Motley Fool Hidden Gems Investing - Motley Fool Money: 07.26.2013

Episode Date: July 26, 2013

Our analysts discuss earnings news from Apple, Baidu, Facebook, Netflix, and Starbucks.   And best-selling author Dan Pink talks about his latest book: "To Sell is Human: The Surprising Truth About Moving Others." Learn more about your ad choices. Visit megaphone.fm/adchoices

Going on vacation? We're here for it. With kids? Who turn the backseat into a courtroom drama over whose tablet is louder, whose charger is faster, and why watching the same cartoon for the hundredth time is a human right? Yep, we totally have vehicles to handle that. Because whether it's a road trip or a business trip,

where your flight's delayed, your phone's at 2% and your dinner is whatever's open, yep, here for that too. Enterprise. We're here for it. Welcome to Motley Fool Money. Thanks for being here. I'm your host, Chris Hill. Joining me in studio this week from Motley Fool Hidden Gems, Andy Cross, and from Million Dollar Portfolio, Charlie Travers and Ron Gross. Good to see you, gents. Earningspalooza rolls on. We've got the latest from Apple, Starbucks, Netflix, and more.

Best-selling author Dan Pink stops by to talk about his latest book, To Sell is Human. And as always, we've got a few stocks on our radar. But we begin this week with the social network. Shares of Facebook rose 30% on Thursday after second quarter profit and revenue came in much higher than expected. And Ron, the big story, mobile ads, which basically didn't exist for Facebook a year ago, and now make up 41% of all their revenue. Woo-hoo! Yeah, very good.

We have a very large position in Facebook in the million-dollar portfolio, so great week for us. They're getting it done. They've had to get it done. It's been years. They kept saying, we're going to get it done. It's happening. They've got big brand advertisers now.

They've got over one million advertisers that are interested in a mobile presence. And let's face it, advertisers must have a mobile presence. Facebook has the largest audience in which to get that done, and it's all coming together, and the stock reacted appropriately. Yeah, I mean, Andy, you think about a year ago, and a lot of the narrative around Facebook was about their struggles, about, to the extent that anyone was talking about advertisers, it was the whole thing with General Motors pulling the $10 million. And now that narrative has completely changed. Yeah, a lot of consumer packaged goods who, with that, I mean, let's face it, those are the big dogs in advertising. they need to be on mobile and they need to be on Facebook's platform, there's good indications

that they are going to be there. And furthermore, that they're not going to be cutting prices so much on mobile. And that's really key, guys. They have to keep the ad rates up on mobile for Facebook to really work. 40% is a great number. I think that's much higher than most analysts expected. But we have to continue to see those mobile ad rates stay healthy. I think what we're seeing that is very exciting for advertisers and why they're getting more and more interested is Facebook has put the ability to put ads right in your news feed, which for some may be a bit annoying, but for the advertisers, it's very, very important.

And I think we're seeing a greater adoption because of that. Some things in Facebook were a little bit slow, things like their Facebook Home that they kind of hung their head on a few months back. Graph search is a bit slow. So not everything is going full force, but it's doing really what it needs to do to bring dollars in and generate cash flow. And even with the amazing run-up that the stock had this week, it is still trading below its IPO price of $38 a share. What do you make of the stock right now? Yeah, we still have it rated a buy. We like it very much. It's very hard to put a valuation on this, so you won't hear me giving you an actual number, but we think it's worth more

than it is now. Starbucks' third quarter profit rose 25%, and shares hit a new all-time high on Friday. And, Andy, it looks like food finally is starting to pay off a little bit for Starbucks. Their comp sales were up 9%. I mean, Howard Schultz himself called that a stunning number and, frankly, one they won't likely repeat anytime soon. But, I mean, like, let's face it. I mean, this could be their best quarter of their history, certainly their best third quarter. Comp's up 9%.

I mean, growth continues to fly all over the place. They're seeing building momentum on food, coffee. I mean, the runway for Starbucks, both domestic and international, is really large. And it's just a great growth story. And the stock's reacted as it should be. It's interesting because it seems like not that far in the past, we were talking about Starbucks being oversaturated. They were closing stores.

And here we are a few years down the road. All of a sudden, there's this mega growth story again. Yeah, I mean, they have 19,000 stores. They opened 300 during the quarter. Howard Schultz said that international could be even larger than domestic here, you know, down the road in, you know, five years or so. So, I mean, the international story with tea and with Teavana, it's really large. And the runway for Starbucks, I think, is much larger than most investors give it credit for.

And 19,000 stores sounds like a lot. It is. But if you look at Yum! Brands or McDonald's, they're well into the 30,000s. So Starbucks could really go a lot bigger than it is right now. Yeah, totally. We also saw Dunkin' Brands reporting earnings this week. Second quarter profits more than doubled. And they also announced plans, and I think people have been waiting on this, specific plans to open around 50 new locations in Southern California in the next couple of years. It seems like in terms of growth opportunities, you look at the western half of the United States, Dunkin' Brands has that, even though Howard Schultz said on CNBC, I'm not losing any sleep over these guys. Yeah, I mean, well, Starbucks has 3,000 stores alone in California, and Howard Schultz said, and we're still adding stores there. So I don't think he's losing sleep over Dunkin'.

Dunkin's a great, I mean, the beautiful thing with Dunkin' that I like is it's a regional growth play that has aspirations to go outside of their core region, which is the Northeast United States. So congratulations, that's great, but I don't think this is necessarily a give or take. Like, Starbucks, with all of the other packaged good offerings they have, and their other growth angles with, you know, Teavana, La Boulange, the food, I mean, there is a much different play than Dunkin' Donuts is. And in their own right, for what they are, they nail it. I mean, the coffee's good, the donuts are good, and loyal customer base. But what concerns me is that they're trying to do too much with their menu.

I applaud their additions to the breakfast menu. Now we're getting into chicken sandwiches, we're getting into other things. It's a very small footprint back there behind the counter at a Dunkin' Donuts, and it's hard for them to do everything well, and it concerns me that they're going to start to mess up from a customer service perspective. You're worried they're going to run out of donuts? I'm a little bit worried. Ron, if they're starting with chicken, it's one more step to chicken and waffles.

Second quarter revenue for Chinese search engine Baidu rose more than 38%. The company also increased guidance for the third quarter, and Charlie, mobile is the story here from Baidu as well. It's a similar story to Facebook. It was two quarters ago that all the analysts in the market was saying, you're not going to succeed in mobile. There's no way you'll monetize any ads over there. And here we are now that mobile is over 10% of their revenue. It's not as big of a surprise as Facebook's numbers were, but they're doing a great job. That's where consumers are heading. And they are just building out a mobile empire of all the things that people want to do on their phones and tablets. They have the number one market share map. They have their own version of YouTube.

It's like a YouTube-Hulu hybrid. They've got that locked down. They're investing heavily in location-based services. Mobile is going to be a very big winner for them over the next five to ten years, and they're just getting started. You look at their stock, though, over the last year, a little bit of a roller coaster. What do you think of shares of Baidu now? So, Ron and I do own shares, a million-dollar portfolio, and there's still a buy at this price. Coming up, there's more trouble in Farmville. 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 in studio with Andy Cross, Charlie Travers, and Ron Gross. Shares of Apple rising this week on second quarter results. Ron, they sold over 31 million iPhones. That was a record for the June quarter. Also, the share buyback of $16 billion worth of shares. What'd you make? It's one of those expectations things we talk about a lot. The results were actually not

very good. Profit was down rather significantly. Margins were weak. A lot of people worried about that. Trouble with the iPads, too. Trouble with the iPads as well. But it was significantly better than expectations. So what happens? The stock goes up. That's short-term kind of thinking. We need to look longer term. What's the company doing? We actually recently lowered our valuation rather significantly because we just don't see the visibility yet in terms of the new products, whether it's an updated iPhone, whether it's the watch. Let's not be too excited about that.

Apple TV eventually. When we start to see them executing, I think we'll probably have the leeway to bring our estimates back up. But we're being conservative now. But even at our lower estimates, it's still a buy. Do you think that the pressure is increased on them to come out with a significant hit as we start to head into the holiday quarter? I think the pressure is there,

but I hope they don't take the bait. I hope they execute on their plan, pretending that the world doesn't exist. I really, the stock will take care of itself two or three years down the road. They can't screw it up. they have to work at their own pace. Second quarter results for Netflix. They added 630,000 subscribers in the U.S. Profits came in better than expected. And yet, Andy, shares

down this week. I know it's been a great run over the last year or so for the stock, but I'm wondering if it is now entered into the territory where expectations for Netflix are only getting greater. Well, they are getting greater. And I mean, And look at the quarter, again, an amazing quarter. Now they have 30 million domestic subs, 8 million subs internationally, operating profits up more than three times, nearly 80% over the previous quarter. So, high expectations for Netflix. Though, look at what they're doing to delight their customers, offer more original programming, original content, grow their sub-base. They continue to show increasing estimates for the next quarter. It just looks

like they have figured it out finally. Reed Hastings, after a bumpy ride a few years ago, got it right. Investors who are looking at the long-term growth story for Netflix can't pay attention to what's happening over the weeks of the stock price. Look at the growth opportunity they have around the world and I think you have to still be excited about the business and the stock. And delighting the customer's angle is really the whole story here because there's a lot of TV shows they know people like that would not even exist if they weren't really to put some money up into their development because they can then in exchange get the exclusive streaming rights. It's not just Arrested Development or House of Cards. It's shows like AMC's The Killing

which got canceled after season two but because Netflix was willing to step up and help pay for season three it's back but in exchange they get the exclusive rights for it which helps them build their sub base yeah and that's really interesting charlie because they are really going after individual shows they're not so i mean they let their mtv deal kind of expire they're not so interested in the kind of the whole broad package they want the a la carte shows because they understand better than almost anyone out there i think how their customers watch their shows and which shows they like so they want to buy and develop the shows that they can then spin off into future and future cash flows down the road through more and more members.

We also see Amazon getting into original content as well. And part of me thinks that if the broadcast networks aren't terrified, they really should be. Because I think just from the standpoint of the people who are creating the content, the showrunners, the producers, the actors, it's just a much better experience for them to work with an HBO or on Netflix or even on Amazon where they know they're not looking at the ratings week after week and they're not living in fear that, oh, we're going to get canceled halfway through the season. No, no, no. The season is already there. They've already bought the whole season. Well, what's interesting, Chris, is it really represents the change in the way that we consume television content

in so much that there are so many varied ways to watch those contents you love. Charlie, you mentioned The Killing. I'm a big fan of The Killing. I think it's a great show, and there are lots of ways to be able to view that. And certainly, network and broadcast companies have to wake up to that. And we're seeing that a lot with Comcast, with their NBC property, too. This week in video games. On Friday, shares of Activision Blizzard popped to their highest point in five years on news that it is buying nearly $6 billion worth of shares from majority owner Vivendi, the French conglomerate.

This, I think, continues the theme of an awesome week for you, Ron, and the million-dollar portfolio. I'm not going to lie, it's been a pretty good week. It's been a good month. Yeah, it's been a good month. This is a wonderful outcome for Activision that we've held for a long time. And the stock actually hadn't woken up until this year. And this news makes it even better. Vivendi being a 60% shareholder of Activision, investors were concerned about what we call the overhang.

Like, what is Vivendi going to do with these shares? Are they going to one day be flooded into the market and put selling pressure on the stock? So, we have that removed now. In addition, Activision is buying these shares back at a nice discount, so that's a wonderful use of capital. Activision has an amazing balance sheet, tons of cash, no debt. They can afford to put low interest rate debt on the balance sheet, still have billions of dollars of cash. It's really a great deal. And we've talked about this before, over the last couple of years, when Activision would report earnings, and particularly around the holiday, where they've

got these amazing franchises, they're turning out all this cash. And I would look across the table at you and say, so why is the stock stuck in this range of $11 to $13, just flat? The Vivendi overhang was one of the reasons. The other one is probably that the video game business is a tough business, like the movie business. You always have to come out with the next big thing, and you can't really rely on that. But the Vivendi overhang was very big. In news that was a surprise to absolutely no one, Zynga's second quarter revenue dropped 31%. And Charlie, they're getting out of gambling. At one point, that seemed to be the thesis for

this stock. They're going to go into online gambling, and the CEO said, no, we're out of this. Yeah, this is really a sign that the company has no clear strategic direction. Maybe that'll change with the new CEO on board. It'll take a couple quarters to put something in place. But I view this really as an indictment of their whole free-to-play model. They still have three of the top 10 games on Facebook, and yet they're burning money. Something has to change here. They're talking about making a nickel per average user per day. That's no way to run a business. And you don't have any customer loyalty.

I mean, because people play these games for a month and then they walk away and you're seeing their user counts just plummet. They have a ton of cash, right? They have over a billion dollars. They have the financial resources to turn this around. But what they need is a clear strategic direction on how to develop profitable games. I think more of an Activision model where you get paid a reasonable rate up front than trying to entice people in for free is a better way to go. If only for the cash on the balance sheet, do you view Zynga even more so now than ever as an acquisition target?

No, I don't think they have any assets worth buying necessarily. I think you can't really buy into the stock until you see a strategic direction that you think makes sense. All right, we will wrap up with the stocks that are on our radar. and we'll bring our man Steve Broido in from the other side of the class. Steve, have you ever played Farmville before? I don't think so. Cityville, Mafia Wars, any of those Zynga games? Yeah, no, don't think so.

I don't think so. Checkers. Not sure, maybe, not sure. Ron Gross, or as some know him, Enrique Trouble, you're up first. Yes, thank you. I am compelled, I slam my hand down, to return to Crocs, which got hit 20% yesterday. stock was down on Thursday on very weak earnings report. We think that was way overblown.

Short-term problems will not persist. The business is not impaired. So, we think it's significantly undervalued here, and we recommend that investors go in even more so. And the ticker symbol? C-R-O-X. Steve, question about Crocs? Should Crocs be expanding to things besides shoes? They have a little bit of an expansion there, but no, I think we should get the shoes right. They're diversifying away from those clogs that many people find ugly.

And they're less than 50% of the business now. And they've got some great offerings there. So let's focus on that. Let's get that right. And then we'll worry about expansion later. Did you have something in mind, like maybe vests? I don't know. Luggage?

They're kind of squishy and soft, kind of comfortable. I don't know. Something like that. We'll see what we can do. Accessories. Just for you. Charlie, what do you got? Let's hope the good times keep rolling for us in MDP.

Coach reports next week. Coach has been doing fantastic in Asia, as have a lot of other fashion retailers. I expect their numbers are going to look very good. I don't think that's at all priced into the stock. I'm certainly looking forward to their report. And the ticker symbol? COH. COH. Steve?

Do you believe in 10 years Coach will be using more or less or the same amount of leather? Hopefully more, because that means they are selling more handbags and men's items like wallets and belts. Are you trying to organize a merger, maybe like a Crocs? My thought is that people will be using less leather in the future. I think there's probably better materials out there and coaches entirely. Their products are basically all leather now, and I can see that changing. Andy Cross, what do you got? Boston Beer, Sam Adams, symbol SAM, reports next week.

Such a great small-cap growth story. We talked about Duncan being a regional play going international. Sorry, international or national and international. Same thing with Sam Adams. I want to see as they continue to add on more and more lines. There's summer air, different packages. How are they going to continue to grow into new regions out of the Northeast? They've had some success on it.

They have a new offering with JetBlue. They offered a report this week. What could go wrong there? Yeah, no, but a new can offering into JetBlue Airlines. So I love just you've got to find these new opportunities for these growth companies. Will they be using more or less hops a few years from now? Again, I hope more. If they're using more hops, that's good for Sam Adams shareholders.

Symbol S-A-M. Steve? Number of Sam Adams beers you've consumed in one sitting. Max number. Oh, max? Is this after college? I would say three. And we're out of time.

Andy Cross, Charlie Travers, Ron Gross. Guys, thanks for being here. Thanks for being here. Bye! I am the maverick. I am the king of beer. Up next, best-selling author Dan Pink discusses the surprising truth about the power of selling. This is Motley Fool Money.

Welcome back to Motley Fool Money. I'm Chris Hill. Caveat emptor, the Latin phrase we probably learned when we were younger, let the buyer beware. But my guest this week says it is time for sellers to beware as well. Dan Pink is a best-selling author of such books as Drive and A Whole New Mind. His latest is To Sell is Human, The Surprising Truth About Moving Others. And he joins me in studio. Dan, thanks for being here.

Chris, it's great to be back here at The Fool. Why do sellers need to beware these days? Again, I took Latin in high school. That was probably the first Latin phrase I learned. Sure, sure. But now you have to know caveat venditor, which is let the seller beware. And the reason for that is information. Let's go back to the reason why we have the principle of buyer beware. The principle is because of asymmetries in information.

In other words, for a very long time, sellers always had a huge information advantage over buyers. They knew a lot more about what they were selling, and as a consequence, they could rip people off. Not only that, but buyers often didn't have many choices, didn't have a way to talk back. And so in that kind of world, a world of information asymmetry where the seller has all the advantages, the buyer's on notice. Buyer beware. But today, what's happened is that information asymmetry that defined the sales relationship is ending. It's much more close. It's closer to information parity in many things, whether you're buying a car, whether you're buying a house, whether you're selling yourself for a job, whether you are trying to recruit somebody for a job. And so we now have

a world where buyers have lots of information, as much as sellers in many cases, lots of choices and lots of ways to talk back. And that's a world where now the sellers are on notice. Seller beware. So, when I hear you talk and I read your book, first and foremost, I do think about those two industries that you mentioned. Housing, the whole notion of buying a home, and in particular, car buying, where there's just so much more information online. Are those 1 and 1A in terms of industries that have been fundamentally changed over time? And if not, what else is sort of on the short list of being affected by this new parity?

Well, I think that most industries are being affected by this new parity. I think that what makes cars interesting is how much we associate car salesmen, usually men, with the whole ethic of sales. One of the things that I did in this book was I asked people, when you think of sales or selling, what's the first picture that comes to mind? And in overwhelming, almost terrifying numbers, people pictured a guy in a suit selling a car. But cars are a great, great example in a relatively short time. You know, 20 years ago, if you went to buy a Toyota Camry, Toyota Camry dealer would know a lot more about Toyotas, a lot more about Camrys than you ever could. Buyer beware. But now, in a remarkable way, you go into that Toyota dealership and you can arguably know as much about Toyotas, as much about Camrys as that dealer.

You can go and say, I know what every dealer in St. Louis is charging for Camrys. I interviewed a car dealer in Washington, D.C., who said that when she first started selling cars in the mid-1980s, the factory invoice price of the car, that is the physical document, what the car dealership paid for it, that was locked in a safe. The car dealers, honestly, the car dealers, the car salespeople weren't allowed to see it. Now, you know, your Aunt Gladys in Glen Burnie can walk into a car dealer knowing the invoice price of the car. And so I think that in many ways we associate sales so much with cars and the process of buying cars and the changes in information and information symmetry from information asymmetry is really profound there. It's true in housing. But, you know, it's also true in, you know, like selling yourself for a job. You know, I could put my resume out 20 years ago and they would say, oh, this looks pretty good.

Now I put my resume out. You can go online and check it out. Dan, did you win the Heisman Trophy in 1984? No. Oh, that must be a typo. Or even if you're trying to recruit somebody for a job. I think a lot of employers are just waking up to this. If I'm working at the Acme Insurance Company, and I'm trying to, 20 years ago, 15 years ago, I was trying to recruit somebody for a job.

I say, hey, Chris, come and work for us. We've got a great culture, very collegial atmosphere, opportunities for professional development, top-of-the-line salaries. You're like, well, that sounds awesome. Now, you're not going to take that job. That is, I'm not going to sell that job to you effectively because I know that you can check it out on something like Glassdoor.com, which is a website where people who work inside of a company tell what it's really like to work there. So you say, I say to you, oh, we got all these great things here at Acme Insurance Company. And you say, wait a second.

Glassdoor says you guys all hate each other. Glassdoor says the senior management stinks. Glassdoor says you pay less than the median in this industry. And so even then, the sellers of selling, I'm trying to sell this job to you, the sellers are unnoticed. And on the flip side, you have a company like LinkedIn, which is not just people putting their resume, but they are able to get recommendations, put their full employment history on there as well. So it seems like it cuts both ways, at least in the employment industry and the hiring industry. Sure. I mean, I think that most employers, when they're looking to hire somebody,

Somebody comes in for an interview or something like that, you know, they check out the LinkedIn profile and that becomes a source of, I mean, that whole phenomenon is quite interesting. But what it means is that we've gone from a world of information asymmetry to a world of information parity. And what that does is, and I think the consequences of this are important, is it forces people to the high road. A world of seller beware is very different from a world of buyer beware. You can't be as much of a sleazebag. You've got to take the high road. You can take the low road, but it's not going to take you very far because you're going to get found out. You're listening to Motley Fool Money, talking with bestselling author Dan Pink.

His new book is To Sell is Human, The Surprising Truth About Moving Others. One of the things you do in the book is you debunk some of the myths about selling. And I wanted to touch on a couple of them, one of which is that extroverts make the best salespeople. That seems to go right along with the whole notion of sort of the outgoing car salesman in the bad suit jacket. Yeah, well, this is a really, really interesting topic. I mean, what the research shows is that extroverts are more likely to go into sales jobs. Extroverts are more likely to get hired in sales jobs. Extroverts are more likely to get promoted in sales jobs. What's curious here is that when scholars have looked at the link between the quality of extroversion and sales performance, not who gets hired or who gets promoted, but who sells stuff, the correlation is basically zero. And so Adam Grant at the University of Pennsylvania's Wharton School has done some really, really, really interesting piece of research where basically what he did is he measured the introversion, extroversion scores of a software sales force. Then they went and sold stuff.

So we know who the introverts are. We know who the extroverts are. We know their sales numbers. And what he found is that strong introverts, not surprisingly, are not very good salespeople. They don't assert themselves. They're too quiet. But strong extroverts are only a tiny bit better. And the people who, because they talk too much, listen too little, come on too strong,

and the people who really tend to flourish are the people in the middle, what the psychological literature calls ambiverts, not a word that a lot of us know about. Our discussion of introversion and extroversion, I think, is too binary. And ambiverts are people who are somewhat introverted, somewhat extroverted. They're not strongly one way or another. And what Adam Grant's research has shown is that there is an ambivert advantage in sales, not an extrovert advantage an ambivert advantage in sales because people who are in the middle these ambiverts are more attuned they can they know when to talk they know when to listen they

know when to push they know when to hold back they know when to speak up they know when to shut up and i think that's the good news in all of this for i think for a lot of us is that most of us are ambiverts and so the idea that you have to be this kind of slick super gregarious glad-handing person to be effective in sales is just flatly not true. What you really want to do, since you're probably an ambivert, is just to be a little bit more like yourself. One of the other myths you touch on is the notion that the ABCs of selling stands for always be closing. This was a little bittersweet for me because it touches on one of my favorite movies, Glenn Gary, Glenn Ross, where Alec Baldwin has the amazing speech at the beginning where he's speaking to the other

guy's in the real estate office and he touches on this abc always be closing and of course you know the the killer line being coffee is for closers yeah yeah but you you through your research you're saying no no it's not all about always be closing no but i think that always be closing is good advice for certain circumstances it's it's it's it's actually not bad i mean forget about leaving aside sort of the um some of the icky ickiness factor of it but if if you're in an environment where buyers don't have many choices, don't have much information, don't have a way to talk back, always be closing that kind of relentless, aggressive, predator approach

is actually not a bad strategy. But we don't live in that world. And so I was able to look at the social science of how people are moved, how people are persuaded, how people talk, how people make decisions. And what it shows you is a handful, three particular qualities that are necessary to be effective in selling in this world of seller beware. And they are the new ABCs, attunement, buoyancy, and clarity. A, attunement. B, buoyancy. C, clarity.

Attunement is perspective-taking. Can I see your point of view, not just my point of view? Understand things through your eyes, not just my eyes. Buoyancy. There's a lot of rejection. One salesman called it an ocean of rejection. How do you stay afloat in that ocean of rejection? Really interesting research on how we can become more buoyant to stay afloat in that ocean of rejection. And finally is clarity.

We live in a world awash in information. So having access to information doesn't matter so much. What matters is being able to make sense of it, curate it, distill it, apply your expertise to it. And also, I mean, there's so much information out there that if somebody knows precisely what their problem is, they can find the solution. So this idea that problem solving is the most important sales skill, I think, is outdated. The most important skill today, I think, is problem finding. Can you identify problems people don't realize that they have? surface latent problems. Look down the road and identify perspective problems. And so it's really

those qualities, attunement, buoyancy, and clarity that seem to be the foundational qualities for being successful. Again, whether you're selling a car, whether you're selling a house, whether you're selling yourself for a job, whether you're selling your idea. Coming up more with bestselling author Dan Pink. This is Motley Fool Money. Welcome back to Motley Fool Money. Chris Hill here in studio with bestselling author Dan Pink. His new book is To Sell is Human, The Surprising Truth About Moving Others. What surprised you the most when you were working on this book?

It was a bunch of things. One of the questions that I asked, and I expected to get an answer, and actually one of the things I was trying to do is I said, And you always hear that there are some people who could sell anything, okay? You could sell- Igloos to Eskimos. You got it. It always involves Eskimos somehow.

Icemakers to Eskimos. Yeah, and I believe that. I said, okay, and one of the things that I tried to do was say, okay, if this is the case, what are the components of that person? Like, what does that person do that the rest of us can learn from? And what's interesting is I started interviewing salespeople, they all rejected the claim. They all said, no, I don't believe that there's some people who can sell anything, that selling women's undergarments is the same as selling wholesale seafood,

which is the same as selling aircraft parts. And I think this represents something of a change. It used to be that in a world where buyers had no information, that the salesperson was kind of like a party planner, sort of a gregarious convener of things. But all the salespeople, successful salespeople, said those days are long gone. Basically, right now is that if you want to be effective at selling aircraft parts, you've got to know a heck of a lot about aircraft parts. You've got to know a heck of a lot about aircraft, or otherwise you're useless.

And in order to know a heck of a lot about aircraft and aircraft parts, you kind of have to be interested in aircraft and aircraft parts. You have to be willing to develop an expertise, and people just aren't capable of developing expertise in wholesale seafood and in aircraft parts and in, you know, men's clothing. What got you interested in the topic in the first place? What made you want to write this book? Was it a late-night viewing of Glengarry Glen Ross? Well, I wrote another book called Drive about the science of motivation that suggested that certain kinds of motivators, particularly these contingent motivators, if you do this, then you get that, I like to call it an if-then motivator, aren't effective for a lot of workplace tasks. And I realized that sales was – sales commissions were the quintessential kind of if-then motivator. But then what's interesting is on the basis of that book, I started hearing from some companies literally all over the world that said, this book is pretty interesting, but let me tell you what I did.

And they described eliminating commissions for salespeople and seeing sales go up. Very counterintuitive. And not just one, but I'm thinking of a company in Baltimore, a public company in Phoenix, a software startup in Cambridge, U.K. Lots of companies taking this alternative approach. And what I realized is that in nearly two decades of writing about business, I'd never written much about sales. And I found it to be a really endlessly fascinating topic. And I found the coverage of it so bad that, I mean, just so horrific in many cases that I said, let's write a book about, I wanted to write a book about sales that actually took it seriously. I think it's actually a serious enterprise.

I think the people who do it are really sharp. I think the people who do it at some level are also really courageous, more courageous than a lot of us because they go out there and they get rejected every single day. And most of us don't have the guts to do that. And so I wanted to sort of take sales seriously and write a book about sales at some level for people who would never read a book about sales. Before we wrap up with a round of buy, sell, or hold, I would be moronic if I did not ask you one thing that I and our listeners could do to be better in the next week, in the next month, or year. What's something I can do to be better at selling? Oh, gosh. I mean, fortunately, I mean, as you know, Chris, the book has 70 or so tools and tips and takeaways to do that.

I guess one of my favorite exercises, for those of you who are working inside of companies, and I like exercises that are cheap and actionable, is the empty chair exercise. It's actually started at Sears, popularized by Amazon. So at Amazon.com, Jeff Bezos, the founder, will have meetings. He'll have meetings of the software people and the marketing people and so forth. And at every meeting, they will keep at the meeting a chair empty. And that chair, empty chair, represents the most important person in the room who's not in the room, which is the customer. And I like this technique. It's a technique of attunement, which I talked about.

a technique to attune yourself to the customer. So you're always taking the customer's point of view. And that empty chair forces you to say, what would the customer think? We're going to change price? What would the customer think of this? We're going to change operations in some ways? What would the customer think of this? So I like that one a lot, too. There's also a whole chapter on pitching, which I love. And one of the things that's helped me is some of the research showing

that we don't pitch enough with questions. We tend to pitch too much with statements. and pitching in the form of a question can be very, very effective in certain times. So without going into all the research, the takeaway for your listeners is that when the facts are very much on your side, pitching with questions is extremely effective because it forces the person to whom you're pitching. The person, if you do a question, people will think about the question. It will elicit a more active response. They'll think through it.

they'll chew on things a little bit more and they'll come up with their own reason for agreeing with you and one which is really important much more powerful absolutely and sort of one of the sort of the meta takeaway is that and it's true for motivation as well is that when we think about motivation when we think about persuading people we have to stop thinking about it or think about much less as something that one person does to another and think about it more in the way of something that people do for themselves it's very true of motivation uh and it's also true of persuasion, selling, and influence. So the more that I can understand where you're coming from and create the conditions and the context to help you understand things better, if you reach your

own, if you come up with my position on your own, if you have your own reasons for agreeing with me, you believe more deeply, adhere to them more strongly. All right, we will wrap up. Doesn't that make sense, Chris? Wait a minute. Hold on. Let me go on the journey and arrive at the conclusion. Yes, it does. We'll wrap up with a round of buy, sell, or hold the future of Groupon. Run. Yeah, buy, sell, hold, or run.

It's the fourth option. No, no, no, no. I actually am on the record of, I'm a little bit premature. I was on the record of predicting that Groupon would be out of business by 2013. At some companies, this has become the new water cooler. Buy, sell, or hold beer fridges in the workplace. The concept that beer fridges in the workplace? Yeah.

I'm a buy because I believe in autonomy. So if people want to drink beer on the job within reason, that's probably a good thing. And there's a lot of evidence showing that when people have informal, inadvertent contact in the workplace, a lot of ideas come out. A lot of innovations happen. And so why not? You can lubricate that with a good India pale ale. Pretty much everyone I work with will be thrilled with your answer. And finally, Facebook was the IPO of 2012, and some say this could be the IPO of 2014.

Buy, sell, or hold Twitter? I'm going to hold because I'm not sure how Twitter's making money. I haven't seen a really good, compelling business model for a really good, compelling argument for how Twitter's making money. And I say this as someone who loves Twitter. I say this as someone who tweets a lot. and I say this also as someone who has never given Twitter a dime. So if they can figure it out and there's some smart people working there, God bless them, but right now I'm a hold.

You can join the quarter million people who follow Dan Pink on Twitter. You can also pick up his book, To Sell is Human, The Surprising Truth About Moving Others. A lot of great stuff in there. Dan, thanks for being here. It's been a pleasure. That's going to do it for this week's Motley Fool Money. Our engineer is Steve Broido.

Our producer is Matt Greer. I'm Chris Hill. Thanks for listening. We'll see you next week.