Episode 126: CSL Breaks Up, Canva Deep Dive, Xero Gets Whacked, Step One's Struggles, RBA Fails Again and the World's Largest Companies
The guys chat about CSL's vaccine spin off, lots of Canva, Xero CEO's pay packet, RBA fails basic understanding of how money works, and Adam quizzes Adir on the world's most valuable companies.
The Contrarians catchup
Adir: “You can always measure the distance between anything in millimetres”.
Adir went through a 10-step process to set up an account with Lenovo in order to find out if they had the touchscreen laptop he wanted (Adam: “What are you trying to achieve by touching the screen?”). Long story short, they didn’t, despite the excessive data capture.
Is Adir correct that CoStar Group will rebrand Domain as homes.com.au after they famously purchased the domain for $22.8M? Listen in for other strategic domain purchases the guys have made over the years.
Australian design unicorn Canva’s valuation hit $65B this week, but Adir says this may be inaccurate. Read his thoughts at Smart Company: “Why Canva may be undervalued at $65 billion”.
After the recent Temple & Webster deep dive, the guys gave a shout out to CEO Mark Coulter for selling 1.6M shares, valued at $36.4M. He must listen to The Contrarians.
The largest companies in the world
Adam quizzed Adir on this topic and you should listen to the podcast, but here are the answers anyway because the author of this newsletter underestimated how long the guys would talk about Canva and just summarised it in a bullet point above, so other sections need padding out now.
Nvidia - $4T (Semiconductors)
Microsoft - $3.7T (Technology)
Apple - $3.2T (Technology)
Amazon - $2.4T (E-commerce)
Alphabet - $2.1T (Technology)
Meta - $1.8T (Social Media)
Saudi Aramco - $1.6T (Oil & Gas)
Broadcom - $1.3T (Semiconductors)
TSMC - $1.2T (Semiconductors)
Berkshire Hathaway - $1T (Investment)
RBA fails again
The RBA defended plans to cut interchange fee caps, arguing savings should flow to small merchants, not fund frequent flyer rewards. It said loyalty programs are a “non-eligible cost” and should be financed from other revenue. Banks may respond with higher fees or reduced rewards, but industry debate continues, which is bad news for those looking to make more money quickly.
Adir: “Who knew the RBA even regulated this? Basically they can regulate whatever part of the banking system they want. Why are they getting involved in commercial decision making for banks?”
Adam: “Is there a more out of touch organisation in Australia than the RBA?”
Adir: “The entire economy and the big four banks are inextricably connected. Whichever one goes down, it all goes down. Politicians love bashing the banks for being too profitable, because there's a big number. But we are best served by the banks being strong because the minute they're not strong, this economy's got very deep problems. And I just think it's a very dumb thing for governments to get political mileage out of bashing banks, because they might succeed one day and they might turn people against the banks and then it'll destabilise the whole economy.”
Step One back to step one
Adir is a self-confessed Step One obsessive. He sees it as an “undervalued business with great growth, great free cash generation, very profitable, and not very expensive”. Plus, Adam wears their underwear (“you don’t have to prove it to me now”).
Step One’s sales rose, but profitability weakened. Gross margin fell 4.4 points due to discounting, while EBITDA slipped 3.9%. Marketing spend was cut 15.3%, but distribution and transaction costs rose sharply. Cash reserves shrank amid higher inventory, which climbed $6.3M from slow-moving stock and range expansion, pressuring financial efficiency.
Adir: “They added a ton to their fixed costs, which is worrying to me about how they're running the business. Then the women's stuff predictably did not fire. And I noticed that the repeat purchasing slide seems to have disappeared from their deck, which is always alarm bells.”
CSL breaks up
CSL will cut up to 3,000 jobs and spin off its Seqirus vaccine unit to save $550M over three years. Despite $2.2B in vaccine revenue, US flu market weakness weighed on results. Shares fell 15% after announcing restructuring, cost cuts, and a $486M share buyback plan.
Adir: “This was the biggest single day loss that the share prices ever had. And they've effectively said to the market, we did a bit worse than you thought we were gonna do, but we still widened the jaws of our profitability and generated tons of money. And we're gonna spin off this thing you may agree with and may not. And in the process, we're gonna save a lot of money and we're gonna buy back your shares. And like people hated it.”
Adam: “I actually think the market has overdone their responses. This is a great business with great powers.”
Xero gets whacked
Nearly half of Xero investors rejected its remuneration report, protesting CEO Sukhinder Singh Cassidy’s $23.5M pay and a $14.3M sign-on bonus for the CFO. While symbolic under NZ rules, the vote signals discontent. Proxy firms opposed the packages, but Xero defended US-level salaries as necessary to secure global talent.
Adir: “What they've basically said is, we're all in on this strategy. All we care about is trying to find someone that optimises for the likelihood of nailing this strategy. We think it's her, her price is this. If we succeed, no one is gonna care what we paid her. And if we fail, it's not gonna matter for any of us anyway because we'll all be gone.”
Five other stories worth following:
Netflix released guidelines for creative partners on generative AI, supporting its use for ideation but discouraging replacing talent or replicating copyrighted work. The company faced criticism for using AI-generated photos in What Jennifer Did, despite celebrating VFX uses in The Eternaut. Principles stress transparency and consent in AI adoption.
Startup Halo, founded by two Harvard dropouts, launched Halo X “always on” AI glasses that transcribe conversations continuously for $249. Marketed as “infinite memory,” the discreet device lacks a recording indicator, raising privacy concerns. Their earlier controversial doxxing glasses project suggests these AI-powered glasses will again spark ethical and legal debates.
The US de minimis exemption for low-value international parcels ends Aug. 29, disrupting shipments. European carriers including Deutsche Post, DHL, La Poste, and Correos are pausing some US deliveries due to increased paperwork. The rule change raises import costs and forces carriers to reassess processes before resuming normal operations.
Netflix’s theatrical experiment paid off as Kpop Demon Hunters sing-along topped the weekend box office, ahead of Weapons and Freakier Friday. The wide release broke Netflix’s usual streaming-first approach. The film is also its second-most-watched title online, highlighting growing crossover potential between streaming-origin content and traditional cinema success.
Coinbase CEO Brian Armstrong revealed he mandated AI tool usage across engineering, firing employees who refused without good reason. Licenses for GitHub Copilot and Cursor were provided company-wide, with Armstrong stressing AI was non-negotiable. He acknowledged backlash to the strict approach but defended it as necessary for rapid innovation adoption.