Episode 88: StrongRoom Disaster, Prada and Versace, Adir's Big Time Meeting, Tariff Deep Dive, Uber's Hits and Misses and Nintendo's Big Swing
The guys discuss the unfolding disasters at StrongRoom, go deep into tariffs, look at the deal between Prada and Versace, the ups and downs of Uber, Nintendo's Switch 2, and Adir's powerful meeting.
The Contrarians catchup
Adir was invited to a lunch in Melbourne last week, sitting alongside Leader of the Opposition, Peter Dutton. Adir was shocked “how intelligent he was, eloquent, and unbelievably across the numbers on a huge range of topics”.
Adam said Peter Dutton’s work-from-home ban was one of the “great political own goals we’ve seen in recent times” and that every public servant went crazy because of the way it was communicated. Also, he looks like Voldemort or a potato.
Adam on Australian politics: “The Liberals are going to left. The Liberal Party, for all intents and purposes, is a traditional Labor Party now in many respects. Their economic policies are classic Labor.”
Adir’s daughter, who turns 16 later this year, was in the studio to discuss the upcoming Australian law to ban social media for those under 16, and how Roblox have adjusted their terms for Australian users.
Adam received someone else’s water bill sent to his house, which shocked Adir because he was still receiving paper bills. When Mike asked if there’s a printing fee for paper bills, Adir said “obviously not because Adam wouldn’t be getting paper bills if there was a fee attached to it.”
The section starting around 45 minutes in about how Adam couldn’t get his South East Water bill sorted is absolutely hilarious and won’t be quoted in this newsletter for fear of cancellation.
Nintendo Switches up strategy
The Nintendo Switch 2 is scheduled for release in June and the guys discuss some of its biggest talking points so far:
Its price - $699 versus $429 for the original (love instant noodles)
Its backwards compatibility (Adir: “There is not a single component from the Switch that's reused in the Switch 2”)
Its divergence from Nintendo’s usual strategy of low-spec narrative-led games (Adam: “They’ve done the exact opposite from their entire life time strategy”).
Adir: “Nintendo as a business is best under pressure. The more pressure they’re under, the better the products they come up with. But life is going pretty well for Nintendo now. This strategy is ‘let's play it safe and just call it the Switch 2’. And let's make it look the same as the Switch with a bigger screen. Also, let's abandon the philosophy of not fighting on tech. And then let's price it so it's really expensive and people can barely afford it.”
Adam’s customer service spectrum
Adam had two very different customer service experiences last week, both related to booking flights. Prior to an Air India flight, Adam received an email saying he’d been downgraded from premium economy to economy, with no refund or explanation, only a button to find out more, which was a dead link.
But he also had an amazing experience with Qantas.
Adam: “I want to give a shout out to Qantas. I flew Qantas last week to the live show, I went up at 6am and came back at 2pm, and I was shocked how good the Qantas staff were with my crutches. I don’t think there's a better domestic airline globally than Qantas. They were unbelievable.”
Prada says pass that Versace
Prada struck a $1.3B deal to buy smaller rival Versace from Capri Holdings, including its debt, in a move that unites two of the biggest names in Italian fashion.
Prada is seeking to expand, having defied a slowdown in luxury demand, while Versace has been operating at a loss in the last few quarters. The merger strengthens Italy’s hand in a luxury industry led by French conglomerates, the biggest being Louis Vuitton owner LVMH.
Adir: “Everybody knows Versace. To only have to pay $1.3B for a global luxury brand that everybody knows. Let’s say you value the business at $0, the brand is worth $1.3B on its own because of what you can do.”
Fyre Festival getting ready to burn again
Fyre Festival 2 is officially scheduled for May 30 to June 2 in Playa del Carmen, Mexico. Billy McFarland is back with a sequel to the infamous 2017 disaster. But with less than two months to go, there’s still no artist lineup, the venue just changed and permit details suggest this may be more of a beachside hang than a full-on festival.
Adir: “It’s amazing how much effort people put into fraud. It seems like he’s quite a good entrepreneur - why doesn’t he do legitimate stuff?”
Adam: “It’s very ‘fake it till you make it’ but unfortunately he never made it.”
Art Vandelay’s roller coaster week
In a stunning backflip, US President Donald Trump said that he was going to temporarily lower the hefty tariffs imposed on pretty much every country, while further ramping up levies on China.
Earlier in the week, stocks had been smashed, with the US markets recording their worst drop since 2020 and Asian markets actually faring worse in what was described as a bloodbath.
[Insert an incredible explanation of tariffs and the balance of trade].
Adir: “When it comes to tariffs, I think Trump went to a grade five class and asked who got the third top mark in the maths test, then asked them to make a formula for tariffs.”
Adam: “The whole thing is so mind-numbingly dumb. You look at Trump and 10-20% of what he does turns out to work. The tariffs are terrible but I’m actually more horrified by the act of deporting people with no due process and 75% of which are totally innocent.”
AI startup running out of script
The dwindling cash pile at pharmacy software start-up StrongRoom AI has claimed the jobs of about half its workforce amid a fire sale triggered by fraud allegations from its shareholder EVP.
One of StrongRoom AI’s biggest investors alleges the start-up’s founder admitted to fraud and faked information to win a government research grant, while a director used its accounts to pay for a trip to Morocco.
EVP has taken the Melbourne-headquartered pharmacy software start-up to the Federal Court in the hope of recovering $10.4M it invested last month in a fundraising round that valued the company at $70M.
Adam: “If what they're alleging is true and he's running a Ponzi scheme, and he's telling investors this is revenue and really it’s capital. That's exactly what Bernie Madoff did. If these allegations are true, these guys will spend 20 years in jail.”
Adam: “My general disposition is anything you do in a business context, think about how it's going to look on the front page of the Fin. And if you're not happy about that, don't do it. But I also think, don't be a complete moron. Like you're probably going to get caught doing dumb shit like this.”
Five other stories worth following:
Some businesses are adding a tariff line item to receipts, with the surcharges cropping up at a range of online retailers. On Reddit, some posters voiced support for the idea of the fees, saying they would help to educate buyers, while others expressed doubts that it would do anything beyond further polarising the consumer base.
Rory McIlroy won the Masters in dramatic fashion.The 35-year-old from Northern Ireland clinched the win in the final round, defeating Justin Rose in the first hole of a sudden-death playoff. The victory cements his career Grand Slam, which only five other golfers have done in the Masters era (Tiger Woods was the last to do it, in 2000).
The Trump admin temporarily exempted certain imported electronics, including smartphones, computers, and semiconductors, from reciprocal tariffs. That could be good news for Big Tech companies like Apple, which relies on China for ~90% of iPhone production and assembly, but such items will still be included in forthcoming “semiconductor tariffs.”
Tariff turmoil could be doubly bad news for airlines, with the potential to crimp spending from both corporations and vacationers (not to mention lower demand from international travellers). Both Delta Airlines and ultra-budget carrier Frontier pulled full-year guidance, with Frontier cutting flights on off-peak weekdays this quarter due to slowing demand.
Despite the general trend of colleges becoming more and more unaffordable for students, some schools have gone the other way, cutting fees entirely for students whose families make under a certain amount, and Harvard is expanding that effort as its tuition fees rise. Previously, the free tuition threshold stood at $85,000, but now that’s more than doubled.