Speaker 1: Everything for us is a long game. It's never like,
Speaker 1: what's a business that I could just buy, put some
Speaker 1: cost out, fixed up and sell Wherever people are taking simplistic,
Speaker 1: top down views. If you're writing the details, you'll find opportunity.
Speaker 1: What we say is is this something that's critical to
Speaker 1: society in a society going to need more of this
Speaker 1: over the next few decades. We like investing in private
Speaker 1: companies to unlisted companies. The reason for that is it's
Speaker 1: going to sound nasty.
Speaker 2: Hello and welcome to Shared Lunch, brought to you by Shas's.
Speaker 2: My name is Sonya and at Shazas we're on a
Speaker 2: mission to create financial empowerment for everyone, which is why
Speaker 2: we do these chats. It's a chance to peek behind
Speaker 2: the curtain and chat about what's going on in the
Speaker 2: world of business today. On Shared Lunch, we're joined by
Speaker 2: Paul Newfield, who's the CEO of Morrison, a global infrastructure
Speaker 2: manager who is known as the manager of ASEX and
Speaker 2: INSIDEX listed INFANTOL. Before we get started, here's some important information.
Speaker 3: Investing in involves the rest You might lose the money
Speaker 3: you start with. We recommend talking to a licensed financial advisor.
Speaker 3: We also recommend reading product disclosure documents before deciding to invest.
Speaker 3: Everything you're about to see and here is current at
Speaker 3: the time of recording.
Speaker 2: Welcome Paul Hey, Thanks Sonya, thanks for joining us today.
Speaker 2: So you lead Morrison, which has about, from our records,
Speaker 2: twenty five billion US dollars in assets under management, seven
Speaker 2: off officers across five countries from Europe to Singapore, and
Speaker 2: over two hundred professionals working with you. So tell us
Speaker 2: how did it all begin for you? I think we
Speaker 2: know you studied philosophy and now you're managing this company.
Speaker 2: How did you get here?
Speaker 1: Obviously, what you're asking is when you do a philosophy degree,
Speaker 1: out of all of the many job of office that
Speaker 1: came to you after you finish your master's in the
Speaker 1: philosophy of love, why did you choose infrastructure. I did
Speaker 1: my degree, I then went backpacking, came back thinking I'd
Speaker 1: come back with ideas about what I do with my career,
Speaker 1: and instead I just came back with a credit card
Speaker 1: bill and literally went into the career's office at university
Speaker 1: and said, can you give me the whole list of
Speaker 1: any employers who come willing to look at philosophy grads
Speaker 1: and it was quite a shortlist and happened to have
Speaker 1: on at Boston Consulting. I didn't know anything about what
Speaker 1: strategy consulting was, but was lucky enough to kind of
Speaker 1: find this organization where they didn't care too much what
Speaker 1: your degree was and they would teach you the basics
Speaker 1: of business. And then literally one day I was having
Speaker 1: a bad day at work and I caught up with Rachel,
Speaker 1: who was an old colleague and friend who now worked
Speaker 1: at Morrison, and she said, oh, this is great. I've
Speaker 1: been telling Lloyd Morrison about you. You should meet Lloyd. The
Speaker 1: next thing I know, I get this text message from
Speaker 1: Lloyd Morrison, who at the time was a real big
Speaker 1: figure in New Zealand, not just in business but campaigning
Speaker 1: to change the flag, always very prominent on issues that
Speaker 1: were important for the long term good of the country
Speaker 1: and the world. And he said, I'm going to be
Speaker 1: an Auckland. I'd love to have a coffee. We did that.
Speaker 1: We talked about all kinds of things, none of which
Speaker 1: were my CV. In fact, you hadn't seen my CV.
Speaker 1: And at the end of that conversation he said, you
Speaker 1: should to come and work for me if you want to.
Speaker 1: If you don't, You're an idiot. And then I got
Speaker 1: another text from him saying I wasn't kidding. Come and
Speaker 1: meet the team. What really excited me was here is
Speaker 1: this guy who had started what was basically the world's
Speaker 1: first infrastructure investment firm when the asset class didn't exist,
Speaker 1: and had been able to do that because New Zealand
Speaker 1: was so early introducing private capital into things like renewable
Speaker 1: energy and airports, and then had gone to take that
Speaker 1: to the world and had this complete attitude of well,
Speaker 1: if anyone can do it, why wouldn't it be us,
Speaker 1: And having spent my career in professional services were surrounded
Speaker 1: by really smart, overachieving, insecure people who always fear and failure.
Speaker 1: I was like, here's a guy who's really smart, overachieving,
Speaker 1: but doesn't have any fear of failure, and so I
Speaker 1: basically resigned. Look up the job offer what a story.
Speaker 2: I think. Definitely known for the impact of the infrastructure
Speaker 2: and to art as well.
Speaker 1: Right, Yeah, and actually that was one of the cool things.
Speaker 1: Lloyd was. Yeah, great sport of the arts and all
Speaker 1: kinds of music, so from opera, some quite obscure or
Speaker 1: kestral things through to great Wellington bands who I liked,
Speaker 1: and so to think like, here's this guy who's got
Speaker 1: such broad interests and genuinely seem to and all things
Speaker 1: start with what does the world need more of? And
Speaker 1: how do I make that happen? And when you think
Speaker 1: about it, even today, we never spend any time fussing
Speaker 1: on an investment idea to say is this infrastructure or not?
Speaker 1: What we say is is this something that's critical to society?
Speaker 1: And is society going to need more of this over
Speaker 1: the next few decades. And that leads you to places
Speaker 1: like investing in renewable energy, secure storage of data, which
Speaker 1: is actually a really great way to think about investing
Speaker 1: because it's good for the world. But also you tend
Speaker 1: to find and you make better returns because you're investing
Speaker 1: in things the world's going to need more of. You're
Speaker 1: always making putting your marginal dollar at work into something
Speaker 1: that has got its own investment options inside it.
Speaker 2: Yeah, So tell us about how Morrison is structured. You
Speaker 2: well known for managing Infertil, So tell us about the group.
Speaker 1: We started purely as the manager of Infertil and for
Speaker 1: the longest time all Morrison was was the manager of Infertils.
Speaker 1: Infertils unusual in the New Zealand market, probably usual in
Speaker 1: most markets, and that it doesn't have its own management team.
Speaker 1: What it has as an independent board and then Morrison
Speaker 1: managing it under a contract and so that was set
Speaker 1: up way back in nineteen ninety four. And then as
Speaker 1: infertill has succeeded and growing, Morrison's always tried to invest
Speaker 1: in building our team and capability ahead of Infertl's needs,
Speaker 1: so that you're trying to find what's the next great idea.
Speaker 1: So how we structured, we're basically two hundred and twenty
Speaker 1: people around the world. A small set of people have
Speaker 1: got very dedicated roles to specific funds like Infantal, so
Speaker 1: Jason is the Infantal CEO with an Infantal finance function
Speaker 1: underneath him. And then a bunch of people who are
Speaker 1: out there just trying to find the best investment ideas
Speaker 1: in the world. So those are people sitting in offices
Speaker 1: in New York, London and Singapore, etc. Combing the world
Speaker 1: for good investment ideas. You've got people who are just
Speaker 1: kind of deep research thinkers who are saying ask that
Speaker 1: question of what will the world need more of? So
Speaker 1: they're doing quite top down research, and then you've got
Speaker 1: people who are real kind of grease out of the
Speaker 1: fingernail operators. So typically, whenever we've invested in a business
Speaker 1: and you found a great CEO or a great chief
Speaker 1: development officer or someone with really special skills, if you've
Speaker 1: sold that business, we've tried to hold on to that person.
Speaker 1: So you end up with a team that's this unusual
Speaker 1: mix of some quite deal oriented finant people, some people
Speaker 1: are these very kind of esoteric big picture thinkers, and
Speaker 1: then some very practical operators. And where the magic happens,
Speaker 1: and it's quite hard to make the mix work culturally.
Speaker 1: Whether the magic happens is when you get those people
Speaker 1: looking at the same problem from different angles and really
Speaker 1: debating and trying to find the truth. And so we
Speaker 1: spend a lot of time trying to find make sure
Speaker 1: the people are smart at all those criteria, but actually
Speaker 1: are people who like a debate like challenge can deal
Speaker 1: with people who are different because it's always a lot
Speaker 1: easier to just work with people who are like you.
Speaker 1: But when you make that all happen, that works really beautifully.
Speaker 2: And so how do you go about making investment decisions?
Speaker 1: With a lot of angst and thoughtfulness. I took you
Speaker 1: through an example of an investment process because I think
Speaker 1: it is quite weird and unusual the way we've ended
Speaker 1: up doing this, but it's evolved and we've got to
Speaker 1: learn what's worked over thirty idears. So how did we
Speaker 1: end up buying Canberra data centers? Way back and it's
Speaker 1: probably about twenty twelve. Some of that research team was
Speaker 1: charged with this question of we can see booming demand
Speaker 1: for data storage and transmission, but we want to have
Speaker 1: investments that are really downside protected and we know that
Speaker 1: if you look at a lot of sectors that are
Speaker 1: exposed to data, they're still very high risk or they
Speaker 1: don't manage to maintain their margins. So that team did
Speaker 1: a lot of research and what's going to drive the
Speaker 1: growth of data? Then they looked at what are all
Speaker 1: of the physical assets that you need to support that
Speaker 1: and then said which have got the biggest barriers to entry,
Speaker 1: strongest market positions. And conclusion from that work was they
Speaker 1: really liked data centers, the fiber that connects up data
Speaker 1: centers and telecommunications towers that mobile operators use. And then
Speaker 1: within data centers we said, oh, some of this feels
Speaker 1: too much like kind of a property play where you
Speaker 1: know you've got a contract, but at some point your
Speaker 1: tenants could move out. Some of it feels a little
Speaker 1: bit too much like venture at too much risk exposure.
Speaker 1: And so we wanted to find the lowest risk way
Speaker 1: to invest in that because often what we're looking for
Speaker 1: is very long term contracts or very strong market position
Speaker 1: in a stable market structure, and that's not always what
Speaker 1: you find with tech companies. And so the team found
Speaker 1: this business called Canbra Data Centers, which back then was
Speaker 1: two locations in Canberra. And when you look through the
Speaker 1: government tendersment publishes all of their tenders publicly, you found
Speaker 1: this company one about ninety percent of all government tenders
Speaker 1: and you're like, okay, how is it when the government's
Speaker 1: running an arms link competitive process one company's winning so much.
Speaker 1: And what you found was they had done some really
Speaker 1: smart positioning about how they set up their business. They
Speaker 1: had the most secure operations, the most secure backup power,
Speaker 1: They had got some very security conscious government agents as
Speaker 1: early customers, and so other government agencies could see that
Speaker 1: that was a safe pace to be and then they
Speaker 1: got this ecosystem benefit of once one government agencies and
Speaker 1: there others want to share data with them, and so
Speaker 1: they want to be in the same location. Like wow,
Speaker 1: that's fascinating. At that point, the original backers of that
Speaker 1: business were looking to exit. We tried to buy it
Speaker 1: and we failed. They sold to someone else, and we
Speaker 1: were very disappointed. And the team kept talking to the
Speaker 1: founder of that business, Greg Borer, who's this amazing entrepreneur,
Speaker 1: for three years, and talking to the private equity firm
Speaker 1: who had invested in it, and finally we got to
Speaker 1: a point where they said, okay, we're thinking about an exit,
Speaker 1: tell us your price, and they gave us a period
Speaker 1: of exclusivity. So after like by then we'd probably been
Speaker 1: work on that there for five years and then you
Speaker 1: had this really intense six weeks of trying to get
Speaker 1: the deal done. So yeah, so not everything is quite
Speaker 1: as secure as route as that, but that's generally the principle.
Speaker 1: Find a problem in the world's got to solve, Try
Speaker 1: and find the business that's best positioned to solve that problem,
Speaker 1: be willing to pay an absolutely fair price, and then
Speaker 1: keep investing to grow it. So that business. Originally we
Speaker 1: put eight hundred million Ausie dollars into it to buy it,
Speaker 1: and we've continued to invest capital and grew it from
Speaker 1: Canberra into Sydney and too Melbourne into New Zealand and
Speaker 1: today it's worth over thirteen billion.
Speaker 2: And it sounds like you played a bit of the
Speaker 2: long game with it too, Like does Horizon play into
Speaker 2: those decisions?
Speaker 1: Yeah, Everything for us is a long game, starting with
Speaker 1: the fact that the money we invest is very long term.
Speaker 1: So if you think about the Morrison business overall, you've
Speaker 1: got Infrato and then most of our other clients are
Speaker 1: either sovereign wealth funds or pension funds and so they
Speaker 1: typically have twenty thirty year horizons. So that's great because
Speaker 1: it drives a culture for us of always thinking about
Speaker 1: the long term. It's never like what's a business that
Speaker 1: I could just buy, pull some cost out, fixed up
Speaker 1: and sell. It's what's a business that I'd want to
Speaker 1: own for decades, which then means you do do that
Speaker 1: really long term thinking about finding the right business, and
Speaker 1: then you're willing to spend two or three years trying
Speaker 1: to own the best business rather than just responding to
Speaker 1: what gets brought to you by investment banks.
Speaker 2: Did geography play and play a part in that with
Speaker 2: it being in Australia.
Speaker 1: Yeah, definitely. Infrastructure is a kind of business where you
Speaker 1: need to be local because you're owning assets that are
Speaker 1: kind of critical to their communities. So for the longest time,
Speaker 1: everything Morrison did was New Zealand through the eighties early nineties.
Speaker 1: Then when Australia started doing its first infrastructure privatizations, Morrison
Speaker 1: kind of jumped the ditch and set up here in
Speaker 1: the nineties and was successful in those, and so we'd
Speaker 1: become i think enough of part of the furniture in
Speaker 1: Australia that when an asset like that came up, we
Speaker 1: felt like we were natural owners. And clearly the Australian
Speaker 1: government really cares who owns that data center, given that
Speaker 1: their own government agencies are in it and they've got
Speaker 1: very secure data loads. And so the fact in that
Speaker 1: that we were local Australia and New Zealand local infratill
Speaker 1: is Australia, New Zealand and the investment partner that we
Speaker 1: brought for in Fronto that was Commonwealth Super So that's
Speaker 1: the pension scheme for government and military employees. So it's
Speaker 1: kind of a perfect match with the end customers of
Speaker 1: that business. So today obviously our footprints global, so we
Speaker 1: look at those same ideas and a lot of different locations.
Speaker 1: But back in twenty thirteen when we started looking at that,
Speaker 1: we wouldn't have looked at it if it wasn't in
Speaker 1: Australia and New Zealand.
Speaker 2: How does it differ between the private companies and the
Speaker 2: public companies knowing that you've got a mix of both.
Speaker 1: We like investing in private companies are unlisted companies and
Speaker 1: the reason for that is it's going to sound nasty.
Speaker 1: We like control, but what I really mean by that
Speaker 1: we want to invest in things where you can fundamentally
Speaker 1: make the business better and drive the direction of the business,
Speaker 1: which means you want to be able to determine strategy.
Speaker 1: You want to be able to determine who's in the
Speaker 1: management team, having great people there and work in partnership
Speaker 1: with them. So that works really well in private markets,
Speaker 1: so you can have a long term perspective infratil. Is
Speaker 1: this quite amazing b strip because infertil is a daily
Speaker 1: liquid stock that you can buy for a minimum unit
Speaker 1: of whatever it is today eleven dollars fifty, but gives
Speaker 1: you access to unlisted private market assets with this long duration,
Speaker 1: and that's really rere in fact one of the big
Speaker 1: trends in our industry of infrastructure funds and management. At
Speaker 1: the moment, all the US firms are trying to create
Speaker 1: these what they call semi liquid vehicles that will attract
Speaker 1: retail and high net wealth money into them, and they're
Speaker 1: doing all these really arcane struck suring to create something
Speaker 1: which looks like what INFRAT was in nineteen ninety four,
Speaker 1: but not quite as liquid now. That's partly to do
Speaker 1: with the US regulation that means you couldn't create an
Speaker 1: inftill there, but it means inflil is this really cool
Speaker 1: thing that you know, you can sit there in Australia
Speaker 1: New Zealand as a retail investor and get access to
Speaker 1: something that otherwise only the biggest institutional investors in the
Speaker 1: world can do.
Speaker 2: You're also credited with integrating sustainable investment in a broader sense.
Speaker 2: Can you tell us about Morrison's philosophy.
Speaker 1: In that Yeah, it starts from Lloyd Morrison and that
Speaker 1: idea of we will only do well we're investing in
Speaker 1: things that the world needs more of. And if you're
Speaker 1: investing in things the world needs less of. You should
Speaker 1: anticipate that. Sooner or later that catches up with you. You know,
Speaker 1: regulators toughened rules on you. Whereas if you're buying investing
Speaker 1: in something the world needs more of, you can buy
Speaker 1: an initial business, but then keep putting more and more
Speaker 1: capital into it, normally at higher average returns because you
Speaker 1: really know what you're doing as you grow that business.
Speaker 1: So that leads you to know what are the big
Speaker 1: problems the world needs to solve. Decapitalization is an obvious one.
Speaker 1: And having got our start in New Zealand, like you've
Speaker 1: got this weird superpower, right, which New Zealand's got a
Speaker 1: lot of rain and wind and not so much coal.
Speaker 1: So New Zealand's already ninety percent renewables and we could
Speaker 1: start investing in renewables in nineteen ninety four, and then
Speaker 1: as the rest of the world has caught up with that,
Speaker 1: we've said, well, here's a problem the world's got to
Speaker 1: solve that we've got an advantage in. So that's the
Speaker 1: starting point. Is actually, it's not a sustainability idea, it's
Speaker 1: actually just an investment idea. I think where a lot
Speaker 1: of our industries got itself into trouble in recent years
Speaker 1: has been where it's tried to tick the box on
Speaker 1: ESG and market ESG without actually thinking does this make
Speaker 1: my investment better? So for us, we've always just tried
Speaker 1: to stay strictly on the what is, what will good
Speaker 1: deliver the best returns and what are we good at?
Speaker 2: So while we're pulling the thread of you know, big
Speaker 2: ideas well, what's going on in the broader environment, we
Speaker 2: are seeing a lot of political volatility. You know, is
Speaker 2: there anything you know what worries you the most about
Speaker 2: that or excites you the most about that?
Speaker 1: Try and be an optimist. So the optimistic point of
Speaker 1: view is wherever there's dislocation, there's opportunities, and wherever people
Speaker 1: are taking simplistic, top down views, if you're writing the detail,
Speaker 1: you'll find opportunity. So for example, right now, the last
Speaker 1: thing most investors want to hear about is a US
Speaker 1: renewable energy idea, because they're like, don't Trump hate renewbal energy.
Speaker 1: But if you can actually work through the detail of
Speaker 1: what things will do well and what won't and exactly
Speaker 1: how will tax credits work and what energy demand from
Speaker 1: US data centers means that can they Actually I'll turn
Speaker 1: inshing fact, there's all this talk about we're going to
Speaker 1: not to renew will do gas generation. If you wanted
Speaker 1: to buy a gas turbine for a power plant right now,
Speaker 1: the earliest delivery you'd get would be twenty twenty nine
Speaker 1: or twenty thirty. So one way or another, if you
Speaker 1: need energy to fuel the data center, you're going to
Speaker 1: be using some combination of solar wind batteries unless you
Speaker 1: happen to live in the area nuclear plant that can
Speaker 1: has got access capacity. So you kind of work through
Speaker 1: all of that, and you see there's actually these really
Speaker 1: interesting micro opportunities that seem quite counterintuitive. So that's the
Speaker 1: optimist in anything great opportunity when everyone else is going
Speaker 1: to running. One way to work out where the opportunity is. Underneath.
Speaker 1: The deep worry I have is there's a risk that
Speaker 1: some things which have underpinned the whole global capital system
Speaker 1: get strained and ultimately, you know, people always talk about
Speaker 1: US exceptionalism, like what does US exceptionalism really mean? Apart
Speaker 1: from being a wonderful dynamic economy, which it definitely is,
Speaker 1: it means because you've got the reserve currency every year
Speaker 1: you get to buy all the world's stuff, run whatever
Speaker 1: it is about a seven percent budget deficit, and then
Speaker 1: hand them bits of paper saying I'll give you money
Speaker 1: later in ten or twenty years, and you keep low
Speaker 1: interest rates because you're the world's kind of reserve currency.
Speaker 1: I think that if the combination of lack of trust
Speaker 1: in US institutions along with lack of fiscal discipline means
Speaker 1: that you have a blowout in the US's ability to
Speaker 1: borrow long term, I just think that will uncover all
Speaker 1: kinds of problems in the financial system that we haven't contemplated.
Speaker 1: Because no one thought that US ten year rates would
Speaker 1: go above a certain number. So that's probably the biggest
Speaker 1: where in everything we do basically prices off US ten
Speaker 1: year bond rates, you then kind of adding your risk
Speaker 1: adjustice on top of that. What happens if that's no
Speaker 1: longer considered the risk free rate in the world.
Speaker 2: How do you think about that? Why do you think
Speaker 2: through that?
Speaker 1: There's no simple answer other than we're being really cautious.
Speaker 1: I don't think there's any really clear kind of economic
Speaker 1: winners in the long run from that, Like you love
Speaker 1: that if you go well, the US might lose in Germany,
Speaker 1: White win. But I think everyone has problems if you
Speaker 1: end up in that situation. So you just have to
Speaker 1: be cautious. So it means you want to keep borrowing
Speaker 1: levels low on your businesses, You want to understand any
Speaker 1: refinancing opportunities you want to that are coming. You want
Speaker 1: to be really kind of greedy and selfish about where
Speaker 1: you invest. So we're last year you might have accepted
Speaker 1: a return of X. Now it might be X plus
Speaker 1: two hundred or three hundred basis points, but it probably
Speaker 1: does had a really great environment from investing if you're
Speaker 1: doing it carefully. But yeah, definitely rest to the downside.
Speaker 2: Infrastructure is having a moment. What do you think is
Speaker 2: behind the global surch of interest from investors? Yeah, I
Speaker 2: mean you've always been in this infrastructure.
Speaker 1: Yeah, that's the weird thing, right. Like one of one
Speaker 1: of our favorite clients here in Australia said to me
Speaker 1: a few years ago about Morrison, it's like he's like
Speaker 1: me at Child of the nineties. He said, you know,
Speaker 1: it's like when there's that band you love all of
Speaker 1: a sudden everyone heard about and you're like, ah, they
Speaker 1: used to be my thing. Like that's how you feel
Speaker 1: a bit about infrastructure like it used to be this weird,
Speaker 1: obscure accid class that people don't even know it was
Speaker 1: an accid class and underground. Yeah, So I think there's
Speaker 1: a couple of things going on. One is everyone is
Speaker 1: realizing there's this massive investment required. So if the world's
Speaker 1: going to decarbonize, if the world's going to get much
Speaker 1: more efficient in terms of its kind of core physical
Speaker 1: infrastructure like roads, etc. A lot of capital has to
Speaker 1: go in. Also, the asset class is now expanding to
Speaker 1: cover things like data centers that hadn't been thought of before,
Speaker 1: So it feels like enormous amount of capital to be
Speaker 1: invested there for a good investment opportunity. The other thing
Speaker 1: that's going on, I think is Australia has been a
Speaker 1: world leader, So the average Australian superannuation fund probably has
Speaker 1: fifteen to eighteen percent of its portfolio invested in infrastructure.
Speaker 1: That's not the case around the world, so US pension
Speaker 1: funds might be at two percent. Australia was just really
Speaker 1: early at privatizing airports and things, and because the US
Speaker 1: has been much slower in those things, the asset class
Speaker 1: hasn't really developed and so as it started to emerge,
Speaker 1: a lot of the big global asset managers have said,
Speaker 1: while there this thing that's currently two percent grow to
Speaker 1: fifteen percent of growing capital pools, and this demand for
Speaker 1: where that money is going to go, we ought to
Speaker 1: get into it. So you're seeing a lot of investors
Speaker 1: want to go there, but also the kind of fund
Speaker 1: managers want to build businesses there, so they're hyping it up,
Speaker 1: which is ultimately probably a good thing for us. More competition,
Speaker 1: but more attention in the space.
Speaker 2: You know, you've got a real strength and digital and
Speaker 2: connectivity assets. How do you balance the environmental footprint on
Speaker 2: those that the data centers have.
Speaker 1: Yeah, that's a really big question. So energy consumption of
Speaker 1: data centers is high and is growing rapidly with AI
Speaker 1: and water use can be very high for cooling that equipment. Again,
Speaker 1: some of these things are better to be lucky than good,
Speaker 1: Like we happen to come from New Zealand, which was
Speaker 1: good for renewables and data center is our first data
Speaker 1: center coming from Australia. Greg Border, the entrepreneur there, actually
Speaker 1: was the first person to build water cooled data centers
Speaker 1: that use a closed loop. So you've got you're not
Speaker 1: checking water out of every day, you're kind of rotating
Speaker 1: it around the loop. That turns out to be perfect
Speaker 1: for AI and excellent for the environment. So we feel
Speaker 1: like in that one, actually the focus on that area
Speaker 1: could be a benefit with renewable energy or with the
Speaker 1: risk of a lot of carbon footprint from your data centers. Actually,
Speaker 1: your customers are your best friends. So the Hyperscalis, the Microsoft,
Speaker 1: the Amazons, etc. Generally all have their own net zero
Speaker 1: commitments and so they are wanting you to show that
Speaker 1: you can source renewable energy for your data centers. So
Speaker 1: you've still got the challenges of can the grid just
Speaker 1: keep up with demand? But I think we will actually
Speaker 1: be a driver of grenification of the grids through our
Speaker 1: data centers. But yes, really it's the kind of thing
Speaker 1: where you can quickly lose your social license. So you
Speaker 1: saw in the past, Ireland and Singapore put in bands
Speaker 1: on new data centers for a period because there just
Speaker 1: wasn't enough energy to go around. And when that's putting
Speaker 1: people's home power bills up, it's quite an easy thing
Speaker 1: to turn off. So means we also need to be
Speaker 1: part of the solution with our renewble energy business, How are.
Speaker 2: You thinking about the developments in AI and infrastructure.
Speaker 1: So there's a few different ways. The first and most
Speaker 1: direct way of experiencing it is through the data center business,
Speaker 1: and that is just insane if you look at this
Speaker 1: rate of advances and therefore the rate of growth of
Speaker 1: demand for computational power. I think we're kind of only
Speaker 1: just at the very start of what that's all going
Speaker 1: to mean. There's still a bunch of concernadis right, like
Speaker 1: when deep seat came out, it showed that you could
Speaker 1: do a lot of stuff more efficiently, and I expect
Speaker 1: that that efficient frontier will keep moving. So it's kind
Speaker 1: of a battle between exponentially growing demand and exponentially improving efficiency.
Speaker 1: But ultimately, in that I think the demand's just going
Speaker 1: to rise because as things can get efficient and cheaper,
Speaker 1: we'll use more of them. So AI will be massive
Speaker 1: for the data center business. We're starting to see it
Speaker 1: roll through now through some of our other digital infrastructure businesses,
Speaker 1: like booming demand for fiber networks that connect end users
Speaker 1: to data centers, for example. And then we're seeing it
Speaker 1: in our renewable energy business, like our biggest customers for
Speaker 1: our renewable energy business in the US are the same
Speaker 1: as our biggest customers for our data center business in Australia,
Speaker 1: you know, it's the HYPERSCALUS. So that's all hitting us
Speaker 1: kind of first, there is in the question of how
Speaker 1: do you use AI within the businesses. You know, I
Speaker 1: talked about those kind of creative strategic research thinkers you
Speaker 1: can imagine that are some of our best experimenters, and
Speaker 1: they're doing things like whenever anyone in our team globally
Speaker 1: comes across an interesting research report on anything relevant, it
Speaker 1: all comes into central place, gets ingested so that you
Speaker 1: can then start asking creative prompts about what we're experiencing
Speaker 1: never in the world. Yes, it feels like we're right
Speaker 1: at the beginning of something that will be transformational for
Speaker 1: our portfolio but also for ourn business.
Speaker 2: Feels like the transformation is coming back. We're not quite
Speaker 2: like we've got. On the one hand, people you know,
Speaker 2: using it to you know, create Barbie Doll versions of
Speaker 2: themselves or like what Barbie would I be? And then
Speaker 2: on the other hand these incredible business efficiencies and I
Speaker 2: think we're only coming to know the ways that it
Speaker 2: will transform.
Speaker 1: Our world exactly. And one of the things that was
Speaker 1: really opening in the last while, right when when we
Speaker 1: all first experienced chat GPT and then Microsoft pulled off
Speaker 1: that amazing deal with open Ai. I think we'd started
Speaker 1: to think this is a kind of like winner takes
Speaker 1: all space, and there's going to be one winning LLM
Speaker 1: and one winning hyperscala out of it. And these days
Speaker 1: you see there's probably six l lms that every few
Speaker 1: months on releases an update and they become the best
Speaker 1: in the world at some different air So really dynamic,
Speaker 1: which probably means it's not when it takes all for
Speaker 1: the llms. Probably the efficiency benefits all flow out to
Speaker 1: companies using these products, right, So I think that's really
Speaker 1: good for the economy, probably drives productivity. Hopefully it's something
Speaker 1: countering those higher interest rates that you might otherwise get
Speaker 1: through all the other fiscal issues in the world.
Speaker 2: Are there any other interesting areas that you're investing in
Speaker 2: that we haven't touched on.
Speaker 1: You were doing really interesting stuff in healthcare related infrastructure,
Speaker 1: So that's one of those spaces where really clear problem
Speaker 1: to solve. As populations age, there's more and more healthcare
Speaker 1: requirement and the government's budget to pay for it is
Speaker 1: limited and that was what led us first to diagnostic imaging.
Speaker 1: So radiologists think about, for anything, bring your spill x rator,
Speaker 1: pet scans. That's an area where early detect and early
Speaker 1: intervention can really reduce the system wide costs of disease.
Speaker 1: And so then we went about saying like, how do
Speaker 1: you find really nice, defensive businesses with good market positions
Speaker 1: to do that. And that's got a real global growth
Speaker 1: story because radiology has moved from being something where you
Speaker 1: go to your local clinic and they take an X
Speaker 1: ray and the radiologist in the next room read your
Speaker 1: scan to being something where that scan can be read
Speaker 1: by appropriately qualified for your jurisdiction doctor anywhere in the world.
Speaker 1: And so for example, as you've got Australia New Zealand
Speaker 1: qualified radiologists sitting in London, they can be working on
Speaker 1: the scans at are urgent overnight that otherwise you pay
Speaker 1: two or three times the amount for. And then if
Speaker 1: you've got these qualified people in New Zealand and you
Speaker 1: bring a few people from London, you can actually serve
Speaker 1: the UK market. So I think that's one of those
Speaker 1: ideas that's globally scalable. From a base at the bottom
Speaker 1: of the world. In fact, the the world's a bit
Speaker 1: of an advantage for the time zones.
Speaker 2: You've got to let stuff go to how do you
Speaker 2: feel about letting stuff go?
Speaker 1: So because we are such long term investors and you
Speaker 1: do everything with a perspective of onwing it for twenty
Speaker 1: or thirty years, I think one of our failings is
Speaker 1: we don't always think about exit as actively as others
Speaker 1: think about normal private equity managers who buy something, fix
Speaker 1: it up, flick it on in three or five years
Speaker 1: and collect their carry. They are always thinking about the sale.
Speaker 1: That's just not the way we're built. So it does
Speaker 1: mean we need to be really disciplined. So you know
Speaker 1: what does we now do For every asset, no matter
Speaker 1: how wonderful it is, We do an annual buy, sell,
Speaker 1: hold review. And sometimes a question can be actually, this
Speaker 1: is a great business, therefore you should sell it. So
Speaker 1: think about Tilt Renewables. You know that was close to
Speaker 1: my heart. That literally we work for that management team
Speaker 1: to create it, to pull it out of TrustPower and
Speaker 1: make this thing. We built it up, got it to
Speaker 1: a point where you thought it was the best renewable
Speaker 1: energy business in Australia and New Zealand. So then to
Speaker 1: be willing when people started making your offers for it
Speaker 1: to entertain them was a bit of an emotional stretch.
Speaker 1: But then when they started coming, you're like, actually, I
Speaker 1: think this with more to them than it is to
Speaker 1: the Infantal shareholders. We can always go again, And so
Speaker 1: being willing to do that and redeploy that capital. I
Speaker 1: think one of the good things about the trust that
Speaker 1: the market has built over the years and the Infantal
Speaker 1: board and the Mount Morrison team is they do believe
Speaker 1: that we can reinvest well. So it's not like you
Speaker 1: sell things and they immediately say give us all that
Speaker 1: capital back. I think they're starting to believe over the
Speaker 1: last few years, actually, if we leave that capital with
Speaker 1: you and a patient like you are, you'll probably find
Speaker 1: something really good to do with it.
Speaker 2: So let's look to the future. What excites you the
Speaker 2: most and what keeps you in your job, I think that.
Speaker 1: Excites the most is actually this idea of building our
Speaker 1: own into generational business. So just like the things we
Speaker 1: invest in go for multiple decades, having a Morrison that
Speaker 1: goes kind of in perpetuity, and when you look around
Speaker 1: the world, because we're the longest standing specialist infrastructure manager
Speaker 1: in the world. We've actually been the third CEO. We've
Speaker 1: been through multiple market cycles. You've seen kind of generational
Speaker 1: change that's really rare. Like most of our peers are
Speaker 1: ten to twenty years old, the original founders probably still
Speaker 1: own most of the business and they're looking for a
Speaker 1: way to sell it and retire, so their horizons us
Speaker 1: to shrink. Whereas for us, we've got this wonderful structure
Speaker 1: where almost all of our team are shareholders and when
Speaker 1: we retire, we sell the shares back to the next generation,
Speaker 1: and along the way we keep kind of increasing the
Speaker 1: ownership of the next generation. And then we've got the
Speaker 1: foundation that Lloyd said up before he died as a
Speaker 1: Cornerstone shareholder there in perpetuity and means you really can
Speaker 1: think on the same horizon that our clients think about you.
Speaker 1: So that's actually what exciting when you look around and
Speaker 1: go there's all these fullness business who are way smarter
Speaker 1: than I am, way more equipped than I was at
Speaker 1: their age to think about investing, and one day they're
Speaker 1: going to be running this business and it's going to
Speaker 1: be way bigger, way better than it is today.
Speaker 2: It's one thing you'd like to your shareholders to know, I.
Speaker 1: Reckon the thing that would surprise people most who kind
Speaker 1: of look at and film Morrison from the outside. Like,
Speaker 1: I think people expect us to be this group of
Speaker 1: really kind of financially driven, almost like investment bankers, and
Speaker 1: I think they'd be really surprised if they walked into
Speaker 1: the office and there's this very kind of curious, inquiring,
Speaker 1: collaborative group of people trying to problem solve and always
Speaker 1: kind of thinking about the long term and then trusting
Speaker 1: that the financial outcomes kind of fall out the bottom
Speaker 1: of that rather than being the thing you're targeting. I think, like,
Speaker 1: certainly that was the thing that surprised me most when
Speaker 1: I turned up, and I think there were only seventeen
Speaker 1: other people when I turned up at Morrison that it
Speaker 1: was this kind of quirky, esoteric, kind of truth seeking,
Speaker 1: curious bunch of people. See, that's probably the thing I'd
Speaker 1: most like if people understood, because I think it's the
Speaker 1: coolest thing about working here.
Speaker 2: Do you have a favorite quote or piece of advice
Speaker 2: that you like.
Speaker 1: I'll tell you the thing that Lloyd Morrison said to
Speaker 1: me that always somethink Lloyd had a lot of good voudisms.
Speaker 1: But when I was talking about moving to Australia and
Speaker 1: that we should set up a business here and back
Speaker 1: in I guess two thousand and eight, two thousand and
Speaker 1: nine this market was dominated by people like Babcock and
Speaker 1: Brown who had got themselves into trouble kind of being
Speaker 1: too short term and not thinking about their clans. And
Speaker 1: I kind of said, I can see an opportunity there,
Speaker 1: but I can see all the reasons why this be
Speaker 1: really hard. And Lloyd said to me, the day you
Speaker 1: decide to run a marathon, you can't run a marathon.
Speaker 1: What matters is that you decide to do it, and
Speaker 1: through deciding to do it, you commit and thenk you
Speaker 1: do all the things that make it possible. So don't
Speaker 1: be put off by the fact that you're not capable
Speaker 1: of doing something. Now, just make the decision and then
Speaker 1: you'll do it. So, yeah, that was the thing I remembered,
Speaker 1: The day you decide to run a marathon. You can't
Speaker 1: run a marathon, but you'll never run a marathon until
Speaker 1: you decide to do it.
Speaker 2: Well, I love that. I'm going to write that one down.
Speaker 2: And I think now that we've had the chat, I
Speaker 2: can definitely think I think philosophy and economics need a
Speaker 2: rebrand because I think there is definitely more in common
Speaker 2: with those ideas than we think. Definitely, definitely they are
Speaker 2: way more connected then I think where we started at
Speaker 2: this time of it exactly.
Speaker 1: I think, like all philosophy really is is the study
Speaker 1: of things we don't you'd have a proper methodology for,
Speaker 1: so it is really esoteric, esoteric great things, which is
Speaker 1: kind of what we do when we're investing. Like once
Speaker 1: you've got a formula for it, it stopped being the
Speaker 1: source of alpha. So yeah, we kind of just do
Speaker 1: philosophy every day.
Speaker 2: Yeah. Hey, well thanks heaps. I've really enjoyed the chat,
Speaker 2: and I'm sure everyone else will too. I appreciate your time.
Speaker 1: Thank you very much for being part