The Secret Broker: The new ‘employ less to make more’ model
The Secret Broker
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After 35 years of stockbroking for some of the biggest houses and investors in Australia and the UK, the Secret Broker is regaling Stockhead readers with his colourful war stories — from the trading floor to the dealer’s desk.
Scott Farquhar, co-founder of Atlassian, was on TV the other day. I wasn’t really listening until he mentioned how the company grew from just two employees to now 4,000.
At the age of 40, he is now worth a cool $12bn after listing Atlassian on the NASDAQ with co-founder Mike Cannon-Brookes in December 2015 under the ticker symbol ‘TEAM’.
Not bad for a company founded in 2002 which they had to fund themselves, as the Australian VC funds just kept lifting their investment bar. They ended up lifting the bar so high, that Farquar and Cannon-Brookes never got a look in!
They now both live next door to each other. Scott paid A$75m for his house and Mike trumped him, paying A$100m for his shack.
As Mike has a double-barrelled surname, he obviously had to pay a bit more. Whenever someone is introduced to me with two surnames, it is normally a sign of a posh privileged plumbed mouth person who is about to trump you on whatever subject you were talking about.
I once worked in London with an Australian broker, who left Australia with one surname on his business cards and got off the plane at Heathrow, magically with two surnames on his business cards.
He was wrongly advised before leaving that this trick would be his meal ticket into the British upper-class system, though the ‘stralian twang sort of gave him away a bit.
Behind his back, everyone would say, ‘look out’, here comes ‘Crocodile Dundee-Dundee’, so he never got very far up the old boy British network before being sent back home, with his original single surname on his plane ticket.
Anyway, back to Atlassian.
The company currently has a market valuation of $61bn and only has 4,000 employees, which is an amazing feat in anyone’s book, let alone a couple of blokes from Australia to achieve.
Online only seller Kogan (ASX:KGN) employs just 157 people, has sales of over $1m a day and are valued at $1.9bn. Founder Ruslan Kogan is worth $660m.
Fortescue employs around 4,000 people and has a valuation of A$49bn which gives the good Dr Andrew a net worth of $14.7bn.
Platinum Asset Management employ less than 200 people who help generate A$280m in fees, (less their $40m in wages). They are valued at $2.3bn and their founder Kerr Neilson is worth $1.49bn.
To put all of this into perspective, Woolworths employ 205,000 people and have a valuation of $49bn, whilst Coles employ 112,000 and have a valuation of $24bn and the head honcho at Woolworths, Brad Banducci holds (or is entitled to) around $30m worth of shares.
Can you see the pattern?
This wealth creation using less employees is the complete opposite to what we learnt in our history classes.
Over in America, the land of COVID-19 the free, Jeff Bezos’s wealth has grown so much under lockdown, that he is worth more now than when he divorced his wife, to whom he gave 25% his Amazon shareholding to.
His wealth is now $US196bn and in true Silicon Valley style, he retains all voting rights over her shares under a ‘please put the ‘X’ there darling and not there’ arrangement.
Even though Amazon employ 840,000 people, most are on a minimum wage and this number will only go down as they move to more robotic warehouses, which can go for 24 hours, seven days a week without a toilet break, sick note or without being able to create an office party sexual harassment incident.
Tesla employ 48,000 with a valuation of $US286b vs GM’s 164,000 employees and a $US38bn valuation but the most amazing stat of all goes to Apple.
They have just 137,000 employees and a valuation of $US1.69tn.
If there are other up and coming companies that you come across, I would love to hear about them.
One that is not listed but hidden away in the giant conglomerate Nestlé, is Nespresso. They sell over 14bn capsules a year, employ 13,000 people and if it had begun life as a Silicon Valley startup, an estimated valuation would be around $US10bn.
Now, if only Coles and Woolworths could find the next Scott, Ruslan or Mike out of their pool of 317,000 employees and back them, then shareholders may be able to enjoy a greater return, than just watching self-service terminals roll out.
Now, that’s food for thought.
The Secret Broker can be found on Twitter here @SecretBrokerAU or on email at email@example.com.
Feel free to contact him with your best stock tips and ideas.