Latest / Stress Tested / Why Kogan CEO refuses to take MASSIVE $800k salary

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Why Kogan CEO refuses to take MASSIVE $800k salary · Stress Tested

0:01
Speaker 1: So you resign. How are your parents reacting at this point?
0:04
Speaker 2: Oh, mum cried. You know, you've got this great education
0:07
Speaker 2: and this great job and you're going to be a
0:08
Speaker 2: TV salesman. If the younger generation is doing more and
0:13
Speaker 2: more work from home, it's not good for the.
0:15
Speaker 1: Future of our nation. You'll forego your salary of over $ 800, 000.
0:18
Speaker 1: You'll take minimum wage, which you plan to donate to charity.
0:23
Speaker 1: Have I got that right? The share price had a
0:25
Speaker 1: tremendous surge during COVID. It's been in broad decline since then.
0:29
Speaker 1: How do you... psychologically as a CEO deal with seeing that. Well,
0:35
Speaker 1: Ruslan Kogan, thanks for coming on the show.
0:38
Speaker 2: Thanks for having me.
0:39
Speaker 1: It's good to have you here because we were hoping
0:41
Speaker 1: to get you here after you ran the Sydney Marathon,
0:45
Speaker 1: but you had an injury. It pulled you out of
0:47
Speaker 1: the event. What happened there?
0:49
Speaker 2: It was tragic. It was, you know, I'd done a
0:52
Speaker 2: big training block leading up to it, ran about 600
0:56
Speaker 2: kilometers over three months. So I did all the training
0:59
Speaker 2: and it was my a fourth marathon. So I'd already,
1:02
Speaker 2: you know, I love running and, you know, I've got
1:06
Speaker 2: the system down pat in terms of how to get
1:09
Speaker 2: ready for a marathon, everything set to go. A few
1:12
Speaker 2: days prior to the marathon, I was in Sydney on
1:16
Speaker 2: some work things and I went for my last run
1:18
Speaker 2: of the training, which was a six kilometre run I
1:21
Speaker 2: was going to do along the harbour. And I'm like
1:25
Speaker 2: two kilometres into the jog Around the harbor last run
1:29
Speaker 2: before the marathon and my hamstring starts tightening up. I'm like, oh,
1:33
Speaker 2: this is weird. Let me jog it out. So keep
1:35
Speaker 2: jogging and it gets tighter and tighter. And I'm like, oh,
1:38
Speaker 2: let me stop. Like this doesn't feel good. Then I
1:42
Speaker 2: went to a physio straight away. Who's like, oh, you
1:44
Speaker 2: should get an MRI. Then I went and got an
1:47
Speaker 2: MRI and it's a level three strain of the hamstring.
1:51
Speaker 2: And I was like, how did I do that? Just
1:52
Speaker 2: by going for a jog. So I don't know if
1:55
Speaker 2: maybe I was a bit too dehydrated from too much
1:57
Speaker 2: travel and flying or what it was or, yeah, but
2:00
Speaker 2: it was tragic. And it meant definitely do not run
2:04
Speaker 2: the Sydney marathon, which I was really looking forward to
2:08
Speaker 2: because it's now one of the Abbott World Series marathons
2:11
Speaker 2: and it had been elevated and I've done all these
2:13
Speaker 2: marathons overseas and this is one in your own backyard.
2:16
Speaker 2: So I thought, yeah, amazing. I was really looking forward
2:20
Speaker 2: to it. But yeah, the MRI said do not run.
2:24
Speaker 2: Funnily enough, since then, I've been, you know, put all
2:28
Speaker 2: the scans into AI and I had a bit of
2:31
Speaker 2: a read about it. And it's like, yeah, from a
2:33
Speaker 2: level three strain of a hamstring, you shouldn't be able
2:37
Speaker 2: to walk pain free. It should be very painful for
2:41
Speaker 2: a few weeks and things like that. And I'm like,
2:43
Speaker 2: I was still walking my 15,000 steps a day straight
2:47
Speaker 2: after it. I'm not I wasn't really in pain.
2:51
Speaker 1: You were able to do a run this morning, you said.
2:53
Speaker 2: I feel like I go for a run. I've started
2:54
Speaker 2: running again. This is now a few weeks after it.
2:57
Speaker 2: And I've got a second MRI to go like, hey,
2:59
Speaker 2: I'm not feeling like, did they give me someone else's MRI?
3:03
Speaker 2: Is there a mistake here? And I've got a second
3:06
Speaker 2: MRI done, which says the exact same thing. So yeah,
3:09
Speaker 2: I've got like one of these anomalies going on at
3:11
Speaker 2: the moment where the scans and the medical science is
3:14
Speaker 2: saying I should be in pain and not being able
3:17
Speaker 2: to jog or not being able to walk pain free,
3:20
Speaker 2: but I went for a 12K jog this morning in Sydney.
3:23
Speaker 2: It's one of my favorite places in the world to
3:25
Speaker 2: go for a run. So I couldn't resist, did that,
3:28
Speaker 2: felt fine, no pain. So I don't know what, obviously
3:31
Speaker 2: you've got to believe how you feel in real life
3:33
Speaker 2: as opposed to what an MRI says. But yeah, so
3:36
Speaker 2: I'm toying with this at the moment.
3:39
Speaker 1: As far as distance running, when did you get into
3:41
Speaker 1: that and what about it appealed to you?
3:44
Speaker 2: I started, my first marathon was 2018, so the New
3:48
Speaker 2: York Marathon, and I then did the 2019 New York
3:53
Speaker 2: Marathon as well, and then I was going to three-peat,
3:56
Speaker 2: and then COVID got in the way of that, so
3:57
Speaker 2: I couldn't actually do my three in a row. I
4:02
Speaker 2: love it. To me, I guess it's a form of meditation,
4:06
Speaker 2: because it's just me and my Garmin watch. I don't
4:10
Speaker 2: listen to music. I'll just You know, won't take my
4:15
Speaker 2: phone with me. Uh, so as you're training for a marathon, there's,
4:20
Speaker 2: you know, you're going out at times when you're doing
4:23
Speaker 2: a run, that's a few hours long and it's just
4:26
Speaker 2: you and your thoughts and, um, taking in the nature
4:30
Speaker 2: around you.
4:30
Speaker 1: How do you fit it into your schedule as a CEO?
4:33
Speaker 1: What does the routine look like?
4:35
Speaker 2: It means starting to run early in the day. So
4:39
Speaker 2: it's usually at first light. So. In summer, you get
4:44
Speaker 2: to start a bit earlier because it's getting light.
4:46
Speaker 1: A bit earlier.
4:47
Speaker 2: But yeah, all my runs are typically first thing in
4:51
Speaker 2: the morning.
4:52
Speaker 1: So as you get in from your run, you've had
4:54
Speaker 1: that big break from screen time. It's a sort of meditation,
4:59
Speaker 1: as you describe it. And then the workday's beginning and
5:02
Speaker 1: tasks are being put in front of you. And do
5:05
Speaker 1: you find that it's helpful to tackle the workday after
5:09
Speaker 1: doing a run?
5:10
Speaker 2: Yeah, definitely. There's even times when there'll be a few
5:16
Speaker 2: important emails or things in the business that we're working
5:19
Speaker 2: on that I'll need to consider. So prior to going
5:22
Speaker 2: on the run, I will read a few briefs from
5:25
Speaker 2: our executives and they would have sent me an email
5:29
Speaker 2: describing a situation or data points or things to take
5:32
Speaker 2: into account or a decision that needs to be made.
5:36
Speaker 2: I will read through that before my run, then I'll
5:38
Speaker 2: go through and I'll go for my run. And it's
5:42
Speaker 2: an ability to think through those things and the possibilities
5:46
Speaker 2: and play them out and various options and to really
5:49
Speaker 2: consider it. And then you get back from the run
5:52
Speaker 2: and you're running straight to the laptop because you're like, oh,
5:55
Speaker 2: I know what we need to do here.
5:57
Speaker 1: To set the scene for people who might not be aware,
5:59
Speaker 1: your family moved over to Melbourne from the Soviet Union
6:02
Speaker 1: in 1989. Yep. They had $ 90 to their name, living
6:09
Speaker 1: in government housing. When you think about that immigrant experience,
6:15
Speaker 1: how has it impacted your mindset as a businessman and
6:21
Speaker 1: what memories about it stick out to you?
6:25
Speaker 2: I think it's had a massive impact. I had the
6:28
Speaker 2: privilege of growing up underprivileged. meaning that every single day
6:36
Speaker 2: it was an active struggle of how do we make
6:40
Speaker 2: ends meet? How do we save money? How do we
6:42
Speaker 2: afford things? How do we progress in life? I'm watching
6:46
Speaker 2: my parents go through that. Parents arrived here with $ 90
6:51
Speaker 2: in their pocket, two kids, couldn't speak English at the time,
6:54
Speaker 2: were learning English, were working three to four jobs each
6:58
Speaker 2: and raising kids. And you know, always had a loving
7:02
Speaker 2: home and always food on the table and things like that, that,
7:05
Speaker 2: you know, sort of you take for granted as a kid,
7:07
Speaker 2: but you get to reflect on it later and go,
7:09
Speaker 2: that would not have been easy for my parents. And
7:13
Speaker 2: you start to appreciate it a lot more. And then
7:16
Speaker 2: I start to think about, well, what does it take
7:19
Speaker 2: to be an immigrant? And it usually means you've got
7:22
Speaker 2: to drop everything you've got, take a massive risk, travel
7:25
Speaker 2: into the unknown, work your butt off for a potential
7:29
Speaker 2: benefit that might not even be there. And then you go, well,
7:33
Speaker 2: what's it take to be an entrepreneur? It is identical.
7:38
Speaker 2: It's that risk-taking, hardworking mentality. And that's often why when
7:43
Speaker 2: you look at all those entrepreneur lists and business lists
7:46
Speaker 2: and things like that, there are a lot of immigrants
7:49
Speaker 2: on there because it's a very pre-selected cohort of people
7:55
Speaker 2: who are risk-takers and because they saw an issue in
8:01
Speaker 2: their current environment and they knew that they need to
8:03
Speaker 2: leave here and go there, then take massive risks around
8:07
Speaker 2: it and then work really hard to make it happen
8:09
Speaker 2: and overcoming adversity when they get there. All the same
8:12
Speaker 2: things you need in a business. So it's not surprising
8:16
Speaker 2: then that a lot of immigrants become very successful entrepreneurs. And, yeah,
8:24
Speaker 2: so I would say that that, you know, The privilege
8:28
Speaker 2: of growing up underprivileged has been a big part of
8:34
Speaker 2: my drive, a big part of how I think about things,
8:38
Speaker 2: a big part even of the core ethos of the
8:41
Speaker 2: Kogan.com business. We're all about price leadership. How do we
8:46
Speaker 2: make things cheaper than other businesses? How do we take
8:49
Speaker 2: a product and manage to get the same product for
8:51
Speaker 2: a better price point? That's what my family grew up doing.
8:55
Speaker 2: That was how we were assessing things. Like that decision-making
8:59
Speaker 2: of watching my parents' research purchases go, hey, we really
9:03
Speaker 2: need this, but what brand do we buy? Where do
9:05
Speaker 2: we buy it from? What products do we really need
9:08
Speaker 2: and what products can we go without? Like all of
9:10
Speaker 2: these decision-making processes are things that I grew up with
9:15
Speaker 2: and then have implemented them into our business.
9:19
Speaker 1: Wow. So they come over from the Soviet Union. They're
9:22
Speaker 1: learning English as they go. What kind of jobs are
9:25
Speaker 1: they working?
9:27
Speaker 2: So dad was a pizza delivery guy, a taxi driver,
9:33
Speaker 2: helped out at some stalls at Queen Victoria Market. He
9:39
Speaker 2: worked at some factories and manufacturing facilities in some pretty
9:44
Speaker 2: yucky environments, the, you know, work safe areas. processes at
9:50
Speaker 2: that time weren't the same. Some of the stories I
9:52
Speaker 2: hear from him are horrendous. Like, you know, WorkSafe wasn't
9:57
Speaker 2: the same as what it is now. So he grew up,
10:01
Speaker 2: he was doing that when we got here. Mum would
10:03
Speaker 2: be a waitress at one cafe, a cleaner at another, and,
10:09
Speaker 2: you know, learning English at the same time. And it's
10:11
Speaker 2: quite incredible now that I think about it that they
10:14
Speaker 2: were working many jobs each. And This is after, you know,
10:19
Speaker 2: mum had medical qualifications in the Soviet Union. Dad was
10:22
Speaker 2: an engineer. And you come here and you have to
10:26
Speaker 2: do those sort of jobs to make ends meet. While
10:31
Speaker 2: at the same time, I can't remember my parents ever
10:34
Speaker 2: being absent for anything important like, you know, if there
10:39
Speaker 2: was a graduation ceremony at school or a parent-teacher interview
10:42
Speaker 2: or Um, you know, my mum could still recite the
10:46
Speaker 2: name of every teacher I've ever had. So, um, and
10:50
Speaker 2: having a very loving home for my sister and I
10:53
Speaker 2: at the same time. So, um, it was quite incredible
10:57
Speaker 2: what they did. I'm, I'm, uh, forever indebted and grateful
11:00
Speaker 2: to them.
11:01
Speaker 1: It sounds like you started to emulate your parents' work
11:05
Speaker 1: ethic early on. As I understand it, you were walking
11:09
Speaker 1: home from tennis one day and you noticed golf balls
11:12
Speaker 1: outside a golf course and you started collecting them and
11:14
Speaker 1: selling them. You were nine years old at the time.
11:18
Speaker 1: So you begin wheeling and dealing and making money yourself.
11:23
Speaker 1: But was that something that your parents encouraged you to
11:25
Speaker 1: do or was it your own initiative?
11:29
Speaker 2: That was my own initiative. So all of this hard
11:33
Speaker 2: work from my parents, it's, you know, on one hand,
11:37
Speaker 2: they gave me that and they taught me a lot
11:39
Speaker 2: of these really important skills that are important in business,
11:41
Speaker 2: the hard work and perseverance. But making a product market
11:46
Speaker 2: fit or seeing opportunity or things like that isn't something
11:50
Speaker 2: they grew up with in the Soviet Union. Like communism
11:53
Speaker 2: doesn't teach you too much about supply demand or economies
11:56
Speaker 2: of scale or things like that. So there's a few
11:59
Speaker 2: silly decisions I've grown up seeing them make over time,
12:03
Speaker 2: like you know, they would drive from Elsternwick to the
12:06
Speaker 2: Dandenong markets to buy fruit and veg because Dandenong markets
12:08
Speaker 2: were cheaper. And I'd say, well, what about your opportunity
12:12
Speaker 2: cost of your time and the hour it takes to
12:15
Speaker 2: drive to Dandenong and the petrol that you'd spend driving
12:18
Speaker 2: to Dandenong and things like that. So communism doesn't really
12:21
Speaker 2: teach you too many business skills like that. So, you know,
12:26
Speaker 2: that was sort of me seeing an opportunity of, hey,
12:30
Speaker 2: I walked into the pro shop one time at Elster
12:33
Speaker 2: McPark golf course. And I saw that they were selling
12:37
Speaker 2: secondhand used golf balls for $ 2 each. And I'm like,
12:41
Speaker 2: these are the same things that I see lying along
12:43
Speaker 2: the fence line. They're just washed and polished a bit.
12:47
Speaker 2: And really like I walked past so many of these
12:50
Speaker 2: every single day, there's an, there's an opportunity here. So
12:55
Speaker 2: then yeah, as a nine-year-old started collecting them and putting
12:57
Speaker 2: them in egg cartons and going and selling them to golfers.
13:01
Speaker 2: So That was probably more of the skills I'd learned,
13:05
Speaker 2: you know, in Australia and seeing an environment where there's
13:09
Speaker 2: lots of businesses and lots of different offerings from different
13:12
Speaker 2: businesses and them trying to innovate and create things to
13:15
Speaker 2: win customers. So maybe that played a bit on my mindset.
13:19
Speaker 2: But yeah, my parents are more, they did a great
13:21
Speaker 2: job from a work ethic and risk-taking perspective, but some
13:25
Speaker 2: of the core business theories is never something that they
13:29
Speaker 2: really learned or got taught. in a communist environment.
13:33
Speaker 1: And then in your early twenties, you were on a
13:37
Speaker 1: conventional path. You, you had, you had day jobs, but
13:41
Speaker 1: then you decided to leave your nine to five to
13:45
Speaker 1: start selling the TVs out of your parents' garage. And
13:51
Speaker 1: I wonder, was there a moment you can remember where you,
13:55
Speaker 1: you decided you didn't want to be an employee anymore.
13:58
Speaker 1: You didn't want to work for someone else anymore.
14:02
Speaker 2: Um, yeah, there was a, a very clear moment. Um,
14:07
Speaker 2: I was working as a management consultant at Accenture. I'd always,
14:12
Speaker 2: you know, I'd self taught myself a lot of tech
14:15
Speaker 2: and IT skills and, um, I also did it at uni, but, um,
14:21
Speaker 2: it's an area that I really enjoyed. Um, and there
14:25
Speaker 2: was a project I was working on where I found
14:27
Speaker 2: an easier way for us to do things. And it
14:31
Speaker 2: was going to save us hundreds of hours of time
14:34
Speaker 2: of all of the grads working on the project. And
14:37
Speaker 2: I suggested it to the managers and I showed them
14:41
Speaker 2: what I had done and it worked and they saw
14:46
Speaker 2: it work and they just completely ignored it and weren't
14:49
Speaker 2: interested in it. In hindsight, when I think it through,
14:51
Speaker 2: because it's like, it's the bit that for me as
14:54
Speaker 2: someone who'd written the code and the system to show
14:57
Speaker 2: them how it could be done easy and them saying no,
14:59
Speaker 2: that was sort of the There was a lot of
15:02
Speaker 2: other stuff I wasn't enjoying there, but those sort of
15:04
Speaker 2: the final nail in the coffin and going like, this
15:06
Speaker 2: isn't for me. I'm not going to numb. I was
15:09
Speaker 2: a 23 year old grad. Like I'm not going to
15:12
Speaker 2: numb my brain for the next 50 or 60 years
15:15
Speaker 2: and work here. Um, I knew I had to get
15:20
Speaker 2: out and that's around the time that the idea for
15:23
Speaker 2: Kogan came along as well. So those two paths collided.
15:27
Speaker 2: I'm like, all right, I'm out of here.
15:29
Speaker 1: So you resigned. You go out on your own. How
15:32
Speaker 1: are your parents reacting at this point?
15:35
Speaker 2: Oh, mom cried. Mom was so upset because, um, up
15:41
Speaker 2: until that point I was on the perfect conventional path
15:45
Speaker 2: for her, you know, like I got, um, really good marks, uh,
15:50
Speaker 2: at high school, topped the state in some subjects. And
15:53
Speaker 2: she was really happy, got a scholarship into university. She
15:56
Speaker 2: was really happy, got good marks at university. She was
16:00
Speaker 2: really happy. Got a really good graduate job. She was
16:03
Speaker 2: really happy. So everything from her perspective, everything's gone to
16:06
Speaker 2: plan and she's, um, she's very happy. And then one
16:09
Speaker 2: day I'm like, yeah, mom, I'm going to quit this
16:12
Speaker 2: and do this. And she's crying saying, you know, you've
16:14
Speaker 2: got this great education and this great job and you're
16:17
Speaker 2: going to be a TV salesman. And I'm like, no, mom,
16:21
Speaker 2: not quite TV salesman. It's an idea for a direct
16:24
Speaker 2: to consumer, uh, online business model and all of this.
16:28
Speaker 2: And yeah, she, obviously no one had heard of online
16:32
Speaker 2: retail at that point. It was, yeah, she was really
16:35
Speaker 2: upset and thought that I'm throwing everything away.
16:40
Speaker 1: So it was kind of like the golf balls on
16:42
Speaker 1: the side of the road. You saw that opportunity and
16:46
Speaker 1: you went for it. But is it something you'd been
16:49
Speaker 1: considering for a while? Because I guess back then in
16:52
Speaker 1: the early 2000s, Nobody was buying electronics or appliances online.
16:59
Speaker 1: Nobody trusted it. But you believed that you could get
17:04
Speaker 1: people to do that. Why did you believe that?
17:08
Speaker 2: As part of my scholarship at Monash Uni, I got
17:11
Speaker 2: to do a semester abroad in Miami. And it was
17:14
Speaker 2: one of my, it was my final semester was actually
17:17
Speaker 2: abroad in Miami. And there I saw the rise of
17:22
Speaker 2: online retail where all the, you live on campus there,
17:26
Speaker 2: and all the international students, we went to Walmart to
17:29
Speaker 2: buy our mini bar fridges for our dorm rooms because
17:32
Speaker 2: that's everything we'd learnt about at uni. Walmart's got economies
17:34
Speaker 2: of scale and the best prices and all of that.
17:38
Speaker 2: So we spent a whole day going to Walmart to
17:41
Speaker 2: buy our mini bar fridges, then saw the local American
17:47
Speaker 2: students ordered theirs online. And then had FedEx drivers deliver
17:52
Speaker 2: them straight up to their dorm rooms. We had to
17:55
Speaker 2: carry ours on the bus and the train and bring
17:57
Speaker 2: them back to the dorm room. And then found out
17:59
Speaker 2: that the American students paid an even better price than
18:02
Speaker 2: we did. So I saw that, what would have that been,
18:07
Speaker 2: roughly a year prior.
18:09
Speaker 1: It was happening in the U.S.
18:10
Speaker 2: It was happening in the U.S.
18:11
Speaker 1: But not in Australia.
18:12
Speaker 2: Australia, it was non-existent. So I had that inspiration from
18:17
Speaker 2: my studies.
18:18
Speaker 1: In the U.S., When you start bringing stock into your parents' garage,
18:22
Speaker 1: how are you paying for it?
18:24
Speaker 2: It was pre-sold. So I went out to a few
18:30
Speaker 2: investors when I had the idea and said, look, here's
18:32
Speaker 2: what I'm planning to do. I'm going to sell TVs
18:34
Speaker 2: and they're going to be direct to consumer. And even
18:37
Speaker 2: though there's some big TV brands out there, the panels
18:40
Speaker 2: in the TV is only made by a few companies.
18:43
Speaker 2: They're all essentially the same panel. The technology is all
18:47
Speaker 2: very similar. And I can do it for much cheaper.
18:52
Speaker 2: No investor was interested, they said, online retailers for books
18:55
Speaker 2: and CDs. So then to make the business happen, it
18:59
Speaker 2: was essentially funded by the customer because I said, well,
19:03
Speaker 2: maybe if I give customers an incredible deal with a
19:05
Speaker 2: price they can't refuse, but say it'll be delivered in
19:08
Speaker 2: 45 days, customers will be willing to buy it. And
19:12
Speaker 2: I did that online and customers loved it. They were
19:15
Speaker 2: happy to wait 45 days for their TV. Because just
19:19
Speaker 2: prior to that, I was helping my mum buy some furniture,
19:22
Speaker 2: and she went into a store and paid up front
19:24
Speaker 2: for furniture that wasn't going to be delivered for a
19:26
Speaker 2: few months. And I thought, all right, well, if people
19:28
Speaker 2: are willing to do that for their bigger purchases, not
19:31
Speaker 2: only is it a little bit of a way, I'm
19:33
Speaker 2: going to give these customers an incredible price like nothing
19:36
Speaker 2: else they've seen before. So didn't need any capital, didn't
19:40
Speaker 2: need any funding. And essentially, our first few containers were
19:45
Speaker 2: literally arriving labels put on them, sent straight out to customers.
19:51
Speaker 1: Is it true that you maxed out some credit cards
19:53
Speaker 1: as well? Yeah. How many?
19:57
Speaker 2: I had at the time, one or two credit cards.
20:02
Speaker 2: And then it was, I think I had a couple.
20:05
Speaker 2: And then It was during a time when credit cards
20:09
Speaker 2: were a lot easier to get. Banks were giving credit
20:13
Speaker 2: cards to every man and his dog and the credit
20:16
Speaker 2: checks were a lot easier back then. So even though
20:18
Speaker 2: I'm unemployed, I was able to just fill out some
20:20
Speaker 2: forms and then receive credit cards in the mail. So
20:22
Speaker 2: it was wonderful. And then I also even told my
20:26
Speaker 2: friends what I'd done and told them I'm onto this
20:30
Speaker 2: business idea. I think it's really going to work. And
20:32
Speaker 2: they went and got a few credit cards and maxed
20:34
Speaker 2: them out as well. So that also helped. a bit
20:37
Speaker 2: of the funding.
20:39
Speaker 1: So you had that huge first mover advantage. No other
20:42
Speaker 1: retailers in Australia are thinking about the internet. They're all
20:46
Speaker 1: writing it off. How do you keep that spirit going
20:51
Speaker 1: sort of into the present day?
20:53
Speaker 2: It's an interesting point. And I talk about it right
20:56
Speaker 2: now because I feel like day zero again because of AI.
21:01
Speaker 2: So if you look at the history of our business, yeah,
21:04
Speaker 2: the first 10 years, was sort of like we were
21:08
Speaker 2: shouting from rooftops about the benefits of online retail. All
21:11
Speaker 2: the traditional retailers weren't really paying attention. They were asleep
21:14
Speaker 2: at the wheel. We won huge market share and created
21:18
Speaker 2: a business that probably shouldn't exist because they weren't paying attention.
21:22
Speaker 2: So we had that huge first mover advantage. Our second
21:25
Speaker 2: 10 years became more about execution because every retailer woke
21:29
Speaker 2: up to the fact that the internet's real and here
21:32
Speaker 2: to stay. They all started building out websites. They all
21:34
Speaker 2: started to have an online offering. So it became about execution.
21:39
Speaker 2: Who knows how to run the website better? Who knows
21:41
Speaker 2: how to manage a customer database? Who knows how to
21:45
Speaker 2: communicate offers to customers better? Who knows digital marketing better?
21:48
Speaker 2: Who knows how to scale all of these things? So
21:51
Speaker 2: we did pretty well, but it wasn't as exciting 10
21:54
Speaker 2: years as our first 10 years. Now, we're in our
22:00
Speaker 2: third decade. We're back to that first decade excitement because
22:05
Speaker 2: of AI The way we're doing things and the speed
22:08
Speaker 2: at which we're going is just absolutely incredible. Knowing that
22:13
Speaker 2: a lot of the bigger competitors and the incumbents and
22:16
Speaker 2: the traditional retailers we have are not doing anywhere near
22:20
Speaker 2: what we're doing right now. So the way that I
22:22
Speaker 2: liken it is sort of they've got a heritage listed
22:27
Speaker 2: house next door to the council. And anything they want
22:31
Speaker 2: to do, they need to get permits and put it
22:33
Speaker 2: through committees and to votes and to this and that.
22:36
Speaker 2: And there's just, they're not taking advantage of this technology
22:42
Speaker 2: revolution we're going through right now. And we don't quite
22:46
Speaker 2: have an empty block where we get to build whatever
22:49
Speaker 2: we want because we've got a 20-year-old business, but we've
22:51
Speaker 2: got a modern house where we get to knock down
22:55
Speaker 2: whatever walls we want and we get to recable whatever
22:57
Speaker 2: rooms we want and we get to you know, be
23:01
Speaker 2: a lot more agile. So it's a very exciting time
23:04
Speaker 2: right now because of AI.
23:06
Speaker 1: How is Kogan deploying AI?
23:09
Speaker 2: It's in every area of our business. So everything from
23:16
Speaker 2: ensuring customers get quicker responses with customer service and ensuring
23:23
Speaker 2: our service is better and faster and Agents are helping there,
23:29
Speaker 2: or AI agents are helping, as well as human agents
23:33
Speaker 2: do it better than we've ever done it before, all
23:35
Speaker 2: the way through to our engineers who are writing code
23:40
Speaker 2: now better and faster than ever before, all the way
23:43
Speaker 2: through to the way marketing works or even my investor
23:50
Speaker 2: presentations that we do, the voice in it is completely AI.
23:56
Speaker 1: I guess it's exciting and there's opportunity there, but there's
24:00
Speaker 1: also disruption risk, right? Like Meta recently released this agent
24:06
Speaker 1: Muse that people can use to browse sites and compare
24:11
Speaker 1: prices and even make purchases on their behalf. So when
24:16
Speaker 1: you think about the rise of these AI agents, do
24:21
Speaker 1: they pose a threat to the traditional Kogan models?
24:26
Speaker 2: To our model, it's a huge opportunity. Like, I can't
24:29
Speaker 2: wait for more and more customers to use it. So
24:32
Speaker 2: over our 20-year journey, I've been saying all along that,
24:37
Speaker 2: you know, usually retailers don't encourage their customers to go
24:43
Speaker 2: and check other retailers. We, for 20 years, have been
24:46
Speaker 2: encouraging our customers to go shop around. We've been saying, hey,
24:51
Speaker 2: we would love an environment where every time somebody needs
24:54
Speaker 2: to make a purchase... They open a browser, open a
24:58
Speaker 2: few tabs, load lots of products, different options, compare specifications,
25:02
Speaker 2: compare pricing, do deep research on every product decision. And
25:08
Speaker 2: if every customer shopped like that, we'd be a 10
25:12
Speaker 2: times bigger business right now. We would absolutely love that environment.
25:17
Speaker 2: And AI is about to make that easier.
25:20
Speaker 1: For customers.
25:21
Speaker 2: So if people are going to be rational and objective
25:24
Speaker 2: in their decision making, we are going to win more
25:27
Speaker 2: customers because our business model is manufacture the specifications needed
25:36
Speaker 2: and deliver that direct to the customer. No middleman as
25:40
Speaker 2: efficient and direct as can be. So when it comes
25:43
Speaker 2: to people making rational decisions and comparing specifications and choosing
25:48
Speaker 2: the best product for them, we're going to win that
25:51
Speaker 2: all the time. So if there's going to be agents
25:54
Speaker 2: that help customers make rational, objective decisions rather than emotional
26:00
Speaker 2: decisions based on brand or other factors, we're going to win.
26:06
Speaker 1: There's a real scrappiness about Kogan, isn't there? And you
26:09
Speaker 1: seem to relish uncertainty, challenges, as far as the current
26:17
Speaker 1: macro environment, we've got high inflation, we've got interest rates
26:21
Speaker 1: going up, there's concerns, at least from people who invest
26:25
Speaker 1: in retail companies, there's concern that spending is diving. But
26:30
Speaker 1: you've said that Kogan actually thrives in that kind of environment.
26:35
Speaker 1: Why is that?
26:36
Speaker 2: Yeah, look, we've learned over the years that if we're
26:39
Speaker 2: going to try and predict the macro environment, we're going
26:41
Speaker 2: to get it wrong 50% of the time. So our
26:44
Speaker 2: job as a business is to run a business that's
26:47
Speaker 2: going to do well, no matter what the macro is doing.
26:51
Speaker 2: And that makes you focus on things that stand the
26:56
Speaker 2: test of time. So in my 20 years in business,
27:01
Speaker 2: I'd never seen a customer say, I love your price points.
27:04
Speaker 2: I just wish I could pay more or, um, that
27:10
Speaker 2: service was too good. I don't want you to reply
27:13
Speaker 2: to me that quickly. Or that delivery was too seamless.
27:18
Speaker 2: Can you slow it down a bit? No customers have
27:23
Speaker 2: ever said that. So we focus on the core fundamentals
27:27
Speaker 2: that are going to do well no matter what the
27:29
Speaker 2: macroeconomic environment is doing.
27:31
Speaker 1: Yeah, you reported strong earnings last month. Sales were over
27:35
Speaker 1: a billion dollars. The market sold off and Kogan, after
27:44
Speaker 1: it had that tremendous surge, the share price had a
27:46
Speaker 1: tremendous surge during COVID, it's been in broad decline since then.
27:50
Speaker 1: How do you psychologically as a CEO deal with seeing
27:54
Speaker 1: that when you see a share price go down and
27:59
Speaker 1: it doesn't reflect what you believe the company is worth?
28:04
Speaker 2: I haven't checked the share price since we IPO'd, so
28:06
Speaker 2: I don't know what you're talking about.
28:10
Speaker 1: I've got to ask.
28:11
Speaker 2: Yeah. Um, I wish what I just said is true,
28:16
Speaker 2: you know, because it is from a running a business perspective,
28:20
Speaker 2: a fairly irrelevant number. Um, and very often it doesn't
28:28
Speaker 2: reflect how the business is performing. And we've seen that
28:31
Speaker 2: along our journey. You know, we IPO'd the share price
28:35
Speaker 2: was a dollar 80 at the time. And I remember
28:38
Speaker 2: ringing the bell at the ASX and giving a speech.
28:41
Speaker 2: And the share price is behind me. And I just
28:46
Speaker 2: see all these concerned faces of all our team members
28:50
Speaker 2: and stakeholders in front of me. So while I'm giving
28:53
Speaker 2: the speech, I could tell by their faces that what's
28:56
Speaker 2: happening behind me is not pretty.
28:59
Speaker 1: So a classic IPO. Yeah.
29:00
Speaker 2: So like the share price went down on the bell
29:02
Speaker 2: ringing while the business was performing brilliantly. We smashed through
29:06
Speaker 2: all of our prospectors forecasts and the business kept performing
29:11
Speaker 2: well while the share price kept going down. And then
29:13
Speaker 2: just one day just started a massive ascent. So it
29:21
Speaker 2: doesn't always reflect how the business is going. And that's
29:23
Speaker 2: a big challenge for me as a CEO of a
29:28
Speaker 2: publicly listed company. And probably one of the things I
29:32
Speaker 2: dislike the most about being publicly listed. I love the scrutiny.
29:36
Speaker 2: I love the fact that lots of people are looking
29:39
Speaker 2: at our business and questioning various elements of it and
29:42
Speaker 2: the transparency of the operation, but I really dislike the
29:46
Speaker 2: fact that there's this number out there that can often
29:51
Speaker 2: demoralise or demotivate team members because our team has... you know,
29:59
Speaker 2: we make mistakes. Sometimes we mess up, but more often
30:02
Speaker 2: than not, they're doing an incredible job and hitting through
30:05
Speaker 2: metrics and targets. And when that doesn't correlate with the
30:08
Speaker 2: share price and think like, what's going on here? Like,
30:11
Speaker 2: because a lot of them are rewarded through equity and
30:14
Speaker 2: so on. So it does cause this unnecessary noise. And,
30:18
Speaker 2: you know, I've just got to reaffirm to the team that,
30:21
Speaker 2: you know, in the short term, the market can be
30:22
Speaker 2: a voting machine. In the long term, it's a weighing machine.
30:25
Speaker 2: Just keep keep doing what's right by our customers and
30:31
Speaker 2: keep growing and keep delivering value. And in the long term,
30:37
Speaker 2: the noise goes away and everything will be rational. But
30:40
Speaker 2: in the short term, it's sometimes not. So yeah, that's
30:43
Speaker 2: our general approach to it. But it's a lot easier
30:46
Speaker 2: said than done.
30:47
Speaker 1: That weighing machine quote is a great piece of wisdom there.
30:51
Speaker 1: You're very online as a CEO. You fire your takes
30:54
Speaker 1: out there. They're unfiltered. Is that a conscious choice?
31:00
Speaker 2: Yeah, I started doing a bit more of it recently.
31:03
Speaker 2: Our CMO has sort of been saying like, hey, we
31:06
Speaker 2: discuss a lot of this stuff internally. People want to
31:09
Speaker 2: hear more from you. You've got people who love listening
31:14
Speaker 2: to you online. Why don't you have more of a voice?
31:18
Speaker 2: And yeah, so I started doing a bit more of it.
31:21
Speaker 1: As far as wanking from home, So you put out
31:25
Speaker 1: one take recently where you were talking about how the
31:28
Speaker 1: loudest advocates for working from home are people who you
31:33
Speaker 1: wouldn't necessarily want working at your company. And I should
31:36
Speaker 1: just clarify, in case we catch our listeners by surprise,
31:39
Speaker 1: it was a post that Ruslan shared on social media
31:43
Speaker 1: where he referred to working from home as wanking from home.
31:47
Speaker 1: Talk us through that. Do you not think that for
31:50
Speaker 1: some employees that there is a case for working from home?
31:53
Speaker 2: Definitely a case for some employees. The biggest problem with
31:57
Speaker 2: it is that those who really care about how much
32:01
Speaker 2: they get to work from home are probably the people
32:04
Speaker 2: you don't want working from home. Probably the people you
32:07
Speaker 2: might not want at your organisation as well. But the
32:11
Speaker 2: issue is that flexibility is great and you want to,
32:16
Speaker 2: you know, treat all your team members as adults and
32:18
Speaker 2: give them whatever flexibility they need. And that's sort of
32:21
Speaker 2: what we do at Kogan. But When I think back
32:24
Speaker 2: to my experiences in the workplace and the corporate world,
32:30
Speaker 2: and then some of the young talent in the early
32:33
Speaker 2: years that we had at Kogan.com, the amount you learn
32:37
Speaker 2: through just being in the room where it happened, through
32:40
Speaker 2: being there in front of the whiteboard and chatting things
32:43
Speaker 2: through and debating ideas and body language, like body language
32:48
Speaker 2: is 80% of communication. So it's like, seeing that is
32:52
Speaker 2: very different to shooting a few emails back and forth
32:55
Speaker 2: or scheduling a video call with someone and things like that.
33:00
Speaker 2: So a lot of that is missing. And I think
33:03
Speaker 2: that if the younger generation is doing more and more
33:08
Speaker 2: work from home, it's not good for the future.
33:11
Speaker 1: Of our nation.
33:12
Speaker 2: I think that they're missing out of a lot of
33:16
Speaker 2: the learning and character development and learning the lay of
33:19
Speaker 2: the land in the organisation and getting a good read
33:23
Speaker 2: on all the people and their managers and different working
33:26
Speaker 2: styles and being there to share ideas, debate ideas and
33:31
Speaker 2: things like that, or discussing things when you go for
33:34
Speaker 2: lunch or you go for a coffee. And so it's
33:37
Speaker 2: I think there is a place for some flexibility and
33:42
Speaker 2: it's great that we've got these productivity tools like video
33:45
Speaker 2: calls and things like that. But I think we need
33:50
Speaker 2: to look at it more wholesomely. We've got to look
33:54
Speaker 2: at the whole picture and say, well, yes, what are
33:57
Speaker 2: the benefits? What are the downsides? And how do we
33:59
Speaker 2: structure our workday to make sure that we enable people
34:04
Speaker 2: the next generation to learn as much as possible, as
34:07
Speaker 2: quickly as possible, because they're going to be the stewards
34:11
Speaker 2: of the business world in years to come.
34:16
Speaker 1: And tell us about your proposed pay package, because it's
34:20
Speaker 1: really interesting. So if this goes ahead, you'll forego your
34:24
Speaker 1: salary of over $ 800, 000. Right. You'll take minimum wage, $ 50, 000,
34:32
Speaker 1: which you plan to donate to charity, and you'll receive
34:36
Speaker 1: these performance rights, these shares, these Kogan shares, which will
34:41
Speaker 1: unlock if shareholder returns double within five years. Have I
34:46
Speaker 1: got that right? Yeah. So that's a remarkable bet on
34:50
Speaker 1: the future success of the company, a high-stakes bet.
34:54
Speaker 2: Oh, yeah. I think we've got incredible prospects as a business.
34:58
Speaker 2: I think we're working on some incredible things. We're delivering
35:01
Speaker 2: a lot of value to customers. Our customers are loving it.
35:06
Speaker 2: Our team is doing an incredible job. I think the
35:10
Speaker 2: business is stronger than ever. And yeah, so I essentially,
35:15
Speaker 2: when discussing the future with the board, I said, hey,
35:19
Speaker 2: I'd love to be on $ 1 a year. and just
35:24
Speaker 2: make a package where if shareholders get an incredible outcome
35:29
Speaker 2: and there's an incredible growth in the business, I get rewarded.
35:33
Speaker 2: And if there isn't, that I don't like just pure
35:36
Speaker 2: alignment with shareholders.
35:39
Speaker 1: What is the plan to double shareholder returns in five years?
35:43
Speaker 1: How will you make it happen?
35:45
Speaker 2: Well, a lot of it is doing exactly what we're
35:48
Speaker 2: doing right now. Our business has done pretty well, but
35:54
Speaker 2: where if you look at any of our high performing areas,
35:56
Speaker 2: we're at one or 2% market share and, you know,
36:01
Speaker 2: customers are loving what we're doing. So it's just keep
36:05
Speaker 2: the growth going, have consistent growth in performance of the business,
36:10
Speaker 2: consistently delivering customer value. Our membership program is very important
36:16
Speaker 2: for Kogan First and, you know, growing that. So, A
36:21
Speaker 2: lot of the, you know, there's nothing revolutionary there, but
36:24
Speaker 2: doing a lot of the things I believe that we
36:26
Speaker 2: are doing and then add on top of that a
36:29
Speaker 2: lot of the efficiencies and productivity gains from AI. And
36:35
Speaker 2: I think that, you know, the business will continue to
36:41
Speaker 2: grow in value.
36:43
Speaker 1: So you're someone who's been building PCs from a young age.
36:46
Speaker 1: You're a tech connoisseur. When you look at the way
36:51
Speaker 1: AI is going, are you optimistic about the future? What
36:56
Speaker 1: do you make of this constant, it seems almost like
37:01
Speaker 1: a hype cycle we have now with these AI labs
37:04
Speaker 1: coming out talking about how AI agents are going to
37:09
Speaker 1: kill a billion people? What do you make of it?
37:14
Speaker 1: Are you skeptical about that?
37:16
Speaker 2: Are they.
37:17
Speaker 1: Are they trying to pump their stocks before the IPO?
37:20
Speaker 1: Do they want regulation to stamp out competition? Is there
37:24
Speaker 1: validity to what they're saying? Do you have a thought
37:26
Speaker 1: on that?
37:28
Speaker 2: Yeah, look, it's hard to judge with very limited information,
37:33
Speaker 2: but I'm a very free market person, and I know
37:41
Speaker 2: that a lot of the AI corporations are, calling for
37:50
Speaker 2: certain regulations and things like that in the market, which
37:55
Speaker 2: does smell of regulatory capture and things like that. But
38:02
Speaker 2: who knows what's going on there? I personally think that
38:06
Speaker 2: the benefits of AI just by far outweigh the risks,
38:14
Speaker 2: but there are risks involved. Like The risks that I'm
38:17
Speaker 2: more concerned about is none of this like, oh, yeah,
38:22
Speaker 2: AI robots are going to kill us all in 10
38:25
Speaker 2: years or any of that. Like, yeah, nearly all technology
38:29
Speaker 2: when it was being developed, there was, you know, the
38:33
Speaker 2: doomsday sort of hypothesis and stuff. I'm more worried about
38:36
Speaker 2: the risks like, you know, like I'm using AI at
38:42
Speaker 2: the moment. I reckon I'm learning technology. at a 10
38:46
Speaker 2: times faster rate than I've ever learned in my life.
38:52
Speaker 2: Every bit of information I want to know, I'm always
38:56
Speaker 2: challenging it, opening it up, connecting it into the various
38:59
Speaker 2: data sources I have, interrogating things. The amount I'm learning
39:06
Speaker 2: at the moment in information I'm consuming is incredible. And
39:09
Speaker 2: so the value it's adding to me is great. there's
39:13
Speaker 2: a lot of people who are using AI to not
39:17
Speaker 2: have to learn again. You know, so taking the lazy
39:22
Speaker 2: approach of like, oh, I'll just get AI to do
39:24
Speaker 2: my stuff for me or whether it be plagiarism or
39:26
Speaker 2: redo certain things. So rather than using it as a
39:29
Speaker 2: tool to increase how quickly they learn, they use it
39:34
Speaker 2: to never learn again. And that is very scary, I'd say.
39:37
Speaker 2: So like thinking that if there's going to be students
39:41
Speaker 2: or young people who are just going to use AI
39:44
Speaker 2: without questioning it, without debating with it, without interrogating it,
39:48
Speaker 2: without taking multiple opinions into account. That becomes scary. And
39:53
Speaker 2: then it becomes even scarier if you go, well, if
39:56
Speaker 2: there's only going to be a few corporations out there
39:58
Speaker 2: who control AI, which basically gives mind control to a
40:03
Speaker 2: few corporations. So what's the next generation of people in
40:07
Speaker 2: the world going to think? Well, it's whatever this AI
40:10
Speaker 2: corporation thinks or that AI corporation thinks. They're the scary
40:15
Speaker 2: things about it, but the value that it's delivering and
40:19
Speaker 2: the possibilities are just incredible. I think back to schooling,
40:23
Speaker 2: for instance, and I excelled in math all the time,
40:29
Speaker 2: but I had this one teacher who was able to
40:32
Speaker 2: get more out of me than any other math teacher
40:36
Speaker 2: I had in my journey to the point where it's like,
40:39
Speaker 2: Even after I finished high school, I would go back
40:42
Speaker 2: and visit him every year or so. I felt so
40:46
Speaker 2: indebted to him after finishing school. And he taught me
40:50
Speaker 2: very differently to how he taught other students in the
40:54
Speaker 2: class because he obviously detected that I respond differently to
40:58
Speaker 2: different methods. I take that thinking into account and I go,
41:02
Speaker 2: imagine an environment where AI can alter the education or
41:08
Speaker 2: the learning pathway for young students and know that this
41:12
Speaker 2: person's more of an audio learner. This person's a visual,
41:15
Speaker 2: this person needs a, um, a real life example of things.
41:20
Speaker 2: This person works really well in this way. And rather
41:23
Speaker 2: than taking the current approach where every student in the
41:26
Speaker 2: classroom has the same curriculum, the same path, the same
41:29
Speaker 2: method of teaching that every single student is able to
41:33
Speaker 2: have a fully custom uniquely designed, um, module for them
41:41
Speaker 2: where AI will teach that student using the exact ways
41:45
Speaker 2: that they learn better with and resonate better with and
41:48
Speaker 2: things like that. Just that one thing alone is incredible,
41:54
Speaker 2: makes the future with AI so bright.
41:59
Speaker 1: Yeah, there is a big difference between getting AI to
42:02
Speaker 1: do something for you and saying to an AI, explain
42:05
Speaker 1: this to me. And personally, I find myself getting ai
42:11
Speaker 1: to give me simple analogies give me a simple analogy
42:14
Speaker 1: for this no make it simpler no make it simpler
42:17
Speaker 1: keep making us yeah yeah.
42:19
Speaker 2: And over time it'll learn that for you specifically you
42:22
Speaker 2: like consuming information this way or if i explain it
42:25
Speaker 2: to you this way you're more likely to get it
42:28
Speaker 2: so i'm very excited about things like that.
42:31
Speaker 1: Ruslan it's been great chatting with you thanks for coming on.
42:34
Speaker 2: The show Lovely to be here. Thank you.
42:36
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