Episode 54: JB Hi-Fi and Temple Soar, Scooters Banned, the guys speak to the superstar founder of Eight Sleep, and is Work From Home dead?
Adam and Adir chat to Matteo Franceschetti, founder of Eight Sleep, who is saving sleep and marriages. Also: JB Hi-Fi and Temple earnings, scooters getting banned, and the impending death of WFH.
The Contrarians catchup
Adir used the Skip app on the Gold Coast to get $5 off his black coffee and banana bread combo and believes Melbourne officially has the most expensive coffee in Australia (besides the one Brighton East cafe he frequents where his coffee is $4.50).
This led to a discussion about EatClub, a Melbourne-born hospitality dynamic pricing app that’s especially killing it in Sydney, but Adir isn’t convinced EatClub isn’t just another deals business that doesn’t have a long-term future (Adam has a contrarian view).
Scooters banned in Melbourne
In a controversial decision, the Melbourne City Council banned electric scooters.
Melbourne began its short-lived love affair with e-scooters in 2022, when the Victoria state government kicked off a two-year trial, calling them an “accessible, environmentally friendly and cost-effective way to travel.”
According to the city’s “ride report”, an average of 7,800 daily trips were made on micro-mobility vehicles, including 6,800 on e-scooters, in Melbourne in recent years.
Adam on Arron Wood, Australian environmentalist and consultant running for Mayor of Melbourne: “This guy's meant to be a Green. So the notion that a Green, clean energy guy is banning a clean form of transport like scooters just shows the Greens aren’t Greens, they haven't been great for a long time. Bob Brown, if he was dead, would be turning over in his grave”
Adir: “I think there's a real opportunity in Australia for a party to be the new Greens or the Real Greens, and to be a real environmental party. And I think that would take tons of votes.
“If I was the premier of Victoria, and this is going to lose me lot of votes if I ever run for the Premier of Victoria from anyone associated with councils, but I would can elected representation at the council level and create like 10 mega councils as administrative zones, reporting to a minister for local government in the state government. And that would eliminate all local elections and a layer of democracy that is virtually undemocratic. Nobody knows the people or the policies and it would save a ton of money.
“And is there any jurisdiction in Australia that represents more sovereign risk to a corporate business than Victoria and the Victorian government? I mean, I know this is the Melbourne City Council, but it's in Victoria. If you're a business and you're operating in this state, you just cannot rely on anything that any government has said or done that is the basis of your business, because they have no hesitation in flipping, because there is just a fundamental disdain for business.”
The Contrarians “favourite Soviet-style investment firm”
Breakthrough Victoria’s inaugural CEO, Grant Dooley, announced he is stepping down after three years leading the Victorian Government’s technology innovation and commercialisation fund.
Dooley commenced in the role in November 2021, returning to his hometown of Melbourne from Singapore where he formerly headed ARA Infrastructure, managing public and private investment across the Asia-Pacific region. Grant was previously an Executive Director and Head of Asia for Hastings Funds Management.
Adir: “The minute you take an investor's money, you've just created a power imbalance between you and that investor and they now have power over you. And you don't have much power over them if they're professional investors.
“It was obvious to me that the whole idea of Breakthrough Victoria was terrible when I first heard it, then when I dug into it, and nobody had actually dug into what was going on or read the annual report and reported about it. And however bad I thought it was before I did that, I thought it was a thousand times worse after I did that, and I thought it should be immediately shut down. But nothing that you could say about Breakthrough Victoria now could possibly surprise me.”
The bizarre reaction to Temple & Webster’s earnings
Online furniture and home goods retailer, Temple & Webster, told investors that it has increased revenue by almost 30% and saw its share price jump from $9.50 to $12 in less than a week, giving the brand a market capitalisation of roughly $1.43B, which has subsequently dropped around 10%.
Meanwhile, marketing expenses exploded from $48M to $77M for the year, dropping before-tax profit to $6M from $12M last year. CEO Mark Coulter is on $4M a year, which is about half the company’s EBITDA.
Adir: “And so I just want to say something that is going to make me sound like you. I would probably take 10% of Nick Scali rather than 100% of Temple & Webster. If you said to me, you can have Temple and Webster for free, but you have to run it out of your own bank account. I would say a business that does 500M top line and has got like 2% EBITDA margin, that business can flip very quickly and bankrupt you.”
JB Hi-Fi, who have been a market darling for a long time, also shared pretty average numbers with marketing costs up 6% and net profit down 16%, but their shares went up 8.3% to an all-time record level.
Is WFH RIP?
New South Wales Premier, Chris Minns, announced that public servants will be required to return to the office full-time. This decision led to online community backlash where workers threatened to boycott hospitality businesses in the Sydney CBD.
Unsurprisingly, Victoria’s “socialist government” couldn’t wait to announce that it wouldn’t be asking its public servants to work full-time in an office.
Adir: “What's really going on here is people are saying ‘I would rather work at home, and I hate the government for making me work in the office’. Ideologically, I think society is worse without community. Homo sapiens have evolved to not be lone animals, and the idea that people just work from home, I don't think is healthy for society. And I think it's probably not good for business either. And so I like the idea that people gather together and work together for a significant part of the week. And I don't know if it's five days or four days. I don't think it's three days for most roles. And I think the idea that a government would boast about not making people come into an office, especially when they're funded and paid for by the taxpayer and they're called public servants. I just think that's a terrible mistake for a government and for the state and also, frankly, for the individuals that it involves.”
Adam: “The reason this whole work from home debacle has been able to prosper was not just the COVID thing, it was because there was a massive imbalance that shifted from probably too far in favour of capital to too far in favour of labor, and now have shifted back the other way, and it's probably gone from being balanced to being probably now slightly better for capital. And we see when we put job ads out, we've seen our turnover drop to almost zero. And you see there’s been 100,000 layoffs across the tech sector globally.”
Live chat with Matteo Franceschetti, CEO of Eight Sleep
The Contrarians speak with the CEO/Founder of Eight Sleep, a smart mattress that uses Active Grid technology paired with an app to regulate your temperature. The mattress also tracks your sleep so you can learn more about how you sleep and how to improve it.
Matteo Franceschetti is a former lawyer (like Adam) and has raised more than $150M from some of the biggest investors in the world, including Y Combinator.
Matteo: “The product is a mattress cover that can be installed on top of any mattress. It will improve how we control the temperature of your body. And so during the night, because I have biometrics and sleep stages, we heat or cool your body and you will get up to 23% better sleep. It's pretty simple. You have to do nothing. You go to bed as you have been for the rest of your life, and if you have our cover installed, you will get better sleep.
“We are not reinventing the wheel. There is plenty of medical evidence that by controlling your body temperature, you will improve your sleep. And this has been proven well before. What we did is we just identified something that was already proven in a lot of clinical tests, and it was well known in medicine and in the sleep industry. We just built a different consumer device that would actually do what was needed at scale.”
Listen in for Matteo’s take on how Eight Sleep thinks about publicly listing, hardware commoditisation and competitive moats, and how they’ve approached different types of pricing models.
Five other stories worth following:
Nearly 9% of US homes (8M+) were valued at $1M or more in June, the highest proportion on record. Even “starter homes” cost at least $1M in 230+ US cities — triple 2019’s rate.
“Fortnite” parent Epic Games launched its own app store in Europe after a battle royale with Apple over iOS payments. Epic’s aiming to hit 100M app-store downloads by year’s end.
Nvidia is facing a lawsuit from a YouTuber who claims the company profited from creators’ videos after a 404 Media investigation found it had scraped various platforms to build an AI video model.
X will shutter operations in Brazil amid ongoing legal disputes with one of the country’s Supreme Court justices. Brazilian users will still be able to access the social platform.
Ben & Jerry’s is debuting a new flavour (Churn Out the Vote) to encourage Americans to vote. It’s vanilla ice cream with fudge chips, pretzels, and chocolate mousse.