Episode 62: Is WiseTech the Most Overvalued Big Business in Australia, Canva Backs Down, Biggest Social Media Platforms, and Listener Questions
The guys discuss why WiseTech is so richly valued, Canva's surprising price hike retreat, GPs behaving badly, the world's biggest biggest social media platforms, and when should you set up a business?
The Contrarians catchup
Adir is in New York and is really impressed with the vibe of the city: “There are no signs in any stores with sales. There are no sales. There are pretty much no vacant stores in the areas that I've walked around. There's just a buzz in the air, and it feels like things are just going really, really well in the economy of this city.”
Adir shares some recommendations: ‘Federer: Twelve Final Days’ (documentary on Amazon Prime) and ‘When We Went MAD!’ (documentary about MAD Magazine).
Adam had positive things to say about Tixel after picking up Coldplay tickets seamlessly after the show was already sold out, with very little mark-up.
Adir tried to buy a $3 cookie in New York from a vendor who had a $5 minimum when using Apple Pay. He walked away, pondering the ramifications of poor business decisions (and got another, inferior, cookie).
Before Adam’s wife could see a doctor, she had to take a $25 COVID test. “I think there's probably 50% of the medical profession that hold their head up high. Since COVID, probably 90% of GPs are a disgrace to themselves and their profession.”
The top social media channels for adults (in order): YouTube, Instagram, Facebook, Snapchat, TikTok, Pinterest, Reddit, X, LinkedIn, BeReal.
Canva Backflips on Pricing
Canva announced a rare backflip last week when it rolled back planned price rises. The US $25B Goliath had planned to stop selling a subscription package that allowed customers to have multiple uses for one price, and instead suggested customers could buy a $10 monthly flat rate. Small business customers threatened to cancel subscriptions en masse after they were informed that annual bills may rise from $165 to $405.
Adir: “When I read that, I thought this is a cohort that Canva does not want to have as customers anymore. That's how I feel about it, because it's just it's too offensive a price rise to give to customers that you want to keep.”
Adam: “What Atlassian has done extremely well is gradual, consistent price increases. What Atlassian is the master of is boiling the frog, just slightly increasing the price every year, customers don't really notice it, and you get what's called expansion revenue. It’s super valuable and what you want as a SaaS business because it’s much cheaper to expand your revenue by eking out the price a tiny bit. Because it doesn't really impact churn versus having to acquire new customer, which is super expensive, especially when you've got most of your market addressed.“
Adir: “At the risk of alarming you, not every customer is perfectly analogous to you.”
The Most Overvalued Business in Australia?
Over the past week, a really strange story has developed, with allegations made against Richard White, one of Australia's richest men and CEO of WiseTech Global, by a former lover.
Entrepreneur Linda Rogan accused White of expecting sex in exchange for investment in her business. Rogan also alleged that White purchased a $13M Vaucluse home for her and her children, and later evicted her after his girlfriend became aware of the liaison.
That aside, the guys talk about WiseTech itself, which is valued at $44B, making it Australia’s thirteenth most valuable company.
Adir: “So the capitalisation is running ahead of the amortisation. That's something I look at quite a bit because that basically says if the capitalisation and the amortisation are the same or close to the same, it means the amount of money we're investing in tech each year is about the same as the amount of money that's hitting our expenses for previous tech costs. And so that's almost like for like and it also tells you that the tech spend has reached some kind of plateau.”
Adam: “I'd value a business like this at maybe 30 times, so $7.5B feels right. I’m giving a premium because it's global leader, great margin, solid history of growth.”
[The above gif works on so many levels that its brilliance needs to be formerly recognised with this addendum.]
Listener questions
I currently run a business with nine staff members, all remotely based. I found the staff don’t scale very well and it’s hard to find more than four hours of work for them to do per day, but I need them to do a shift for support. I’m concerned if I don’t engage them, I’m going to end up with high turnover rate. How we can engage people better without just giving them busywork?
Adam: “I think my advice there would be stop working remotely. Having remote staff is great from a cost perspective. You pay less for them, especially if they're in countries that are off a lower cost base. The problem with remote staff is you don't have any sense of collegiality, you have very little collaboration, you have little spontaneity. You don't have those great conversations that just happen because you’re near each other.”
Adir: “Basically what he's saying is I'm paying people for full time and then not giving them that much work. How do I keep them engaged? I'll give you a tip. Pay them for full time and don’t give them that much work. You're doing it.”
I'm a young Australian who's looking into digital production-based work such as video editing and graphic design. I'm tossing up between starting my venture as a freelancer or establishing a business. Are there any particular benefits or downsides to each side?
Adir: “Well, my first comment is, if you're going into video editing now, I think it would be most advantageous if you were AI, which would be better than being a young Australian.”
Followed by a great answer about how to start a company!
Five other stories worth following:
The guys have talked about dynamic pricing from ticketing companies and balancing supply and demand, which made news again this week with Oasis tickets going on sale for new Melbourne and Sydney shows. Presale tickets went live Monday, with fans waiting behind a digital queue of 20,000 people. Taylor Swift’s tour earlier this year saw 800,000 people waiting in a Ticketek online lounge.
Seven & I Holdings is closing 444 underperforming 7-Eleven locations — 3% of the chain’s 13k+ stores in the US and Canada. The chain cited inflation, shifting consumer tastes, a decline in cigarette sales, and slow traffic, which dropped 7.3% in August, as reasons for the closures.
Elon Musk had a rough Friday: He unveiled Tesla’s years-in-the-making robotaxi concept, along with a Robovan, last Thursday, but Wall Street wanted more as Tesla stock sank ~9% the next day. But he had a great Sunday: SpaceX caught a rocket booster the height of a 23-story building with giant mechanical arms on its Texas launchpad yesterday.
All eyes on Netflix’s earnings call this week. The stream leader beat estimates in April after ad-tier subscribers grew 34% while its global paid subs topped 277M (Netflix will stop breaking out sub #s next year as it focuses on revenue). The streamer’s password-mooching crackdown and its cheaper ad tier have prompted a wave of sign-ups, and the stock’s nearly 2x’d over the past year.
McDonald’s, where menu prices are up an average of 40% since 2019, says higher subtotals are the result of meat-packers’ greedflation. In the US, McDonald’s filed a lawsuit accusing nine US meatpackers of colluding to push up beef costs. The meat’s price is up 4.2% from last year, far outpacing pork and poultry.