Episode 219: AI’s $7 Trillion Bubble, Corporate Travel’s Next Disaster, Work From Home Revolts, and The Man Shake Buy Back
London’s heat wave, Victoria’s crime wave, Labor’s housing mess, Nvidia and the AI bubble, remote work, Canva vs Figma, Koala, SkinKandy, The Man Shake and the latest Corporate Travel disaster.
H3: The Contrarians catchup
Adam is in London visiting Luxury Escapes’ 11-person UK team. His verdict: “London is incredible. The restaurants are full, London’s in its own bubble. The rest of the UK is a bit of a basket case, but London is incredible.” Dinner at Bubala, a favourite Israeli vegetarian restaurant, cost upwards of $100 a head before drinks. Apartment costs, strangely, have barely moved in a decade.
Victoria’s crime wave has not abated. A friend of the pod relayed a home invasion by three teenagers who found car keys inside the house, used a wheel lock to break in, stole the car, and drove through the fence. The car was found. No one was charged. Adam: “You just got this abomination in Victoria. Crime is still rampant. You’ve got a Labor government that simply doesn’t care about people. It feels like ‘Back to the Future 2’ when Biff was running the place.”
A What the Flux community survey of over 1,000 respondents found only 4% believe they’ll be better off as a result of the budget. 42% said scrapping the CGT discount was their biggest worry. 57% said the changes will force them to change their investment strategy. Adam: “Young people hate this budget. This is a budget that fraudulently claimed it was for young people. Jim Chalmers went and said, we’re gonna fix this intergenerational inequity. These guys have somehow made it worse.”
A London School of Economics study of 400M job postings found entry-level hiring has fallen more than 14% since 2019. Adam: “Older people want to work from home. Younger people hate working from home because it just destroys their careers. Less than a quarter of Gen Z want a fully remote workplace.”
Canva has quietly started preferencing Sydney-based applicants who work from the office, according to Rampart. Adam: “The Atlassian universe. The kings of work from home. Now saying, hold on, this isn’t working for us. Canva’s founders sniff the breeze and they clearly realise that the balance of power has shifted away from employees into businesses.”
H3: Sydney’s housing crisis: battlers banished for billionaires
Two recent Sydney developments illustrate what Adam and Adir argue is the perverse consequence of the budget’s tax settings. In North Bondi, 45 apartments are being demolished to make way for 16 luxury residences. In Bondi, 16 units on Campbell Parade were converted into seven luxury apartments called “The Mayfair,” with the top floor listed at $22-24M. Both qualify for primary residence tax exemptions.
Adir: “If I was writing the headline for The Daily Telegraph, I would say 45 battler tenants evicted to make way for sixteen rich owners who get the best tax treatment in Australia.”
Adam: “My headline would be battlers banished for billionaires.”
Adam: “This feels like the exact opposite of what the government’s been trying to achieve. Primary residence, full zero tax exemption all the time. Whatever these go up to, you’re not paying a cent of tax. This is a massive distortion on the free market. Everything should probably be taxed the same if you want things to be treated as free market.”
Adir: “The overarching issue that headlines everything else in this country is the increasing disparity between wealthy people and other people and the disappearance of the traditional middle class in Western liberal democracies. And I think this is just a piece of that disaster that’s going on.”
H3: CGT debate is about systems, not values
Adir delivered what he called his definitive framing of why the capital gains tax argument has been lost in a fog of class warfare, and why that framing is wrong.
Adir: “The idea of capital gains tax is in no way a value judgment on who should pay less tax. The problem with this capital gains tax argument is it’s been turned into an argument of morals and values when really it’s an argument of systems. If you don’t play by the rules of the system, the system is not going to work. And one rule is if you don’t give people good treatment for profits they make for investing capital, then they take that capital and they invest it elsewhere. And if that happens, capitalism is going to stop working for all of us.”
Adir: “Socialism is a great idea. We all want things to be fairer for people. But every time you try it in a country, it’s the worst possible system you can imagine. And so we want to live in capitalism because it sucks, but it is the best way for the largest number of people to live the best possible life.”
Adam: “I think we generally prefer whoever’s closer to the centre.”
Adir: “That is a perfect summary of how we feel. I kind of hate you a bit for saying that. I wish I would have said that.”
H3: The AI chip depreciation timebomb
Adam and Adir dug into what they see as the most underappreciated risk in the AI investment cycle: hyperscalers are depreciating their AI chips over five years, but the technology is moving so fast that chips become obsolete far sooner. When that mismatch is forced onto income statements, profitable businesses can turn loss-making overnight.
Adir: “I buy $5,000 worth of AI chips. I put them on my balance sheet, not my income statement. I say these chips are going to last for five years, so every year I take $1,000 of that $5,000 as an expense. I make $2,000 in sales. I record $1,000 of expenses. I make $1,000 of profit. But at year two, I realize these chips are only going to last one more year, not four more years. The remaining $4,000 has to become an expense. I’ve gone from $2,000 revenue, $1,000 expense, $1,000 profit, to $2,000 revenue, $4,000 expense, minus $2,000 profit. Suddenly I turn into a loss-making business simply because I miscalculated or deliberately misrepresented the amount of time that these chips were going to be useful for.”
Adam: “Either we have this massive expense coming up, or companies are going to start pulling back on spending. That starts hitting NVIDIA. Either way, this bubble pops one way or the other. There’s probably no great outcome here.”
Adam: “The Shiller CAPE Index has got this almost perfect record of predicting bubbles and crashes. The highest it ever was was 1999. The second highest point is right now. So either AI really is game changing and we’re all wrong, or what’s going to happen is what happened every time: too much debt, it’s pushed up asset prices too much, and there’s a massive overcorrection.”
Adir: “You can make a ton of money at the end of a bubble cycle. This is the ultimate greed versus fear moment for markets. You know that you might get caught any day, or it might be two years out and you’ll miss two years of incredible gains. You’ve got businesses like Sandisk that have gone up seventeen times in the last year. No one wants to miss that.”
H3: What happens when the founder leaves
PEP Private Equity bought Manshake, a protein drink business built by NRL star Adam McDougall and his wife, scaled it up, bought the manufacturing facilities, and then reportedly sold it back to the founder for next to nothing. The business had struggled after McDougall departed.
Adam: “If you’re gonna transition from founder to manager, you need to have competitive advantages in the business. You can’t just have product market fit. A founder can work with product market fit and continue to hustle and eke out profitability. But if you chuck a manager in there, they’ll probably stuff it up. If you’ve got great competitive advantage, if you’ve got great brand, you’ve got scale, and you just need to keep doing what you’re doing and extract more value, then you can chuck a really smart manager in. But if you haven’t got competitive advantage and an outside owner comes in and gets rid of the founder, almost certainly the business dies.”
Adir: “The brand was inextricably linked to the founder. And once that founder goes, the brand goes. You can’t maintain that without him. And so good night, turn off the lights on your way out. There is always a danger in buying a business whose brand is so inextricably connected to the founder, especially when it has no other powers.”
Adir: “PEP actually came out and said, irrespective of that outcome, we’ll still generate PEP-like returns from this fund because of our other wins. Which might be true, but it’s the closest you ever will hear a private equity business saying we messed up.”
H3: It keeps getting worse at CTM
Corporate Travel Management missed yet another deadline to refile its financial statements, now targeting August, more than a year late. The company announced a further $10-15M revenue restatement affecting its ANZ region, after flatly claiming for months the problem was confined to the UK. It also announced $400M in goodwill write-downs across Europe, ANZ and North America. The amount owed to the British government has grown from $80M to potentially $150M, against free cash of around $60M.
Adam: “This is fraud on fraud. I don’t know how ASIC hasn’t charged anyone here. What are they doing? The auditors have actually given them their rule book. What are they waiting for?”
Adam: “CTM claimed point blank it was just the UK. Now Australia, these liars. So $10-15M in ANZ. Remember they said this is just UK. Australia is fine.”
Adir: “The single biggest risk they face is getting the auditors to sign off on this in this environment. What auditor is going to want to take that risk? They would have to feel very, very confident that standing up in front of a parliamentary inquiry and on the front page of the Financial Review, their actions were watertight.”
Adam: “As businesses roll off, Flight Centre and their other competitors are feasting on them. It’s a slow burn, you’re not gonna lose all your revenue straight away. But this was a business that before this wasn’t profitable. After this, it’s gonna be less profitable. To pay the three hundred million dollars now they need banks to give them money and they need to trade out of it. I don’t think they’re gonna be able to trade out of it.”
H3: Five other stories worth following:
Andreessen Horowitz-backed Ornn is building a market where companies can trade and hedge GPU access like commodities, aiming to create financial infrastructure for soaring global AI compute and data-centre spending through 2031.
AI-driven demand is sending memory-chip profits and prices soaring, with DRAM and NAND benchmarks up roughly 660% over a year, raising device costs and potentially reviving pressure to ease Chinese chip restrictions.
Nigel Farage faces intensified scrutiny over political finances after reports a convicted fraudster funded expenses and an investigation into a £5 million crypto-billionaire donation, though Farage and Reform UK deny wrongdoing.
SpaceX will join the Nasdaq 100 less than a month after going public, giving passive funds exposure to the company while exposing investors to volatility after Nasdaq changed rules to fast-track inclusion.
Australia may force data centres to deliver direct local financial benefits as public concern grows over AI infrastructure, while Labor also backs worker protections against AI being used to intensify or fragment work.