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The Contrarians catchup
Adir spent nine hours in a stress-recovery session playing Kingdom Come: Deliverance II, a medieval open world game made by Hungarian developers. He looked up at 11:30pm and realised he hadn’t eaten or used the bathroom.
Alexander Zverev won the US Open men’s final and was so locked in that he didn’t notice. He walked back to the baseline to prepare for the next point, saw people standing up around the arena, read the scoreboard, and visibly lip-synced “Oh, I won.” Adir’s business lesson: “This is the greatest example of how winners think about the moment. He was so locked in that he just kept playing.”
Victoria’s roads are killing people. A motorcyclist died after hitting a pothole on a Melbourne road. Adir on ABC talkback callers, including Labor voters, all ringing in about the state’s crumbling infrastructure: “I think when I listened to ABC, I heard the Labor government lose the election because Left people were ringing up talkback radio time and time again and just talking about how terrible the government was for allowing these potholes.” Adam: “Daniel Andrews has blood on his hands. His specific decisions to buy votes has killed people.”
Kmart Tyre and Auto is reportedly being sold to PE at 5x. Adir’s verdict on Victoria’s pothole boom: “There’s no doubt that these potholes are causing a boom in tyre repair businesses.”
Carolyn Creswell’s Carmen’s Kitchen, which she bought for $1,000 as an 18-year-old babysitter, has just hired its first CEO. Adir: “She started it, she paid $1,000 for the brand in the 90s when she was an 18-year-old. So it’s one of the great stories.”
Anthropic’s “profitability”: the word is doing a lot of lifting
Anthropic released partial financials claiming to be profitable on an “adjusted” basis. Adam and Adir did a methodical breakdown of what has been excluded from that number. The list includes: training costs, inference costs, share-based payments, and, most damningly, the Amazon partner revenue split, where Anthropic books 100% of revenue generated through its AWS partnership but excludes the portion paid to Amazon as an expense.
Adir: “Anthropic pretty much defines profit as revenue not including any costs. That’s Anthropic’s profit. Adjusted is doing a lot of heavy lifting. I would say it’s more like Atlas, who had the earth on his shoulders.”
Adam: “No inference costs, no training costs, no amortization, no share-based payments.”
Adir: “There is no legitimate argument for: I give $50 out of every $100 to Amazon, but I’m just gonna pretend I don’t. That is ridiculous. This is in the domain of fraud. The only reason the soft fraud is so transparent is that it’s there on the paper pretty easy for anyone to read.”
Adam: “I think Dario Modi makes Sam Altman look like a good guy. He is the greatest flog of all time, this guy. He’s SBF’s mate. What can you say?”
Adir: “I don’t think a crash is imminent. But I think the thing that brings it all down is the day people stop giving NVIDIA 70% margins on their chips. That is the day the entire system crashes, because the entire system is propped up by NVIDIA equity and NVIDIA debt.”
The valuation keeps climbing, the logic doesn’t
Firmus is now being discussed at a $50B valuation for its IPO, up from $15B earlier in the year. The founders hold around 13% each. Adam calculated that if they were allowed to sell 5% of their combined stake at IPO, the proceeds would exceed what he believes the entire company is worth.
Adir: “I’m not gonna make friends by saying this, but that IPO should not get away in my view. But it will, because too many powerful people have got too much financial interest in getting it away.”
Adir: “At a $50B valuation, nobody loses. The losing comes later. And people are hoping that the people that lose are the people with no power in the market, because that’s not going to be them. Retail investors.”
Adam: “My issue with Firmus remains: if Nick Curtis is selling, I’ve got real doubt. He sold at what, a $2B valuation, which I thought was high. Now talking $50B? Like what the hell? It’s like the classic act: let’s anchor at this crazy high valuation. So maybe $15B, which is insane, doesn’t feel that bad.”
Adir: “If they’ve got 13% of $50B and let’s say you let them sell five percent of their shareholding, it’s $350M each. Combined that is more than the whole company should be worth.”
Adam: “I just want to say, Jensen who runs the biggest business in the world is calling out this little Aussie company that three years ago barely existed or was doing Bitcoin mining or whatever the hell it was.”
Jim Chalmers’ latest backflip changes almost nothing
Chalmers announced changes to the CGT founder carve-out, removing the 30% minimum tax floor, reducing the holding period from five to three years, and removing the $10M lifetime cap. But the core problem remains: to qualify, a business must be under $50M turnover and its predominant activity must still be developing, commercialising, or innovating a product, service, or process. E-commerce businesses, florists, and luggage makers need not apply.
Adam: “This means a huge number of startups are excluded. So if you run an e-commerce business, forget about it. If you run a florist, forget about it. If you run a luggage business, forget about it. You’re not high-tech enough. There’s a risk you also might lose the status down the track if you change your set of business somewhat along the line.”
Adir: “This is not lipstick on a pig, by the way. This is lipstick on a 15-day rotting pig’s carcass. The lips are long gone from this carcass. What are they putting lipstick on?”
Adir: “I think any founder that starts a business in any industry, I don’t see a strong argument for them paying no capital gains tax at all on their shares. Zero. All we want is for people to create jobs and export earnings. Why would you ever say there’s this universal concept of capital gains and it doesn’t matter how you made the gain? I think that’s totally wrong.”
On Tanssu’s Maya facing 47% CGT on any future exit:
Adam: “These are young people giving you the crack, creating jobs, creating export revenue, paying 47% in one hit if you did sell it. How outrageous is this?”
Adir: “Fundamentally it is wrong on an ideological level to tax her 47% on her gains. And I said this is a misogynist policy from a misogynist budget. I got hate for that, but I stand by it.”
Adam: “The average person can’t see how dumb it is because it’ll hide below the surface. We’ll have great founders leaving. No one will realize. It’s like the Commonwealth Games times a thousand, and we’ll lose these incredible founders.”
Breakthrough Victoria and the National Reconstruction Fund
The AFR reported that the coalition opposition plans to abolish Breakthrough Victoria if elected in November, saving $1.27B over a decade. Meanwhile, fund manager Chris Prunty wrote a piece for Rampart exposing the National Reconstruction Fund, a $15B federal entity with 64 staff, a $28M cost base, and a return on investment target lower than its cost of capital.
Adir: “When they say they’re gonna save $1.27B, you’ll notice that the value of the existing investments do not offset the saving at all, which effectively means everyone is expecting all of these investments to be worth zero in totality.”
Adam: “Chris noted that the fund produces quarterly investment reports with the enthusiasm of his teenage son entering the dishwasher.”
Adam: “The sign of how outrageous this government has become: we just talked fifteen minutes ago about how bad this CGT is. We’re going to take money from honest, hardworking, risk-taking founders and give it to these businesses. It’s just so outrageous.”
Adir: “There is no money. This $15B is borrowed. We’re running deficits. We go and say we want to put some money in a reconstruction fund, let’s go and borrow the money, pay interest on the money, saddle Australians and future generations with the debt we’ve borrowed, because we’re unlikely to generate a return to pay it back.”
Xero customers are now also offside
Xero ran a UK marketing campaign suggesting accountants could be replaced by AI plugged into Xero. It was widely condemned by the UK accounting industry. The UK CEO apologised. Adam and Adir argued this was the wrong move. Xero shares are now 68% off their highs, the Midland Milo acquisition is now worth around a third of the business, and profits are approximately $200M, implying the business is still trading well above what both believe is fair value.
Adir: “You got investors offside. You got the media offside. And now you’ve got the customer offside as well. That is an achievement. They’ve ticked both boxes: got shareholders offside and got customers offside. Bingo.”
Adam: “I think by apologising was actually the wrong call here. I think they should have just ignored it. Because now if you apologise, anything that Xero does goes straight into the media.”
Adir: “There is software out in the marketplace that is AI-powered that is doing exactly this type of thing where you can plug whatever you want into it and it’s doing your accounting. And it is in the double-digit millions of revenue and growing hundreds of percent a year.”
Adam: “These are the high watermark for malfeasance in executive remuneration. And they not only, you think after getting a 70% REM knockback, you quietly walk it back. And remember, this share price keeps getting smashed and people just don’t want to be a part of this business anymore.”
Adir: “The higher the pay, the better the talent. So what he’s saying is there is a direct one-to-one correlation between how much you pay executives and how they perform.”
Five other stories worth following:
Paramount reportedly discussed investing $1.5B in California production and remaining in the state to settle an antitrust lawsuit over its Warner Bros. merger. Negotiations remain unresolved, with four state attorneys general opposing haste.
President Trump announced plans for an AI Force and forthcoming AI czar, promising to support industry growth rather than restrict it. He predicted AI could generate 25% of US GDP, without explaining its structure.
Meta Connect begins Wednesday, with Mark Zuckerberg expected to share updates on artificial intelligence, virtual reality and smart glasses. A possible camera-free model could address privacy concerns following last year’s glitch-plagued live AI demonstration.
Fashion recycling startup Ravel raised $8.2M to scale technology that separates elastane from synthetic fabrics and turns it into reusable plastic pellets. Its process tackles a major barrier to recycling discarded clothing globally.
New York City installed its first two smartphone-accessible modular public toilets under a $4M pilot planning 17 stalls across five boroughs. Built by Throne Labs, doors automatically open after a strict 10-minute limit expires.