's only increasing more and more each year with the amount of data points fed in. And then beyond that, you think about, you know, people out there using chat, GPT and Claude.

Unknown · 00:14:51Think about how far AI has come in the last two or three years. The A TO are only just kind of catching up on data from four or five years ago and catching people out. But it's only a matter of time before they're gonna have the ability to turn on even more powerful AI and technology to rip through all the data to go.

Unknown · 00:15:07Flags, flags. And then the next problem will be like always the, the human intervention to be able to go and tackle the particular problem. But, you know, why, why are we seeing this as a problem or why is

Unknown · 00:15:19Nick: just a question first back on the trying to determine where you actually land.

Unknown · 00:15:23Jason: Mm.

Unknown · 00:15:23Nick: If so hypothetically I go to Dubai.

Unknown · 00:15:27Jason: Yep.

Unknown · 00:15:27Nick: I've got an owner occupied house. Yep. I don't wanna rent that out because I don't want tenants in there. I wanna keep that as an asset because one day if something goes wrong in Dubai, I want the ability to come back. Not the intention, but the ability. Is there a, a hard line as to, okay, we, you know, you've gotta declare that you've spent this much time in Dubai, or I'm just picking to buy 'cause that's what we're talking about.

Unknown · 00:15:52Is there a hard line as to. If you spend this amount of time in this country, let's say you're earning a global, you are earning your money in a couple of different areas. Like how, like how do, what's the actual, because intention's gray. Mm-hmm. Right? So what is the actual rule for someone? We might see on social media that's got a global income that says they've got a property here, but they'll, they are a Dubai resident.

Unknown · 00:16:18Is there a hard and fast rule?

Unknown · 00:16:20Jason: No, there's, there's no clear, crisp answer each, each case, like everything, uh, especially with the a TO and, you know, innocent or guilty until proven innocent for a lot of the things that happen with the tax system. Mm. But it'll be, each case by case needs to be assessed, you know, how did it come about?

Unknown · 00:16:34Why was it done? What was the initial intention? You know, what is your longer term plan? What are you gonna do with the property if your intention's not to come back, but you're not renting it out? There'll all be questions that you have to answer and, and essentially working your way through the test is only one part of it.

Unknown · 00:16:49And then it'll, there'll be a flow on effect. And, and again, a lot of it, again, the, you can get an advisor that tells you one thing, but if the HEO come and unpack it and go, no, we, we think that you should have been lodging a taxes as an Australian resident. Yeah, we wanna tax your global income. You then have to make the fight to fight that, to prove that they were wrong.

Unknown · 00:17:07But if you've held onto your property, they're probably gonna say, well, well our argument is you've got a property here in Australia. Yeah. You wouldn't have kept it if you weren't intending to come back. So we want to touch you as an Australian resident.

Unknown · 00:17:18Nick: Okay. And then, and just another question regarding that, and this is pivoting a little bit

Unknown · 00:17:23Jason: of course,

Unknown · 00:17:23Nick: but if you did have income in a couple of different countries, so you know, you were deriving income, uh, in Australia at the same time as other

Unknown · 00:17:31Jason: Yeah.

Unknown · 00:17:32Nick: How was that? Treated,

Unknown · 00:17:33Jason: yeah. You lodge a tax return here as a foreign resident for tax purposes.

Unknown · 00:17:36Nick: Okay. Yeah. And how's the tax rates on that? Is it the same or different?

Unknown · 00:17:38Jason: Nah, it's basically starts at 32 and a half cents, right? You, you don't have a tax free threshold, right? You don't have the 16 cents or 19 cents.

Unknown · 00:17:44It basically starts up in the thirties.

Unknown · 00:17:46Nick: So what I'm getting at is. It could actually hurt you.

Unknown · 00:17:50Jason: Yep,

Unknown · 00:17:51Nick: correct. Possibly,

Unknown · 00:17:52Jason: depending on, yeah, especially if you've got like a, a great share portfolio. But then you also think about, we've had ones where people have moved overseas, and this is why part of this episode, the idea is, it's not to say don't move to Dubai or don't move overseas, but it's to say.

Unknown · 00:18:05If you are going to do it, make sure you have a clear plan with an intention, a reason, and you map out all of the things that can or can't go wrong and what can happen. But one of the ones that we've seen that really hurts people is they've had an opportunity to go take a job overseas. So they, they thought they would return to Australia.

Unknown · 00:18:23So that's probably 0.1, is that thought that you would, would return, so you leave the main residence, you leave the investment property, or you might rent the main residence out and then all of a sudden they, this particular example, which was like. Devastating. They were gone for more than six years, and then without talking to their advisor, they sold both their properties back home because they, they decided we're probably not gonna come back.

Unknown · 00:18:46Now from a tax perspective, foreign resident tax rates, no capital gains discount, and then their main residents went outside of the six years, so cop tax as well. The tax outcome on that was devastating as opposed to returning home. Moving into the property, becoming an Australian tax resident again for tax purposes, and kind of settling in for a bit to go, is this what I want?

Unknown · 00:19:09Maybe my intention might be to return. I've taken a bit of a break. And then again, it's all about how you work the system in your favor, but moving back into the home to reactivate your main residence exemption, then selling it would've saved a ridiculous amount of tax. Mm. Um, but instead, so again.

Unknown · 00:19:25Mapping these things out is one thing, but having a plan, the what if scenarios with an advisor with a tax, um, tax professional, um, goes a long way. So I was just gonna touch on like why we're seeing a bit of activity in this. So the HEO basically has well in excess of a $50 billion tax, uh, debt book. So they're owed a lot of money.

Unknown · 00:19:47They're getting government pressure to collect that income. Then they're going, well, okay, well, well, where are we looking? How are we gonna collect, uh, more income? So this increasing enforcement is around chasing global income. So people who are are have income global sources that aren't declaring it in Australia.

Unknown · 00:20:03The a l wants to crack down on that. Now, you'd think they could look at the. Bigger businesses that have billions in revenue and are significant global entities. But Nick, sometimes that's too hard for the a TO to fight that. Then they get lawyers and it's stretched out. Sometimes the easy wins are the individuals and the small business owners that are trying to gain the system or trying to get a win without paying tax and to go after these ones, you know?

Unknown · 00:20:27And, and it's, it's pretty crazy. I mean, um, the de there's departure, prohibition orders that stop people from leaving the country if they think that you are going overseas. Earning income over there and not paying it, and you've come back in the country and they wanna question it and come after you, they'll stop you leaving the country until you can argue your case and plead your case that you know that you aren't doing anything wrong.

Unknown · 00:20:47So this is really important to get right. I mean, I've touched on the silly things or not silly things like a help debt repayment or you can't have your super, but if you are planning on leaving. You gotta work through all these steps to make sure you get them right. Um, and it's not as simple as, well, I'm just gonna go over to Dubai and set up a company and pay tax there, and then I'll return to Australia after I've made money for a couple of years.

Unknown · 00:21:08There is more nuance to it and it's definitely worth understanding what you need to know before you go. 'cause again, some people just kind of. Assume that it's a lot easier than it is. Mm-hmm. Um, and like anything with what, what I do in tax land, yeah. It's never as easy when the HEO, uh, are chasing money and they've got a debt book to close.

Unknown · 00:21:27Nick: Yeah. Yeah. It's, um, the more complicated they make it, the better for you.

Unknown · 00:21:32Jason: In theory. Yeah, Nick. Uh, I wish that was the case, but I mean, and even in, in doing this, I mean, we learn something new all the time too. I mean, I didn't know if pizza cost a hundred dollars or two coffees were $50. So that's been fun.

Unknown · 00:21:43And um, even setting up a company, I think it was something like $30,000. To from start to finish to get a company set up over there. Yeah. And even, um, as these things become more common, learning that to get the 10 year visa, you have to buy a property. You, one of the options is buying a property for over $750,000 and then you activate a 10 year visa to be able to live and work there.

Unknown · 00:22:05So there's all these little things that we learn. I mean, in, in future advisory land, we definitely don't say we're international tax experts. Yeah, we wanna stay focused on the Australian market. But as these things start to become more common. We obviously expand our, our skills and knowledge to make sure we can at least have the high level conversations with our clients, uh, and give them their options.

Unknown · 00:22:24Nick: Awesome.

Unknown · 00:22:25Jason: I reckon that, uh, pretty much wraps this up, Nick. I think, uh, you know, if, if this has pricked your interest and you're thinking about a, a trip to Dubai to pay less tax, or maybe it's Singapore, maybe it's Bali, but, uh, definitely speak to a professional first. Work through the, uh, pros and cons and, and the steps to make sure that you are setting yourself up for success.

Unknown · 00:22:43Nick: So in closing, Jace, you can run away from Australia. You can't run away from the a TO game artist.

Unknown · 00:22:49Jason: This podcast is for educational and informational purposes only. The conversations are of a general nature and do not qualify as financial or tax advice. We recommend before you make any financial decisions, you consult a licensed professional.

Unknown · 00:23:02Individuals on the podcast may hold positions in the companies discussed. Ep 96 Jason • 00:00 Welcome to the Numbers Game Podcast. I'm Jason and as always I'm joined by the wonderful Nick and Marty. How are we going today guys? Marty • 00:07 Going well Jace. Excited about this episode. We're gonna deep dive into some more personal stuff and vulnerable stuff on this episode and probably as we usually do poke fun at others and poke fun at ourselves which is what life's all about. So going well. Nick, how are you my friend? Nick • 00:24 I'm going well too, mate. And yeah, also looking forward to this. I think we run it so hard as business owners that sometimes we get wrapped up in what we're doing in the day today and we don't think about the external um the external people or the well what's external to the business and you know relationships and whatnot and the damage that we might be doing in other areas of our life. So Yeah, given we're all business owners and running very hard and really looking forward to uh today's episode. How are you, Jace? Jason • 00:52 Mate, I'm good. I'm good and I actually think a lot of where we'll go Can also apply to to people working in their jobs. Uh you know, I deal with a lot of uh individual tax returns and and people that I look after doing their taxes that work jobs for for great companies. They're earning good money, they're doing their thing, but you know, stress and burnout and anxiety and fear and all these different things that people go through. Um, you know, and and m often find themselves wondering, why do I do what I do? Like what's what's getting me out of bed today? So I think um yeah this is going to be an interesting discussion unpacking some vulnerabilities, some keys to happiness, and um yeah, looking forward to cracking into it. Marty • 01:33 Well Jace will no doubt have a sponsor, mate, so let's uh Let's build it up. Let's build it up big. Who have we got this week? Jason • 01:40 None other than the proud sponsors of Future Advisory getting behind the podcast once again. Uh very lucky to have uh two great companies that uh get behind uh the numbers game podcast. Uh Always getting uh offers from more to come on board and start to throw sponsorship money at us, which you know we'll have to declare to the ATO of course, because we're good good tax abiding uh numbers game citizens. So future advisory, tax, compliance, section 100A, bucket companies, all the crazy stuff that's going on. Make sure that you've got it all dialed and handled by an expert team if you do need some help. futureadvisory. com. au and uh check out the team there and we'll be glad to help you. So um today's episode, Nick, as we said, we're going to touch on a few different things, but uh I might pass it over to you to lead the way into what got us thinking and talking about these kind of topics. Nick • 02:29 Yeah, thanks Chase. Um look I I listened to a a podcast called The Imperfects and I know both of you listen to it as well. Um it's really good. It's um it's based on vulnerability and mainly uh I I guess people that we would know, so whether that be celebrities or sports people or or whatnot, talking about their vulnerabilities. So it's a really good podcast because it Yeah, you can actually go, okay, well, we thought that person was perfect, but but maybe not. Um, so I love what the guys do there, and I think we've spoken about uh the the podcast before. before so shout out to the imperfects. Hopefully they give numbers game a plug in the next couple of weeks. That'd be very much appreciated. Jason • 03:08 Ryan Shelton and Hugh Van Keilenberg. Please don't forget your mates at the Numbers Game if you are listening. Nick • 03:15 I'm sure Tommy's got some connections there. He can uh make sure I hear this episode. Jason • 03:19 I think so too. Nick • 03:21 Um but but um Aaron Deering is the the interview that I listened to. Um Her business Triangle. I read something about how how they got that business promoted. Um so for those that don't know, trying Triangle is a swimwear brand. Um I'd never heard of it, Marty pointed out to me, so not sure how we knew all about Triangle, but he did. But um it's it's very much a a story where you go, shit, some people just have a have an idea and you just you've really got to you just run with that idea. So when I look at Aaron's story, it's it's a true entrepreneur story. Um and the part that really got me is how she blew the brand up, basically. Um but she w she knew she had to get the the swimwear promoted by, you know, someone famous who was an influencer. Um she picked out Kendall Jenner, um, part of the Kardashian family and I would think probably one of the hardest people to get to. Um so the idea that she had with her co-founder who was her partner at the time was to send all of Kendall Jenner's friends um swimwear, free swimwear. And the theory being that Kendall would see all of her friends wearing the swimwear. And would say, how good is the triangle swim wear? I need some of those myself. Marty • 04:38 So smart. Nick • 04:40 So that's what they did. They sent um Free swimwear to all of Kendall's friends. Kendall sees her friends wearing it. Next thing she gets a message from Kendall reaching out saying, hey, I really like what my friends are wearing. Any chance I can get some of your swimwear. Next thing you know, she posts about it and and and and it all blows up. So um that's what got me onto the podcast 'cause I'd I'd read that and I thought that's a brilliant story and then I I saw her her name pop up on the Imperfect so I thought I'd I'd listen to it. And I believe I can't quite remember the title of the podcast, but it was about basically about how money doesn't make you happy. And, you know, you can have all the money in the world. Jason • 05:16 That's exactly the title. That's how money doesn't always make you happy. Nick • 05:19 There you go. So um it was talking about, you know, externally we look in and we might look at an Aaron Deering and a $45 million business. um Kendall Jenner wearing your swimwear um from you know rags to riches basically but what does it all all mean and you know money doesn't mean anything and I guess what Aaron's story r well, how it resonated with me was that you can you can go hard at business and you can do so many things well in your business. And most people that are good at business give their business 110% And it and it's it's all in. But what's happening out externally um in your business, you know, what's happening to your relationships? How's your mental health? Erin had a marriage breakdown. Um, who was her business partner or a relationship breakdown Went through bouts of depression, um whether that was, you know, lack of balance um or or what it might be um had r relationship breakdowns or was uh closed off to her family and people that were really close to her. So yeah, we build these amazing businesses, or some people build amazing businesses And you think, what are you giving up to do that? Um and one of the things that come up the this morning when we're talking to Tommy is did you need to do that to do the business that you have built? You know, you think about people like Um Elon Musk, uh, Richard Branson, I've read his books. Um the the businesses they have built, it was their entire life. And there was relationships around them that continued to break down. If anyone's read the Um the Richard Branson book is quite interesting. But um yeah, it just got me thinking about all of our listeners and our business owners. Um, you know, as much as business is your livelihood and puts food on the table and whatnot, you need to still be spending time on these other things and make sure that you don't break down in areas that's gonna impact you mentally And at the end of the day, for some people, have a significant impact on the ability for your business to be successful. Um so Marty, I know you're pretty strong on this. We've actually had some conversations about this recently around your social networks and and how and how they might break down when you're a hundred and ten percent in your business. So I'll pass over to you for some comments. Marty • 07:40 Yeah, well I just I I just thought to myself, uh and I think about this consistently when you're building businesses Yeah, what's the potential collateral damage that you're not thinking about, that you're unaware of? Because you do when you're in business, you know you're in it twenty four seven. You're always thinking about it, you're always trying to grow it. You're putting in the time, the effort, and and you know, it takes up takes up a hell of a lot of space. So what's that potential for collateral damage in relationships, in friendships and Uh I I was at a barbecue going back a few weeks ago and we have a friendship group, really tight knit friendship group, about eight couples. And uh Linda who runs a real estate agency uh stood up and she said we should be really proud of ourselves. We're now in our fifties. We've all run yeah really challenging businesses over our time And we've all managed to maintain our relationships. Like one not one of the circle of friendship had been divorced. And um yeah Kids are decent, happy, and um progressed as families quite well. And it really made an impact. Like I actually was quite emotional when she said it because I wouldn't have thought that that was the accomplishment in driving so hard in business and questioning myself a lot of the times. Like when you go through a challenging time in your business your partner's there with you on that the whole time. You know, when you're doing well everything's okay generally, but but again, if you're going well you get bullish and you put more energy in to try and expand that. that feeling as well in the business. So 'cause you want to do even better. So I've always been really concerned of the collateral damage of course. Like even to family. Like I had this moment uh dad was in hospital on Friday and I had this moment where I was working and I thought, no, I need to get this done before I go away on the weekend. And I I put that as a priority to go and see Dad. And I'm going And on the way in I thought, what happens if he had of um fallen over? What happens if he had died? during that time. You know, that decision was probably a poor decision where I could have had that done, you know, on you know, today, for example. And I thought there's all these little things when you're so driven and you try and do as well as you can Sometimes there's some collateral damage with family um and also loved ones that can really be a big problem because like I said, businesses can come and go. But the people in your life are are constant and I thought I think that's why when Lyndall said that comment, I felt really proud that I was a part of a friendship group that placed such high value on working together as families, as friends and in your relationship. So that was the thing that impacted me. Chase Jason • 10:32 I think when you're younger you don't necessarily appreciate that time is finite and that, you know, you only get a limited amount of time on the planet Um, I think when I say younger, I say that 'cause as I've gotten older and you know, I'm in I'm in my mid thirties now and I'm sure you boys have got your own experiences, but all of a sudden I I felt like, you know, between the age of fifteen and thirty, I didn't lose anyone significant in my life. Nobody got cancer. Um life kind of ticked by. For some friends came and went and and I started the business at twenty seven, twenty-eight. All cool. Now in 30s though, within a five year period, there's people that have gotten sick. Um, I lost my mum a couple of years ago, and all of a sudden it's it's starting to hit home that time moves fast. Like, you know, you've got a limited amount of time on the planet and You don't want to spend it being miserable and being unhappy. And if you're doing something that you're not enjoying, like what choices and decisions decisions are you making to change that? rather than just complaining about your situation. And then on what you were saying, you know, that that being making decisions, let's say, to forego seeing a family member or you know, to prioritize work because at that point in time it seemed like you know you needed to get that work done. It's one of those things, and I've spoken about it maybe on this podcast and some other ones about, you know, one of life's biggest regrets was For the last, you know, five of the last seven years when when mum was still here, I would very, very often choose work over going to visit. my mum and dad, let's say, because I always felt like, oh, but I've got to I've got to build the business now and I've got to get this job done. And I'll go see mum and dad another time. If I if I get this business right, oh, in a couple of years I'll be able to spend so much time with mum and dad because I've I've got the business humming and everything's going right. But then it took something like a tragedy that took my mum away for me to go Shit, for five years I didn't pr I didn't spend as much time as I could have with my mum because I chose business over family and things that made me happy. So yeah, it's it's a it's a it's a tough one. And obviously I've got the the benefit of uh not the benefit, but I've got perspective now. And that's changed and and look, I still make some shit decisions sometimes where I go, look, I'm gonna do this over that. And you've got to make those decisions and and live with them. Um, but yeah, bloody hard. It's difficult. And, you know, I I fortunately really love what I do. I work with a great bunch of people. And, you know, every day when I get up, or most days when I get up, I've had a bit of a Bit of a rough one today, but we bounce back and that's what we do. But I love going to work and I love being surrounded by my team and I love getting on the phone or talking to my clients. And when I speak to someone who goes I fucking hate my job. I have a hard time reconciling going, but hang on, you go to that job 40 hours a week, you're away from your family or your kids or your f- friends or doing something you enjoy to be at that job or be running that business if you're a if you're a business owner that hates the business you've created. And I have a really hard time reconciling and dealing with that because I I I just don't often know how to respond apart from, well, fucking change. Do something to change it. Nick • 13:42 Um I I really liked what you said there. Well, I didn't I didn't like it. It just resonated. You said, Oh look in two you've got this business going in two years or I've got to go hard for two years or I've got to go hard for three years. What I can tell anyone, and I think any business owner will agree, the running hard never stops because if you're running hard and you're doing well, you're creating a business bigger business and you're just creating more things going on. So Yeah, you you need to find a balance from day dot because it doesn't get easier. It looks different for sure, and it might get easier from a financial point of view. But you still just get busier and busier in your business. So you've got to find that balance day one because, you know, you're you're always on the cusp of um being more free, but it just never happens because, you know, you're You want to build a business, so you just continue to do that and go to a new level. So yeah, I think that's one of the things that um that I think about. It's like, well, it's never gonna stop. It's only I'm always gonna be busy. So I've got to find a way to to build that balance in, uh, no matter how busy we are or at what stage of the um cycle our business is in. Marty • 14:49 Yeah, it's it's a great point, um, actually there, Nick. And I think like I think about the depth of connection with friends even in early twenties playing sports and not having the responsibilities and and You know, that's the life, that's the path you've chosen too. You want to do well at business, you love playing in the game. Uh, but I think about little things like you know, where you would give money to, let's say, a family member to compensate for the lack of time or you'd give a gift to your partner. because to compensate for the lack of time. So you've got to be really careful even with when you're successful. All people want is that depth of connection and and time And you know, I've been really conscious 'cause Dad, what you said, Jace, was really important point. Uh at thirty five I had the majority of my family. like uh l still alive, yeah, grandparents, you know, mum and dad and everything like that. I'm down to dad and then and my immediate family, right? My which is my my s my wife, Charlie and my sister. But I go, they're all gone. Like in a fifteen year period, they're they're gone. And I go, and I've worked bloody hard during that time and what I'd give for a cup of coffee now with them. And you go that I don't get that anymore. You know, I don't get that anymore. So I think what Nick is saying is absolutely right. You've you've got to build that into your plan to really Have depth of connection and have the people that you you love, you know, love you back because of your actions and behaviors in building your businesses as well and not lose sight. of that because that time passes and you you don't get that back. And I'm not being morbid on that. I think that to me is um You know, that that's how I've reinvigorated my own plan 'cause I go, you know, I think about Cole and I'm just so fortunate to have someone like Cole that really supports my initiatives, my stupid ideas, sometimes my good ideas. And she'll tell me direct, right or wrong. But the thing is We just have a level of depth in the relationship and trust that um if there's something not quite right, we we address it right away, but always with a loving intention. and always about, you know, expanding our relationship as a couple and also with Charlie as well and now with a dog, Penny as well. But it's um but that I've I've probably siloed that to the immediate relationships and probably cut off other family members just because there's you've you've sort of Grown in different ways because you're in business, they're not necessarily interested in what I'm doing in business. That's no disrespect to them They're they are who they are. They haven't changed. But they still want that depth of connection and relationship with you on some level. So you've got to still be open enough to come back. And, you know, build that because otherwise you could lose that forever and you might never get it back or you might never have the opportunity to to make it as good as it could be. So I just think as a business owner you need to You need to think, have have depth of thought around that on how you wanna do that. So you don't have stories like Erin where she's lost the main person in her life and she says now in hindsight they were never well matched, but Maybe they were never well matched for a reason too. Maybe that there wasn't an effort in the right places, you know. And and on both people's behalf as well. You know. It's never one one person, it's usually two people that uh not doing something well. Nick • 18:20 So back to the question that was raised earlier, uh which I and I'll you know maybe put it to you, Jace, is do you think you need to do that to have a successful business? You know, we business is all consuming, as we've said. So, you know, it's very y you'll speak to some people and they'll say You have to be in 110% or don't bother. Um what's your thoughts on that specific question? Jason • 18:46 I think you've got to be in one hundred percent, but the extra ten percent, you know, you've got to spend that where you know, you actually have some happiness outside of business and it's definitely about balance. Um that statement being at a hundred percent probably wasn't the right way to lead in. Um the I definitely think, and I might actually reference uh the book um The Monk Who Sold His Ferrari. I think this this kind of uh put some some principles around what I think. So um that was a story around Julian Mantle, who was a lawyer um and he suffered a heart attack and realized his life was out of balance. So talking of You know, what we're saying here is, you know, dedicating to business and running a million miles an hour or dedicating yourself to your career and not having everything else in check and balance, whether that be mental health, physical health. emotional time with family and those kind of things. So part of his journey after his heart attack and quitting his job and going on this journey, he went to the Himalayan mountains and met a group of monks And the monks taught him valuable life lessons. And a few of those ones, you know, one of the most important ones is to live with discipline. And that is to establish and maintain good habits and good routines. I think, you know, putting structure and boundaries, boundaries around your work and your routines and habits around work is that let's say, let's say you're a nine to five person and that's when you fire your best. It's when you come home at five, not reopening that laptop again from six to nine when that's family time, for example. Because if that's the structure and routine and habit that you'd you've built in to create good balance in your life. That's what you need to have, you know, to to have the balance and to make sure that you're you're enjoying business and life. So living with discipline, I think one of the other one of the seven principles is mastering your mind. So control your thoughts and emotions and maintain a positive outlook. For me, I think, you know, there's so many things that can get you down and make you feel miserable and, you know, hate your job, hate your career, hate the life you've built. But that's a choice for you to mentally feel that way. You can look have a negative outlook on what you've built. So one of those principles of maintaining a positive outlook, I think, is super important that You've actually got a plan, you've got a long-term view of what you're doing and you're you're putting things in place to make sure that it's it's making you feel good and being positive and One of the simple ones, and I won't go through them all. It's a great one to learn, but embracing the present moment. So live in the present and enjoy life's simple pleasures. So on Valentine's Day, Case and I skipped training in the morning, where bodies were sore. We had a Valentine's Day training session that night. But our morning we got up, saw it was sunny, we walked and got a coffee from an old cafe that we used to go to where we hadn't seen that cafe owner for ages because we just it we just hadn't gone and done it and it was just a beautiful walk together with my wife on Valentine's Day morning to get a coffee. And I I went into work that day and felt like, you know what? That was just life's simple pleasures. Just a beautiful coffee with my wife sitting in the sun. And that that's that that was embracing the present moment. And sometimes we I I'm the first to admit I'll lose sight of embracing the present moment because I'll be thinking about all this other stuff that I've got to do. Um, and the other lesson there that I think I touched on with you guys earlier, this I saw a post separate to the monk story, but I saw a post around like Life's the the the true key to happiness in life is making sure you've got your next holiday booked. And it triggered me because it's like If you're living your life just worried about your next holiday, what does that say about what you're doing day to day, the time you spend with your friends and your family and your kids and whatever else? Is that If the key to happen and like I I've got quite a lot of people who say that and whether they mean it or not, that, oh, you know, I've got to get my next holiday booked in so I've got something to look forward to. That's a true example of not enjoying the present, like enjoying life's simple pleasures day to day and getting getting joy out of going for a jog in the sun and getting those endorphins going or grabbing a coffee with your wife or a friend. or picking up the phone and calling a mate and just having a chin wagon, booking in your next catch-up, you know, over a beer. If you are simply booking the next holiday and looking for forward to that and then this post followed up by saying and then by the time that holiday finishes you've already booked your next holiday that's not a way to live life I think um so you know great point kind of went on a little bit there but Positive think positive thoughts, good habits and routines and and enjoying life's simple pleasures day to day. It's for me Okay. Marty • 23:17 And Nick, I think to answer your question in regards to do you think you have to be that way? I think if you do think you have to be that way, there's a lot of insecurities that drive that reasoning. I I feel like 'cause I definitely have felt that. Like I thought, you know, I have to accomplish something in my life, otherwise I'll be hopeless. So the drive the drive out of that um gets you so far. You know, you'll you'll burn out eventually or you'll drink yourself into into s uh you know, stupidity and then, you know, buy a koala bed. Uh just catch catch the last episode if you to get that joke. But um but I think that's the thing you gotta you You gotta always work out that balance as to go, why are you driving in the direction you are? Um so once you have that answer Uh because and Colleen says it to me, sometimes we're always trying to upgrade a house or do something. She goes, I was happy at another warning twenty years ago. We didn't need anything more. I was happy. And it's a constant reminder going, Well, who am I trying to impress? And I think I'm trying to impress myself somehow compared to someone else. And and they're the sort of things you start to take on board and going, you know, a happy life can be something very different to whatever the story is in your head. Um so yeah, in answering that question Nick • 24:35 Yeah, I think um I think if you're not happy, you know, don't discount the impact that has on your ability to run and build your business as well. So you know, and we we all know p people with those stories who have, you know, mentally broken down and If you do that, then the business is gone and generally when you're happy you produce better work. So yeah, it's good stuff. And um I think um I think every now and then we just need to remind ourselves when things like this come up because we get so busy in our businesses and yeah I'm guilty of it and I know that you two are as well but every now and then you just you just need a bit of a reminder like most things um to look after yourself and those around you Marty • 25:15 And we love business. We love people, we love business and y we love the challenges it brings and, you know, the opportunities it brings too. And I think Don't underestimate that um there's a big difference between, you know, maintaining relationships of the past as to where they were at and how valuable they were, but also you need new circles of influence. that, you know, just stimulate you mentally as where you're at too. Um and you can't feel guilty about that. You know, you need to have friends that really challenge you and business associates that challenge you because you're wide that way too. So you don't want to feel guilty at the expense of having those people in your circle where you're at and that's okay as well but you just have to know that there are other people that are still you know want connection with you and Yeah, you can you can still maintain those as well. So yeah. Jason • 26:07 Well said, Marty, and uh well shared Niko on the story and how it came about and uh I think it's been uh Very valuable topic to discuss and uh obviously if you are struggling out there and you know you need to you know get some help there are plenty of places that you can go to. We're definitely not experts. We do love sharing content. But yeah, if you are not feeling great and feeling a bit vulnerable, please definitely seek professional help. Ep 99 Jason • 00:00 Welcome to the Numbers Game. I'm Jace and I'm joined by Nick and Marty. How are we going today boys? Marty • 00:05 Going well Jace. Feeling good today. I've uh been doing a little bit of reading on the Berkshire Hathaway Annual Letter and Feeling pumped, also feeling depressed because I'll never be able to do what they do, but I will leverage them for all it's worth. I'm gonna chat about that today So excited to hear what you boys think about that. Nick, how are you going my friend? You well? Nick • 00:28 I'm going well mate. I'm actually really looking forward to this. I know that uh Warren Buffett and Charlie Munger are probably two of your biggest heroes. What I'm looking forward to more is you divulging how many shares you actually have in Berkshire Hathaway. How much are they worth? Marty • 00:44 What uh what what I'll say is I've got 75% in Berkshire and uh 25% in Microsoft, but um they're they're not I haven't got enough. Nick • 00:54 I haven't got enough. We are digressing a bit before Jace Tells us how he is, but you don't have to buy a full share, can you? Isn't there like a B class share now where you can get in a little bit cheaper? Because the share's worth four hundred and fifty grand, right? Marty • 01:07 Yeah, the the the A shares are worth 458. I think the B shares you can get for about 310 bucks. Okay. I can tell you about why they did that. They just didn't want people going into EFTs and getting it. They wanted people to be able to, you know, have these these purchase opportunities to buy into the company. So it's just a smidgen of the A shares, but it tracks on the same levels pretty much. Nick • 01:29 Tracks on the same level, same dividends and whatnot. Marty • 01:32 Yeah, that's right. That's right. So There's no disadvantage. And you can uh you can change your A shares into B shares as well. You can convert them. So Um for whatever reason you can you can do that. Some people want to do that. Nick • 01:46 There's hope for you and me, mate. The common people on this podcast. Marty • 01:49 I've only got bees. I've only got bees, alright? So that's a hit. That's a hit I gotta make a lot more money. Jason • 01:54 I don't believe him. Marty • 01:54 Anyway. Chase, how are you? Jason • 01:56 Guys, I'm well. I'm really good. Life's good. It's uh I know it depends when you're listening, but March twenty-three, when we're recording this, uh we're again still on the road to one hundred episodes. I think it Episode 57, I was really ready to raise the bat and we've just had to keep chipping away, just playing a straight bat and you know, getting those singles. And and here we are, we're nearly there. But um no, really, really good. It's um Lots always lots of interesting things happening in the accounting and finance world, and uh that's a nice little segue into our show's sponsor today, Innovate. Um So that you only get so far listening to the numbers game, I was thinking before, and if you actually want to take that next step in the journey and actually get your financial world in order or get your finances sorted with some loans, commercial, cars and equipment. The team at Innovate will definitely be able to help you out. It's I-N-O-V-A-Y-T. com. au. Go and check the team out. Um, excited for today's show. I think it's always really interesting when um Marty sends her his pre-show notes and and he's excited about things. And there's nothing more that gets Marty more excited than this. So throwing to you, Marty. What have you been reading and what are you going to be sharing today? Marty • 03:06 Well, it's a it's it's a great thing to do for anyone. If you go to the Berkshire Halfway annual letter that Warren Buffett produces for his shareholders There is always gold and uh you can go back to 1965 and there's just uh some great lessons and learnings uh throughout. And why my interest in it is because I've probably done the opposite to what they do. Yeah, always compulsive, always looking for that next big win. And I know it's cost me over the journey and You know, in my forties I wanted to be much more disciplined and you know when I read their letters it just uh reinforces Their patience, uh how they look at value, how they hold long term, and it's just a really good sort of mentorship for anything like whether you're buying property or shares and this is in no way investment advice, let me put that uh out there. It's just looking at a letter and learning from that letter some some gold. So that's what I'm gonna share. And Look, I I look at I look at even what Berkshire did in their returns in two thousand and twenty two. They were four point one percent up and the S P five hundred, which is top five hundred companies in the US were down eighteen point one percent. So that's pretty, you know, that's pretty significant. But to sort of give you some scope on a longer term If you look at the compounded annual gains from 1965 to 2022, you're looking at the S P 500, and this is with dividends being paid out. and included at 9. 9%, which is very serviceable, nothing wrong with that. But when you look at Berkshire Halfay, they're at 19. 8%. So yeah, virtually double, which is quite extraordinary given the amounts of money they deal with. So um the benefit of that, cash-wise, hundred thousand invested for twenty-five years. The SP 500 will bring you one million and six thousand uh one million and sixty thousand over that twenty-five-year period. And because of the compounding effect with Berkshire Hathaway, that 100,000 would be 9. 15 mil. So you can just see the compounding benefit of um of really just staying the course. Uh the stock, uh Berkshire stock in nineteen sixty-five was nineteen dollars. And their A share is now 456,254. Wouldn't you like to have collected a couple of those shares back in uh 1965. Jason • 05:42 Marty, you could have bought them. Marty • 05:45 Well, well, yeah. I didn't have much coming through the depression, right? So I had to I I had to build back up. So now that I'm 128 years old. So thanks Jets. But here's a great example, the secret source, and I'll I'll use one company that they invested in to give you an example of how they think about business. Uh so Berkshire completed seven year purchase of 400 million shares of Coca-Cola back in 1994. They spent 1. 3 billion, which at the time was a very meaningful investment for Berkshire. Um, the cash dividend they received from Coke in 1994 was $75 million. Now we go forward to 2022. So what are we? It's about 18 years later. What's that? 20? No, more. 28 years later. The dividend has increased to 704 million. And growth occurred every year just as certain as birthdays. And and it was it's quite amazing to think that that was that they they could have two years of dividends to pay for their initial purchase price, which is quite remarkable. But what's even more important is when you look at what the capital growth is in the stock itself apart from the dividend, that is now worth that 1. 3 billion. is worth twenty-five billion dollars. So which is quite extraordinary. Um and when you think about So just let me take you to a term deposit, right? So let's say he would have invested in a term deposit, he would have got his, you know, seventy-five million a year on his whatever the investment rate was at the time But that capital growth would have remained where it was at one point three billion. He never would have got the upside. So upside. So he's got enough confidence in buying value. He wants to make sure the companies are gonna be around for a long long time and it's a great it's a great lesson in find a great investment that's going to be around forever at a great price and just let the company do the work for you. So without going on to the next bit, guys, what do you think about that initial piece? I think that's a great lesson there. In property or shares for that matter. Nick • 08:04 I read that letter that you sent through and there's a paragraph I really liked which I'll share when you're done and and why I like it. But the thing I liked about the letter was how humble he was. Like He basically said, we haven't done anything special. We haven't made any bold predictions. We've just bought really good companies and we've we've stuck to those companies. And the two main ones were Co Coca-Cola and Microsoft. Um, but the big thing with him, and you've always told me this, Marty, is he invests in people and you know, he buys businesses and he brings them into the Berkshire. um ecosystem and um yeah he's his theory around investing in people and those people will take the businesses forward doesn't go for the uh for the next big thing, whether it's um lithium or some sort of resource or green energy, just invest as in good businesses with good cash flows and holds onto them and reinvests. And it's um A really simple strategy and again I loved how he actually pointed that out, that they don't do anything crazy, it's just simple and they just rinse and repeat. So that's that that's what I took out of that letter that you sent through. Marty • 09:10 Well they have most of their friends' money. in that in Berkshire halfway, including their own and all the owners of those businesses own huge stakes of Berkshire as well. So they feel very responsible and I love the fact that they, you know, they buy businesses outright as part of their strategy and reinvest those dividends and then they buy, you know, you know, percentage shares in existing companies that do the work for them. And I was thinking about the benefit too in regards to they don't pay out dividends, so they just work on growing that company's value and they think in time people will be smart enough to see that value and want want to buy in. But what I like about that, that if you are on you know, the higher tax brackets, you're growing your wealth not through dividends where you'll have to pay tax on those dividends, you're growing your wealth through capital appreciation So it works really, really well for people that, you know, don't necessarily want to be paying more tax. And the last thing I'll say about that is I'm not going to invest those dividends as successfully as they will. They're the greatest investors in the world and they're training up the next greatest investors in the world. So I've got if I tried to duplicate, and people have People try and duplicate their strategy, but again, the way they invest, they might be humble. They have a real, real system going. on what they will do and they will do that ultra successfully and um it's just very challenging to duplicate. So why would you? Why wouldn't you just allow them to do what they do? And what the other thing I like is just the spreading of risk Because they have legitimate businesses they own 100% of and they own, you know, major companies, they're gonna be around forever in a day. It's like a hundred and twenty-eight of the five hundred or so companies didn't make a profit, but they still had massive returns. They still grow. they know they'll make profits down the track and they'll reinvest accordingly to make more cash flow upside on those new investments they buy. So even though there's a lot more money there and people say, oh, they'll struggle to make those returns into the future They just invest those dividends into, you know, those companies coming through, those great companies for the future as well. So there's a lot of elements and doing a lot of reading around it. that I've actually enjoyed and and it's given me different scope in regards to how I think about business and and, you know, just staying the course for you know, building great uh great company and being a part of great companies. So yeah, that was that's my two cents on that. Uh Jace, anything to Jason • 11:45 Uh look, I'm just blown away by the numbers and I know we're called the numbers game and we're a couple of guys that all work in numbers a lot, but it's not until you like you get to hear it said out loud and It really hits, you know, when when the sh the show headline we wrote down was buy value, play the long game. This is just the epitome, just the greatest example of playing the long game and and buying value, you know, actually understanding the fundamentals of the company you're investing in and having a long-term plan. None of this get rich quick kind of schemes that we see a lot with whether it's cryptocurrency and other stuff going on. Like these are just smart people that have stood the test of time and, you know, throwing back to it though, like you know, a hundred grand for twenty five years, nine million with Berkshire Berkshire versus one million in the SP. Um, pretty incredible. And that's that, you know, like People who want to make investment decisions that don't know where to look or where to start. This is a great example of the power of, you know, ETFs and managed funds and things like that. So Love the message you're sharing, Marlene. Marty • 12:51 De he walks the war. He bought his house in nineteen I think it was nineteen six sixty three, sixty four. He still owns that same house So, you know, here's me trying to upscale paying, you know, 30 grand agents fees every time you sell, pay another fifty thousand to the government. To upscale try and look a bit better, you know. But when you when you really fundamentally think about it, you go, w we all try and do that, right? We're all trying to get ahead. And they go, he just stays the course, buys the house he wants at the time and, you know, he's he's got time in the game and that's the that's the winning formula there. So he does that even on his own property, which I think's uh you know another fantastic and like when I've seen people, you know, build wealth, I've seen people that bought in Northgate for, you know, 160 grand in the nineties. And now it's worth two million. And, you know, sitting pretty. They only had to pay a hundred and forty grand of debt. Yeah. Debt uh so yeah, yeah, you s you you see that and then you you know, you bring it back to this and it makes total sense. So Um and what's the line? The weeds wither away in significance as the flowers bloom. I like that line. Yeah. Yeah, invest wisely. Nick • 14:03 So yeah, I I read this last night and I think there was nine pages, Marty, um, roughly. And there was there was one paragraph that really stood out to me as a business owner and I I actually wanted to share it because I think we've obvio well, I know we've got a lot of business owners um who listen. So I just read this paragraph and I went, geez, that is exactly what I should be thinking about in our business. So I thought Uh we should definitely share it. So I'm going to read it and then I'll just give you an idea of why I think it's so um why it's so powerful. But the paragraph is as for the future. Uh Berkshire will always hold a boatload of cash and US Treasury bills along with a wide array of businesses. We'll also avoid behavior that could result in any uncomfortable cash needs at inconvenient times, including financial panics. and unprecedented insurance losses. Our CEO will always be the chief risk officer. That task is irresponsible to delegate Additionally, our future CEOs will have a significant part of their net worth in Berkshire shares bought with their own money And yes, our shareholders will continue to save and prosper by retaining earnings. At Berkshire there will be no finish line So I just read that and I just went, Wow, like that is if you as a CEO or a business leader, if you own your own business out there, if you just kept that paragraph in the back of your mind and read it once a week You'll make some fantastic decisions and I've just got some notes here. So he talks about uh the boatload of cash and US Treasury bills. So, you know, cash is king. Cash, I just thought about our business. Cash can get you through hard times. Cash can prevent you from making wrong decisions at the wrong time. Cash allows you to take advantage of opportunities, so acquisitions and and and whatnot during tougher times. And then cash flow issues prevent you focusing on what you do really well as a business owner, which is building a business. It's stressful and time consuming if you're managing money and trying to play around with cash flow. So Cash is king, huge. That that was number one. CEO is is a risk is the risk officer and that actually made me think about myself in in my business. And we've got so many risks that are attached to our business because we deal with people's money and we deal with a lot of data. Um and Marty, you'll attest to this, but I constantly say risk and data breaches are the one thing that keeps me up at night. So Jason • 16:27 Um CEO being the risk officer is something I'm gonna implement and I'd still drive it, but I'm gonna be more across it. Nick • 16:36 Um, because it's the one thing that can end your business. I think before like cash flow and sales and expenditure, you can control these things. External risks you generally can't control. You've just got to make sure that you've got boundaries up to prevent the downside. So that was another really big thing that I took from it. A CA a CEO should be invested. Um that way the CEO makes decisions that benefit the company as a whole. Um the CEO will then think about the company's long-term Uh viability and long term growth versus just their tenure at that business, which might be, you know, five to eight years. Um and the CEO being invested with their own money. They've got skin in the game. They don't feel like, well, I didn't pay for that equity, so who really cares? By CEO investing and buying those shares, they're all in and they're show they're saying that they believe in the story. Like I've done some investments um in IPOs and seed seed capital raising and whatnot, and you always look for the CEOs or the leaders of the business to be continuously buying shares because that just says that They're really confident in what they're doing and that then gives the other shareholders confidence that the business is going to go forward in the right way if the leaders are backing the business. And the no finish line. And I think about this all the time. And Marty, we have conversations about this, and I get asked all the time, well, what's the end game with Innovate? Surely you'll sell it. And I think, well why why would you sell it? Like if you're really happy in the business and you're growing the business and the and the business is allowing you to to grow as an individual and and make more money and do what you want to do, then why does there need to be a finish line? Um and I think about his line around reinvesting um earnings. So you reinvest your earnings so you can then you can grow the business. And for myself, like my role continuously changes in the business. So I don't feel like I need to to sell because because I'm cooked and I need to get out. Look, everything keeps changing um as the business grows and we keep growing it, Marty. So if there are business owners out there listening, you know, how do you make sure there's no finish line for you? You just keep building your business and your role will continuously change. So, you know, you're not creating a job for yourself. You're creating a A business if you keep growing. Marty • 18:58 A legacy too. Nick • 18:59 A legacy and it just becomes exciting as you build it and you start to do different things. So That paragraph is going to go somewhere where I can see it all the time, and I reckon I'm going to read it, if not weekly, at least at least once a month because it's um yeah, I just found it really powerful and underpins how you should run a business. Marty • 19:16 Yeah, and there was a stat I saw the other day too, that fifty four percent of businesses that have a cyber breach are pretty much cooked within eighteen months because of the significance of the damage. So it's it's huge if uh someone gets in. So chief risk officer is yeah very, very important. Very important. I want to be beautifully said, Nick, some great points there. Uh the other thing out of the letter that I really enjoyed is uh Charlie Munger and Warren Buffett have uh are tied as as anything. They've been great mates and great business partners for a long time. And he writes about that nothing beats having a great business partner. This is why I call on Nick a lot of the time too, uh just to iron out uh some of the curly things that I go through. Uh but I think He's got some great lines here. One of the lines that Charlie Munga would say is the world is full of foolish gamblers and they will not do well as a patient investor. Um I I think that's that's so true. How many times are we looking for a a quick win? We want to get a quick win under our belt rather than having a strategy that we believe in and that we just go all in on and keep advancing that strategy. So true. The other line I like, all I want to know is where I'm going to die so I never go there. That's that's a part of that risk. Process. Know where you're going to get burnt at the stake, and sure as hell, make sure you've got strategy to mitigate going into those places. Um, yeah. Big. Patience can be learned. Having a long attention span and the ability to concentrate on one thing for a long time is a huge advantage. So again, there's always complexity within the one strategy. It's like you said, Nick, your your role changes within Innovate, but it's still Innovate. So again, it's quite easy to have four different business ideas in different ventures and all sorts of things, but as we've talked about previously that can be a distraction instead of something you hone in on and just leverage and create great value and legacy. And uh and one of my favorites is don't bail away in a sinking boat. if you can swim to one that is seaworthy. I really like that. Like pushing bad money after bad money, like playing the pokies. You know, trying to get your win back. Not a good strategy. Uh any comments on those guys? There's some great lines from Charlie Munker there. Jason • 21:39 They're all brilliant. There's more there's so many of them that you put in the show notes and I've kind of read ahead read ahead a few and just learn they Look, and having a business partner as well that you can get along really well with and are so aligned with is so important. And it's obviously very clear they've got an insanely great relationship. Um They are all brilliant. A company, a great company keeps working after you are not. A mediocre a mediocre company won't do that. That one, you know Along with what he what uh the end of the letter, um, Nick, what w how is it worded? The The end of the The CO letter. Nick • 22:12 Built for a lifetime or Uh there will be no finish line. Jason • 22:15 No finish line. So that that's that's along the same thing. And even even when I heard you say no finish line, it's like If you think there's a finish line or an ending to your business, you're gonna make short-term decisions or short-sighted decisions over that. Whereas if you go You know, when when we first started our first version of the accounting firm, we talked about, you know, the the letters or the brand of our firm being on the side of a building in a hundred years without us having to be there to run it. You know, you look at KPMG and PWC and EY and Grant Thornton, all these names and letters on buildings. Those people that founded those businesses aren't there anymore. And if they are, they sure as shit aren't doing tax returns, you know, at five o'clock on a Thursday afternoon, right? So we we had that mindset of going, well, how can we build something that will be here in a hundred years, even after we're gone? So that mindset that they've got is is, yeah, that's the bit I take out of that. Marty • 23:06 Yeah, and I and I've asked Nick that hi uh you know question t straight to him. I said, What's your play? Are you looking at an exit because or you're looking at you know, just continuing along the path. Because again, like you said, Jace, it's really important. The strategy changes. If if if you want a short term exit, then you've got a different strategy approach to if you're building a legacy and something that stands the test of time. Michael Hill Jewellers, I always remember that he had a 99 year business plan. I was always so I I admired that process because he was creating a legacy for generations and I'd never heard that before. Um so I thought that was, yeah, that was really good. And I like um I like in the fact that um, you know, even though, well, you do this for me, I waffle on a bit, Nick, but you could cut through and get to something in one sentence, and Geordie can do that as well. So I can give you my intuitive thought process around something and you guys just knock it knock it right in the head and get to the point, which I really like. Saves me a lot of time. Just have to say it once. Nick • 24:12 It is all gold though. We just summarise it for you. Let's be clear about that. Marty • 24:17 But that's where that's what helps. my intuition and and my experience which I really I really admire that that um that assistance. So yeah. So I think yeah some great lines there and I think um Yeah, there's so many there. Anyone any standout for you, Nick, that you just I'm just in love with that paragraph. Nick • 24:40 You know. I don't want to complicate it. Um I I I just find their relationship Incredible. And I just find you know you've told me a lot of the stories about some of the small businesses that they've bought. And that's why I I mentioned um investing in people. Yeah, because they bought some reasonably small businesses, right? Yeah. Um But they invest in business owners. So they buy businesses where the business owner is still very much involved because they know they're gonna get maximum output and maximum results. Um so that that is something that's um That I'm very interested in because yeah, again, you've you've told me quite a few stories. Um I think the one that comes to mind is the the textile lady. Am I Is that right? Marty • 25:24 Uh the furniture lady. Nick • 25:25 The furniture lady. Marty • 25:26 Yeah. She was dyslexic. She couldn't uh she came out from Russia and you know twenty bucks to her name and saved up enough to you know, eventually buy her own store and it was just great customer service and product. It's uh other people had the product, but she just had incredible customer service and her whole family did and she made absolute uh millions uh when Berkshire bought them out. And it was funny, Warren went to her house, I always remember the story, when and all her furniture was in her house. Like she was so congruent, loved the furniture that much that it when it still had the price tags on it in her house because she loved the fact that she was selling This furniture was a dream of hers. And um yeah, and and she retired I think when she was something like Uh don't quote me exactly, but she was something like 102 and died the next year, which he says, you know, it's a it's a good example of not to retire. Keep doing what you love to do and and I the other thing I really like is that um you know Charlie Munger brings a lot of value to him, uh Warren Buffett. But But um the other thing that Charlie does is make Warren laugh. So again, you wanna have you wanna be strategic, but you also wanna have fun with your business partners as well and keep each other in good humor because again You're gonna face challenges and crisis and I know that if you're smiling at them even when they hurt, you can maneuver through them a lot more effectively than carrying that stress yourself as well. And that's That's a line that he's written in the letter, but I, you know, I've always felt that with good business partners. Uh yeah When you're smiling at a problem, you'll generally, no matter how much how painful it is, you can work through it with strategy pretty effectively rather than getting stuck in the crisis. So yeah, really important point too. Jason • 27:23 Marty, the line here, you have to keep learning if you want to become a great investor. When the world changes, you must change. Where do our listeners go to read all this gold? Marty • 27:33 Yeah, just go to the Berkshare Hathaway website, just type it in Google and go shareholder letters, and it's got everyone there from nineteen sixty-five to two thousand and twenty-two. And every one of them has something like this one here that you take away, you learn something about business, but you also learn about the psychology of people and the psychology of investing as well. Backed by s by actual science, backed by numbers. So it's um it's it's a great read. And like I said, I'm reading it 'cause I sure as hell haven't got it right in fifty years, but I want to make sure the next fifty uh you know uh are much more along these lines and wish I had a read it a hell of a lot earlier. So even if you're in your early twenties um I'd recommend you uh Like I said, it's not a long read. It's probably only a ten, fifteen minute read, and it could change the course of your life. Like we do here at the Numbers game. Jason • 28:26 Correct. Absolutely. Thanks for sharing, Marty, and until next time. Game over. Ep 98 Jason • 00:00 Welcome to the Numbers Game. I'm Jason and I'm joined by Nick and Marty. How are we going today, fellas? Marty • 00:05 Going well, thanks Jason. Great to be back. Uh it's gonna be a big one today because the uh the government's got their uh They got their greedy little hands into the pots again and uh Nick's gonna be talking about that um all up and about for this one. Nick, how are you my friend Nick • 00:21 Marty, I'm well. Uh today being Monday, coming off a a couple of weekends actually with no plans, which has been fantastic. We make plenty of plans as the weekend goes on, but it's nice just to uh to cruise around. So feeling refreshed and feeling good. Jace, how are you? Looking quite rosy today. Jason • 00:38 Get a bit of sun on the weekend or Yeah, it was a sunny day yesterday, so decided to sit in the sun and uh get myself uh yeah Just nice and baked. It was awesome. Greggy, Greggy ran a triathlon, his first one. So a little shout out to Greggy, his little um, well I shouldn't say a little triathlon. What do you call it? A sprint? So it was seven fifty swim, twenty kilometer bike and five kilometer run. And I think he was his first one ever and he was within a minute of first place. So the guy just keeps on going from strength to strength in his uh fitness and training. Nick • 01:09 Awesome. That's good. Shout out to Greg. Jason • 01:11 Did get a bit of a bug for it though. Nick • 01:13 Mate, they uh um well you know I'd say this uh very carefully. Uh I did try flons for a while and they are a different group of people And you you cannot help but get addicted. So I saw what was happening and decided I need to get away. So um but anyway, Greg will go on his own journey and uh no doubt he'll get addicted and Hopefully he doesn't fall under the uh vortex. Marty • 01:39 Boys, boys, hang on. I know all this triathlon thing is uh fantastic, but let's just uh take a moment. I I walked for more than twenty minutes. uh on the weekend, which is uh the most I've done for the last two years because of my new robotic hip. So uh any prizes? Any like ribbons or something for me or Do I just go to twenty one minutes and get on with it? Nick • 02:02 You got no room on the trophy cabinet, mate, so it's pointless. Jason • 02:08 Uh well boys, I'm excited to talk about what we've got on today. After all this triathlon talk and walking and sun, it's been uh exciting times, but the government always kind of throws something back at us. But before we get stuck in I believe this episode is sponsored by the great team at Future Advisory, keeping us going and uh getting towards that 100th episode, which will be coming up soon. If you do need any tax and advisory help, futureadvisory. com. au, the team there will be more than happy to get you sorted Future Advisory uh obviously does a lot with superannuation, as does the Innovate team. So delighted to throw to you, Nick, to bring us the news of what the government have done with superannuation. Nick • 02:48 Thank you, Jason. It's not necessarily what they've done, but definitely what they are planning to do. And this has been a I wouldn't say a concern, but always in the back of the mind that um There's so much money in our superannuation environment and when was the temptation to grab some of that money going to be too much for the government? And it's it's no sake um it's no secret we're at record deficits at the moment post the pandemic and giving money out to people. So The Anthony Albanese government has suggested or is introducing as of July 2025 a 30% tax on superfund balances over three million dollars. Um so it's two years away. Um and most people look at that and say, well Um, over three million dollars, you know, that's a small percentage of the population. That's not going to impact me. And this is this is the narrative the government are talking about, you know, it's It's only uh 80,000 Australians, which is 0. 5% of the population. Um, and basically, you know, presenting it as we're just taking some more money off the wealthy. I'll just read a couple of things um out just just some some numbers and then we'll have a bit of a talk about what the impact of this could be and and why why I think the impact is is worse or going to be worse than what the government is portraying. Um, so again, the government has stated it will impact 80,000 Australians. The Financial Services Council believes that number is actually uh five hundred thousand Australians, uh which is six times what the government has proposed. Um it's expected to add two billion dollars in its first full year. Um so that will be July twenty twenty five to uh June twenty sixth. It's expected to add two billion dollars to the tax revenue uh that that comes in. Um the government is stating that Super tax concessions, so the concessions that they give to people for contributing to super at the moment amount to $50 billion a year in savings for people or the population. And they estimate that by twenty fifty that will outweigh the cost of the pension. So they're suggesting there's a problem here. The money that we put into the pension, um, by twenty fifty those super contributions or those super um tax advantages will will outweigh that, hence the problem. So you can see why they want to do it. They've got a massive deficit. There's this large sum of money just sitting there that they again the temptation has been too much for them to get their hands on it. So A couple of things that I wanted to point out. And again, we don't really know if this is going to come to fruition. Like it could all change. This is what they're saying they would like to do. It might not actually happen. But The way that this has been, I guess, sold to the public by the government is that this is only taxing the wealthy and 0. 5% of the population or 80,000 people. What what what we need to think about is three million dollars sounds like a lot of money for most people, but in twenty or thirty years time, three million dollars won't be a lot of money. And I'll I'll give you some examples. And the the main thing being people that are my generation, I'm forty years old, we've been paying tax uh sorry, we've been paying money into our super since since we started working, unlike our parents who who started maybe halfway through their working life. So it's not gonna be it's not gonna be uncommon for younger Australians to have three million dollars in super in the future. And I've just got some examples for you here. A 25-year-old IT professional earning $100,000 with a current superannuation balance of $35,000. Would reach three million by age sixty-five. So that's just someone on a hundred thousand dollars, which is not a huge income these days, uh, that's only twenty-five years old. Jason • 06:48 It's quite a small starting balance too. Nick • 06:50 It is a small starting balance and it's that's pretty normal. Correct, just you know, compound interest. Marty talks about that all the time. You can't touch the money. So here's something that's probably more closer to my heart. A 45-year-old school principal, so that's mean five years, not a principal, but age-wise, um earning $150,000 today. And again, $150,000 is not a huge income. There's people on construction sites earning that quite easily. Uh with the current superannual super balance of six hundred and fifty thousand, they would also reach three million by the time they were sixty-five years old. So now you've got a forty-five year old that's also going to reach that three million dollar um cap. So Don't think about this as being just the wealthy. Think about the future, and it might seem like the wealthy now. The other issue, and and this is what the Financial Services Council is bringing up. Is the government is stating they're not going to index this. So for the 25-year-old IT professional, by the time they hit 65, which is in 40 years' time, that cap will still be three million dollars. So the Financial Services Council is pushing for the government to have that indexed, obviously indexed with inflation, because three million dollars isn't uh won't be the same value in in the IT professionals case in forty years time. So that's that's another big issue. The other thing that I think is a problem is forget about the three million dollar figure. Forget about the 30% tax rate. Forget about the fact that the original tax rate was fifty uh fifteen percent. What this does is it just gives a lack of confidence in the whole system. So people at the moment have been putting extra money into Super because they get um concessional contributions where they can save tax. The government's brought forward some rules where you can put some of your owner-occupied sale home sale proceeds into super So people have been trying to get money into Super to Save Tax. This play, no matter what the numbers are, just shows that the government are willing to go there. if they need to. So it's three million, thirty percent now. What's to say in twenty twenty seven it won't be Uh 35% at 2 million. And I'm just picking numbers here. But what this is going to do, it's going to make people think twice about contributing to super because the government has gone there speaking to some of our clients. Particularly some of our older clients, there is a concern that the government could all always tax super if they needed to. So this is them putting their hand up and saying, well, we're doing it and we're willing to do it. So what confidence does that give people in the future around making extra contributions? So I think it's more than the three million, it's more than the 30%, and it's not just the wealthy. This goes deeper than that I want to unpack some um some other consequences, but might just pass to you guys to get your theory on it first. Marty • 09:55 Oh well for me, you know, superannuation and your own home are the two greatest you know, benchmark stability factors in someone's life. And like you said, once they get proof of concept of um them getting some good returns back on uh taxing the super at that higher end then why wouldn't they go to the next level and the next level? And like you've aptly stated, Nick, you know, people are going to be reaching these benchmark figures. But again Uh it just gripes me. It gripes me the from the fact that, you know, people are being given concessions to put money into super. as something that's, you know, tax effective for them, that builds their future, they do the right things, and then Yeah, the hooves are in the trough again. And I go, and like you said, it just takes away all confidence. Um I come back to my original point. If it was all taxed at twenty-five percent across the board We wouldn't even have to worry, right? Super business, personal. We just think about doing better. And uh and I just don't like the sentiment of How can they get more money back to pay that deficit instead of having something holistic where everyone wins across the board? But that's my initial take. Yeah, wonderfully explained. Uh uh Jace, any additions there? Jason • 11:20 Not so much. What I mean what we're covered hits the nail on the head. The the confidence of when you go to government uh when you go to vote, sorry, and you put your vote into the little bucket at on the voting day you get your sausage and bread on the way out the door if uh that's the main thing most people are going there for. Marty • 11:34 But the confidence to go or a hot dog. Oh god, don't go there, Marty. Jason • 11:40 We lost so many listeners over you calling a sausage in brand a hot dog. There was a revolt. It was just yeah. We still think it's covered. Nick • 11:47 Sorry. Jason • 11:48 Yeah. Yeah, it it hurts. I don't even know how we can recover from this now, but I'll try. So, you know, you come out you're sausage in bread, not a bloody hot dog, and you're told, We will not touch super. That's what the gu current Labour government said. They will not touch Super. It's it won't be touched. And then a few months later, here we are with a 30% tax rate on a balance over three million. I think it's yeah, as you said, Nick, it goes beyond just the 30% tax and the three million dollar super. It's what's next. What are the other broke what are the other promises that can now be broken and undone? And then you've got the greens coming out. I don't know if you saw this as well. One of the greens came out and said, well, why stop at 3 million? Let's bring it down to 1. 9 million. Anything above 1. 9, we can tax it 30%. And that doubles the amount of people that this affects. And they go, hey, why wait until the first of July 2025? Let's bring it forward. Let's bring it forward and start recouping this money now to be able to start giving back to, you know, lower social uh lower socioeconomic Australians and, you know, more projects and everything else. But let's bring that money forward and fix the problem that we created years ago. So yeah, it it's I don't like it. Marty • 12:58 You you cannot set up a mechanism for people to be encouraged for future prosperity and then just Take a lick of it because it suits you because of you've mismanaged the whole budget and and the whole fiscal, you know, system. It just it just does not sit well. Nick • 13:15 Yeah. And and and to your point, Marty, simplify it twenty-five percent because you keep on creating these complicated structures. People are gonna do things to get around it. And Jace, you know, who's who's the winner out of this? Well it's going to be businesses like yours and mine. Financial planners and accountants where people come and say, well what am I going to do now? So I want to put a couple of things to you about some impacts that, you know, beyond the tax and people paying the tax, but what are some of the the impacts that um might might be felt outside of that? So the first thing I thought about, well Where do people go now? So if Super was a tax haven, and mind you, it still is at 30% compared to the top marginal tax rate. But what are some other areas that might be impacted? First thing I thought about was the owner-occupied home. So it's the one thing that's sacrosanced at the moment that you do not pay tax on, capital gains tax or ongoing tax, but who knows, that could change. So I thought, well, wealthier people, what are they going to do? They're going to buy bigger houses, which means that top end of the market is going to get more expensive. So that's that. But then I went deeper and I thought about the what I mentioned earlier. That's not really just the wealthy. This is people thinking about the future and the fact that, geez, I'm only 30 years old or 35. I could get to three million Nick • 14:34 Maybe I won't put the money into super. Nick • 14:36 Maybe I'll buy a bigger house or maybe I'll buy a better house. So what does that do for housing affordability? Because now there's one safe Avenue left and that's your own occupied house. So it could have a negative impact on housing affordability, particularly at that family home level or That level where people are spending, you know, one and a half to three mil, cause these are the same people that are going to have three mil in their super one day Um does it this is one for you, Marty, does it force wealthier people to pour money back into companies? Companies have a uh a tax rate of twenty-five percent. Um, you know, they can build their wealth through through companies and then they can get distributions from companies and you know, then they can start to manipulate what they do with the money versus in the superfund. So people might start to come back into companies and say, well, I'd rather build the company at twenty-five percent tax rate and build my wealth uh that way. So that's the question passive income. Jason • 15:29 Passive income company will still be thirty percent But yeah, you're right though, there's there's still a no benefit to putting into super if you can throw it in your own company where you've got your own control without the regulation of a super fund. I think that's the thing. It's like all the regulatory costs of having either a self managed superfund or throwing it into an industry fund or another managed type of superfund where you've got all the fees that are taken for managing it and investing it and everything else. If you've got your own company without regulation and the same tax rate, yeah, why would you do it? So completely agree. Marty • 16:01 And and the very thing they're trying to achieve, they're being very ignorant here because People that know how to play this game look at the rules, they play within the parameters, and they take the best options. They're not going to give that money to the government. They're going to find other avenues to create more wealth and create more strategy and utilize advisors like you said previously. It just makes total sense. So this is the thing. You you go, yep, you could you could change the rules, but it's just gonna shape shift where the money's going. Yep. And There'll be new ways to create wealth on assets, like through companies, like you suggested. Um, don't think for a minute you're just taking a bit of cream off the top. people will reshape their whole strategy. And rightly so, because like Carrie Pack Carrie Packer said, you know, the the government's not using the money wisely enough to have that bigger deficit. That they're going to utilize it successfully in the future. So why wouldn't you critically think about it and repurpose that money in a in a healthy productive way. You'll do more for the community by doing that, creating more jobs and and it's um they just don't get it Nick • 17:08 So that Carrie Packer clip came up on my feed last night and I reckon it was because I was researching this stuff. Um I've seen it a thousand times, but every time I watch it I just laugh. You know, anyone that doesn't minimize their tax needs their headred 'Cause you guys aren't doing anything with the uh aren't spending it in in a good way. Um something else and Jace, this is probably more a question for you just around SMSFs and and and paying tax, but I found this an interesting stat So there are more than a million self-managed superfunds in Australia with around seventy-six billion invested in commercial properties. and 42 billion in residential property. So this goes against what I just said, but again I'm just trying to work out what the impacts are going to be here. But one of the things that a lot of people won't know is that if you have a self-mented superfund, you're actually taxed on unrealized gains. Is that correct? So Picture this, so you've got a and I'm just picking easy numbers here, but you've got a commercial asset or property in your superfund that's worth two million bucks. Uh that that then goes from two million, let's say it's a property that's been rezoned or you know the government comes out and says it's Um, you know, they would they they want to put some sort of residential um pro property there. So so the value goes from two million to two point four million in a year. That's not crazy. At a 30% tax rate on that $400,000 gain, Jace or the Numbers man, is $120,000. Jason • 18:42 Reading show notes, but yes. So where does that where does that money come from? Nick • 18:47 So that is now double what the tax would have been prior. So These bigger super funds with that that are holding a lot of property that gets revalued on an annual basis that goes up in value, they then have to pay that tax, whether they've realized that gain or not. It's purely just based on the valuation. So you could have comp these SMSFs or super funds that need to sell down property purely to meet their tax obligations and get some liquidity back into the fund. Now that it's 30% and not 15%. So going against my first argument around the property market, but does it cause um properties to come back onto the market because these investors now need to free up liquidity Because the tax rate is now 30%, not 15%. So just thinking about some flowing effects that this might have, particularly at the top end of the market and looking at really uh high-valued commercial properties that could have some significant tax consequences and liquidity issues within these funds. So Jason • 19:47 Hundred percent. When you do the maths on a million super funds, but seventy six billion in commercial properties, that's pretty significant amount. Nick • 19:55 Yep. Crazy. Marty • 20:08 They keep it as an available asset they they can continue to leverage into the future because it just wouldn't make sense. So you can't put your hand out and then bite it It it just again, it's ridiculous. Yep. I'm I'm on my high horse here. You're on your high horse but just the living daylights out of it. Jason • 20:28 It's it's definitely gonna I can already see the conversations coming now. A lot of the time We'll have tradies come to us that want to buy their commercial property. And a lot of the time they'll say, My mate did it in their superfund. I want to do the same thing. You know, smart investment choice. If they can't access the money personally, but they've got money in the superfund, makes it all work. obviously need to see a financial advisor for a statement of advice to make sure that's the right thing for you to do. But you know, a lot of the times it it works out and they can make it happen. But Now I can imagine the the talk at the barbecues going, nah, I'm just gonna do it in my own name. Why why would I wanna put it into super for the government to take thirty percent of my earnings? Like, you know, it's just it's just Gonna end up with the wrong result. Nick • 21:05 Yeah, and look there the reality is inside or outside of super you're still paying tax, right? So let's not let's not forget that. But it's you just have far more options when it's not inside the super environment And just what really bugs me is that just the big push the last few years to get money in. Um and then something like this, it's, you know, you just think Really? Like you we're trying to cheeky. Yeah, yeah, we're we're trying to put money away for our future um so that we don't rely on the government pension and then things like this happen. And I just really don't like the push towards we're taxing the wealthy. Well, that's not the case at all. And most of the industry bodies that I'm involved with, the financial planning uh ones, have all come out this morning and said Don't keep mentioning the wealthy because fast forward 20 years and you're gonna need three million in your super just to survive. So Jason • 21:56 Uh the way that 25 year old IT example was perfect. Correct. 25 year old IT professional. By the time they're sixty five, three million's not gonna be an absurd amount of money. You know, so Spot on. So anyway. Marty • 22:10 And the business, the conversation, like I had a conversation with a commercial client, business client a couple of weeks ago looking to buy their own premise again. And that was one of the points of the discussion. They're going, should I put it in my self-managed superfund? Now it's a viable option given the s the way the system's set up. But the question I said, I said Do you want to lock away that asset and put it in the hands of some, you know, a system that we're not quite sure how it's going to end up, or do we want to keep it as an available asset and back what you've been able to build in your business to be able to leverage that into the future. And I said, just answer that question before you make a decision to go one way. or the other because, you know, it could be it could be locked away and they can't do anything with it. So it's um and then they're they're hemorrhaging on the back end because, you know, things change. So it's um yeah, it's I just come back to I just don't know what's wrong with my 25% idea across the board. The wealthy will make more money and will use advisors to strategize to progress. And that money will go back into the system to help the less fortunate, you know, a and support them. I I just can't understand. how that simple philosophy can't be engaged. Yeah, please put it out there. I'll vote for you. Well miss Mr. Nick • 23:29 Albanese, if you're listening. Them Marty's Mart Marty's offered, he's got the whole tax the whole tax system written on a post note. A post-it note. That's how that is needed. uh you can implement that and go on go on to bigger and better things and uh and and make our country a better place. Jason • 23:47 I've got to go there again just before we wrap up though and just go. The the super fund tax on super funds is such a small area of the total revenue that the government gets um from from different taxes. So the biggest one is individuals. So 270 Fu the number's ridiculous. But 270 billion comes from individuals, sixteen billion comes from super funds. So like the the fact that they've gone into this super fund area and and are gonna make, you know, go against this promise I'm still waiting for the government that has the balls to change GST. It's been ten percent since two thousand. Nick • 24:23 I'll tell you what's coming next. What's that? This is after Elon gets thrown into jail. The next thing will be a tax on your own occupied home. That is a hundred percent coming. Um so they introduced the windfall tax for developers. Um so you know if you're a farmer You know, that bought a plot of land to farm 30 years ago because that's what you did. You're a farmer, and the government has rezoned that land. So you've worked that land for 20 years, you've paid it off, you've done what you've done. Uh the government um changes the or well says that is going to be uh a residential area, which has happened to a lot of people. There's now a windfall tax that you need to pay. So you know if your farm goes from a value of two million to twenty million, you don't just take that 18 million, the government takes some of that back as a windfall tax because they've made the decision to make that residential. So You know, underoccupied house I think is around the corner. Maybe maybe not around the corner. Maybe down the freeway a little bit, but it's um that'll be the next thing Um I can see that happening for sure. Marty • 25:27 Is the US uh do uh are they taxed on their own or occupied? I think the US are, aren't they? Jason • 25:32 I think they are 'cause they get to claim tax deductions for their interest reports on their home loan. So I think if you if you're paying tax then you've got to be able to claim the expense on the way through as well. Nick • 25:41 So probably state driven, I would have thought, over there. Jason • 25:44 Yeah, between state, federal, local. There's taxes out of the wazoo there. It's quite a complicated area. But yes, I've seen Yeah, just gonna tax there you go. But yeah, there's definitely um claiming interest on your home loan for your main residence. So I think yeah, they're paying taxes when they sell as well. Nick • 26:03 So anyway, that's my rant. Thanks for listening. I like it, Nico. Jason • 26:08 You've uh enlightened our listeners onto uh you know your thoughts on the government and beyond just what it means for 30% tax on super so thank you for sharing Nico. Marty • 26:18 No worries. Thank you Nick. Game over Ep 97 Jason • 00:00 Welcome to the numbers game. I'm Jason and I'm here with Nick and Marty. How you going today guys? Marty • 00:05 Going really well, Jace. Excited today, another case study. And this one has gone off the rails. Successful and then uh made a few maneuvers that didn't work so well and went into liquidation. So we give you the good news at the numbers game and we share the bad news too because we want to learn from both. So but really good. Nick, how are you my friend? Nick • 00:28 I'm well, thank you. And yeah, we want to learn not what what not to do as well as what to do. And it's uh it's gonna be good 'cause it kinda links back into um links back into the story we were talking about last week around, you know, everything breaking down around you whilst your business is is hypothetically going well and then the impact that can have when it doesn't Do so well your business. So yeah, looking forward to it. How are you, Jace? Looking fresh today. Thank you, mate. Uh trimmed the uh beard off Jason • 00:56 uh a little while ago, a few hopes ago, and um yeah just uh rocking the short stubbly look rather than the big uh homeless beard look so just something a little bit different but thank you for noticing mate it's uh and yeah going well um These uh last couple of apps have been been just getting me up and about, putting me in a good mood and uh I really enjoyed the case study app on on Koala, so I'm glad we've brought another case study uh back to the table. So looking forward to hearing you unpack it for us, Marty. Before we jump in, I was just going to say that this episode has been proudly brought to you by the wonderful team at Innovates off the back of talking about, you know, companies getting into trouble and people losing their money If you do need to make sure that your money is in the right places, there's a fantastic wealth financial planning team who can help you with your budgeting and cash flow. And then when you need some money, the finance team are absolutely outstanding. So check out innovate. com. au. It's I-N-O-V-A-Y-T for those that have been living under a rock and not listening to the podcast for that long. So Marty, birds of shoes of prey, birds of prey, shoes of prey. Let's try that again. Marty, tell us about shoes of prey. What have you got for us today? Marty • 02:03 Well I wonder if birds of prey, the band, come out of shoes of prey now that you mention it, because Shoes of Prey started in uh uh 2009 and uh interesting interesting business in regards to the owner, which I think was The back have I got a name here somewhere? Fox? Megan Fox? Was it? Oh geez, I gotta stop reading magazines. Jody Fox. I've been reading uh reading the Packers uh biography. But um no, Jodie Fox with uh Shoes of Prey started a business in two thousand and nine that came out of a concept and I always love how businesses come out of a personal concept where she just didn't like the shoes that um she saw on the store shelves And she went to Hong Kong and designed about 14 pairs of personalized shoes that she loved and brought them back to Australia. And of course what happened, all her friends go, where'd you get those shoes from? And uh before too long she had a business in customising shoes. Now it was very, very successful for a period of time Uh they grew to 200 staff members, uh they had uh offices that expanded into the US and overseas. Uh but the pain point of the business ended up being decision pol uh paralysis in that that people had to make a decision on the type of shoes they wanted to design for themselves. So there was timing issues, decision issues, and all of a sudden the initial excitement over the concept uh caused ended up causing the problem where people were just spending too much time making a decision rather than buying. Um so it was uh yeah. A really unique business. She worked with her uh co-founder Mike and Michael who worked at Google at the time and came across and um yeah I just thought very interesting concept They raised more than thirty million in funding uh in order to grow the business as well. So again, this is one of those stories where uh Jody faced uh loss. She lost her business partner and her spouse in the in the business as well. So again, not a great situation uh with a divorce and again like the previous episode We talked about it's amazing the pressures that come on in business. When businesses go well, sometimes you face pressures, but also when businesses don't do so well or they turn for the worse. uh it can put a lot of strain on relationships as well. So it was customization was all the fad. It was uh it's still a growing trend where people like to personalize uh their their purchases. Uh but and that's what she was basically tapping into. But the thing that cooked it in the end was just that decision pol uh paralysis. She had twelve foundational designs and then there were just bolt-ons in regards to how you wanted to design them. But again Another good lesson in regards to what seemed like a great idea and did get initial traction to the point of really growing the business to a to a point in time uh and then coming to the point where people just wanted to buy the shoes they saw uh on the shelf because that was more fashionable. So yeah Lads, just a little snapshot there. Nick • 05:29 I had a uh watched the video, it was very good, and um a couple of things I picked up is they missed the market and Well they miss they misread the market. And I think if you look at where the world has gone now through social media and the world of influencers and you know, people now Um particularly, you know, we're talking fashion, we we're and we're mainly talking female shoes. So they they're so more exposed to what other other females are wearing now from a shoe point of view and and they want to look like that particular female so they want to be wearing the shoes that that female is wearing. So that was um That that was the other big thing I took out of it. And and also just high fixed costs. They had um uh they had they they had committed to um um a certain way of production and you know that that involved uh very heavy workforce, um, lots of properties that you know, m manufacturing the shoes. So They had very large fixed costs and when you have very large fixed costs, uh things go downhill pretty quickly. Um if you Yeah, if you can't release some of those costs quickly. Um so that was the two main things that I picked up. Jason • 06:44 R relies on a certain amount of scale too. You know, you've got to meet certain revenue numbers to obviously tackle those fixed costs or to maintain those fixed costs. So Um, looking at the numbers, I mean that they'd raised thirty, thirty-five million. They wanted to be able to do a hundred million in revenue, which was part of the story they were telling, or the you know, what they were aiming for. But Just looking at those numbers, that's that's between 500,000 and a million pairs of customized shoes that you've got to be selling per year. It's a lot of people that you got to get onto your website to design a pair of shoes and put an order in. Um and even thinking about that now, and I just brought up something um, you know, looking into into it now that I knew we're talking about shoes of prey, not birds of prey. I've been looking at the wrong thing all day getting prepared for this episode recording. So um all my research into birds of prey is just gone to shit. Um No, so shoes of prey, uh read this article and it actually talked about you know, the other thing that went wrong was around the market research. So obviously we talked about koala and all of that and the things that they put into place. The shoes of prey, Jody, and the and the other founders and people involved in the business obviously conduct market research. Um she had the the the example of bringing the shoes back and having, you know a dozen of her work friends going, oh my God, I love that. I'd love to be able to do that too, which you know, uh promotes the idea. Then go and do a bunch of market research and What it says is the problem with market research is what people say and what they do can be very different. So the example of market research was that 50% of Victorians say they eat healthy. But only seven percent of Victorians eat enough vegetables. So if you get surveyed, do you know, do you think you eat enough vegetables? Yes, I do. Yep, I'm in that number. I eat vegetables. But then if you actually looked at the amount of serves and vegetables you're eating, you probably find you're not. So what you say and what you do are two different things. The example another one, 60% of Americans, when surveyed, say they'll vote. But on voting day, only forty percent of Americans turn up to vote. So they relied on market research that said that all these people would love to customize their own shoes But as you said, Marty, that anal um decision paralysis of getting to check out and actually deciding what you wanted to change on the shoes versus being able to walk into a store and grab it off the shelf or just go to the checkout with the pair of shoes that was already designed by a designer who's got a job designing shoes and moving on with life. Marty • 09:15 You know my favorite market research? Yes. Sales. Cash in the bank. Sales. That's my favorite market research because that's uh That's people actually buying the product. And uh you're exactly right, Jason. I think you go back four episodes ago where we talked about the case study of Koala and just when we've been talking through this case study how much co fixed costs in regards to wages and design on the shoes and infrastructure costs. It it's it's astronomical, whereas koala was very, very lean with high margins at forty eight percent on the product. Uh it was all internet based, great Google reviews. So again, like you said, I th thought Nick you brought up a really good point in regards to the influencer status now in that people wanna wear what they see someone else wear um and make their purchase based on that rather than designing your own shoe and hoping that someone goes, Where did you get it from? I don't think it has the same pull so It's amazing how the you know the market can change as well as to what people place value on. So yeah, really interesting. Nick • 10:27 Well the other thing that we haven't mentioned here was um was was the tech side. So You think of all these things that I'm just thinking about it now as we're talking about it. But first thing, you know, we've we spoke about electric cars and mass production. Um and we we actually talked about being able to modified cars quite a few episodes ago and Imagine if you've got all these different designs coming in. So I can only imagine it's hard to get efficiencies when you're not running with one or two of the same product all the time. Then you've got the tech business. So they also had the challenge of being able to deliver an interface that made it really easy for people to design the shoes. This wasn't just click and buy. they had to have uh a program where someone could go on and it was a really nice experience to design the shoe. So imagine the upfront costs that um that would have been needed to to get that sort of program running. Um so it's just I don't know. I'm just looking at it and thinking, well how did it do so well for ten years? And I'm I'm not sure how well it actually did for ten years, but I'm looking at it thinking, it's a wonder it lasted that long. That's a big investments. Uh investors. Um Mike Kennan Brooks was a was an investor. Uh he's the CEO of Atlassian now trying to take over AGL. uh blue sky capital so yeah there's some big big companies that that that were in there and it does mention um they dabbled in bricks and mortar so They must have been buying some of the manufacturing places they were building, uh they were working out of I would have thought. Marty • 11:59 Yeah, well well they do say that thirty-six percent of consumers are interested in personalized products or services. One in five consumers interested in personalized products are willing to pay a twenty percent premium, but I think you've you've articulated it well. There's too many moving pieces. And this is remember in the episode like you said we talked about the Tesla cars where they said you could have buy all these extra features on a membership and have different packages and stuff. I'm already going I've already got decision fatigue. I'm going, just give me the car and make sure it's good. I'll pay for it and then use what's in it. I'm going you know, I don't want to have to think through all this You know, life's busy. But yeah, I think that's what's happened here. But it was a fad like back in two thousand there was a business going around called Make Your Own Pizza. And it was in the C B D in Melbourne and everyone rush out at lunch and you know, you'd y and and you'd go and put your own ingredients on the pizza, then they'd weigh the pizza and you'd be charged as to what the pizza weighed and everything. And it It was okay because it was interesting to start with, but then how long do you think the line took to go and get get to the point where people were just topping up their pizzas and then You didn't know the exact cost. So you go, that was a variable all of a sudden. And just, you know, it it just became annoying. But the concept initially was great Chuck some salmon on, some salami, fantastic. But yeah, but then the annoyance of the execution was was just go and get a pizza from Pizza Hut. Simple. I know what I'm getting. Nick • 13:36 That that decis decision fatigue is huge and I I think you might do it once or twice as a novelty, but um yeah, it's it's definitely not for me. But uh again, I guess I guess some people would like it, but is it is it enough people where you can get, as you stated, Jay scale? And you can get scale that you need because of your fixed costs, you know. Marty • 13:57 So question I want to ask Jace, I'll open it up to both of you, is what do you do to turn this business around? If you've got this issue um in regards to fixed costs. Who how would you how would you turn this business around? Any thought process around that? Jason • 14:14 Oh, understanding your fixed costs is also a great always a great place to start. So um and look Fixed costs, well the word fixed makes it sounds like it's set in st sound like it's set in stone. Of course you can renegotiate fixed costs. You can look at, you know, changing different things. So, you know, you might be in a rent that you're stuck in, but you might go to the landlord. And say, hey, I need to negotiate the lease. Otherwise, you know, I might not be around forever. You know, those kind of things. So there might be fixed costs you can look at negotiating. Um, you know, you one of your fixed costs is Wages, you know, you've got your team, you've got a set number of employees working a set number of hours, you may look to change that. I mean, we've used examples where companies have let go of 10, 20, 30 percent of their employees. Um, I was gonna say often what happens when companies raise money like this, you know, they've raised 30, 35 million over a number of years. That meant they had the cash to burn, right? You know, and I think a lot of a lot of the times raising money puts the wrong mindset into the founders' heads of what they can do with that money and how they can expand and what they'll do to grow without actually settling back down and going, how do we be smart with our money and this investment? You know, uplifting operations and moving to LA, for example, like what What business benefits did having the headquarters in LA have over the headquarters being in Melbourne or Sydney or wherever it was originally for in this shoes of prey example? Um, or was that just fuck, we've got the money and we want to be in LA now? Let's let's let's uplift the business and move. You know, opening bricks and mortar stores when you were customizing shoes. What decision led to that? I know we're talking I was meant to be talking about fixed costs, but that was where my head was going before. Marty • 15:53 Well we want to pivot to what the where what do you change in regards to the delivery to the market. to make it attractive again because there's a fair p pivot but it goes against the actual integrity of why they started it up. Yeah. Um I I th I sh think they've got to create a brand. Jason • 16:08 Yeah, strip strip back to basics, build a brand, build trust from your clients, you know, have a set number that are already pre-custom designed and have a limited number. So then that way, you know, that that for me is an example would be going, I want to get a custom pair of shoes, I want to design it, get to the website and actually have one pop up that's been customized with a limited number that'll be out there. So I know that there's not going to be that many people rocking around in this design and I can go straight to the checkout, have it delivered to my door a week later. Bang, done. Just solve the problem of sitting there trying to figure out what I actually really wanted the shoe to look like. Um, there's little things like that that that I do. Yeah, but eliminating fixed costs and being a lean, lean machine where you've got to have volume and scale coming through, but you can actually bring that back a little bit and make it more of a boutique, um, you know, high-end, good, great, you know, quality at a good at a at a premium price. You know, r remove the need to sell a hundred million dollars worth of them And do your hundred million with less less customers because it's premium and niche and unique. Remove the fixed the the huge fixed heads overheads. The other thing I was going to say in relation to shoes of prey, I saw somewhere in the show notes that like the Daily Edited was an example of these customizable personalized products. And you know what happened at the end of 2022? The Daily Edited went into liquidation as well. So probably a bit of a it's been bought out and revived and somebody put some money into it. Um the former CEO of I think Meyer, um can't remember the guy's name, but you know, but again it went into liquidation, it was basically, you know. It lost its heartbeat and somebody had to come along and and uh Bernie Brooks. There we go. Bernie Brooks, the former CEO of Meyer, ended up coming in and reviving it out of liquidation and taking back over. But it's yeah, it makes just makes you think that these customized sub you know, these customization kind of brands that rely on people making decisions before they get to check out, you know, there's probably a bit of a sign there that It's a tough market to crack. Nick • 18:10 Yeah, and when you've got investment groups like Blue Sky Capital and, you know, s Mike Cannon Brooks coming in, it's not a It's not a heart and soul mum and dad business where they do what they need to do to turn it around. Um these VC guys say, well, that's enough. Taps off. Yeah. Next venture. So and it comes with the pressures. Jason • 18:29 Once that 30 to 35 mil went in, the pressure would have been a ROI. Grow, build, scale, keep the factory in China pumping, get the sales through the door. And within a little bit of time when it wasn't where it needed to be, it was, Gip, turn the tap off, shut it down, it's not working. We're, you know, done Move on. Marty • 18:46 Amazing to think how often that does happen, doesn't it? Like you think someone chucks in thirty mil on a concept that has some traction and uh you just go you hate to think how often they get burnt like a lot of those startups but yeah, had some good traction. But I think it was a good it was a good business lesson. It was good to get your input, lads, on on just, yeah, little things on what you could do to Yeah, save that business what you do differently. 'Cause again, there's certainly some pivots that are needed, but it sounds like it was too far gone by the time uh they they did any of that but um like I said we weren't in their shoes literally thankfully given the type of shoes they had but uh but yeah it's uh it's a good business lesson so hopefully you took some thing away from today Game over. --- ---