The Analyst, the Disclaimer, and the Two-Speed AI Economy | Ep. 8

EPISODE TRANSCRIPT

Alright. Today’s episode of Things Reasons is so absolutely red hot that it needs its own disclaimer. So buckle up everybody. Here we go. Now before we start, we wanted to cover off some formalities. Conor is here in a personal capacity and not as a representative of Canaccord Genuity.

Over the course of the conversation, we will talk about ASX listed companies, but this will be in the context of general background and to illustrate certain points and should not. Under any circumstances be taken as investment advice. As with any investment, you should do your own research and note that neither Conor nor Canaccord Genuity or things reasons accepts responsibility for decisions made based on this podcast.

Wow, we’ve never done one of those before. How about that? How about that? How about that? That tells me we’re about to have a good conversation. I think this is gonna be a fantastic conversation. Yep. Okay, so this is of course things reasons. Thank you for joining us. Again. We are very happy to have you with us.

My name is Naran McClung and I’m of course joined by Jonathan Staff. We do have a guest here with us. I’m not quite ready to introduce yet. This is like end of year madness. Jono for me. I’m sure it’s the same for everybody. We always want our deals to land, just in a nice linear fashion, month to month throughout the year.

They don’t Alright. They come in at the end of the half or the end of the fy. It’s wild. Everyone panics. It’s crazy. Somehow things seem to happen anyway. And then we put on colorful shirts right? And we start to embrace Christmas and we go on holidays and we do stuff. What do you do about it? I was gonna say, I think the madness is bleeding out into your wardrobe.

I’d like to take credit for this. Anything nice in my wardrobe was procured for me by someone with better taste than me. Perfect. And I’m pretty, but you gotta be comfortable in your own skin, Jono. Yeah. It’s important. It is important. It’s important. Yeah. Look I we’ve been up to a lot.

You’re right, it is absolute madness. Heading out to to Christmas. I’ve been incredibly busy launching a awesome new venture WinDC Yep. Which has been really fun and something that was a bit new for me. I was really fortunate to go and meet with Chris Minns, the premier of New South Wales.

Huh. During the week. How’d you get an audience with Chris? Look, I don’t wanna say too much about it but it helps when you’ve got a great idea that that is helpful Yes. To New South Wales government. Yeah I’ve been very busy. Well done mate. It’s fantastic.

It’s been wild to watch as well, and it’s only gonna get crazier too, so the WinDC movement is alive and well, and may that continue?   Yeah, absolutely.

   let’s get in it. We’ve got a wonderful guest who have we got with us today?  it’s a wonderful chap that you and I both know, suffice to say a lot of my friends know this fellow as well.

I was gonna say, he gets around, let’s just say he is well known. He’s obviously very well respected. His name is Conor O’ Prey.

Conor is the first person that we’ve ever needed a legal disclaimer for.

Congratulations, Conor. Congratulations. You rock for that.

And which should explain to everybody the exact kind of conversation we’re about to have. Conor is a senior industrials analyst at Canaccord Annuity and has spent nearly 20 years inside equity markets, first in London and now in Sydney. If you follow Australia’s digital infrastructure space, you’ve almost certainly read his expert analysis.

He’s covered companies like Next DC, Megaport and Macquarie Technology group and has a front row seat to how AI is reshaping that entire sector. He brings a rare lens, somebody who sits between technology, capital markets, and the realities of AI’s impact on digital infrastructure. Conor, welcome to things, reasons, Narran and I promised to behave mostly.

Thanks Jono, that it’s a bit like this is your life. True, but a long time listener. So happy to be here. Thanks. It’s a pleasure to have you Here. Really is. Now look, let’s get stuck into it. I coined a phrase the other day. I wanna believe I was the first one to say it. I don’t care if anybody else said it.

I said it better. Alright. This is this concept of a two speed economy with ai. One nature is all hyped up with expectation and we’ll get into that and what that means for markets. So you’ve got the super high speed. Was it 80% of all stock gains Jono a year ago? Are all AI related in the US Massive amounts of hype and expectation versus the other speed, which is bringing it back to the working men, right? It’s AI for the working men and it’s the projects that people have implemented, the things that they’ve done, and I should say the limited number of successful projects in market. 95% of these projects are failing. 95 have failed. You and I johno in the category where we’ve seen this stuff work.

For us it’s worked with very little cost, nevermind the development cost, but the actual ongoing costs isn’t gonna pay for all the investment and the hype in that first speed that we’ve talked about. So first things first, I really just wanna get a sense from you, do you see the same sort of thing?

What do you have to say about that? So I think we probably separate people’s everyday experience in AI and the popular culture. It’s been around for a long time. If we think about, I think I was reading the other day that there’s some books that reference AI going back to the 18 hundreds, arguably Frankenstein’s Monster as an example of a, of an artificial intelligence.

More recently, lots of films. I was thinking about films from my youth, like war games, very young Matthew Broderick, and a computer system that nearly starts a nuclear war. The Terminator franchise is entirely predicated on an AI that goes rogue. So this has been in the popular conscience for a really long time.

And think for people in every life, it’s become maybe a bit of fun. Maybe you use a ChatGPT or a Gemini to generate a funny poem. You send it to your friends, everyone gets a laugh. Maybe you generate a, an image similarly, and it’s but that’s like low stakes.

I think for businesses it’s very different, right? It’s high stakes, it’s significant investment of time and money, maybe culture changing. And I think you do get and you described that the failure rate is currently high. I think for equity markets, the job of investors is to take a long term view, not what’s happening today or even tomorrow.

Even the short run. What I think you probably see happening with those gains that you describe are the market taking a very long term view looking through the entire scur Yeah. Adoption and concluding that over the long run these things will these initiatives will bear significant economic benefits.

And one way to think about this is we are in the foothills of adoption. We’ve gotta go through the steep part of the curve and then and then the shallow part. So what you’re seeing is the market there, there’s a really important principle in financial markets called the efficient market hypothesis.

And one, one of the factors that is. All information is absorbed instantaneously and priced accordingly. Yes. So assets are priced according to that. So that’s what you’re seeing now. People have taken a view that this is gonna be huge and in the long run there’s gonna be significant valuation, accretion, ac accruing to certain companies that you described like the Magnificent seven essentially.

Yeah. That you described. Is there a difference between, have the markets assumed an absolute industrial revolution? Is there a way that you can put words to the level investment level of investment, I should say, and the expectation that maybe off in the future of the kind of world that we’ll be living in?

So what I’d say is one piece of data that’s true is if you aggregate a number of Big U, the kind of big US companies that you’re referring to earlier, and if you look at the amount of capital expenditure that they are. Investing in just generally now compared to five or six years ago. And if you look at that in relation to their revenue so about six years ago, I’m talking, these are the big kind of companies you might think about. So in aggregate, their CapEx was about 8% of their revenue. In Bear Mind, the revenue’s massive. Yes. So CapEx is big, but now that’s sitting very close to 20%. So they have significantly ramped up their investment into these initiatives.

And some of these companies are very high return on capital. They return props, 30% return on the capital that they invest. That’s genuinely extraordinary stuff. And, but has it been sustainable over, they’ve shown that it’s sustainable over a long period of time. I’m sure they don’t really want to dilute those returns because they’re genuinely world leading.

Yeah. So they would obviously have a view that over the long run. This increased investment that they’re making will bear those kinds of returns that they’re used to seeing. Fascinating. So taking a it’s interesting taking a very long-term view and starting to think about not exactly what’s going on now, but five, even 10 years from now.

Explain a little bit for our listeners who perhaps aren’t as involved in, in, in the investment space, maybe more spectators. So a lot of IT leaders, for example in our audience who read the press and go, oh, this company’s raising this money and this huge firm is investing this. And a lot of that centered around access to chips or all of these things.

What exactly is going on there? Can you explain the process behind an organization that’s got a great AI idea? And how an analyst might then take a forward looking view to determine whether or not that’s a great investment. So what is there a process for how you’d go about evaluating this?

Yeah, so there’s probably you might break this down into a couple of different types of markets, private markets and public markets. And the approach would be probably a little bit different. So in the case of a private company, you probably got less information about that because by definition they’re not publicly listed.

And so there might be more due diligence around that. You might want to see, hear more about who the people are, they might be less well known, et cetera, et cetera. So that is and that is generally less in the sweet spot of what I would do. We’re much more of a public company facing business.

So if we talk about that. So generally speaking, a company comes to the market to raise some new equity. They will have to be pretty prescriptive, generally pretty prescriptive about what they want to use it for. They might have a timeframe over what they want to use it for.

And then over the course of time, there is scrutiny about how that investment has been made. So that might be for an acquisition, I wanna acquire this hot AI business, and they’ve got their revenue’s going very quickly. And so we’re gonna invest this in an acquisition, but over time, investors will want to understand how that acquisition has performed within the acquiring business, and they’ll wanna understand if it’s being complimentary to the underlying business as well.

So the so there’s parts of that, but generally speaking, for public companies, there’s accountability. Through the stock price and through how the market perceives it. So there’s definitely an element of due diligence. People will want to understand the prospects of the asset that’s being acquired.

But usually, oftentimes for a public company, there’s a track record there so people can, can rely on that a little bit and the track record of the management if they’re doing these kind of transactions. So you’re looking at the past performance quality of the leadership or the key players involved, what they want to use, the money that they raise for.

Yep. And then thinking about, are all the right ingredients there for me to get a return? Yep. And, okay, just to double click on that a little bit, right? ’cause we’ve seen I’m not gonna name them, but some businesses where there’s, let’s say there’s an AO AI solution of sorts. A product, a capability.

It might be relatively small, it right in size, in capacity and footprint, et cetera. There may be no customers. There may be no revenue, right? There may be an allocation of GPUs. Is it enough to look at the people behind the business and say, look, these guys have got a great track record. Does that help to offset the fact that without revenue, without customers, that forward looking view again enough, and perhaps with an allocation of GPUs, is that enough to say, you know what, I back these guys anyway.

I feel like they’re good people. They’ve done good things in the past. They’ve got the GPUs, there’s money in this. How do you balance that? Look, I think in that context, track record can be important. Certain individuals, certain entrepreneurs, let’s say in the market will have a real good track record of of adapting and finding areas of growth and investing there. And they will develop something of a fan club. Yeah. That that definitely exists. So you can offset that with maybe a lack of customers or revenue maybe. I wouldn’t necessarily, yeah. There would normally be something else behind the idea than just, I’ve got an idea, I’ve got some forward projections.

There might be some commitments or some letters of intent or something there. Okay. Which provides you with some there may be some ways of doing other due diligence Yep. On this company. Other companies that have done business with them in the past or I’ve gotten some partnerships with them so there may be ways of Okay.

Of doing that. Alright. That’s really interesting. That concept of a fan club. I think you and I have spoken about this before when analysts are looking at and again there’s a difference between obviously private investments and pre-revenue post revenue investments in that space. And then obviously public companies.

Can you help our listeners understand a little bit more f from an analyst perspective in the analyst community, how you view this fan club concept? ’cause that was quite a new thing for me. Do we have a fan club? Jono? I dunno. Do we con I’m a member. Ah, thanks Cara. Sweet guy. Good on you.

I might categorize this as a phenomenon. You might see more in the resources sector than in the industrial sector.

I think you get that, that more ability for people to move around from say mineral to mineral might be I don’t know where it might be copper, it might be lithium, might be critical mineral, something like that. I think. From a really strictly quantitative, analytical perspective, it’s hard to quantify that benefit.

I would say that more provides comfort for the investors On the other side of the table I’ve invested with this person before, also helps if they’ve got a significant stake in the entity in which they’re being asked to invest. But I think it provides more comfort on the other side of the table, the person who’s being asked to supply capital for this if they know this person and have, had success in the past. If you wanted to take a really mathematical approach to this, you might say, the concept of discounted cash flow and the discounted cash flow model depends on a the valuation that pops out at the end of that is is it depends very heavily on the discount rate that you apply.

So if you wanted to take a really mathematical approach, as you might say, look, this person’s got a really strong track record, I might lower the discount rate a tiny bit. But that’s again, a bit touchy feely. It’s not like you’re not ground it in any real finance, not an theory or anything like that.

Yeah, exactly. It’s exact science kind of a touch. I’m not sure that I would I’m trying to think about how research, if I, if, because my, as you said, my, my research is published. I’m not sure how I would read if I said I’m knocking 50 basis points off my discount ’cause this guy’s magnificent or this lady, which obviously isn’t what happens.

Track record. But it, no, like I would I would struggle to see a situation. Where I would write that. So I think it’s a, that might be more of a qualitative assessment. What’s the track record of this person? Have they had success in the past, and we’ll back them again to do the same.

Whatever you think of the man, Elon Musk has had a success in a number of different, he’s, that he’s that kind of profile.

Its ing for me perspective that just the optics on the fallout with Trump, the public’s response to Tesla as a result of all the things that he was doing, but just the bounce back, it hasn’t really been that long. Yeah. Whether that’s moved on pretty remarkable. Going back to this two speed thing, like there’s a lot of talk in the market. There’s a lot of talk, generally there’s a lot of talk in the media about a bubble, right? And are we in a bubble? And is it gonna pop?

Now I was listening to Jensen actually on the way in Nvidia Jensen, and it’s interesting. He got into a couple of, to topics of mine, favorite interest points of mine. And he talked about the fact that he thinks we’re just gonna be seeing gradual improvements with the tech and with the models and the capabilities and this fear that that one day the technology will become sentient, it’s gonna take over the world and we’ll have a Terminator two moment, et cetera, et cetera.

He’s of a view that’s not gonna happen. He seems to think that the gains will be slower and more incremental. But he doesn’t know what the gains are. By the way, each time there’s a new model, nobody knows what’s gonna happen until they start playing around with it. Why do I mention that? I think if there are steady gains, right?

And if there is at least the right expectation that the technology’s gonna improve and improve slowly. Is that enough do you think, to stave off a bubble? Because my view is that I think the whole market’s expecting something akin to artificial general intelligence. Can you separate out this thing of sentience and consciousness and awareness from where the market sees this thing going?

So I think one of the things that most people would agree about in investment bubble is you don’t know you are in it at the time. Yeah. If we look back at a genuine bubble from recent history, the.com bubble, and you guys are far too young to remember this, how lovely.

If I remember correctly, valuations were being done on, enterprise value to eyeballs on a website and really unconventional valuation metrics. And at that time, I think there was something like a 75% decline in the nasdaq. Yeah. From peak to trough. And it took I was looking at this, the other 15 years for it to regain.

So that’s a genuine bubble. If you look at what’s happening today, in my view, there’s no way you would describe us being in that kind of territory. Interesting. The companies like Nvidia, which are, the current view clearly is that it’s an AI winner and all evidence suggests that’s the case, it’s not trading on, in seeing, it’s trading on valuation multiples that suggest a really positive outlook for the company. This is a company with proper revenues, with proper earnings. We can do proper valuation metrics like EV to sales price to earnings, and we’ll find that these are, as I said, they are expecting an optimistic outlook, but they’re absolutely not in the sort of realm that you would’ve seen back in the early two thousands.

That’s not to say we don’t go there, but I will say a lot of the AI exposure, direct exposure you can get in on ASX is in the digital infrastructure. So they, the listed data center companies. I think a strange fact is that Surs got more listed data center companies than almost any other market in the world.

Really just really been a lot of, there’s been a lot of over, over time, there’s been a lot of acquisitions of data center businesses by long-term infrastructure investors, by private equity with a view to that to really harvesting those long-term cash reserves, recurring revenues, very attractive for those.

So if you look and it hasn’t been a completely smooth ride for those stocks. So a lot of those stocks in this current market cycle, a lot of those stocks saw their peak valuations somewhere between July last year and January this year. And there a couple, there were a couple of dislocations in the market.

So the deep seek, launched back in January worried people that AI wasn’t gonna be anywhere near as expensive or computationally intensive Yep. To develop. So maybe not so much requirement for data center services. And then there were a bunch of stories earlier about Microsoft exiting leases Yeah.

That they’d agreed. Yeah. No, I think there’s a view maybe now that that was the nature of the changing relationship that Microsoft had with OpenAI and maybe other companies have taken up those leases or broadly taken up those leases. And that’s, but those so you can look on the price chart for all of these companies, like an XT CA really important section 100 company valuation peak, maybe middle of last year.

And they all bottomed on the same day. It’s like the 7th of April this year. I dunno why. And they all, and they bounced a bit, but they haven’t regained. Their previous houses. There’s a lot of moving parts here. Interest rate expectations. Yeah. Play a part here. The, these are interest rate sensitive stocks because they’re long duration assets.

In a situation where interest rates are coming down, those stocks might be expect to perform better than in an environment where interest rates are going up ’cause discount rates change. 

Conor, we don’t want to discuss any specific companies, but something that I think o obviously selfishly, Naran and I are really interested in, but I know our listeners are too, everybody struggles with this. What are the qualities that really help a business leader build credibility when they’re communicating with analysts like you that and they’re trying to sell their stock?

Yeah, so I would say consistency of delivery and meeting or beating expectations are the absolute key things which drive stock prices and ultimately then probably how a CEO. Is regarded or a management group, let’s call it a management group, more generally is regarded. So what does that mean?

It means that so lemme take you to the nuts and bolts of how our process works. It’s not trying too long in a fashion but in August we had a whole set of the vast majority of Australian public companies would’ve released their full year results to the year June 25. Yep.

So there’ll be a review of the year’s performance. And then there will be a section at the end generally, which talks about the outlook. And the outlook will describe maybe how they’re trading over six or seven weeks of the new financial year. And maybe, and for companies that have got it within the business model and the kind of revenue profile, they might offer you some quantitative guidance, maybe revenue, maybe ebitda, some other me metric of profit.

Alright. So it’ll be in a range. It’ll be, it might be 15 to $20 million or 250 to $275 million or something like that. And that will and those numbers if it’s presented in that way, they will be reflected in what’s called consensus. So a company might have 10 or 15 analysts, maybe more covering it and they will all have their own separate models and they’ll all have their own forecasts that they publish in the same way that we would.

And these form were called consensus. And this is really what matters to investors. Not what my estimate is or what somebody else’s estimate is. It’s what the average is or the median or some metric like that. But usually in the case where a company has provided you with some quantitative guidance, the consensus will be somewhere in that range.

Be quite unusual for it to be, you’d be taking a contrarian stance if you are ’cause you’re questioning the company’s guide. So for the most part, for those situations. And then through the course of the year, there are more updates. There’s the a GM, there’s the half year result, and then finally the full year result.

So there are ways of, the company will then probably provide some updates along the way. And if things aren’t changing, that’s good. Nothing changes. And you come to August, you’ve delivered tick, or if you’ve even better little beat tick and the stock that, that, that’s a real positive in the eyes of investors.

Because from their perspective and generally speaking, what the market hits is uncertainty. I think I can generalize about that. And so if you can have a good level of confidence that a company is going to do what they said they’re gonna do, then that is a usually a positive thing.

And then you, in that case, you probably get a wider dispersion of consensus because there’s no firm guidance. But the market will hone in on either an average or a median or something like that, and then it’ll, and then it will over the course of the year, that might get tightened up through, at some point the company might provide you some quantitative guidance through the half year or later on the year.

They might tighten that up and give you some.

And so for a business to have ambition, maybe optimism wanting to talk about things that are happening, can’t quite quantify it, perhaps may not want to.

That balance between ambition, optimism, and realism, because you’ve talked about, it’s good to be a steady hand, to be predictable. At the same time, I’m sure every business, when they announce their results, they wanna bump. Yeah. They want the market to respond. And it’d be nice to be able to talk about things that are coming up and maybe not necessarily putting a noose around your neck to say, this is what we think it’s worth.

Yeah. Yeah. How do we balance this?

You are absolutely right. It is their job to promote the business to the best of their ability. Yeah. They have to be realistic about that because, and by the way, this is absolutely not easy. This is definitely, and in many cases I think companies will end up, will find themselves trying to thread a needle.

Yeah. Between, as you say, expressing some ambitious targets, but not wanting to set themselves up for failure because and failure in this case would be missing expectations. That’s right. Like John, you and I, we, we spin plates all the time. And one, one of the things we love about our jobs is we get to explore new ideas, right?

And we like our ideas, particularly when we invest money in them and people and focus, et cetera. But if you’ve got five of them going, you probably don’t know which of those five are gonna perform better than the others. Just that on aggregate, you’re gonna do well. I now, if it was me, right? But this is just how I’m wired.

I like to tell people what I’m doing. I would wanna stand up in front of a crowd and say, I’m working on these things. I think they’re cool for the following reason. We think we’ve got this kind of captive audience with customers and prospects and all the rest of it. I’m pumped about it. Don’t ask me what it’s gonna do for revenue and ebit.

You can just forget about that ’cause that’s gonna come later. Invest in our company. I’ve been naren. See you later. What’s wrong with that? Look, I’m sold. Okay. Look regrettably what those kind of conversations, so people in finance generally pretty numerate, numerical, quantitative. So those kind of conversations quickly transmute into what’s the time?

Alright? How fast is that time growing? What margins could you get for this kind of product? What kind of, tell me about the market structure. Is there one dominant player? Is it pretty evenly? And before you know it, there’s somebody sitting in front of you with a financial model and they said, this is amazing, but they, you might not have quantified it, but somebody is gonna try, but they’ve done it anyway, but somebody is gonna qualify, they’re gonna do it anyway.

And you’re not in control of that. So just pause on that. Would it be then appropriate to go in with low ball, right? Like some good incremental gains in the back of your mind? You’re thinking, I’ve got four times this, but I’m not gonna tell these investors or these sandbagging. Yeah. Is that, so I’ve seen an example of this.

So this company I used to cover, it’s not, I was, it was acquired, not necessarily anymore. I won’t say who it is, but they had got into the habit of the had guidance and they got into a virtuous habit of beating it. By a small amount every year. And it was pretty consistent, let say over two or three years they’d done that.

And then what happened was some of the analyst thought I’m gonna, I’m gonna strike my flag course two or three. You’re damned if you’re doing, you’re damned if you don target a hundred percent. Yeah. Yeah. And then one year they came in the guidance range and people were disappointed, right?

Because they’d established this track record and perhaps people had identified what they thought was a pattern of behavior of just, and by the way, it’s not egregious because companies can’t be egregious about this ’cause they’ve got disclosure requirements. So if they are a long way from either their guidance or market expectations, generally yeah.

They have to tell the market. Yeah. So you can’t be too far away. It’s not super prescriptive what those limits are. But they do have to, but there’s tolerances so I think your other I would not advocate particularly that a company has a slide in their deck with a talk about five blue sky ideas.

I like, I wouldn’t I don’t know. Maybe I’m even more concerned. So all my hopes and dreams are wrapped up in being able to do this con I know but as I said, whether you like it or not, there’s gonna be five financial models for that built and Right. People are gonna be taking if you, and then you will be held to account for that.

That’s the, that, that’s the nature of the beast. It’s very similar to I’m probably most of our audience here in the sales game in tech, thinking about how their sales quotas get set and all those red hot reps out there, the synergies are who crushed their target last year. And very quickly find out that the bar has now moved.

Yeah. Yeah. It’s, and it is, maybe it’s just human nature Yeah. Conor yeah. To to want more and align expectations with results. Yeah. Yeah. Yeah. Yeah. It’s super interesting. I’m, other layers of nuance here are so there can be expectations set by the company, and then there can be expect, so expectations by the market.

So for example, you might have a company that has got some good guidance in the market and the, and all the analysts are very compliant and they’re in the middle of the range, and it all looks good. And then all of a sudden, one of this company’s payer reports results a week before, and they’re really good.

And the stock that you’ve got the guidance for has goes up. Yeah. The stock price goes well in anticipation of a strong result. Yep. And maybe a beat even because the payer has beaten or something like that. And so I and so these expectations aren’t. So expectations are not different.

They’re, the company has a set of expectations, which is guidance, but the market has a different set of expectations. Now it can be for a short period of time, and then the stock price response on the day of the result depends on how the market has viewed. And I’ve seen that before where exactly EE exactly.

This has happened. A, an overseas comp pier Yep. Reported a blowout set of results a week earlier. A stock that I was covering started, it was very strange to me a week before, and someone said to me, yeah, I think there was like an overseas comp that, and someone has mentioned that this could be a read across a really common word and, and so there’s an expectation this company will have a really good result. And it didn’t happen, but that’s not the company’s fault.

So there is a lot there that’s, you’ve mentioned things that are with, I like to use this concept of sphere of control and sphere of influence.

And if it’s outside of that, I try not to worry about it. Easier said than done a lot in his sphere of control and influence, but also a hell of a lot of stuff driving your stock price as a leader of one of these companies that is beyond your control.

I feel like with every investor presentation, there needs to be a non-binding section, Conor. Okay. Where you get all the sensible stuff out of the way, all the projections, the things you are working on. Go. All right. Now just hard stop on that shiny face. Guy comes in, here’s some cool shit we’re working on.

Yeah. Just so you’re aware, there’s a bunch of stuff going on in the company,

inside the company you might be able to do it. Do you know, does this go on? Yeah. And these are quite public. People can, you can attend strategy days. Yep. Okay. Yeah. In fact, companies use them for that purpose. Alright? So people can understand the bus, you get a deeper dive into the company, what’s going on.

But I still think the conversation will migrate over to that sort of, help me understand how this might have impact earnings. And because investors are always looking for opportunities or ideas where earnings might be lower, sorry where they might be higher in the future than the market is anticipating.

That’s. The generally the market is long, which it means they own generally the market owns the stock. Yeah. There’s some people in the market who are looking for opportunities where earnings are gonna be lower than the market expects, and they would be looking to what’s called short the stock or borrow and the anticipation of the stock goes down.

But generally we’re looking for long ideas. Yeah. And so you so I think ultimately it comes down to that kind of p people will try to dimension it in, in, in some way.

I had an interesting take actually. We met up with a the founder of a very prominent storage business.

We were in San Francisco and it was great chat with this fellow. And he said that there’s some supply chain constraints. The build out of the GPUs is one thing. Finding data centers and power is another thing, but there’s all sorts of complimentary infrastructure that people aren’t thinking about by way of availability and scarcity and things of that nature.

He was in the storage game. He was of a view that in his space he may be a reason for things to slow down organically, which I thought was interesting. But again, look if things happen slower, but the expectation’s still there and if there’s material gains being enjoyed and we can get past this 95% success thing and turn that into 60 or 70, et cetera, et cetera, it seems like the market’s definitely just assuming that we will.

So I think what a lot of the AI. Related stock price increases are betting ahead of these growing s Another way to play that might be in, in that case, if you think that you’ve identified an idea where a certain part of the supply chain is causing a blockage. Yeah. So you might say this company’s got an opportunity to raise its prices.

Because scarcity, there’s a scarcity there. Yeah. So if this is a publicity company, you might take a view that, so people are looking for ideas like this. Yeah. All the time. People are looking for opportunities all the time. So just on that too, is there any truth to the rumor? And it’s just a rumor of course, that the hyperscalers aren’t allowed to buy as many GPUs as they would like so they’re therefore out there buying companies that have GPUs and end of statement. I don’t know. I dunno. Okay. Fair enough. I dunno. Maybe it’s just a rumor. There, there’s rumors everywhere, that’s for sure. Alright. Hey Conor, good conversation. I wanna bring it back to just some practical takeaways for our listeners, if that’s okay.

Can you walk us through what kinds of information would analysts typically be looking for when they’re assessing the viability of a business model or an idea and trying to figure out whether or not this is something they people should invest in? I guess so so if we if we take this in a tech context, because there might be like a resources analyst might look at this in a very different way.

I would say that in a tech context and by the way, I work with colleagues who are much who are much deeper into software and things like, than I would be, but, I would’ve thought growth and recurring revenue are the gold standards. If you’ve got a business that’s growing very healthfully and that grow, it’s growing its revenue, very healthfully, and that revenue is highly recurring in nature, that is the kind of thing that will really get people’s attention.

If there’s some IP around it, that’s good as well. If there’s a moat around it, an investment moat around it that’s very helpful, people really appreciate that. In the investment case, recurring revenue growth trends and property. Difficult to replicate. Yeah. Yeah. Or substitute.

Brilliant. Listen, I think we’ve now reached the point of the conversation we refer to as our quick fire three questions, Conor. Okay.

So here we go. Question number one, what is one piece of advice that you would give your past self before taking on let’s say major tech initiative or challenge? So I’m at school, Catholic school in Northern Ireland, and Latin is an important part of our curriculum. So coming into third year, about 14 or 15 years old and my class cohort is divided into two for one specific purpose.

Half of us who were getting good marks in Latin, continue to do Latin. The other half went to do this new thing called computer studies. I like Latin. I’ve got a qualification in Latin. I’ve got all level Latin because I was put into the cohort that did Latin. But I never at school studied any computer study.

So I went on to do engineering at university. And I was at a really distinct disadvantage when I went there because I had literally never looked at a computer except to play some games on or something. Go and talk to my parents, I’d say, you’ve gotta get this kid into the computer study stream. Not the Latin stream. The world is lands of thousands of years, defunct language computers where it’s at.

Pretty hard to avoid in your line of work. Yeah, I have to say. Yeah, I think so. My wife tends to be a bit less, so she’s very keen tot detect our house. She the kind of thinks that the more tech there is, the more things can go wrong.

I’ll tell you what, she’s not wrong there. Like when the internet goes out in my house, nothing works. Yeah. I’d rather have internet than water.

Alright. Question number two. What is something that you used to believe in? I wanna say in tech leadership? It can be leadership generally that you no longer do. Yeah, look, I’ll take that in a more general sense of leadership and I think probably when I was a bit younger I probably would’ve thought of leaders or managers in organizations that I worked as somewhat omniscient and, and and all powerful and we’ve spoken about this and I think as I’ve gotten a bit older, you realize that people in those positions are they’ve got strengths and they’ve got development opportunities, and the really good leaders are the ones who can recognize where they lie. Where they sit in their strengths and they utilize the resource available to them. Yeah. Where their development areas are either to improve or just to fill in those gaps. The extreme example of this is, I think the Silicon Valley fake it till you make it the Theranos example where Yeah.

You’re literally the leadership of that company are they’re operating really with. With nothing or to the point of illegality. Yes. As it’s been subsequently proven. And those leaders, I’m sure there are people in those organizations or other investors who thought, God, these are, these people are amazing.

Question number three. This goes to partnership. What would you say is your gut check for spotting a good partner and walking away from one who’s not? It’s an issue of like trust Yeah. Shared values. I think I was listening to one of the other additions and I’m probably looking for people who are not like entirely transactional, so they’re gonna think Matt referred to someone who’s got a widget for a lot of money and you buy the widget and then they disappear and never That’s right.

I really. Resonated with me. This is all very intangible, by the way. And I suppose in, maybe in your line of work, you don’t have the luxury of building those relationships over a long period.

You need to make quicker decisions than two years to build trust with someone. So maybe the answer is you go and you consult with your network. Do you know this person? Do you know this organization? Do they do good work? Do, can you get a reference or something like, yeah. Yeah. Unfortunately, I think this is quite a nebulous answer, but it’s No, it’s fine.

Look, it’s absolutely fine. And like you, you’re right to s Boonie, right? So shout out to Matt Boone. Love you Boonie. I think the best need to the very least, communicate, collaborate, and be very open because I think we’re seeing signs of the market, certainly in the B2B tech space, valuing what you are describing more and more.

And I think it’s fair to say there could be a direct correlation with this phenomena of people needing to, starting to value partnerships over transactional relationships in tech. With the research that Adapt has recently released in their go to market edge series around the average time it takes in Australia for a B2B Tech deal, over a million dollars to close.

Do you wanna ever guess what it is? It’s over 400 days. Over 400 days to do that deal. So Connie, you, you were saying in our, again, we don’t have the luxury of we’ve gotta move fast because tech moves really fast, but customers in B2B Tech are going, this is actually so important for my business now.

I cannot afford for this relationship to go wrong and be transactional. Yep. And I think you’re seeing that directly linked to the time it takes to close deals. And also now the average number of people involved in making that purchasing decision has blown out to 29 people. Yep. That’s it. To vet that decision.

I think it’s, I think it’s hard for people to hide who they are over a 400 day sales cycle. That’s right. You can, or in a 45 minute podcast. Yeah. Just not hide it. Oh my goodness. You can you can wear a mask for a short duration cycle, but. Over 400 days if you’re talking to people regularly.

Yeah. You at some point, if you’ve got something that rankles it’s gonna, yeah. It’s gonna show itself. And that’s right. You’re being tested too, right? Because you just know that you’ve gone so far beyond the viability of the product. It’s beyond whether the thing ticks the boxes not about the widget anymore is it’s not about the widget, it doesn’t take 400 days to evaluate a widget. It takes longer to evaluate culture and purpose and how you implement and fail safes and risks and this, that and the other. All of those things. How are you when it goes wrong? Are you there? Are you at the end of the phone?

When I’ve had a failure of the product? Yeah. Are you there for me? Or have you just taken the commission and gone to Tahiti or something like that? That’s right. Gone to Tahiti. Indeed. Conor, this has been amazing. It’s been an absolute pleasure having you on things, reasons.

Thank you so much. Thank you so much, Conor. Really appreciate it. I know we’ll have you on again, and I know our listeners will have gotten a lot from that. It’s not often people get to peek behind the curtain in terms of how analysts and this whole industry works. Very grateful for your insights.

No pleasure being on. And if there’s any feedback or questions from people, pass ’em on and we’ll try and do our best. So thank you very much. Thank you, Conor. That was things. Reasons. 

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