Motley Fool Hidden Gems Investing - Disney, Airbnb, and The Scout Mindset

Episode Date: August 13, 2021

Disney’s blowout 3rd quarter is fueled by growth in Disney+ subscribers. Airbnb predicts record revenue on the horizon. Unity Software’s 2nd-quarter report calms shareholder concerns. Boston Beer and Pepsi team up to create an alcoholic version of Mountain Dew. Jason Moser and Ron Gross analyze those stories, discuss the latest from eBay, Chegg, DoorDash, and The Trade Desk, and share two stocks on their radar: Outset Medical and bluebird bio. Plus, Motley Fool analyst Maria Gallagher talks with Julia Galef about her book, The Scout Mindset: Why Some People See Things Clearly and Others Don’t. Learn more about your ad choices. Visit megaphone.fm/adchoices

Chris Hill, joining me this week, senior analysts Jason Moser and Ron Gross. Good to see you as always, gentlemen. Howdy. How are you doing? We've got the latest headlines from Wall Street. We'll talk investing mindset with author Julia Galef. And as always, we've got a couple of stocks on our radar. We begin this week in the Magic Kingdom. Shares of Disney up on Friday after a blowout third quarter report. Profits were much higher than expected. And the Disney Plus streaming service now has 116 million subscribers. And I will point out, Ron, it was less than two years ago that they launched it, and they're already at 116 million. Very, very impressive. They ended

the quarter with a total of 174 million streaming subscribers overall, and that's just 35.5 million short of Netflix's subscriber base, and Netflix has been at this game for quite some time. So, really impressive. Overall, the quarter, really strong. Beat expectations on the top and the bottom line. Overall revenue up 45%. And as we noted, streaming is most of the story here, but the theme parks are back despite the rising Delta variant. As you said, Disney subscribers doubled to 116 million. ESPN subscribers increased 75%. Hulu subscribers up 21%. So the whole overall direct-to-consumer division, which includes that streaming business, had a 57% increase in revenue. But it's important to note, they did report a loss in that division

of about $299 million because they invested in programming, which, as we know from all the years of Netflix, is expensive. So, we have to keep an eye on that. Also, very important to keep an eye on average monthly revenue per paid subscriber. For Disney+, that actually decreased to $4.16 from $4.62. And that's due to a higher mix of Disney+, Hotstar, which is the subscription service in India. So, that metric is going to be really key to profitability for this streaming business and where the growth comes from, whether it's overseas or domestic, is going to be a very important part of the story as well. Theme park revenue rose for the first time in five quarters. Great to see that back. Upcoming theme park reservations at the two U.S. parks remain strong

even as the COVID Delta cases increased. We saw some weakness in their network business due to an increase in production and marketing costs, but overall adjusted earnings per share for the quarter, increased to $0.80 from just $0.08 in the prior year. Now, the stock's not cheap. We've got Disney selling at 40 times earnings here. Disney is not the highest growth story in the world. The digital business is exciting. Let's keep an eye on the stock. As I said, not the cheapest it's ever been. Although it's interesting when you mentioned the ESPN Plus numbers, it's interesting to see that one of the benefits of the Disney Plus streaming service is it's basically a catalyst to get people into ESPN Plus and Hulu, the way they bundle that service.

Absolutely. And the fact that sports is back and sports gaming is back and excitement in general, we have the NFL heating up now, all important for ESPN. Hulu Live, a bit pricier than just the regular Hulu, is good for the average price point as well. So yes, that bundle, very, very important. As good as Airbnb's second quarter revenue was, the company said it expects third quarter revenue to be a record. But that guidance also came with warnings about the Delta variant, and that was enough to keep Airbnb stock flat this week, Jason. Yeah, they did a good job kind of walking the line here and not being too optimistic, but yet not being too pessimistic either. I mean, I think that it's clear that people

are traveling again, and Airbnb is proving to be a prime beneficiary there. And it won't be a straight line up, at least in the near term. But we saw this with Disney's report. We saw this with Airbnb's report. We're seeing signs, at least, that people are starting to accept and learn more how to live in a world where COVID exists, ultimately. And that's a good thing, because it's going to be the case, I think, for some time to come. But as far as the numbers, very impressive. The revenue for the quarter, $1.3 billion. That was up 300% basically from a year ago. Now, that's for obvious reasons. Let's take a look at 2019, shall we, Chris? It's still up by 10% from 2019. Very respectable there. Adjusted EBITDA, $217 million. That was

up substantially from a year ago, and even from 2019 as well, as the company works towards profitability. But the numbers are just really, really impressive. 83.1 million nights and experiences booked. That was basically flat with 2019, obviously, up considerably from last year. $13.4 billion in gross booking value, that was up 37% from 2019 as demand continues to pick back up, which is ultimately what leads them to their rosy predictions there for the third quarter, as you mentioned. I mean, the persistence of COVID in Delta remains, but they do expect quarter three revenue to be their strongest quarter ever. As demand starts to pick back up, They are seeing guests from countries with higher vaccination rates, including the U.S. and parts

of Europe. That's really driving the travel recovery. They are introducing features to the platform like flexible dates, which has really proven to be quite popular in this environment. Interestingly, the trend of long-term stays, they highlighted this in the first quarter, stays of 28 days or longer. That remains one of the largest and strongest growing parts of the business. It seems like they're benefiting from a number of different trends here, given their brand awareness in the space. It feels like they're setting themselves up for a pretty good run here. eBay's second quarter revenue was light, gross merchandise volume fell, and guidance for the third quarter was lower than expected. But despite all that, shares of eBay up 10% this week.

Ron, as a shareholder, I'm not complaining, I am confused though. Yeah, the quarter was mixed, and as you noted, revenue guidance was weak. Revenue up 14%, but that GMV, that gross merchandise volume, was down 7% as the company faced tough comps to last year's really strong growth. On the conference call, management noted that they're seeing positive GMV growth compared to pre-pandemic levels two years ago, which is always smart to compare it to pre-pandemic. The fact that they used the word positive and they didn't really get into some details, to me, I'm thinking that means slightly positive, maybe not that exciting. They did end the quarter with 159 million active buyers. That's a decline of 2%,

so flat-ish from a year earlier. They had weak operating margins, but they managed to report adjusted EPS that was flat. eBay, they're looking to generate more revenue from their advertising and their payments business. In order to offset that slowing growth from the online marketplace, place. During the quarter, they processed 71% of online platform buying through their own managed payments. That's an important part of their future. Under pressure from activist investors, they're selling off non-core businesses. I like that a lot. They completed the sale of their classified business for $13 billion, announced an agreement to sell 80% of eBay Korea for about $3 billion. I like that as well. Now, revenue guidance,

as you mentioned, was weak. As vaccinations continue to roll out, people return to pre-pandemic habits. That's just the nature of the game. But still, understanding all that and looking back compared to two years, the quarter was relatively solid. The stock's not that expensive at 17 times, so there's room for buyers to come in and cause some strength to the stock. Shares of Unity Software up nearly 20% this week after a second quarter report was highlighted by strong revenue. Jason, there were concerns that Apple's new privacy changes were going to hurt Unity Software's advertising platform. It kind of looks like they're in pretty good shape. Yeah, yeah. I think that's just a very near-term headwind that shouldn't really pose too much of

an issue for Unity Software. And mainly, if you are a believer that the metaverse is inevitable, and Chris, I am. I mean, I think the metaverse is just on the way. I don't know that I'm going really participate all that much in it, Chris, but I think it's coming. If you think we're headed towards a world of 3D and interactive content as more the norm, then it feels like Unity is really a company that you need to own. And that really bears out of the numbers they're presenting. Revenue for the quarter was up 48% from a year ago ahead of their guidance. That was the 11th consecutive quarter of 30% or greater revenue growth, which is really impressive, of course. The Create Solutions business, that's the smaller part of the business. Revenue growth of 31%.

there. That's one that's based on subscriptions and contracts. The operate solutions, that was up 63%. That's a revenue share and usage-based model. Clearly, we're seeing engagement headed in the right direction. I think 888 customers, each generating more than $100,000 of revenue for the company over the past year compared to 716 large customers from a year ago. The dollar-based net expansion rate of 142% that was same from a year ago. Again, they continue to do very good things to bring people in and keep them in there. Making an effort to consolidate the space a little bit, they're bringing in some little bolt-on acquisitions as time goes on, not only to build out their capability, but it also really helps keep that flow of talent steady, which is really

important in this line of work. All things considered, a very strong quarter for the business, one that I own, I've recommended. I continue to remain very optimistic about it. Two giants in the beverage industry are joining forces to create a new drink. Get the popcorn ready, because this one is going to be something to see. Details after the break, so stay right here. This is Motley Fool Money. Welcome back to Motley Fool Money. Chris Hill here with Jason Moser and Ron Gross. just in time for the start of the school year. Good second quarter results from Chegg, the online education company's profits and revenue came in higher than expected.

And Jason Chegg also bumped up their full year guidance. Yeah, really exciting to see the kids getting ready to go back to school. Hopefully this 2021-2022 year shakes out to be far, far better than the last one. In regards to Chegg, though, this has been a fascinating business to follow. It's really evolved over time to not only remain relevant, but to become more relevant, it seems. They went from just a stodgy textbook business to e-textbooks to now services. And it seems like it's proving itself to be an invaluable resource for educators and students alike. The numbers were very impressive. Net revenue grew 30% from a year ago and 38% growth in the Chegg services side of the business. That was $174 million

dollars of that total, $198 million in revenue. And so, 4.9 million Chegg Services subscribers now, that's up 31% from a year ago. Both revenue and subscribers have more than doubled in the past two years for this business as they continue to invest in that network and all of the information, the help, the aid that it provides for students. And the neat thing about this business, acquisition costs are so low because it's just the brand awareness and word of mouth alone. They just don't have to invest a lot in actually acquiring those customers. So, this results in modestly raising guidance. They are working on limiting account sharing.

I know one of the criticisms there with Chegg is that it can promote perhaps less than ethical behavior for students. Yes, yes, yes, and yes. They are working on that. They are investing in a feature, a product called Honor Shield. This is ultimately security to help prevent that cheating and protect the integrity of the system. But listen, there's a reason the stock's up over 1,100% over the last five years. It still feels like it's got plenty of room to grow with around 20 million total college students in the U.S. today. So, like what I'm seeing from Chegg.

DoorDash posted record revenue in the second quarter, but the actual loss for the quarter was bigger than expected. Ron, DoorDash was down after the bell on Thursday, but on Friday, shares recovered. I'm assuming their guidance for the full year probably helped. Yeah, but it was also cautious. The quarter was very strong, right? With sales up 83%, total orders up 69%. That's driven by increased order frequency as well as new customer growth. International orders, interestingly, grew substantially faster than domestic, but expenses more than doubled as the company increased investments to build out non-meal category is a very important part of their growth strategy to expand internationally and to boost

driver recruitment in a labor market that's very tight. Management said they intend to increase that level investment in these categories in the second half of 2021. That speaks to your comment about guidance, which I think was somewhat cautious based on the increased costs that they're seeing. They've added over 5,000 new third-party convenience stores as part of their growth initiative, they launched Albertson in the grocery category, they added PetSmart. So, moving into many things other than just restaurants, they launched in Japan, that's their third international market behind Canada and Australia, but they did report a loss of $100 million versus a profit of $23 million during the pandemic when business was gangbusters.

So, guidance for Q3, again, included a seasonal decline, that shouldn't be surprising to people, but it does also include increased levels of investments for those news categories and those international markets. So they're spending to grow, which is essential, but that probably will take a bite out of profitability for a while. Second quarter revenue for the trade desk was double what it was a year ago. Good guidance as well. But when you look at shares of the trade desk this week, Jason, it's almost like investors couldn't make up their mind. They were down after the report, then it recovered. It's basically flat for the week. Yeah, there was a spate of upgrades the day after the release, and I understand why.

I mean, to me, this is one I remain a very happy owner because it just continues to be one of the most attractive ways to invest in the advertising opportunity. And it really all comes down to the connected TV for the trade desk. To that point, management noted on the call, Moffitt Nathanson recently reported that the ad-supported video-on-demand market will grow from $4.4 billion in 2022, around $18 billion as early as 2025. So, clearly a lot of opportunity there, particularly as you see all of these ad-supported platforms, Disney, well, Hulu, I mean, Peacock, Discovery+, all of these different ad-supported platforms contribute to Trade Desk's success. Revenue more than doubled from a year ago to over $280 million

for the quarter. Non-gap earnings per share followed suit. Customer retention remains robust, over 95% during the quarter, as it has remained for the last seven years. These guys are consistently doing something very well, clearly. They do see that advertising video on demand market. That's going to outpace the growth of the subscription video on demand market over the coming years. I think from a global perspective, that's important to remember. That really is the nature, I think, of this advertising video on demand market. That's where the opportunity is. They're seeing plenty of big brand spending. They saw the number of brands spending more than $1 million in connected TV on their platform. It's already

more than doubled from a year ago. The number of advertisers spending over $100,000 has also doubled. They just continue to bring more and more customers in because they've got what they want. You like that market opportunity, then I think the Trade Desk is a business you need to keep a close eye on. Last month's shares of Boston Beer fell 25% after a disastrous second quarter earnings report. But fear not, shareholders. Boston Beer is teaming up with Pepsi to create an alcoholic version of Mountain Dew. Boston Beer will make it. Pepsi will deliver and market the product. Ron, hard Mountain Dew is expected to hit the shelves early next year. Are you interested? The phrase flavored malt beverage

kind of makes me gag a little, to be honest with you. But I've never been a big Mountain Dew fan in the first place, just that the flavor doesn't sit right with me. I feel this is more a novelty item than something that's going to storm the category and help Boston Beer's hard seltzer beverage business. But I could maybe just be a little cynical about this, and maybe you guys have a different opinion, but I don't see this changing the direction of Boston Beer. I know Coke has their hard version of their Topo Chico sparkling water. So, this is Pepsi's entry into the space. I'm not convinced. I don't know, Jason. I get why both these companies are doing it, particularly Boston Beer. I'm with you. It feels like Boston Beer

might need to change its name to Boston Beverage, given that it is not so much a beer company anymore. Yeah, I think novelty is probably the right word, Ron. It feels to me like KFC Crocs or something. I mean, is this really what the masses want? Probably not. Certainly don't mind them giving it a shot, but I don't know that we'll be seeing them breaking these sales results out in any future quarters. Do we want it to be green? Is that important to the novelty aspect of this? I mean, this day and age, everybody's so focused on health and wellness. I mean, take those colors out and make it clear. Maybe that's a selling point if you keep it clear. The companies are splitting the costs and the work, so presumably they'll split the blame once

all this goes horribly wrong. Guys, we'll see you later in the show. Up next, a conversation about investor mindset with author Julia Galef. Stay right here. This is Motley Fool Money. Chris Hill. Welcome back to Motley Fool Money. I'm Chris Hill. Having the right mindset is important for any investor. That's where our guest comes in. Julia Galef is co-founder of the Center for Applied Rationality and author of the book, The Scout Mindset, why some people see things clearly and others don't. Recently, my colleague Maria Gallagher talked with Julia about how investors can improve their thinking and the ways in which a scout mindset differs from a soldier mindset. Yeah, so these are my metaphors, kind of the framing

metaphor of the book. I'll start with soldier mindset. So this is my term for the motivation to defend your preexisting beliefs or to defend things that you want to believe, um, against any evidence that might threaten those beliefs. So it's, you know, I'm sure everyone has encountered this before. I'm not the first person to point it out. Uh, it might, you might've heard of it under the name rationalizing or wishful thinking or, uh, denial. Um, the term that cognitive scientists more often use is motivated reasoning, or like the full term is directionally motivated reasoning, reasoning that's aimed at arriving at a sort of predetermined conclusion. And my favorite sort of concise definition of what that looks like comes from a psychologist named Tom

Gilovich. And he said that when you're engaging in motivated reasoning and you encounter something you want to believe, you evaluate it through the lens, can I believe this? Sort of looking for any excuse to accept it. Whereas if you're evaluating something you don't want to believe, you instead look at it through the lens of must I believe this and look for any reason to reject it. So you're just kind of applying an asymmetric standard of evidence or, um, um, criteria that you're using when you evaluate evidence. So I call that soldier mindset just because of the language that we use to talk about reasoning. It's very militaristic. Uh, you know, we'll talk about shooting down an argument or about like poking holes in someone's logic. Um, we talk about our

beliefs as if they're these fortresses that we have to like buttress or support with evidence or strengthen against attack. So I call that soldier mindset. And then scout mindset is this alternative way of thinking and reasoning because the scout's role, unlike the soldier, is not to attack or defend. It's to go out, try to see what's really out there, what's really true and put together as accurate a map as possible of, you know, a situation or the landscape. Um, so being in scout mindset just means reasoning with the goal of, of actually figuring out what's true to the best of your abilities, being as objective and intellectually honest as you can. Um, and that doesn't mean that you don't have preferences about what's true. Like you might

hope that your, uh, investment is going to do well, or you might hope that, you know, in the metaphor of the scout, that there's like a bridge across the river where you need to cross, but above all, you want to know what is actually true. You don't want to draw a bridge on your map where there isn't one in reality. So that's soldier and scout mindset. That's awesome. I hadn't really thought about these types of militaristic, how strong the language is around defending our beliefs until I was reading it in your book. And once you start seeing it, I was having a conversation with a friend the other day and I realized I was getting so defensive about a belief I held. And I realized I was using this quite intense language. And so I think that's

really fascinating as investors. We've, we've talked a lot about things like confirmation bias, which is seeking out information that confirms your opinions or even survivorship bias. You remember the stories of the Amazon that survived the 2001 internet bubble, but you don't think as much about the many companies that didn't. And so how would you kind of compare and contrast the ideas of motivated reasoning with those ideas of confirmation bias as well? Yeah, that's a great question because the terms are often used kind of loosely or interchangeably. And there is a lot of overlap between confirmation bias and soldier mindset or motivated reasoning, um, on the other hand. Um, but they're not, they're not quite the same thing. So confirmation bias officially is,

um, reasoning or, or processing evidence in such a way that confirms what you expect is true. Whereas motivated reasoning is, uh, processing evidence in a way that confirms what you want to be true. So it's expect versus want. Um, and again, that can often overlap. Um, Um, but an example where they wouldn't overlap might be, uh, like, okay, suppose for whatever reason you suspect that your friend is depressed and, uh, and there's a party and your friend doesn't show up for the party. And so you think to yourself, ah, it must be, you know, because my friend is depressed. She didn't feel like coming to the party. Um, and you know, maybe, but like, there's lots of reasons why someone might not come to a party. And the fact

that someone didn't show up, isn't that strong evidence of depression, but like, because that's what you expect to see. That's how you interpret the new evidence. But it's not that you want your friend to be depressed. It's just interpreting evidence in a manner that's consistent with your expectations. So that would be confirmation bias, but not motivated reasoning. Something that's interesting too, when you talk about in your book, you talk about some business leaders. So you talk about Elon Musk starting Tesla, that he thought it would probably fail. Jeff Bezos started Amazon. He gave himself about a 30% chance of success and he shared that with investors. So So how we think of them as confident leaders, how do you kind of think about leadership as it comes

to these types of mindsets and then how they, they, uh, they talk to the public and they talk to their companies and, uh, the media. Yeah. So I, I find the stories of, uh, you know, the, the early days of, of Tesla and SpaceX and Amazon fascinating because they kind of, uh, they kind of undermine this, this common wisdom that people have, which is that leaders in order to be a successful leader, in order to be, you know, influential and to, to inspire people to work for you and, and fund you and, uh, just like cover you in the media, you need to just be certain in, in all of your opinions, you need to be expressed certainty that your plans will succeed. And that's, that's what confidence is. And so the fact that, you know, these two extremely

successful entrepreneurs and very like influential people of Jeff Bezos and Elon Musk, like actively went against that advice and expressed low confidence in the success of their companies. Elon Musk, I think gave both Tesla and SpaceX a 10% chance of success. And it was very open about that. And Jeff Bezos gave Amazon a 30% chance of success, which is still relatively high compared to the base rate of startup success, but like well below what, you know, a typical entrepreneur says about his company starting out. So, so I think it's very interesting that they are counter examples to that common wisdom. And so the question is why, like how are they so successful and influential despite expressing low confidence? And the answer is

that there are two different things that we're conflating when we talk about confidence. So one type of confidence is what I call epistemic confidence. And that's about how much certainty you express in your beliefs or, you know, in your predictions about like whether your company will succeed. Um, and so Bezos and Musk both expressed low epistemic confidence in their project success with their companies. Um, but then another type of confidence is just social confidence. Like, are you, you know, self-assured? Are you charismatic? Do you seem comfortable, uh, taking charge and making things happen and speaking in front of groups, things like that. Um, and so people conflate those two, but actually, if you look at the evidence,

both anecdotal and the studies that we have, the thing that matters to whether people see you as an influential leader is social confidence. And both Musk and Bezos have lots of social confidence. It's like one of the things people tend to remark on about them when they first meet them. Um, and so that that's sort of all you need, which is, which is great. That's like great news because people all along have been thinking, Oh, in order to be influential, I have to, I have to like convince myself that I'm certain about everything, even when, you know, there isn't actually good evidence. Like even when I can't justifiably be 100% certain and like being a good scout means you're going to be uncertain about a lot of things. Like, cause

you can't, can't actually justify a hundred percent confidence in a lot of things, especially messy, unknowable things like whether your company will succeed. Um, and so it's good news that you don't actually have to express a hundred percent certainty in order to be a confident leader. You just need to cultivate social confidence. While you were doing research for your book, was there anything that really surprised you? Um, and, you know, kind of shocked you a little bit as you were researching these, these mindsets. Yeah. Well, so kind of in this vein, something that surprised me, um, that I don't think I ended up including in the book actually is so a different bit of common wisdom that I would often hear is that the public doesn't want to hear uncertainty

from scientific experts, like, um, public health experts speaking about COVID or, you know, scientists speaking about climate change, um, public hates uncertainty. They just want, you know, definitive answers from scientists. That's that I've heard that a million times. And then when I actually looked into the evidence, that's not true. Uh, so I read a bunch of studies that all, uh, sort of measured people's reaction to uncertainty from scientific experts. And in the vast majority of them, the result was actually bimodal. So there is in all of these studies, a significant minority of people like 30 or 40% who don't like uncertainty. And if they hear an uncertain statement from a scientist, they will, you know, report having lowered their trust in

the scientist or, you know, lower their confidence in science. But then there's also another often bigger, uh, group of people like four or 50% who like hearing uncertainty from scientists and think, uh, and, and find that that increases their trust in scientists in the scientific process. Um, and when interviewed people like in the second group will often say like, well, you can't actually be a hundred percent certain. So if a scientist says he is, then I don't trust him. And so it's actually a sort of more nuanced situation than people made it sound. Uh, and I've started to wonder if maybe scientists haven't been, um, kind of, uh, unwisely optimizing just for the first group of the uncertainty averse people when actually

there's this, you know, often bigger group of people who would be happy to hear uncertainty if it's warranted. So that was surprising and interesting to me. That is very surprising. I would assume that they would be the exception to the rule and that most people would not want scientists to show any sort of doubt, but that's really fascinating. What I had heard and what I assumed. Yeah. I wonder what group I would fall into. I feel like I don't want any doctors to be uncertain, but maybe I would, I would feel, uh, like I was refreshed with their honesty if they were. So it depends on the kind of uncertainty, right? Like there's a certain kind of uncertainty that's, that's sort of the result of ignorance. Like if a doctor says, wow, wow,

I've just, I've never seen anything like this. I don't know what it could be. Then you're like, oh, maybe there's a better doctor out there that I can find. But then there's a different kind of uncertainty, um, that again, in studies people react well to, um, which is like, okay, uh, here's what is known about your condition. You know, the diagnosis is hard to predict as of now, but I can tell you the factors that tend to make it more or less likely that you'll have a good outcome, but it's not guaranteed. And so, you know, when a doctor sort of explains the uncertainty in detail like that, what they're doing is they're demonstrating that the uncertainty is not in them. Sorry. The uncertainty is not the fault of their own

ignorance. It's just the world is messy and things are often unknowable and they're kind of showing you, um, you know, they're showing you that they, they understand the uncertainty, um, and they can kind of map it out for you. And that tends to make someone look like more of an expert, not less. So that would be my prediction about how you would react if a doctor expressed uncertainty to you. yeah, that's really fascinating. Um, I know we only have a couple of minutes left, so I was just wondering, uh, to kind of end, uh, to finish off, uh, what's one thing that investors and people should start to implement in their daily life to work on, to start having more of that scout mindset, to kind of looking for the truth, no matter what, what your initial, uh, opinions are

going to be. Uh, yeah. So I'd say one category of, um, technique to cultivate scout mindset is the thought experiment, um, which I mentioned earlier. So that could look like the outsider test. Um, another one is the status quo bias test where you sort of flip around the status quo to see if you were sort of motivated to stick to whatever the status quo was, even if it's not actually best. So you might ask yourself, like, you know, maybe I don't, I don't think it's wise to sell, but like, suppose if I imagine I didn't actually already own the stock, what I want to buy it. Um, that can often flip things around in an interesting way. Um, another category of technique is just finding ways of making yourself more open or receptive to the truth. Um, even if it's not

what you wish it was. Um, so the way that I usually do that is by, uh, before I figure, before I ask myself, if something is true, I'll instead imagine, okay, suppose it is true. Um, how bad would that be? Or like, what would I do about it? Um, so, you know, if I'm in an argument online and I start to think, Oh, I wonder if I'm wrong. Uh, the temptation is to push that thought out of my mind and just focus on ways to defend my position. Um, but instead I'll sort of stop and ask myself, okay, suppose I was wrong. How bad would that be? Or like, how would I say it? And often in just a couple of seconds, I can come up with a, you know, like draft, uh, you know, phrasing that I could say that I would be, I would be happy with. Um, and I'm like,

I don't think it would be so bad. I've been wrong before people didn't tear my head off. Um, and then, you know, that just takes a couple of seconds. And then I just feel much more willing to consider the possibility that I am wrong because I feel like it would be fine. I could handle it. Um, and same thing for, you know, if you start to worry that maybe you made the wrong call at work or, you know, maybe you shouldn't have bought that stock or something. Um, before you try to think about whether that's true, first ask yourself, suppose it were true, what would I do? And come to, you know, try to get into a state where you feel like, okay, I could handle that if that were true. And only then will you have the kind of freedom to think honestly about whether

or not it is true. So I find that really helpful as well. That is really helpful. I think especially as investors, you know, when you look at your overall portfolio, a winning portfolio is only right about 60% of the time, right? You know, there's no way that I'm going to exclusively pick companies that are always going to win. So I think having that mindset, okay, my thesis is wrong. What does that mean? My thesis has been wrong before. And it's looking at it as a learning opportunity and saying, well, what does that mean for the next time I look at a biotech company? What are these red flags I'm going to make sure I pay attention to next time? And, and kind of having that growth mindset of always trying to learn and grow as you're wrong about things,

as we all are, as the world is a messy and kind of confusing place to be an investor in and to be a person in. Right. Yeah. I mean, I think that I could like pick one takeaway. It would be that, that sort of shift in your thinking about what it even means to be wrong, because we tend to just implicitly think that if I'm wrong, it means I did something wrong. I screwed up somehow. and, you know, sometimes you're wrong because you screwed up. Like maybe you were really negligent and, you know, you didn't do enough due diligence before you bought the stock and you're like, okay, so that was a mistake. I should have known better. Um, but a lot of the time you made the best call you could have given the information you had at the time. And you shouldn't feel bad

about that. Um, and so, you know, the, in the metaphor of the scout, we, we all have these imperfect, incomplete maps, uh, just, you know, they're wrong necessarily because we're not omniscient beings. And over time, our goal is to get more information and revise the map and make it less wrong. And that's kind of the best we can do as humans. The book is The Scout Mindset, Why Some People See Things Clearly and Others Don't. Check it out when you get a chance. Stick around because after the break, Ron Gross and Jason Moser return with a couple of stocks on their radar. You're listening to Motley Fool Money. As always, people on the program may have interest in the stocks they talk about, and

The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. Welcome back to Motley Fool Money. Chris Hill here once again with Jason Moser and Ron Gross. It's time to get to the stocks on our radar. Our man behind the glass, Dan Boyd, is going to hit you with a question. Jason Moser, you're up first. What are you looking at this week? Yeah, just taking a look at Outset Medical, ticker is OM. They are responsible for the Tableau hemodialysis system. I know, I know, it's a mouthful. It allows for dialysis, believe it or not, to be delivered anytime, anywhere and by anyone. In fact, it's the only hemodialysis system on the market with FDA

clearance for two-way wireless data transmission. But it's got a lovely razor and blade model there. Recently, console revenue grew by 106% from a year ago. Consumable revenue was up 150% from a year ago. They did report for the second quarter $25.2 million in total revenue. That was revenue growth of 115% from a year ago as well. Secured sales agreements with seven of the eight largest national health systems. Raising guidance modestly could be looking at crossing that $100 million in revenue mark this year. This is a very young business. It is just getting started. Clearly, valuation is going to be one of the bigger risks in the near term, but it's a tremendous market opportunity. It really does look like they're proving their case. It's one I own myself,

I remain very excited about its potential. Dan, question about Outset Medical? Certainly, Chris. Jason, since inception, this stock has been flat to a little bit down. Is the time to strike now for Outset Medical? I think so, Dan. I think so. Like I said, valuation being one of the bigger risks, but they are pursuing a very, very big market opportunity, one that is not going to go away. As we see more moves towards that hospital in the home and telemedicine. This is a business playing in that same basic sandbox, so to speak. Ron Gross, what are you looking at this week? I've got Bluebird Bio, ticker symbol blue, BLUE, one of the stocks in my personal biotech basket, but I need to keep

a close eye on this one. It got crushed on Monday, down about 25% in one day. The FDA paused one of its gene therapy studies due to concerns that one of its therapies contributed to a patient getting cancer. Obviously, very, very serious that needs to be investigated. The company also confirmed its plans to separate into two separate companies, one to focus on gene therapy, one to focus on oncology, and they also plan to pull out of directly selling in Europe. A lot of news on that one day. I'm still hanging on to this one for now, but this stresses the importance of buying companies like this in a basket. This is one of nine companies I own in the space. Even though the stock got crushed, that basket as a whole was actually up on the day.

Dan, question about Bluebird Bio? This is one of those stocks that Ron brings every now and then, where I think he's bringing it to show us how bad things can get when a company has a ton going for it and then loses 25% in one day. What do you want to add to your watch list? Use that basket approach, Danny. Well, it's certainly not Bluebird Bio. I'm going to go with AdSense Medical here. all right ron gross jason moser guys thanks for being here thank you chris that's gonna do it for this week's show we're out of time we'll see you next week