Nicholas Moore with Belinda Hutchinson AC: Leadership, investing and philanthropy

BELINDA HUTCHINSON AC:  Hi.  I’m Belinda Hutchinson, Chairman of Future Generation Global.  Welcome to our live discussion this afternoon for the Future Generation Virtual Investment Forum.  We’re absolutely delighted to have with us Nicholas Moore this afternoon, the former CEO of Macquarie.  Thank you very much for joining us.

NICHOLAS MOORE:  Great pleasure.  Congratulations in terms of what you’re doing here.  It’s a remarkable achievement in terms of the outperformance of the fund managers and of course what you’re contributing to charity, almost $42 million to date.

BELINDA HUTCHINSON AC:  It’s a great outcome and we’re very, very proud of our fund managers.  We’re absolutely delighted to be supporting our charities.  Thank you, Nicholas.

NICHOLAS MOORE:  I’m very happy to help.

BELINDA HUTCHINSON AC:  I just want to thank Livewire, who are live-streaming us today.  Thank you very much for doing that.  I want to just give a bit of background about you, Nicholas, because since you left Macquarie you have not been kicking back.  Nicholas has taken on the chairmanship of The Smith Family, the National Catholic Education Commission, Screen Australia, Centre for Independent Studies at the Opera House, and in addition you’ve taken on one public company board, Willow Technology.

NICHOLAS MOORE:  Yes, not listed.

BELINDA HUTCHINSON AC:  It’s a start-up technology company, which I think the Microsoft CEO, Satya Nadella, has been raving about, saying it’s a real up and comer.  Then I think you’ve got a whole range of farming interests and business interests.  So, we’re really excited about talking to you this afternoon.

NICHOLAS MOORE:  Thank you, Belinda.

BELINDA HUTCHINSON AC:  I’ve got some questions that I’d love to ask you.  This year, it’s been one of a kind – bushfires, COVID-19, lots of challenges.  I know you don’t have a crystal ball, but I have seen over the years you give some pretty amazing presentations on global financial markets and the economies.  When people have been pretty bleak about things, you’ve been the optimist.  I’m hoping you might be able to give us some views on where you think the global markets are going, where you think the global economies are going, and I’d just be interested to hear your views.

NICHOLAS MOORE:  Thanks, Belinda.  As you say, I have had a track record when I was at Macquarie of presenting on a regular basis.  It was generally an optimistic story.  I was basically basing that always on the past, on history.  I think it was James Buchanan, the famous economist, who said ‘when I think about the future, I’m a pessimist; and when I think about the past, I’m an optimist’.  Of course, I love always reflecting on the past; at least you know what it is.  When you look at the past, you always feel optimistic about the future.  By that, obviously I’m referring to the fact that when the Industrial Revolution took place 220 years ago or however it was, since that time there’s just been a one-way story in terms of growth, in terms of innovation, in terms of people finding new and better ways to do things.  As a result of that, productivity increases, per capita income has increased.  As you know, you’ve seen me talk about this in presentations before.  I used to put a chart from 1980 on, it could’ve been 1940 on, frankly it could’ve been 1820 on, showing the growth of GDP in the world, not just per capita GDP but absolutely GDP.  It’s just been a continuous one-way story.  When I say continuous, over the long term, of course, all curves look smooth.  If you look at various points in time, obviously there are negatives points that are actually recurring on that curve – obviously 1929 of course; the financial crisis in 2008 saw 2009 go backwards.  Of course, we’re in one of those unusual periods where we see growth around the world going backwards.  You do see growth going backwards in individual years.  I think what history tells us is that long-term, that not just nominal but real GDP growth is pretty consistent.  When I gave those presentations to you and others, Belinda, over the preceding 12 years, I would always, as you probably remember, make a forecast at the end of the presentation and I’d say this is where I think global GDP will be next year, real global GDP, which will be about 3.5%.  The reason I was right for ten years was because it was around about 3.5% for ten years!  So, it wasn’t a particularly bold assumption!  This year, of course, I would’ve been totally wrong!  But that gives me confidence.  As I said, when you look at the past, you become optimistic in terms of what the future may be.  When we sit back and look at the future, obviously there’s a whole range of challenges, with the pandemic obviously being front and centre right now in terms of the issues that the world is dealing with.  If you want to sit down and you write all the reasons to be pessimistic in the world, you can get a very long list.  As I said, when you look forward, using that quote that I picked up and it is a very good quote, I think we have to remember that’s how we are all wired.  It’s not just an observation about me personally; I think it’s about humanity generally.  You can see the growth that’s taken place in your lifetime, but very few people actually believe that will continue, and ever have.  Macaulay, the historian, famously in the 19^th Century came up with a quote – and I think this was like 1840 – along the lines of ‘why is it that when we’ve experienced nothing in our lifetime but growth and improvement in standards of living, we are nothing but pessimistic in terms of the future?’  I think we have to recognise that this is part of the human condition that we are sensibly wired to be cautious about the future.  It obviously was a very effective mechanism for our ancestors.  We should observe that, we should be cautious about the future always, but generally speaking we can look at the last 220 years and it might give us a bit more confidence.  I think that’s the balance.  As I said, if you’re looking at all the things that you know out there that are concerning, you would feel very, very optimistic about the year to come.  We perhaps should try to get a longer timeframe.  That said, obviously there is no shortage of challenges out there for individuals, obviously out there for communities and out there for nations.  If you look at what’s happening in Europe at the moment and the United States, it is a litany of genuine concern and genuine worry.

BELINDA HUTCHINSON AC:  You obviously faced very unusual conditions and challenging conditions when you took over at Macquarie as CEO, with the global financial crisis having just struck and there being the turmoil in the financial markets, which you led the company through extremely well.  What do you see as any similarities or differences between where we are today and how we might apply those to the post-pandemic economic recovery plans?

NICHOLAS MOORE:  Time is always different.  Ignoring everything I just said, it’s always new and we don’t know what the future will be.  As you say, there is no crystal ball telling us where to go.  An important issue of course for everybody and for every corporation and every community and every investor is thinking about what the worst-case situation is.  There is no point long-term for the world to go on and grow if you’re not part of that, economically or any other way, going forward.  It’s always essential to prepare for a reasonable worst-case situation.  That was a philosophy, a way of management at Macquarie that I stepped into.  It had been there long before me.  The organisation would always focus on what was the worst-case scenario, actually run those scenarios out and make sure that we could not just survive them, but could survive them comfortably.  As I took over at that time, the organisation had been well prepared for difficult circumstances.  I think that’s important for all investors to actually think long-term it might be okay, but short-term there can be a lot of pain that can be experienced, and making sure that no matter what business it is, the way you’re thinking about the world, that you’re able to well and truly survive those difficult circumstances that inevitably will be arising out there.  I think that’s most important.  In everything in life, a lot of it is in preparation.  That’s what I found at Macquarie.  I’m not at Macquarie anymore of course, but I’m sure they’re still continuing to be very careful around the world.  I think the financial system coming out of 2008 was so traumatic for the world, so much suffering coming out of that for the world; I think it seems to be a lot more robust now than it was back in 2008.  But it will be tested and it will be consistently tested, and that’s why I think rightly our communities, our regulators are very focused in terms of ensuring that these worst-case situations, they’re working through them, organisations understand them and that they’re able to actually endure them.

BELINDA HUTCHINSON AC:  It’s obviously about risk management.  Actually, in some ways, the global financial crisis has meant we’re now much better prepared to deal with the circumstances we face today.  Nicholas, the other question, on behalf of our shareholders, because they’re all investors, they’ve got their self-managed super funds, they’ve got their foundations for charitable giving, I’m sure they’re really interested in your approach to investment and how you go about it, and what would be the things that you’re looking at, at the moment?

NICHOLAS MOORE:  I think number one, you’d say always you need professional assistance!  Investment is a serious-

BELINDA HUTCHINSON AC:  We’re not asking for stock picks, I promise!

NICHOLAS MOORE:  Investment is a serious business.  As we know, it all depends very much on an individual’s risk tolerance and an individual’s timeframe as we’re talking about.  There can be a lot of pain in the short to medium term, so timeframe is very important from an investment viewpoint.  Risk appetite is very important and professional advice.  Frankly, the number of ways one can get invested, it’s very, very large indeed.  It’s not a limited view of the world with the global markets, with the different areas.  You do need, to start off with, professional help, unless you want to take a very simple profile of just going with cash or near cash equivalents, and there’s nothing wrong with that, of course, from a risk viewpoint.  Number one, it’s complex and you need to be well advised, and not just well advised, you need to think through from your own viewpoint what’s important to you.  The other element that I think, and I use personally, rightly or wrongly, is invest in things that you feel comfortable that you understand.  You won’t understand them of course, because the world is impossibly complex.  But try to focus on things that you can be as comfortable with as possible.  For me, obviously with my legacy, investments coming out of my time at Macquarie, my time with infrastructure style of investments, you can guess where my natural bias would be in terms of those sorts of categories.  As well as that, as you mentioned, technology obviously is a fascinating investment area, obviously a different risk profile.  As everything, it’s not just a question of getting good advice, the truisms of the advice of course, make sure you have a balanced portfolio, make sure that regardless of the different outcomes of the world, don’t assume you know what will happen.  It is very, very uncertain out there, so make sure you have balance in the portfolio, make sure you have professional advice, make sure, as I said before from the starting point, that you understand what the downside could be and that you are happy and comfortable with that downside position.

BELINDA HUTCHINSON AC:  I think that’s great advice.  That’s why we think Future Generation Global Investments and Future Generation Investments giving you access to a range of domestic and global fund managers actually is a really good opportunity for retail investors to actually spread the risk and diversify.  We’re really keen on lenders and investment opportunity.  The other question I wanted to move onto, we talked a bit about Willow, the start-up technology company you’re involved with, and you think about COVID-19 and what an extraordinary time it has been in terms of digital technology and people working from home and online transactions and how that’s really accelerated.  From your background as chair of Willow, how do you see that further accelerating and the impact on both the business, community and consumers?

NICHOLAS MOORE:  Like everybody, I’m seeing it and trying to assess what it means; plainly, the opportunity not just for Willow, but for all technology companies with the increasing amount of sensors that will be embedded in our normal life.  If you sit in a room like this, you can count the sensors in the room, whether it’s on the fire system, on the air-conditioning system, on the lighting system.  There will be more systems obviously coming out of COVID in terms of physical occupancy, in terms of cleaning, in terms of a whole range of different things.  Given the falling costs of technology, we’ll see a lot more sensors on everything.  Then the question is, what do we do with all that information?  How do we actually make sense of that information?  The consequences of that in the built environment, the consequences of that for processes, no matter what the process is, whether it’s a manufacturing process or even an agricultural process as you mentioned before.  We can imagine all sorts of things, but it comes back to how are we going to process that incredible amount of data we have and make intelligent decisions.  We’ve got a long way to go, I suspect.  The thing about technology obviously, we’re seeing a lot of value being created, rightly, in terms of people who are developing these new systems and these new devices, in terms of using the systems.  The other side of the coin of course is how that will impact the broader economy, because what we find through history of course, innovation, the benefits of innovation, 99% – I’m making that number up; I don’t know what it is – but most of the benefit of innovation flows through to the consumer and the people buying the services.  I think you can focus necessarily in terms of this is a great new way of retail, a great new way of running buildings or processes or plans, all the different elements coming out of it.  But the question is how will that actually flow through to the broader society?  How will that flow through in terms of benefits?  What are the second and third tier impacts of that?  I think again in terms of imagination, in terms of actually thinking it through, knowing that those benefits we see will be flowing through, how will they be flowing through?  Where will they be flowing to?  It’s a fascinating exercise.  I’m delighted to be at Willow because we’re there actually confronting these issues and trying to think we’ve got this platform, what can be done with it?  It’s only one of many.  Really interesting here in Australia, obviously we’ve got great technology companies that are continuing to emerge.  Willow obviously is very small in this, but there are dozens of fascinating companies out there, both from a digital viewpoint, but also in the health sciences.  It’s remarkable again coming out of the COVID crisis how we see so many of our health-related companies are stepping up and responding.  I read in the newspaper of a Queensland company that’s developed a 15-minute test for COVID; it’s all being accelerated.  Vaxxas, a company that I know, has again got money from the US government to develop needle-free patches.

BELINDA HUTCHINSON AC:  Little nano patches, absolutely amazing.

NICHOLAS MOORE:  All these technologies that have been floating around suddenly seem to be accelerating with the crisis that’s been created by COVID.  It is accelerating and I think the COVID impact will accelerate a lot of the technologies that have been out there.  Coming back to my optimistic in history – I’m not optimistic necessarily looking forward, to be very clear, I’ve got no idea what’s going to happen in the future – but you can see the sort of innovations taking place now that have driven growth historically.  Even though we can look at the growth historically and say that’s been great, it’s going to stop now, you get a degree of confidence having regard to what’s happening now in response to COVID; the human ingenuity, human needs are actually responding to the need out there.

BELINDA HUTCHINSON AC:  I’m also interested in talking about the not-for-profit sector because I mentioned all of the organisations that you so generously support, and in particular The Smith Family is one of our shareholders in Future Generation Global, which is terrific.  Also, they work in a space that Future Generation does with disadvantaged children.  I’m interested in any insights that you’ve had about how COVID has impacted that particular group, disadvantaged kids, and what is it that The Smith Family and others can do to help them get back on track?

NICHOLAS MOORE:  Importantly, of course, a bit like the Willow situation and similarly with The Smith Family and these other things, my role is very limited.  I’m just in a governance role, of course.  The great work being done in the organisation is by the people in the organisation.  In all these organisations, both the not-for-profit and indeed the for-profit organisations, these people are very, very dedicated and very, very focused to achieving outcomes and outcomes that they can measure and outcomes that they can see.  The Smith Family is certainly very much right up there with that.  The team, I’ve been incredibly impressed getting to know them over the last 12 months, very much outcome focused in terms of saying is this program making a difference?  Historically, where programs can’t be seen to be making a difference, they stop doing it.  So, they’re very focused on this program is making a difference, therefore we’ll put more resources into it, more work in it.  As you say, Belinda, a big focus on education with disadvantaged kids, Learning for Life; I think you’re a sponsor of that.

BELINDA HUTCHINSON AC:  We are indeed.

NICHOLAS MOORE:  57,000 kids who are being supported, with the idea of helping them ensure that they not just attend school, but also they get help in areas such as reading and numeracy and these key learning elements, seeing that this is a way of moving them from disadvantage.  A lot of work, a lot of dedicated people, volunteers as well as paid staff at The Smith Family are working on that.  As you mentioned, if the focus is on education and this is not just for Smith Family kids, for all kids across the community, obviously COVID has been very disruptive here in Australia, even moreso overseas when you look at what’s been happening there.  I heard an educator just today actually say the impact of COVID for them has been that a lot of the kids have just lost a year’s education.  They’ve lost a year’s education.  That’s very significant.  The loss is obviously they haven’t lost a year of schooling necessarily, but we all forget what we’ve learnt and if we’re kids at school, we’re building on what we’ve learned every day.  If you stop building, you’re not just standing still, you’re actually going backwards.  It’s quite challenging.  Obviously, when the scope moves from the school to home education, coming back to your point about digital disruption, remarkable the way education systems around Australia, both in the Catholic, independent and the government systems, have responded in terms of providing solutions for teachers to assist children at home.  This has happened internationally as well.  For many students, that’s been successful.  It’s been very demanding on the teachers because they’ve got to do two jobs essentially, so it’s been very demanding on the teachers and on the principals, and very demanding on the parents as well.  The challenge is of course some families can’t provide that same level of support that others can, both in terms of digital inclusion.  Some people have lots of computers or iPads around the house; some people don’t.  Some parents are very familiar in terms of how to use it and how to assist the children; some parents aren’t.  The divide we have in our community between children who are well supported and children who need support at times like this obviously is getting wider rather than closing.  The idea of The Smith Family obviously in terms of what we’re doing is trying to close that divide, using the centrepiece of the schools, ensuring that everyone gets a good education.  If the schools aren’t operating, it’s creating challenges.  Schools are responding, they’re responding well.  Really you see what teachers are doing and principals, they’ve really stepped up remarkably, from what I can see.  They’ve put in a great effort across the country and it has been very hard for them.  But still, some children naturally will be missing out, so there will be quite a deficit to be filled.  I’ve seen the government has stepped up and has got funding I saw recently for private tuition and things like that, as a way of stepping in to close the gap.  I know lots of schools and lots of programs will be focused on the kids who have missed out.  A year of schooling is obviously probably an exaggeration, but it gives you an idea that there’s quite a deficit for some people.  On the other hand, people have pointed out some kids are coming out of this actually ahead of where they would’ve been.  Actually addressing that, I think the systems from what I can understand are well aware of it.  They’re putting in a lot of work in the individuals in the system.  The government is stepping up and providing money.  But it is an issue; people like The Smith Family obviously are responding with programs.  But we have to recognise it’s an issue.  It’s one of the many problems, one of the causes of suffering coming out of the whole COVID experience.  It’s a very significant problem.

BELINDA HUTCHINSON AC:  It makes The Smith Family program even more important going forward, I would think.

NICHOLAS MOORE:  Yes.  Lots of programs, it’s not just The Smith Family.  I think there are so many programs.  We are a generous society and you see the number of programs where people are helping children and of course, the whole government sector.  A lot of funding has been provided to education in recent years and there’s a lot of very dedicated people who are going above and beyond in terms of trying to minimise the cost to these kids.

BELINDA HUTCHINSON AC:  Our Future Generation kids at risk charities I think are doing an amazing job too.  You’re absolutely right, it’s across the board.  We’ve got a lot to do.

NICHOLAS MOORE:  A lot to do.  As I said, being an optimist and being positive, it’s just wonderful the way so many people are responding.

BELINDA HUTCHINSON AC:  I’ve got the same thing at the University of Sydney and seeing all of our classes, 96% of our classes, being put online in three weeks and then to get the feedback from the students about how well it’s gone, it’s just really impressive how people have stepped up.  The teachers have done the same at schools, so you’ve got to say, a big shout-out to all the teachers out there in our community who really have stepped up during COVID-19.

NICHOLAS MOORE:  A big shout-out.  Not only are they doing something that they weren’t expecting to do, they’re doing it with such dedication, and it is really demanding.

BELINDA HUTCHINSON AC:  It’s hard.  It’s really hard.

NICHOLAS MOORE:  It’s really hard.  I think a huge shout-out for them, as you say, for the people not just in the not-for-profit sector who are helping, a big shout-out for them of course, with The Smith Family hat on, but also for the people in the broader system, the teachers, the principals, everybody who is responding to the need, and the government.  The governments have been great in terms of the state governments and the federal government in terms of responding to this need.

BELINDA HUTCHINSON AC:  I have one final question, and that is about the Opera House, because lots of our investors are very keen to know when they can get back to the opera, to the theatre, to the ballet, to the symphony.  When do you think we might be able to get back in?

NICHOLAS MOORE:  The good news, I think it’s all happening.  You probably saw the western forecourt, those things like the Opera Bar have reopened.  The state government has come out and said 50% in terms of the density.  As a result of that, I think we’re seeing on the 28^th or 29^th of this month, Bennelong will be opening.  At Bennelong, what the Opera House has done, Louise and the team down there, they’ve got the Sydney Symphony Orchestra working with Bennelong, so it’s a meal as well as music, which is a nice way of starting it.  As well as that, the Joan Sutherland Theatre, there’s a jazz performance happening I think on 1 November for Don Burrows memorial.  Then there’s a whole range of other events happening through November.  I think the hope is, I don’t think it’s been confirmed yet, that companies such as the Australian Opera will be starting again in January; that’s the hope.  It’s not sure yet.  There’s a whole range of events starting in November, as I said, 50%.  There will be a whole range of safety precautions of course at the Opera House.  As we know everywhere, people will be being checked in, there will be sanitisers, there will be 50% only occupancy in terms of the place; face masks of course will be preferable.  But it’s also important to point out with the Opera House that again in terms of the way people have been responding to this crisis, when it got closed down Louise and the team were very focused on how can we use what we have here?  Particularly with the iconic status of the Opera House, they started a program From Our House to Yours, and I think there’s been six million views digitally, where performances have been effectively televised or digitalised from the Opera House to the broader community.  Even though the Opera House was closed, it’s still very busy down there with the renovations taking place to the Concert Hall – remarkable, if you go down there, it’s remarkable, the whole Concert Hall is filled effectively with scaffolding at the moment.  All the seats have been stripped out, the stage is gone, it’s all being redone, and obviously having this period of time has not hurt the progress in terms of having that all happen.  The Opera House has been very active, not just in terms of the rebuilding but as well as that, this really great way of having From My House to Yours.  As well as that, Louise and the team have had a program commissioning new work, so I think we’ve raised over a million dollars to be actually commissioning new work, given so many of the artists of course weren’t eligible for various programs.  So, actually going out there and commissioning artists to produce work to be broadcast from the Opera House, so they’ve been very busy.  They’ve been responsive, coming up with new ideas and again, in terms of the money that came in, it was people stepping up and being generous and donating.  Again, a positive view in terms of how people are responding to the crisis, not just from an organisational viewpoint in terms of the Opera House, saying we’re not just going to sit on our hands, we’re going to get things done and we’re going to digitalise and broadcast, but again people responding generously in terms of the crisis.  Again, coming back to The Smith Family, we were expecting revenue donations and I think everyone did, JBWere put out a report for charities saying expect your revenue to be down at least 10%.  I’m probably wrong with that number, but expect your revenue to be down for 30 June, and from The Smith Family viewpoint, people knew the problem out there and they responded.  Corporates responded, individuals responded, and so rather than the fundraising falling at the end of the year as we thought it would, it actually stepped up.  So, people are responding generously, from what I can see, and they’re thoughtful and they’re using technology and they’re very good.  Coming back to my positive statement in terms of looking at the past optimistically and pessimistically about the future, perhaps we shouldn’t be so pessimistic about the future.  We should be nervous about the future, but we should see some of the good things that have come out of a terrible situation for many people, many people across the country, many disadvantaged people, kids as we were talking about before.  It’s been a very challenging time for many people, but there are a few glimmers of positive lessons and positive stories out there.

BELINDA HUTCHINSON AC:  We’re looking forward to a new year with the opening of your new Concert Hall at the Opera House.

NICHOLAS MOORE:  The People’s Opera House!

BELINDA HUTCHINSON AC:  The People’s Opera House!  Thank you so much, Nicholas.  It’s been absolutely fantastic.  I’ve really enjoyed talking to you this afternoon.  This is the opening of our Future Generation Virtual Investment Forum.  Our interview is going to be going online.  To our investors and supporters, thank you so much for joining us this afternoon.  In addition to this interview, we also have the Investment Forum with Geoff Wilson from Wilson Asset Management, Ben Griffiths from Eley Griffiths and Jacob Mitchell from Antipodes, who will be in conversation with James Thomson from the AFR.  That’s going up live on the website now.  Thank you again for joining us.  It’s been absolutely terrific.

NICHOLAS MOORE:  I should just make the important point at the end, Belinda, that when I talk about looking at the past and being optimistic – no guarantee for the future, of course!  Past performance is no guarantee for the future.

BELINDA HUTCHINSON AC:  We always know that one!

NICHOLAS MOORE:  As I said, it’s an observation about global GDP.  Obviously, I’ve got no better idea than anybody else.

BELINDA HUTCHINSON AC:  No crystal ball!

NICHOLAS MOORE:  Certainly, I wouldn’t be forecasting GDP certainly in the years to come.

BELINDA HUTCHINSON AC:  We hope it’s going to be a turnaround from this year.  Thanks again, Nicholas, it’s been terrific to have you.

NICHOLAS MOORE:  Thanks, Belinda.