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The Contrarians catchup
Grand Final Friday public holiday is once again a mess. Adam: “It’s just such an inconvenience. It’s not matched up with other states. So you’ve got all these different states on random different holidays, so you can’t get work done when somebody’s working, somebody’s not.” On the broader harm: “When you run small business into the grave, people have less jobs. And that’s why Victoria’s got the highest unemployment rate. So you can’t be anti-business without actually being anti-worker at the same time.”
Adir did a Coles supermarket audit and found a 70-pack of Finish dishwasher tablets priced at $76, while a 90-pack is $47. The 70-pack is regularly “discounted” to $38, appearing to be a bargain. “This is a fraud. Like this is a scam. They’ve got a hundred, they’ve got 90, they’ve got 70, they’ve got 46, they’ve got 14. Nothing divides into anything else. And somehow this 70 full price is not a real full price. It is only running that price so they can discount it and seem super cheap. Fraud is maybe not quite the right word, but in my view, it’s unlawful.”
Cost-to-eat quiz results: Switzerland is the most expensive country in the world for a local meal, Bangladesh is the cheapest. Japan is around the 20th cheapest, which surprised both hosts given recent currency devaluation. Adam: “Cuba and Japan are roughly the same, which I never in a million years would have thought, which is bizarre.”
Adir’s deepening AI skepticism: “My bearishness on AI in the current moment, like as an economic opportunity, has deepened. It’s just becoming increasingly obvious to me that we are going to have big problems at these prices in driving sufficient economic activity to justify the high cost of AI.”
A cost burden, not a productivity engine
Adir used the example of journalism to frame a broader concern about the AI investment cycle. Journalists will use AI to assist with research and polish. The output of journalism is fixed, prices can’t increase because there’s more of it, and AI costs more to run on top of existing staff. The same logic applies across most software businesses.
Adir: “Lots and lots of companies are going to struggle to generate sufficient economic productivity growth. Lots of companies are going to absorb cost, and it’s very difficult to see how it’s going to drive any economic productivity at all, let alone productivity that justifies the cost of tokens.”
Adir: “Let’s say I’ve got developers now and they’re producing stuff three times more quickly, what am I going to get for that? So far, nobody has proven, if we really look through the numbers that are presented, that you can charge lots more money for the extra output that you’re generating.”
Adir: “Let’s talk about a business called Riverside. We know Zoom. We know Teams. They are pumping through the token cost with their dev teams, no doubt about it. And I can say the likelihood of us paying one cent extra for their increased cadence of releases, the chances of that are zero. And so how do they ever, if they can’t cut costs, how do they ever recoup the money they’ve spent on tokens by driving economic value? I don’t see how they can.”
Adir: “The problem for these AI businesses is that when you are a company that sells products to customers that just increase their costs, all they want to do is spend less and ideally zero. And that is a really bad way to be able to extract increasing margins.”
Adam’s counterpoint:
Adam: “We’ve been able to double our transaction numbers and haven’t really increased our team size. That’s because we’re able to add a whole layer of efficiency, really, which is basically half our tickets and comms being handled by AI in a much better way for the customer. So our team can focus on the really hard stuff.”
The Fair Work Commission puts ideology before lives
The Fair Work Commission ordered Uber to reinstate a driver despite three dangerous driving complaints over four months, including speeding at 93km/h in a 60 zone, 89km/h in a 40 zone, and 92km/h in an 80 zone, along with complaints the driver was texting, watching YouTube, scrolling Instagram, and spraying cologne while passengers were in the car. The commissioner found in the driver’s favour partly because the complainants did not give evidence at the hearing.
Adam: “There’s probably hundreds of people who didn’t complain who probably had the same experience. This is just usually you get one complaint of every fifty bad instances. So God knows how many times this guy has actually done it.”
Adir: “Obviously the riders are not going to testify. I mean, who is this guy and who does he know and who’s he gonna send after you?”
Adam: “The AFR did bury the lead in this article, forgetting to note that the Commissioner who made this shocking decision was, of course, a former unionist at the Australian Workers Union appointed by the far left Labor government. Tony Burke has just gone we’re going to put as many far left people on here as we can, and this is what happens. People are actually going to die as a result of this ideological war from Labour and the unions.”
Adir: “I wonder what it would take for that commissioner to uphold a dismissal of an Uber driver. I suspect unluckily for Uber, the three people that complained were not clearly the right people for to be protected and therefore they were just ignored. I mean, this is absolutely preposterous. It’s also just a total lack of empathy. I am certain, if it was someone in his family that experienced this, he would be very supportive of getting rid of that driver.”
The Lottery Corporation: A deep dive
The Lottery Corporation (TLC) runs every lottery in Australia except Western Australia. It owns Powerball (36% of turnover), Saturday Lotto (27%), Tatslotto (14%), scratchies (7%), and several other games. Revenue is around $3.5B, but half of all ticket value is paid out in prizes before revenue is even booked. Of the remaining $3.5B, around $2.6B goes straight to government and retailer commissions. Retailers earn 12% of each ticket sold in store, which is why news agencies are still in business. Online sales have grown from 15% in 2018 to 40% today, saving 12% per ticket.
Adir: “So they’ve got three and a half billion dollars in revenue. When you go into a retailer to buy a lottery ticket versus buying online, the reason that all these newsagents still exist to sell lottery tickets is because they’re taking twelve percent of the ticket as a commission for selling you that ticket.”
Adir: “They’re left with like two fifty out of that or thereabouts. And so that does not make this an easy business.”
Adam: “Essentially it’s a government regulated monopoly because you can’t just start a lottery. It’s like a government guaranteed revenue stream. The government’s going to tax them a certain amount. We kind of know what their expenses are. The expenses aren’t going to change that much. It’s basically as good as a bond. So it’s kind of a proxy for a government bond.”
On the Victorian government extending TLC’s contract by 40 years for $1.2B, all to be paid by October 1st this year:
Adir: “$1.2 billion of cash right before an election. That’s coincidence. And so one suspects that $1.2 billion was a massive, massive undercharging of a 40-year contract.”
On the valuation at 35 times earnings with revenue falling and 1% earnings growth per year:
Adam: “In this environment, I don’t know, I think it just shows sort of the power of index funds now. This makes no sense. I would absolutely not be buying this business at this price with this kind of growth when there’s no real market expansion here. They’re just sort of eking away inflation revenue gains. And government control, government could always go for more money as soon as they need it.”
Adir: “It pays a dividend yield that’s grossed up to four point eight percent. Four point eight percent is exactly the same grossed up yield as Transurban. And their share price has gone the same nowhere in five years as Transurban.”
Adir: “The thing I slightly don’t understand is that this year’s dividend yield was paid with 109% or something of profit. So they’re actually paying a dividend above their profit.”
Adam: “I can see it dropping twenty-five to thirty percent easily. Like without a heartbeat could drop that much.”
AirTree and Eucalyptus: gossip dressed as news
The AFR ran a story noting that Blackbird earned a 34X return ($206M on a $6M investment) on Eucalyptus, while AirTree, despite investing at Series B, earned significantly less after declining to lead at Series A in 2019. Tim Doyle told the AFR that AirTree “underbid” and that AirTree partner
Adir: “I think Tim Doyle was maybe one of the easiest people to back. You could have just said to me Tim is doing something and I’m like, no, I’ll back that. Just tell me the price of backing it. Like he knows as much about how to sell consumer products to people as almost anyone I’ve ever met on the marketing side.”
Adir: “The fact that they didn’t lead this early round is a non-story. I just want to say that to begin with. There is something going on inside AirTree or in and around AirTree that is a bit messy. We don’t even know how messy it is. It might not be very messy, but it’s a bit messy and it’s creating very interesting gossip news articles that people in the industry salivate over. This is basically a rear window story that was turned into a longer form article.”
Adam: “I think where you could be critical of the AFR here is they’ve certainly taken a very negative slant on AirTree. When A, the nature of VC is you obviously don’t strike on four, you hit at 400. You’ve missed stuff, you don’t get stuff. They actually did make an investment a bit later. This is one of Blackbird’s best bets. So I’m not sure you can be too critical of AirTree at all here. I think they owe AirTree an apology to be fair.”
Five other stories worth following:
Retail investors are retreating after dominating markets during the pandemic and 2025. Their S&P 500 trading share is below average, while institutions surge, as investors shift toward AI agents, bonds and selective AI stocks.
Meta’s Muse AI agent has become the top free app in US stores, partly by identifying and cancelling unwanted subscriptions. Investors are now watching businesses reliant on recurring bills, negotiable pricing and add-ons closely.
Dumb.co, a startup selling modified flip phones, now requires handwritten cover letters for internship applicants to deter AI-generated applications. Despite the old-school hurdle, it still received roughly 900 applications for just four open roles.
Fearn launched an AI-powered patent law firm promising provisional patent filings in three business days for $2,500, versus months and 18,000–40,000 traditionally. Former Big Law patent attorneys still review every application before final filing.
Aperol’s rise from regional Italian aperitif to global spritz phenomenon was driven by Campari’s branding, bartender education, festivals and simple recipe, aided by Prosecco growth, low-alcohol trends, television exposure and social media momentum worldwide.